Marketing
Engineering
Computer-Assisted
Marketing Analysis and Planning
Gary L. LUien
The Pennsylvania State University
Arvind Rangaswamy
The Pennsylvania State University
Joel Steckel, Series Editor
New York University
Co-sponsored by
Institute for
the Study of
Business Markets
ADDISON-WESLEY
An imprint of Addison Wesley Longman, Inc.
Reading, Massachusetts • Menlo Park, California • New York • Harlow, England
Don Mills, Ontario • Sydney • Mexico City • Madrid • Amsterdam
Preface
xiii
PART I The Basics
Chapter 1 Introduction
1
1
Marketing Engineering: From Mental Models to Decision Models
Marketing and marketing management 1
Marketing engineering 2
Why marketing engineering? 5
Marketing Decision Models
Definition 6
6
Characteristics of decision models 7
Verbal, graphical, and mathematical models 8
Descriptive and normative decision models 11
Benefits of Using Decision Models
Philosophy and Structure of the Book
Philosophy 19
13
19
Objectives and structure of the book 20
Design criteria for the software 22
A Tour of the Software
Summary
26
23
1
viii
CONTENTS
Chapter 2 Tools for Marketing Engineering: Market Response Models
Why Response Models?
27
Types of Response Models
29
Some Simple Market Response Models
Calibration
35
Objectives
37
31
Multiple Marketing-Mix Elements: Interactions
Dynamic Effects
40
40
Market-Share Models and Competitive Effects
42
Response at the Individual Customer Level
44
Shared Experience and Qualitative Models
47
Choosing and Evaluating a Marketing Response Model
Summary
49
50
Appendix: About Excel's Solver 50
PART II Developing Market Strategies
Chapter 3 Segmentation and Targeting
The Segmentation Process
55
55
Defining segmentation 55
Segmentation theory and practice 56
The STP approach 58
Segmenting markets (Phase 1) 60
Describing market segments (Phase 2) 62
Evaluating segment attractiveness (Phase 3)
Selecting target segments (Phase 4) 64
Defining a Market
55
63
67
Segmentation Research: Designing and Collecting Data
Developing the measurment instrument
71
Selecting the sample 71
Selecting and aggregating respondents 72
70
27
CONTENTS
Segmentation Methods
ix
76
Using factor analysis to reduce the data
76
Forming segments by cluster analysis: Measures of association
Clustering methods
76
80
Interpreting segmentation study results 85
Behavior-Based Segmentation: Cross-Classification, Regression,
and Choice Models 88
Cross-classification analysis 88
Regression analysis 88
Choice-based segmentation 90
Summary
Chapter 4 Positioning
93
95
Differentiation and Positioning
Definition
95
95
Positioning using perceptual maps 96
Applications of Perceptual Maps
99
Perceptual Mapping Techniques
104
Attribute-based methods 105
Similarity-based methods for perceptual mapping
Joint-Space Maps
116
Overview 116
Simple joint-space maps 116
External analysis using PREFMAP3
Incorporating Price in Perceptual Maps
Summary
113
118
121
122
Appendix: Factor Analysis for Preprocessing Segmentation Data
Chapter 5 Strategic Market Analysis: Conceptual Framework and Tools
Strategic Marketing Decision Making
Market Demand and Trend Analysis
Judgmental methods 130
Market and product analysis
Time-series methods 132
125
129
131
124
1 25
CONTENTS
Causal methods
137
What method to choose?
The Product Life Cycle
143
145
Cost Dynamics: Scale and Experience Effects
Summary
149
153
Chapter 6 Models for Strategic Marketing Decision Making
Market Entry and Exit Decisions
154
Shared Experience Models: The PIMS Approach
Product Portfolio Models
154
163
166
The Boston Consulting Group (BCG) approach 166
The GE/McKinsey approach 168
Financial models 170
Analytic Hierarchy Process 170
Competition
Summary
174
177
PART III Developing Marketing Programs
Chapter 7 New Product Decisions
Introduction
178
1 78
178
New Product Decision Models
181
Models for identifying opportunities
181
Models for product design 183
Models for new product forecasting and testing
Conjoint Analysis for Product Design
184
Introduction 184
Conjoint analysis procedure 187
Contexts best suited for conjoint analysis
Forecasting the Sales of New Products
194
195
Overview of the Bass model 195
Technical description of the Bass model 196
Extensions of the basic Bass model 202
183
CONTENTS
Pretest Market Forecasting
xi
204
Overview of the ASSESSOR model 204
The preference model
206
Trial-repeat model 208
The validity and value of the ASSESSOR model
7.6
Summary
210
211
Chapter 8 Advertising and Communications Decisions
The Bewildering Nature of Advertising
212
213
Advertising Effects: Response, Media, and Copy 214
Advertising response phenomena
Frequency phenomena 218
Copy effects 219
Advertising Budget Decisions
Media Decisions
214
220
229
Advertising Copy Development and Decisions
Copy effectiveness 234
Estimating the creative quality of ads
Advertising design 238
Summary
234
237
245
Chapter 9 Salesforce and Channel Decisions
Introduction to Salesforce Models
246
246
Sales-response models for representing effects of sales activities
Salesforce management decisions
Salesforce Sizing and Allocation
248
249
Intuitive methods 249
Market-response methods (the Syntex model)
Sales Territory Design
246
251
255
The GEOLINE model for territory design
Salesforce Compensation
256
259
Using conjoint analysis to design a bonus plan (the MSZ) model
Improving the Efficiency and Effectiveness of Sales Calls
The CALLPLAN model
262
262
260
xii
CONTENTS
Marketing Channel Decisions
The gravity model
Summary
267
268
273
Chapter 10 Price and Sales Promotion Decisions
274
Pricing Decisions: The Classical Economics Approach
274
Pricing in Practice: Orientation to Cost, Demand, or Competition
278
Cost-oriented'pricing 278
Demand-oriented pricing 279
Competition-oriented pricing 282
Interactive Pricing: Reference Prices and Price Negotiations
Price Discrimination
284
286
Understanding price discrimination 286
Geographic price discrimination 288
Temporal price discrimination 289
Nonlinear pricing or quantity discounts 292
Other forms of price discrimination 293
Pricing Product Lines
294
Sales Promotions: Types and Effects
295
Objectives of promotions 296
Characteristics of promotions 297
Aggregate Models to Analyze Promotional Effects
Analyzing Individuals' Responses to Promotions
Summary
300
304
307
PART IV Conclusions
309
Chapter 11 Marketing Engineering: A Look Back and a Look Ahead
Marketing Engineering: A Look Back
309
Using Marketing Engineering Within Firms
Marketing Engineering: A Look Forward
Postscript 321
References 323
Index 339
Name Index 347
312
313
309