Characteristics and Attitudes of
Middle and Lower Classes
• Middle classes
– Plan and save for
the future
– Analyze
alternatives
– Understand how the
world works
– Feel they have
opportunities
– Willing to take risks
• Lower classes
– Live for the present
– "Feel" what is
"best"
– Have simplistic
ideas about how
things work
– Feel controlled by
the world
– "Play it safe"
Grid of Evaluative Criteria for
Three Car
Brands
Common Features
Brand
Gas
Mileage
Ease of
Service
Comfortable
Interior
Styling
Nissan
--
+
+
--
Saab
+
--
+
+
Toyota
+
+
+
--
Process, Adoption Process, and
Learning (given a problem)
• Problem-solving steps
– Becoming aware of or interested in the problem
– Gathering information about possible solutions
– Evaluating alternative solutions, perhaps trying
some out
– Deciding on the appropriate solution
– Evaluating the decision
• Adoption process steps
–
–
–
–
–
Awareness and interest
Interest and evaluation
Evaluation, maybe trial
Decision
Confirmation
Organizational Buying
Focuses on Value
• Vendor analysis is likely to be more
formal
• Focus on economic criteria, including
– Quality (including ISO 9000
certification)
– Total costs to purchase and use
– Reliability
– Value in use
Buying Center
• Business purchases often involve
multiple influence
• "Buying center"—all people who
participate in or influence a particular
purchase
• Buying center varies from purchase to
purchase
• Does not appear on the "organizational
A Retailer’s “Statement of Policy
Concerning Gifts”
To: Our Manufacturers and Suppliers
Re: Statement of Policy Concerning Gifts
The holiday season is a happy time when custom
suggests we share gifts and remembrances
with friends and associates. The joy and
goodwill of the holiday spirit brings us all a
little closer together, and for that we are
thankful.
However, a (store name) associate who accepts a
gift or gratuity from a supplier or vendor during
any season violates (store name) policies and
Three Kinds of Organizational
Buying Processes
• New-task buying
– a firm has a new need and the buyer
wants a great deal of information
• Modified rebuy
– the in-between process where some
review of the buying situation is done—
though not as much as in new-task
buying
• Straight rebuy
Major Sources of Information
Used by Organizational Buyers
Personal Sources
Marketing Sources
Nonmarketing Sources
Salespeople
Others from supplier
firms
Trade shows
Buying center members
Outside business
associates
Consultants and outside
experts
Advertising in trade
publications
Sales literature
Impersonal Sources
Sales catalogs
Web page
Rating services
Trade associations
Product directories
Internet news pointcasts
Some Basic Practices in
Organizational Buying
• Inspection buying
• Sampling buying
• Description buying
– Use of Internet “bots” to search for
products and vendors is making
specification buying more
competitive
• Negotiated contract buying
North American Industry
Classification System Codes
• NAICS—new system of number codes
that groups firms in similar lines of
business
• Most government data is now being
organized by NAICS codes
• Replacing the older Standard Industrial
Classification (SIC) codes
– SIC codes are still prominent in most
published government reports because of
Producers of Services
•
•
•
•
Geographically spread out
Growing in number
Buying may be informal
Government data is incomplete
Government Market
• Government units
– Federal government
– State governments
– Local governments
– Foreign countries
• Bid buying and negotiated contracts
• Sources of information
– Commerce Business Daily
Marketing Information System
(MIS)
• Organized for a continuous flow of information
– Gathering information
– Accessing information
– Analyzing information
• Development of intranets is speeding the
adoption
– Multimedia information, not just numerical data
– Search engines make information easier to find
• Design of the MIS requires data processing
Decision Support System
(DSS)
• A computer program—an interface—
between the manager and the MIS
• Makes it easy to get needed information
– Search engines are a powerful tool for
finding what’s needed
– Easy access to databases in a data
warehouse
• Makes it easy to analyze the information
Examples of Uses of a Decision
Support System
• Selecting target markets (chapter 3)
• Competitive evaluation, such as changes in
market share (chapters 4, 17)
• Customer analysis (chapters 5, 6, 7)
• Sales analysis (chapter 19)
• Cost analysis (chapters 19, 20, 21)
• Analysis of responses to elements of
marketing mix (chapter 21)
Marketing Research
• Procedures to gather and analyze
information for marketing decision
making
• Focus is on new information not
already available in the MIS or other
secondary data sources
• May be handled inside the firm or by
outside specialists
Data
• PRIMARY DATA: Information
specifically collected to solve a current
problem. Examples:
– surveys
– experiments
– observational studies
• SECONDARY DATA: Information that
has previously been collected or published.
Some examples:
Focus Group Interviews
• A popular type of qualitative research
• Involves a small group (usually 6 to 10
people) in a discussion—usually for about
1 hour
• A group leader ("interviewer")
unobtrusively guides the discussion
• Designed to get in-depth, open-ended
responses, not intended to be
"representative" of larger market
Responses to a Phone Company
Consumer Survey
Questions:
Answers
Do you have
Touch-tone
dialing at
your home?
Yes
No
Total
Have you moved in the last year?
No
Yes
10.2%
89.8%
100.0%
23.4%
76.6%
100.0%
Total
15.5%
84.5%
100.0%
Product Line Decisions
• Individual Product
– a particular product within a product line
– a "stock keeping unit" (sku)
• Product Line
– set of individual products that are closely
related
– "depth" and "breadth"
– breadth implies number of product lines
Product Classes
• Two broad classes
– consumer products
– business products
• Classes help in planning marketing mix
needed
• Based on how the customer views the
product
– how consumers think about and shop for
Consumer Product Classes and
Marketing Mix Planning
Consumer
Marketing Mix Considerations
Product Class
Convenience products
Staples Maximum exposure with widespread, low-cost
distribution; mass selling by producer; usually low
price; branding is important
Impulse Widespread distribution with display at point of
purchase
Emergency Need widespread distribution near probable point
of need; price sensitivity low.
Shopping products
Homogeneous Need distribution near similar products; promotion
(including personal selling) to highlight product
advantages; less price sensitivity
Hetergeneous Need distribution near similar products; promotion
(including personal selling) to highlight product
advantages; less price sensitivity
Specialty products Price sensitivity is likely to be low; limited
distribution may be acceptable, but should be
treated as a convenience or shopping product (in
whichever category product would typically be
included) to reach persons not yet sold on its
specialty product status.
Unsought products
New unsought Must be available in places where similar (or
related) products are sought; needs attentiongetting promotion
Regularly unsought Requires very aggressive promotion; usually
personal selling
Consumer Behavior
Routinized (habitual), low effort, frequent
purchases; low involvement.
Unplanned purchases bought quickly.
Purchase made with time pressure when a need is
great.
Customers see little difference among alternatives,
seek lowest price.
Extensive problem solving; consumer may need
help in making a decision.
Willing to expend effort to get specific product,
even if not necessary; strong preferences make it an
important purchase.
Need for product not strongly felt; unaware of
benefits or not yet gone through adoption process.
Aware of product but not interested; attitude toward
product may even be negative.
Special Considerations with
Business Products
• Derived demand
– Demand for goods and services is
derived from the demand for what
firms produce and sell
• Demand elasticity faced by whole
industry
• Tax treatment
– Capital item
Business Product Classes and
Marketing Mix Planning
Business Product
Classes
Marketing Mix Considerations
Buying Behavior
Installations
Usually requires skillful personal selling by
producer, including technical contacts, and/or
understanding of applications; leasing and
specialization support services may be required
Multiple buying influence (including top
management) and new-task buying are common;
infrequent purchase, long decision period, and
boom-or-bust demand are typical
Accessory equipment
Need fairly widespread distribution and
numerous contacts by experienced and
sometimes technically trained personnel; price
competition is often intense, but quality is
important
Purchasing and operating personnel typically make
decisions; shorter decision period than for
installations
Raw materials
Grading is important, and transportation and
storing can be crucial because of seasonal
production and/or perishable products; markets
tend to be very competitive.
Long-term contract may be required to ensure
supply.
Component parts and
materials
Product quality and delivery reliability are
usually extremely important; negotiation and
technical setting typical on less-standardized
items; replacement after market may require
different strategies
Multiple buying influence is common; competitive
bids used to encourage competitive pricing
Maintenance, repair,
and operating (MRO)
supplies
Typically require widespread distribution or
fast delivery (repair items); arrangements with
appropriate middlemen may be crucial
Often handled as straight rebuys, except important
operating supplies may be treated much more
seriously and involve multiple buying influence
Professional services
Services customized to buyer’s need; personal
selling very important; inelastic demand often
supports high prices
Customer may compare outside service with what
internal people could provide; needs may be very
specialized.
Branding
•
•
•
•
Product easy to identify by brand
Consistent quality can be maintained
Widespread availability is possible
Strong demand enables price to be high
enough to support branding
• Economies of scale are possible
• Favorable shelf locations can be
obtained
Levels of Brand Familiarity
•
•
•
•
•
Brand Rejection
Brand Nonrecognition
Brand Recognition
Brand Preference
Brand Insistence
Characteristics of a Good
Brand Name
•
•
•
•
•
•
Short and simple
Easy to spell and read
Easy to recognize and remember
Easy to pronounce
Can be pronounced in only one way
Can be pronounced in all languages (for
international markets)
• Suggestive of product benefits
Branding Decisions
• What kind of brand to use?
– Individual Brand
– Family Brand
– Licensed Brand
– No brand at all (generic products)
• Who does the branding?
– Manufacturer Brand
Packaging
• Opportunity to promote the product
– at the point of purchase
– links product to earlier promotion
– at the point of consumption
• Opportunity to protect the product
– reduces costs of shipping and storing
– reduces theft, spoiling, etc.
Per Capita Consumption of
Paper and Board (Packaging)
700
Consumers in the U.S. like the
convenience of disposable packaging
and small serving sizes, but some
critics argue that it is wasteful and bad
for the environment.
670
491
Pounds
per person
347
88
98
22
U.S.
Japan
W.
Europe
E.
Europe
China
World
Warranties
• Warranty: what the seller promises about
its product
• Regulated by the Magnuson-Moss Act
(1975)
– producers must provide clearly written
warranty if a warranty is offered
– warranty does not have to be "strong"
• Federal Trade Commission provides
guidelines
Moves
through the Product Life Cycle
• Comparative advantage—is the new
product really better?
• The new product is easy for consumers to
use
• Product advantages are easy to
communicate
• Product is easy to try on a limited basis
• Product is compatible with customers'
values and experiences
Three Stages
• Distinctiveness stage
– Some consumers seek—and are willing
to pay for—products different from those
that satisfy the majority
• Emulation stage
– When many consumers want to buy what
is satisfying the original users or fashion
leaders
Patterns of Fashion, Fad, and
Style Cycles for Fashion Products
Fad cycles may be
very short
Sales level
Fashion cycles may last for
some time as they spread
beyond the innovators
Sales level
Styles may come back over time as fashions and fads
New Products
• New products are critical to survival
– markets change
– competition changes
– product life cycles march on
• What is a new product?
• Firm's perspective
– a product that is new in any way
• FTC's perspective
New-Product Development
• New-product thinking should be an ongoing effort
• Top-level support is vital
• Someone should be “in charge” of the effort
• Firm should constantly generate new ideas,
then narrow down to the best opportunities
with clearly specified screening criteria
• Need a well organized new-product
development process
Types of New Product
Immediate
Opportunities
Satisfaction
Long-run
consumer
welfare
High
Low
High
Desirable
products
Pleasing
products
Low
Salutary
products
Deficient
products
Place Decisions in the Marketing
Mix
• Making products available in the right
quantities and locations—when
customers want them
• Channels of distribution (Chapters 1113)
– Focus on institutions involved in getting
product to the customer
• Physical Distribution (Chapter 12)
Factors Related to the Use of
Direct Distribution
• Direct (producer to customer) distribution is
more common when:
– the customer is a business or organization
(rather than a final consumer)
– an aggressive personal selling effort is required
and/or when customers need special technical
service
– the product is primarily a service rather than a
physical good
– when working with middlemen would make it
Channel Specialists Adjust
Discrepancies
• DISCREPANCIES OF QUANTITY
– Difference between the quantity of products it
is economical to produce and the quantity
customers want
• DISCREPANCIES OF ASSORTMENT
– Difference between the lines a producer makes
and the assortment customers want
• REGROUPING ACTIVITIES REDUCE
DISCREPANCIES
Channel Captain
• A manager who helps direct the activities of
the whole channel
• Tries to develop cooperation and avoid or
resolve conflicts
• May be either a producer or middleman
– Big retail chains increasingly taking this role
• Guides the whole channel to compete better
with other channels
– Effective allocation of functions
Vertical Marketing Systems
• Whole channel focuses on the same target
market at the end of the channel
• Corporate channel systems
– corporate ownership all along the channel
– often involves vertical integration
• Administered channel systems
– informal agreements among channel members
• Contractual channel systems
– legal contracts among channel members
Level of Market Exposure
• Intensive
– selling through all responsible and suitable
wholesalers and retailers who will stock and/or
sell the product
• Selective
– selling through only those middlemen who will
give the product special attention
• Exclusive
– selling through only one middleman in a
particular geographic region
Selective Distribution
• Sell only through middlemen who give the
product special attention
• Avoids dealing with middlemen who:
–
–
–
–
–
have poor credit standing
make too many returns
require too much service
place only small orders
can't or won't do a satisfactory job
• Becoming more popular
Reverse Channels of Distribution
• Reverse channels are channels used to
retrieve products that customers no longer
want
• Examples of situations:
–
–
–
–
–
recall of unsafe products
return of products from incorrectly filled order
return of products under warranty
return of products customer orders in error
return of products to be recycled (bottles, etc.)
Logistics and Physical
Distribution Customer Service
• The transporting, storing, and handling of
goods to match target customers' needs with
a firm's marketing mix
• Both within individual firms and along a
channel of distribution (or supply chain)
• Customers think of physical distribution in
terms of the customer service level
Physical Distribution Concept
• All transporting, storing, and producthandling activities of a business and a
whole channel system should be
coordinated as one system to:
– minimize the costs of distribution
– for a given customer service level
• Simply focusing on individual costs may
increase total costs—since a total system is
involved
Examples of Factors that Affect
PD Service Level
•
•
•
•
•
•
•
•
Advance information on product availability
Time to enter and process orders
Backorder procedures
Where inventory is stored
Accuracy in filling orders
Damage in shipping, storing, and handling
Order status information
Advance information on delays
Using Technology to Coordinate
• Just-in-time delivery (reliably getting
PD
Activities
Among
Firms
products there just before the customer needs
them) requires close coordination and
information flows
–
–
–
–
reduces handling costs
reduces storing costs
shifts greater responsibility to the supplier
a small problem can cause big ripple effects!
• Electronic data interchange (EDI) puts
information in a standardized format easily
shared between different computer systems
Transporting
• Marketing function of moving goods
• Helps facilitate economies of scale in
producing goods
– Produce in large quantities where it is
inexpensive to produce, and then ship products
to customers
• Shipping costs increase delivered cost
• Five major modes of transportation
– Rail
Transporting Costs as a Percent
of Selling Price for Different
Products
• Products
–
–
–
–
–
–
–
–
Sand and gravel (55%)
Bituminous coal (42%)
Cabbage (38%)
Iron Ore (20%)
Manufactured food (8%)
Chemicals and plastics (6%)
Factory machinery (4%)
Electronic equipment (3%)
Benefits and Limitations of
Transportation Features
Different Transport Modes
Transport
Mode
Cost
Delivery
Speed
Number of
Locations
Served
Rail
Medium
Average
Extensive
Water
Truck
Air
Pipeline
Very low Very slow
High
Fast
Limited
Very
extensive
Very high Very fast Extensive
Low
Slow
Very
Limited
Ability to
handle a
variety of
goods
Frequency
of
scheduled
shipments
Dependability in
meeting
schedules
High
Low
Medium
Very high Very low
Medium
High
High
High
Limited
High
High
Very
Limited
Medium
High