Summary Principles of Marketing 18th Edition
Chapter 1: Marketing; Creating Customer Value and Engagement
What is Marketing?
Marketing deals with customers, and can be defined as engaging customers and managing profitable customer
relationships. There are two goals within marketing:
1. Attract new customers by promising superior value.
2. Keep and grow current customers by delivering value and satisfaction.
Marketing can be broadly defined as a social and managerial process by which individuals and organisations obtain
what they need and want through creating and exchanging value with others. In other words, it is the process by which
companies engage customers, build strong customer relationships, and create customer value in order to capture value
from customers in return.
A simple, five step model of the marketing process for creating and capturing value is provided in the figure. The first
four steps involve understanding, creating value and building strong relationships. The fifth step is about reaping the
rewards of creating superior customer value.
Understanding the Marketplace and Customer Needs
Customer Needs, Wants, and Demands
The most basic concept underlying to Marketing is human needs, which are the states of felt deprivation. Needs are
not created by marketers but are a basic part of the human makeup, example of needs are food, clothing, warmth.
Wants are the form of human needs take as they are shaped by culture and individual personality. They are shaped by
one’s society and described in terms of objects that will satisfy those needs, in example an American needs food and
wants a hamburger and a soda. When packed by buying power, wants becomes demands. Given wants and resources,
people demand products and services with benefits that add up to the most value and satisfaction. To understand the
needs, wants, and demands companies conduct consumer researches an analyse lots of customer data.
Market Offerings – Products, Services, and Experiences
Through Marketing offerings, consumers’ needs and wants are fulfilled. Marketing offers are some combination of
products, services, information, or experiences offered to a market offered to satisfy a need or a want.
A mistake many sellers make is marketing myopia, where they pay more attention to the specific products they offer
than to the benefits and experiences produced by these products. They use to forget that a product is a tool to solve a
consumers problem.
Marketers must be careful to set the right level of expectations. Customers form expectations about the value and
satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell
others about their good experiences, whereas dissatisfied customers often switch to competitors and disparage the
product.
Exchange and Relationships
Marketing occurs when people decide to satisfy their needs and wants through exchange relationships. Exchange is
defined as ‘the act of obtaining a desired object from someone by offering something in return’. The marketing of
organisations consists of actions taken to create, maintain, and grow desirable exchange relationships with target
audiences involving a product, service, idea, or other object.
A market is the set of actual and potential buyers of a product or
service. These buyers share a particular need or want that can be
satisfied through exchange relationships. Therefore, marketing
also means to manage markets to bring about profitable customer
relationships.
The figure shows a modern marketing system. Company research
market → create exchange market. Each party in the system adds
value, and every arrow defines relationships.
Designing a Customer Value-Driven Marketing Strategy and Plan
Marketing Management is defined as the art and science of choosing target markets and building profitable
relationships with them. The aim of the marketing manager is therefore; to engage, keep, and grow target customers
by creating, delivering, and communicating superior customer value. Two questions which must be answered are:
1. What customers will we serve?
2. How can we server these customers best?
Selecting Customers to serve
➢ Market segmentation – Dividing the market into segments of customers.
➢ Target marketing – selecting which segments the focus lies.
➢ Marketing managers must decide which customers they want to target and the level, timing, and nature of
their demand
Choosing a Value Proposition
➢ How to differentiate and position a company on the market
➢ Value proposition – set of benefits or values a company promises to deliver to consumers to satisfy their needs
➢ Answer to the question: “Why should I buy your brand rather than a competitor’s?
Marketing Management Orientations
➢ Design strategies that will engage target customers and build profitable relationships.
➢ Five alternative concepts under which organizations design/carry out their marketing strategy:
1. Production concept – consumers will favour products that are available and highly affordable
- Focus on improving production.
- Can lead to marketing myopia, losing sight of customer needs and building relationships
2. Product concept – consumers will favour products that offer the most in quality, performance, and innovative
features
- Focus on making continuous products improvements.
- Lead to marketing myopia
3. Selling concept – consumers will not buy enough of the firm’s products unless it undertakes a large-scale
selling and promotion effect.
- Practiced with unsought goods, which are goods that buyers do not normally think of buying (blood
donations, life insurance)
- Industries must be good at tracking down prospects and selling them on a product’s benefits
- Focus on creating sales transactions rather than on building long-term, profitable customer relationships
4. Marketing concept – achieving organizational goals depend on knowing the needs and wants of target
markets and delivering the desired satisfactions better than competitors do
- Customer focus and value are paths to sales and profits.
- A customer-centered-sense-and-respond philosophy.
5. Social marketing concept – Marketing strategy should deliver value to customers in a way that maintains or
improves both the consumer’s and society’s well-being.
- Questions whether the pure marketing concept
overlooks possible conflicts between consumer
short-run wants and consumer long-run welfare.
- Calls for sustainable marketing – socially and
environmentally responsible marketing that meets
the present needs of consumers and business while
also preserving or enhancing the ability of future
generations to meet their needs
Preparing
Integrated
an
Marketing
Plan and Program
The company’s strategy outlines which customers it will serve and how it will create value for these customers.
The next step is to develop an integrated marketing program that will actually deliver the intended value to target
customers.
- The marketing program builds customer relationships by transforming the marketing strategy into action
- Consists of the firm’s marketing mix, broadly grouped into four Ps:
1) Product
▪ Create a need-satisfying market offering
2) Price
▪ Decide how much to charge for the offering.
3) Place
▪ Decide how it will make the offering available to target customers
4) Promotion
▪ Engage target consumers, communicate about the offering, and persuade consumers of the offer’s merits
Managing Customer Relationships and Capturing Customer Value
Engaging Consumers and Managing Customer Relationships
So far, the first three steps of the marketing process have been described:
1. Understanding the marketplace and customer needs
2. Designing a customer value-driven marketing strategy
3. Constructing a marketing program
These steps lead up to the fourth, most important, step: engaging customers and managing profitable customer
relationships.
Customer relationship management
➢ Customer relationship management – overall process of building and maintain profitable customer
relationships by delivering superior customer value and satisfaction.
- Deals with all aspects of acquiring, engaging, and growing customers.
➢ Building blocks: Customer value and Satisfaction
- Satisfied customers are more likely to be loyal.
- Customer buys from firms that offer the higher customer-perceived value – consumer’s valuation of the
difference between all the benefits and all costs of a market offering
- !Customers do not judge values and costs “accurately” or “objective”, but act on perceived value.
- Customer Satisfaction – depends on the product’s perceived performance relative to a buyer’s
expectations.
• Higher levels of customer satisfaction led to greater customer loyalty
• Companies aim to delight customers by promising only what they can deliver and then delivering
more than they promise
• Delighted customers become brand advocates and “customers evangelists” who spread the word
about their good experience to others.
➢ A customer-centered firm does not attempt to maximize customer satisfaction. It can always increase
customer satisfaction by lowering its prices or increasing its services
➢ Companies can build relationships at man levels, depending on the nature of the target market.
- Low-margin customers – seeking to develop basic relationships with their customers
- Few customers, high margin – sellers want to create full partnerships with key consumers
- Beyond offering consistently high value/satisfaction, marketers can use specific marketing tools to
develop stronger bonds with consumers
• Offering frequency marketing programs that reward customers who buy frequently or in large
amounts (HHonours)
• Almost every brand has a loyalty reward program
Customer engagement and Today’s Digital, Mobile and Social Media
Today’s companies are using online, mobile, and social media to refine their targeting and to engage customers more
deeply and interactively.
➢ Customer-engagement marketing – fostering direct and continuous customer involvement in shaping brand
conversations, brand experiences, and brand community
- Goes beyond just selling a brand to consumers.
- Goal is to make the brand a meaningful part of consumers’ conversations and lives.
Today’s consumers are better informed, more connected, and more empowered than ever before.
➢ Marketers are embracing not only customer relationships management but also customer-managed
relationships – customers connect with companies and with each other to help forge and share their own
brand experiences
- Customer brand advocacy – satisfied customers initiate favourable interactions with others about the
brand
➢ The greater consumer empowerment means that companies ca no longer rely on marketing by intrusion, and
should rather focus on attraction – creating market offerings and messages that engage consumers rather than
interrupt them.
Nowadays, marketers combine mass-media marketing efforts with a rich mix of online, mobile, and social media
marketing that promotes brand-consumer engagement, brand conversations, and brand advocacy among customers.
Consumer-Generate Marketing
➢ Consumer-generated marketing- consumers themselves play roles in shaping their own brand experiences
and those of others.
- Happens through uninvited consumer-to-consumer exchanges in social media, and all digital platforms.
As consumers become more connected an empowered and as the boom in digital and social media continues,
consumer brand engagement will be an increasingly important marketing force.
➢ Brands must embrace this increased consumer empowerment and maser the digital and social media
relationship tools.
Partner Relationship Management
When creating customer value, marketers must work closely with a variety of marketing partners.
➢ Partner relationship management – working with others inside and outside the company to jointly engage
and bring more value to their customers.
- Traditionally, marketers have been charged with representing customer needs to different company
departments. Now, firms must link all departments in the cause of creating customer value.
- Marketers must partner with suppliers, channel partners, etc.
- The supply chain describes a longer channel, stretching from raw materials to components to final
products that are carried to final buyers.
• Through supply chain management firms are strengthening the connections with partners
Capturing Value from Customers
The outcome of customer value is loyalty and retention, share of market and share of customer, and customer equity.
Creating Customer Loyalty and Retention
➢ Satisfied customers remain loyal and talk favourably about the company
➢ Customer lifetime Value – total income a business can expect from a customer over the entire period of their
relationships
- Losing a customer means losing more than a single sale, it means losing the entire stream of purchases
that the customer would make over a lifetime of patronage
Growing share of customer
Good customer lifetime value and relationship management can help marketers increase their share of customer – the
share they get of the customer’s purchasing int heir product categories.
➢ Banks want to increase “share of wallet”, supermarkets wants to increase “share of stomach” etc.
To increase share of customer, firms can offer greater variety to current customers, to create programs to cross-sell
and up-sell to market more products and services to existing customers.
Building Customer equity
➢ Customer equity – total combined customer lifetime values of all of the company’s current and potential
customers, a measure of the future value of the company’s customer base
- May be a better measure than sales or market share
- The more loyal customers the higher customer equity
➢ Building the right relationships with the Right customers
- Customers need to be viewed as assets that need to be managed and maximized.
- Company classifies customers according to their potential profitability and manage its relationships with
them accordingly. They can be classified into four groups:
1. Strangers – low potential profitability and little projected loyalty. Little fit between company’s offerings and
customer’s needs.
- Relationship management: Do not invest anything in them; make money on every transaction
2. Butterflies – potentially profitable but not loyal. Good fit between company’s offerings and needs.
- Can only be enjoyed for a short while, enjoy as much of the business as possible in the short time
3. True friends – both profitable and loyal. Strong fit between company’s
offerings and customer needs.
- Making continuous relationship investments to delight these customers
and engage, nurture, retain, and grow them.
- Turning true friends into true believer who come back regularly and
tell others about the good experiences
4. Barnacles – highly loyal but not very profitable. Limited fit between
company’s offering and customer needs.
- Most problematic customers.
- Company might be able to improve their profitability by selling them
more, raising their fees, or reducing service to them.
- If they cannot be made profitable, they should be “fired”.
The Changing Marketing Landscape
Every day, dramatic changes are occurring in the marketplace.
The Digital Age: Online, Mobile, and Social Media Marketing
➢ The Age of Internet of Things (IoT) – a global environment where everything and everyone is digitally
connected to everything and everyone else.
- Most consumers are totally smitten with all things digital.
- The consumer love affair with digital and mobile technology makes it fertile ground for marketers trying
to engage customers
- Digital and social media marketing – involves using digital marketing tools such as websites, social
media, mobile ads, and apps, online video, email, blogs, and other digital platforms to engage consumers
anywhere, anytime via their computers, smartphones and other digital devices.
At the most basic level, marketers set up company and brand websites that provide information and promote the
company’s products. They also set up online brand community sites, where customers can congregate and exchange
brand-related interests and information.
Social media marketing
➢ Social media provide exciting opportunities to extend customer engagement and get people talking about a
brand
➢ A perfect platform for real-life marketing – marketers can engage consumers in the moment by linking brands
to important trending topics, real-world events, causes, personal occasions or other happenings.
➢ Brands create large-scale, carefully integrated social media programs.
Mobile marketing
Mobile marketing is currently the fastest-growing digital marketing platform
➢ Smartphones are ideal for engaging customers anytime, anywhere as they move through the buying process
➢ Mobile advertising is surging and now accounts for more than two-thirds of all digital ad spending
The key is to blend digital approaches with traditional marketing to create a smoothly integrated marketing strategy
and mix.
Big Data and Artificial Intelligence (AI)
➢ Brands can use big data to gain deep customer insights, personalize marketing offers and improve customer
engagement.
- To understand this data, marketers turn to ever-more-advanced marketing analytics like AI.
• AI involves machines that think and learn in a way that looks and feels human but with a lot more
analytical capacity. AI-empowered applications include everything from customer-service chat
bots and virtual assistants.
The Growth of Not-for-Profit Marketing
Marketing has also become a major part of the strategies for not-for-profit organizations (colleges, hospitals etc.).
Sound marketing can help them attract membership, funds, and support.
Rapid Globalization
Almost every company is touched in some way by global competition.
➢ Managers in countries around the world are increasingly taking a global, not just local, view of the company’s
industry, competitor’s and opportunities.
➢ Ask questions like:
- What is global marketing?
- How does it differ from domestic marketing?
- How do global competitors and forces affect our business?
Sustainable Marketing
Marketers must develop sustainable marketing practices since corporate ethics and social responsibility have become
hot topics for almost every business. Every company action can affect customer relationships.
➢ Some companies resist the environmental and social responsibility movements and only budge when forced
by legislation or organized consumer outcries.
➢ Most companies readily accept their responsibilities and view sustainable marketing as an opportunity to do
well by doing good.
- They seek ways to profit by serving immediate needs and the best long-run interests of their customers
and communities.
So, What is Marketing? Pulling it all together?
The first four steps of the marketing
process focus on creating value for
customer:
1. Gaining a full understanding
of the marketplace and
customer needs and wants
2. Designs a customer-driven
marketing strategy based on
answers of two simple
questions.
3. Construct an integrated
marketing program,
consisting of blend of the
four Ps, which transforms the
marketing strategy into real
value for customers
4. Engaging target customers
and building value-laden,
profitable relationships with
them.
5. Company reaps the rewards
of its strong customer
relationship by capturing value from customers
Developing Skills for your Career
➢ Marketing is an exciting, fast-changing discipline that offers a wide range of rewarding careers. Within this
course a student will:
- Sharpen their critical-thinking and problem-solving skills when learning about and assessing marketing
strategies
- See how technology and marketing analytics are dramatically reshaping the marketing world
- Learn about the importance of collaboration and teamwork when seeing how marketers work closely with
others on their marketing teams and with managers form other companies
- Learn more about business ethics and social responsibility
Chapter 2 Company and Marketing Strategy
Company-Wide Strategic Planning: Defining Marketing’s Role
Each company must find the game plan for long-run survival and growth that makes the most sense given its specific
situation, opportunities, objectives, and resources
➢ Strategic planning – the process of developing and maintaining a strategic fit between the organization’s
goals and capabilities and its changing marketing opportunities
- Sets the stage for the rest of planning the firm
- At corporate level, the process starts by defining its overall purpose and mission. This mission then turns
into detailed supporting objectives that guide the entire company.
Defining a Market-Oriented Mission
An organization exists to accomplish something, and this purpose should be clearly stated.
➢ Mission statement – a statement of the organization’s purpose - What it wants to accomplish in the larger
environment.
- Should be market oriented (We arrange customer mobility) and not product oriented (we run a railroad)
- Should be meaningful and specific yet motivating
- Should not be stated as making more sales or profits; profits are only a reward for creating value
Setting Company Objectives and Goals
The company needs to turn its broad mission into detailed supporting objectives for each level of management.
➢ Each manager should have objectives and be responsible for reaching them
➢ Marketing strategies should be developed to support the marketing objectives
Designing the Business Portfolio
The next step for management is to plan its business portfolio
➢ Business portfolio – collection of businesses and products 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
- Most large companies have complex portfolios of business and brands
Analysing the Current Business Portfolio
The major activity in strategic planning is an analysis of the business portfolio.
➢ Portfolio analysis - management evaluates the products and business that make up the company
- Company will want to put strong resources into its more profitable business
- The steps are as follows:
• Identify key businesses that make up the company, strategic business units (SBUs). Which can be
a company division, product line, or a single product/brand.
• Assess the attractiveness of its various SBUs and decide how much support each deserves
➢ SBUs are evaluated on two important dimensions:
1. Attractiveness of the SBU’s market or industry
2. Strength of the SBU’s position in that market or industry
➢ The purpose of strategic planning is to find ways in which the company can best use its strengths to take
advantages of attractive opportunities in the environment.
The Boston Consulting Group (BCG) Approach
With the Boston Consulting Group Approach, a company classifies all its SBUs according to the growth-share
matrix. With on the vertical axis market growth rate and on the horizontal axis relative market share. This matrix
defines four types of SBUs:
1. Stars – high-growth, high-share of business/products.
- Often need heavy investment to finance their rapid growth, but the growth eventually slows down and
they start turning into cows.
2. Cash cows – low-growth, high-share businesses/products
- Established/successful SBUs need less investment to hold their
market share. They produce a lot of the cash that the company
uses to pay its bills and support other SBUs that need
investment.
3. Question marks – low-share of business units in high-growth
markets
- Require a lot of cash to hold their share, let alone increase it.
Management has to think hard about which question marks it
should try to build into starts and which should be phased out
4. Dogs – low-growth, low-share businesses/products
- May generate enough cash to maintain themselves but do not promise to be large sources of cash.
➢ The 10 circles represent the company’s 10 current SBUs.
Once a company has classified its SBUs, the company must determine what role each will play in the future. It can
pursue 4 strategies for each SBU:
1. Invest more in the business unit to build its share
2. Invest just enough to hold the SBUs share at the current level
3. Harvest the SBU, milking its short-term cashflow regardless of the long-term effect
4. Divest the SBU by selling it or phasing it out and using the resources elsewhere
Problems with Matrix Approaches
There are some limitations to the formal methods, such as BCGP
➢ Can be difficult, time-consuming, and costly to implement
- Difficult to define SBUs and measure market share and growth
➢ Approaches focus on classifying current business but provide little advice for future planning
This resulted in companies using more customized approaches that better suit their specific situations. Today’s
strategic planning efforts has been decentralized and companies are placing responsibility for it in the hands of crossfunctional teams of divisional managers who are close to their markets.
➢ Such managers have rich and current data at their fingertips and can adapt their plans quickly to meet
changing conditions and events in their markets.
Developing Strategies for Growth and Downsizing
A firm must be careful to not make growth itself an objective but rather to manage “profitable growth”. Marketing has
the main responsibility for achieving profitable growth for the company. Marketing needs to identify, evaluate, and
select market opportunities and lay down strategies for capturing them
➢ Product/market expansion grid – useful device for identifying growth opportunities. Which consists of four
parts:
1. Market penetration – making more sales to current customers without changing its original products
- Existing markets, Existing products
- In example, add new stores
2. Market development – identifying and developing new
markets for its current products
- New markets, Existing products
- Review new demographic markets
3. Product development – offering modified or new products to
current markets
- Existing markets, new products
- Starbucks expanding to ready-to-go beverages in grocery
stores
4. Diversification – starting up or buying business beyond its current products and markets
- New markets, New products
- Can be either related or unrelated diversification in comparison with the existing products
Companies must develop not only strategies for growing their business portfolios but also strategies for downsizing
them. There can be many reasons why a firm might want to abandon products/markets.
Planning Marketing: Partnering to Build Customer Relationships
The company’s strategic plan establishes what kinds of business the company will operate and its objectives for each.
Then, within each business unit, more detailed planning takes place and the major functional departments must work
together to accomplish strategic objectives. Marketing plays a key role in the planning in several ways;
➢ Marketing provides a guiding philosophy – the marketing concept – that suggests the company strategy should
revolve around creating customer value and building profitable relationships with important consumer groups
➢ Marketing provides inputs to strategic planners by helping to identify attractive market opportunities and
assessing the firm’s potential to take advantage of them
➢ Within individual business units, marketing designs strategies for reaching the unit’s objectives. Once the
units are set, it is marketing’s task to help carry them out profitably.
In addition to customer relationship management, markets must also practice partner relationship management. They
must work closely with partners in other company departments to form an effective internal value chain that serves
customers. Moreover, they must partner with other companies in the marketing system to form a competitively
superior external value delivery network.
Partnering with other Company Departments
Each department can be thought of as a link in the company’s internal value chain.
➢ Each department carries out value-creating activities to design, produce, market, deliver, and support the
firm’s products.
➢ The firm’s succeeds depends also on how well the various departments coordinate their activities, and not
only on their performances.
➢ Marketers must find ways to get all departments to “think consumer” and develop a smoothly functioning
value chain.
Partnering with Others in the Marketing System
More companies today are partnering with other members of the supply chain – suppliers, distributors, customers – to
improve the performance of the customer value delivery network.
➢ Competition no longer takes place only between individual competitors, but at the entire value delivery
network created by those competitors
Marketing Strategy and the Marketing Mix
Recall that the strategic plan defines a company’s overall mission
and objectives. The figure summarizes the major activities involved
in managing a customer-driven marketing strategy and the marketing
mix.
➢ Consumers are at the center, and the goal is to create value
for customers and build profitable customer relationships
➢ Marketing strategy – the marketing logic by which the
company hopes to create this customer value and achieve
the relationships.
- Company choices between which customers it will serve
(segmentation / targeting), how (differentiation /
positioning)
➢ Guided by the strategy, a company designs an integrated
marketing mix made up of factors under its control.
➢ Finally, company engages in marketing analysis, planning,
implementation, and control and when necessary adapt
Customer Value-Driven Marketing Strategy
Companies must be customer centered. They cannot profitable serve all consumers in a given market, so they must
divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments.
Market Segmentation
➢ Market segmentation – process of dividing a market into distinct groups of buyers who have different needs,
characteristics, or behavior and who might require separate marketing strategies or mixes
- Market segment – consists of consumers who respond in a similar way to a given set of marketing efforts
➢ Consumers can be grouped and served in various ways
- Geographic, demographic, psychographic, and behavioral factors
➢ Companies are wise to focus their efforts on meeting the distinct needs of individual market segments.
Market Targeting
➢ Market Targeting – evaluating each market segment’s attractiveness and selectin one or more segments to
enter
- A company should target segments in which it can profitably generate the greatest customer value and
sustain it over time
- A company with limited resources might decide to serve only one or a few special segments/ market
niches, while a large company might decide to offer a complete range of products to serve all market
segments.
➢ Most companies enter a new market by serving a single segment and add more segments if it proves to be
successful.
Market Differentiation and Positioning
A company must also decide how to differentiate its market offering for each targeted segment and what positions it
wants to occupy within those segments.
➢ Positioning - arranging for a product to occupy a clear, distinctive, and desirable place relative to competing
products in the minds of target consumers.
- Marketers plan positions that distinguish their products from competing brands and give them the greatest
advantage in their target markets.
➢ Effective positioning begins with differentiation – differentiating the company’s market offering to create
superior customer value.
- After deciding the position, strong steps must be taken to deliver and communicate that position to target
consumers.
- The entire marketing program should support the positioning strategy
Developing an Integrated Marketing Mix
After determining its overall marketing strategy, a company is ready organise the
details of the marketing mix.
➢ Marketing Mix – set of tactical marketing tools that the firm blends to
produce the response it wants in the target market., consists of everything a
firm can do to engage consumers and deliver consumer value.
➢ Division into 4 Ps:
➢ Some critics think that the four Ps may omit or underemphasize certain
important activities (i.e., where is packaging?)
- The four Ps also takes the seller’s view, not the buyer’s view. For
customer’s it might be better described as four Ps:
Four Ps
Product – goods-and-services combination the
company offers to the target market
Price – amount of money customers must pay to
obtain the product
Place – company activities that make the product
available to target consumers
Promotion – activities that communicate the merits of
the product and persuade target customers to buy
the product.
Four As
Acceptability – extent to which the product exceeds
customer expectations
Affordability – extent to which customers are willing
and able to pay the product’s price
Accessibility – extent to which customers can readily
acquire the product
Awareness – extent to which customers are informed
about the product’s features, persuaded to try it, and
reminded to repurchase
Managing the Marketing Effort and Marketing Return on Investment
Managing the Marketing Effort
Managing the marketing process requires the five marketing management functions shown in the figure:
➢ Analysis, planning, implementation, organization, and control
Marketing
Analysis
Managing the marketing function begins with a complete analysis of the company’s situation.
➢ SWOT-Analysis – evaluates the company’s overall Strengths, Weaknesses, Opportunities and Threats.
SWOT Analysis
Positive
Negative
Strengths
Weaknesses
Internal capabilities that may help a
Internal limitations that may
Internal
company reach its objectives
interfere with a company’s ability to
achieve its objectives
External
Opportunities
External factors that the company
may be able to exploit to its
advantage
Threats
Current and emerging external
factors that may challenge the
company’s performance
Marketing Planning
Marketing planning involves choosing marketing strategies that will help the company attain its overall strategic
objectives. A marketing plan should be organised as follows:
Contents of a Marketing Plan
Section
Purpose
Executive Summary
Presents a brief summary of the main goals and recommendations of the plan for management
review, helping top management find the plan’s major points quickly
Current Marketing Situation
Describes the target market and the company’s position in it, including information about
the
market, product performance, competition, and distribution. This section includes the following:
• A market description that defines the market and major segments and then reviews
customer
• needs and factors in the marketing environment that may affect customer purchasing.
• A product review that shows sales, prices, and gross margins of the major products
in the
• product line.
• A review of competition that identifies major competitors and assesses their market
positions
• and strategies for product quality, pricing, distribution, and promotion.
• A review of distribution that evaluates recent sales trends and other developments
in major
• distribution channels.
Threats and Opportunities analysis
Assesses major threats and opportunities that the product might face, helping management
to
anticipate important positive or negative developments that might have an impact on the
firm and
its strategies.
Objectives and Issues
States the marketing objectives that the company would like to attain during the plan’s term
and
discusses key issues that will affect their attainment.
Marketing Strategy
Outlines the broad marketing logic by which the business unit hopes to engage customers,
create
customer value, and build customer relationships, plus the specifics of target markets, positioning, and marketing expenditure levels. How will the company create value for customers in order
to capture value from customers in return? This section also outlines specific strategies for
each
marketing mix element and explains how each responds to the threats, opportunities, and
critical
issues spelled out earlier in the plan
Action Programs
Spells out how marketing strategies will be turned into specific action programs that answer
the
following questions: What will be done? When will it be done? Who will do it? How much
will it
cost?
Budgets
Details a supporting marketing budget that is essentially a projected profit-and-loss statement.
It shows expected revenues and expected costs of production, distribution, and marketing.
The
difference is the projected profit. The budget becomes the basis for materials buying, production
scheduling, personnel planning, and marketing operations
Controls
Outlines the controls that will be used to monitor progress, allow management to review
implementation results, and spot products that are not meeting their goals. It includes
measures of return on marketing investment.
Marketing Implementation
Planning good strategies is only a start toward successful marketing.
➢ Marketing implementation – process that turns marketing plans into marketing actions to accomplish strategic marketing objectives.
- Addresses the who, where, when, and how
- Companies can gain competitive advantages through effective implementation
➢ People at all levels of the marketing system must work together to implement marketing strategies and plans.
Marketing Department Organization
A company must design a marketing organization that can carry out marketing strategies and plans.
➢ A small company might have one person doing all the research, selling, advertising, customer service, and
other marketing world
- Large companies have created a chief marketing officer (CMO) position which heads up the company’s
entire marketing operation and represents marketing on the company’s top management team
➢ Most common form of marketing organization is the functional organization – different marketing activities
are headed by a functional specialist, like sales manager, advertising manager etc.
- Companies selling across countries have geographic organization – assigning sales/marketing people to
specific countries, regions, and districts.
- Companies with different products/brands create a product management organization
- Companies selling one product to consumers with different needs/preferences us a market or customer
management organization
- Companies can also use a combination when selling to different consumers across countries
➢ Companies are more and more shifting their brand management focus towards customer management – managing customer profitability and customer equity
Marketing Control
Since many surprises occur during the implementation of marketing strategies and plans, marketers must control.
➢ Marketing control – evaluating results and taking corrective action to ensure that the objectives are attained.
➢ It involves four steps
1. Set specific marketing goals
2. Measures performance in the marketplace
3. Evaluates the causes of any differences between expected and actual performance
4. Management takes corrective action to close the gaps between goals and performance
➢ Operating control – checking ongoing performance against the annual plan and taking corrective action when
necessary
- Ensuring that the company achieves the goals set out in its annual plan
➢ Strategic control – looking at whether the company’s basic strategies are well matched to its opportunities.
Measuring and Managing Marketing Return on Investment
Marketing managers must ensure that their marketing dollars are being well spent.
➢ Marketing return on investment (Marketing ROI) – measures the profits generated by investments in marketing activities
Net return from a marketng investment
Costs of the marketing investment
-
Marketing ROI can be difficult to measure. A company can assess it in terms of standard marketing
performance measures.
- Companies assemble the measures into marketing dashboards – meaningful sets of marketing
performance measures in a single display used
to monitor strategic marketing performance. It
provides
marketers the detailed measures
needed to assess and adjust their marketing
strategies.
➢ The figure views marketing expenditures as investments that produce returns in the form of more profitable customer engagement and relationships. The
investments result in improved customer value, engagement, and satisfaction, which increase customer
attraction and retention.
- It also increases customer lifetime values and
the firm’s overall customer equity. Increased customer equity, in relation to the cost of the marketing investments , determines return on marketing investment.
Chapter 3 Analyzing the Marketing Environment
A company’s marketing environment – actors and forces outside marketing that affect marketing management’s
ability to build and maintain successful relationships with target customers. By carefully studying the environment,
marketers can adapt their strategies to meet new marketplace challenges and opportunities.
The Microenvironment and Macroenvironment
➢ Microenvironment – actors close to the company that affect its ability to engage and serve its customers.
- Company, suppliers, marketing intermediaries, customer markets, competitors, and public
➢ Macroenvironment – larger societal forces that affect the microenvironment.
- Demographic, economic, natural, technological, political, and cultural forces
The Microenvironment
The figure shows the major actors in the marketer’s
microenvironment. The success of marketing requires building
relationships with all of the actors and forces within this
environment.
The company
➢ Marketing management takes other company groups into
account.
- All departments are interrelated groups which form
the internal environment.
➢ Marketing managers must work closely with all the
departments which share the responsibility for
understanding customer needs and creating customer value.
Suppliers
➢ Form an important link in the company’s overall customer value delivery network.
- Provide resources needed by the company to produce its goods and services.
➢ Marketing managers must watch supply availability and costs, and suppliers should be treated as partners in
creating and delivering customer value
Marketing intermediaries
➢ Marketing intermediaries – help the company promote, sell, and distribute its products to final buyers
- Resellers – distribution channel firms that help the company find customers or make sales to them
- Physical distribution firms – help the company stock and move goods from their points of origin to
customers
- Marketing services agencies – marketing research firms, advertising agencies etc, which help the
company target and promote its products to the right markets
- Financial intermediaries – banks, credit companies, insurance etc, which help finance transactions or
insure against the risks associated with the buying and selling of goods
➢ Marketing intermediaries form an important component of the company’s overall value delivery network.
Competitors
➢ To be successful, a company must provide greater customer value and satisfaction than its competitors.
- Marketers must gain strategic advantages by positioning their offerings strongly against competitors in the
minds of consumers
Publics
➢ Public – an group that has an actual or potential interest in or impact on an organization’s ability to achieve its
objectives. Seven types of publics can be identified.
1. Financial publics – influences the company’s ability to obtain funds
2. Media publics – includes television stations, newspapers, et which carries news, features opinions etc.
3. Government publics – management must take government development into account.
4. Citizen-action publics- decisions may be questioned by consumer organizations, environmental groups etc.
5. Internal publics – includes workers, managers, volunteers, and BOD. A positive attitude spill over externally.
6. General public – the public’s image of the company towards its products/activities
7. Local publics – local community residents/organizations.
Customers
➢ Most important actors in the company’s microenvironment
➢ Aim of the entire value delivery network is to engage target customers and create strong relationships.
- Consumer markets – individuals/household that buy goods and services for personal consumption
- Business markets – buying goods/services for further processing or use in production processes
- Government markets – government agencies buying goods/service to produce public service or transfers
- Reseller markets – buying goods/services to resell at a profit.
- International markets – buyers in other countries
The Macroenvironment
The company and all the other actors operate in a larger
macroenvironment of forces that shape opportunities and pose threats to
the company’s microenvironment. The figure shows the six major forces.
in the company’s macroenvironment.
It consist of Demographic, Economic, Natural, Technological, Political,
and Cultural forces that have an impact on the company.
The Demographic and Economic Environments
The Demographic environment
➢ Demography – study of human populations in terms of size, density, location, age, gender, race, occupation,
and other statistics.
- The demographic environment is of a major interest to markets because it involves people, and people
make up markets.
- Changes have major implications for business, so marketers must keep an eye on developments.
The Changing Age Structure of the Population
The population consists of several generation groups
➢ Baby boomers – people born during the post-World War II baby boom from 1946 – 1964
- Tend to appreciate marketers who appeal to their youthful thinking, rather than their advancing age
- Constitute a lucrative market for financial services, new housing and home remodeling, new cars, travel
and entertainment, eating out, health and fitness products, and just about everything else
➢ Generation X – People born between 1965 and 1980, lie in the shadow of the baby boomers
- Are sensible shoppers who research products heavily before they consider a purchase, prefer quality to
quantity, and tend to be less receptive to overt marketing pitches
- Are more loyal than other generational groups once they have found a brand
➢ Milennials/Generation Y – People born between 1980 and 1996, children of baby boomers.
- Seek authenticity, value, and opportunities to shape their own brand experiences and share them with
others
- Comfortable with digital technology
➢ Generation Z – People born between 1997 – 2012
- Fluency and comfort with digital technologies
- Blend the online and offline worlds seamlessly as they socialize and shop
➢ Generation Alpha – People born after 2012.
- Hold great promises for marketers and will be the most formally educated, most technologically-supplied
and globally wealthiest generation ever.
The Changing American Family
➢ Tradition household = husband, wife, and children
- More people divorcing/separating, choosing not to marry (or marrying later), remarrying, or marrying
without the intention of getting children.
- Marketers must consider the special needs of nontraditional households because they are now growing
more rapidly than traditional household. Each group has distinctive needs and buying habits.
Geographic Shifts in Population
➢ Shift in where people live has cause a shift in where they work
- Marketers are actively courting the lucrative telecommuting market.
Increasing Diversity
➢ Countries vary in their ethnic and racial makeup.
- Marketers face increasingly diverse markets, both at home and abroad, as their operations become more
international in space
- Brands in a wide range of industries are targeting the LGBTQ community with specific ads and marketing
efforts
- Marketers adapt their products and services to meet the needs of consumers with disabilities.
➢ Successful marketers will continue to diversify their marketing programs to take advantage of opportunities in
fast-growing segments
The Economic Environment
➢ Economic environment – economic factors that affect consumer purchasing power and spending patterns.
They can have a dramatic effect on consumer spending and buying behaviour.
- Post-recession era, consumer spending is again on the rise after the recession in 2008-2009.
- Consumers have adopted a back0to-basics sensibility in their lifestyles and spending patterns that will
likely persists for years to come.
- Consumers are looking for greater value in the things they do buy.
➢ Companies in all industries are focusing on value for the money, practicality, and durability in their product
offerings and marketing pitches.
The Natural and Technological Environments
➢
➢
➢
➢
The Natural Environment
Natural environment – physical environment and the natural resources that are needed as inputs by
marketers or that are affected by marketing activities.
- Environmental sustainability concerns have grown steadily over the past several decades.
Some trends in the natural environment are:
- Shortages of raw materials – firms making products that require scarce resources face large cost increases
even if the materials remain available.
- Increased pollution – Companies are stepping up to reduce their environmental footprints in production,
distribution, packaging and many other areas
- Increased government intervention – governments vigorously pursue environmental quality policies that
affect marketing actions.
Environmental sustainability – developing strategies and practices that crate a world economy that the
planet can support indefinitely.
Meeting present needs without compromising the ability of future generations to meet their needs.
The Technological Environment
Technological environment – Forces that create new technologies, creating new product and market
opportunities.
- The unending barrage of digital advances is affecting every aspect of how consumers learn about, shop
for, buy, and experience brands.
- Changes rapidly, creating new markets and opportunities. Every new technology replaces and older one.
- As products and technologies become more complex, the public needs to know that these items are safe.
The Political-Social and Cultural Environments
The Political and Social Environment
➢ Political environment – consists of laws, government agencies, and pressure groups that influence or limit
various organizations and individuals in a given society.
Legislation Regulating Business
➢ Governments develop public policy to guide commerce.
➢ Every marketing activity is subject to a wide range of laws and regulations.
➢ Laws covering issues such as competition, fair-trade practices, environmental protection, product safety, truth
in advertising, consumer privacy, packaging and labeling, pricing, and other important areas
➢ Business legislation has been enacted for a number of reasons.
- Protect companies from each other.
- Protect consumers from unfair business practices.
- Protect the interests of society against unrestrained business behavior.
Increased Emphasis on Ethics and Socially Responsible Actions
Business is also governed by social codes and rules of professional ethics.
➢ Socially Responsible Behavior – seek out ways to protect the long-run interests of their consumers and the
environment
- With issues people can disagree about the right course of action in a given situation. Therefore, companies
are developing code of ethics – guidelines, policies and other responses to complex social responsibility
issues.
➢ Cause-Related Marketing – to exercise the social responsibility and build more positive images, companies
link themselves to worthwhile causes.
- It lets companies “do well by doing good” by linking purchases of the company’s products or services
with benefiting worthwhile causes or charitable organizations.
- Cause-related marketing can make good economic sense for the company since there are now global
consumers which are “belief-driven” buyers who will choose or avoid a brand based on its stand on social
issues.
The Cultural Environment
➢ Cultural environment – consists of institutions and other forces that affect a society’s basic values,
perceptions, preferences, and behaviors.
- People grow up in a particular society that shapes their basic beliefs and values.
➢ Cultural characteristics can affect marketing decisions making.
The Persistence of Cultural Values
➢ The core beliefs and values have a high degree of persistence. They are passed on from parents to children and
are reinforced by schools, business, religious institutions, and government
➢ Secondary beliefs and values are more open to change.
- Believing in marriage = core belief, believing people should get married early in life = secondary belief
➢ Marketers have some chance of changing secondary values but little chance of changing core values.
Shifts in Secondary Cultural Values
➢ Marketers want to predict cultural shifts to spot new opportunities or threats.
➢ The major cultural values of a society are expresses in people’s views of themselves and others as well as int
her views of organizations, society, nature, and the universe
- People’s Views of Themselves – Some people seek personal pleasure, wanting fun etc. Others seek selfrealization through religion, recreation. Some people see themselves as sharers and joiners. Others see
themselves as individualists.
• People use products, brands, and services as a means of self-expression, and they buy products
and services that match their views of themselves.
• Marketers can position their brands to appeal to specific self-view segments.
- People’s Views of Others – Digital technologies seem to be allowing people to connect more than ever.
Groups of people may sit or walk in their own bubbles, intensely connected to tiny screens and keyboards.
• This new way of interacting strongly affects how companies market their brands and
communicate with customers. Consumers increasingly tap digitally into networks of friends and
online brand communities to learn about and buy products and to shape and share brand
experiences.
- People’s Views of Organizations – People vary in their attitudes toward corporations, government
agencies, trade unions, universities, and other organizations.
• Many people today see work not as a source of satisfaction but as a required chore to earn money
to enjoy their nonwork hours.
• This trend suggests that organizations need to find new ways to win consumer and employee
confidence.
- People’s Views of Society – People vary in their attitudes toward their society. Patriots defend it,
reformers want to change it, and malcontents want to leave it.
• Companies can run patriotic advertising, such marketing efforts are tasteful and well received but
also tricky. Flag-waving promotions can be viewed as corny or as token attempts to cash in on the
nation’s emotions
- People’s Views on Nature – People vary in their attitudes toward the natural world. Some feel ruled by it,
others feel in harmony with it, and still others seek to master it
• A long-term trend is people’s growing mastery over nature through technology. Recently, people
developed a view that nature is finite and fragile.
• This new development has created a sizable market of consumers how seek out everything from
natural, organic, and nutritional products to fuel-efficient cars and alternative medicines.
- People’s Views of the Universe – People vary in their beliefs about the origins of the universe and their
place in it.
• Religious conviction and practice have been dropping off through the years. Some futurist have
noted a renewed interest in spirituality, as a part of a broader search for a new inner purpose.
• The changing spiritualism affects consumers in everything from the television shows they watch
and the books they read to the products and services they buy.
Responding to the Marketing Environment
Many companies view the marketing environment as “an uncontrollable element to which they must react and adapt”.
Some companies take a proactive stance and develop strategies to change the environment. They also take aggressive
actions to affect the publics and forces in their marketing environment. By taken action, they often overcome
seemingly uncontrollable environmental events.
Marketing Management cannot always control environmental forces. IN many cases, it must settle for simply
watching and reacting to the environment. Whenever possible, smart marketing management takes a proactive rather
than reactive approach to the marketing environment.
Chapter 5 Consumer Markets and Buyer Behavior
➢ Consumer buyer behavior – buying behavior of final consumers, individuals and households that buy goods
and services for personal consumption.
➢ Consumer market – all of the final consumers combined.
Consumers around the world vary tremendously in age, income, education level, and tastes.
Model of Consumer Behavior
➢ Consumers make many buying decisions every day, and they are the focal point of the marketer’s effort.
- Large companies research consumer buying decisions in great detail.
- Often, consumers do not know exactly what influences their purchases.
➢ The central question for marketers is “How do consumers respond to various marketing efforts the company
might use?”. The starting point is the stimulus-response model of buyer behavior, shown in the figure.
- Marketers want to understand how the stimuli are changed into responses inside the consumer’s black
box.
Characteristics Affecting Consumer Behavior
Consumer purchases are influence strongly by cultural, social, personal, and psychological characteristics.
Cultural Factors
➢ Cultural factors exert a broad and deep influence on consumer behavior.
➢ Marketers need to understand the role played by the buyer’s culture, subculture, and social class.
Culture
➢ Culture – basic cause of a person’s wants and behavior.
- Every group or society has a culture, and cultural influences on buying behavior may vary greatly from
both county to county and from country to country.
➢ Marketers are always trying to spot cultural shifts to discover new products that might be wanted.
Subculture
➢ Subcultures – groups of people with shared value systems based on common life experiences and situations.
Each culture contains smaller subcultures.
- Include nationalities, religions, racial groups, and geographic regions.
➢ Subcultures make up important market segments, and marketers often design products and marketing
programs tailored to their needs.
➢ Three important subcultures are.
- Hispanic American Consumers – Hispanic represents a large, fast-growing market. They share many
characteristics and behaviors with the mainstream buying public, but also have distinct differences.
• They tend to be deeply family oriented and make shopping a family affair.
• They are more active on mobile and social networks than other segments, making digital media
ideal for reaching this segment.
- African American Consumers – African American population is growing in affluence and sophistication.
• They are more price conscious than other segments, but are strongly motivated by quality and selection.
• They tend to pressure business to do and be better, and are also heavy users of social media.
- Asian American Consumers – Asian Americans are most affluent demographic segment.
• They are a diverse group and speak many different languages.
• They shop frequently and are the most brand conscious of all the ethnic groups and can be
fiercely brand loyal, especially to brands working to build relationships with them.
Total Marketing Strategy
➢ Total market strategy – practice of integrating ethnic themes and cross-cultural perspectives within their
mainstream marketing.
- A total market approach appeals to consumer similarities across subcultural segments rather than differences.
Social Class
➢ Social classes – society’s relatively permanent and ordered divisions whose members share similar values,
interests, and behaviors.
➢ Upper-upper class, lower-upper class, upper-middle class, middle class, working class, upper-lower class, and
lower-lower class.
- It is not determined by a single factor, such as income, but is measured as a combination of occupation,
income, education, wealth, and other variables.
➢ Marketers are interest in social classes because people within a given social class tend to exhibit similar buying behavior. They show distinct product and brand preferences.
Social Factors
A consumer’s behavior is also influenced by social factors.
Groups, Social Networks, and Influencer Marketing
Many groups influence a person’s behavior.
➢ Membership groups – groups that have a direct influence and to which a person belongs.
➢ Reference groups – serve as (in)direct points of comparisons or reference in forming a person’s attitude or
behavior.
- Expose a person to new behaviors/lifestyle, influence their attitudes and self-concept, and create pressures
to conform that may affect the person’s product and brand choices.
- Marketers subjected to strong group influence must figure out how to reach opinion leaders – people
within a reference group who exert social influence on others.
➢ Worth-of-mouth influence – words and recommendations of trusted friends, family, associates which tend to
be more credible than those coming from commercial sources.
- These influences happen naturally.
➢ Influencer marketing – enlisting established influencers or creating new influencers to spread the word.
- Marketers can also shape influence by tapping into online social networks – online communities where
people socialize or exchange information and opinions.
Family
➢ Family is the most important membership reference group and consumer buying organization in society.
- Thus, marketers are interested in the roles and influence of the family members.
➢ Shifting roles signal a new marketing reality and marketers in industries that have traditionally been selling to
only women/men are now carefully targeting the opposite sex.
➢ Children have an influence on food, entertainment, electronic, vacations etc from 10 years old.
Roles and Status
➢ A person’s position in each group can be defined in terms of both role and status.
- A role – activities people are expected to perform according to the people around them.
- Status – each role has one and reflects the general esteem given to it by society.
➢ People usually choose products appropriate to their roles and status.
Personal Factors
Occupation
➢ A person’s occupation affects the goods and services bought. Blue-collar workers buy more rugged work
clothes, and executives buy more business suits
➢ Marketers try to identify the occupational groups that have an above-average interest in their products and
services. A company can also specialize in making their products needed for a given occupational group.
Age and Life Stage
➢ People change goods and services they buy over their lifetimes. Life-stage changes usually result from
demographics and life-changing events.
➢ Marketers often define their target markets in terms of life-cycle stage and develop appropriate products and
marketing plans for each stage.
➢ Life-stage segmentation provides a powerful marketing tool for marketers in all industries to better find,
understand, and engage consumers.
Lifestyle
➢ Lifestyle – a person’s pattern of living as expressed in his or her psychographics.
- Involves measuring consumers’ major AIO dimensions – activities (work, hobbies etc.), interests (food,
fashion, family etc.), opinions (themselves, social issues, products)
➢ Lifestyle concept can help marketers can help marketers understand changing consumer values and how they
affect buyer behavior.
- Consumers do not just buy products; they buy the values and how they affect buyer behavior.
Personality and Self-Concept
➢ Personality – unique psychological characteristics that distinguish a person or group.
- Described in terms of traits such as self-confidence, dominance, sociability, autonomy, defensiveness,
adaptability, and aggressiveness.
➢ Brands also have probabilities, and consumers are likely to choose brands with personalities that match.
- Brand personality – specific mix of human traits that may be attributed to a particular brand. Five traits:
• Sincerity – down-to-earth, honest, wholesome, and cheerful
• Excitement – daring, spirited, imaginative, and up-to-date.
• Competence – reliable, intelligent, successful
• Sophistication – glamorous, upper class, charming
• Ruggedness – outdoorsy, tough
➢ Marketers use a concept related to personality – a person’s self-concept/image. The idea is that people’s
possessions contribute to and reflect their identities. To understand consumer behavior, marketers must first
understand the relationship between consumer self-concept and possessions.
Psychological Factors
A person’s buying choices are further influenced by four major psychological factors.
Motivation
➢ A motive (drive) – need that is sufficiently pressing to direct the person to seek satisfaction.
➢ Two major theories of human motivation:
- Sigmund Freud: - assumed people are largely unconscious about
the real psychological forces shaping their behavior and suggests
that a person’s buying decisions are affected by subconscious
motives that even the buyer may not fully understand.
- Abraham Buy – explained why people are driven by particular
needs at particular times. Human needs are arranged in a
hierarchy, shown in the figure, including psychological needs,
safety needs, social needs, esteem needs, and self-actualization
needs.
➢ Consumers often don’t know or can’t describe why they act as they
do. Companies employ teams of psychologists, anthropologists and
other social scientists to carry out motivation research that probes the
subconscious motivations underlying consumers’ emotions and
behaviors toward brands.
Perception
➢ Perception – process by which people select, organize, and interpret information to form a meaningful picture
of the world.
➢ People can form different perceptions of the same stimulus because of three perceptions:
- Selective attention – tendency for people to screen out most of the information to which they are exposed.
- Selective distortion- tendency of people to interpret information in a way that supports what they already
believe
- Selective retention – consumers are likely to remember good points made about a brand they favor and
forget good points made about competing brands
➢ Consumers worry that they will be affected by marketing messages without even knowing it – subliminal
advertising. Numerous studies by psychologists have found little or no link between subliminal messages and
consumer behavior.
- Subliminal messages might be able to affect the behavior of smart devise without consumers knowing.
Learning
➢ Learning – changes in an individual’s behavior arising from experience. It occurs through the interplay of.
- Drive – strong internal stimulus that calls for actin.
- Stimulus object – a drive which becomes a motive when it is directed toward a particular stimulus object.
- Cues – minor stimuli that determine when, where, and how the person responds
- Response – can be determined by cues, response to his/her interest in buying the product
- Reinforcement – If an experience is rewarding, greater change of buying from the same brand next time.
Beliefs and Attitudes
➢ Belief – descriptive thought that a person holds about something. They are based on real knowledge, opinion,
or faith and may or may not carry an emotional charge
- Marketers are interested in the beliefs that people formulate about specific products and services because
the beliefs make up product and brand images that affect buying behavior.
➢ Attitude – a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea.
- A person’s attitude fits into a pattern ‘changing one attitude may require difficult adjustments in others.
- Company should usually try to fit its products into existing attitude patterns rather than attempting to
change them.
Buying Decisions Behavior and the Buyer Decision Process
Types of Buying Decision Behavior
Buying behavior differs greatly for a tube of toothpaste, a
smartphone, financial services and a new car. More complex
decision usually involves more buying participants and more buyer
deliberation. Four types of buying behavior can be identified, as
shown in the figure.
Complex Buying Behavior
➢ Complex buying behavior – when consumers are highly
involved in a purchase and perceive significant differences
among brands.
- Consumer will develop beliefs about the product, then attitudes, and then make a thoughtful purchase
choice.
- Marketers of high-involvement must understand the information-gathering and evaluation behavior of
consumers and help buyers in their learning process, and differentiate their brands features.
Dissonance-Reducing Buying Behavior
➢ Dissonance-reducing buying behavior – consumers are highly involved with an expensive, infrequent, or
risky purchase but see little difference among brands
- Consumers might experience postpurchase dissonance (after-sale discomfort) when they notice certain
disadvantages of the purchased product/brand or hear favorable things about other brands
Habitual Buying Behavior
➢ Habitual Buying Behavior – low-consumer involvement and little significant brand differences.
- Consumers do not search extensively for information about the brands, evaluate brand characteristics, and
make weighty decisions about which brands to buy.
- Marketers of low-involvement products with few brand differences use price and sales promotions to
promote buying.
Variety-Seeking Buying Behavior
➢ Variety-seeking Buying Behavior – low consumer involvement but significant perceived brand differences.
Consumers often do a lot of brand switching.
The Buyer Decision Process
The Buyer Decision Process consists of five stages., and consumers pass through all of them before a purchase.
Need recognition.
➢ Need recognition – buyer recognizes a problem or need.
- Need can be triggered by internal stimuli when one of the person’s normal needs rises to a level of high
enough to become a drive, or by an external stimuli.
- At this stage, 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.
Information Search
➢ Information search – search for information/ads relating to the need of a consumer.
➢ Information can be retained from any of several sources.
- Personal sources – family, friends, neighbor, acquaintances
- Commercial sources – advertising, sales-people, dealer and manufacture web, sites, packaging, displays)
- Public source – mass media, consumer rating organizations, social media, online searches, peer reviews)
- Experiential sources – examining and using the product.
➢ Commercial resources inform the buyer, personal sources legitimize or evaluate products for the buyer.
➢ As more information is obtained, the consumer’s awareness and knowledge of the available brands and
features increase.
Evaluation of Alternatives
➢ Alternative evaluation – how consumers process information to choose among alternative brands.
Consumers do not use a simple and single evaluation process in all buying situations but use several.
➢ How consumers go about evaluating purchase alternatives depends on the individual consumer and the
specific buying situations.
- Marketers should study buyers to find out how they evaluate brand alternatives. If marketers know what
evaluative processes go on, they can take steps to influence the buyer’s decision.
Purchase Decision
➢ Purchase decision – buying the most preferred brand.
➢ Two factors which come between the purchase intention and the purchase decision.
- Attitudes of others
- Unexpected situational factors – may change the purchase intention.
Postpurchase Behavior
➢ Postpurchase behavior – consumers satisfaction after the purchase of a product.
➢ The relationship between consumer’s expectations and the product’s perceived performance determine the
satisfaction of consumers.
- The larger the negative gap, the greater the consumer’s dissatisfaction
➢ Cognitive dissonance – discomfort caused by postpurchase conflict.
- Every product has drawbacks, so consumers feel at least some postpurchase dissonance for every
purchase.
- A company should measure customer satisfaction regularly. It should set up systems that encourage
customers to complain, so the company can learn how well a product is doing and how it can improve.
The Customer Journey
➢ Customer Journey – sum of the ongoing experiences consumers have with a brand. It begins with a
customer’s brand awareness and ends with the customer advocating the brand to others.
- The experiences will shape a consumer’s continuing behavior and attitudes toward the brand.
- Marketers focus not just on what customers do across the stages and touch points in the buying process
but also on understanding and shaping the evolving customer experience.
The Buyer Decision Process for New Products
➢ New product – good, service, or idea that is perceived by some potential customers as new.
➢ Adoption process – mental process through which an individual passes from first learning about an
innovation to final adoption.
- Adoption – decision by an individual to become a regular user of the product.
Stages in the Adoption Process
Consumers go through five stages in the process of adopting a new product.
1. Awareness – the consumer becomes aware of the new product but lacks information about it
2. Interest – the consumer seeks information about the new product.
3. Evaluation – The consumer considers whether trying the new product makes sense.
4. Trial – The consumer tries the new product on a small scale to improve his/her estimate of its value.
5. Adoption – The consumer decides to make full and regular use of the new product
Marketers should think about how to help consumers move through these stages.
Individual Differences in Innovativeness
People differ greatly in their readiness to try new products in a category. Five adopter groups are identified:
1. Early adopters – guided by respect, opinion leaders in their communities and adopt new ideas early but
carefully.
2. Early mainstream – are deliberate, they adopt new ideas before the average person
3. Late mainstream – skeptical, adopt an innovation only after a majority of people have tried it
4. Lagging adopters – tradition bound, suspicious of changes and adopt the innovation only when it has become
something of a tradition itself.
Influence of Product Characteristics on Rate of Adoption
Five characteristics are important in influencing an innovation’s rate of adoption.
1. Relative advantage – degree to which the innovation appears superior to existing products.
2. Compatibility – degree to which the innovation fits the values and experiences of potential consumers.
3. Complexity – degree to which innovation is difficult to understand or use
4. Divisibility – degree to which the innovation may be tried on a limited basis
5. Communicability – degree to which the results of using the innovation can be observed or describe to others.
Chapter 6 Business Markets and Business Buyer Behavior
➢ Business buying behavior – buying behavior of organizations that buy goods and services for use in the
production of other products and services that are sold, rented, or supplied to others.
- Includes the behavior of retailing and wholesaling firms that acquire goods to resell or rent to others at a
profit.
➢ Business buying process – determining which products and services organizations need to purchase and then
find, evaluate, and choose among alternative suppliers and brands.
- Business-to-business (B-to-B) marketers must do their best to understand business markets and business
buyer behavior.
Business markets
➢ The business market is huge and involves far more dollars and items than consumer markets do.
➢ Many sets of business purchase are made for only one set of consumer purchases.
➢ The main difference between consumer and business markets are in market structure and demand, the nature
of the buying unit, and the types of decisions and the decision process involved.
Market Structure and Demand
➢ The business marketer deals with far fewer but far larger buyers.
➢ Business markets have inelastic and more fluctuating demand. The total demand for many business products
is not much affected by price changes.
- The demand also fluctuates more than consumers markets because small changes in demand on consumer
markets can lead to high changes in demand on business markets.
➢ Business demand is derived demand – the demand is ultimately derived from the demand for consumer
goods.
Nature of the Buying Unit
➢ A business purchase involves more decision participants and a more professional purchasing effort.
- Business buying is done by trained purchasing agents, supply managers.
➢ Companies must have well-trained marketers, salespeople, and digital personal to deal with the well-trained,
technology-oriented buyers.
Types of Decisions and the Decision process
➢ Business buyers face more complex buying decisions.
- The buying process tends to be longer and more formalized.
- The buyer and seller are much more dependent on each other.
➢ Relationships between most customers and suppliers have been changing from downright adversarial to close
and chummy.
- Supplier development – systematically developing networks of supplier-partners to ensure a dependable
supply of the products and materials that they use in making their own products or reselling to others.
Business Buyer Behavior
Marketers want to know how business buyers will respond to various marketing stimuli. The model in the figure
shows a buying behavior, with stimuli affecting buying behavior.
➢ Buying activity consists of two major parts; the buying center (all people involved in the buying decision, and
the buying decisions process.
- The parts are influenced by
internal, organizational,
interpersonal, and individual
factors as well as external
environmental factors.
Major Types of Buying Situations.
There are three major types of buying situations:
1. Straight rebuy situation – buyers reorder something without any modifications. Usually handed on a routine
basis by the purchasing department.
- “in” suppliers maintain customer engagement and product and service quality.
- “out” suppliers try finding ways to add value or exploit dissatisfaction so that the buyer considers them
2. Modified rebuy situation – buyer wants to modify product specifications, prices, terms, or suppliers.
- “in” suppliers become nervous and feel pressured to put their best foot forward to protect an account
- “out” suppliers see the situation as an opportunity to make a better offer and gain new business.
3. New task situation – a company buying a product or services for the first time.
- The greater the cost or risk, the larger the number of decision participants and the greater the company’s
efforts to collect information.
• Marketers try to reach as many key buying influences and provides help and information.
- Sale often goes to the firm that engages business customers deeply and provides the most complete system
for meeting a customer’s needs and solving its problems.
• System selling (solution selling) – a key business marketing strategy for winning and holding
accounts.
Participants in the Business Buying Process
➢ Buying center – the decision-making unit of a buying organization, consisting of all individuals and units that
play a role in the business purchase decision-making process.
- Includes all members of the organization who play any of five roles in the purchase decision process:
• Users – members of the organization who will use the product/service. They initiate the buying
proposal and help define product specifications.
• Influencers – help define specifications and also provide information for evaluating alternatives.
Technical personnel are particularly important influencers
• Buyers – formal authority to select the supplier and arrange terms of purchase. Help shaping the
product specifications, and selecting vendors and negotiating. In complex purchases they include
high-level officers participating in the negotiations.
• Deciders – formal or informal power to select or approve the final suppliers. In routine buying,
buyers are often the deciders or at least the approvers.
• Gatekeepers – control the flow of information to others. Include purchasing agents, technical
personnel and personal secretaries.
- The business center is a set of buying roles assumed by different people for different purchases.
➢ The buying center concept presents a major marketing challenge:
- Business marketer must learn who participates in the decision, each participant’s relative influence, and
wat evaluation criteria each decision participant uses.
Major Influences on Business Buyers
➢ Business buyers are subject to many influences when they make their buying decisions.
- Business buyers respond to both economic and personal factors, they react to both reason and emotion.
The figure lists various groups of influences on business buyers: environmental, organizational, interpersonal, and
individual.
➢ Business buyers are heavily influenced by factors in the current/expected economic environment., the supply
of key materials, and technological, political and competitive developments. It also is affected by culture and
customs.
- Organizational factors - are important, each organization has its own objectives, strategies, structure,
systems, and procedures.
- Interpersonal factors – influencing each other.
- Individual factors – are affected by personal characteristics and styles.
The Business Buyer Decision Process
The figure lists the eight stages of the business buyer decisions process.
Problem recognition
➢ Problem recognition – someone in a company recognizes a problem or need that can be met by acquiring a
specific product/service.
- Results from internal or external stimuli. Internally, company might decide to launch a new product that
requires new production equipment and materials. Externally; buyer may get some new ideas via ads,
websites, etc.
- Business marketers often alert customers to potential problems and then show how their products and
services provides solutions
General Need Description
➢ General Need Description – description of the characteristics and quantity of the needed item.
- A team might want to rank the importance of reliability, durability, price, and other attributes desired in
the item.
- Business marketer can help the buyers define their needs and provide information about the value of
different product characteristics.
Product Specification
➢ Product specifications – technical specifications, often with the help of a value analysis engineering team.
- Product value analysis – approach to cost reduction in which components are studies carefully to
determine if they can be redesigned, standardized, or made by less costly methods of production.
- By showing buyers a better way to make an object, outside sellers can turn straight rebuy situations into
new task situations that give them a chance to obtain new business.
Supplier Search
➢ Supplier search – conducted research to find the best vendors.
- The supplier’s task is to get listed in major directories, create a robust online presence, and build a good
reputation in the market place.
- Salespeople should watch for companies in the process of searching for suppliers and make certain that
their firm is considered.
Proposal Solicitation
➢ Proposal Solicitation – buyer invites qualified suppliers to submit proposals
- Business marketers must be skilled in researching, writing, and presenting proposals in response to buyer
proposal solicitations.
- Proposals should be marketing documents, and presentations should inspire confidence and make the
marketer’s company stand out from the competition.
Supplier Selection
➢ Supplier selection – buying center draw up a list of the desired supplier attributes and their relative
importance. The attributes include product/service quality, price, on-time delivery, honest communication.
- Buyers may attempt to negotiate with preferred suppliers for better prices and terms before making a final
selection.
- Supplier development managers want to develop a full network of supplier-partners that can help the
company bring more value to its customers.
Order-Routine Specification
➢ Order-routine specification – includes the final order with the chosen supplier(s) and lists items.
- Large companies practice vendor-managed inventory, in which they turn over ordering and inventory
responsibilities to suppliers. Within this system, sales and inventory information is shared.
Performance Review
➢ Performance review – review of supplier performance and contacting users asking them their rate of
satisfaction.
- May lead the buyer to continue, modify, or drop the arrangement.
- Seller’s job is to monitor the same factors used by the buyer to make sure the seller gives expected
satisfaction.
Throughout the various stages of the process, different buying center participants may be involved. It is possible that
stages are repeated, and a customer relationship might involve many different types of purchases ongoing in all stages.
Engaging Business Buyers with Digital and Social Marketing
Two important technology advancements which has changed the B-to-B buying and marketing process are eprocurement and online purchasing and B-to-B digital and social media marketing.
E-procurement and Online Purchasing
➢ E-procurement – online purchasing, which has grown rapidly in recent years.
- Business marketers can connect with customers online to share marketing information, sell products and
services, provide customer support services, and maintain ongoing customer relationships.
- E-procurement can be done in many ways.
• Reverse auctions – purchasing requests are put online and suppliers are invited to bid for the
business.
• Trading exchanges – companies work collectively to facilitate the trading process.
• Company buying sites – site on which companies posts its buying needs and invites bids,
negotiates terms, and places orders.
• Extranet links – links with key suppliers, created direct procurement accounts with suppliers.
➢ Business-to-Business procurement comes with many benefits.
- Shaves transaction costs and results in more efficient purchasing for both buyers and suppliers.
- Reduces time between order and delivery, and eliminates the paperwork associated with traditional
requisition and ordering procedures.
- Helps organization to keep track of all purchases
- Frees purchasing people from a lot of drudgery and paperwork.
➢ The rapidly expanding use of e=procurement also comes with some problems.
- It can erode decades-old customer-supplier relationships
- Buyers use the power of the internet to pit suppliers against one another and search out better deals,
products, and turnaround times on a purchase-by-purchase basis.
Business-to-Business Digital and Social Media Marketing
➢ B-to-B digital and social media marketing – approaches to engage business customers and manage
customer relationships anywhere, any time.
- Plays an important role in engaging the always-connected business buyers.
➢ B-to-B marketers must know that they are not targeting businesses, but individuals in those business who
affect buying decisions.
- A common mistake is assuming that today’s digital and social media are useful primarily to consumer
products and services companies. Digital platforms can be powerful tools for engaging customers and
other important publics in every industry.
Institutional and Government Markets
Institutional Markets
➢ Institutional market – consist of schools, hospitals, nursing homes, prisons, and other institutions that
provide goods and services to people in their care.
- They are characterized by low budgets and captive patrons.
- Many marketers set up separate divisions to meet the ‘special’ characteristics and needs of institutional
buyers.
Government Markets
➢ Government market – governmental units – federal, state, and local – that purchase or rent goods and
services for carrying out the main functions of government.
- Offers large opportunities for many companies.
- Government organization typically require suppliers to submit bids, and normally award the contract to
the lowest bidder.
- Government organizations tend to favor domestic suppliers over foreign suppliers.
- Government buyers are affected by environmental, organizational, interpersonal, and individual factors.
➢ Government spending decisions are subject to public review
- Government organizations require considerable documentation from suppliers.
➢ Many companies that sell to the government have not been very marketing oriented.
- Total government spending is determined by elected officials rather than by any marketing effort to
develop a certain market.
- Government buying has emphasized price, making suppliers invest their effort in technology to bring
costs down.
Chapter 7 Customer Vale-Driven Marketing Strategy
Most companies have moved away from mass marketing toward target marketing; identifying market segments,
selecting one or more of them, and developing products and marketing programs tailored to each.
Marketing Strategy
The figure shows the four steps in designing a customer value-driven marketing strategy. In the first two steps, a company selects customers it will serve:
1. Market segmentation – dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes.
2. Market targeting – evaluating each market segment’s attractiveness and selecting one or more market segments to enter.
The final two steps consist of deciding on a value proposition, how a company will create value for their customers:
3. Differentiation – differentiating the firm’s market offering to create superior customer value.
4. Positioning – arranging for a market offering to occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
Market Segmentation
Through market segmentation, companies divide large, diverse markets into smaller segments that can be reached
more efficiently and effectively.
Segmenting Consumer Markets
The table shows variables which might be used in segmenting consumer markets.
Segmentation Variable
Examples
Geographic
Nations, regions, states, neighborhoods, cities
Demographic
Age, life cycle, gender, income, occupation, religion
Psychographic
Lifestyle, personality
Behavioral
Occasions, benefits, user status, usage rate, loyalty
Geographic Segmentation
➢ Geographic segmentation – dividing the market into different geographical units, such as nations.
- Companies operating in one or few areas pay attention to geographical differences in needs and wants.
- Companies are localizing products, services, advertising, promotion, and sales efforts to fit the needs of
individual regions, cities, and other localities
➢ Hyperlocal social marketing – location-based targeting to consumers in local communities or neighborhoods
using digital and social media.
Demographic segmentation
➢ Demographic segmentation – divides the market into segments based on variables such as age, income,
occupation
- Consumer needs, wants, and usage rates often vary closely with demographic variables.
- Demographic variables are easy to measure and are often used in combination with other variables.
➢ Age and life-cycle segmentation – offering different products or using different marketing approaches for
different age and life-cycle groups.
- Companies must be careful with stereotyping.
➢ Gender Segmentation – dividing a market into different segments based on gender
- Brands that have traditionally targeted women are now also targeting men, and the other way around
➢ Income segmentation – Dividing a market into different income segments.
- Companies target affluent consumers with luxury goods and convenience services, but not all.
Psychographic segmentation
➢ Psychographic segmentation – divides buyer into different segments based on lifestyle or personality characteristics
- Companies might use personalized offers, message, and media plans for each segment.
Behavioral Segmentation
➢ Behavioral segmentation – divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product.
- Many marketers believe that behavioral segmentation is the starting point for building segments.
➢ Occasion segmentation – dividing the market into segment according to occasions when buyers get the idea
to buy, actually make their purchase, or use the purchased item.
- Can help brands building up usage.
- Some brands try to boost consumption by promoting usage during nontraditional occasions.
➢ Benefit segmentation – dividing the market into segments according to the different benefits that consumers
seek from the product
- Requires finding the major benefits people look for in a product class, the kinds of people who look for
each benefit, and the major brands that deliver each benefit.
➢ User Status – markets can be segmented into 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 - markets segmented into 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
➢ Loyalty Status – market segmented by consumer loyalty.
- Consumers can be completely loyal, somewhat loyal, or not loyal at all.
- Companies might put loyalists to work for the brand.
- Companies can study its less-loyal buyers and detect which brands are most competitive with its own
Using Multiple Segmentation Bases
➢ Marketers rarely limit their segmentation analysis to only one or a few variables.
➢ Systems can help marketers to segment people and locations into marketable groups of like-minded consumers.
- This rich segmentations can help companies with identifying and understanding key customer segments,
reach them more efficiently, and tailor market offerings and messages to their specific needs.
Segmenting Business Markets
Consumers and business marketers use many of the same variables to segment their markets. However, business marketers use some additional variables such as; customer operating characteristics, purchasing approaches, situational
factors and personal characteristics.
➢ Almost every company serves at least some business markets.
➢ Companies establish separate systems for dealing with larger or multiple-location customers.
Segmenting International Markets
Few companies have either the resources or the will to operate in most countries in the world.
➢ Companies can segment international markets using one or a combination of several variables
- Countries can be segmented by:
• Geographic location – grouping countries by regions.
• Economic factors – income levels, overall level of economic development
• Political and legal factors – type/stability of government, monetary regulations
• Cultural factors – common languages, values and attitudes, customs and behavioral patterns
➢ Segmenting international markets using multiple variables indicates that segments should consists of clusters
of countries.
- Intermarket segmentation (cross-market segmentation) – forming segments of consumers who have
similar needs and buying behaviors even though they are located in different countries.
Requirements for Effective Segmentation
Not all segmentations are effective. To be useful, segments must be:
➢ Measurable – size, purchasing power, and profiles of the segments can be measured.
➢ Accessible – the market segments can be effectively reached and served
➢ Substantial – the market segments are large or profitable enough to serve. A segment should be the largest
possible homogeneous group worth pursuing.
➢ Differentiable – the segments are conceptually distinguishable and respond differently to different marketing
mix elements and programs
➢ Actionable – Effective programs can be designed for attracting and serving the segments.
Market Targeting
After the market segmentation, a firm has to evaluate the various segments and decide how many and which segments
it can serve best.
Evaluating Market Segments
In evaluation different market segments, a firm must look at three factors:
1. Segment size and growth – a company wants to select segments that have the right size and growth characteristics.
2. Segment structural attractiveness – taking into account the existing competitors, the ease for new entrants,
potential substitute products, and the relative power of buyers and suppliers can make a market less attractive.
3. Company objectives and resources – Segments must meet with the company’s long-run objectives and a company needs to possess the skills and resources needed to success in an attractive segment.
Selecting Target Market Segments
After evaluating, a company must decide which and how many segments it will target.
➢ Target market – set of buyers who share common needs or characteristics that a company decides to serve.
- Companies can target very broadly (undifferentiated marketing), very narrowly (micromarketing), or
somewhere in between (differentiated or concentrated marketing). These are all market-coverage strategies.
Undifferentiated marketing
➢ Undifferentiated marketing (mass marketing) – strategy where a firm decides to ignore market segment
differences and go after the whole market with one offer
- Focuses on what is common in the needs of consumers rather than on what is different.
- Company designs a product and a marketing program that will appeal the largest number of buyers
Differentiated marketing.
➢ Differentiated marketing (segmented marketing) – strategy where a firm targets several market segments
and designs separate offers for each.
- Companies hope for higher sales and a stronger position within each market segment
- Increases the costs of doing business.
Concentrated marketing
➢ Concentrated marketing (niche marketing) – strategy in which a firm goes after a large share of one or a
few segments or niches
- Firms achieve a strong market position due to its greater knowledge of consumer needs in the niches it
serves and the special reputation it acquires
- It can market more effectively (fine-tuning products) and efficiently (targeting its product)
- Can be highly profitable, giving nichers an advantage in their corners of the market, but it involves
higher-than-normal risks.
Micromarketing
➢ Micromarketing – tailoring products and marketing programs to the needs and wants of specific individuals
and local customer segments
- Micro marketers see the individual in every customer
➢ Local marketing – tailoring brands and marketing to the needs and wants of local customer segments – cities,
neigborhoods, and even specific stores.
- Can drive up manufacturing and marketing costs by reducing the economies of scale.
➢ Individual marketing – tailoring products and marketing programs to the needs and preferences of individual
customers
- Marketers also personalize advertising, messages, marketing offers, and service encounters on a one-toone basis
Choosing a Targeting Strategy
Companies need to consider a couple of factors when choosing a market-targeting strategy:
➢ Companies resources – firms with limited resources fits best with concentrated marketing
➢ Degree of product variability – undifferentiated marketing is more suited for uniform products
➢ Product’s life-cycle stage – when introducing a new product, concentrated/undifferentiated makes sense
➢ Market variability – buyers with the same taste, undifferentiated marketing
➢ Competitor’s marketing – firms can gain an advantage choosing a more suitable strategy
Socially Responsible Target Marketing
➢ Target marketing sometimes generates controversy and concern
- Biggest issue involves targeting of vulnerable or disadvantaged consumers with controversial or
potentially harmful products
• Children are seen as an especially vulnerable audience.
➢ Controversies arise when marketers attempt to profit at the expense of targeted segments, when they unfairly
target vulnerable segments or target them with questionable products or tactics.
➢ Socially Responsible Target Marketing calls for segmentation and targeting that
serve not just the interests of the company but also the interests of those
targeted.
Differentiation and Positioning
➢ Product position – the way a product is defined by consumers on important
attributes, the place it occupies in consumers’ minds relative to competing products
- Products are made in factories, but brands happen in the mind of consumers
- Marketers must plan positions that will give their products the greatest advantage in selected target markets, and they must design marketing mixes
to create these planned positions.
Positioning Maps
For planning the differentiation/positioning strategies, marketers often prepare perceptual positioning map that shows
consumer perceptions of their brands versus those of competing products on important buying dimensions.
Choosing a Differentiation and Positioning Strategy
In many cases, two or more firms will go after the same position.
➢ Each firm must differentiate its offer by building a unique bundle of benefits that appeal to a substantial group
within the segment.
- The differentiation and positioning tasks consists of three steps: identifying a set of differentiating competitive advantages on which to build a position, choosing the right competitive advantages, and selecting
an overall positioning strategy. Then a company must effectively communicate and deliver the chosen
position to the market
Identifying Possible Value Differences and Competitive Advantages
➢ Competitive advantage – advantage over competitors gained by offering greater customer value either by
having lower prices or providing more benefits that justify higher prices.
- gains this advantage to the extent that a company can differentiate and position itself as providing superior
customer value.
➢ Companies can differentiate along the lines of product, services, channels, people or image.
- Product differentiation – brands can be differentiated on features, performance, or style and design
- Service differentiation – speedy, convenient service
- Channel differentiation – way of designing channel’s coverage, expertise, and performance
- People differentiation – hiring and training better people than competitors do
- Image differentiation – conveying a product’s distinctive benefits and positioning.
Choosing the Right Competitive Advantage
➢ How many Differences to Promote
- Company should develop a unique selling proposition (USP) for each brand and stick to it.
- If two or more firms claim to be the best on the same attribute, it is necessary to position a firm on more
than one differentiator
➢ Which Differences to promote:
- A difference is wort establishing to the extent that it satisfies the following criteria’s
• Important – difference delivers a highly valued benefit to target buyers
• Distinctive – competitors do not offer the difference, or it can be offered more distinctively
• Superior – difference is superior to other ways that customers might obtain the same benefit
• Communicable – difference is communicable and visible to buyers
• Preemptive – Competitors cannot easily cope the difference
• Affordable- buyers can afford to pay for the difference
• Profitable – company can introduce ethe difference profitably
Choosing competitive advantages on which to position a product/service can be difficult, yet such choices are crucial
to success.
Selecting an Overall Positioning Strategy
➢ Value proposition – the full positioning of a brand, the full mix of benefits
on which it is positioned and differentiated.
➢ The figure shows possible value propositions on which a company might
position its products.
- Red cells at the lower left, represent losing value propositions.
- Central cell represents at best a marginal proposition.
- Green cells represent winning value propositions which gives the company competitive advantage.
• More-for-more involves providing the most upscale product or
service and charging a higher price to cover the higher costs.
• More for the same involves positioning of a brand as offering
more for the same price
• More for less offering more for a lower price, not sustainable
• The same for Less involves offering the same for a good deal, deep discounts based on superior
purchasing power and lower-cost operations
• Less for Much Less meeting consumers’ lower performance or quality requirements at a much
lower price
Developing a Positioning Statement
➢ Positioning statement – a statement that summarizes company or brand positioning using this form; To (target segment and need) our (brand) is (concept) that (point of difference).
Communicating and Delivering the Chosen Position
➢ Company must take strong steps to deliver and communicate the desired position to its target consumers.
➢ Company must also deliver its communicated position.
- Designing the marketing mix involves working out the tactical details of the positioning strategy.
➢ Once a company has built the desired position, it must take care to maintain the position through consistent
performance and communication.
- Closely monitoring and adapting the position over tie to match changes in consumer needs and competitor’s strategies.
- A product’s position should devolve gradually as it adapts to the ever-changing marketing environment.
Chapter 18 Creating Competitive Advantage
Competitive advantage is the advantage over competitors gained by offering consumers greater value. Competitive
market strategies involve:
➢ Competitor analysis – process of identifying key competitors, assessing their objectives, strategies, strengths
and weaknesses, and reaction patterns, and selecting which competitors to attack or to avoid.
➢ Competitive market analysis – strategies that strongly position the company against competitors and give it
the greatest possible competitive advantage.
Competitor Analysis
A company needs to find out all it can about its competitors, to plan effective marketing strategies. The competitor
analysis involves identifying, assessing and selecting competitors.
Identifying Competitors
➢ At the narrowest level, a company can define its competitors as other companies offering similar products and
services to the same customers at similar prices.
- Companies actually face a much wider range of competitors, as it might define its competitors as all firms
with the same product or class of products or supply the same service.
- Competitors might include all companies that compete for the same consumer dollars.
➢ Companies must avoid “competitor myopia”, because a company is more likely to be “buried” by its latent
competitors than its current ones
➢ Companies can identify their competitors from a:
- Industry point of view – oil industry, pharmaceutical industry, etc.
- Market point of view – define competitors as companies trying to satisfy the same customer need or build
relationships with the same customer group.
➢ The market concept of competition opens the company’s eyes to a broader set of actual/potential competitors.
Assessing Competitors
After identifying the main competitors, the marketing management must ask:
➢ What are the competitors’ objectives?
➢ What does each seek in the marketplace?
➢ What is each competitor’s strategy?
➢ What are various competitors’ strengths/weaknesses, and how will each react to actions the company takes?
Determining Competitors’ Objectives
The company wants to know the relative importance that a competitor places on current profitability, market share
growth, cash flow, technological leadership, service leadership, and other goals. This reveals whether the competitors
are satisfied with its current situation and how it might react to different competitive actions.
A company also must monitor its competitors’ objects for various segments.
Identifying Competitors’ Strategies
➢ Strategic group – a group of firms in an industry following the same or a similar strategy in a given target
market.
- Competition is most intense within a strategic group, but there is also rivalry among groups.
• Some strategic groups may appeal to overlapping customer segments.
• Customers may not see much difference in the offers of different groups
• Members of one strategic group might expand into new strategy segments.
- A company must understand how each competitor delivers value to its customers, so it needs to know
each competitor’s product quality, features, and mix, consumer services, pricing policy, distribution coverage, sales force strategy, advertising, and online content programs.
Assessing Competitor’s Strengths and Weaknesses
➢ Marketers need to carefully assess each competitor’s strengths and weaknesses to answer a critical question;
- What can our competitors do?
- First, companies can collect data on each competitor’s goals, strategies, and performance in past years.
- Companies usually learn about strengths and weaknesses through secondary data, personal experience,
and worth of mouth
➢ Benchmarking – comparing the company’s products and processes to those of competitors or leading firms in
other industries to identify best practices and find ways to improve quality and performance.
- A powerful tool for increasing a company’s competitiveness.
Estimating Competitors’ Reactions
Marketers want to know; “What will our competitors do?
➢ A company’s strengths and weaknesses suggest likely reactions to company moves, such as price cuts, promotion increases, or new product introductions
- Each competitor has a certain philosophy of doing business, an internal culture and guiding beliefs.
➢ In some industries, competitors live in relative harmony; in others, competitors are more openly combative.
Selecting Competitors to Attack and Avoid
Strong or Weak competitors
➢ Most companies prefer to compete against weak competitors, which requires fewer resources and less time.
- A company might gain little, and sometimes companies cannot avoid larger competitors.
➢ A useful tool for assessing competitors’ strengths and weaknesses
- Customer value analysis – an analysis conducted to determine what benefits target customers value and
how they rate the relative values of various competitor’s offers
• Firstly, the company identifies the major attributes that customers value and the importance customers place on its attributes
• Secondly, company assesses its performance against competitors on those valued attributes
➢ Key to competitive advantage is to examine how a company’s offer compares to that of its major competitors
in each customer segment
Good or Bad Competitors
➢ The existence of competitors results in several strategic benefits.
- Competitors may share costs of market and product development and help legitimize new technologies
- Competitors may serve less-attractive segments or lead to more product differentiation
- Competitors may help increase total demand.
➢ Not all competitors can be beneficial.
- An industry contains good and bad competitors.
• Bad competitors break the rules and try to buy shar rather than earn it, take larger risks, and play
by their own rules
Finding Uncontested Market Spaces
Many companies seek out unoccupied positions in uncontested market spaces.
➢ Companies try to create products and services for which there are no direct competitors
- Called a blue ocean strategy, the goal is to make competition irrelevant.
- This value innovation creates powerful leaps in value for both the firm and its buyers, creating all-new
demand and rendering rivals obsolete.
- By creating blue oceans, companies can largely take rivals out of the picture.
Designing a Competitive Intelligence System
All the main types of information on competitors must be collected, interpreter, distributed and used. Gathering competitive intelligence can cost much money and time, so the company must design a cost-effective intelligence system.
➢ Competitive intelligence system identifies the vital types of competitive information needed and the best
sources of this information.
➢ System continuously collects information from the field.
➢ The system checks the information for validity and reliability, interprets it, and organizes it in an appropriate
way.
➢ The system sends relevant information to decision makers and responds to inquiries form managers about
competitors
Company managers receive timely intelligence about competitors in the form of reports and can connect when they
need to interpret a competitor’s sudden move.
Competitive Strategies
Now, the broad competitive marketing strategies need to be analysed and decided which one the company might use.
Approaches to Marketing Strategy
➢ Each company must determine what makes the most sense given its position in the industry and its objectives,
opportunities, and resources.
➢ Companies differ in how they approach the strategy-planning process.
- Many companies develop formal competitive marketing, while others develop strategies in a less formal
and orderly fashion.
- Approaches to marketing strategy and practice often pass through three stages:
1. Entrepreneurial marketing – companies are started by individuals who live thy their wits. They visualize an
opportunity, construct flexible strategies on the back of envelopes, and knock on every door to gain attention.
2. Formulated marketing – as small companies achieve success, they inevitably move toward more-formulated
marketing. They develop formal marketing strategies and adhere to them closely.
3. Intrapreneurial marketing – large/nature companies get stuck in formulated marketing. They pore over the
lates numbers, scan market research reports, and try to fine-tune their competitive strategies and programs.
“Intrapreneurship” – encouraging employees to be more entrepreneurial within the larger corporation.
➢ Bottom line is there are many approaches to developing effective competitive marketing strategies.
Basic Competitive Strategies
Michael Porter has suggested four basic competitive positioning strategies that companies can follow, three winning
and one losing strategy:
1. Overall cost leadership – company works hard to achieve the lowest production and distribution costs.
2. Differentiation – company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry
3. Focus – company focuses its effort on serving a few market segments well rather than going after the whole
market
4. Middle-of-the-roaders – companies trying to be good on all strategic counts but ending up being not very
good at anything.
Michael Tracey and Fred Wiersema offer a more customer-centered classification of competitive marketing strategies.
They suggest that companies gain leadership positions by delivering superior value to their customers. Companies can
pursue any of three strategies – called value disciplines – for delivering superior customer value:
1. Operational excellence – company provides superior value by leading its industry in price and convenience.
- It works to reduce costs and create a lean and efficient value delivery system
2. Customer intimacy – company provides superior value by precisely segmenting its markets and tailoring its
products or services to exactly match the needs of targeted customers
- Specializes in satisfying unique customer needs through a close relationship with an intimate knowledge
of the customer. Empowers its people to respond quickly to customer needs.
3. Product leadership – company provides superior value by offering a continuous stream of leading-edge products or services.
- Aims to make its own and competing products obsolete.
- Product leaders are open to new ideas, relentlessly pursue new solutions, and work to get new products
Value disciplines defines strategies in terms of the single-minded pursuit of delivering superior value to customers.
Competitive positions
Firms competing in a given target market at any point differ in their objectives and resources. Now, competitive strategies based on the roles
firms play in the target market – leader, challenger, follower, or nicher –
is examined.
➢ Market leader – firm in an industry with the largest market share
➢ Market challenger – runner-up firm that is fighting hard to increase its market share in an industry.
➢ Market follower – runner-up firm that wants to hold its share in an industry without rocking the boat.
➢ Market nicher – firm that serves small segments that the other firms in an industry overlook or ignore
Strategies for market leaders, challengers, followers and nichers
Market leader strategies Market challenger strat- Market follower strateMarket nicher strategies
egies
gies
Expand total market.
Full frontal attack
Follow closely.
By customer, market,
Protect market share.
Indirect attack
Follow at a distance
quality, price, service
Expand market share
Multiple niching
Market Leader Strategies
➢ A leader usually leads the other firms in price changes, new product introductions, distribution coverage, and
promotion spending.
- Leader may or may not be admired.
➢ Market leaders’ life is not easy
- Other firms keep challenging its strengths or trying to take advantage of its weaknesses.
- Leaders can easily miss a turn in the market and plunge into second or third place
➢ Market leaders can choose three strategies, expand total market, protect market share or expand market share
Expanding Total Demand
➢ Can be done by developing new users, new uses, and more usage of its products.
- New users can be found through untapped market segments.
- New uses for the product
- More usage by convincing people to use the product more often or use more per occasion
Protecting Market Share
➢ Leading firm must protect its current business against competitors’ attacks
- Companies must prevent or fix weaknesses that provide opportunities for competitors
- Companies must always fulfill its value promise and work tirelessly to engage valued customers in strong
relationships
- Leaders must “plug holes” so that competitors do not jump in.
➢ The best response is continuous innovation.
- Leading the industry in new products, customer services, distribution effectiveness, promotion, and cost
cutting.
- Keep increasing competitive effectiveness and vale to customers and when attacked by challengers, leaders react decisively
Expanding market share
➢ Companies have sought expanded market shares to improve profitability.
- The gain in profitability depends on the strategy for gaining increased share.
- The cost of buying higher market share may far exceed the returns
Market Challenger Strategies
➢ Runner-uppers in the market can adopt one of two competitive strategies:
- Challenge through aggressive bid for more market share (market challenger)
- Play along with competitors and not rock the boat (market followers)
➢ A challenger must define which competitors to challenge and its strategic objective.
➢ Challengers have a “second mover advantage”
- Challengers often become market leaders by imitating/ improving on the ideas of pioneering processors.
➢ Challenger can also avoid the leader and instead challenge firms its own size or smaller local/regional firms.
➢ The full frontal attack is used by challengers by matching the competitor’s product, advertising,
- The outcome depends on who has the greater strength and endurance.
- Many new market entrants avoid frontal attacks, knowing that market leaders can head them off with ad
blitzes, price wars, and other retaliations.
Market Follower Strategies
➢ A follower can gain many advantages.
- A market leader often bears the huge expenses of developing new products and markets, expanding distribution, and educating the market.
- Followers can learn from the market leader’s experience.
- Followers can copy or improve on the leader’s products and programs with much less investment.
➢ A follower must know how to hold current customers and win a fair share of new ones.
- Finding the right balance between following closely enough to win customers from the leader and following at enough of a distance to avoid retaliation.
➢ Followers should maintain customer value, through either lower costs and prices or higher quality and better
services that justify higher prices.
- Followers must also enter new markets as they open.
Market Nicher Strategies
➢ Market nichers target subsegments
➢ Niching is profitable because the nicher ends up knowing the target customer group so well that it meets their
needs better than other firms that casually sell to that niche.
- Nicher can charge a substantial mark upper costs because of the added value.
➢ Nichers try to find one or more market niches that are safe and profitable.
➢ Niching is specialization.
- Specializing along any of several market, customer, product or marketing mix lines.
- Specialize in serving one type of end user, like law firms specializing in the criminal law markets
- Specialize in serving a given customer-size group, serving small/midsize customers who are neglected by
the majors
- Focus on one or a few specific customers, selling their entire output to a single company.
- Specialize in geographic market, selling only in a certain locality, region, or area of the world.
- Quality-price, operate at the low or high end of the market
- Service nichers, offer services not available from other firms.
➢ Many companies practice multiple niching.
- By developing two or more niches, a company increases its chances for survival.
Balancing Customer and Competitor Orientation
A company must watch its competitors closely and find the competitive marketing strategy that positions it most effectively. The question arises whether the company can spend too much time and energy tracking competitors, damaging its customer orientation? Yes, a company can become so competitor centered that it loses its even more important
focus on maintaining profitable customer relationships.
➢ Competitor-centered company – company whose moves are mainly based on competitors’ actions and reactions.
- Spending most of the time on tracking competitors’ moves and market shares and finding strategies to
counter them.
- Company develops a fighter orientation but becomes too reactive.
➢ Customer-centered company – focuses on customer developments in designing its marketing strategies and
delivering superior value to its target customers.
- Better position to identify new opportunities and set long-run strategies that make sense. It can decide
what customer groups and what emerging needs are the most important to serve
- Can concentrate its resources on delivering superior value to target customers.
➢ Market-centered – paying balanced attention to both customers and competitors in designing its market strategies.
➢ Companies might have four orientations:
1. Product orientation – paying little attention to either customers or competitors.
2. Customer orientation – paying attention to customers
3. Competitor orientation – starting to pay attention to competitors.
4. Market orientation – paying balanced attention to both customers and competitors.