Chapter 7 Analyzing business markets
What is organizational buying?
Organizational buying:
The decision-making process by which formal organizations establish (vaststellen) the need for
purchased products and services and identity, evaluate, and choose among alternative brands and
suppliers.
• The business market versus the consumer market
- Business market:
Consists of all the organizations that acquire goods and services used in the production of other
products or services that are sold, rented, or supplied to others.
- Business markets have several characteristics that contrast sharply with those of consumers
markets:
- fewer, larger buyers
- close supplier-customer relationship
- professional purchasing → business goods are often purchased by trained purchasing agents
- several buying influences → more people typically influence business buying decisions
- multiple sales calls
- derived demand → the demand for business goods is ultimately derived from the demand for
consumer goods
- inelastic demand → the total demand for many business goods and services is inelastic (not much
affected by price changes)
- fluctuating demand → the demand for business goods and services tends to be more volatile than
the demand for consumer goods and services
- geographically concentrated buyers → more than half of U.S. business buyers are concentrated in
seven states
- direct purchasing → business buyers often buy directly from manufacturers rather than through
intermediaries, especially items that are technically complex or expensive
• Buying situations
→ straight rebuy → the purchasing department reorders on a routine basis and choose from suppliers
on an “approved list”
→ modified rebuy → the buyer wants to modify product specifications, prices, delivery requirements
or other terms
→ new task → a purchaser buys a product or service for the first time
Purchasing agents (inkoopmedewerkers) are influential in straight-rebuy and modified-rebuy
situations, whereas other department personnel are more influential in new-buy situations.
Engineering personnel usually have a major influence in selecting product components, and
purchasing agents dominate in selecting suppliers.
• Systems buying and selling
• The buying center:
All members of the organization who play any of seven roles in the purchase decision process:
initiators → those who request that something be purchased. They may be users of others in the
organization
users → those who will use the product or service
influencers → people who influence the buying decision, ex. technical personnel
deciders → people who decide on product requirements or on suppliers
approvers → people who authorize the proposed actions of deciders or buyers
buyers → people who have formal authority to select the supplier and arrange the purchase
terms
gatekeepers → people who have the power to prevent sellers or information from reaching
members of the buying centre
• Buying center influences
• Buying center targeting
Four types of business customers can often be identified, with corresponding marketing implications:
price-oriented customers → (transactional selling), price is everything
solution-oriented customers → (consultative selling), they want low prices but will respond to
arguments about lower total cost or more dependable supply or service
gold-standard customers → (quality selling), they want the best performance in terms of product
quality, assistance, reliable delivery, and so on
strategic-value customers → (enterprise selling), they want a fairly permanent sole-supplier
relationship with your company
The purchasing/procurement process
• Purchasing orientations
→Three company purchasing orientations:
- buying orientation → the purchaser’s focus is short term and tactical
- procurement orientation → buyers simultaneously seek quality improvements and cost reductions
- supply chain management orientation → purchasing’s role is further broadened to become a more
strategic, value-adding operation
• Types of purchasing processes
Four product-related purchasing processes:
routine products → these products have low value and cost to the customer and involve little risk
leverage products → these products have high value and cost to the customer but involve little
risk of supply
strategic products → these products have high value and cost to the customer and also involve
high risk
bottleneck products → these products have low value and cost to the customer but they involve
some risk
• Purchasing organization and administration
Marketers need to understand how business purchasing departments work. These departments
purchase many types of products, and the purchasing process will vary depending on the types of
products involved.
Stages in the buying process:
• problem recognition
• general need description and product specification
• supplier search
• E-procurement
• proposal solicitation
• supplier selection
• order-routine specification
• performance review
Managing business-to-business customer relationships
• The benefits of vertical coordination
→ The relationship between advertising agencies and clients illustrates these findings:
in the relationship formation stage, one partner experienced substantial market growth
information asymmetry between partners was such that a partnership would generate more
profits than if the partner attempted to invade the other firm’s area
at least one partner had high barriers to entry that would prevent the other partner from entering
the business
dependence asymmetry existed such that one partner was more able to control or influence the
other’s conduct
one partner benefited from economies of scale related to the relationship
→ Eight different categories of classified buyer-supplier relationships:
basic buying and selling
bare bones
contractual transaction
customer supply
cooperative systems
collaborative
mutually adaptive
customer is king
• Business relationships: risks and opportunism
Institutional and government markets
Institutional market:
Consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods
and services to people in their care.
Chapter 8 Identifying market segments and targets
Target marketing involves three activities: market segmentation, market targeting, and market
positioning.
Levels of market segmentation:
→ Mass marketing:
In this the seller engages in the mass production, mass distribution, and mass promotion of one
product for all buyers.
• Segment marketing
→Flexible market offering:
Consists of two parts: a naked solution containing the product and service elements that all segment
members value, and discretionary options that some segment members value.
• Niche marketing:
Niche: a more narrowly defined group
• Local marketing
• Customerization:
Combination of operationally driven mass customization with customized marketing in a way that
empowers consumers to design the product and service offering of their choice
Segmenting consumer markets:
• geographic segmentation:
Calls for dividing the market into different geographical units such as nations, states, regions,
counties, cities or neighborhoods
• demographic segmentation:
The market is divided into groups on the basis of variables such as age, family size, family life cycle,
gender, income, occupation, education, religion, race, generation, nationally, and social class.
→ age and life-cycle stage
→ life stage
→ gender
→ income
→ generation
→ social class
• psychographic segmentation:
Buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or
values.
→ Psychographics:
Is the science of using psychology and demographics to better understand consumers
The major tendencies of the four groups with higher resources are:
innovators
thinkers
achievers
experiencers
The major tendencies of the four groups with lower resources are:
believers
strivers
makers
survivors
• behavioral segmentation:
In this, buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or
response to a product
→ decision roles
→ behavioral variables
occasions
benefits
user status
usage rate
buyer-readiness stage
loyalty status
attitude
→ the conversion model
Bases for segmenting business markets
• Marketing to small businesses
• Sequential segmentation
Market targeting
• Effective segmentation criteria
To be useful, market segments must rate favourable on five key criteria:
- measurable → the size, purchasing power, and characteristics of the segments can be measured
- substantial → the segments are large and profitable enough to serve
- accessible → the segments can be effectively reached and served
- differentiable → the segments are conceptually distinguishable and respond differently to different
marketing-mix elements and programs
- actionable → effective programs can be formulated for attracting and serving the segments
• Evaluating and selecting the market segments
→ Single-segment concentration
Supersegment:
Is a set of segments sharing some exploitable similarity
→ selective specialization
→ product specialization
→ market specialization
→ full market coverage
→ managing multiple segments
→ differentiated marketing costs
• Additional considerations
→ segment-by-segment invasion plans
Mega marketing:
Is the strategic coordination of economic, psychological, political, and public relations skills, to gain
the cooperation of a number of parties in order to enter or operate in a given market.
→ updating segmentation schemes
Market partitioning:
The process of investigating the hierarchy of attributes consumers examine in choosing a brand if
they use phased decision strategies.
→ ethical choice of market targets
Chapter 9 Creating brand equity
What is brand equity?
→ Brand:
A product or service that adds dimensions that differentiate it in some way from other products or
services designed to satisfy the same need.
• The role of brands
• the scope of branding
→ Branding:
Is endowing products and services with the power of a brand.
• Defining brand equity
→ Brand equity:
Is the added value endowed to products and services.
→ Customer-based brand equity:
The differential effect that brand knowledge has on consumer response to the marketing of that brand
→ Brand knowledge:
Consists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated
with the brand
• Brand equity as a bridge
→ Brand promise:
Is the marketer’s vision of what the brand must be and do for consumers
• Brand equity models
→ brand asset valuator (BAV)
Four key components of brand equity, according to BAV:
- differentiation → measures the degree to which a brand is seen as different from others
- relevance → measures the breadth of a brand’s appeal
- esteem → measures how well the brand is regarded and respected
- knowledge → measures how familiar and intimate consumers are with the brand
→ aaker model
- core identify
- extended identify
→ brandz
BRANDZ → five steps:
- presence
→ Do I know about it?
- relevance
→ Does it offer me something?
- performance
→ Can it deliver?
- advantage
→ Does it offer something better than others?
- bonding
→ Nothing else beats it
→ brand resonance
The blocks of the brand resonance pyramid:
- brand salience → relates to how often and easily the brand is evoked under various purchase or
consumption situations
- brand performance → relates to how the product or service meets customers’ functional needs
- brand imagery → deals with the extrinsic properties of the product or service, including the ways in
which the brand attempts to meet customers’ psychological or social needs
- brand judgments → focus un customers’ own personal opinions and evaluations
- brand feelings → are customers’ emotional responses and reactions with respect to the brand
- brand resonance → refers to the nature of the relationship that customers have with the brand and
the extent to which customers feel that they are “in sync” with the brand.
Building Brand Equity
From a marketing management perspective, there are three main sets of brand equity drivers:
- the initial choices for the brand elements or identities making up the brand
- the product and service and all accompanying marketing activities and supporting marketing
programs
- other associations indirectly transferred to the brand by linking it to some other entity
• Choosing Brand elements
Brand elements:
Are those trademarkable devices that serve to identify and differentiate the brand
→ Brand element choice criteria (six)
memorable → how easily is the brand element recalled?
meaningful → to what extent is the brand element credible and suggestive of the corresponding
category?
likeability → how aesthetically appealing do consumers find the brand element?
transferable → can the brand element be used to introduce new products in the same or different
categories?
adaptable → how adaptable and updatable is the brand element?
protectible → how legally is the brand element? How competitively protectible? Can it be easily
copied?
→ Developing brand elements
• Designing holistic marketing activities
Brand contact:
Can be defined as any information-bearing experience a customer or prospect has with the brand, the
product category, or the market that relates to the marketer’s product or service.
→ Personalization
→ Integration
- Integrating marketing:
Is about mixing and matching marketing activities to maximize their individual and collective effects
- Brand awareness:
Is consumers’ ability to identify the brand under different conditions, as reflected by their brand
recognition or recall performance
- Brand image:
Is the perceptions and beliefs held by consumers, as reflected in the associations held in consumer
memory
→ Internationalization
- Internal branding:
Is activities and processes that help to inform and inspire employees
• Leveraging secondary associations
Measuring brand equity
• Brand audits:
Is a consumer-focused exercise that involves a series of procedures to assess the health of the
brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity
→ Brand inventory
The purpose of this is to provide a current, comprehensive profile of how all the products and services
sold by a company are marketed and branded.
→ Brand exploratory:
Is research activity conducted to understand what consumers think and feel about the brand and its
corresponding product category to identify sources of brand equity.
• Brand tracking
→ Tracking studies:
Collect information from consumers on a routine basis over time
• Brand valuation:
Is the job of estimating the total financial value of the brand
Managing brand equity
• Brand reinforcement
• Brand revitalization
• Brand crisis
Devising a branding strategy
Branding strategy:
For a firm reflects the number and nature of common and distinctive brand elements applied do the
different products sold by the firm.
When a firm introduces a new product, it has three main choices:
- it can develop new brand elements for the new product
- it can apply some of its existing brand elements
- it can use a combination of new and existing brand elements
Brand extension:
When a firm uses an established brand to introduce a new product
Sub-brand:
When a new brand is combined with an existing brand, the brand extension can also be called so
Parent brand:
An existing brand that gives birth to a brand extension
Family brand:
If the parent brand is already associated with multiple products through brand extensions, then it may
also be called so
Line extension:
The parent brand is used to brand a new product that targets a new market segment within a product
category currently served by the parent brand
Category extension:
The parent brand is used to enter a different product category from that currently served by the parent
brand
Brand line:
Consists of all products sold under a particular brand
Brand mix:
Is the set of all brand lines that a particular seller makes available to buyers
Branded variants:
Specific brand lines supplied to specific retailers or distribution channels
Licensed product:
Is one whose brand name has been licensed to other manufacturers who actually make the product
• Branding decision: to brand or not to brand?
Assuming a firm decides to brand its products or services, it must then choose which brand names to
use. Four general strategies are often used:
- Individual names
- Blanket family names
- Separate family names for all products
- Corporate name combined with individual product names
• Brand extensions
→ Advantages of brand extensions
Two main advantages of brand extension are that they can facilitate new-product acceptance, as well
as provide positive feedback to the parent brand and company.
→ Disadvantages of brand extensions
Brand dilution:
Occurs when consumers no longer associate a brand with a specific product of highly similar
products and start thinking less of the brand.
→ Success characteristics
• Brand portfolios
Reasons for introducing multiple brands in a category include:
- to increase shelf presence and retailer dependence in the store
- to attract consumers seeking variety who may otherwise have switched to another brand
- to increase internal competition within the firm
- to yield economies of scale in advertising, sales, merchandising, and physical distribution
Brand portfolio:
Is the set of all brands and brand lines a particular firm offers for sale to buyers in a particular
category. Different brands may be designed and marketed to appeal to different marketed segments
Chapter 10 Crafting the brand positioning
Developing and communicating a positioning strategy
» Positioning:
Is the act of designing the company’s offering and image to occupy a distinctive place in the mind of
the target market
• Competitive frame of reference
» Category membership:
The products or sets of products with which a brand competes and which function as close
substitutes
• Points-of-parity and points-of difference
→ Points-of-difference (PODs):
Are attributes or benefits consumers strongly associate with a brand, positively evaluate, and belief
that they could not find to the same extent with a competitive brand.
→ Points-of-parity (POPs):
Are associations that are not necessarily unique to the brand but may in fact be shared with other
brands
→ Points-of-parity versus points-of-difference
Once the competitive frame of reference for positioning has been fixed by defining the customer
target market and nature of competition, marketers can define the appropriate points-of-difference
and points-of-parity associations.
• Establishing category membership
There are three main ways to convey a brand’s category membership:
- announcing category benefits → to reassure consumers that a brand will deliver on the fundamental
reason for using a category, benefits are frequently used to announce category membership
- comparing to exemplars → well-known, noteworthy brands in a category can also be used to specify
category membership
- relying on the product descriptor → the product descriptor that follows the brand name is often a
concise means of conveying category origin
• Choosing POPs and PODs
There are three key consumer desirability criteria for PODs:
1. relevance → target consumers must find the POD personally relevant and important
2. distinctions → target consumers must find the POD distinctive and superior
3. believability → target consumers must find the POD believable and credible
There are three key deliverability criteria:
1. feasibility → the firm must be able to actually create the POD.
2. communicability → it is very difficult to create an association that is not consistent with
existing consumer knowledge or that consumers, for whatever reason, have trouble believing
3. sustainability → is the positioning pre-emptive, defensible, and difficult to attack?
• Creating POPs and PODs
→ Present separately
→ Leverage equity of another entity
→ Redefine the relationship
Differentiation strategies
• product differentiation
• personnel differentiation
• channel differentiation
• image differentiation
Product life-cycle marketing strategies
• Product life clycles
The product live-cycle curve is typically divided into four stages:
1. introduction → a period of slow sales growth as the product is introduced in the market.
Profits are nonexistent because of the heavy expenses of product introduction
2. growth → a period of rapid market acceptance and substantial profit improvement
3. maturity → a slowdown in sales growth because the product has achieved acceptance by
most potential buyers. Profits stabilize or decline because of increased competition
4. decline → sales show a downward drift and profits erode
• Style, fashion, and fad life cycles
We need to distinguish three special categories of product life cycles: styles, fashions, and fads.
• Marketing strategies: introduction stage and the pioneer advantage
• Marketing strategies: growth stage
The firm uses several strategies to sustain rapid market growth, for example:
- it improves product quality and adds new product features and improved styling
- it enters new market segments
- it lower prices to attract the next layer of price-sensitive buyers
• Marketing strategies: maturity stage
→ market modification
Volume = number of brand users x usage rate per user
→ product modification
→ marketing program modification
Product managers might try to stimulate sales by modifying other marketing program elements, they
should ask the following questions:
- prices
would a price cut attract new buyers?
- distribution
can the company obtain more product support and display in existing outlets?
- advertising
should advertising expenditures be increased?
- sales promotion
should the company step up sales promotion?
- personal selling
should the number or quality of salespeople be increased?
- services
can the company speed up delivery?
• Marketing strategies: decline stage
Five strategies are available to the firm, some examples:
- increasing the firm’s investment
- divesting the business quickly by disposing of its assets as advantageously as possible
• The product life-cycle concept: critique
Market evolution
→ emergence
→ growth
→ maturity
→ decline
Chapter 11 Dealing with competition
Competitive forces
There are five forces that determine the intrinsic long-run attractiveness of a market or market
segment: industry competitors, potential entrants, substitutes, buyers, and suppliers. The threats
these forces pose are as follows:
Threat of intense segment rivalry → a segment is unattractive if it already contains numerous,
strong, or aggressive competitors.
Threat of new entrants → a segment’s attractiveness varies with the height of its entry and exit
barriers
Threat of substitute products → a segment is unattractive when there are actual or potential
substitutes for the product.
Threat of buyers’ growing bargaining power → a segment is unattractive if buyers possess strong
or growing bargaining power
Threat of suppliers’ growing bargaining power → a segment is unattractive if the company’s
suppliers are able to raise prices or reduce quantity supplied
Identifying competitors
• Industry concept of competition
» Industry:
Is a group of firms that offer a product or class of products that are close substitutes for one another.
→ Number of sellers and degree of differentiation
The starting point for describing an industry is to specify the number of sellers and whether the
product is homogeneous or highly differentiated. These characteristics give rise to four industry
structure types:
1. pure monopoly
2. oligopoly
3. monopolistic competition
4. pure competition
→ Entry, mobility, and exit barriers
→ Cost structure
→ Degree of vertical integration
» Vertical integration:
Situation in which manufacturers try to control or own their suppliers, distributors, or other
intermediaries
→ Degree of globalization
• Market concept of competition
Analyzing competitors
• Strategies
» Strategic group:
A group of firms following the same strategy in a given target market
• Objectives
• Strengts and weaknesses
In general, a company should monitor three variables when analyzing competitors:
1. share of market → the competitor’s share of the target market
2. share of mind → the percentage of customers who named the competitor in responding to
the statement, “Name the first company that comes to mind in this industry”
3. share of heart → the percentage of who named the competitor in responding to the
statement, “Name the company from which you would prefer to buy the product.”
• Selecting competitors
Competitive Strategies for Market leaders
• Expanding the total market
→ New customers
→ More usage
• Defending market share
→ Position defense:
Involves occupying the most desirable market space in the minds of the consumers, making the
brand almost impregnable
→ Flank defense:
Although position defense is important, the market leader should also erect outposts to protect a
weak front or possibly serve as an invasion base for counterattack.
→ Pre-emptive defense:
A more aggressive maneuver is to attack before the enemy starts its offense.
→ Counteroffensive defense:
The leader can meet the attacker frontally or hit its flank or launch a pincer movement.
→ Mobile defense:
The leader stretches its domain over new territories that can serve as future centers for defense and
offense through market broadening and market diversification.
→ Contraction defense:
Large companies sometimes recognize that they can no longer defend all of their territory
• Expending market share
Other competitive strategies
• Market-challenger strategies
→ Defining the strategic objective and opponent(s)
→ Choosing a general attack strategy
- Frontal attack → the attacker matches its opponent’s product, advertising, price, and
distribution
- Flank attack → can be directed along two strategic dimensions – geographic and segmental
- Encirclement attack → an attempt to capture a wide slice of the enemy’s territory through a
“blitz”
- Bypass attack → bypassing the enemy and attacking easier markets to broaden one’s
resource base
- Guerilla warfare → consists of waging small, intermittent attacks to harass and demoralize
the opponent and eventually secure permanent footholds
→ Choosing a specific attack strategy
The challenger must go beyond the five broad strategies and develop more specific strategies, some
examples:
- price discount
- lower price goods
- manufacturing-cost reduction
• Market-follower strategies
Four broad strategies can be distinguished:
counterfeiter → duplicates the leader’s product and package and sells it on the black market or
through disreputable dealers
cloner → emulates the leader’s products, name, and packaging, with slight variations
imitator → copies some things from the leader but maintains differentiation in terms of packaging,
advertising, pricing or location
adapter → takes the leader’s products and adapts or improves them
• Market-nicher strategies
Balancing customer and competitor orientations
• competitor-centered companies
• customer-centered companies
Chapter 12 Setting product strategy
Product characteristics and classifications
» Product:
Is anything that can be offered to a market to satisfy a want or need
• Product levels: the customer value hierarchy
» Customer value hierarchy
Each level adds more customer value, and the five constitute this
Five product levels (constitute a customer value hierarchy) in a circle. From outside to inside:
• potential product → encompasses all the possible augmentations and transformations the product
or offering might undergo in the future
• augmented product → exceeds customer expectations
• expected product → a set of attributes and conditions buyers normally expect when they purchase
this product
• basic product → nothing special, maybe things are not clean or something like that
• core benefit → the service or benefit the customer is really buying (ex. a hotel guest is buying “rest
and sleep”)
» Consumption system:
The way the user performs the tasks of getting and using products and related services
• Product classifications
→ Durability and tangibility
According to durability and tangibility products can be classified into three groups:
1. nondurable goods → are tangible goods normally consumed in one or few uses, like beer
and soap.
2. durable goods → are tangible goods that normally survive many uses: refrigerators, machine
tools, and clothing
3. services → are intangible, inseparable, variable, and perishable products
Marketers have traditionally classified products on basis of characteristics: durability, tangibility, and
use (consumer or industrial). Each product type has an appropriate marketing-mix strategy.
→ Consumer goods classification:
• convenience goods → goods which are usually purchased frequently, immediately, and with a
minimum of effort
• shopping goods → are goods that the consumer, in the process of selection and purchase,
characteristically compares on such
bases as suitability, quality, price, and style
• specialty goods → have unique characteristics or brand identification for which a sufficient number
of buyers are willing to make
a special purchasing effort.
• unsought goods → are those the consumer does not know about or does not normally think of
buying, like smoke detectors
→ Industrial-goods classification:
• materials and parts → are goods that enter the manufacturer’s product completely
• capital items → are long-lasting goods that facilitate developing or managing the finished product
• supplies and business services → are short-term goods and services that facilitate developing or
managing the finished product
Differentiation
• Product differentiation:
- form → the size, shape, or physical structure of a product
- features → things that enhance the basic function of a product
- performance quality → is the level at which the product’s primary characteristics operate
- conformance quality → is the degree to which all the produced units are identical and meet
the promised specifications
- durability → a measure of the product’s expected operating life under natural or stressful
conditions
- reliability → a measure of the probability that a product will not malfunction or fail within a
specified time period
- repairability → a measure of the ease of fixing a product when it malfunctions or fails
- style → describes the product’s look and feel to the buyer
• Design: the integrative force
» Design
Is the totality of features that affect how a product looks and functions in terms of consumer
requirements
• Services differentiation:
- ordering ease → refers to how easy it is for the customer to place an order with the company
- delivery → refers to how well the product or service is delivered to the customer
- installation → refers to the work done to make a product operational in its planned location
- customer training → refers to training the customer’s employees to use the vendor’s
equipment properly and efficiently
- customer consulting → refers to data, information systems, and advice services that the
seller offers to buyers
- maintenance and repair → describes the service programs for helping customers keep
purchased products in good working order
Product and brand relationships
• The product hierarchy
The product hierarchy stretches from basic needs to particular items that satisfy those needs. We can
identify six levels of the product hierarchy:
1. Need family → the core need that underlies the existence of a product family
2. Product family → all the product classes that can satisfy a core need with reasonable
effectiveness
3. Product class → a group of products within the product family recognized as having a certain
functional coherence. Also known as product category
4. Product line → a group of products within a product class that are closely related because
they perform a similar function, are sold to the same customer groups, are marketed through
the same outlets or channels,or fall within given price ranges
5. Product type → a group of items within a product line that share one of several possible
forms of the product
6. Item (also called stockkeeping unit or product variant) → a distinct unit within a brand or
product line distinguishable by size, price, appearance, or some other attribute.
• Product systems and mixes
» Product system:
A group of diverse but related items that function in a compatible manner
» Product mix (also called product assortment):
Is the set of all products and items a particular seller offers for sale
• Product-line analysis
→ Sales and profits
→ Market profile
• Product-line length
→ Line stretching: occurs when a company lengthens its product line beyond its current ranged
- down-market stretch
- up-market stretch
- two-way stretch
→ Line filling
→ Line modernization, featuring, and pruning
• Product-mix pricing
We can distinguish six situations involving product-mix pricing:
product-line pricing → companies normally develop product lines rather than single products and
introduce price steps
optional-feature pricing → many companies offer optional products, features, and services along
with their main product
captive-product pricing → captive products are necessary to the use of other products
two-part pricing → consists of a fixed fee plus a variable usage fee
by-product pricing → the production of certain goods (meats, petroleum products) often results in
by-products
product-bundling pricing → sellers often bundle products and features
- pure bundling → occurs when a firm only offers its products as a bundle
- mixed bundling → the seller offers goods both individually and in bundles
• Co-branding and ingredient branding
→ Co-branding (also called “dual branding” or “brand bundling”):
In this two or more well-known existing brands are combined into a joint product and/or marketed
together in some fashion
→ Ingredient branding:
Is a special case of co-branding. It involves creating brand equity for materials, components, or
parts that are necessarily contained within other branded products
Packaging, labelling, warranties, and guarantees
• Packaging:
All the activities of designing and producing the container for a product
Various factors have contributed to the growing use of packaging as a marketing tool:
- self-service
- consumer affluence
- company and brand image
- innovation opportunity
• Labeling
• Warranties and guarantees
Chapter 13 Designing and managing services
The nature of services
• Service industries are everywhere
» Service:
Is any act or performance that one party can offer to another that is essentially intangible and does
not result in the ownership of anything.
• Categories of service mix
Five categories of offerings can be distinguished:
1. pure tangible good → the offering consists primarily of a tangible good such as soap,
toothpaste, or salt. No services accompany the product
2. tangible good with accompanying services → the offering consists of a tangible good
accompanied by one or more services
3. hybrid → the offering consists of equal parts of goods and services
4. major service with accompanying minor goods and services → the offering consists of a
major service along with additional services of supporting goods
5. pure service → the offering consists primarily of a service
• Distinctive characteristics of services:
→ intangibility
Through a number of marketing tools a positioning strategy could be made tangible:
1. place → the exterior and interior should have clean lines
2. people → personnel should be busy. There should be a sufficient number of employees to
manage the workload
3. equipment → computers, copying machines, desks should be and look “state of the art”
4. communication materials → printed materials (text and photos) should suggest efficiency and
speed
5. symbols → the name and symbol should suggest fast service
6. price → the bank could advertise that it will deposit €5 in the account of any customer who
waits in line for more than five minutes
→ inseparability
→ variability
Three steps service firms can take to increase quality control:
1. invest in good hiring and training procedures
2. standardize the service-performance process throughout the organization
3. monitor customer satisfaction
→ perishability
Marketing Strategies for service firms
• A shifting customer relationship
• Holistic marketing for services
Managing service qualities
• Customer expectations
There is a service-quality model that highlights the main requirements for delivering high service
quality. The model identifies five gaps that cause unsuccessful delivery:
1.
2.
3.
4.
5.
gap between consumer expectation and management perception
gap between management perception and service-quality specifications
gap between service-quality specifications and service delivery
gap between service delivery and external communications
gap between perceived service and expected service
Based on the model from above, the following five determinations of service quality are identified, in
order of importance:
1. reliability → the ability to perform the promised service dependably and accurately
2. responsiveness → the willingness to help customers and to provide prompt service
3. assurance → the knowledge and courtesy of employees and their ability to convey trust and
confidence
4. empathy → the provision of caring, individualized attention to customers
5. tangibles → the appearance of physical facilities, equipment, personnel, and communication
materials
• Best practices of service-quality management:
→ strategic concept
→ top-management commitment
→ high standards
→ self-service technologies (SSTS)
→ monitoring systems
→ satisfying customer complaints
→ satisfying employees as well as customers
Managing service brands
• Differentiation services
• Developing brand strategies for services
→ choosing brand elements
→ establishing image dimensions
→ devising branding strategy
Managing product support services
• Identifying and satisfying customer needs
» Life-cycle cost:
Is the product’s purchase cost plus the discounted cost of maintenance and repair less the
discounted salvage value
• Postsale service strategy
Chapter 14 Developing pricing strategies and programs
Understanding pricing
• How companies price
• Consumer psychology and pricing
→ Reference prices:
Pricing information a consumer retains in memory which is used to interpret and evaluate a new price
→ Price-quality inferences
→ Price cues
Setting the price:
• Step 1: Selecting the pricing objective
The company first decides where it wants to position its market offering. The clearer a firm’s
objectives, the easier it is to set price. A company can pursue any of five major objectives through
pricing:
• survival → if companies are plagued with overcapacity, intense competition, or changing consumer
wants
• maximum current profit → companies estimate the demand and costs associated with alternative
prices and choose the price that produces maximum current profit, cash flow, or rate of return on
investment
• maximum market share → companies believe that a higher sales volume will lead to lower unit costs
and higher long-run profit
• maximum market skimming → companies unveiling a new technology favor setting high prices to
maximize market skimming
• product-quality leadership
» Market-penetration pricing:
Companies set the lowest price, assuming the market is price sensitive
» Market-skimming pricing:
Prices start high and are slowly lowered over time
• Step 2: Determining demand
→ Price sensitivity
→ Estimating demand curves
Most companies make some attempt to measure their demand curves using several different
methods:
• statistical analysis → of past prices, quantities sold, and other factors can reveal their relationships
• price experiments
• surveys → can explore how many units consumers would buy at different proposed prices.
→ Price elasticity of demand
• Step 3: Estimating costs
→ Types of costs and levels of production
→ Accumulated production
Experience curve / Learning curve:
A decline in the average cost with accumulated production experience
→ Activity-based cost accounting
Activity-based costing (ABC):
Procedures that can quantify the true profitability of different activities by identifying their actual costs
→ Target costing:
Deducting the desired profit margin from the price at which a product will sell, given its appeal and
competitors’ prices.
• Step 4: Analyzing competitors’ costs, prices and offers
• Step 5: Selecting a pricing method
Six price-setting methods:
- markup pricing → pricing an item by adding a standard increase to the product’s cost
- target-return pricing → the firm determines the price that would yield its target rate of return
on investment (ROI)
- perceived-value pricing → the value promised by the company’s value proposition and
perceived by the customer
- value-pricing → win loyal customers by charging a fairly low price for a high-quality offering
Everyday low pricing (EDLP):
In retailing, a constant low price with few or no price promotions and special sales
High-low pricing:
The retailer charges higher prices on an everyday basis but then runs frequent promotions in
which prices are temporarily lowered below the EDLP level
- going-rate pricing → the firm bases its price largely on competitor’s prices
- auction-type pricing → sales on electronic marketplaces
• Step 6: Selecting the final price
→ Impact of other marketing activities
→ Company pricing policies
→ Gain-and-risk-sharing pricing
→ Impact of price on other parties
Pricing methods narrow the range from which the company must select its final price. In selecting that
price, the company must consider additional factors, including the impact of other marketing activities,
company pricing policies, gain-and-risk-sharing pricing, and the impact of price on other parties.
Adapting the price
• Geographical Pricing (cash, counter trade, barter)
Counter trade:
The practice that many buyers want to offer other items in payment
• Price discounts and allowances
• Promotional pricing
• Differentiated pricing
Price discrimination:
Occurs when a company sells a product or service at two or more prices that do not reflect a
proportional difference in costs
Initiating and responding to price changes
• Initiating price cuts
• Initiating price increases
• Reactions to price changes
→ Customer reactions
→ Competitor reactions
• Responding to competitor’s price changes
Chapter 15 Designing and managing value networks and channels
Marketing channels and value networks
Marketing channels:
Are sets of interdependent organizations involved in the process of making a product or service
available for use or consumption
• The importance of channels
Marketing channel system:
Is the particular set of marketing channels employed by a firm
Push strategy:
Involves the manufacturer using its sales force and trade promotion money to induce intermediaries
to carry, promote, and sell the product to end users
Pull strategy:
Involves the manufacturer using advertising and promotion to persuade consumers to ask
intermediaries for the product, thus inducing the intermediaries to order it
• Channel development
Hybrid channels:
Use of multiple channels of distribution to reach customers in a defined market
» Different consumers have different needs during the purchase process. In many markets, buyers
fall into one of four categories:
1. Habitual shoppers → purchase from the same places in the same manner over time
2. High value deal seekers → know their needs and “channel surf” a great deal before buying at
the lowest possible price
3. Variety-loving shoppers → gather information in many channels, take advantage of hightouch services, and then buy in their favorite channel, regardless of price
4. High-involvement shoppers → gather information in all channels, make their purchase in a
low-cost channel, but take advantage of customer support from a high-touch channel
• Value networks
Demand chain planning:
The process of designing the supply chain based on adopting a target market perspective and
working backward
Value network:
A system of partnerships and alliances that a firm creates to source, augment, and deliver its
offerings
The role of marketing channels
Why would a producer delegate some of the selling job to intermediaries? Delegation means
relinquishing some control over how and to whom the products are sold. Producers do gain several
advantages by using intermediaries:
-
Many producers lack the financial resources to carry out direct marketing
Producers who do establish their own channels can often earn a greater return by increasing
investment in their main business
- In some cases direct marketing simply is not feasible
• Channel functions and flows
• Channel levels
» Zero-level channel / Direct-marketing channel:
Consists of a manufacturer selling directly to the final customer
• Service sector channels
Designing a marketing channel system involves analyzing customer needs, establishing channel
objectives, identifying major channel alternatives, and evaluating major channel alternatives.
Channel-design decisions
• Analyzing customer’s desired service output levels
In designing the marketing channel, the marketer must understand the service output levels desired
by target customers. Channels produce five service outputs:
1. Lot size → the number of units the channel permits a typical customer to purchase on one
occasion
2. Waiting and delivery time → the average time customers of that channel wait for receipt of
the goods
3. Spatial convenience → the degree to which the marketing channel makes it easy for
customers to purchase the product
4. Product variety → the assortment breadth provided by the marketing channel
5. Service backup → the add-on services (credit, delivery, installation, repairs) provided by the
channel
• Establishing objectives and constraints
• Identifying major channel alternatives
→ Types of intermediaries (bemiddelaars)
→ Number of intermediaries
Exclusive distribution:
Severely limiting the number of intermediaries, in order to maintain control over the service level and
outputs offered by resellers
Selective distribution:
Involves the use of more than a few but less than all of the intermediaries who are willing to carry a
particular product
Intensive distribution:
Consists of the manufacturer placing the goods or services in as many outlets as possible
→ Terms and responsibilities of channel members
• Evaluating the major alternatives
→ Economic criteria
Channel advantage:
When a company successfully switches its customers to lower-cost channels, while assuming no loss
of sales or deterioration in service quality.
→ Control and adaptive criteria
Channel-management decisions
• selecting channel members
• training channel members
• motivating channel members
• evaluating channel members
• modifying channel members
After a company has chosen a channel alternative, individual intermediaries must be selected,
trained, motivated, and evaluated. Channel arrangements must be modified over time.
Channel power:
The ability to alter channel members’ behavior so that they take actions they would not have taken
otherwise
Channel integration and systems
• Vertical marketing systems
Conventional marketing channel:
Comprises an independent producer, wholesaler(s), and retailer(s)
Vertical marketing system (VMS):
Comprises the producer, wholesaler(s), and retailer(s) acting as a unified system
→ Corporate VMS
→ Administered VMS
Distribution programming:
Building a planned, professionally managed, vertical marketing system that meets the needs of both
manufacturer and distributors
→ Contractual VMS
Contractual VMSs now constitute one of the most significant developments in the economy. They are
of three types:
Wholesaler-sponsored voluntary chains → wholesalers organize voluntary chains of independent
retailers to help them compete with large chain organizations
Retailer cooperatives → retailers take the initiative and organize a new business entity to carry on
wholesaling and possibly some production
franchise organizations → a channel member called a franchisor might link several successive
stages in the production-distribution process
→ The new competition in retailing
• Horizontal marketing systems
Horizontal marketing system:
Two or more unrelated companies put together resources or programs to exploit an emerging
marketing opportunity
• Multichannel marketing system
Multichannel marketing:
Occurs when a single firm uses two or more marketing channels to reach one or more customer
segments
→ Planning channel architecture
Distribution channels do not stand still. New wholesaling and retailing institutions emerge, and new
channel systems evolve. We will look at the recent growth of vertical, horizontal, and multichannel
marketing systems.
Conflict, cooperation, and competition
Channel conflict:
Is generated when one channel member’s actions prevent the channel from achieving its goal
Channel coordination:
Occurs when channel members are brought together to advance the goals of the channel, as
opposed to their own potentially incompatible goals
• Types of conflict and competition
• Causes of channel conflict
• Managing channel conflict
• Legal and ethical issues in channel relations
Tying agreements:
Agreement in which producers of strong brands sell their products to dealers only if dealers purchase
related products or services, such as other products in the brand line.
E-Commerce marketing practices
» E-business:
Describes the use of electronic means and platforms to conduct a company’s business
» E-commerce:
Means that the company or site offers to transact or facilitate the selling of products and services
online.
» E-purchasing:
Means companies decide to purchase goods, services, and information from various online suppliers
» E-marketing:
Describes company efforts to inform buyers, communicate, promote, and sell its products and
services over the Internet
» Pure-click:
Companies which have launched a Web site without any previous existence as a firm
» Brick-and-click:
Existing companies that have added an online site for information and/or e-commerce
• Pure-click companies
→ the dot-com bubble
→ business-to-business e-commerce
• Brick-and-click companies
Chapter 16 Managing, retailing, wholesaling, and logistics
Retailing
» Retailing:
Includes all the activities involved in selling goods or services directly to final consumers for personal,
nonbusiness use
» Retailer / Retail store:
Is any business enterprise whose sales volume comes primarily from retailing
• Types of retailers
→ Levels of service
Retailers can position themselves as offering one of four levels of service:
Self-service → is the cornerstone of all discount operations
Self-selection → customers find their own goods, although they can ask for assistance
Limited service → These retailers carry more shopping goods, and customers need more
information and assistance
Full service → salespeople are ready to assist in every phase of the locate-compare-select
process
By combining these different service levels with different assortment breadths, we can distinguish the
four broad positioning strategies available to retailers:
Bloomingdale’s → stores that feature a broad product assortment and high value added
Tiffany → stores that feature a narrow product assortment and high value added
Sunglass Hut → stores that feature a narrow line and low value added
Wal-Mart → stores that feature a broad line and low value added
Nonstore retailing falls into four major categories:
Direct selling
Direct marketing → has roots in direct-mail and catalog marketing; it includes telemarketing,
television direct-response marketing, and electronic shopping
Automatic vending → is used for a variety of merchandise, including impulse goods like
cigarettes, soft drinks etc.
Buying service → is a storeless retailer serving a specific clientele who are entitled to buy from a
list of retailers that have agreed to give discounts in return for membership
→ Corporate retailing:
Corporately owned retailing outlets that achieve economies of scale, greater purchasing power, wider
brand recognition, and better-trained employees.
• New models for succes
• Marketing decisions:
- target market
- product assortment
- procurement
Direct product profitability (DPP):
Used by stores to measure a product’s handling costs from the time it reaches the warehouse
until a customer buys it in the retail store.
- services and store atmosphere
- store activities and experiences
- price decision
- communication decision
- location decision
• Trends in retailing
Private labels
» Private label brand:
Is one retailers and wholesalers develop
• House brands
• The private label threat
Wholesaling
» Wholesaling:
Includes all the activities involved in selling goods or services to those who buy for resale or business
use
• The growth and types of wholesaling
• Wholesaler marketing decisions:
→ target market
→ product assortment and services
→ price decision
→ promotion decision
→ place decision
• Trends in wholesaling
Market logistics
» Supply chain management (SCM):
Procuring the right inputs (raw materials, components, and capital equipment); converting them
efficiently into finished products; and dispatching them to the final destinations.
» Market logistics:
Involves planning the infrastructure to meet demand, then implementing and controlling the physical
flows of materials and final goods from points of origin to points of use, to meet customer
requirements at a profit
• Integrated logistics systems (ILS):
Materials management, material flow systems, and physical distribution, abetted by information
technology (IT)
• Market-logistics objectives
• Market-logistics decisions
Four major decisions must be made with regard to market logistics:
→ order processing
→ warehousing
→ inventory
→ transportation
» Containerization:
Consists of putting the goods in boxes or trailers that are easy to transfer between two transportation
modes
• Organizational lessons
Chapter 17 Designing and managing integrated marketing communications
The role of marketing communications
» Marketing communication:
Are the means by which firms attempt to inform, persuade, and remind consumers about the products
and brands that they sell.
• Marketing communications and brand equity
The marketing communication mix consists of six major modes of communication:
Advertising → any paid form of no personal presentation and promotion of ideas, goods, or
services by an identified sponsor
Sales promotion → a variety of short-term incentives to encourage trial or purchase of a product
or service
Events and experiences → company-sponsored activities and programs designed to create daily
or special brand-related interactions
Public relations and publicity → a variety of programs designed to promote or protect a
company’s image or its individual products
Direct marketing → use of mail, telephone, fax, e-mail, or Internet to communicate directly with or
solicit response or dialogue form specific customers and prospects
Personal selling → face-to-face interaction with one or more prospective purchasers for the
purpose of making presentations, answering questions, and procuring orders
• The communications process models
→ Macromodel of the communication process:
Selective attention → the mental process of screening out certain stimuli while noticing others
Selective distortion → receivers will hear what fits into their belief systems
Selective retention → people will retain in long-term memory only a small fraction of the
messages that reach them
Note that these processes bay be operating during communication
→ Micromodel of consumer responses
Developing effective communications:
• Identify the target audience
Image:
The set of beliefs, ideas and impressions a person holds regarding an object
• Determine the communication objectives
Communications objectives can be set at any level of the hierarchy-of-effects model. There are four
objectives identified:
Category need → establishing a product or service category as necessary to remove or satisfy a
perceived discrepancy between a current motivational state and a desired emotional state
Brand awareness → ability to identify the brand within the category, in sufficient detail to make a
purchase
Brand attitude → evaluation of the brand with respect to its perceived ability to meet a currently
relevant need
Brand purchase intention → self-instructions to purchase the brand or to take purchase-related
action
• Design the communications
→ Message strategy
→ Creative strategy
- informational appeals
- transformational appeals
→ Message source
Principle of congruity:
Implies that communicators can use their good image to reduce some negative feelings toward a
brand but in the process might lose some esteem with the audience.
• Select the communication channels
→ Personal communication channels:
Involve two or more persons communicating directly face-to-face, person-to-audience, over the
telephone, or through e-mail
→ Nonpersonal communications channels
→ Integration of communications channels
• Establish the total market communications budget
Four common methods how companies decide on the promotion budget:
→ affordable method (what a company thinks that they can afford)
→ percentage-of-sales method
→ competitive-parity method (some companies set their promotion budget to achieve share-of-voice
parity with competitors)
→ objective-and-task method
Objective-and-task method:
1. Establish the market share goal
2.
3.
4.
5.
6.
Determine the percentage of the market that should be reached by advertising
Determine the percentage of aware prospects that should be persuaded to try the brand
Determine the number of advertising impressions per 1 percent trial rate
Determine the number of gross rating points that would have to be purchased
Determine the necessary advertising budget on the basis of average cost of buying a gross
rating point
Deciding on the marketing communications mix
• Characteristics of the marketing communications mix:
→ Advertising
Qualities of advertising:
Pervasiveness → advertising permits the seller to repeat a message many times
Amplified expressiveness → advertising provides opportunities for dramatizing the company and
its products through the artful use of print, sound, and color
Impersonality → the audience does not feel obligated to pay attention or respond to advertising
→ Sales promotion
Communication → they gain attention and may lead the consumer to the product
Incentive → they incorporate some concession, inducement, or contribution that gives value to
the consumer
Invitation → they include a distinct invitation to engage in the transaction now
→ Public relations and publicity
The appeal of public relations and publicity is based on three distinctive qualities:
High credibility → news stories and features are more authentic and credible to readers than ads
Ability to catch buyers off guard → public relations can reach prospects who prefer to avoid
salespeople and advertisements
Dramatization → public relations has the potential for dramatizing a company or product
→ Events and experiences
Three advantages to events and experiences:
Relevant → a well-chosen event or experience can be seen as highly relevant as the consumer
gets personally involved
Involving → given their live, real-time quality, consumers can find events and experiences more
actively engaging
Implicit → events are more of an indirect “soft-sell”
→ Direct marketing
The many forms of direct marketing share three distinctive characteristics. Direct marketing is:
Customized → the message can be prepared to appeal to the addressed individual
Up-to-date → a message can be prepared very quickly
Interactive → the message can be changed depending on the person’s response
→ Personal selling
Personal selling is the most effective tool at later stages of the buying process, particularly in building
up buyer preference, conviction, and action. Personal selling has three distinctive qualities:
Personal interaction → personal selling involves an immediate and interactive relationship
between two or more persons. Each party is able to observe the other’s reactions
Cultivation → personal selling permits all kinds of relationships to spring up, ranging form a
matter-of-fact selling relationship to a deep personal friendship
Response → personal selling makes the buyer feel under some obligation for having listened to
the sales talk
• Factors in setting the marketing communications mix
→ Type of product market
An effectively trained company sales force can make four important contributions:
Increased stock position → sales reps can persuade dealers to take more stock and devote more
shelf space to the company’s brand
Enthusiasm building → sales reps can build dealer enthusiasm by dramatizing planned
advertising and sales promotion backup
Missionary selling → sales reps can sign up more dealers
Key account management → sales reps can take responsibility for growing business with the
most important accounts
→ Buyer-readiness stage
→ Product life-cycle stage
• Measuring communication results
Managing the integrated marketing communications process
» Integrated marketing communications (IMC):
A concept of marketing communications planning that recognizes the added value of a
comprehensive plan
• Coordinating media
• Implementing IMC
Chapter 18 Managing mass communications: advertising, sales promotions, events, and public
relations
Developing and managing an advertising program
» Advertising:
Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified
sponsor
• Setting the objectives
» Advertising goal (or objective):
Is a specific communications task and achievement level to be accomplished with a specific audience
in a specific period of time
» 4 advertising goals:
- Informative advertising → aims to create brand awareness and knowledge of new products or
new features of existing products
- Persuasive advertising → aims to create liking, preference, conviction, and purchase of a
product or service
- Reminder advertising → aims to stimulate repeat purchase of products and services
- Reinforcement advertising → aims to convince current purchasers that they made the right
choice
• Deciding on the advertising budget
Five specific factors to consider when setting the advertising budget::
Stage in the product life circle → new products typically receive large advertising budgets to build
awareness and to gain consumer trial
Market share and consumer base → high-market-share brands usually require less advertising
expenditure as a percentage of sales to maintain share
Competition and clutter → in a market with a large number of competitors and high advertising
spending, a brand must advertise more heavily to be heard
Advertising frequency → the number of repetitions needed to put across the brand’s message to
consumers had an important impact on the advertising budget
Product substitutability → brands in less-well-differentiated or commodity-like product classes
require heavy advertising to establish a different image
• Developing the advertising campaign
→ Message generation and evaluation
→ Creative development and execution
- television ads
- print ads
- radio ads
→ Social-responsibility review
To develop a message strategy, advertisers go through three steps: message generation and
evaluation, creative development and execution, and social-responsibility review.
After choosing the message, the advertiser’s next task is to choose media to carry it. The steps here
are deciding on desired reach, frequency, and impact; choosing among major media types; selecting
specific media vehicles; deciding on media timing; and deciding on geographical media allocation.
Then the results of these decisions need to be evaluated.
Deciding on media and measuring effectiveness
• Deciding on reach, frequency, and impact
Media selection:
Is finding the most cost-effective media to deliver the desired number and type of exposures to the
target audience
• Choosing among major media types
• Alternative advertising options
→ Place advertising:
Is a broadly defined category that captures many different alternative advertising forms
- Billboards
- Public spaces
→ Product placement
Branded entertainment:
Using sports, music, arts, or other entertainment activities to build brand equity
→ Point-or-purchase (P-O-P):
The location where a purchase is made, typically thought of in terms of a retail setting
→ Evaluating alternative media
• Selecting specific vehicles
• Deciding on media timing and allocation
• Evaluating advertising effectiveness
→ Communication-effect research:
Seeks to determine whether an add is communication effectively.
→ Sales-effect research
Sales promotion
» Sales promotion:
A key ingredient in marketing campaigns, consists of a collection of incentive tools, mostly short term,
designed to stimulate quicker or greater purchase of particular products or services by consumers or
the trade
• Objectives
• Advertising versus promotion
• Major decisions
→ Establishing objectives
→ Selecting consumer promotion tools
→ Selecting trade promotion tools
→ Selecting business and sales force promotion tools
→ Developing the program
→ Pretesting, implementing, controlling, and evaluating the program
In using sales promotion, a company must establish its objectives, select the tools, develop the
program, pretest the program, implement and control it, and evaluate the results.
Events and experiences
• Events objectives
Marketers report a number of reasons why they sponsor events:
To identify with a particular target market or life style
To increase awareness of company or product name
To create or reinforce consumer perceptions of key brand image associations
To enhance corporate image dimensions
To create experience and evoke feelings
To express commitment to the community or on social issues
To entertain key clients or reward key employees
To permit merchandising or promotional opportunities
• Major decisions
→ Choosing event opportunities
→ Designing sponsorship programs
→ Measuring sponsorship activities
Developing successful sponsored events involves choosing the appropriate events; designing the
optimal sponsorship program for the event; and measuring the effects of sponsorship
Public relations
» Public:
Is any group that has an actual or potential interest in or impact on a company’s ability to achieve its
objectives.
» Public relations (PR):
Involves a variety of programs designed to promote or protect a company’s image or its individual
products
» PR perform the following five functions:
Press relations → presenting news and information about the organization in the most positive
light
Product publicity → sponsoring efforts to publicize specific products
Corporate communications → promoting understanding of the organization through internal and
external communications
Lobbying → dealing with legislators and government officials to promote or defeat legislation and
regulation
Counseling → advising management about public issues and company positions and image
during good times and bad
• Marketing public relations
» Marketing public relations (MPR):
Publicity and other activities that build corporate or product image to facilitate marketing goals
» Publicity:
The task of securing editorial space in print and broadcast media to promote or “hype” a product,
service, idea, place, person, or organization.
• Major decisions in marketing PR
→ Establishing objectives
→ Choosing messages and vehicles
→ Implementing the plan and evaluating results
Chapter 19 Managing personal communications: direct marketing and personal selling
Direct marketing
» Direct marketing:
Is the use of consumer-direct (CD) channels to reach and deliver goods and services to customers
without using marketing middlemen.
» Direct-order marketing:
Marketing in which direct marketers seek a measurable response, typically a customer order
• The benefits of direct marketing
• Direct mail
→ Objectives
→ Target markets and prospects
→ Opper elements
→ Testing elements
→ Measuring campaign success: lifetime value
• Catalog marketing
• Telemarketing:
Is the use of the telephone and call centers to attract prospects, sell to existing customers, and
provide service by taking orders and answering questions.
• Other media for direct-response marketing
→ Television
Television is used by direct marketers in several ways:
Direct-response advertising
At-home shopping channels
Videotext and interactive TV
→ Kiosk marketing
Interactive marketing
• The benefits of interactive marketing
• Designing an attractive web site
• Placing ads and promotion online
» Banner ads:
Are small, rectangular boxes containing text and perhaps a picture
» Sponsorships:
Are best placed in well-targeted sites where they can offer relevant information or service.
» Microsite:
Is a limited area on the Web managed and paid for by an external advertiser/company
» Interstitials:
Are advertisements, often with video or animation, that pop up between changes on a Web site.
» Search-related ads:
Ads in which search terms are used as a proxy for the consumer’s consumption interests and
relevant links to product or service offerings are listed along side the search results.
» Content-target advertising:
Links ads not to keywords but to the content of Web pages
» Alliances and affiliate programs:
When one Internet company works with another one, they end up advertising each other
• E-marketing guidelines
Designing the sales force
The term “sales representative” covers a broad range of six positions, ranging from the least to the
most creative types of selling:
Deliverer
Order taker
Missionary → a salesperson who is not expected or permitted to take an order but whose major
task is to build goodwill or to educate the actual or potential user
Technician
Demand creator → a salesperson who relies on creative methods for selling tangible products or
intangibles
Solution vendor → a salesperson whose expertise is in the solving of a customer’s problem, often
with a system of the company’s products and services
→ Sales force objectives and strategy
Contractual sales force:
Consists of manufacturers’ reps, sales agents, and brokers, who are paid a commission based on
sales
→ Sales force structure
→ Sales force size
→ Sales force compensation
Managing the sales force:
• Recruiting and selecting representatives
• Training and supervising sales representatives
• Sales rep productivity
→ Norms for prospect calls
→ Using sales time efficiently
• Motivating sales representatives
Most marketers believe that the higher the salesperson’s motivation, the greater the effort and the
resulting performance, rewards, and satisfaction – and thus further motivation. Two assumptions:
Sales managers must be able to convince salespeople that they can sell more by working
harder or by being trained to work smarter
- Sales managers must be able to convince salespeople that the rewards for better performance
are worth the extra effort
• Evaluating sales representatives
→ Sources of information
→ Formal evaluation
-
Principles of personal selling
• The six steps
Most trainers agree that selling is a six-step process:
→ Prospecting and qualifying
→ Preapproach
→ Presentation and demonstration
→ Overcoming objections
→ Closing
→ Follow-up and maintenance
• Negotiation
• Relationship marketing
Chapter 20 Introducing new market offerings
Challenges in new-product development
» Six categories of new products:
New-to-the-world products → new products that create an entirely new market
New product lines → new products that allow a company to enter an established market for the
firs time
Additions to existing product lines → new products that supplement established product lines
(package sizes, flavors)
Improvements and revisions of existing products → new products that provide improved
performance or greater perceived value and replace existing products
Repositions → existing products that are targeted to new markets or market segments
Cost reductions → new products that provide similar performance at lower cost
» 4 principles to guide its new-product development:
1. Work with potential customers
2. Let employees choose projects
3. Give employees “dabble” time → all research associates 10 percent of their work hours developing
their own ideas
4. Know when to let go → sometimes dead ends in one area can spark an innovation in another
Organizational arrangements
• Budgeting for new-product development
• Organizing new-product development
» Venture team:
Is a cross-functional group charged with developing a specific product or business
Managing the development process: ideas
• Idea generation
→ Interacting with others
→ Creativity techniques
• Idea screening
Managing the development process: concept to strategy
• Concept development and testing
→ Concept development
→ Concept testing
Researchers measure product dimensions by having consumers respond to the following questions:
Communicability and believability → Are the benefits clear to you and believable?
Need level → Do you seek this product solving a problem or filling a need for you?
Gap level → Do other products currently meet this need and satisfy you?
Perceived value → Is the price reasonable in relation to the value?
Purchase intention → Would you buy the products?
User targets, purchase occasions, purchasing frequency → Who would use this product, and
when and how often will the product be used?
→ Conjoint analysis:
A method for deriving the utility values that consumers attach to varying levels of a product’s
attributes
• Marketing strategy
• Business analysis
→ Estimating total sales
→ Estimating costs and profits
» Breakeven analysis:
Management estimates how many units of the product the company would have to sell to break even
with the given price and cost structure.
» Risk analysis:
A method by which possible rates of returns and their probabilities are calculated by obtaining
estimates for uncertain variables affecting profitability
Managing the development process: development to commercialization
• Product development
→ Physical prototypes
→ Customer tests
• Market testing
→ Consumer-goods market testing
Four major methods of consumer-goods market testing, form the least to the most costly:
• sales-wave research
• simulated test marketing
• controlled test marketing
• test markets
→ Business-goods market testing
• Commercialization
→ when (timing)
→ where (geographic structure)
→ to whom (target-market prospects)
→ how (introductory market strategy)
Critical path scheduling (CPS):
Calls for developing a master chart showing the simultaneous and sequential activities that must take
place to launch the product
The consumer-adoption process
» Adoption:
Is an individual’s decision to become a regular user of a product.
• Stages in the adoption process
» Innovation:
Is any good, service, or idea that is perceived by someone as new.
» Innovation diffusion process:
The spread of a new idea from its source of invention or creation to its ultimate users or adopters
» Adopters of new products have been observed to move through five stages:
Awareness → the consumer becomes aware of the innovation but lacks information about it
Interest → the consumer is stimulated to seek information about the innovation
Evaluation → the consumer considers whether to try the innovation
Trial → the consumer tries the innovation to improve his or her estimate of its value
Adoption → the consumer decides to make full and regular use of the innovation
• Factors influencing the adoption process
→ Readiness to try new products and personal influence
» Personal influence:
Is the effect one person has on another’s attitude or purchase probability.
→ Characteristics of the innovation
→ Organizations’ readiness to adopt innovations
Chapter 21 Tapping to global markets
Competing on a global basis
» Global industry:
Is an industry in which the strategic positions of competitors in major geographic or national markets
are fundamentally affected by their overall global positions
» Global firm:
Is a firm that operates in more than one country and captures R&D, production, logistical, marketing,
and financial advantages in its costs and reputation that are not available to purely domestic
competitors
Deciding which market to enter
• How many markets to enter
• Developed versus developing markets
• Regional free trade zones
→ The European union
→ Nafta
→ Mercosul
→ Apec
• Evaluating potential markets
Deciding how to enter the market
• Indirect and direct export
A company can carry on direct exporting in several ways:
- Domestic-based export department or division
- Overseas sales branch or subsidiary
- Traveling export sales representatives
- Foreign-based distributors or agents
• Using a global web strategy
• Licensing
• Joint ventures
» Joint venture:
A company in which multiple investors share ownership and control
• Direct investment
Deciding on the marketing program
» Four cultural dimensions that can differentiate countries:
Individualism vs. collectivism
High vs. low power distance
Masculine vs. feminine
Weak vs. strong uncertainty avoidance
• Product
» Straight extension:
Means introduction the product in the foreign market without any change
» Product adaptation:
Involves altering the product to meet local conditions or preferences
» Product invention:
Consist of creating something new
» Backward invention:
Is reintroducing earlier product forms that are well adapted to a foreign country’s needs
» Forward invention:
Is creating a new product to meet a need in another country
• Communications
» Communication adaptation:
A process in which companies can run the same marketing communications programs as used in
the home market or change them for each local market
» Dual adaptation:
Adapting both the product and the communications to the local market
• Price
» Price escalation:
An increase in the price of a product due to added costs of selling it in different countries
» Transfer price:
The price a company charges another unit in the company for goods it ships to foreign subsidiaries
» Because the cost escalation varies from country to country, the question is how to set the prices in
different countries. Companies have three choices:
Set a uniform price everywhere
Set a market-based price in each country
Set a cost-based price in each country
» Dumping:
Occurs when a company changes either less than its costs or less than it charges in its home
market, in order to enter or win a market.
» Arm’s-length price:
The price charged by other competitors for the same or a similar product
» Gray market:
Consists of branded products diverted from normal or authorized distributions channels in the
country or product origin or across international borders.
• distribution channels
Country-of-origin effects
• Building country images
• Consumer perceptions of country of origin
Deciding on the marketing organization
• Export department
• International division
• Global organization
Three organizational strategies:
- A global strategy treats the world as single market
- A multinational strategy treats the world as a portfolio of national opportunities
- A “glocal” strategy standardizes certain core elements and localizes other elements