Chapter summaries
Part 1: The Marketing Concept
Marketing is both a business philosophy and an action-oriented process. Within the firm,
marketing's function is twofold: (a) to create opportunities or to lead the firm towards
market opportunities adapted to its resources and know-how and which offer a potential
for profit and growth (strategic marketing); (b) to be the firm's commercial arm for
achieving a targeted market share through the use of tactical means related to product,
distribution, price and communication decisions (operational marketing). Strategic
marketing has two roles: to be responsive and to be proactive in needs analysis.
Strategic marketing can be implemented in seven steps that will re-examined one by
one in the following chapters. Operational marketing can be transactional or relationship.
Several aspects of the marketing concept have to be clarified and these questions will be
examined in the following chapters.
Chapter 2: The Market Orientation Concept
MO is a business corporate culture, disseminated in the organization through interfunctional coordination, having the objective to design and promote, at a profit for the
firm, superior value solutions to the firm's direct and indirect customers and to the other
involved market stakeholders. In a market economy, an ecosystem is a complex
grouping of market actors, companies and customers, suppliers, competitors,
distributors, influencers and partners that gain mutual benefit from one another. In
physical markets, we identify five market actors – suppliers, direct and end-customers,
distributors, competitors, influencers – and other market stakeholders. As suggested
by Guo and Sun (2004), with the development of Internet technology, markets are
shifting towards two specialized yet collaborative global markets: GEMs and GTMs. From
an organizational viewpoint, the implementation of the traditional marketing concept has
been achieved by the creation of powerful marketing departments in charge of both
strategic and operational marketing. Brand and product management play a key role in
these organizational structures. The main characteristics of a marketdriven organization
are discussed in this chapter.
Chapter 3: The Impact of Globalization
Free trade has played a key role in the process of world market internationalization. Free
trade is a system of trade policy that allows traders to act and transact without
restrictions imposed by governments. Free trade is supposed to be a win–win policy
for rich and poor countries, but drawbacks exist, in particular the temptation of
outsourcing to low-wages emerging economies. In designing their strategy, international
firms are confronted with two approaches: a multi-domestic approach where the
strategy is adapted to each market's characteristics or a global approach which looks for
standardization, emphasizing similarities among markets. Each strategy has its merits
and its drawbacks. A key assumption made by several marketing scholars is the
existence of a substantial untapped market potential among poor people, at the bottom
of the pyramid. Some companies are now deliberately targeting the poor by adapting
their marketing strategy. Several options can be considered by the firm having the
objective of selling to the poor.
Chapter 4: Emerging Values and Issues
The adoption of the sustainable development objective changes the traditional view of
consumption. The socio-ecological view of consumption reflects a new awareness of the
scarcity of natural resources, the uncontrolled growth of waste and the social cost of
consumption. The socio-ecologic view of consumption induces firms to improve their
"eco-efficiency", that is, to increase the volume of production per unit of natural
resource. To implement the sustainable development objective, firms have to adopt new
business models which are more eco-sensitive. As the market-driven business
philosophy is gaining acceptance in industry, many product companies have tried to
partner with their customers and other market players to become a "solution provider"
by selling solutions, that is, "a unique combination of products and services components"
– rather than mere products – that could solve a customer's problem. A virtual
market represents an end-to-end temporal sequence of activities logically related in the
cognitive space of customers who search for a solution to a generic need.
Chapter 5: Customers’ Needs Analysis
The satisfaction of customers' needs is at the heart of a market economy, yet it is
popular in some quarters to claim that marketing creates needs. The notion of need
generates controversy because it contains value judgement based on morality or
ideology. Apart from the ethical or social rules imposed by society, marketing is pluralist
and respects the diversity of tastes and preferences. The distinction between absolute
and relative generic needs brings to the fore the existence of a dialectic of relative
needs, which leads to the general impossibility of saturation. Similarly, the distinction
between generic and derived needs shows that saturation does not relate to generic
needs but only to derived needs, that is, the dominant technological response at the
time. Experimental psychology has proposed a range of motivational orientations.
Particularly useful are the conceptual frameworks proposed by the stimulus–response
theory, Maslow's needs hierarchy and the Sheth–Gross–Newman theory of
consumption values. If the principles governing organizational or B2B marketing are the
same as for consumer marketing, a major difference exists. The industrial customer is
represented by a group of individuals, called the buying centre, who exercise different
functions and have distinct motivations.
Chapter 6: The Customer Purchase Behaviour
Customer purchasing behaviour is neither erratic nor conditioned by the environment. It
is rational in the sense of the principle of limited rationality, which means within the
bounds of individuals' cognitive and learning capacities. An industrial chain consists of all
the stages of production, from raw materials to satisfying the final need of the
consumer, irrespective of whether this final need concerns a product or a service. From a
customer's point of view, a product can be defined as a "bundle of attributes" which
provides the customer with the functional value or "core service" specific to that class of
product, as well as a set of secondary values or utilities (called benefits or services)
which may be necessary or added .These additional services differentiate the brands and
may have a determining influence on customers' preferences. What sets present-day
CRM apart is that organizations now have an increased potential to utilize technology
and manage one-to-one relationships with customers. Postbehaviour is based mainly on
the degree of satisfaction–dissatisfaction of customers. A good indicator of customer
satisfaction is loyalty rate. Recession has modified consumers' behaviour and these new
trends are likely to stay in the decades to come.
Chapter 7: Measuring Customers’ Response
A market-oriented firm has to develop an MIS to monitor changes in the macromarketing environment. The role of marketing research is to provide market information
data that will help management implement a market-oriented strategy. Marketing
research has to provide management with accredited (or certified) knowledge and, for
this reason, has strictly to follow the rules of scientific method. The development of a
research project implies a sequence of interrelated activities, which ensures a systematic
and orderly investigation process. Three types of marketing research can be identified:
exploratory, descriptive and causal studies. The objective of exploratory research is to
generate hypotheses and to translate the research problem into research objectives. The
techniques of exploratory research are use of secondary data, key informant surveys,
analysis of selected cases and focus group discussions. Group discussions, also called
qualitative research, are particularly useful, but they should be used strictly to suggest
hypotheses for further research and not as conclusive evidence. Descriptive studies
attempt to obtain a complete, quantitative and accurate description of a situation and
must follow a precise methodology. The techniques used are observation and
communication. The most popular communication method is by far the survey method
through personal, telephone or mail interviewing. Good questionnaire design is the key
to obtaining good survey results and a seven-step procedure is proposed to help in
designing a questionnaire. Sampling techniques can be divided into two categories:
probability and non-probability samples. These two sampling techniques have their own
merits. The two sources of error in survey research are sampling and non-sampling
errors. To minimize non-sampling error the market analyst should have strict control
over the entire data-gathering process. Causal research is used to establish the
existence of a causal link between an action and a response variable. An
experimentation is a scientific investigation in which the researcher manipulates and
controls one or more action variables and observes the response variable for variation
concomitant to the manipulation of the action variable. Different types of experimental
designs exist which vary in the way the analyst controls extraneous factors.
Chapter 8: Needs Analysis Through Market Segmentation
In a market-oriented company, the target market is identified in the buyer's perspective,
that is, by reference to the "solution" sought by the customer and not in technical terms.
Given the diversity of buyers' expectations, the choice of a target market implies the
partitioning of the total market into subgroups of potential customers with similar needs
and behavioural characteristics. A first level of market segmentation, called macrosegmentation, splits the market by reference to three criteria: (a) solutions or functions
performed, (b) groups of buyers and (c) technologies. A key output of this exercise is a
segmentation grid, which can help to decide on the market coverage strategy, and which
can also be used as an instrument to discover new potential segments. The objective of
micro-segmentation is to analyse the diversity of potential customer profiles in a more
detailed way within each previously identified macro-segment. Four micro-segmentation
methods exist which each have their own merits and weaknesses: socio-demographic,
benefit, lifestyle and behavioural segmentation. Different market coverage strategies can
be considered: undifferentiated or standardized marketing, differentiated or focused
marketing. To be effective, a segmentation strategy must meet four criteria: differential
response, adequate size, measurability and accessibility. International segmentation is a
key issue in global marketing. The objective is to identify supranational or universal
segments that can be reached with a standardized marketing programme.
Chapter 9: Market Attractiveness Analysis
The key demand concepts are "primary" versus "company" demand, "absolute" versus
"present" market potential, "end" versus "derived" demand, "first equipment" versus
"replacement" demand for durable goods. The objective of demand analysis is to give an
empirical content to these concepts through market research in order to objectively
assess the attractiveness of each potential target segment and to identify the
determinants of demand. These concepts are useful for detecting growth opportunities in
the reference market through gap analysis. The PLC model is a conceptual framework
which describes the evolution of primary demand in a dynamic perspective. A large
variety of profiles exist for the PLC, which can be explained by the evolution of
technology and consumption habits and by the size of industry marketing efforts. The
competitive situation and the financial structure (turnover and profits) are different at
each stage of the PLC and the priority strategic objective and the marketing programme
must be adapted accordingly.
Chapter 10: Company Competitiveness Analysis
Competitive advantage refers to a product superiority held by the firm over its direct
competitor. Competitive advantages can be classified in two main categories: external
advantages based on market power due to superior value to the buyer and internal
advantages based on productivity generating a cost advantage. A firm's ability to exploit
a competitive advantage depends on the strength, not only of direct competition, but
also of other rival forces, such as potential entrants, substitute products, customers and
suppliers. The intensity of direct competition varies according to the extent of market
power held by each competitor. In an oligopoly, the degree of interdependence among
rivals is high and explicit consideration of competitors' behaviour is an essential aspect
of strategy development. In a monopolistic situation, products are differentiated in a way
which represents a value to the buyer, either by reducing their cost or by improving their
performance. The effect of product differentiation is to give the firm some degree of
market power, customer loyalty and weaker price sensitivity. This is the typical
competitive situation that strategic marketing seeks to create for the firm. Another way
to gain a competitive advantage is cost domination through better productivity and cost
controls. In many industries, there is an opportunity to lower costs as experience
increases in producing a product. The strategic importance of the experience law stems
from the fact that it is possible not only to forecast one's own costs, but also to forecast
competitors' costs. Porter has identified four determinants of international competitive
advantage which can be used by governments or management to create a favourable
context in which a nation's firms compete.
Chapter 11: Market Targeting and Positioning Decisions
The firm can consider different market coverage strategies. There are described in Figure
11.1, where the two extremes are the "mass marketing" strategy and a "mass
customization" strategy. Several intermediate options exist, however. Selection of the
positioning strategy provides the unifying concept for the development of the marketing
programme. This is one of the most critical steps in the implementation of strategic
marketing, because the firm has to decide how to best differentiate its brand from
competing brands. There are different ways to position the brand against competition.
One can identify three types of differentiation strategies: product differentiation, price
differentiation and image differentiation. The effect of differentiation is to give the firm
some degree of market power, because it generates preferences, customer loyalty and
lower price sensitivity. In the search for a differentiation strategy, the value chain model
(Porter, 1980) provides a particularly useful framework. There are three different
approaches for global segmentation: (a) identifying clusters of countries that demand
similar products; (b) identifying segments present in many or most countries; and (c)
targeting different segments in different countries with the same product.
Chapter 12: Formulating a Marketing Strategy
Product portfolio analyses are designed to help guide a multi-product firm's strategic
thinking by evaluating each activity with reference to indicators of attractiveness and of
competitiveness. The growth–share matrix has the merit of simplicity and objectivity,
but its underlying assumptions are restrictive and limit its scope of application. The
multi-factor matrix is more widely applicable and more flexible because the indicators
used are company-specific, but the risk of subjectivity is higher and the procedure is
more demanding in terms of available information. In elaborating a development
strategy, the firm should clarify the nature of the sustainable competitive advantage
which will serve as the basis for later strategic actions and tactics. Two views of strategy
exist, one which is more relevant in existing markets, and the other being better
adapted for strategy development in future markets. Three generic options can be
adopted in existing markets: overall cost leadership, differentiation or focus. The choice
of one generic strategy is not neutral, but implies different resources, know-how and
risks. In assessing growth opportunities, growth objectives can be considered at different
levels: within the reference market (intensive growth), within the supply chain
(integrative growth) or outside the current field of activity (diversification). For each of
these three development strategies, several options are open which should be
systematically explored in a strategic thinking exercise. A development strategy should
explicitly take into account competitors' positions and behaviour on the basis of a
realistic assessment of the forces at work. One can distinguish four types of competitive
strategies: market leader, market challenger, market follower or market nicher. As a
consequence of the globalization of the world economy, international development is no
longer limited to large enterprises and is motivated by a variety of strategic objectives. A
firm's internationalization does not happen overnight but results from a process which
can be subdivided into different stages of international involvement and also in various
organizational forms.
Chapter 13: New Product Decisions
The new product development process consists of three phases: (a) idea phase (idea
generation and screening), (b) concept phase (concept development, concept testing,
business analysis) and (c) launching phase. In market-driven companies this process
tends to be more a parallel than a sequential development process in order to ensure
better inter-functional co-ordination. The concept development phase is crucial for
incorporating the market orientation upfront and also for adopting a thorough approach
to product greening. In the business analysis, the economic viability of the new product
must be assessed in a dynamic perspective under alternative marketing programmes
and the risk of the new venture evaluated. The market-oriented firm tries to have a
permanently balanced portfolio of projects, a useful tool for identifying priority projects.
Chapter 14: Brand Management
A brand is perceived by a potential customer as a bundle of attributes and of mental
associations which, taken together, will form the distinctive elements of the brand
identity. The composition of the bundle, the relative importance and the perceived
presence of the attributes will contribute to influence potential customers' purchasing
decision. Brands are now present everywhere. They exist because they generate trust.
This trust is based on a close relationship that brands have built over the years with
consumers. The brand plays an important role in a market economy, not only for the
customer, but for the producer as well. In this chapter, the brand functions in the B2C
and in the B2B markets are examined. Having decided to cover by priority one or several
segments, the firm has to "position" its offering (brand) in a way which is both
consistent with potential customers' expectations and different from competitors'
offerings. It consists in giving a "raison d'être" to a product. Kapferer (1991/2004) has
developed the "brand identity prism" that defines the brand identity in terms of six
facets. Brand positioning and brand identity are manufacturer's concepts. They have
been created by the seller and should not be confused with the brand image. The brand
image is the perception of the brand identity in the minds of consumers. In both
definitions, the concept refers to the brand's strength which can vary largely among
brands and which is determined by its awareness, personality, perceived quality,
leadership or stock value. The brand equity concept was created to summarize the
strengths of a brand because traditional data such as market share or volume sold were
not satisfactory to reflect the value of a brand, and because they do not take into
account the association that exists in the consumers' mind. Brand architecture is the way
in which the brands within a company's portfolio are related to, and differentiated from,
one another. The architecture should specify brand roles and the nature of relationships
between brands. Companies have used the brand extension/stretching strategies
frequently in the last few years. The idea is to benefit directly from the awareness and
image of a strong existing brand by using the same brand name for launching new
products in different categories. It is clear that international and global brands present
many important advantages to the firm. They permit the generation of strong economies
of scale. It is well-known that a globalized brand can generate significant cost reductions
in all areas of the business system, including R&D, manufacturing and logistics.
Chapter 15: Distribution Channel Decisions
Distribution channels are organized structures performing the tasks necessary to
facilitate exchange transactions. The functions of distribution channels are to create
time, space and state utilities which constitute the added value of distribution.
Distributors (wholesalers, retailers, agents, brokers) are required because manufacturers
are unable to assume by themselves, at a reasonable cost, all the tasks implied by a free
and competitive exchange process. Distribution channels can be characterized by the
number of intermediary levels that separate the supplier from the end-user. The
selection of a particular channel design is determined by factors related to market, buyer
behaviour and company characteristics. When the channel structure is indirect, some
degree of co-operation and co-ordination must be achieved among the participants in
the vertical marketing system. Regarding the number of intermediaries necessary, three
market coverage strategies are possible: intensive, selective or exclusive distribution.
Exclusive distribution through franchising is a popular system present in almost all
business fields. The distribution margins, or trade margins, compensate the distribution
functions and tasks assumed by the intermediaries in the channel.
Chapter 16: The Battle of the Brands in B2C Markets
Distributors are increasingly adopting an innovative and active role, thereby modifying
the balance of power between manufacturers and retailers. Maturity, over-capacity,
concentration and price competition are typical characteristics suggesting that the
retailing industry has become commoditized. Retail consumers today behave differently,
not only because of the social and demographic changes described above, but also
because they are more educated and professional in their purchase decisions. From the
consumer standpoint, the store concept can be viewed as a package of benefits and the
multi-attribute product concept is useful here to help design a store concept. Retail
outlets can be classified according to two dimensions: the level of the gross margin (high
or low) and the type of benefit sought by the consumer, that is, symbolic or functional.
Retailers' marketing strategies tend to become more sophisticated. They do not simply
imitate existing products but develop new product concepts targeted at well-defined
market segments which are then produced by international manufacturers specializing in
private labels. Four basic strategic options exist for the brand manufacturer: a pull
strategy, direct marketing, sub-contracting operational marketing and trade marketing.
Chapter 17: Pricing Decisions
The choice of a pricing strategy must respect two types of coherence: an internal
coherence that is, setting a price respecting constraints of costs and profitability, and an
external coherence, that is, setting a price compatible with the buyer's price sensitivity
and with the price of competing goods. Cost-based pricing (break-even, target and
mark-up pricing) is the first and necessary step which helps to identify the financial
implications of various pricing strategies. Pricing based exclusively on the firm's own
financial needs is inappropriate, however, since in a market economy it is the buyer who
ultimately decides which product will sell. In demand-oriented pricing, the notion of price
elasticity is central although difficult to estimate empirically with sufficient precision. The
factors affecting buyers' price sensitivity are useful to help estimate price elasticity in
qualitative terms. Value pricing is a customer-based pricing procedure, which is an
outgrowth of the multi-attribute product concept. Flexible pricing strategies (second
market, periodic or random discounting) arise primarily because buyers' heterogeneity
shows different price sensitivities. Two kinds of factors influence competition-oriented
pricing: the competitive structure of the market and the product's perceived value. One
objective of analysing competition in pricing is to evaluate competitors' capacity to act
and react. Special issues in pricing are pricing new products (skimming versus
penetration pricing), product line pricing (price bundling, premium pricing, image and
complementary pricing) and international pricing (transfer price and export costs).
Chapter 18: Marketing Communication Decisions
Marketing communication refers to all the signals and messages made by the firm to its
various publics. The four major communication tools, called the communication mix, are
personal selling, advertising, sales promotion and public relations. The four tasks in
designing a communication programme are communication objective, message
execution, media planning and communication effectiveness. Due to developments in
communication technology, the role of the sales force is undergoing a major
transformation and relationship selling and commercial negotiation are tending to
replace traditional selling techniques. This evolution gives salespeople an important new
role to play in strategic marketing.
Chapter 19: Advertising Offline and Online Decisions
When a firm resorts to advertising, it is effectively following a pull communication
strategy. Its main objective is to create a brand image and brand equity and to ensure
co-operation from distributors. Advertising objectives can be defined by reference to the
three levels of market response: cognitive, affective and behavioural. The share of sales
promotion expenditure is growing in the total marketing communication budget as a
result of the development of direct marketing. There are a large variety of promotion
tools whose effects are complex and which can sometimes have a negative impact on
the brand image. Public relations is a form of softer communication, which is gaining in
popularity as one observes a decrease in the communication effectiveness of media
advertising. Sponsorship and patronage are two special forms of institutional advertising,
which are more frequently observed in industrialized economies.
Chapter 20: Measuring Marketing Performance
Marketing is traditionally one of the least measured functions of the firm, despite the fact
that it represents a significant share of companies' budgets. Market-driven management
needs a marketing measurement framework to analyse the way marketing activities and
investments influence customers in different ways at different levels of relationship
development. If marketing is to be a credible contributor to marketing success of the
firm, it must speak the same financial language as the rest of the firm. And it must
translate outcomes into economic metrics comprehensible outside the marketing
department. Among the stakeholders, investors are particularly important market
players in the global market, and it is imperative that companies understand the needs
of investors and their perception of the company.
Chapter 21: The Strategic and Operational Marketing Plan
This chapter has provided a scheme for developing a formal strategic marketing plan.
The role of strategic planning is to design a desired future for the company and to define
effective ways of making things happen. The plan summarizes, in a formal way, the
marketing strategy development phase. One of the key elements of the strategic plan is
the mission statement which should reveal the company's long-term vision of what it
wants to be and whom it wants to serve. The strategic plan is based on an external
audit. The environment is ever-changing and complex and the firm must constantly scan
and monitor the environment to identify the main threats and opportunities. The
assessment of strengths and weaknesses is also an essential task in the strategic
process. The objective is to evaluate company resources in order to identify a
sustainable competitive advantage on which to base the development strategy. Using
the information collected in the external and internal audits (SWOT analysis), the next
task is to define priority objectives to be translated into operational action programmes
and in a marketing budget. Testing the robustness of a strategic plan is useful to
improve the strategic planning performance. Also, in the current turbulent environment,
vulnerability and risk analysis is required to help the firm anticipate the unexpected
through contingency planning and crisis management.