COMM 223: Marketing Management
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COMM 223: Marketing Management
Professor: Alex Zinegyi
Email: alex.zinegyi@concordia.ca
Phone: 514-288-0133
Class: S2.401
MyLab: zinegyi19492
2023-09-06
Class 1: 1 Marketing: Creating Customer Value and Engagement
Objectives:
1. Develop an understanding of basic marketing concepts and how they relate to the real world.
2. Provide an opportunity to analyze real situations via various assignments.
3. Sensitize both future marketers and non-marketers to the challenges and issues marketing people
have to deal with.
1.1 What is Marketing?
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Evolution of Marketing
○ Agrarian societies -> trading societies -> industrial revolution
○ The marketing process began with a large manufacturing capacity.
■ Need to find buyers for surplus stock
■ Need for mass distribution systems to distribute goods
■ Need to find new products to use expanded manufacturing capacity
Marketing is often not clearly understood:
○ Some think of it as just selling
○ Some think of it as just advertising
Marketing: the process by which companies engage customers, build strong customer
relationships, and create customer value in order to capture value from customers in return.
○ It is a process or system of activities by which the organization gets its products/services
into the hands of customers.
○ In this complex process, the seller and customer are linked by a product (or service) that
meets the customer’s needs.
○ So, the essence of marketing is a transaction - an exchange of something of value which
is intended to satisfy human needs at a profit to the firm. Marketing consists of all the
activities designed to facilitate that exchange.
Marketing is…
A total system:
Of organizational activities
Designed to:
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Place, price, promote, and distribute
Some of value:
Want-satisfying goods/services
To the benefit of:
The target market – present and potential
consumers or organizational users
The Marketing Process
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Create value for customers and build customer relationships
1) Understand the market palace and customer needs and wants
2) Design a customer value-driven marketing strategy
3) Construct an integrated marketing program that delivers superior value
4) Engage customers, build profitable relationships, and create customer delight
Capture value from customers in return
5) Capture value from customers to create profits and customer equity
1.2 Understanding the Marketplace and Customer Needs
Customer Needs, Wants, and Demands
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Needs: states of felt deprivation
Wants: the form human needs take as they are shaped by culture and individual personality.
Demands: Human wants that are backed by buying power.
Market Offerings - Products, Services, and Experiences
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Market offerings: some combination of products, services, information, or experiences offered to
a market to satisfy a need or want.
○ Products and services
○ Marketing myopia: the mistake of paying more attention to the specific products a
company offers than to the benefits and experiences produced by these products.
Exchanges and Relationships - Markets
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Exchange: the act of obtaining a desired object from someone by offering something in return.
What is a market?
● Market: the set of all actual and
potential buyers of a product or service.
○ A market is people with
■ Needs and/or wants
■ Money to spend
■ Willingness to spend it
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Definitions:
Marketing is:
The total of what we are talking about.
Selling is:
One part of promotion and promotion is one part of the total marketing system.
Merchandising is:
Product Planning - The internal Company plans to get the right product or service to
the right market at the right time, place, and in the right colours and sizes.
Distribution is:
Market Coverage - The retailing and wholesaling structure - The channels used to get
the products to its markets.
Physical Distribution is:
Material-flow activities such as transportation,
warehousing, and inventory control.
Selling vs. Marketing
Selling Orientation
Marketing Orientation
1. Emphasis is on the product.
2. The company first makes the product and
then figures out how to sell it.
3. Management is sales-volume oriented.
4. Planning is short-run oriented in terms of
today’s products and markets.
1. Emphasis is on the customer’s wants.
2. The company first determines what the
customers want and then figures out how
to make and deliver a product to satisfy
those wants.
3. Management is profit-oriented.
4. Planning is long-run oriented in terms of
new products, tomorrow’s markets, and
future growth.
Evolution of Marketing Management
Concept
Focus
Production
Manufacturing and distribution efficiency
Product
Innovation, quality, performance
Selling
Promotion, hard sell
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Marketing
Customer’s needs at a profit to firm
Societal Marketing
Customer’s needs at a profit plus human
long-term welfare.
Three Foundational Ideas
Marketing Concept
Marketing
orientation
Profitable sales
volume
Coordination of
marketing activities
1.3 Designing a Customer Value-Driven Marketing Strategy and Plan
Customer Value-Driven Marketing Strategy
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Marketing management: the art and science of choosing target markets and building profitable
relationships with them.
○ Marketing manager’s aim is to engage, keep, and grow target customers by creating,
delivering, and communicating superior customer value.
Selecting Customers to Serve
○ Companies do this by dividing the market into segments of customers (market
segmentation) and selecting which segments it will go after (target marketing).
Choosing a Value Proposition
○ How the company will serve targeted customers (how it will differentiate and position
itself in the marketplace).
○ A brand’s value proposition is the set of benefits or values it promises to deliver to
consumers to satisfy their needs.
Marketing Management Orientations
○ Production concept: the idea that consumers will favour products that are available and
highly affordable; therefore, the organization should focus on improving production and
distribution efficiency
○ Product concept: A detailed version of the new product idea stated in meaningful
consumer terms.
○ Selling concept: the idea that consumer will not buy enough of the firm’s products unless
the firm undertakes a large-scale selling and
promotion effort.
○ Marketing concept: a philosophy in which
achieving organizational goal depends on
knowing the needs and wants of target
markets and delivering the desired satifastions better than competitors do.
○ Social marketing concept: The idea that a
company’s marketing decisions should
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consider consumer’s wants, the company’s requirements, consumers’ long-run interests,
and society’s long-run interests.
Concept
Focus
Production
Manufacturing and distribution efficiency
Product
Innovation, quality, performance
Selling
Promotion, hard sell
Marketing
Customer’s needs at a profit to firm
Societal Marketing
Customer’s needs at a profit plus human long-term
welfare.
1.4 Managing Customer Relationships and Capturing Customer Value
Engaging Customers and Managing Customer Relationships
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Customer relationship management: the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfaction
Customer-perceived value: The customer’s evaluation of the difference between all the benefits
and all the costs of a marketing offer relative to those of competing offers.
Customer satisfaction: the extent to which a product’s perceived performance matches a buyer’s
expectations.
Customer-engagement marketing: making the brand a meaningful part of consumers’
conversations and lives by fostering direct and continuous customer involvement in shaping
brand conversations, experiences, and community.
Consumer-generated marketing: brand exchanges created by consumers themselves- both invited
and uninvited- by which consumers are playing an increasing role in shaping their own brand
experiences and those of other consumers.
Partner relationship management: working closely with partners in other company departments
and outside the company to jointly bring greater value to customers.
Capturing Value from Customers
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Creating Customer Loyalty and Retention
○ Customer lifetime value: the value of the entire stream of purchases a customer makes
over a lifetime of patronage.
Growing Share of Customer
○ Share of customer: the portion of the customer’s purchasing that a company gets in its
product categories.
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Building Customer Equity
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Customer equity: the total combined customer lifetime
values of all the company’s customers.
Building the right relationships with the right customers
○ Strangers show low potential profitability and little
projected loyalty. There is little fit between the
company’s offerings and their needs. The
relationship management strategy for these
customers is simple: Don’t invest anything in
them; make money on every transaction.
○ Butterflies are potentially profitable but not loyal. There is a good fit between the
company’s offerings and their needs. However, like real butterflies, we can enjoy them
for only a short while and then they’re gone. An example is stock market investors who
trade shares often and in large amounts but who enjoy hunting out the best deals without
building a regular relationship with any single brokerage company. Efforts to convert
butterflies into loyal customers are rarely successful. Instead, the company should enjoy
the butterflies for the moment.
○ True friends are both profitable and loyal. There is a strong fit between their needs and
the company’s offerings. The firm wants to make continuous relationship investments to
delight these customers and engage, nurture, retain, and grow them. It wants to turn true
friends into true believers, who come back regularly and tell others about their good
experiences with the company.
○ Barnacles are highly loyal but not very profitable. There is a limited fit between their
needs and the company’s offerings. An example is smaller bank customers who bank
regularly but do not generate enough returns to cover the costs of maintaining their
accounts. Like barnacles on the hull of a ship, they create drag. Barnacles are perhaps the
most problematic customers. The company might be able to improve their profitability by
selling them more, raising their fees, or reducing service to them. However, if they cannot
be made profitable, they should be “fired.”
1.5 The Changing Marketing Landscape
Trends Marketers Face
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Use of marketing in the non-profit sector
○ (cause-related marketing; social marketing)
Explosion in information technology
○ (fine tune target marketing; Internet)
Globalization of markets
○ (increased competition; strategic alliances)
Ethics & social responsibility in marketing
○ (truth in advertising; environmentally responsible)
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2023-09-13
Class 2: 3 Analyzing the Marketing Environment
3.1 Microenvironment and Macroenvironment
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Microenvironment: The actors close to the company affect its ability to serve its customers - the
company, the suppliers, marketing intermediaries, customer markets, competitors, and the public.
Macroenvironment: the larger societal forces that affect the microenvironment- demographic,
economic, natural, technological, political, and cultural forces.
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The Microenvironment
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The Company
○ Marketing management takes other company groups into account—groups such as top
management, finance, research and development (R&D), purchasing, operations, human
resources, and accounting
■ All of these interrelated groups form the internal environment.
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Suppliers
○ Suppliers form an important link in the company’s overall customer value delivery
network.
○ They provide the resources needed by the company to produce its goods and services.
○ Supplier problems can seriously affect marketing. Marketing managers must watch
supply availability and costs.
■ Supply shortages or delays, natural disasters, and other events can cost sales in
the short run and damage customer satisfaction in the long run.
■ Rising supply costs may force price increases that can harm the company’s sales
volume.
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Marketing Intermediaries
○ Marketing Intermediaries: firms that help the company promote, sell, and distribute its
products to final buyers.
■ Resellers are distribution channel firms that help the company find customers or
make sales to them.
● This includes wholesalers and retailers that buy and resell merchandise
■ Physical distribution firms help the company stock and move goods from their
points of origin to their destination
■ Marketing services agencies are the marketing research firms, advertising
agencies, media firms, and marketing consulting firms that help the company
target and promote its products to the right markets
■ Financial intermediaries help finance transactions or insure against the risks
associated with the buying and selling of goods
● This includes banks, credit companies, insurance companies, etc.
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Competitors
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The marketing concept states that to be successful, a company must provide greater
customer value and satisfaction than its competitors do.
■ Marketers must do more than adapt to the needs of target customers: they must
gain strategic advantage by positioning their offers strongly against their
competitor’s
■ No single marketing strategy is best for all companies.
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Publics
○ Public: Any group that has an actual or potential interest in or impact on an organization’s
ability to achieve its objectives.
1) Financial Publics: This group influences the company’s ability to obtain funds.
○ Banks, investment analysts, and stockholders are the major financial
publics.
2) Media Publics: This group carries news, features, editorial opinions, and other
content.
○ It includes television stations, newspapers, magazines, blogs, and other
social media.
3) Government Publics: Management must take government developments into
account. Marketers must often consult the company’s lawyers on issues of
product safety, truth in advertising, and other matters.
4) Citizen-action Publics: Its public relations department can help it stay in touch
with consumer and citizen groups.
○ A company’s marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups, and others.
5) Internal Publics: Large companies use newsletters and other means to inform
and motivate their internal publics. When employees feel good about the
companies they work for, this positive attitude spills over to the external publics.
○ This group includes workers, managers, volunteers, and the board of
directors.
6) General Public: A company needs to be concerned about the general public’s
attitude toward its products and activities. The public’s image of the company
affects its buying behaviour.
7) Local Publics: Large companies usually work to become responsible members
of the local communities in which they operate.
○ This group includes local community residents and organizations.
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Customers
○ Most important actors in the company’s microenvironment.
■ The aim of the entire value delivery network is to engage target customers and
create strong relationships with them.
○ The company might target any or all of the five types of customer markets. The company
might target any or all of the five types of customer markets.
1) Consumer markets consist of individuals and households that buy goods and
services for personal consumption.
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2) Business markets buy goods and services for further processing or use in their
production processes.
3) Reseller markets buy goods and services to resell at a profit.
4) Government markets consist of government agencies that buy goods and services
to produce public services or transfer the goods and services to others who need
them.
5) International markets consist of these buyers in other countries, including
consumers, producers, resellers, and governments.
The Macroenvironment
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3.2 Demographic and Economic Environments
The Demographic Environment
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Demography: the study of human populations in terms of size, density, location, age, gender, race,
occupation, and other statistics.
The Changing Age Structure of the Population
● The Baby Boomers
○ Baby Boomers: The 9.4 million people born during the years following World War II and
lasting until 1965.
■ 1946-1965
○ Wealthiest generation in Canadian history.
■ Today’s baby boomers account for over 25 percent of the Canadian population
but still control the highest spending power of any age cohort.
○ However, thinking of older boomers as phasing out or slowing down would be a mistake.
Rather than viewing themselves that way, many of today’s boomers see themselves as
entering new life phases.
○ Contrary to the popular belief that they are staid in their ways, one recent survey found
that 82 percent of boomers are open to new brands. Anything but tech-phobic, boomers
are also digitally active and increasingly social media savvy. Some 70 percent of baby
boomers now use mobile internet.
● Generation X
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The baby boom was followed by a “birth dearth,” creating another generation of people –
numbering 7.2 million in Canada – born between 1966 and 1980.
■ Generation X: the 55 million people born between 1965 and 1980 in the “birth
dearth” following the baby
○ Considerably smaller than the boomer generation that precedes them and the millennials
who follow, the Generation Xers are a sometimes-overlooked “in-between” consumer
group.
○ For many of the Gen Xers who are parents and homeowners, family comes first—both
children and their aging parents—and career second.
○ From a marketing standpoint, the Gen Xers are a more skeptical bunch.
■ They 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.
■ But once they find a brand, they tend to be more loyal than other generational
groups.
■ They are more receptive to irreverent ad pitches that make fun of convention and
tradition.
■ Many Gen Xers grew up before the internet and adapted to digital technology
during young adulthood.
○ The Gen Xers, now in their 40s and early 50s, have grown up and are taking over. They
have increasingly displaced the lifestyles, culture, and values of the baby boomers. They
are firmly into their careers, and many are proud homeowners with growing families.
They are the most educated generation to date, and they possess hefty annual purchasing
power.
Millennials
○ Millennial (or Generation Y): the 8.6 million children of the baby boomers born between
1981 and 1997.
○ By their numbers, the 20- to 30-something millennials wield substantial buying power
and make up a huge and attractive market, both now and in the future.
○ One thing that all millennials have in common is their comfort with digital technology.
They don’t just embrace technology; it’s a way of life. The millennials were the first
generation to grow up in a world filled with computers, mobile phones, satellite TV,
iPods and iPads, and online social media. As a result, they engage with brands in an
entirely new way, such as with mobile or social media.
○ More than sales pitches from marketers, millennials seek authenticity, value, and
opportunities to shape their own brand experiences and share them with others.
Compared with other generational groups, they tend to be frugal, practical, connected,
mobile, and impatient.
Generation Z
○ Generation Z: People born between 1998 and 2016 who make up the kid, tween, and teen
markets.
○ The oldest of this market is now entering adulthood. One U.S. study estimated that
Generation Z spends an estimated US$43 billion to US$143 billion annually of their own
money and influences up to US$333 billion of family spending.
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Generation Z takes Wi-Fi, smartphones, tablets, internet-connected game consoles, and
digital and social media for granted—they’ve always had them—making this group
highly mobile, connected, and social. “If they’re awake, they’re online,” quips one
analyst. They have “digital in their DNA,” says another.
The Changing Canadian Family
● For example, there is a growing “crowded nest” syndrome. About 35 percent of young Canadians
aged 20 to 34 now live with at least one parent. However, there were also almost 4 million
Canadians (approximately 28 percent of all households) living alone in 2016, up from only 1.7
million in 1981. In fact, one-person households are now the most common type of household in
Canada, surpassing couples with children for the first time. From 2011 to 2016, the number of
couples living without children rose faster (7.2 percent) than the number of couples with children
(2.3 percent). As a result, the share of couples living with at least one child fell to 51.1 percent in
2016—the lowest level on record. Canada also experienced growth in diverse family structures,
including common-law marriages, same-sex couples, and blended families.
● More dual-income families and more women in the workforce
Geographic Shifts in Population
● The population of Canada grew by approximately 4.7 percent between 2015 and 2019.
● The largest growth as a percentage of the population came from some of Canada’s smallest
provinces and territories, while central and western Canada experienced growth rates near the
national average.
○ Only Newfoundland and Labrador experienced a decline in population during this time
period.
● The shift in where people live has also caused a shift in where they work. For example, the
migration to micropolitan and suburban areas has rapidly increased the number of people who
“telecommute”—working remotely at home or in a remote office with the help of PCs, tablets,
smartphones, and broadband internet access.
○ One recent study found that 43 percent of employed North Americans spend at least some
time working remotely.
A Better-Educated, More White-Collar, More Professional Population
● The Canadian population is becoming better educated. Statistics Canada reported that in 2016, 54
percent of Canadians aged 25 to 64 had completed post-secondary education (university or
college). An additional 10.8 percent of Canadians had an apprenticeship or other trades
certificate. Canada continues to rank first among the Organisation for Economic Co-operation and
Development (OECD) countries in the proportion of college and university graduates.
Increasing Diversity
● Canada and the United States are nations in which various groups have mixed together but have
maintained their diversity by retaining and valuing important ethnic and cultural differences.
Marketers now face increasingly diverse markets, both at home and abroad, as their operations
become more international in scope.
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In the most recent Census, over 250 ethnic origins were reported by the Canadian
population.
Diversity goes beyond ethnic heritage. For example, many major companies explicitly target gay
and lesbian consumers. According to one estimate, the 7 percent of U.S. adults who identify
themselves as lesbian, gay, bisexual, or transgender (LGBT) have buying power of nearly US$1
trillion.
Another attractive diversity segment is individuals with disabilities. One in five U.S. adults has a
disability, representing a market of anywhere from US$200 to US$550 billion in annual spending
power.
The Economic Environment
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Economic environment: economic factors that affect consumer purchasing power and spending
patterns.
In today’s post-recession era, consumer spending is again on the rise. However, even as the
economy has strengthened, Canadians retain an enthusiasm for frugality rather than reverting to
their old free-spending ways.
○ They are looking for greater value in the things they do buy. In turn, companies in all
industries—from discounters such as Target to luxury brands such as Lexus and
Tiffany—are focusing on value for the money, practicality, and durability in their product
offerings and marketing pitches.
Companies may be tempted to cut their marketing budgets and slash prices to coax customers into
opening their wallets. However, although cutting costs and offering selected discounts can be
important marketing tactics, smart marketers understand that making cuts in the wrong places can
damage long-term brand images and customer relationships.
3.3 Natural and Technological Environments
The Natural Environment
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Natural environment: the physical environment and the natural resources that are needed as inputs
by marketers or that are affected by marketing activities.
○ Unexpected happenings in the physical environment—anything from weather to natural
disasters—can affect companies and their marketing strategies.
■ Companies can’t prevent such natural occurrences but should prepare to deal
with them.
○ Environmental sustainability concerns have grown steadily over the past several decades.
○ Marketers should be aware of several trends in the natural environment:
■ The first involves growing shortages of raw materials. Air and water may seem
to be infinite resources, but some groups see long-run dangers.
● Renewable resources, such as forests and food, also have to be used
wisely. Nonrenewable resources, such as oil, coal, and various minerals,
pose a serious problem.
■ A second environmental trend is increased pollution. Industry will almost always
damage the quality of the natural environment.
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A third trend is increased government intervention in natural resource
management. The governments of different countries vary in their concern and
efforts to promote a clean environment.
Environmental sustainability: developing strategies and practices that create a world
economy that the planet can support indefinitely.
The Technological Environment
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Technological environment: forces that create new technologies, products, and market
opportunities.
Digital technologies and the dawn of the Internet of Things (IoT) have created a brave new world
of marketing. Digital advances affect how consumers learn about, shop for, buy, and experience
brands. The digital age gives marketers exciting opportunities to understand consumers, create
new products, and engage customers more directly and meaningfully.
The technological environment changes rapidly, creating new markets and opportunities.
However, every new technology replaces an older technology. Transistors hurt the vacuum-tube
industry, digital photography hurt the film business, and digital downloads and streaming are
hurting the DVD and book businesses. When old industries fight or ignore new technologies,
their businesses decline. Marketers should watch the technological environment closely.
3.4 Political-Social and Cultural Environments
The Political and Social Environment
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Political environment: laws, government agencies, and
pressure groups that influence and limit various
organizations and individuals in a given society.
Legislation Regulation Business
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Well-conceived regulation can encourage competition and
ensure fair markets for goods and services. Thus,
governments develop public policy to guide commerce—sets
of laws and regulations that limit business for the good of
society as a whole.
Marketers must work hard to keep up with changing
regulations
○ Laws and regulations can overlap between the
federal, provincial, and municipal levels
○ Regulations are constantly changing
Business legislation is enacted for several reasons:
○ The first is to protect companies from each other. Although business executives may
praise competition, they sometimes try to neutralize it when it threatens them. Therefore,
laws are passed to define and prevent unfair competition.
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The second purpose of government regulation is to protect consumers from unfair
business practices. Some firms would make shoddy products, invade consumer privacy,
mislead consumers in advertising, and deceive them through their packaging and pricing.
The third purpose of government regulation is to protect the interests of society against
unrestrained business behaviour. Profitable business activity does not always create a
better quality of life. Regulation arises to ensure that firms take responsibility for the
social costs of their production or products.
Increased Emphasis on Ethics and Socially Responsible Actors
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Beyond written laws and regulations, business is also governed by social codes and rules of
professional ethics.
Socially Responsible Behaviour
○ Almost every aspect of marketing involves ethical and social responsibility issues.
Unfortunately, because these issues usually involve conflicting interests, well-meaning
people can honestly disagree about the right course of action in a given situation. Thus,
many industrial and professional trade associations have suggested codes of ethics. And
more companies are now developing policies, guidelines, and other responses to complex
social-responsibility issues.
Cause-Related Marketing
○ To exercise their social responsibility and build more positive images, many companies
link themselves to worthwhile causes.
○ Some companies are founded on cause-related missions. Under the concept of
“values-led business” or “caring capitalism,” their mission is to use business to make the
world a better place.
○ Cause-related marketing has become a primary form of corporate giving. 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.
○ Cause-related marketing has also stirred some controversy.
■ Critics worry that cause-related marketing is more a strategy for selling than a
strategy for giving—that “cause-related” marketing is really “cause-exploitative”
marketing.
■ Companies using cause-related marketing might find themselves walking a fine
line between an improved image and perceptions of exploitation or inauthenticity.
■ Cause-related marketing can greatly benefit both the company and the cause.
● The company gains an effective marketing tool while building a more
positive public image.
● The charitable organization or cause gains greater visibility and
important new sources of funding and support.
The Cultural Environment
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Cultural environment: institutions and other forces that affect society’s basic values, perceptions,
preferences, and behaviours.
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The Persistence of Cultural Values
○ People in a given society hold many beliefs and values. Their core beliefs and values
have a high degree of persistence.
■ Core beliefs and values are passed on from parents to children and are reinforced
by schools, businesses, religious institutions, and government.
■ Secondary beliefs and values are more open to change. Believing in marriage is a
core belief; believing that people should get married early in life is a secondary
belief. Marketers have some chance of changing secondary values but little
chance of changing core values.
Shifts in Secondary Cultural Values
○ Although core values are fairly persistent, cultural swings do take place.
■ Ex: Impact of popular music groups, movie personalities, and other celebrities on
young people’s hairstyle and clothing norms.
○ Marketers want to predict cultural shifts to spot new opportunities or threats. The major
cultural values of a society are expressed in people’s views of themselves and others as
well as in their views of organizations, society, nature, and the universe.
People’s Views
○ People’s Views of Themselves
■ People vary in their emphasis on serving themselves versus serving others. Some
people seek personal pleasure, wanting fun, change, and escape. Others seek
self-realization through religion, recreation, or the avid pursuit of careers or other
life goals. 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.
○ People’s Views of Others
■ People’s attitudes toward and interactions with others shift over time. In recent
years, some analysts have voiced concerns that the digital age would result in
diminished human interaction, as people buried themselves in social media pages
or emailed and texted rather than interacting personally. Instead, today’s digital
technologies seem to be allowing allow people to connect more than ever.
Basically, the more people meet, network, text, and socialize online, the more
likely they are to eventually meet up with friends and followers in the real world.
■ However, these days, even when people are together, they are often “alone
together.” » Groups of people may sit or walk in their own little bubbles,
intensely connected to tiny screens and keyboards.
○ People’s Views of Organizations
■ People vary in their attitudes toward corporations, government agencies, trade
unions, universities, and other organizations. By and large, people are willing to
work for major organizations and expect them, in turn, to carry out society’s
work.
○ People’s Views of Society
■ People vary in their attitudes toward their society—nationalists defend it,
reformers want to change it, and malcontents want to leave it. People’s
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orientation to their society influences their consumption patterns and attitudes
toward the marketplace.
People’s Views of 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
has been people’s growing mastery over nature through technology and the belief
that nature is bountiful. More recently, however, people have recognized that
nature is finite and fragile; it can be destroyed or spoiled by human activities.
People’s Views of the Universe
■ Finally, people vary in their beliefs about the origin of the universe and their
place in it.
● Although many Canadians practise religion, religious conviction and
practice have been gradually declining through the years.
● However, the fact that people are dropping out of organized religion
doesn’t mean that they are abandoning their faith. Some futurists have
noted a renewed interest in spirituality, perhaps as a part of a broader
search for a new inner purpose. People have been moving away from
materialism and dog-eat-dog ambition to seek more permanent
values—family, community, earth, faith—and a more certain grasp of
right and wrong. Rather than calling it “religion,” they call it
“spirituality.”
3.5 Responding to the Marketing Environment
●
Someone once observed, “There are three kinds of companies: those who make things happen,
those who watch things happen, and those who wonder what’s happened.”
○ Many companies view the marketing environment as an uncontrollable element to which
they must react and adapt. They passively accept the marketing environment and do not
try to change it. They analyze environmental forces and design strategies that will help
the company avoid the threats and take advantage of the opportunities the environment
provides.
○ Other companies take a proactive stance toward the marketing environment. Rather than
assuming that the current environment bounds strategic options, these firms develop
strategies to change the environment.
■ Proactive firms take aggressive actions to affect the publics and forces in their
marketing environment. Such companies hire lobbyists to influence legislation
affecting their industries and stage media events to gain favourable press
coverage. They take to social media and run blogs to shape public opinion. They
press lawsuits, file complaints with regulators to keep competitors in line and
form contractual agreements to better control their distribution channels.
■ Smart marketing managers take a proactive rather than reactive approach to the
marketing environment whenever possible.
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Class 3: 4 Managing Marketing Information
4.1 Marketing Information and Customer Insights
Marketing Information and Today’s “Big Data”
●
Big Data: the huge and complex data sets generated by today’s sophisticated information
generation, collection, storage, and analysis technologies.
○ Big data presents marketers with both big opportunities and big challenges.
■ Companies that effectively tap this glut of data can gain rich, timely customer
insights.
■ However, accessing and sifting through so much data is a daunting task.
■ Thus, marketers don’t need more information; they need better information. And
they need to make better use of the information they already have.
Managing Marketing Information
●
●
Customer insights: fresh marketing information-based understandings of customers and the
marketplace that become the basis for creating customer value, engagement, and relationships.
○ Companies have created customer insights teams, whose job is to develop actionable
insights from marketing information and work strategically with marketing
decision-makers to apply those insights.
Marketing information system (MIS): People and procedures dedicated to assessing information
needs, developing the needed information, and helping decision markers to use the information to
generate and validate actionable customer and market insights.
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●
4.2 Assessing Information Needs and Developing Data
Developing Marketing Information
Marketers can obtain the needed information from internal data, marketing intelligence, and marketing
research.
Internal Data
●
Internal databases: collections of consumer and market information obtained from data sources
within the company’s network.
○ Primary Data (Original)
■ Data observed, recorded, and collected with a view to resolving a specific
problem.
○ Secondary Data (Existing)
■ Data compiled and published by others, for purposes other than resolving a
specific problem.
1. Internal secondary data
- Accounting reports
- Sales force
2. External secondary data (marketing intelligence): on the competition and
changes in the marketing environment
- Marketing research companies
- University research organizations
- Non-profit research foundations
- Government reports
- Trade journals
- Trade associations
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Competitive Marketing Intelligence
●
Competitive Marketing Intelligence: the systematic monitoring, collection, and analysis of
publicly available information about consumers, competitors, and developments in the
marketplace.
○ Competitive marketing intelligence aims to improve strategic decision-making by
understanding the consumer environment, assessing and tracking competitors’ actions,
and providing early warnings of opportunities and threats.
■ Gain insight into how consumers talk about and engage with brands.
■ Companies actively monitor competitors’ activities.
● Firms use competitive marketing intelligence to gain insights into
competitor moves and strategies and prepare quick responses.
● Much competitor intelligence can be collected from people inside the
company—executives, engineers and scientists, purchasing agents, and
the sales force. The company can also obtain important intelligence
information from suppliers, resellers, and key customers. Intelligence
seekers can also pour through any of thousands of online databases.
○ The intelligence and monitoring game goes both ways. Facing
determined competitive marketing intelligence efforts by
competitors, most companies protect their information.
Companies should conduct marketing intelligence investigations,
looking for potentially damaging information leaks.
● Some intelligence-gathering techniques may involve questionable ethics.
Companies should take advantage of publicly available information.
However, they should not stoop to snoop.
4.3 Marketing Research
●
Marketing research: The systematic design, collection, analysis, and reporting of data relevant to
a specific marketing situation facing an organization.
Traditional Marketing Research in Transition
●
●
●
●
Marketing researchers are adjusting to the digital world
Traditional marketing research is still widely used and important:
○ For many marketing decisions, information quality and rigour are more important than
speed, convenience, and lower cost.
When combined, the traditional and new digital approaches can greatly enhance the marketer’s
ability to gather, analyze, communicate, and gain insights from data about consumers and
markets.
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Defining the Problem and Research Objectives
●
●
●
Exploratory research: Marketing research to gather preliminary information that will help define
problems and suggest hypotheses.
Descriptive research: Marketing research to better describe marketing problems, situations, or
markets, such as the market potential for a product or the demographics and attitudes of
consumers.
Causal research: Marketing research to test hypotheses about cause-and-effect relationships.
Developing the Research Plan
●
●
Proposed research may call for the following:
○ The demographic, economic, and lifestyle characteristics of current customers
○ The characteristics and usage patterns of the broader population of customers (e.g. all
fast-food and casual diners)
○ Impact of a change on the customer experience
○ Employee reactions to the change
○ Forecast the sales and profits of the change
The research plan should be presented in a written proposal.
○ Secondary data: Information that already exists somewhere, having been collected for
another purpose.
○ Primary data: Information collected for the specific purpose at hand.
Gathering Secondary Data
●
●
●
●
Usually, start by gathering secondary data
○ The company’s internal database provides a good starting point
○ Can buy secondary data from outside suppliers
○ Can use commercial online databases, researchers can conduct their searches
○ Internet search engines also provide a great starting point but can be frosting and
inefficient
Usually, it can be obtained more quickly and at a lower cost than primary data
Also, it sometimes provides data an individual company cannot collect on its own
Secondary data problems
○ Rarely has all the data researchers need
○ Must be relevant, accurate, current, and impartial.
Primary Data Collection
●
Research Approaches
○ Observational Research: Gathering primary data
by observing relevant people, actions, and
situations.
■ Ethnographic research: A form of
observational research that involves
sending trained observers to watch and
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interact with consumers in their “natural environments.”
■ Some things cannot be observed: attitudes, motives, or private behaviour.
Long-term or infrequent behaviour is also difficult to observe.
● Observations may also be difficult to interpret.
○ Survey Research: Gathering primary data by asking people questions about their
knowledge, attitudes, preferences, and buying behaviour.
○ Experimental Research: Gathering primary data by selecting matched groups of subjects,
giving them different treatments, controlling related factors, and checking for differences
in group responses.
Contact Methods
○ Mail, Telephone, and Personal Interviewing
■ Mail questionnaires can collect large amounts of information at a low cost per
respondent.
● More honest answers.
● Mail surveys take longer to complete, and response rates are often low.
■ Telephone interviewing can gather information quickly, providing greater
flexibility than mail questionnaires.
● Higher response rates.
● The cost per respondent is higher than with mail, online, or mobile
questionnaires.
● People may not want to discuss personal questions with an interviewer.
● The method introduces interview bias.
■ Personal interviewing takes two forms: individual interviewing and group
interviewing. Individual interviewing involves talking with people in their homes
or offices, on the street, or in shopping malls.
● Very flexible.
● Costs the most.
○ Focus Group Interviewing: Personal interviewing involves inviting small groups of
people to gather for a few hours with a trained interviewer to talk about a product,
service, or organization. The interviewer “focuses” the group discussion on important
issues.
○ Online Marketing Research: Collecting primary data through internet and mobile surveys,
online focus groups, consumer tracking, experiments, and online panels and brand
communities.
■ The Internet is especially well suited to quantitative research —for example,
conducting marketing surveys and collecting data.
■ Internet-based surveys also tend to be more interactive and engaging, easier to
complete, and less intrusive than traditional phone or mail surveys.
■ Costs much less than traditional means.
■ Online focus groups: Gathering a small group of people online with a trained
moderator to chat about a product, service, or organization and gain qualitative
insights about consumer attitudes and behaviour.
○ Online Behavioural and Social Tracking and Targeting
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Increasingly, they are listening to and watching consumers by actively mining the
rich veins of unsolicited, unstructured, “bottom-up” customer information
already coursing around the internet.
● Tracking consumers online might be as simple as scanning customer
reviews and comments on the company’s brand site or shopping sites
such as Amazon.ca or BestBuy.ca.
● Or it might mean using sophisticated online analysis tools to deeply
analyze the mountains of consumer brand-related comments and
messages found in blogs or social media sites.
Behavioural targeting: using online consumer tracking data and analytics to target
advertisements and marketing offers to specific consumers.
● They use social targeting, mining individual online social networking
activity for target ads and marketing efforts.
Sampling Plan
○ Sample: a segment of the population selected for marketing research to represent the
population as a whole.
○
Research Instruments
○ Questionnaires
■ The questionnaire is by far the most common instrument, whether administered
in person, by phone, by email, or online.
● Very flexible - there are many ways to ask questions
○ Close-ended questions include all the possible answers, and the
subject makes a choice among them
○ Open-ended questions allow respondents to answer in their own
words.
■ It is especially useful in exploratory research
● Researchers should also use care in the wording and ordering of
questions. They should use simple, direct, and unbiased wording.
Questions should be arranged in a logical order.
○ The first question should create interest if possible, and difficult
or personal questions should be asked last so that respondents do
not become defensive.
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Mechanical Instruments
■ Today’s big data, Internet of Things (IoT) world, has produced information from
internet-connected devices.
4.4 Analyzing and Using Marketing Information
Customer Relationship Management (CRM)
●
Customer Relationship Management (CRM): The overall process of building and maintaining
profitable customer relationships by delivering superior customer value and satisfaction.
○ CRM consists of sophisticated software and analysis tools from companies such as
Salesforce.com, Oracle, Microsoft, and SAS that integrate customer and marketplace
information from all sources, analyze it, and apply the results to build stronger customer
relationships.
○ By using CRM to understand customers better, companies can provide higher levels of
customer service and develop deeper customer relationships. They can use CRM to
pinpoint high-value customers, target them more effectively, cross-sell the company’s
products, and create offers tailored to specific customer requirements.
Big Data, Marketing Analytics, and Artificial Intelligence
●
Marketing analytics: The analysis tools, technologies, and processes by which marketers dig out
meaningful patterns in big data to gain customer insights and gauge marketing performance.
Distributing and Using Marketing Information
●
●
Marketing information system must make information readily available to managers and others
who need it, when they need it.
○ Regular performance reports, intelligence updates, and reports on the results of research
studies.
Many firms use company intranet and internal CRM systems to facilitate this process. These
systems provide ready access to research and intelligence information, customer transaction and
experience information, shared reports and documents, and more.
Class 4: 5 Understanding Consumer and Business Buyer Behaviour
5.1 Consumer Markets and Consumer Buying
Behaviour
●
Consumer buyer behaviour: The buying behaviour
of final consumers – individuals and households
that buy goods and services for personal
consumption.
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○
●
●
Consumer market: All the individuals and
households that buy or acquire goods and services
for personal consumption.
The black box represents the unknown, the consumer
Marketing mixes: four Ps, product, promotion, price, place
Characteristics Affecting Consumer Behaviour
Inter-Personal (Socio-cultural) variables
●
Culture & lifestyle
○ Culture: the set of basic
values, perceptions, wants,
and behaviours learned by a
member of society from
family and other important
institutions.
■ Subcultures: A
group of people
with shared value
systems based on
common life
experiences and situations.
■ Total market strategy: Integrating ethnic themes and cross-cultural perspectives
within a brand’s mainstream marketing, appealing to consumer similarities across
subcultural segments rather than differences.
○ All social group influences start with the culture in which we live
○ A complex set of symbols and artifacts that are handed down from generation to
generation that affect our lives
■ Ex: tools, language, art, etc.
■ Sociocultural institutions: languages, schools, families, etc.
○ Lifestyle is also referred to as psychographics
■ Important to consider for marketers
● The more you understand the (AIOs) activities, interests, and
opportunities of consumers, the better job you can do in reaching them.
○ Changes
■ More emphasis on quality of life
● More emphasis on safety (e.g. cars) and the environment
■ Changes in home and family life
● More people are putting off marriage (more marketing toward singles)
● Smaller families (unit product packaging affected, homebuilding, etc.)
■ Changing attitudes towards work and pleasure
● Seeking rewards other than money and prestige (meaning, fulfillment)
■ A greater desire for convenience.
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Increase in discretionary income since there are more double-income
households.
○ Less time, for example, to prepare food
● Influences product planning
○ Single-unit packaging
○ More choices for consumers
○ Pricing is impacted (faster shipping costs, packaging changes,
more choice)
○ Distribution (longer store hours)
○ Culture and lifestyle also impact the marketing plan - your domestic plan may not work
in international markets due to differences.
Social class
○ Social classes: Relatively permanent and ordered divisions in a society whose members
share similar values, interests, and behaviours.
■ Social scientists have identified seven American social classes: upper-upper
class, lower-upper class, upper-middle class, middle class, working class,
upper-lower class, and lower-lower class.
● However, social class in Canada is not as well-defined as that of our
neighbours to the south, and most Canadians like to define themselves as
middle-class.
○ A division in society that is relatively homogenous (values, interests, behaviour).
○ Affects how we perceive things and our motivational needs
○ Affects what we buy more than income level alone
Social Factors
○ Other reference groups
■ Reference groups: A group that serves as direct or indirect point of comparison or
reference in forming a person’s attitudes or behaviour.
● People often are influenced by reference groups to which they do not
belong. For example, an aspirational group is one to which the
individual wishes to belong.
■ Opinion leaders: A person within a reference group who, because of special
skills, knowledge, personality, or other characteristics, exerts social influence on
others.
■ Word-of-mouth influence: The impact of the personal words and
recommendations of trusted friends, family, associates, and other consumers on
buying behaviour.
■ Influencer marketing: Enlisting established influencers or creating new
influencers to spread the word about a company’s brands.
■ Online social networks: Online social communities–blogs, online social media,
brand communities, and other online forums–where people socialzie or exchange
information and opinions.
■ We are influenced by the norms and behaviours of those around us.
■ Any group that influences your buying behaviour (ex. Peer groups)
■ Peer-group pressure: the pressure to conform to that group's behaviour
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Informal advice within a reference group may be much more influential than any
other marketing activity
● You view that person as unbiased
Marketers need to:
● Identify the relevant reference groups
● Identify the extent of the influence that group holds
● Communicate with two key players:
○ The early adopters
○
Family
■ Strongest and longest-lasting influence on our
behaviour and our perceptions
■ Indirectly and directly influencing our
attitudes, values
■ Our attitudes and values tend to be
homogenous among family units
■ Marketers would ask:
● Who influences the buying decision?
● How do they buy? (together vs. alone;
cash vs. credit)
● Who makes the buying decision? (ex: joint decision)
● Why do they buy? (primary motivation)
● Who makes the actual purchase?
● Who uses the product?
● Where do they buy?
Personal Factors
●
●
●
●
Occupation
○ A person’s occupation affects the goods and services bought. Blue-collar workers tend to
buy more rugged work clothes, whereas executives buy more business suits.
○ Marketers try to identify the occupational groups that have an above-average interest in
their products and services.
Age and Life Stage
○ People change the goods and services they buy over their lifetimes. Tastes in food,
clothes, furniture, and recreation are often age related.
○ Buying is also shaped by the stage of the family life cycle—the stages through which
families might pass as they mature over time.
■ Life-stage changes usually result from demographics and life-changing
events—marriage, having children, purchasing a home, divorce, children going to
university, changes in personal income, moving out of the house, and retirement.
Economic Situation
○ A person’s economic situation will affect his or her store and product choices.
○ Marketers watch trends in spending, personal income, savings, and interest rates.
Lifestyle
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○
●
Lifestyle: a person’s pattern of living as expressed in his or her activities, interests, and
opinions.
■ People coming from the same subculture, social class, and occupation may have
quite different lifestyles.
■ It involves measuring consumers’ major AIO dimensions—activities (work,
hobbies, shopping, sports, social events), interests (food, fashion, family,
recreation), and opinions (about themselves, social issues, business, products).
Personality and Self-concept
○ Personality: the unique psychological characteristics that distinguish a person or group.
■ Personality is usually described in terms of traits such as self-confidence,
dominance, sociability, autonomy, defensiveness, adaptability, and
aggressiveness.
○ The idea is that brands also have personalities, and consumers are likely to choose brands
with personalities that match their own. A brand personality is the specific mix of human
traits that may be attributed to a particular brand.
■ One researcher identified five brand personality traits: sincerity (down-to-earth,
honest, wholesome, and cheerful), excitement (daring, spirited, imaginative, and
up-to-date), competence (reliable, intelligent, and successful), sophistication
(glamorous, upper class, charming), and ruggedness (outdoorsy and tough).
○ Many marketers use a concept related to personality—a person’s self-concept (also called
self-image). The idea is that people’s possessions contribute to and reflect their
identities—that is, “we are what we consume.”
Intra-Personal (Psychological) Variables
○
Motivation
■ Motive (drive): a need that is sufficiently pressing to direct the person to seek
satisfaction of the need.
■ A desire/need that a person wants to satisfy
● A person has many needs at any given time. Some are biological, arising
from states of tension such as hunger, thirst, or discomfort. Others are
psychological, arising from the need for recognition, esteem, or
belonging. A need becomes a motive when it is aroused to a sufficient
level of intensity.
● Different behaviour can arise from the same motive
● The same behaviour can also arise from different motives
■ Sigmund Freud assumed that people are
largely unconscious about the real
psychological forces shaping their
behaviour. His theory suggests that a
person’s buying decisions are affected by
subconscious motives that even the buyer
may not fully understand.
■ Abraham Maslow sought to explain why
people are driven by particular needs at
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particular times. Why does one person spend a lot of time and energy on personal
safety and another on gaining the esteem of others? Maslow’s answer is that
human needs are arranged in a hierarchy, from the most pressing at the bottom to
the least pressing at the top.
● They include physiological needs, safety needs, social needs, esteem
needs, and self-actualization needs.
■ Many companies employ teams of psychologists, anthropologists, and other
social scientists to carry out motivation research that probes the subconscious
motivations underlying consumers’ emotions and behaviours toward brands.
Perception
■ Perception: The 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
perceptual processes: selective attention, selective distortion, and selective
retention.
● Selective attention—the tendency for people to screen out most of the
information to which they are exposed—means that marketers must work
especially hard to attract the consumer’s attention.
● Selective distortion describes the tendency of people to interpret
information in a way that supports what they already believe.
○ People also will forget much of what they learn.
○ They tend to retain information that supports their attitudes and
beliefs.
● Selective retention means that consumers are likely to remember good
points made about a brand they favour and forget good points made
about competing brands.
Learning
■ Learning: Changes in an individual’s behaviour arising from experience.
■ A drive is a strong internal stimulus that calls for action. A drive becomes a
motive when it is directed toward a particular stimulus object. Cues are minor
stimuli that determine when, where, and how the person responds. Cues might
influence a consumer’s response to his or her interest in buying the product. If the
experience is rewarding, the consumer will probably use the object more and
more, and his or her response will be reinforced.
■ Past learning experiences
■ Depending on queues from the environment
■ Drive → Cue → Response
● When the response is followed by satisfaction, reinforcement between
the cue and the response
● This develops habits
○ The more developed the habit, the more developed
Attitudes and Beliefs
■ Belief: A descriptive thought that a person holds about something.
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Attitude: A person’s consistently favourable or unfavourable evaluations,
feelings, and tendencies toward an object or idea.
Attitudes reflect values, judgments and positive/negative feelings towards brands,
etc.
Attitudes impact perception and, thus, buying behaviour.
How are attitudes formed?
● Information we’ve gotten from using the product, from others around us
● Important to the marketer because, as consumers, we are constantly faced
with having to make decisions (to buy or not, for example)
Attitudes are hard to measure but can be done with preference scales
As attitudes change, marketers try to change the product to the changing attitude.
5.2 Buyer Decision Process
A. Need recognition
● The buyer recognizes a problem or need.
○ A need can also be triggered by external stimuli. For example, an advertisement
or a chat with a friend might get you thinking about buying a new car.
B. Information search
● An interested consumer may or may not search for more information.
○ If the consumer’s drive is strong and a satisfying product is near at hand, he or
she is likely to buy it then.
○ If not, the consumer may store the need in memory or undertake an information
search related to the need.
● Consumers can obtain information from any of several sources. These include personal
sources (family, friends, neighbours, acquaintances), commercial sources (advertising,
salespeople, dealer and manufacturer web and mobile sites, packaging, displays), public
sources (mass media, consumer rating organizations, social media, online searches, and
peer reviews), and experiential sources (examining and using the product). The relative
influence of these information sources varies with the product and the buyer.
○ The most effective sources, however, tend to be personal. Commercial sources
normally inform the buyer, but personal sources legitimize or evaluate products
for the buyer.
C. Evaluation of alternatives
● How consumers go about evaluating purchase alternatives depends on the individual
consumer and the specific buying situation. In some cases, consumers use careful
calculations and logical thinking. At other times, the same consumers do little or no
evaluating.
D. Purchase decision
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Generally, the consumer’s purchase decision will be to buy the most preferred brand, but
two factors can come between the purchase intention and the purchase decision.
○ The first factor is the attitudes of others. If someone important to you thinks that
you should buy the lowest-priced car, then the chances of you buying a more
expensive car are reduced.
○ The second factor is unexpected situational factors.
■ Some things could influence the decision last minute (unexpected
promotion, availability, etc.)
E. Postpurchase behaviour
● After purchasing the product, the consumer will either be satisfied or dissatisfied and will
engage in postpurchase behaviour of interest to the marketer.
● What determines whether the buyer is satisfied or dissatisfied with a purchase? The
answer lies in the relationship between the consumer’s expectations and the product’s
perceived performance.
○ The larger the negative gap between expectations and performance, the greater
the consumer’s dissatisfaction. This suggests that sellers should promise only
what their brands can deliver so that buyers are satisfied.
● Cognitive dissonance: Buyer discomfort caused by postpurchase conflict.
○ Did I make the right decision? Talk to peers, read about the product, to arrive at
cognitive conssonance
○ So consumers feel uneasy about acquiring the drawbacks of the chosen brand and
about losing the benefits of the brands not purchased. Thus, consumers feel at
least some postpurchase dissonance for every purchase.
● Why is it so important to satisfy the customer? Customer satisfaction is a key to building
profitable relationships with consumers—to keeping and growing consumers and reaping
their customer lifetime value. Satisfied customers buy a product again, talk favourably to
others about the product, pay less attention to competing brands and advertising, and buy
other products from the company.
● A dissatisfied consumer responds differently. Bad word of mouth often travels farther and
faster than good word of mouth. It can quickly damage consumer attitudes about a
company and its products. But companies cannot simply wait for dissatisfied customers
to volunteer their complaints. Most unhappy customers never tell the company about their
problems. Therefore, a company should measure customer satisfaction regularly. It
should set up systems that encourage customers to complain. In this way, the company
can learn how well it is doing and how it can improve.
5.3 The Buyer Decision Process for New Products
●
●
New product: A good, service, or idea that is perceived by some potential customers as new.
Adoption process: The mental process through which an individual passes from first hearing
about an innovation to final adoption.
○ Adoption is the decision by an individual to become a regular user of the product.
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Stages in the Adoption Process
1.
2.
3.
4.
Awareness. The consumer becomes aware of the new product but lacks information about it.
Interest. The consumer seeks information about the new product.
Evaluation. The consumer considers whether trying the new product makes sense.
Trial. The consumer tries the new product on a small scale to improve his or her estimate of its
value.
5. Adoption. The consumer decides to make full and regular use of the new product.
Individual Differences in Innovativeness
●
●
●
People differ greatly in their readiness to try
new products.
People can be classified into the adopter
categories:
○ Innovators (first 2.5%)
■ Venturesome, they try new
ideas at some risk
○ Early adopters (next 13.5%)
■ Guided by respect–they are
opinion leaders in their
communities and adopt new ideas early but carefully
○ Early mainstream (34%, majority)
■ Deliberate–although they rarely are leaders, they adopt new ideas before the
average person.
○ Late mainstream (34%, majority)
■ Skeptical–they adopt an innovation only after a majority of people have tried it.
○ Lagging adopters (16%, Laggards)
■ Tradition bound–they are suspicious of changes and adopt the innovation only
when it has become something of a tradition itself.
As successive groups of consumers adopt the innovation, it eventually reaches its cumulative
saturation level.
Influence of Product Characteristics on Rate of Adoption
1. Relative advantage
○ The degree to which the innovation appears superior to existing products.
2. Compatability
○ The degree to which the innovation appears superior to existing products.
3. Complexity
○ The degree to which the innovation is difficult to understand or use.
○ Negatively correlated
4. Divisibility (Trialability)
○ The degree to which the innovation may be tried on a limited basis.
5. Communicability (observability)
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●
The degree to which the results of using the innovation can be observed or described to
others.
Other characteristics influence the rate of adoption, such as initial and ongoing costs, risk and
uncertainty, and social approval. The new product marketer must research all these factors when
developing the new product and its marketing program.
5.4 Business Markets and Business Buying Behaviour
●
●
●
Business buyer behaviour: The buying behaviour
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.
Business buying process: The decision process by
which business buyers determine which products
and services their 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 behaviour. Then, like businesses that sell to final buyers, they
must engage business customers and build profitable relationships with them by creating
superior customer value.
Business-to-Business Marketing
○ Business users: organizations that buy products or services to use in making other
products or services OR in running their own operations
○ Business goods: intended for use in making other products or in operating a
business/organization.
○ Business Marketing: marketing of business goods or services to business users rather than
to the consumer
○ The business market is huge. In fact, business markets involve far more dollars and items
than do consumer markets.
■ Many sets of business purchases were made for only one set of consumer
purchases.
○ In some ways, business markets are similar to consumer markets. Both involve people
who assume buying roles and make purchase decisions to satisfy needs. However,
business markets differ in many ways from consumer markets. The main differences are
in market structure and demand, the nature of the buying unit, and the types of decisions
and the decision process involved.
Main Differences of Business Markets
●
Market Structure and Demand
○ The business marketer normally deals with far fewer but far larger buyers than the
consumer marketer does.
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●
●
●
Further, many business markets have inelastic and more fluctuating demand. The total
demand for many business products is not much affected by price changes, especially in
the short run.
○ Finally, business demand is derived demand.
■ Derived demand: Business demand that ultimately comes from (derives from) the
demand for consumer goods.
Nature of the Buying Unit
○ Compared with consumer purchases, a business purchase usually involves more decision
participants and a more professional purchasing effort.
■ The more complex the purchase, the more likely it is that several people will
participate in the decision-making process. Buying committees composed of
technical experts and top management are common in the buying of major goods.
Types of Decisions and the Decision Process
○ Business buyers usually face more complex buying decisions than do consumer buyers.
Business purchases often involve large sums of money, complex technical and economic
considerations, and interactions among people at many levels of the buyer’s organization.
○ The business buying process also tends to be longer and more formalized. Large business
purchases usually call for detailed product specifications, written purchase orders, careful
supplier searches, and formal approval.
○ Finally, in the business buying process, the buyer and seller are often much more
dependent on each other. B-to-B marketers may roll up their sleeves and work closely
with customers during all stages of the buying process—from helping customers define
problems to finding solutions to supporting after-sale operation.
○ Supplier development: Systematic development of networks of supplier-partners to
ensure an appropriate and dependable supply of products and materials for use in making
products or reselling them to others.
Characteristics of Business Markets
1. Demand is derived
- A function of something else
- Ex: the demand for steel is a demand derived from the demand for
something else
2. Reverse elasticity
- In terms of their buying behaviour, businesses are the opposite of consumers.
- Reverse price elasticity
- If prices go up, they may buy more because they think prices may
continue rising.
3. Widely fluctuating demand
- Businesses may buy a piece of equipment only rarely
4. Market is knowledgable
- The market knows very well what is available and the pros and cons
5. Regional concentration
- Geographically concentrated, it makes more sense to send a sales representative.
6. Buying power
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7. Buying motive
- Two objectives: optimal combination of price, quality, and service to maximize
profit – improve their standing within the organizations
Business Buyer Behaviour
●
●
●
At the most basic level, marketers want to
know how business buyers will respond to
various marketing stimuli.
Within the organization, buying activity
consists of two major parts: the buying
centre, composed of all the people involved
in the buying decision; and the buying
decision process.
○ The model shows that the buying centre and the buying decision process are influenced
by internal organizational, interpersonal, and individual factors as well as external
environmental factors.
Buying Patterns of Business Users
1. Length of negotiation period
2. Lower frequency of purchase
3. Size of order
4. More direct selling
5. Reciprocity arrangements
Major Types of Buying Situations
●
Three major types of buying situations:
1) Straight rebuy: A business buying
situation in which the buyer
routinely reorders something without
modification.
● It is usually handled on a
routine basis by the
purchasing department. To
keep the business, “in” suppliers try to maintain customer engagement and
product and service quality. “Out” suppliers try to find new ways to add value or
exploit dissatisfaction so that the buyer will consider them.
2) Modified rebuy: A business buying situation in which the buyer wants to modify product
specifications, prices, terms, or suppliers.
● The “in” suppliers may become nervous and feel pressured to put their best foot
forward to protect an account. “Out” suppliers may see the modified rebuy
situation as an opportunity to make a better offer and gain new business.
3) New task: A business buying situation in which the buyer purchases a product or service
for the first time.
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●
●
In such cases, the greater the cost or risk, the larger the number of decision
participants and the greater the company’s efforts to collect information.
● The new task situation is the marketer’s greatest opportunity and challenge. The
marketer not only tries to reach as many key buying influences as possible but
also provides help and information.
● The buyer makes the fewest decisions in the straight rebuy and the most in the
new task decision.
Many business buyers prefer to buy a complete solution to a problem from a single seller rather
than buying separate products and services from several suppliers and putting them together.
○ Systems selling (solutions selling): Buying a packaged solution to a problem from a
single seller, thus avoiding all the separate decisions involved in a complex buying
situation.
Participants in the Business Buying Process
●
Buying Centre: All the individuals and units that
play a role in the purchase decision-making
process.
○ This group includes the actual users of the
product or service, those who make the
buying decision, those who influence the
buying decision, those who do the actual
buying, and those who control buying
information.
○ The buying centre is not a fixed and formally identified unit within the buying
organization. It is a set of buying roles assumed by different people for different
purchases. Within the organization, the size and makeup of the buying centre will vary
for different products and for different buying situations.
Major Influences on Business Buyers
●
Business buyers actually
respond to both economic
and personal factors. Far
from being cold,
calculating, and impersonal,
business buyers are human
and social as well. They
react to both reason and emotion.
○ Environmental
■ Business buyers are heavily influenced by factors in the current and expected
economic environment, such as the level of primary demand, the economic
outlook, and the cost of money. Another environmental factor is the supply of key
materials. Business buyers also are affected by technological, political, and
competitive developments in the environment. Finally, culture and customs can
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strongly influence business buyer reactions to the marketer’s behaviour and
strategies, especially in the international marketing environment.
Organizational
■ Each buying organization has its own objectives, strategies, structure, systems,
and procedures, and the business marketer must understand these factors well.
Questions such as these arise: How many people are involved in the buying
decision? Who are they? What are their evaluative criteria? What are the
company’s policies and limits on its buyers?
Interpersonal
■ The buying centre usually includes many participants who influence each other,
so interpersonal factors also influence the business buying process. However, it
is often difficult to assess such interpersonal factors and group dynamics. Buying
centre participants do not wear tags that label them as “key decision maker” or
“not influential.”
Individual
■ Each participant in the business buying decision process brings in personal
motives, perceptions, and preferences. These individual factors are affected by
personal characteristics such as age, income, education, professional
identification, personality, and attitude toward risk. Also, buyers have different
buying styles. Some may be technical types who make in-depth analyses of
competitive proposals before choosing a supplier. Other buyers may be intuitive
negotiators who are adept at pitting the sellers against one another for the best
deal.
5.5 The Business Buyer Decision Process
A. Problem Recognition
● The buying process begins when someone in the company recognizes a problem or need
that can be met by acquiring a specific product or service.
● Problem recognition can result from internal or external stimuli.
○ Internally, the company may decide to launch a new product that requires new
production equipment and materials. Or a machine may break down and need
new parts. Perhaps a purchasing manager is unhappy with a current supplier’s
product quality, service, or prices.
○ Externally, the buyer may get some new ideas at a trade show, see an ad or
website, or receive a call from a salesperson who offers a better product or a
lower price.
B. General need description
● Having recognized a need, the buyer next prepares a general need description that
describes the characteristics and quantity of the needed item.
○ For standard items, this process presents few problems.
○ For complex items, however, the buyer may need to work with
others—engineers, users, consultants—to define the item. The team may want to
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rank the importance of reliability, durability, price, and other attributes desired in
the item.
C. Product specification
● The buying organization next develops the item’s technical product specifications, often
with the help of a value analysis engineering team.
○ Product value analysis is an approach to cost reduction in which components are
studied 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.
D. Supplier search
● The buyer now conducts a supplier search to find the best vendors.
○ The buyer can compile a small list of qualified suppliers by reviewing trade
directories, doing online searches, or phoning other companies for
recommendations. Today, more and more companies are turning to the internet to
find suppliers.
● The supplier’s task is to get listed in major directories and build a good reputation in the
marketplace. Salespeople should watch for companies in the process of searching for
suppliers and make certain that their firm is considered.
E. Proposal solicitation
● In the proposal solicitation stage of the business buying process, the buyer invites
qualified suppliers to submit proposals.
○ In response, some suppliers will refer the buyer to their website or promotional
materials or send a salesperson to call on the prospect.
○ However, when the item is complex or expensive, the buyer will usually require a
detailed written proposal or formal presentation from each potential supplier.
F. Supplier selection
● The members of the buying centre now review the proposals and select a supplier or
suppliers. During supplier selection, the buying centre often will draw up a list of the
desired supplier attributes and their relative importance. Such attributes include product
and service quality, reputation, on-time delivery, ethical corporate behaviour, honest
communication, and competitive prices. The members of the buying centre will rate
suppliers against these attributes and identify the best suppliers.
● Buyers may attempt to negotiate with preferred suppliers for better prices and terms
before making the final selections. In the end, they may select a single supplier or a few
suppliers. Many buyers prefer multiple sources of supplies to avoid being totally
dependent on one supplier and to allow comparisons of prices and performance of several
suppliers over time.
G. Order-routine specification
● The buyer now prepares an order-routine specification. It includes the final order with the
chosen supplier or suppliers and lists items such as technical specifications, quantity
needed, expected delivery time, return policies, and warranties. In the case of
maintenance, repair, and operating items, buyers may use blanket contracts rather than
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periodic purchase orders. A blanket contract creates a long-term relationship in which the
supplier promises to resupply the buyer as needed at agreed prices for a set time period.
● Many large buyers now practise vendor-managed inventory, in which they turn over
ordering and inventory responsibilities to their suppliers. Under such systems, buyers
share sales and inventory information directly with key suppliers. The suppliers then
monitor inventories and replenish stock automatically as needed.
H. Performance review
● In this stage, the buyer reviews supplier performance. The buyer may contact users and
ask them to rate their satisfaction. The performance review may lead the buyer to
continue, modify, or drop the arrangement.
● The seller’s job is to monitor the same factors used by the buyer to make sure that the
seller is giving the expected satisfaction.
● The seller must manage the total customer relationship, not just individual purchases.
5.6 Engaging Business Buyers and Digital and Social Marketing
E-Procurement and Online Purchasing
●
●
●
●
E-procurement: Purchasing through electronic connections between buyers and sellers–usually
online.
Companies can do e-procurement in any of several ways.
○ They can conduct reverse auctions, in which they put their purchasing requests online
and invite suppliers to bid for the business.
○ Or they can engage in online trading exchanges, through which companies work
collectively to facilitate the trading process.
○ Companies also can conduct e-procurement by setting up their own company buying
sites.
○ Or companies can create extranet links with key suppliers.
■ For instance, they can create direct procurement accounts with suppliers such as
Dell or Staples through which company buyers can purchase equipment,
materials, and supplies directly.
Benefits of business-to-business e-procurement
○ First, it shaves transaction costs and results in more efficient purchasing for both buyers
and suppliers.
○ E-procurement reduces the time between order and delivery.
○ Online-powered purchasing program eliminates the paperwork associated with traditional
requisition and ordering procedures and helps an organization keep better track of all
purchases.
○ E-procurement frees purchasing people from a lot of drudgery and paperwork. Instead,
they can focus on more strategic issues, such as finding better supply sources and
working with suppliers to reduce costs and develop new products.
Problems with business-to-business e-procurement
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Although the internet makes it possible for suppliers and customers to share business data
and even collaborate on product design, it can also erode decades-old customer–supplier
relationships.
■ Many buyers now 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
●
●
●
In response to business customers’ rapid shift toward online buying, today’s B-to-B marketers are
now using a wide range of digital and social media marketing approaches—from websites, blogs,
mobile apps, e-newsletters, and proprietary online networks to mainstream social media such as
Facebook, LinkedIn, YouTube, Google+, and Twitter—to engage business customers and manage
customer relationships anywhere, anytime.
Compared with traditional media and sales approaches, digital and social media can create greater
customer engagement and interaction. B-to-B marketers know that they aren’t really targeting
businesses, they are targeting individuals in those businesses who affect buying decisions. And
today’s business buyers are always connected via their digital devices—whether it’s computers,
tablets, or smartphones.
Trends in Business Buying
○ Increased globalization results in:
■ increased competitive environment
■ upgrading of the purchasing function
■ so business marketers must ensure sales people are properly trained.
○ Centralized purchasing to achieve economies of scale results in:
■ need for more “national account” type of sales reps
○ Long-term contracts result in:
■ fewer opportunities once contracts are signed
○ Just-in-time inventory systems result in:
■ more pressure on seller to meet demanding conditions (e.g., maintain stock, quick
delivery, and still maintain competitive pricing)
Class 5: 6 Customer Value-Driven Marketing Strategy: Creating Value
for Target Customers
6.1 Marketing Strategy
●
●
Market segmentation: Dividing a market into distinct groups of buyers with different needs,
characteristics, or behaviours and who might require separate marketing strategies or mixes.
Market targeting (targeting): Evaluating each market segment’s attractiveness and selecting one
or more segments to serve.
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○
●
Differentiation: Actually differentiating the market offering to create superior customer
value.
○ Positioning: Arranging for a
market offering to occupy a
clear, distinctive, and desirable
place relative to competing
products in the minds of target
consumers.
Target Marketing Strategies:
○ Undifferentiated (Mass) Marketing: one offer and marketing program for the market as a
whole.
○ Differentiated (Segmented) Marketing: separate offerings and programs for each
segment.
○ Concentrated (Niche) Marketing: focus on one or a limited number of market segments.
○ Micro Marketing (Mass Customization): adapt your offering to individual needs.
6.2 Marketing Segmentation
Segmenting Consumer Markets
●
●
●
Geographic segmentation
○ Geographic segmentation: Dividing a market
into different geographical units, such as
nations, regions, provinces, cities, or even
neighbourhoods.
■ Urban vs. rural, climate, etc.
■ The surge in digital and mobile
technology has caused a corresponding
surge in hyperlocal social
marketing—location-based targeting to
consumers in local communities or
neighbourhoods using digital and social
media.
Demographic Segmentation
○ Demographic Segmentation: Dividing the
market into segments based on variables such as
age, life-cycle stage, gender, income,
occupation, education, religion, ethnicity, and
generation.
■ Age and Life-Cycle segmentation: dividing a market into different age and
life-cycle groups.
■ Gender segmentation: dividing a market into different segments based on gender.
■ Income segmentation: dividing a market into different income segments.
Psychographic Segmentation
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●
●
Psychographic Segmentation: Dividing a market into different segments based on
lifestyle or personality characteristics.
■ Lifestyle, personality
Behavioural Segmentation
○ Behavioural Segmentation: Dividing a market into segments based on consumer
knowledge, attitudes, uses of a product, or responses to a product.
■ Occasion segmentation: Dividing a market into segments according to occasions
when buyers get the idea to buy, actually make their purchase, or use the
purchased item.
■ Benefits segmentation: Dividing a market into segments according to the
different benefits that consumers seek from the product.
■ 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. Included in the potential users
group are consumers facing life-stage changes—such as new parents and
newlyweds—who can be turned into heavy users.
■ Usage Rate
● Markets can also be 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
● A market can also be segmented by consumer loyalty. Consumers can be
loyal to brands (Tide), stores (Canadian Tire), and companies (Apple).
Buyers can be divided into groups according to their degree of loyalty.
Some consumers are completely loyal—they buy one brand all the time
and can’t wait to tell others about it.
● Other consumers are somewhat loyal—they are loyal to two or three
brands of a given product or favour one brand while sometimes buying
others.
● Still other buyers show no loyalty to any brand—they either want
something different each time they buy, or they buy whatever’s on sale.
Using Multiple Segmentation Bases
○ Marketers rarely limit their segmentation analysis to only one or a few variables. Rather,
they often use multiple segmentation bases in an effort to identify smaller, better-defined
target groups.
Segmenting Business Markets
●
Consumer and business marketers use many of the same variables to segment their markets.
Business buyers can be segmented geographically, demographically (industry, company size), or
by benefits sought, user status, usage rate, and loyalty status. Yet business marketers also use
some additional variables, such as customer operating characteristics, purchasing approaches,
situational factors, and personal characteristics.
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Segmenting International Markets
●
●
●
●
●
Most international firms focus on a small set of countries to operate in.
Different countries can vary greatly in their economic, cultural, and political makeup.
International firms (like domestic ones) need to group their world markets into segments with
distinct buying needs and behaviours.
They can use one or a combination of several variables:
○ Geographic location, grouping countries by regions such as Western Europe, the Pacific
Rim, etc. Geographic segmentation assumes that nations close to one another will have
many common traits and behaviours
○ Economic factors, population income levels or by their overall level of economic
development.
○ Political and legal factors, such as the tupe and stability of government, receptivity to
foreign firms, monetary regulations, and amount of bureaucracy.
○ Cultural factors, grouping markets according to common languages, religions, values,
and attitudes, customs, and behavioural patterns.
Intermarket segmentation (cross-market segmentation): Forming segments of consumers who
have similar needs and buying behaviours even though they are located in different countries.
Requirements for Effective Segmentation
To be useful, market segments must be
1. Measurable. The size, purchasing power, and profiles of the segments can be measured.
2. Accessible (Reachability). The market segments can be effectively reached and served.
3. Substantial. The market segments are large or profitable enough to serve. A segment should be
the largest possible homogeneous group worth pursuing with a tailored marketing program. It
would not pay, for example, for an automobile manufacturer to develop cars especially for people
whose height is greater than seven feet.
4. Mutual exclusivity: People in each segment should be different from others.
5. Differentiable. The segments are conceptually distinguishable and respond differently to
different marketing mix elements and programs. If men and women respond similarly to
marketing efforts for soft drinks, they do not constitute separate segments.
6. Actionable. Effective programs can be designed for attracting and serving the segments. For
example, although one small airline identified seven market segments, its staff was too small to
develop separate marketing programs for each segment.
6.3 Market Targeting
Evaluating Market Segments
●
In evaluating different market segments, a firm must look at three factors: segment size and
growth, segment structural attractiveness, and company objectives and resources.
○ Segment size and growth
■ “Right size and growth” is a relative matter.
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■
○
○
The largest, fastest-growing segments are not always the most attractive for every
company. Smaller companies may lack the skills and resources needed to serve
larger segments. Or they may find these segments too competitive. Such
companies may target segments that are smaller and less attractive, in an absolute
sense, but that are potentially more profitable for them.
Segment structural attractiveness
■ For example, a segment is less attractive if it already contains many strong and
aggressive competitors or if it is easy for new entrants to come into the segment.
■ The existence of many actual or potential substitute products may limit prices
and the profits that can be earned in a segment.
■ The relative power of buyers also affects segment attractiveness. Buyers with
strong bargaining power relative to sellers will try to force prices down, demand
more services, and set competitors against one another—all at the expense of
seller profitability.
■ Finally, a segment may be less attractive if it contains powerful suppliers that can
control prices or reduce the quality or quantity of ordered goods and services.
Company objectives and resources
■ Some attractive segments can be dismissed quickly because they do not mesh
with the company’s long-run objectives.
■ Or the company may lack the skills and resources needed to succeed in an
attractive segment.
■ A company should only enter segments in which it can create superior customer
value and gain advantages over its competitors.
Selecting Target Market Segments
●
●
Target market: A set of buyers who share common needs or characteristics that a company
decides to serve.
Market targeting can be carried out at several different levels.
○ Companies can target very broadly (undifferentiated marketing), very narrowly
(micromarketing), or somewhere in between (differentiated or concentrated marketing).
Undifferentiated Marketing
●
●
Undifferentiated (mass) marketing: A market-coverage strategy in which a firm decides to ignore
market segment differences and go after the whole market with one offer.
Such a strategy focuses on what is common in the needs of consumers rather than on what is
different. The company designs a product and a marketing program that will appeal to the largest
number of buyers.
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Differentiated Marketing
●
●
●
Differentiated (segmented) marketing: A market-coverage strategy in which a firm targets several
market segments and designs separate offers for each.
By offering product and marketing variations to segments, companies hope for higher sales and a
stronger position within each market segment.
○ Developing a stronger position within several segments creates more total sales than
undifferentiated marketing across all segments.
But differentiated marketing also increases the costs of doing business.
○ Thus, the company must weigh increased sales against increased costs when deciding on
a differentiated marketing strategy.
Concentrated Marketing
●
●
●
●
●
Concentrated (niche) marketing: A market-coverage strategy in which a firm goes after a large
share of one or a few segments or niches.
Through concentrated marketing, the firm achieves a strong market position because of its greater
knowledge of consumer needs in the niches it serves and the special reputation it acquires.
○ It can market more effectively by fine-tuning its products, prices, and programs to the
needs of carefully defined segments.
○ It can also market more efficiently, targeting its products or services, channels, and
communications programs toward only consumers that it can serve best and most
profitably.
Niching lets smaller companies focus their limited resources on serving niches that may be
unimportant to or overlooked by larger competitors.
Concentrated marketing can be highly profitable.
At the same time, it involves higher-than-normal risks. Companies that rely on one or a few
segments for all of their business will suffer greatly if the segment turns sour. Or larger
competitors may decide to enter the same segment with greater resources.
Micromarketing
●
●
Micromarketing: Tailoring products and marketing programs to the needs and wants of specific
individuals and local customer segments; it includes local marketing and individual marketing.
Local marketing
○ Local marketing: Tailoring brands and marketing to the needs and wants of local
customer segments–cities, neighbouhoods, and even specific stores.
■ Advances in communications technology have given rise to new high-tech
versions of location-based marketing. Thanks to the explosion in smartphones
and tablets that integrate geolocation technology, companies can now track
consumers’ whereabouts closely and engage them on the go with localized deals
and information fast, wherever they may be.
■ Local marketing has some drawbacks, however. It can drive up manufacturing
and marketing costs by reducing the economies of scale. It can also create
logistics problems as companies try to meet the varied requirements of different
local markets.
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Individual Marketing
○ Individual marketing: Tailoring products and marketing programs to the needs and
preferences of individual customers.
■ Individual marketing has also been labelled one-to-one marketing, mass
customization, and markets-of-one marketing
■ Mass customization is the process by which firms interact one to one with masses
of customers to design products, services, and marketing programs tailor-made to
individual needs.
Choosing a Targeting Strategy
●
Companies need to consider many factors when choosing a market-targeting strategy.
○ Which strategy is best depends on the company’s resources.
■ When the firm’s resources are limited, concentrated marketing makes the most
sense.
○ The best strategy also depends on the degree of product variability.
■ Undifferentiated marketing is more suited for uniform products, such as
grapefruit or steel.
■ Products that can vary in design, such as cameras and cars, are more suited to
differentiation or concentration.
○ The product’s life-cycle stage also must be considered.
■ When a firm introduces a new product, it may be practical to launch one version
only, and undifferentiated marketing or concentrated marketing may make the
most sense.
■ In the mature stage of the product life cycle, however, differentiated marketing
often makes more sense.
○ Another factor is market variability.
■ If most buyers have the same tastes, buy the same amounts, and react the same
way to marketing efforts, undifferentiated marketing is appropriate.
○ Finally, competitors’ marketing strategies should be considered.
■ When competitors use differentiated or concentrated marketing, undifferentiated
marketing can be suicidal.
■ Conversely, when competitors use undifferentiated marketing, a firm can gain an
advantage by using differentiated or concentrated marketing, focusing on the
needs of buyers in specific segments.
Socially Responsible Target Marketing
●
●
Target marketing sometimes generates controversy and concern. The biggest issues usually
involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially
harmful products.
Thus, in target marketing, the issue is not really who is targeted but rather how and for what.
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.
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6.4 Differentiation and Positioning
●
Product position: The way consumers define a product on important attributes – the place it
occupies in consumers’ minds relative to competing products.
○ Consumers are overloaded with information about products and services. They cannot
reevaluate products every time they make a buying decision. To simplify the buying
process, consumers organize products, brands, and companies into categories and
“position” them in their minds. A product’s position is the complex set of perceptions,
impressions, and feelings that consumers have for the product compared with competing
products.
Positioning Maps
●
In planning their differentiation and
positioning strategies, marketers often
prepare perceptual positioning maps that
show consumer perceptions of their brands
versus those of competing products on
important buying dimensions.
○ The position of each circle on the
map indicates the brand’s
perceived positioning on two dimensions: price and orientation (luxury versus
performance).
○ The size of each circle indicates the brand’s relative market share.
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.
Above all else, a brand’s positioning must serve the needs and preferences of well-defined target
markets.
The differentiation and positioning task 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.
Identifying Possible Value Differences and Competitive Advantages
●
Competitive advantage: an advantage over competitors gained by offering greater customer value
either by having lower prices or providing more benefits that justify higher prices.
○ If a company positions its product as offering the best quality and service, it must actually
differentiate the product so that it delivers the promised quality and service.
○ Companies must do much more than simply shout out their positions with slogans and
taglines. They must first live the slogan.
○ To find points of differentiation, marketers must think through the customer’s entire
experience with the company’s product or service. An alert company can find ways to
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differentiate itself at every customer contact point. In what specific ways can a company
differentiate itself or its market offer? It can differentiate along the lines of product,
services, channels, people, or image.
■ Through product differentiation, brands can be differentiated on features,
performance, or style and design.
■ Some companies gain services differentiation through speedy, convenient service.
■ Firms that practise channel differentiation gain competitive advantage through
the way they design their channel’s coverage, expertise, and performance.
■ Companies can also gain a strong competitive advantage through people
differentiation—hiring and training better people than their competitors do.
■ Even when competing offers look the same, buyers may perceive a difference
based on company or brand image differentiation. A company or brand image
should convey a product’s distinctive benefits and positioning.
Choosing the Right Competitive Advantages
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How Many Differences to Promote
○ Many marketers think that companies should aggressively promote only one benefit to
the target market. Former advertising executive Rosser Reeves, for example, said a
company should develop a unique selling proposition (USP) for each brand and stick to
it. Each brand should pick an attribute and tout itself as “number one” on that attribute.
■ Buyers tend to remember number one better, especially in this
overcommunicated society.
○ Other marketers think that companies should position themselves on more than one
differentiator. This may be necessary if two or more firms are claiming to be best on the
same attribute.
○ Today, in a time when the mass market is fragmenting into many small segments,
companies and brands are trying to broaden their positioning strategies to appeal to more
segments.
Which Differences to Promote
○ Important. The difference delivers a highly valued benefit to target buyers.
○ Distinctive. Competitors do not offer the difference, or the company can offer it in a
more distinctive way.
○ Superior. The difference is superior to other ways that customers might obtain the same
benefit.
○ Communicable. The difference is communicable and visible to buyers.
○ Preemptive. Competitors cannot easily copy the difference.
○ Affordable. Buyers can afford to pay for the difference.
○ Profitable. The company can introduce the difference profitably.
Selecting an Overall Positioning Strategy
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Value proposition: The full positioning of a brand–the full mix of benefits on which it is
positioned.
In the figure, the five green cells on the top and right represent winning value
propositions—differentiation and positioning that give the company a competitive advantage. The
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red cells at the lower left, however, represent
losing value propositions. The centre cell
represents at best a marginal proposition.
More for more will draw one target market, less
for much less will draw another, and so on.
A. More for More
■ More-for-more positioning
involves providing the most
upscale product or service and
charging a higher price to cover
the higher costs. A
more-for-more market offering
not only offers higher quality, it also gives prestige to the buyer. It symbolizes
status and a loftier lifestyle.
■ Although more-for-more can be profitable, this strategy can also be vulnerable. It
often invites imitators who claim the same quality but at a lower price.
B. More for the Same
■ A company can attack a competitor’s value proposition by positioning its brand
as offering more for the same price.
C. The Same for Less
■ Offering the same for less can be a powerful value proposition—everyone likes a
good deal.
■ Other companies develop imitative but lower-priced brands in an effort to lure
customers away from the market leader.
D. Less for Much Less
■ A market almost always exists for products that offer less and therefore cost less.
Few people need, want, or can afford “the very best” in everything they buy. In
many cases, consumers will gladly settle for less-than-optimal performance or
give up some of the bells and whistles in exchange for a lower price.
■ Less-for-much-less positioning involves meeting consumers’ lower performance
or quality requirements at a much lower price.
E. More for Less
■ Of course, the winning value proposition would be to offer more for less. Many
companies claim to do this. And, in the short run, some companies can actually
achieve such lofty positions.
■ Yet in the long run, companies will no doubt find it very difficult to sustain such
best-of-both positioning. Offering more usually costs more, making it difficult to
deliver on the “for-less” promise. Companies that try to deliver both may lose out
to more focused competitors.
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Class 7: 7 Products, Services, and Brands: Building Customer Value
7.1 What is a Product?
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Product: Anything that can be offered to a market for attention, acquisition, use, or consumption
that might satisfy a want or need.
Services: An activity, benefit, or satisfaction offered for sale that is essentially intangible an does
not result in the ownership of anything.
Products, Services, and Experiences
●
Products are a key element in the overall market offering. Marketing mix planning begins with
building an offering that brings value to target customers.
○ A company’s market offering often includes both tangible goods and services. At one
extreme, the market offer may consist of a pure tangible good, such as soap, toothpaste,
or salt; no services accompany the product.
○ At the other extreme are pure services, for which the market offer consists primarily of a
service.
○ Between these two extremes, however, many goods-and-services combinations are
possible.
■ To differentiate their offers, beyond simply making products and delivering
services, they are creating and managing customer experiences with their brands
or companies.
Levels of Products and Services
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Product planners need to think about products and
services on three levels (see Figure 7.1). Each level
adds more customer value.
The most basic level is the core customer value,
which addresses the question: What is the buyer
really buying? When designing products,
marketers must first define the core,
problem-solving benefits, services, or experiences
that consumers seek.
At the second level, product planners must turn the
core benefit into an actual product. They need to
develop product and service features, a design, a
quality level, a brand name, and packaging.
Finally, product planners must build an augmented
product around the core benefit and actual product
by offering additional consumer services and
benefits.
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Product and Service Classifications
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Products and services fall into two broad classes based on the types of consumers who use them:
consumer products and industrial products. Broadly defined, products also include other
marketable entities such as experiences, organizations, persons, places, and ideas.
Consumer Products
○ Consumer products: A product bought by final consumers for personal consumption.
■ Convenience product: A consumer product that customers usually buy frequently,
immediately, and with minimal comparison and buying effort.
■ Shopping product: a consumer product that the customer, in the process of
selecting and purchasing, usually compares on such attributes as suitability,
quality, price, and style.
■ Specialty product: A consumer product with unique characteristics or brand
identification for which a significant group of buyers is willing to make a special
purchase effort.
■ Unsought product: A consumer product that the consumers either does not know
about or knows about butdoes not normally consider buying.
Marketing
Considerations
●
Type of Consumer Product
Convenience
Shopping
Specialty
Unsought
Customer buying
behaviour
Frequent
purchase; little
planning, little
comparison or
shopping effort;
low customer
involvement
Less frequent
purchase; much
planning and
shopping effort;
comparison of
brands on price,
quality, and style
Strong brand
preference and
loyalty; special
purchase effort;
little comparison
of brands; low
price sensitivity
Little product
awareness or
knowledge (or, if
aware, little or
even negative
interest)
Price
Low price
Higher price
Highest price
Varies
Distribution
Widespread
distribution;
convenient
locations
Selective
distribution in
fewer outlets
Exclusive
distribution in
only one or a few
outlets per market
area
Varies
Promotion
Mass promotion
by the producer
Advertising and
personal selling
by both the
producer and
resellers
More carefully
targeted
promotion by
both the producer
and resellers
Aggressive
advertising and
personal selling
by the producer
and resellers
Examples
Toothpaste,
magazines, and
laundry detergent
Major appliances,
televisions,
furniture, and
clothing
Luxury goods,
such as Rolex
watches or fine
crystal
Life insurance
and Red Cross
blood donations
Industrial Products
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Industrial products: A product bought by an individuals and organizations for further
processing or or use in conducting a business.
The three groups of industrial products and services are materials and parts, capital items,
and supplies and services.
Materials and parts include raw materials as well as manufactured materials and parts.
Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and
natural products (fish, lumber, crude petroleum, iron ore). Manufactured materials and
parts consist of component materials (iron, yarn, cement, wires) and component parts
(small motors, tires, castings). Most manufactured materials and parts are sold directly to
industrial users.
■ Price and service are the major marketing factors; branding and advertising tend
to be less important.
Capital items are industrial products that aid in the buyer’s production or operations,
including installations and accessory equipment.
■ Installations consist of major purchases such as buildings (factories, offices) and
fixed equipment (generators, drill presses, large computer systems, elevators).
■ Accessory equipment includes portable factory equipment and tools (hand tools,
lift trucks) and office equipment (computers, fax machines, desks). These types
of equipment have shorter lives than do installations and simply aid in the
production process.
The final group of industrial products is supplies and services. Supplies include operating
supplies (lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails,
brooms).
■ Supplies are the convenience products of the industrial field because they are
usually purchased with a minimum of effort or comparison. Business services
include maintenance and repair services (window cleaning, computer repair) and
business advisory services (legal, management consulting, advertising). Such
services are usually supplied under contract.
7.2 Product and Services Decisions
Individual Product and Service Decisions
●
Product and Service Attributes
○
Product Quality
■ Product quality: The characteristics of a product or service that bear on its ability
to satisfy stated or implied customer needs.
● In the narrowest sense, quality can be defined as “no defects.” But most
marketers go beyond this narrow definition. Instead, they define quality
in terms of creating customer value and satisfaction.
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Product quality is a serious matter for marketers, many of whom belong
to the Society of Quality Assurance (SQA), an international professional
membership organization that provides a forum for organizations to
exchange information about research and regulations that govern quality
assurance practices.
● Total quality management (TQM) is an approach in which all the
company’s people are involved in constantly improving the quality of
products, services, and business processes. For most top companies,
customer-driven quality has become a way of doing business. Today,
companies are taking a return-on-quality approach, viewing quality as an
investment and holding quality efforts accountable for bottom-line
results.
● Product quality has two dimensions: level and consistency.
○ In developing a product, the marketer must first choose a quality
level that will support the product’s positioning. Here, product
quality means performance quality—the product’s ability to
perform its functions.
○ Beyond quality level, high quality also can mean high levels of
quality consistency. Here, product quality means conformance
quality—freedom from defects and consistency in delivering a
targeted level of performance. All companies should strive for
high levels of conformance quality.
Product Features
■ A product can be offered with varying features. A stripped-down model, one
without any extras, is the starting point. The company can then create
higher-level models by adding more features. Features are a competitive tool for
differentiating the company’s product from competitors’ products. Being the first
producer to introduce a valued new feature is one of the most effective ways to
compete.
■ How can a company identify new features and decide which ones to add? It
should periodically survey buyers who have used the product and ask these
questions: How do you like the product? Which specific features of the product
do you like most? Which features could we add to improve the product? The
answers to these questions provide the company with a rich list of feature ideas.
The company can then assess each feature’s value to customers versus its cost to
the company. Features that customers value highly in relation to costs should be
added.
Product Style and Design
■ Another way to add customer value is through distinctive product style and
design.
● Design is a larger concept than style.
○ Unlike style, design is more than skin deep—it goes to the very
heart of a product. Good design contributes to a product’s
usefulness as well as to its looks.
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Style simply describes the appearance of a product.
Branding
○ Brand: A name, term, sign, symbol, or design, or a combination of these, that identifies
the products or services of one seller or group of sellers and differentiates them from
those competitors.
■ Consumers view a brand as an important part of a product, and branding can add
value to a consumer’s purchase. Customers attach meanings to brands and
develop brand relationships.
○ Branding helps buyers in many ways.
■ Brand names help consumers identify products that might benefit them.
■ Brands also say something about product quality and consistency—buyers who
always buy the same brand know that they will get the same features, benefits,
and quality each time they buy.
○ Branding also gives the seller several advantages.
■ The seller’s brand name and trademark provide legal protection for unique
product features that otherwise might be copied by competitors.
■ Branding helps the seller to segment markets.
○ Finally, a brand name becomes the basis on which a whole story can be built about a
product’s special qualities.
Packaging
○ Packaging: The activities of designing and producing the container or wrapper for a
product.
○ In recent times, however, packaging has become an important marketing tool as well.
Increased competition and clutter on retail store shelves means that packages must now
perform many sales tasks—from attracting buyers to communicating brand positioning to
closing the sale. Not every customer will see a brand’s advertising, social media pages, or
other marketing content. However, all consumers who buy and use a product will interact
regularly with its packaging. Thus, the humble package represents prime marketing
space.
Labelling and Logos
○ At the very least, the label identifies the product or brand
○ The label might also describe several things about the product—who made it, where it
was made, when it was made, its contents, how it is to be used, and how to use it safely.
○ The label might help to promote the brand and engage customers. For many companies,
labels have become an important element in broader marketing campaigns.
○ Labels and brand logos can support the brand’s positioning and add personality to the
brand. In fact, they can become a crucial element in the brand–customer connection.
Customers often become strongly attached to logos as symbols of the brands they
represent.
Product Support Services
○ Customer service is another element of product strategy. A company’s offer usually
includes some support services, which can be a minor part or a major part of the total
offering.
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The first step in designing support services is to survey customers periodically to assess
the value of current services and obtain ideas for new ones. Once the company has
assessed the quality of various support services to customers, it can take steps to fix
problems and add new services that will both delight customers and yield profits to the
company.
Product Line Decisions
■ Product line: A group products that are closely related because they function in a
similar manner, are sold to the same customer groups, are marketed through the
same types of outlets, or fall within given price ranges.
■ The major product line decision involves product line length—the number of
items in the product line. The line is too short if the manager can increase profits
by adding items; the line is too long if the manager can increase profits by
dropping items. Managers need to analyze their product lines periodically to
assess each item’s sales and profits and understand how each item contributes to
the line’s overall performance.
● A company can expand its product line in two ways: by line filling or
line stretching.
○ Product line filling involves adding more items within the
present range of the line. There are several reasons for product
line filling: reaching for extra profits, satisfying dealers, using
excess capacity, being the leading full-line company, and
plugging holes to keep out competitors. However, line filling is
overdone if it results in cannibalization (eating up sales of the
company’s own existing products) and customer confusion. The
company should ensure that new items are noticeably different
from existing ones.
○ Product line stretching occurs when a company lengthens its
product line beyond its current range. The company can stretch
its line downward, upward, or both ways. Companies located at
the upper end of the market can stretch their lines downward.A
company may stretch downward to plug a market hole that
otherwise would attract a new competitor or to respond to a
competitor’s attack on the upper end. Or it may add low-end
products because it finds faster growth taking place in the
low-end segments. Companies can also stretch their product lines
upward. Sometimes, companies stretch upward to add prestige to
their current products or to reap higher margins.
Product Mix Decisions
■ Product mix (product portfolio): The set of all product lines and items that a
particular seller offers for sale.
■ A company’s product mix has four important dimensions: width, length, depth,
and consistency.
● Product mix width refers to the number of different product lines the
company carries.
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●
■
Product mix length refers to the total number of items a company carries
within its product lines.
● Product line depth refers to the number of versions offered of each
product in the line.
● Finally, the consistency of the product mix refers to how closely related
the various product lines are in end use, production requirements,
distribution channels, or some other way.
These product mix dimensions provide the handles for defining the company’s
product strategy. A company can increase its business in four ways. It can add
new product lines, widening its product mix. In this way, its new lines build on
the company’s reputation in its other lines. A company can lengthen its existing
product lines to become a more full-line company. It can add more versions of
each product and thus deepen its product mix. Finally, a company can pursue
more product line consistency—or less—depending on whether it wants to have a
strong reputation in a single field or in several fields.
● From time to time, a company may also have to streamline its product
mix to pare out marginally performing lines and to regain its focus.
7.3 Services Marketing
●
●
●
●
●
A company must consider four
special service characteristics
when designing marketing
programs: intangibility,
inseparability, variability, and
perishability.
Service intangibility: Services
cannot be seen, tasted, felt,
heard, or smelled before they are
bought.
○ To reduce uncertainty, buyers look for signals of service quality. They draw conclusions
about quality from the place, people, price, equipment, and communications that they can
see. Therefore, the service provider’s task is to make the service tangible in one or more
ways and send the right signals about quality.
Service inseparability: Services are produced and consumed at the same time and cannot be
separated front heir providers.
○ If a service employee provides the service, then the employee becomes a part of the
service. And customers don’t just buy and use a service; they play an active role in its
delivery. Customer coproduction makes provider–customer interaction a special feature
of services marketing. Both the provider and the customer affect the service outcome.
Service variability: The quality of services may vary greatly depending on who provides them
and when, where, and how they are provided.
Service perishability: Services cannot be stored for later sale or use.
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The Service Profit Chain
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Service profit chain: the chain that link service firm profits with employee and customer
satisfaction.
This chain consists of five links:
○ Internal service quality. Superior employee selection and training, a quality work
environment, and strong support for those dealing with customers, which results in . . .
○ Satisfied and productive service employees. More satisfied, loyal, and hardworking
employees, which results in . . .
○ Greater service value. More effective and efficient customer value creation,
engagement, and service delivery, which results in . . .
○ Satisfied and loyal customers. Satisfied customers who remain loyal, make repeat
purchases, and refer other customers, which results in . . .
○ Healthy service profits and growth. Superior service firm performance.
○
Interactive marketing: Training service employees in the fine art of interacting with customers to
satisfy their needs.
Managing Service Differentiation
●
●
●
The offer can include innovative features that set one company’s offer apart from competitors’
offers.
Service companies can differentiate their service delivery by having more able and reliable
customer-contact people, developing a superior physical environment in which the service
product is delivered, or designing a superior delivery process.
Finally, service companies also can work on differentiating their images through symbols and
branding.
Managing Service Quality
●
●
●
Unfortunately, service quality is harder to define and judge than product quality.
○ Customer retention is perhaps the best measure of quality; a service firm’s ability to hang
onto its customers depends on how consistently it delivers value to them.
Top service companies set high service-quality standards. They watch service performance
closely, both their own and that of competitors.
Unlike product manufacturers who can adjust their machinery and inputs until everything is
perfect, service quality will always vary, depending on the interactions between employees and
customers. As hard as they may try, even the best companies will have an occasional late delivery,
burned steak, or grumpy employee.
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However, good service recovery can turn angry customers into loyal ones. In fact, good
recovery can win more customer purchasing and loyalty than if things had gone well in
the first place.
■ Many companies train their frontline employees in the art of service recovery.
■ These days, social media such as Facebook, Instagram, and Twitter can help
companies root out and remedy customer dissatisfaction with service.
Managing Service Productivity
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●
With their costs rising rapidly, service firms are under great pressure to increase service
productivity. They can do so in several ways.
○ They can train current employees better or hire new ones who will work harder or more
skilfully.
○ Or they can increase the quantity of their service by giving up some quality.
○ Finally, a service provider can harness the power of technology.
However, companies must avoid pushing productivity so hard that doing so reduces quality.
Attempts to streamline a service or cut costs can make a service company more efficient in the
short run. But that can also reduce its longer-run ability to innovate, maintain service quality, or
respond to consumer needs and desires.
Thus, in attempting to improve service productivity, companies must be mindful of how they
create and deliver customer value. They should be careful not to take service out of the service. In
fact, a company may purposely lower service productivity to improve service quality, in turn
allowing it to maintain higher prices and profit margins.
7.4 Branding Strategy: Building Strong Brands
Brand Equity and Brand Value
●
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Brands represent consumers’ perceptions and feelings about a product and its
performance—everything that the product or the service means to consumers.
Brand equity: The differential effect that knowing the brand name has on customer response to
the product or its marketing.
○ A brand has positive brand equity when consumers react more favourably to it than to a
generic or unbranded version of the same product. It has negative brand equity if
consumers react less favourably than to an unbranded version.
○ Ad agency Young & Rubicam’s BrandAsset Valuator measures brand strength along four
consumer perception dimensions: differentiation (what makes the brand stand out),
relevance (how consumers feel it meets their needs), knowledge (how much consumers
know about the brand), and esteem (how highly consumers regard and respect the brand).
■ Brands with strong brand equity rate high on all four dimensions. The brand must
be distinct, or consumers will have no reason to choose it over other brands.
However, the fact that a brand is highly differentiated doesn’t necessarily mean
that consumers will buy it. The brand must stand out in ways that are relevant to
consumers’ needs. Even a differentiated, relevant brand is far from a shoo-in.
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Before consumers will respond to the brand, they must first know about and
understand it.
Brand value: The total financial value of a brand.
Above all, however, a powerful brand forms the basis for building strong and profitable customer
engagement and relationships. The fundamental asset underlying brand equity is customer
equity—the value of customer relationships that the brand creates.
Building Strong Brands
●
●
●
Brand Positioning
○ They can position brands at any of three levels.
■ At the lowest level, they can position the brand on product attributes.
● In general, however, attributes are the least desirable level for brand
positioning. Competitors can easily copy attributes. More important,
customers are not interested in attributes as such—they are interested in
what the attributes will do for them.
■ A brand can be better positioned by associating its name with a desirable benefit.
■ They are positioned on strong beliefs and values, engaging customers on a deep,
emotional level.
○ When positioning a brand, the marketer should establish a mission for the brand and a
vision of what the brand must be and do. A brand is the company’s promise to deliver a
specific set of features, benefits, services, and experiences consistently to buyers. The
brand promise must be clear, simple, and honest.
Brand Name Selection
○ It begins with a careful review of the product and its benefits, the target market, and
proposed marketing strategies. After that, naming a brand becomes part science, part art,
and a measure of instinct.
○ Desirable qualities for a brand name include the following:
1) It should suggest something about the product’s benefits and qualities
2) It should be easy to pronounce, recognize, and remember
3) The brand name should be distinctive
4) It should be extendable
5) The name should translate easily into foreign languages
6) It should be capable of registration and legal protection
Brand Sponsorship
○ A manufacturer has four sponsorship options.
1) The product may be launched as a national brand (or manufacturer’s brand)
2) The manufacturer may sell to resellers who give the product a private brand.
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3) Although most manufacturers create their own brand names, others market
licensed brands.
4) Finally, two companies can join forces and co-brand a product.
○ National Brands versus Store Brands
■ Store brand (private brand): A brand created and owned by a reseller of a product
or service.
■ In the so-called battle of the brands between national and private brands, retailers
have many advantages. They control what products they stock, where they go on
the shelf, what prices they charge, and which ones they will feature in local
promotions. Retailers often price their store brands lower than comparable
national brands and feature the price differences in side-by-side comparisons on
store shelves. Although store brands can be hard to establish and costly to stock
and promote, they also yield higher profit margins for the reseller. And they give
resellers exclusive products that cannot be bought from competitors, resulting in
greater store traffic and loyalty.
■ To compete with store brands, national brands must sharpen their value
propositions, especially when appealing to today’s more frugal consumers. Many
national brands are fighting back by rolling out more discounts and coupons to
defend their market share. In the long run, however, leading brand marketers
must compete by investing in new brands, new features, and quality
improvements that set them apart. They must design strong advertising programs
to maintain high awareness and preference. And they must find ways to partner
with major distributors to find distribution economies and improve joint
performance.
○ Licensing
○ Co-branding: The practice of using the established brand names of two different
companies on the same product.
Brand Development
○ Line extensions: Extending an existing brand anime to new forms, colours, sizes,
ingredients, or flavours of an existing product category.
○ Brand extension: Extending an existing brand name to new product categories.
○ Multibrands
○ New Brands
Managing Brands
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Class 8: 8 Developing New Products and Managing the Product Life
Cycle
8.1 New Product Development Strategy
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New product development: The development of original products, product improvements,
product modifications, and new brands through the firm’s own product development efforts.
○ A firm can obtain new products in two ways.
■ One is through acquisition—by buying a whole company, a patent, or a licence to
produce someone else’s product.
■ By new products we mean original products, product improvements, product
modifications, and new brands that the firm develops through its own product
development.
8.2 The New Product Development Process
1. Idea Generation
● Idea generation: The systematic search for new product ideas.
○ Internal Idea Sources
○ External Idea Sources
○ Crowdsourcing
2. Idea Screening
● Idea screening: Screening new product ideas to spot good ones and drop poor ones as
soon as possible.
3. Concept Development and Testing
● Product concept: The idea that consumers will favour products that offer the most quality,
performance, and features; therefore, the organization should devote its energy to making
continuous product improvements.
○ Concept Development
○ Concept Testing: Testing new product concepts with a group of target consumers
to find out if the concepts have strong consumer appeal.
4. Marketing Strategy Development
● Marketing strategy development: Designing an initial marketing strategy for a new
product based on the product concept.
5. Business Analysis
● Business analysis: A review of the sales, costs, and profit projections for a new product to
find out whether theses factors satisfy the company’s objectives.
6. Product Development
● Product development: Company growth by offering modified or new products to current
market segments.
7. Test Marketing
● Test marketing: The stage of new product development in which the product and its
proposed marketing program are tested in realistic market settings.
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8. Commercialization
● Commercialization: Introduction a new product into the market.
Managing New Product Development
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●
●
Customer-Centred New Product Development: New product development that focuses on finding
new ways to solve customer problems and create more customer-satisfying experiences.
Team-Based New Product Development: New product development in which various company
departments work closely together, overlapping the steps in the product development process to
save time and increase effectiveness.
Systematic New Product Development:
8.3 Product Life-Cycle Strategies
●
●
Product life cycle (PLC): The course of a product’s sales and profits over its lifetime.
Five distinct stages
1. Product development stage. Product development begins when the company finds and
develops a new product idea. During product development, sales are zero, and the
company’s investment costs mount.
2. Introduction stage. Introduction is a
period of slow sales growth as the
product is introduced in the market.
Profits are nonexistent in this stage
because of the heavy expenses of
product introduction.
● Introduction stage: The PLC
stage in which a new product is
first distributed and made
available for purchase.
● Slow increase in sales
● Technological problems
● Distribution delays
● Recalls
● Consumer resistance
● Pricing strategy
● Promotion strategy
● Losses experienced.
3. Growth stage. Growth is a period of rapid market acceptance and increasing profits.
● Growth stage: The PLC stage in which a product’s sales start climbing quickly.
● Sales increase at faster rate
● Lower prices
● More competition
● Promotion geared towards brand preference.
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4. Maturity stage. Maturity is a period of slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits level off or decline because of
increased marketing outlays to defend the product against competition.
● Maturity stage: The PLC stage in which a product’s sales growth slows or levels
off.
● Sales increase at decreasing rate
● Market saturation
● Replacement sales
● Price competition
● Profits decline
● Intense promotional activity to maintain market share
● Penetration strategy
● Repositioning
5. Decline stage. Decline is the period when sales fall off and profits drop.
● Decline stage: The PLC stage in which a product’s sales fade away.
● Sales decline quickly
● Competition declines
● Prices drop then stabilize
● Promotion drops off; used as reminder
● Period of replacement
● Survival or abandonment will depend on management’s abilities to adapt to new
market demand.
●
The PLC concept also can be applied to what are known as styles, fashions, and fads.
○ Style: A basic and distinctive mode of expression.
○ Fashion: A currently accepted or popular style in a given field.
○ Fad: A temporary period of
unusually high sales driven by
consumer enthusiasm and
immediate product or brand
popularity.
12 Engaging Consumers and
Communicating Customer Value: Advertising and Public Relations
12.1 The Promotion Mix
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Promotion mix (Marketing communications mix): The specific blend of promotion tools that the
company uses to persusasively communicate customer value and build customer relationships.
The five major promotion tools are defined as follows:
1) Advertising: Any paid form of nonpersonal presentation and promotion of ideas, goods,
or services by an identified sponsor.
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2) Sales promotion: Short-term incentives to encourage the purchase or sale of a product or
a service.
3) Personal selling: Personal presentation by the firm’s sales force for the purpose of
engaging customers, making sales, and building customer relationships.
4) Public relations (PR): Build good relations with the company’s various publics by
obtaining favourable publicity, building up a good corporate image, and handing or
heading off unfavourable rumours, stories, and events.
5) Direct and digital marketing: Engine directly with carefulyl targeted individual
consumers and customer communities to both obtain and immediate response and build
lasting customer relationships.
12.2 Integrated Marketing Communications
The New Marketing Communications Model
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Several major factors are changing the face of today’s marketing communications.
○ First, consumers are changing.
■ In this digitally connected, mobile age, consumers are better informed and more
communications empowered. Rather than relying on marketer-supplied
information, they can use the internet, social media, and other technologies to
find information on their own. They can connect easily with other consumers to
exchange brand-related information or even create their own brand messages and
experiences.
○ Second, marketing strategies are changing.
■ As mass markets have fragmented, marketers are shifting away from mass
marketing. More and more, they are developing focused marketing programs
designed to engage customers and build customer relationships in more narrowly
defined micromarkets.
○ Finally, sweeping advances in digital technology are causing remarkable changes in the
ways companies and customers communicate with each other.
■ The digital age has spawned a host of new information and communication
tools—from to smartphones and tablets to the many faces of the internet (brand
websites, email, blogs, streamed content, social media and online communities,
the mobile web, and so much more). Just as mass marketing once gave rise to a
new generation of mass-media communications, the new digital and social media
have given birth to a more targeted, social, and engaging marketing
communications model.
Content marketing: Creatin, inspiring, and sharing brand messages and conversation with and
among consumers across a fluid mix of paid, owned, earned, and shared channels.
The Need for Integrated Marketing Communications
●
Consumers today are bombarded by brand messages from a broad range of sources. But all too
often, companies fail to integrate their various communication channels.
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Mass-media ads say one thing, whereas company’s website, social media pages and posts,
videos, or emails say something altogether different.
Conflicting content from these different sources can result in confused company images,
brand positions, and customer relationships.
Shaping the Overall Promotion Mix
●
The Nature of Each Promotion Tool
○ Advertising
■ Advertising can reach masses of geographically dispersed buyers at a low cost
per exposure, and it enables the seller to repeat a message many times.
■ Beyond its reach, large-scale advertising says something positive about the
seller’s size, popularity, and success. Because of advertising’s public nature,
consumers tend to view advertised products as more legitimate. Advertising is
also very expressive; it allows the company to dramatize its products through the
artful use of visuals, print, sound, and colour. On the one hand, advertising can be
used to build up a long-term image for a product (such as Coca-Cola ads). On the
other hand, advertising can trigger quick sales (as when Canadian Tire advertises
weekend specials).
■ Advertising also has some drawbacks. Although it reaches many people quickly,
mass-media advertising is impersonal and lacks the direct persuasiveness of
company salespeople. For the most part, advertising can carry on only a one-way
communication with an audience, and the audience does not feel that it has to pay
attention or respond. In addition, advertising can be very costly.
■ Establishing Advertising Objectives
● Define your target market
● Determine what type of communication you want to convey
● Establish a timetable
● Must have more specific objectives then that of personal selling
objectives
● Two types:
○ Product advertising
■ Aimed at the consumer or the retailer or both
■ Informing and stimulating target audience
○ Institutional advertising
■ Create, continue, or establish good will towards the
industry
○ Personal Selling
■ Personal selling is the most effective tool at certain stages of the buying process,
particularly in building up buyers’ preferences, convictions, and actions. It
involves personal interaction between two or more people, so each person can
observe the other’s needs and characteristics and make quick adjustments.
Personal selling also allows all kinds of customer relationships to spring up,
ranging from matter-of-fact selling relationships to personal friendships.
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These unique qualities come at a cost, however. A sales force requires a
longer-term commitment than does advertising—advertising can be turned up or
down, but the size of a sales force is harder to change. Personal selling is also the
company’s most expensive promotion tool, costing companies on average $600
or more per sales call, depending on the industry.9 Firms spend up to three times
as much on personal selling as they do on advertising.
Sales Promotion
■ Sales promotion includes a wide assortment of tools—coupons, contests,
discounts, premiums, and others—all of which have many unique qualities. They
attract consumer attention, engage consumers, offer strong incentives to
purchase, and can be used to dramatize product offers and boost sagging sales.
Sales promotions invite and reward quick response. Whereas advertising says,
“Buy our product,” sales promotion says, “Buy it now.” Sales promotion effects
can be short lived, however, and often are not as effective as advertising or
personal selling in building long-run brand preference and customer
relationships.
Public Relations
■ Public relations is very believable—news stories, features, sponsorships, and
events seem more real and believable to readers than ads do. PR can also reach
many prospects who avoid salespeople and advertisements—the message gets to
buyers as “news and events” rather than as a sales-directed communication. And,
as with advertising, public relations can dramatize a company or product.
Marketers tend to underuse public relations or use it as an afterthought. Yet a
well-thought-out public relations campaign used with other promotion mix
elements can be very effective and economical.
● All those activities designed to build good relations with the different
publics that an oranziation must take into account
● PR departments deal with
○ Press relations
○ Lobbying governments
○ Investor relations
○ Public affairs
● Good PR tools
○ Favourable news stories about the organization
○ Involvement in charitable/non-profit activities
○ Organziation’s website (eg providing helpful information on how
to use its products)
Direct and Digital Marketing
■ The many forms of direct and digital marketing—from traditional direct mail,
catalogues, and telephone marketing to newer online, mobile, and social
media—all share some distinctive characteristics. Direct marketing is more
targeted: It’s usually directed to a specific customer or customer community.
Direct marketing is immediate and personalized: Messages can be prepared
quickly—even in real time—and tailored to appeal to individual consumers or
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brand groups. Finally, direct marketing is interactive: It allows a dialogue
between the marketing team and the consumer, and messages can be altered
depending on the consumer’s response.
Promotion Mix Strategies
○ Push strategy
■ Push strategy: A
promotion strategy
that calls for using
the sales force and
trade promotion to
push the product
through channels.
The producer promotes the product to channel members who in turn promote it to
final consumers.
● Personal selling and trade promotions
○ Pull strategy
■ Pull strategy: A promotion strategy that calls for spending a lot on consumer
advertising and promotion to induce final consumers to buy the product, creating
a demand vacuum that “pulls” the product through the channel.
● Advertising
Main Element in
Promotional Mix:
Advertising
Personal Selling
When market is:
Geographical dispersed
Many customers
Many industries
Geographically concentrated
Few customers
Few industries
When product is:
Standardized
Of low unit value
Nontechnical
Custom made
Of high unit value
Technical
12.3 Advertising and Major Advertising Decisions
Setting Advertising Objectives
●
Advertising objective: A specific communication task to be accomplished with a specific target
audience during a specific period of time.
Informative Advertising
Communicating customer value
Suggesting new uses for a product
Building a brand and company image
Informing the market of a price change
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Telling the market about a new product
Describing available services and support
Explainging how a product works
Correcting false impressions
Persuasive Advertising
Building brand preference
Persuading customers to purchase now
Encouraging switching to a brand
Creating customer engagement
Changing customer perceptions of product
value
Building brand community
Reminder Advertising
Mainting customer relationships
Reminding consumers where to buy the
product
Reminding consumers that the product may be Keeping the brand in a customer’s mind
needed in the near future
during off-seasons
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Informative advertising is used heavily when introducing a new product category. In this case, the
objective is to build primary demand.
Persuasive advertising becomes more important as competition increases. Here, the company’s
objective is to build selective demand.
○ Some persuasive advertising has become comparative advertising (or attack advertising),
in which a company directly or indirectly compares its brand with one or more other
brands.
Reminder advertising is important for mature products; it helps to maintain customer
relationships and keep consumers thinking about the product.
Setting the Advertising Budget
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Advertising budget: The dollars and other resources allocated to a product or a company
advertising program.
Affordable Method
○ Affordable method: Setting the promotion budget at the level management thinks the
company can afford.
Percentage-of-Sales Method
○ Percentage-of-Sales method: Setting the promotion budget at a certain percentage eof
current or forecasted sales or as a percentage of the unit sales price.
Competitive-Parity Method
○ Competitive-Parity method: Setting the promotion budget to match competitors’ outlays.
Objective-and-Task Method
○ Objective-and-Task method: Developing the promotion budget by (1) defining specific
promotion objectives. (2) determining the tasks needed to achieve these objectives, and
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(3) estimating the costs of performing these tasks. The sum of these costs is the proposed
promotion budget.
Developing Advertising Strategy
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Advertising strategy: The strategy by which the company accomplishes its advertising objectives.
It consists of two major elements: creating advertising messages and selecting advertising media.
Creating the Advertising Message and Brand Content
○ Breaking Through the Clutter
○ Merging Advertising and Entertainment
■ Madison & Vine: A term that has come to represent the merging of advertising
and entertainment in effort to break through the clutter and create new avenues
for reaching customers with more engaging messages.
○ Message and Content Strategy
○ Message Execution
■ Execution styles: The approach, style, tone, words, and format used to executing
an advertising message.
● Slice of life
● Lifestyle
● Fantasy
● Mood or image
● Musical
● Personality symbol
● Technical expertise
● Scientific evidence
● Tertimonial evidence or endorsement
○ Consumer-Generate Content
Selecting Advertising Media
○ Advertising media: The vehicles through which advertising messages are delivered to
their intended audiences.
○ Determining Reach, Frequency, Impact, and Engagement
○ Choosing among Major Media Types
Medium
Advantages
Limitations
Television
Good mass-marketing coverage;
low cost per exposure; combines
sight, sound, and motion;
appealing to the senses
High absolute costs; high clutter;
fleeting exposure; less audience
selectivity
Digital,
mobile, and
social media
High selectivity; low cost;
immediacy; engagement
capabilities
Potentially low impact; high
audience control of content and
exposure
Newspapers
Flexibility; timeliness; good
local market coverage; broad
acceptability; high believability
Short life; poor reproduction
quality; small pass-along
audience
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Direct mail
High audience selectivity;
flexibility; no ad competition
within the same medium; allows
personalization
Relatively high cost per
exposure; “junk mail” image
Magazines
High geographic and
demographic selectivity;
credibility and prestige;
high-quality reproduction; long
life and good pass-along
readership
Long ad purchase lead time;
high cost; no guarantee of
position
Radio
Good local acceptance; high
geographic and demographic
selectivity; low cost
Audio only; fleeting exposure;
low attention (“the half-heard”
medium); fragmented audiences
Outdoor
Flexibility; high repeat
exposure; low cost; good
positional selectivity
Little audience selectivity;
creative limitations
Selecting Specific Media Vehicles
Deciding on Media Timing
Evaluating Advertising Effectiveness and the Return on Advertising Investment
●
Return on advertising investment: The net return on advertising investment divided by the costs
of the advertising investment.
Other Advertising Considerations
Organzing for Advertising
International Advertising Decisions
12.4 Public Relations
PR may include any or all of the following functions:
● Press relations or press agency. Creating and placing newsworthy information in the news
media to attract attention to a person, product, or service.
● Product and brand publicity. Publicizing specific products and brands.
● Public affairs. Building and maintaining national or local community relationships.
● Lobbying. Building and maintaining relationships with legislators and government officials to
influence legislation and regulation.
● Investor relations. Maintaining relationships with shareholders and others in the financial
community.
● Development. Working with donors or members of nonprofit organizations to gain financial or
volunteer support.
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The Role and Impact of PR
Major Public Relations Tools
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One of the major tools is news. PR professionals find or create favourable news about the
company and its products or people. Sometimes news stories occur naturally; sometimes the PR
person can suggest events or activities that would create news.
Another common PR tool is special events, ranging from news conferences and speeches, brand
tours, and sponsorships to multimedia presentations or educational programs designed to reach
and interest target publics.
Public relations people also prepare written materials to reach and influence their target markets.
These materials include annual reports, brochures, articles, and company newsletters and
magazines.
Audiovisual materials, such as videos, are being used increasingly as communication tools.
Corporate identity materials can also help create a corporate identity that the public immediately
recognizes. Logos, stationery, brochures, signs, business forms, business cards, buildings,
uniforms, and company cars and trucks all become marketing tools when they are attractive,
distinctive, and memorable.
Finally, companies can improve public goodwill by contributing money and time to public
service activities.
Class 9: 13 Personal Selling and Sales Promotion
13.1 Personal Selling
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Personal selling: Personal presentation by the firm’s sales force for the purpose of engaging
customers, making sales, and building customer relationships.
Salesperson: An individual who represents a company to customers by performing one or more of
the following activities: prospecting, communicating, selling, servicing, information gathering,
and relationship building.
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13.2 Managing the Sales Force
13.3 The Personal Selling Process
13.4 Sales Promotion
14 Direct, Online, Social Media, and Mobile Marketing
14.1 Direct and Digital Marketing
14.2 Forms of Direct and Digital Marketing
14.3 Marketing in the Digital Age
14.4 Social Media and Mobile Marketing
Class 10: 9 Price Mix
Class 11: 10 Place Mix (Marketing Channels)
Class 12: 15 The Global Marketplace
16 Sustainable Marketing, Social Responsibility, and Ethics
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