Chapter 13
Marketing:
Building
Customer Relationships
What is Marketing
The Process of
Planning
Executing the concept
Pricing
Promotion
Distribution
The Evolution of Marketing
Production
Era – prior to 1930
Sales
Era – 1920 to 1970
Marketing
Concept Era – 1950 to 1990
Customer
Relationship Era – after 1990
Production Era
Produce as much as you can
Limitless markets
Production capabilities small compared to
demand
Most business owners were farmers, carpenters
& other trade workers (silversmith, etc.)
Production, Distribution & Storage was
businesses greatest need
Sales Era
Mass Production Techniques in use: assembly lines
Production exceeded market demand
Emphasis on selling & advertising
Sale after sale rare
Marketing Concept Era
After WWII Demand for Goods & Services Grew
Baby boomers increased consumer spending
Need for businesses to be responsive to
customers to attract consumer spending
A Customer Orientation 
A Service Orientation 
A Profit Orientation
Customer Relationship Era
CRM = Customer Relationship Management
Enhanced Customer Service
Exceed consumer expectations to grow
customer loyalty
Nonprofits & Marketing
Charities: to raise funds for social initiatives
Red Cross
Churches: to new members & raise funds
Politicians: to get votes
States: to attract new businesses & tourists
The Marketing Mix
4 “P”s
Product: design & make a want satisfying product
Price: Set a price
Place: Put the product where people will buy it
Promotion: Advertising
Steps to Marketing
Find Opportunities
Conduct Research
Identify Target Market
Design Product to Meet a Need
Product Testing
Choose Brand Name
Design Package & Set Price
Select Distribution System
Design Promotion Program
Build a Relationship with Customers
Marketing Research
Good Decisions depend on Good Information
Demographic Information
Trends in purchasing by consumers
Ecological Impact
(& social impact)
Marketing Research Process
Define the question
Collect Data: secondary or primary data
Analyze the Data
Choose Best Solution & Do It
Primary Data
Interviews
Surveys/Online Surveys
Observations
Focus Groups
Questionnaires
Customer Comments
Letters from Customers
Secondary Data
Government Publications (many online)
Commercial Publications: A C Nielsen, MRCA
Magazines: Fortune, Forbes, Inc., etc.
Newspapers: WSJ, Barron’s
Internal Sources: Firm’s Records
General Source: Internet Searches
The Marketing Environment
Global Factors
Technological Factors
Sociocultural Factors
Competitive Factors
Economic Factors
Price & Promotion
Price & Product
Product
Place
Place & Promotion
All these surround the consumer & their needs.
2 Markets
Consumer Market
Market Segmentation
Target Marketing
Geographical Segmentation
Demographic Segmentation
Psychographic Segmentation
Benefit Segmentation
Volume Segmentation
Business to Business Market = B2B
Smaller Market Segments
Niche Marketing
One-to-one Marketing
Relationship Marketing
Industrial Revolution  Mass Production 
Mass Marketing  Mass Media 
One-way Messages
Relationship Marketing  Customer Loyalty 
Long term relationships & response to
customer input  Two-way Messages
Consumer Decision-making
Learning/Experience
Didn’t like product  never buy it again
Liked product  consistent customer
Reference Group
Norms & expectations of peer group
Culture
Values, attitudes & customs/traditions, ways of doing
things
Subculture
Ethnic, age, religious or other group a consumer strongly
identifies with
Cognitive Dissonance/Buyers Remorse
Business 2 Business
Small # of Customers - Potentially larger transactions
Firm size & market utilization of goods or services
Geographic concentration
Products tend to be more complex & B2B; sales require
more rational & less emotion than consumer market,
greater need for direct sales
More formal process, negotiated detail,
closer buyer/seller relationship
Your Prospects in Marketing
A skill that can be learned
Mentoring/Internship
Who can you work for in the field?
Chapter 14
Developing & Pricing
Products & Services
Product Development
The Whole Product Offer
Design Products of Quality at a Fair Price
Replacement/Returns
Service & Repair
Exceeding the Customers Expectations
VALUE is more important than Price
Change to Match the Desires
of your Customers
Surveys & Comment Cards
Expanded Menus & Services
Experimenting & Variety
Total Product Offer
Price
Brand
Name
Convenience
Package
Store
Surroundings
Service
Internet
Access
Buyer’s
Past
Experience
Guarantee
Speed
of Delivery
Image Created
by Advertising
Reputation
of producer
Grouping Products
Product Lines
Brand Name Detergents or Cereals
Product Mix
All the Product Lines of P & G or General Mills
Marketing Goods & Services
to Different Kinds of Consumers
Product Differentiation
Convenience: Time or work saving
Shopping: Variety & Choices
Specialty: Luxury or no reasonable substitute
Unsought: Consumers are unaware of need
planning ahead: emergency car-towing,
insurance, or burial services, etc.
Industrial Goods & Services
B2B
Sales people/internet sales:
Installation
Heavy Equipment
Capital Goods = Durables
Accessory Equipment
Production or Support Goods
Packaging
Protect the Product: Morton’s Salt
Attracts the Consumer: Colorful, Artwork,
Information
Holds & Dispenses the Product: Tooth Paste
Tracking the Product: UPC Code
6 Functions of Packaging
1)
2)
3)
4)
5)
6)
Protect Goods/Withstand Handling/Deter Theft
Attract the buyer
Describe contents
Explain the products benefits
Provide warrantee & other information
Give indication of price, value & uses
Branding & Brand Equity
Brand = a name, symbol or design
(or combination)
Trademark = legal protection to exclusive use of
a brand name or design
Manufacturer & Private Label Brands
Manufacturer: (makers name)
Xerox, Kodak, Sony, Chevrolet, etc
Dealer/Distributor (private-label)
Kenmore (made by …)
Sears Paint (made by Sherwin-Williams)
Brand Names can become generic
aspirin, nylon, kerosene, zipper, linoleum
What about Scott Towel & Kleenex?
Generic Goods & Knockoff Brands
Generic Goods: Pharmaceuticals, Cereals
lack of advertising, quality ?, lower priced
Knockoff Brands:
Do you want to buy a Rolex watch?
How about a Bolex?
Price ?, Discounts ? What would it take for you
to by a knockoff, instead of the real one?
Brand Equity
Brand Equity =
awareness+loyalty+perceived quality+images+emotions
Brand Loyalty = customer satisfaction & commitment to
future purchases
Brand Awareness
Car Racing  NASCAR
Shoes & Sports Apparel  Nike
Golf balls  Titleist
Jewelers  Zales, Jareds
Brand Association
Linkage between a Brand Name item & something or
someone else
Nike  Tiger Woods
Buick  Tiger Woods
Quaker Oats  the 1812 Overture
Muscular Dystrophy Association Jerry Lewis
Brand Management
Product Manager
responsible for one line or brand
Marketing Mix
product, price, place, promotion
New Product Development
Idea Generation
Product Screening
Product Analysis
Development
Testing
Commericialization
Product Life Cycle
Introduction
Price lower
Growth
Price reaches zenith
Maturity
Profit maximized
Sales Crest
Price & Sales both drop
Decline
Competitive Pricing
Pricing Objectives
Achieve largest return on investment
The Profit Motive
Building Traffic
Achieve greater market share
Create an image
Furthering social objectives
3 major approaches to pricing
Cost-based Pricing
Demand-based Pricing
Competition-based Pricing
Price Leadership
Low Price
Break Even Analysis
Break-Even Point (BEP) = revenues & cost are equal
BEP =
Total Fixed Cost (TFC)
.
Price of a unit – Variable Cost of a unit
(P)
(VC)
BEP = TFC/(P – VC)
Other Pricing Strategies
Skimming Price Strategy
Every day low prices = EDLP
High-low pricing strategy = higher prices than EDLP
store with many special sales; internet sales may
reduce the frequency of this strategy
Bundling
Psychological Pricing:
Why set a price of $19.99 or $199.99?
Demand-Oriented Pricing
Compared with Demand-based Pricing (DBP)
DBP is also called Target Costing
Price is an input for production and the
target cost + profit margin = DBP
Demand oriented pricing (DOP) is reflected in
theater seat prices, where highly desire seats
cost more than less desirable one.
Nonprice Competition
Attributes other than price
features
convenience
service
durability
style
Remaining competitive does always mean meeting
or beating the price at Walmart.
Why is Nordstrom’s successful?
Chapter 15
Distributing Products
Quickly & Efficiently
Marketing Intermediaries
Middlemen
Do they increase or lower the cost of business?
A Channel of Distribution = a set of intermediaries:
agents/brokers/wholesalers/retailers
Agent/Broker = bring buyers & seller together
a Broker may manage many agents or just (him/her)self
Wholesaler = sells to other firms; B2B
Retailer = sells to consumers (people)
Why do we need Middlemen?
Middlemen can do things faster, at lower cost & give
the producer more time to concentrate on what they
do best.
Storage
Transport
Advertising
Selling
Relationship building
5 Sellers & 5 Buyers
How many contact need to be made?
Seller
Seller
Seller
Buyer
Buyer
Buyer
Seller
Buyer
Seller
Buyer
Using middlemen: 5 Seller & 5 Buyers
Seller
Buyers
Seller
Buyers
Seller
Seller
Seller
One
Middleman
Buyers
Buyers
Buyers
Value versus Cost
If middlemen save time and/or money for a
product heading to market, it make sense to
use them.
If about half the cost of a product goes to
middlemen, then getting rid of middlemen
would reduce the price of goods & services…
RIGHT?!
Wrong!!! It would reduce product availablitiy
& increase costs & prices!!!
Six Utilities of Intermediaries
(middlemen)
Form
Time
Place
Possession
Information
Services
turning wheat into flour
get it when you want it
local outlets
transfer ownership/credit
installation/follow-up
Consumer Reports, BBB
internet
Education on use, repair
Wholesale – B2B
Merchant Wholesalers: take possession of goods
they handle
Rack Jobbers: keep title until good is sold
Cash-and-carry Wholesalers: now use credit too
Drop Shippers: have product shipped directly
from maker to buyer
Agents & Brokers
Arrange transfer of possession without taking
possession of a product.
Wholesalers make profit from sale of products,
but agents & brokers make commissions that
are a percentage of the sales revenue.
Retail Intermediaries
Department Store
Discount Store
Supermarket
Warehouse Club
Convenience Store
Outlet Store
Specialty Store
Category Killer
Sear, JC Penney, Nordstrom
Walmart, Target, Kmart
Safeway, Kroger, Albertson’s
Costco, Sam’s Club
7-Eleven
TJ Maxx, Marshall’s
Shoe Stores, Foot Locker
Toys R Us, Office Depot,
Staples
Retail Distribution Strategy
Intensive Distribution
Starbuck’s
as many outlet as
possible
Selective Distribution
Mary Kay
a few outlets
Exclusive Distribution
Sax 5th Avenue
one retail outlet
in a local area
Nonstore Retailing
Telemarketing: No Call List Laws
Vending Machines
Kiosks
Carts
Direct Selling: Primerica/Avon/Kirby/SW Books
Multilevel Marketing: MLM/Independent Contractors
Direct Marketing: Direct mail/Catalog Sales
Internet Marketing: Virtual stores
Channel Systems
Corporate Distribution Systems
GE, Firestone, Xerox, Walmart
Contractual Distribution Systems
Franchises: McDonald’s, KFC, AAMCO
Wholesalers: Ace Hardware, IGA
Retail Cooperatives: Associated Grocers
Administrative Distribution Systems
Kraft Foods, Scott’s Lawncare
Supply Chains
Linked activities that transfer products to consumers
Supplier’s plant 
Manufacturers 
Wholesalers 
Retailers 
Consumers
Supply Chain Management
Managing the movement of
raw materials
parts
work in progress
finished goods
related information through all the organization
SCM is Interfirm & International
Logistics
Shipping or Physical Distribution
Speed of delivery
Cost effective
Taxes, Tariffs & Duties
Labor Law
FDA & Bureau of Alcohol, Tobacco & Firearms
Inbound or Outbound Logistics
Control of the physical flow of materials
involves planning, implementing, moving
Inbound: raw material, packaging, G & S from
suppliers to producers & information
Outbound: finished products
Reverse Logistics: Return of defective or
recycled products
Choosing the right mode
Train: Great for large shipments on land
30-40% of volume in USA
Trucks: Good for smaller shipments or where rail is
not available; >25% of volume in USA
Water: Inexpensive, but slower
Pipelines: Fast & Efficient for fluids
Air: Fast, but expensive
Intermodal Shipping: use two or more of the above
Storage
Storage Warehouses: Longer term holding of
goods
Distribution Warehouses: gather & redistribute
products
Tracking of Goods: RFID (radio frequency ID)
& UPS (uses a Bluetooth short-range radio)
What it all means
10am-7pm
A successful firm has product to sell, it
takes orders, processes the orders,
keeps customers informed about a
shipment’s progress and gets the right
goods to their customers as quickly as
possible. There are many new jobs in
this area of managent.
Chapter 16
Using Effective
Promotional Techniques
Promotion Mix
Advertising
Personal Selling
Sales Ppromotion
Public Relations
Intergrated Marketing Communication
IMC: a technique that combines all the
promotional tools into one comprehensive,
unified promotional strategy; create a positive
brand image & meet the goals of the firm
IMC Part 2
Identify the target market
Define the objectives; make this clear &
measurable
Budget how much promotion will cost
Develop unifying message
Implement the plan
Evaluate the effectiveness of the plan
Advertising
Keep the customer’s interest
Advertising is paid, nonpersonal communication
through various media & individuals, who are
identified in the message
Propoganda is nonpersonal communication that
does not have an identified sponsor
Advertising in USA
$245 billion/yr
TV
Direct mail
Newspapers
Internet
Methods of Advertising
Retail Ads
Trade Ads
B2B Ads
Institutional Ads
Product Ads
Advocacy Ads
Comparative Ads
Interactive Ads
Online Ads
Media & Product Placement
Target Market: How can they reached?
Readers: Newspapers/magazines/flyers
Listeners: Radio
Viewer: TV, internet
Walk/Drive by: Billboards & Signs
Receive mail or email: Direct advertising
Search: Yellow pages, Craig’s List
Infomercials
Half an hour to one hour commercials for:
Bowflex
Total Gym
George Foreman Grill
Moving to Internet Advertising
Nissan & Chrysler are moving money into online
ads 20 to 40 increases from 2004 to 2005
That money had been going into TV or other
forms of advertising.
Four years age McDonald’s spent 80% of its
advertising dollars on TV & now only 50%.
Much of the money now goes to
Internet advertising.
Global Advertising
Something lost is translation
el Papa = the Pope or la papa = potato
Mist Stick
Pocari Sweat
Ford Probe
Krapp toilet paper
Global Adverting does not always work well.
Regional advertising is more effective.
Personal Selling
Face-to-face presentation & promotion
not just persuading people to buy
helping identify their wants & needs
& finding ways to assist them later on
Personalized service
The Selling Process
Prospect & Qualify
Preapproach
Approach
Make Presentation
Answer Objections
Close the Sale
Follow-up
Willing to listen/Power to act
Know who you will talk to
Friendly professionalism
Know the product
More information needed
Trial close/Commitment
Be available for more
requests for help
Business to Consumer Selling
B2C
Approach
Ask questions
Make Presentation
Close Sale
Follow-up
Public Relations
PR
Management function that evaluates public
attitudes, changes in policy & procedures in
response to the public’s requests.
Action plan executed & information used to
earn public understanding & acceptance.
Public Relations 2
3 steps
1. Listen to the public
2. Change policies & Procedures
3. Inform people that you are responding to
their needs
PR department must maintain close ties to
stakeholders; customers, media, community
leaders, government officials, shareholders &
owners
Publicity
The talking/writing part of PR
It must be interesting to get reported by the
media.
Publicity is free & reach people the advertising
won’t.
Marketer lose control of how, when, or if the
media will use the story.
Sales Promotion
The tool that stimulate consumer purchasing &
dealer interest by means of short term activity
Displays
Trade shows
Event Sponsorships
Free Samples Test Drive
Coupons
Bonuses
Sweepstakes
Exhibitions
Contests
Demo
Lotteries
% off Sales
Sampling & Word of Mouth
How can the taste of chocolate fudge brownies
be described for someone unfamiliar with the
taste of chocolate (or fudge).
Sampling is the easiest remedy.
The best advertising is done by satisfied
customers (Word of Mouth) and it’s free.
Viral Marketing
Internet chat rooms entered and hype for a
product released. Chat room visitors spread
the word to their friends and other chat
rooms they visit.
Blogging (blog is short for Web log)
Podcasting: distributing audio & video vai the
internet
Who is watching you on the internet?
Firms keep track of the number of hits on
product websites & even monitor the tastes of
individual web users.
Then using this information they design
advertising just for your kind of consumer.
You may sit alone at your computer, but
someone will notice where you go on the
internet.
Matching market with promotion
Push Strategy: push the product to vendors &
sellers, people will see it in store/outlets &
buy
Pull Strategy: promotion directed toward
consumers, they ask for the product & stores
start stocking the product