With the advent of the Internet, consumers have greater freedom of choice and more evaluative criteria than every before. Consumers can and do make more informed decisions than previous generations. Marketers can be rightly accused of influencing wants, along with societal factors such as power, influence, peer pressure, and social status. These societal factors pre-exist marketing and would continue to exist if there was no marketing efforts expended. 1 MARKETING DISCUSSION Consider the broad shifts in marketing. Are there any themes that emerge to these shifts? Can they be related to the major societal forces?
Which force contributed to which shift? ANSWER:The major themes that emerge in these broad shifts are technology, decentralization, and empowerment. As companies face increased global competition, they are beginning to increase their attention to all aspects of marketing and are beginning to encompass marketing as a corporate goal and not just a departmental function. The major societal forces at work: two-income families, increased technology, fewer firms, increased consumer education, and empowerment are forcing companies and marketers to shift their thinking about marketing and rethink their best business practices.
Global competition: 1. From marketing does the marketing to everyone does the marketing. 2. From organization by products units to organizing by customer segments. 3. From being local to being “glocal”—both global and local. 4. Increase technology. 5. From making everything to buying more goods and services from outside. 6. From emphasizing tangible assets to emphasizing intangible assets increasing consumer expectations. 7. From relying on old market positions to uncovering new ones. 8. From building brands through advertising to building brands through performance and integrated communications. . From attracting customers through stores and salespeople to making products available online. 10. From selling to everyone to trying to be the best firm serving a well-defined target market. 11. From focusing on profitable transactions to focusing on customer lifetime value. 12. From focusing on the financial scorecard to focusing on the marketing scorecard. 13. From a focus on gaining market share to a focus on building customer share. 14. From focusing on shareholders to focusing on stakeholders. 15. Decreased availability of firms. 16.
From using many suppliers to working with fewer suppliers in a “partnership. ” 2 . MARKETING SPOTLIGHT—Coca-Cola 1. What have been the key success factors for Coca-Cola? Its pursuit of always looking for new ways to portray the brand, to keep the brand “fresh” in the minds of current consumers without betraying the “core values. ” 2. Where is Coca-Cola vulnerable? A change in consumer tastes for soft drinks is vulnerability for Coca-Cola. Additionally, as the brand expands into third-world countries, lifestyles and customs provide challenges. 3.
What should they watch out for? Any demographic, or lifestyle changes that would have long-term consequences would be a threat for the brand. Young consumers must embrace the brand to ensure that they continue to drink Coca-Cola as they age. If Coca-Cola misses a generation, sales will suffer for a long time. 4. What recommendation would you make to their senior marketing executives going forward? Continue to embrace the core values of the brand and expand soft drink sales opportunities, not from the Coca-Cola brand, but from flanker brands or acquisitions.
Preserve the Coke franchise and defend it steadfastly. 5. What should they be sure to do with their marketing? Evolve, adapt to changes in the consumer market by constantly monitoring consumer buying habits, purchase intents, and their shifts in lifestyle priorities. 3 DETAILED CHAPTER OUTLINE Q1. What is marketing and why it is important? ANS:Marketing is everywhere. Formally or informally, people and organizations engage in a vast number of activities that could be called marketing. Good marketing is no accident, but a result of careful planning and execution.
Marketing is both an “art” and a “science”—there is constant tension between the formulated side of marketing and the creative side. THE IMPORTANCE OF MARKETING Financial success often depends on marketing ability. Many firms have created a Chief Marketing Officer (CMO) to put marketing on an equal footing with other Chief Executives such as a CFO and CEO. Marketing is tricky and making the right decisions is not always easy. Skillful marketing is a never-ending pursuit. Q2. What is the scope of marketing and explain some fundamental marketing concepts?
ANS:To prepare to be marketers, you need to understand what marketing is, how it works, what is marketed, and who does the marketing. What Is Marketing? Marketing deals with identifying and meeting human and social needs. One of the shortest definition of marketing is “meeting needs profitably. ” A) The American Marketing Association offers the following formal definition: “Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. B) Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. 4 C) A social definition of marketing is that “marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. ” Exchange and Transactions Exchange is the process of obtaining a desired product from someone by offering something in return.
For exchange potential to exist, the following conditions must be satisfied: A) There are at least two parties. B) Each party has something that might be of value to the other party. C) Each party is capable of communication and delivery. D) Each party is free to accept or reject the exchange offer. E) Each party believes it is appropriate or desirable to deal with the other party. F) Exchange is a value-creating process because it normally leaves both parties better off. G) A transaction is a trade of values between two or more parties and involves several dimensions: 1) At least two things of value. ) Agreed upon conditions. 3) A time of agreement. 4) A place of agreement. H) A transaction differs from a transfer. In a transfer, A gives X to B but does not receive anything tangible in return. I) Marketers seek to elicit a behavioral response from another party. What Is Marketed? Marketing people are involved in marketing ten types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. A) Goods Physical goods constitute the bulk of production and marketing efforts.
B) Services A growing portion of business activities are focused on the production of services. The U. S. economy today consists of a 70–30 services to goods mix. C) Events 5 Marketers promote time-based events such as trade shows, artistic performances, and the Olympics. D) Experiences By orchestrating several services and goods, a firm can create and market experiences such as Walt Disney World’s Magic Kingdom. E) Persons Celebrity marketing is a major business. F) Places Cities, states, regions, and whole nations compete actively to attract tourists, factories, and new residents.
G) Properties Are intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds). H) Organizations Actively work to build a strong, favorable, and unique image in the minds of their target publics. I) Information Can be produced and marketed as a product. Schools, universities, and others produce information and then market it. J) Ideas Every market offering includes a basic idea. Products and services are platforms for delivering some idea or benefit. Who Markets? Marketers and Prospects A marketer is someone seeking a response (attention, purchase, vote, donation, etc. from another party called the prospect. A) Marketers are responsible for stimulating demand for a company’s product. B) Marketing managers seek to influence the level, timing, and composition of demand to meet the organization’s objectives. Eight demand states are possible: 1) Negative demand—consumers dislike the product and may even pay a price to avoid it. 2) Non-existent demand—consumers may be unaware or uninterested in the product. 3) Latent demand—consumers may share a strong need that cannot be satisfied by an existing product. 6 4) Declining demand—consumers begin to buy the product less frequently or not at all. ) Irregular demand—consumer purchases vary on a seasonal, monthly, daily, or even an hourly basis. 6) Full demand—consumers are adequately buying all product put into the marketplace. 7) Overfull demand—too many consumers would like to buy the product that can be satisfied. 8) Unwholesome demand—consumers may be attracted to products that have undesirable social consequences. Markets Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class. Marketers use the term “ market” to cover various groups of customers.
They view the sellers as constituting the industry and the buyers as constituting the market. They talk about need markets, product markets, demographic markets, and geographic markets. A) Sellers and buyers are connected by flows: 1) Seller sends goods, services, and communications to the market. 2) In return they receive money and information. 3) There is an exchange of money for goods and services. 4)There is an exchange of information Key Customer Markets A) Consumer Markets Consumer goods and services such as soft drinks and cosmetics, spend a great deal of time trying to establish a superior brand image.
B) Business Markets Companies selling business goods and services often face well-trained and wellinformed professional buyers who are skilled in evaluating competitive offerings. C) Global Markets Companies face challenges and decisions regarding which countries to enter, how to enter the country, how to adapt their products/services to the country, and how to price their products. D) Nonprofit and Governmental Markets Companies selling to these markets have to price carefully because these organizations have limited purchasing power. 7
MARKETPLACES, MARKETSPACES, AND METAMARKETS >>The marketplace is physical; the marketspace is digital. locations (Internet locations) that consumers use in deciding what car to purchase. >>Mohan Sawhney has proposed the concept of metamarkets to describe a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries. An example is the automobile industry that consists of physical locations (car dealers) and marketspace How Business and Marketing Are Changing A) Changing technology.
B) Globalization. C) Deregulation. D) Privatization. E) Customer empowerment. F) Customization. G) Heightened competition. H) Industry convergent. I) Disintermediation. COMPANY ORIENTATIONS TOWARD THE MARKETPLACE The competing concepts under which organizations have conducted marketing activities include; the production concept, product concept, selling concept, marketing concept, and holistic marketing concept. Production Concept A) The production concept holds that consumers will prefer products that are widely available and inexpensive. Product Concept
A) The product concept holds that consumers will favor those products that offer the most quality, performance, or innovative features. Selling Concept A) The selling concept holds that consumers and businesses, will ordinarily not buy enough of the organization’s products, therefore, the organization must undertake aggressive selling and promotion effort. 8 Marketing Concept A) The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets. ) Reactive market orientation—understanding and meeting consumers’ expressed needs. 2) Proactive marketing orientation—researching or imagining latent consumers’ needs through a “probe-and-learn” process. Companies that practice both reactive and proactive marketing orientation are implementing a total market orientation. Relationship Marketing A) Relationship marketing has the aim of building mutually satisfying long-term relationships with key parties—customers, suppliers, distributors, and other marketing partners. Relationship marketing builds strong economic, technical, and social ties among the parties. ) Marketing must not only do customer relationship management (CRM) but also partnership relationship management (PRM). 2) Four key constituents for marketing are: a. Customers. b. Employees. c. Marketing partners (channel partners). d. Members of the financial community. 3) The ultimate outcome of relationship marketing is the building of a unique company asset called a marketing network. A marketing network consists of the company and its supporting stakeholders (customers, suppliers, distributors, retailers, ad agencies, university scientists, and others) with whom it has built mutually profitable business relationships. Integrated Marketing A) The marketer’s task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for consumers. The 4Ps of marketing: product, price, place, and promotion Marketing—mix decisions must be made for influencing the trade channels as well as the final consumers. 1) Robert Lauterborn suggests that the sellers 4Ps correspond to the customers’ 4Cs: 4Ps Product Price Place Promotion 4Cs Customer solution Customer cost Convenience Communication
B) Two key themes of integrated marketing are: 1) Many different marketing activities are employed to communicate and deliver value. 2) All marketing activities are coordinated to maximize their joint efforts. Internal Marketing A) Holistic marketing incorporates internal marketing, ensuring that everyone in the organization embraces appropriate marketing principles. B) Internal marketing must take place on two levels: 1) At one level, the various marketing functions (sales force, advertising, customer services, product management, and marketing research) must work together. ) Secondly, marketing must be embraced by the other departments—they must “think customer. ” Marketing is not a department so much as a company orientation. Social Responsible Marketing Holistic marketing incorporates social responsibility marketing and understanding broader concerns, and the ethical, environmental, legal, and social context of marketing activities and programs. 10 FUNDAMENTAL MARKETING CONCEPTS, TRENDS, AND TASKS To understand the marketing function, we need to understand certain fundamental concepts and tasks, along with current trends. Core Concepts
Creates foundations for marketing management and holistic marketing orientation. Needs, Wants, and Demands Marketers must try to understand the target market’s needs, wants, and demands. A) Needs are basic human desires. B) Wants are shaped by one’s society. C) Demands are wants for specific products backed by an ability to pay. D) Marketers do not create needs—needs pre-exist marketers. E) Marketers, along with society influence wants. 1) There are five types of needs that marketers must understand: a. Stated needs. b. Real needs. c. Unstated needs. d. Delight needs. e.
Secret needs. Target Markets, Positioning, and Segmentation A) A marketer can rarely satisfy everyone in a market therefore the marketers must divide the market into segments. B) The marketer then decides which segment presents the greatest opportunity—which are its target markets. C) For each chosen target market, the firm develops a market offering. D) The offering is positioned in the minds of the target buyers as delivering some central benefit(s). Offerings and Brands A) Companies put forth a value proposition, a set of benefits they offer to customers to satisfy their needs.
B) The intangible value proposition is made physical by an offering that can be a combination of products, services, information, and experiences. 11 Value and Satisfaction A) The offering will be successful if it delivers value and satisfaction to the target buyer. B) The buyer chooses between different offerings based on which is perceived to deliver the most value. C) Value reflects the perceived tangible benefits and costs to customers. D) Value can be a combination of quality, service, and prices called the customer value triad. E) Value is a central marketing concept.
F) Marketing can be seen as the identification, creation, communication, delivery, and monitoring of customer value. 1) Satisfaction reflects a person’s comparative judgment resulting from a product’s perceived performance (or outcome) in relation to his or her expectations. Marketing Channels (three kinds of marketing channels) A) Communication channels deliver and receive messages from target buyers. B) Distribution channels to display, sell, or deliver the physical product or service(s). C) Service channels to carry out transactions with potential buyers (warehouses, transportation companies, banks). Supply Chain
A) Describes a longer channel stretching from raw materials to finished goods. B) Represents a value delivery system. Competition A) Includes all the actual and potential rival offering and substitutes that a buyer might consider. Marketing Environment A) Consists of the task environment and the broad environment. B) Task environment includes the immediate actors involved in producing, distribution, and promoting the offering: suppliers, company, dealers, and target customers. C) The broad environment consists of six components: 1) Demographic. 2) Economic. 3) Natural. 12 4) Technological. 5) Political-legal. 6) Social-cultural.
Marketing Planning A) Consists of analyzing marketing opportunities. B) Selecting target markets. C) Designing marketing strategies. D) Developing marketing programs. Managing the marketing effort. Q3. How has marketing management changed? ANS:A) A number of important trends and forces are eliciting a new set of beliefs and practices on the part of business firms. These fourteen major shifts are: 1) From marketing does the marketing to everyone does the marketing. 2) From organization by products units to organizing by customer segments. 3) From making everything to buying more goods and services from outside. ) From using many suppliers to working with fewer suppliers in a “partnership. ” 5) From relying on old market positions to uncovering new ones. 6) From emphasizing tangible assets to emphasizing intangible assets. 7) From building brands through advertising to building brands through performance and integrated communications. 8) From attracting customers through stores and salespeople to making products available online. 9) From selling to everyone to trying to be the best firm serving a well-defined target market. 10) From focusing on profitable transactions to focusing on customer lifetime value. 1) From a focus on gaining market share to a focus on building customer share. 12) From being local to being “glocal”—both global and local. 13) From focusing on the financial scorecard to focusing on the marketing scorecard. 14) From focusing on shareholders to focusing on stakeholders. 13 Q4. What are the tasks necessary for successful marketing management? ANS:A) Developing marketing strategies and plans Connecting with customers B) Building strong brands C) Shaping the market offerings D) Delivering value E) Communicating value F) Capturing marketing insights and performance G) Creating successful long-term growth 4 CHAPTER 2 : DEVELOPING MARKETING STRATEGIES AND PLANS MARKETING DEBATE—What Good Is a Mission Statement? Virtually all firms have mission statements to help guide and inspire employees as well as signal what is important to the firm to those outside the firm. Mission statements are often the product of much deliberation and discussion. At the same time, some critics claim that mission statements sometimes lack “teeth” and specificity. Moreover, critics also maintain that in many cases, mission statements do not vary much from firm to firm and make the same empty promises.
Take a position: Mission statements are critical to a successful marketing organization versus mission statements rarely provide useful marketing value. MY OPINION:Pro: A well-crafted corporate mission statement reflects the values of the firm as they relate to the community at large, its stakeholders, its employees, and its customers. Once the firm’s positions are delineated in the mission statement, marketing can begin the process of setting its priorities, goals, and objectives derived from the stated priorities of the firm.
With the advent of holistic marketing, what the firm believes about the communities at large and what strategic direction the firm wishes to take should be defined through its mission statement. Con: Mission statements are written for public consumption and rarely if ever do they reflect the actual goals, objectives, and mission of the firm. These statements are for public consumption and are written to placate the corporate stakeholders, employees, and consumers. Although most mission statements are written with good intentions, the real direction of the firm must be found in the application of its business practices.
Marketing should not make the mistake of deriving its goals, objectives, and strategies from these platitudes. 1 MARKETING DISCUSSION Consider Porter’s value chain and the holistic marketing orientation model. What implications do they have for marketing planning? How would you structure a marketing plan to incorporate some of their concepts? ANSWER Michael Porter’s value chain is a tool for identifying ways to create more customer value. This value chain identifies nine strategically relevant activities that create value and cost in a business.
There are five primary activities and four support activities in this value chain. The five primary activities are: inbound logistics, operations, outbound logistics, marketing and sales, and service. The four support activities are: procurement, technology development, human resource management, and infrastructure. Before the marketing function begins its planning, it first must examine the costs and performance of the firm in each of these value-creating activities and look for ways to improve or reduce costs/products as needed. Marketing must also force the firm to benchmark itself to the competition in all of these areas.
The structure of the marketing plan must take into account each of the five primary activities and each of the four support activities. A marketing plan must incorporate both a “downstream” and “upstream” review in the process to deliver superior customer value. This means that the planning process must include areas for improvement in the five primary areas and the four support areas as part of its strategy and product development. Essentially, the marketing plan becomes an “improvement” document for the firm in each of these nine strategic activities delineating areas for change or modification for the firm.
MARKETING SPOTLIGHT—Nike Discussion Questions (suggested responses): 1) What have been the key success factors for Nike? a. Consistent advertising program and selective spokespersons. b. Tracking consumer-purchasing behavior. 2) Where is Nike vulnerable? a. Loss of key sports figures. b. Loss of incremental growth in high-end products. c. Changes in governmental regulations/rules for production of their products. d. Competitive activities that mimic or improve upon technological processes. 3) What should it watch out for? a. Identifying trends and megatrends in the sports apparel industry. 2 b.
Monitoring the six major environmental forces of: (i) (ii) Demographic Economic (iii) Social-cultural (iv) Natural (v) Technological (vi) Political-legal 4) What recommendations would you make to senior marketing executives going forward? a. Understand people’s views of themselves, others, organizations, society, nature, and the universe as it pertains to sports. 5) What should they be sure to do with their marketing? a. Work closely with local and national governments, pressure groups and other environmental arenas to position the company as being socially responsible to the concerns about shoe manufacturing.
Continue to present their advertising showing “fun” in sports and the use of their products DETAILED CHAPTER OUTLINE Q1. How does marketing affect customer value? ANSWER:MARKETING AND CUSTOMER VALUE Marketing involves satisfying consumers’ needs and wants. The task of any business is to deliver customer value at a profit. The Value Delivery Process The traditional view of marketing is that the firm makes something and then sells it. A) Will not work in economies where people face abundant choice. B) New belief: marketing begins with the planning process. C) Value creation and delivery consists of three parts: 1) Choosing the value (segment the market, define target market, develop “offering”). 2) Providing the value (product features, prices, and distribution channels). 3) Communicating the value (sales force, advertising, and promotional tools). Each of these “values” involves a cost component to the company. D) The Japanese use: 1) Zero customer feedback time. 2) Zero product-improvement time. 3) Zero purchasing time. 4) Zero set-up time. 5) Zero defects. E) Nirmalya Kumar’s 3 “Vs” approach to marketing: 1) Define the value segment or segments. 2) Define the value proposition. ) Define the value network. F) Frederick Webster views marketing in terms of: 1) Value defining process. 2) Value developing processes. 3) Value delivering processes. 4 The Value Chain Michael Porter’s Value Chain (Figure 2. 2) identifies nine strategically relevant activities that create value and costs (five primary and four support activities). A) Primary activities: 1) Inbound logistics (material procurement). 2) Operations (turn into final product). 3) Outbound logistics (shipping and warehousing). 4) Marketing (marketing and sales). 5) Servicing (service after the sale).
B) Support activities: 1) Procurement. 2) Technology development. 3) Human resource management. 4) Firm infrastructure. The firm’s task is to examine its costs and performance in each value-creating activity and to look for ways to improve performance. C) Core business processes: 1) The market sensing process (marketing intelligence). 2) The new offering realization process (research and development). 3) The customer acquisition process (defining target markets and consumers). 4) The customer relationship management process (deeper understanding of consumers).
The fulfillment management process (receiving, shipping, and collecting payments). Strong companies develop superior capabilities in these core business processes. Strong companies also reengineer the workflows and build cross-functional teams responsible for each process. Many companies have partnered with suppliers and distributors to create a superior value-delivered network. D) Value-delivery network (supply chain). To be successful today, a firm must look for competitive advantages beyond its own operations—to its suppliers and distributors to create a superior value-delivery network (supply chain). Value Exploration A) Customer’s cognitive space (reflects existing and latent needs and includes participation, stability, freedom, and change). B) Company’s competence space (broad versus focused scope of business and depth physical versus knowledge-based capabilities). C) The collaborator resource space (horizontal and vertical partnerships). Value Creation A) Marketer’s need to: 1) Identify new customer benefits from the customer’s view. 2) Utilize core competencies. 3) Select and manage business partners from its collaborative networks. ) Business realignment may be necessary to maximize core competencies. a. (Re)defining the business concept—big idea. b. (Re)shaping the business scope—lines of business. c. (Re)position the company’s brand identity. Value Delivery—What Companies Must Become? Often requires an investment in infrastructure and capabilities. A) Proficient at customer relationship management. 1) Who the customers are, and respond to different customer opportunities. B) Internal resource management. 1) Integrate major business processes within a single family of software modules. C) Business partnership management. ) Allow the company to handle complex relationships with its trading partners. 6 Q2. How is strategic planning carried out at different levels of the organisation? ANSWER:The Central Role of Strategic Planning A) Calls for action in three areas: 1) Managing a company’s businesses as an investment portfolio. 2) Assessing each business’s strength by the market’s growth rate and the company’s position and fit in that market. 3) Establish strategy. B) Most large companies consist of four organizational levels: 1) Corporate level. 2) Division level. 3) Business unit level. 4) Product level.
C) The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operates on two levels: strategic and tactical. 1) The strategic marketing plan lays out target markets and the value proposition. 2) The tactical marketing plan specifies the product, promotion, merchandising, pricing, sales channels, and service. CORPORATE AND DIVISION STRATEGIC PLANNING A) All corporate headquarters undertake four planning activities: 1) Defining the corporate mission. 2) Establishing strategic business units (SBUs). 3) Assign resources to each SBU. ) Assessing growth opportunities. 7 Defining the Corporate Mission A) Key questions to ask: 1) What is our business? 2) Who is the customer? 3) What is of value to the customer? 4) What will our business be? 5) What should our business be? Mission statements are best when guided by a “vision” that provides direction for the company. B) Good mission statements have three major characteristics: 1) Focused on a limited number of goals. 2) Stresses the company’s major policies and values. 3) Defines the major competitive spheres within which the company will operate by defining the: a. Industry. b.
Products and applications. c. Competence. d. Market-segment. e. Vertical. f. Geographical. Defining the Business Redefine the definition of businesses in terms of needs and not products. A) A target market definition tends to focus on selling a product or service (Pepsi® and all who drink cola sodas). B) A strategic market definition is broader and more encompassing (Pepsi redefines its strategy to everyone who has a “thirst”). 1) A business can be defined in terms of three dimensions: a. Customer groups. b. Customer needs. 8 Assessing Growth Opportunities A) Involves planning for new businesses.
B) Downsizing or terminating old businesses. Intensive Growth Corporate manager’s first course of action should be a review of opportunities for improving existing businesses. A) Market-penetration strategy (gain more market share). B) Market-development strategy (new markets for current products). C) Product-development strategy (new products for current markets). D) Diversification strategy (new products for new markets). Integrative Growth A) Sales and profits may be increased through: 1) Backward integration. 2) Forward integration. 3) Horizontal integration Diversification Growth
When opportunities are found outside the present business and the company has the right mix of business strengths to be successful. A) Several types are possible: 1) New products that have technological or marketing synergies with existing product lines. 2) New products unrelated to the current industry. 3) New businesses unrelated 9 BUSINESS UNIT STRATEGIC PLANNING Business Mission A) Each business unit needs to define its specific mission within the broader company mission. SWOT Analysis A) The evaluation of a company’s strengths, weaknesses, opportunities, and threats is called SWOT analysis.
It involves monitoring the external and internal marketing environment. External Environment (Opportunity and Threat) Analysis A) A business unit must monitor key macroenvironment forces: 1) Demographic-economic. 2) Natural. 3) Technological. 4) Political-legal. 5) Social-cultural. 6) And significant microenvironment actors: a. Customers. b. Competitors. c. Suppliers. d. Distributors. e. Dealers. A major purpose of environmental scanning is to discern new opportunities. A marketing opportunity is an area of buyer need and interest in which there is a high probability that a company can profitably satisfy that need.
B) There are three sources of market opportunities: 1) First is to supply something in short supply. 2) Second is to supply an existing product or service in a new or superior way. 3) There are several ways to uncover possible product or service improvements: a. By asking customers for their suggestions (problem detection method). 10 b. By asking consumers to imagine an ideal version of the product or service (ideal method). c. By asking consumers to chart their steps in acquiring, using, and disposing of a product (consumption chain method). C) Third is a totally new product or service.
D) To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to determine attractiveness and probability of success: 1) Can the benefits involved in the opportunity be articulated convincingly to a defined target market(s)? 2) Can the target market(s) be located and reached with cost-effective media and trade channels? 3) Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits? 4) Can the company deliver the benefits better than any actual or potential competitors can? ) Will the financial rate of return meet or exceed the company’s required threshold for investment? E) An environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit. Internal Environment (Strengths/Weaknesses) Analysis It is one thing to find attractive opportunities and another to be able to take advantage of them. Each firm must evaluate its internal strengths and weaknesses. A) George Stalk suggests that winning companies are those that have achieved superior in-company capabilities, not just core competencies.
Stalk calls this capabilities-based competition. Goal Formulation Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period. This stage of the process is called goal formulation. Managers use the term “goals” to describe objectives that are specific with respect to magnitude and time. A) The firm sets objectives, and then manages by objectives (MBO). For MBOs to work they must meet four criteria: 1) They must be arranged hierarchically, from the most to least important. 2) Objectives should be stated quantitatively whenever possible. ) Goals should be realistic. 4) Objectives must be consistent. 11 Strategic Formulation Every business must design a strategy for achieving its goals, consisting of a marketing strategy, and a compatible technology strategy, and sourcing strategy. Porter’s Generic Strategic A) Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking: 1) Overall cost leadership. 2) Differentiation. 3) Focus. B) According to Porter, firms pursuing the same strategy to the same target market constitute a strategic group. Strategic Alliances
A) Companies are discovering that there is a need for strategic partners if they hope to be effective. B) Many strategic alliances take the form of marketing alliances. These fall into four major categories: 1) Product or service alliances. 2) Promotional alliances. 3) Logistics alliances. 4) Pricing collaborations. C) To keep strategic alliances thriving, corporations have begun to develop organizational structures for support and have come to view the ability to form and manage partnerships as core skills (called Partner Relationship Management, PRM). Program Formulation and Implementation
A) A great marketing strategy can be sabotaged by poor implementation. B) Marketing must estimate its costs. C) In implementing strategy, companies must not lose sight of the multiple stakeholders involved and their needs. D) According to McKinsey & Company, strategy is only one of seven elements in successful business practice. 1) The first three—strategy, structure, and systems are considered the “hardware” of success. 12 2) The next four—style, skills, staff, and shared values are the “software” a. “Style” means that company employees share a common way of thinking and behaving. . “Skills” means that the employees have the skills necessary to carry out the company’s strategy. c. “Staffing” means that the company has hired able people, trained them well, and assigned them to the right jobs. d. “Shared values,” means that the employees share the same guiding values. Feedback and Control As it implements its strategy, the firm needs to track the results and monitor new developments. A company’s strategic fit with the environment will inevitably erode because the market environment changes faster than the company’s 7Ss.
Organizations are subject to inertia and are set up as efficient machines and it is difficult to change one part without adjusting everything else. Q3. What does a marketing plan include? ANSWER:- PRODUCT PLANNING: THE NATURE AND CONTENTS OF A MARKETING PLAN A) Each product level (product line, brand) must develop a marketing plan for achieving its goals. A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives. B) Marketing plans are becoming more customer and competitor orientated.
The plan draws more input from all the business functions and is team developed. C) Contents of the marketing plan: 1) Executive summary and table of contents. 2) Situation analysis. 3) Marketing strategy. 4) Financial projections. 5) Implementation controls. 13 CHAPTER 3 : GATHERING INFORMATION AND SCANNING THE ENVIRONMENT MARKETING DEBATE—Is Consumer Behavior More of a Function of a Person’s Age or Generation? One of the widely debated issues in developing marketing programs that target certain age groups is how much consumers change over time.
Some marketers maintain that age differences are critical and that the needs and wants of a 25-year-old in 2002 are not that different from those of a 25-year-old in 1972. Others dispute that contention and argue that cohort and generational effects are critical and that marketing programs must therefore suit the times. Take a position: Age differences are fundamentally more important than cohort effects versus cohort effects can dominate age differences. MY OPINION:Pro: People are the “age” they think they are. We have experienced some fundamental changes in consumer lifestyles and the definition of “family. These changes suggest that people are and can adapt to different products regardless of their chronological age. Today a vast number of aging baby boomers, for example, do not think of themselves as approaching middle age; as a result represent a growing market for age defeating products. This is true with other age groups, as the advances in medicine, technology, and income have redefined what the “age” number really means to people. In marketing today, the marketing of a product or service can be designed to fit differing age groups by its positioning and advertising.
Key examples include cruise line advertising and marketing to “active adults” encompassing a wide range of activities and locations previously thought of for the “youth” market. Conversely, with the delay in child bearing and child rearing by some generations, activities that were once thought of as for middle age or empty nesters can be remarketed to appeal to these groups as well. Some generations have decided to explore the world before settling down with children and a mortgage. All of these changes open up vast amounts of marketing opportunities to enterprising firms and individuals.
Marketing to one’s perception of “age” rather than to the physical definition of age is an exciting new arena for marketers. Con: Age and cohorts are more important than age differences. People still pass through life as part of a “group” and experience the newness of life through cohort experiences and relate to others within their identifiable group. Marketing to cohorts extends the ability of the marketer to capitalize on share emotions, experiences, trends, and fads that have or had made lasting impressions on the cohort. Technology has changed so much in he last few decades and has influenced subsequent generations about expectations and potential, that one must market to the cohorts in order to identify with their experiences. People within a particular cohort seek information for purchase decisions from influencers within their cohort. Marketers must identify these influencers and tailor messages that affect their review of products and gain favor with them. MARKETING SPOTLIGHT—Budweiser Discussion Questions (suggested responses): 1) What have been the key success factors for Anheuser-Busch? a. Decision to become a leader in mining customers’ buying patterns. . Timely data: getting information back from wholesalers and retailers on what is selling where and when. c. Creating BudNET and WEARS. d. Tracking consumer-purchasing behavior using IRI data. e. Using store data, creating targeted marketing material. f. Demographic data allows them to know what products sell better in each location. g. Use of the EIA to guide product assortment decisions 2) Where is Anheuser-Busch vulnerable? a. Changes in governmental regulations concerning alcoholic products b. Changes in diet preferences/consumer preferences for alcoholic products c.
Competitive activities that mimic or improve upon technological processes 3) What should it watch out for? a. Identifying trends and megatrends in the alcoholic industry b. Monitor the six major environmental forces of: (i) Demographic. (ii) Economic. (iii) Social-cultural . (iv) Natural. (v) Technological. (vi) Political-legal. 4) What recommendations would you make to senior marketing executives going forward? a. Understand people’s views of themselves, others, organizations, society, nature, and the universe as it pertains to alcoholic consumption. . Continue to present a positive corporate education awareness program regarding responsibility toward alcoholic consumption. 5) What should they be sure to do with their marketing? a. Work closely with local and national governments, pressure groups and other environmental arenas to position the company as being socially responsible to these concerns. b. Continue to present their advertising showing alcoholic consumption in a responsible manner. DETAILED CHAPTER OUTLINE Q1. what are the components of a modern marketing information system?
ANSWER: The major responsibility for identifying significant marketplace changes falls to the company’s marketers. More than any other group in the company, they must be the trend trackers and opportunity seekers. Although every manager in an organization needs to observe the outside environment, marketers have the following advantages: A) They have disciplined methods for collecting information. B) Additionally, they spend more time interacting with customers and observing competition. C) Some firms have developed marketing information systems that provide management with rich detail about buyer wants, preferences, and behavior.
D) Marketers also have extensive information about how consumption patterns vary across countries. E) Many business firms are not sophisticated about gathering information. 1) Many do not have a marketing research department. F) Every firm must organize and distribute a continuous flow of information to its marketing manager. G) A marketing information system (MIS) consists of: 1) People. 2) Equipment. 3) Procedures to: a. Gather. b. Sort. c. Analyze. d. Evaluate. e. Distribute needed,timely, and accurate info to marketing decision makers. H) A marketing information system is developed from: 1) Internal company records. ) Marketing intelligence activities. 3) Marketing research. I) The company’s marketing information system should be a cross between what managers think they need, what managers really need, and what is economically feasible. Q2. What is involved in a marketing intelligence system? And what are the useful internal records? ANSWER:Internal Records and Marketing Intelligence Marketing mangers rely on internal reports on orders, prices, costs, inventory levels, receivables, payables, and so on. By analyzing this information, they can spot important opportunities and problems.
Order-to-Payment Cycle The heart of the internal records systems is the order-to-payment cycle. A) Sales representatives, dealers, and customers send orders to the firm. B) The sales department prepares invoices and transmits copies to various departments. C) Shipped items are accompanied by shipping and billing documents that are sent to the various departments. D) Today companies need to perform these steps quickly and accurately. E) An increasing number of companies are using the Internet and extranets to improve the speed, accuracy, and efficiency of the order-to-payment cycle.
Sales Information Systems Marketing managers need timely and accurate reports on current sales. A) Companies must carefully interpret the sales data so as not to get the wrong signals. B) Technological gadgets are revolutionizing sales information systems and allowing representatives to have up-to-the second information. Databases, Data Warehouses, and Data-Mining Today companies organize information in databases—customer databases, product databases, salesperson databases—and then combine data from the different databases. A) Companies warehouse these data for easy accessibly to decision makers.
B) By hiring analysts skilled in sophisticated statistical methods, companies can “mine” the data and garner fresh insights into: 1) Neglected customer segments. 2) Recent customer trends. 3) Other useful information. C) The customer information can be cross-tabbed with product and salesperson information to yield still deeper insights. Marketing Intelligence System The internal records systems supplies results data, but the marketing intelligence system supplies happenings data. A) A marketing intelligence system is a set of procedures and sources managers use to obtain everyday information about developments in the marketing environment.
B) Marketing managers collect marketing intelligence by: 1) Reading books, newspapers, and trade publications. 2) Talking to customers, suppliers, and distributors. 3) Meeting with other company managers. C) A company can take several steps to improve the quality of its marketing intelligence: 1) A company can train and motivate the sales force to sport and report new developments. 2) A company can motivate distributors, retailers, and other intermediaries to pass along important intelligence. 3) A company can network externally. ) A company can set up a customer advisory panel. 5) A company can take advantage of government data resources. 6) A company can purchase information from outside suppliers. A company can use online customer feedback systems to collect competitive intelligence. Q3. What are the key methods for tracking and identifying opportunities in the macro-environment? ANSWER:ANALYZING THE MACROENVIRONMENT Successful companies recognize and respond profitably to unmet needs and trends. Needs and Trends Enterprising individuals and companies manage to create new solutions to unmet needs.
A) A fad is “unpredictable, short-lived, and without social, economic, and political significance. ” B) A trend is a direction or sequence of events that has some momentum and durability. C) Trends are more predictable and durable than fads. 1) A trend reveals the shape of the future and provides many opportunities. D) Megatrends have been described as “large social, economic, political, and technological changes [that] are slow to form, and once in place, they influence us for some time—between seven and ten years, or longer. E) Trends and megatrends merit close attention.
F) To help marketers’ spot cultural shifts that might bring new opportunities or threats, several firms offer social-cultural forecasts. Identifying the Major Forces Companies and their suppliers, marketing intermediaries, customers, competitors, and publics, all operate in an macroenvironment of forces and trends that shape opportunities and pose threats. These forces represent “noncontrollables” to which the company must monitor and respond. A) Within the rapidly changing global picture, the firm must monitor six major forces: 1) Demographic. 2) Economic. 3) Social-cultural. 4) Natural. ) Technological. 6) Political-legal. B) Marketers must pay attention to the interactions of these forces, as these will lead to new opportunities and threats. DEMOGRAPHIC ENVIRONMENT Demographic trends are highly reliable for the short and intermediate run. A) The main demographic force that marketers monitor is population because people make up markets. B) Marketers are keenly interested in the: 1) Size and growth rate of populations in cities, regions, and nations. 2) Age distribution and ethnic mix. 3) Educational levels. 4) Household patterns. 5) Regional characteristics and movements.
Worldwide Population Growth The world’s population is showing explosive growth: It totaled 6. 1 billion in 2000 and will exceed 7. 9 billion by the year 2025. A) The population explosion has been a source of major concern. B) Explosive population growth has major implications for business. C) A growing population does not mean growing markets unless these markets have sufficient purchasing power. Economic Environment A) Markets require purchasing power as well as people. B) The available purchasing power in an economy depends upon: 1) Current income. 2) Prices. 3) Savings. 4) Debt. 5) Credit availability.
Marketers must pay careful attention to trends affecting purchasing power because they can have a strong impact on business, especially for companies whose products are geared to high-income and price-sensitive consumers. Population Age Mix A) National populations vary in their age mix. B) There is a global trend toward an aging population. Social-Cultural Environment Purchasing power is directed toward certain goods and services and away from others according to people’s tastes and preferences. A) Society shapes the beliefs, values, and norms that largely define these tastes and preferences.
B) People absorb a worldview that defines their relationships to themselves, others, organizations, society, nature, and to the universe. 1) Views of themselves, people vary in the relative emphasis they place on selfgratification. 2) View of others, people are concerned about the homeless, crime and victims, and other social problems. 3) Views of organizations, people vary in their attitudes toward corporations, government agencies, trade unions, and other organizations. 4) Views of society, people vary in their attitudes toward their society. 5) View of nature, people vary in their attitudes toward nature. ) View of the universe, people vary in their beliefs about the origin of the universe and their place in it. C) Every trend seems to breed a countertrend. D) Here are some other cultural characteristics of interest to marketers: 1) The persistence of core cultural values. 2) The existence of subcultures. 3) Shifts of values through time. Natural Environment A) The deterioration of the environment is a major global concern. B) In many world cities, air and water pollution have reached dangerous levels. C) There is great concern about “greenhouse gases. ” D) New regulations have hit certain industries very hard.
E) Consumers often appear conflicted about the natural environment. F) Marketers need to be aware of the treats and opportunities associated with four trends in the natural environment: 1) Shortage of raw materials, especially, water. 2) Increased cost of energy. 3) Increased pollution levels. 4) Changing role of governments. Technological Environment A) One of the most dramatic forces shaping peoples’ lives is technology. B) Every new technology is a force for “creative destruction. ” C) The economy’s growth rate is affected by how many major new technologies are discovered.
D) New technologies also creates major long-run consequences that are not always foreseeable. E) The marketer should monitor the following trends in technology: 1) Pace of change. 2) Opportunities for innovation. 3) Varying R&D budgets. 4) Increased regulation. A population can be subdivided into six age groups: 1) Preschool 2) School-age children 3) Teens 4) Young adults age 25 to 40 5) Middle-aged adults age 40 to 65 6) Older adults ages 65 and up C) For marketers, the most populous age groups shape the marketing environment. Ethnic and Other Markets
Countries vary in ethnic and racial makeup. A) A frequently noted megatrend, the increase in the percentage of Hispanics in the total population, represents a major shift in the nation’s center of gravity. B) Ethnic groups have certain specific wants and buying habits. C) Marketers must be careful not to overgeneralize about ethnic groups. D) Within each ethnic group are consumers who are quite different from each other. E) Diversity goes beyond ethnic and racial markets. 1) More than 50 million Americans have disabilities and they constitute a market for home delivery products.
Educational Groups A) The population in any society falls into five educational groups: 1) Illiterates. 2) High school dropouts. 3) High school degrees. 4) College degrees. 5) Professional degrees. Household Patterns A) The “traditional household” consists of a husband, wife, and children (sometimes grandparents). B) In the United States today, one out of eight households is “diverse” or “nontraditional” and includes: 1) Single live-alones. 2) Adult live-togethers of one or both sexes. 3) Single-parent families. 4) Childless married couples. 5) Empty-nesters.
C) Each group has a distinctive set of needs and buying habits. D) Marketers must increasingly consider the special needs of nontraditional households, because they are now growing more rapidly than traditional households E) Single does not necessarily mean “alone,” “friends are the new family. ” F) “Neo tribes” of twenty-somethings living communally. G) This emphasis on friendship can influence marketers in everything from whom they target to how they craft their marketing messages. H) The gay market is a particularly lucrative segment. Geographical Shifts in Population
This is a period of great migratory movements between and within countries. Forwardlooking companies and entrepreneurs are taking advantage of the growth in immigrant populations and marketing wares specifically to these new members of the population. A) Within countries, population movement occurs as people migrate from rural to urban areas, and then to suburban areas. B) Location makes a difference in goods and service preferences. C) There are also regional differences. D) Suburban growth and a disdain for commuting has helped those business that cater to the growing SOHO (small office-home office) segment.
E) Marketers also look at where consumers are flocking. CHAPTER 4:- CONDUCTING MARKET RESEARCH AND FORECATING DEMAND MARKETING DEBATE—What Is the Best Type of Marketing Research? Many marketing researchers have their favorite research approaches or techniques, although different researchers often have different preferences. Some researchers maintain that the only way to really learn about consumers or brands is through indepth, qualitative research. Others contend that the only legitimate and defensible form of marketing research involves quantitative measures.
Take a position: Marketing research should be quantitative versus marketing research should be qualitative. Suggested Response Pro: People are complex in their buying habits and purchase decision-making. Consumers, do not always have the capacity to voice, or understand how they decide to purchase a particular product or service. As a result, good marketing research should delve into the consumers’ “purchase decision trees” to understand hidden motivations and influences. Good qualitative research may undercover hidden purchase agendas, hidden uses for the product, or hidden opportunities for new, yet undeveloped products.
Because of the freedom afforded to both researchers in their probes and consumers in their responses, qualitative research can often be a useful step in exploring consumers’ brand and product perceptions. The drawbacks of quantitative research, which include selection bias, response bias, and non-response, will always allow this type of research to be criticized for such shortcomings and their results discounted. Qualitative research, although having its own sets of disclaimers, closely describes the actions of consumers—that is what marketing is all about in the first place—to get someone to purchase something.
Con: Quantitative research is the only accepted method of marketing research that can be scientifically defended. Quantitative research methods, techniques, and modeling have advanced substantially in recent years. Along with these advancements in techniques, quantitative research has improved in its predictability and accuracy due to more sophisticated mathematical processes. Quantitative research is also the most economically and timely research available today. With quantitative research, there is secondary data that can quickly be accessed further reducing time and cost considerations.
As the world increases in its “speed of information” and “speed of living,” quick, accurate information becomes essential for a marketer to possess. 1 With the proper framing of the research assignment and the proper set of specific research objectives, quantitative research is the most efficient method to gather the necessary information in the shortest time for the lowest cost. MARKETING SPOTLIGHT—Sony Discussion Questions: 1) What have been the key success factors for SONY? a. SONY has three types of creativity: to make inventions, creativity in product planning and production, and creativity in marketing. . Creativity in marketing means deep insight into its customers. c. SONY also carefully measures the effectiveness of each campaign by pretesting these campaigns. d. Sony’s Gen Y youth marketing efforts with its online program promoting the Internet usage and tracking the respondents “click-throughs. ” 2) Where is SONY vulnerable? a. In its belief that the next wave of consumer electronics will come from the integration of numerous devices networked and linked together. b. A lapse of marketing research caused by corporate changes or financial setbacks. c. Corporate complacency due to success. ) What should it watch out for? a. The effectiveness of its marketing research in identifying emerging trends. b. The temptation to expand into other consumer products outside of its core competencies. 4) What recommendations would you make to senior marketing executives going forward? a. Accept your competencies, accept your limitations, and capitalize on your strengths. b. Continue to believe that marketing research is the underlying foundation of your product development processes and marketing successes. 5) What should they be sure to do with their marketing? a.
Continue to target their marketing to identify those segments of the total market that are receptive to new and innovative products and ideas. b. Concentrate on the next generation of consumers—the Millenniums and conduct research into what type of consumers this group is and will become. 2 DETAILED CHAPTER OUTLINE Q1. What constitute good marketing research? ANSWER:Marketing managers often commission formal marketing studies of specific problems and opportunities. A) They may request a(n): 1) Market survey. 2) Product-preference test. 3) Sales forecast by region. ) Advertising evaluation. B) It is the job of the marketing researcher to produce insight into the customer’s attitudes and buying behavior. C) We define marketing research as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. D) Most large companies have marketing research departments. E) At smaller companies, marketing research is often carried out by everyone in the company. F) Companies normally budget marketing research at one to two percent of company sales.
G) Marketing research firms fall into three categories: 1) Syndicated-service research firms. 2) Custom marketing research firms. 3) Specialty-line marketing research firms. H) Small companies can hire the services of a marketing research firm or conduct research in creative and affordable ways, such as: 1) Engaging students or professors to design and carry out projects. 2) Using the Internet. 3) Checking out rivals. Most companies use a combination of marketing research resources to study industries, competitors, audiences, and channel strategies. Q2. What are good metrics for measuring marketing productivity? ANSWER: An important task of marketing research is to assess the efficiency and effectiveness of marketing activities. A) Marketers, increasingly, are being held accountable for their investments and must be able to justify marketing expenditures to senior management. B) Marketing research can help address this increased need for accountability. C) Two complementary approaches to measure marketing productivity are: 1) Marketing metrics to assess marketing effects. ) Marketing mix modeling to estimate causal relationships and how marketing activities affects outcomes. Marketing Metrics Marketing metrics is a set of measures that help firms to quantify, compare, and interpret marketing performance. A) Marketing metrics can be used by brand managers to design marketing programs. B) Marketing metrics can be used by senior managers to decide on financial allocations. C) Many marketing metrics relate to customer-level concerns such as their attitudes and behavior. D) Others relate to brand-level concerns such as market share, relative price premium, or profitability.
E) Firms are also employing organizational processes and systems to make sure that the value of all of these different metrics is maximized by the firm. F) A summary set of relevant internal and external measures can be assembled in a marketing dashboard for synthesis and interpretation. G) As input to the marketing dashboard, companies can prepare two market-based scorecards that reflect performance and provide possible early warning signals. H) A customer-performance scorecard records how well the company is doing year after year on such customer-based measures. ) Norms should be set for each measure. I) The second measure is called a stakeholder-performance scorecard. 1) Again, norms should be set for each measure and management should take action when performance falls outside of these norms. 4 Q3. How can marketers assess their return on investment of marketing expenditures? ANSWER:Sales Analysis Sales analysis consists of measuring and evaluating actual sales in relation to goals. Two specific tools are used in sales analysis. A) Sales-variance analysis measures the relative contribution of different factors to a gap in sales performance.
Microsales analysis looks at specific products, territories, and so forth that failed to produce expected sales. Market-Share Analysis Company sales do not reveal how well the company is performing relative to competitors. For this purpose, management needs to track its market share. Market share can be measured in three ways: A) Overall market share is the company’s sales expressed as a percentage of total market share. B) Served market share is its sales expressed as a percentage of the total sales to its served market. ) Its served market is all the buyers who are able and willing to buy the product. 2) Served market share is always larger than overall market share. Relative market share can be expressed as market share in relation to its largest competitor. C) A useful way to analyze market-share movement is in terms of four components: Overall Market Share Where: 1) Customer penetration is the percentage of all customers who buy from the company. 2) Customer loyalty is the purchases from the company by its customers expressed as a percentage of their total purchases from all suppliers of the same products. ) Customer selectivity is the size of the average customer purchase from the company expressed as a percentage of the size of the average customer purchase from an average company. = Customer X Customer X Customer X Price penetration loyalty selectivity selectivity 5 4) Price selectivity is the average price charged by the company expressed as a percentage of the average price charged by all companies. Marketing Expense-to-Sales Analysis Annual plan control requires making sure that the company is not overspending to achieve its goals. A) The key ratio to watch is marketing expense-to-sales ratio.
B) The period-to-period fluctuations in each ratio can be tracked on a control chart. C) The behavior of successive observations even within the upper and lower control limits should be watched. D) Note that in Figure 4. 2 the level of expense-to-sales ratio rose steadily from the ninth period onward. Profitability Analysis A) Companies should measure the profitability of: 1) Products. 2) Territories. 3) Customer groups. 4) Segments. 5) Trade channels. 6) Order sizes. This information can help management determine whether any products or marketing activities should be expanded, reduced, or eliminated.
Marketing-Profitability Analysis Step 1: Identifying Functional Expenses A) Assume that the expenses listed in Table 4. 6 are incurred to sell the product, advertise it, pack and deliver it, and bill and collect for it. B) The first task is to measure how much of each expense was incurred in each activity. Step 2: Assigning Functional Expenses to Marketing Entities A) The next task is to measure how much functional expense was associated with selling through each type of channel. B) Advertising expense can be averaged across all one hundred ads. 6
C) Packaging and delivery expense is allocated according to the number of orders placed by each type of channel, the same for billing, and collection expenses. Step 3: Preparing a Profit and Loss Statement for Each Marketing Entity A profit-and-loss statement can now be prepared for each type of channel. Table 4. 9 shows that the firm is losing money through the garden supply stores and is making almost all of its money from the department stores. Q4. How can companies more accurately measure and forecast demand? ANSWER One major reason for undertaking marketing research is to identify market opportunities.
Once the research is complete, the company must measure and forecast the size, growth, and profit potential of each market opportunity. A) Sales forecasts are used by finance to raise the needed cash for investment and operations. B) By the manufacturing department to establish capacity and output levels. C) By purchasing to acquire the right amount of supplies. D) By human resources to hire the needed number of workers. E) Sales forecasts are based on estimates of demand. Measures of Market Demand Companies can prepare as many as 90 different types of demand estimates.
A) Demand can be measured for six different product levels. B) Five different space levels. C) Three different time levels. D) Each demand measure serves a specific purpose. E) Forecasts also depend on which type of market is being considered. F) The size of the market hinges on the number of buyers who might exist for a particular market offer. G) The potential market is the set of consumers who profess a sufficient level of interest in a market offer. 7 H) The available market is the set of consumers who have interest, income, and access to a particular offer.
I) The target market is the part of the qualified available market the company decides to pursue. J) The penetrated market is the set of consumers who are buying the company’s product. K) These definitions are a useful tool for market planning. 1) If the company is not satisfied with its current sales it can: a. Attract a larger percentage of buyers from its target market. b. Lower the qualifications of potential buyers. c. Expand its available market by opening distribution elsewhere or lower its price. d. Reposition itself in the minds of its customers A Vocabulary for Demand Measurement
The major concepts in demand measurement are market demand and company demand. Within each, we distinguish among a demand function, a sales forecast, and potential. Market Demand The marketer’s first step in evaluating marketing opportunities is to estimate total market demand. A) Market demand for a product is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a defined marketing environment, under a defined marketing program. B) Market demand is not a fixed number, but rather a function of the stated conditions.
For this reason, it can be called the market demand function. C) Some base sales (called the market minimum) would take place without any demandstimulating expenditures. D) Marketing expenditures beyond a certain level would not stimulate much further demand, thus suggesting an upper limit to market demand called the market potential. D) The distance between the market minimum and the market potential shows the overall marketing sensitivity of demand. E) An expansible market is very much affected in its total size by the level of industry marketing expenditures.
F) A non-expansible market is not much affected by the level of marketing expenditures. 8 1) Organizations selling in an non-expansible market must accept the market’s size and direct efforts to winning a larger market share for its products. G) The comparison of the current level of market demand to the potential demand level is called the market penetration index. 1) A low market penetration index indicates substantial growth potential for the firm. 2) A high market penetration index suggests that there will be increased costs in attracting the few remaining prospects.
Market Forecast Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the market forecast. Market Potential The market forecast shows expected market demand, not maximum market demand. For the latter, we have to visualize the level of market demand resulting from a “very high” level of industry marketing expenditure. A) Market potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. CHAPTER 5:- CREATING CUSTOMER VALUE, SATISFACTION, AND LOYALTY MARKETING DEBATE—Online Versus Off-Line Privacy As more and more firms practice relationship marketing and develop customer databases, privacy issues are emerging as an important topic. Consumers and public interest groups are scrutinizing- and sometimes criticizing the privacy policies of firms. Concerns are also being raised about potential theft of online credit card information or other potentially sensitive or confidential financial information.
Others maintain that the online privacy fears are unfounded and that security issues are every bit as much a concern in the off-line world. They argue that the opportunity to steal information exists virtually everywhere and that it is up to the consumer to protect his or her interests. Take a position: (1) Privacy is a bigger issue in the online world than the off-line world versus privacy is no different online than off-line. (2) Consumers on the whole receive more benefit than risk from marketers knowing their personal information. 1) Pro: Privacy is a larger issue in the online world than the off-line world simply because the information has a greater opportunity to be exposed to more people than off-line transactions. The transmission of private information electronically travels through electronic channels each of which presents opportunity for misdirection or computer “hacking” activities. In many of these cases, the person, or firm transmitting this information, redirecting this information receiving this information and storing this information is unknown to the consumer.
In the offline world, the consumer has the opportunity to know the company, personnel, or firm receiving this information and has the opportunity to accept or decline sharing their personal information. Con: Transmission of personal information in the off-line world still travels electronically, in many cases. The act of paying with a credit card still involves the transmission of data electronically at some point in the transaction. What differs is the fact that the consumer is initially interfacing with a person (or firm).
Although this does not mitigate the risks involved to the consumer, it does present some concrete knowledge of the people, or firm involved in the transaction. (2) Pro: With an active CRM program in place by a firm, consumers can receive more benefit than risks with the marketer knowing their personal information. A firm with an active CRM program can and does allow the consumer to move through the Customer Development Process (from suspects to partners) thus establishing strong ties to the firm and the reception of increased specially designed promotional and service programs unavailable to the general public.
This is seen in frequent flyer discounts, member discount, special shopping days, and advance notices of new products, promotions, and reminders for service opportunities (oil change reminders, medical appointment reminders, and others). In today’s fast paced world, consumers stand to benefit from such attention to detail. Con: In current society, the dissemination of one’s personal information is scary and a concern to the public in general as opportunities for misuse of this information abound. The public does not like intrusions into their personal lives, unless invited.
Consumers do not feel that the benefits of this sharing of information outweigh the cost of the lost of privacy. The recent “Do Not Call Registry” established to limit the telemarketing industry is an example of consumers revolting in opposition. MARKETING DISCUSSION Consider the lifetime value of customers (CLV). Choose a business and show how you would go about developing a quantitative formulation that captures the concept. How would organizations change if they totally embraced the customer equity concept and maximized CLV?
Suggested Response A) CLV describes the net present value of the stream of future profits expected over the customers’ lifetime purchases. Each student’s example will differ but the main tenets of each report should include the following: 1) Add: a) Profit from a sale (dollar or percent). b) Number of sales per customer per year. c) Average age of a customer. d) Average expected lifespan of a customer. 2) Subtract: a) Appropriate discount rate. b) Costs of attracting one customer. c) Selling one customer. d) Servicing one customer.
B) Organizations would change by beginning to take a long-term perspective rather than a short-term (quarter-to-quarter view). No longer viewing a customer as a “transaction” but rather as a “lifetime value” solidifies and demonstrates the impact that a single consumer has to a firm in a language they understand—dollars. Firms would begin to customize offerings and messages to each customer, ensure that retention strategies are in place, differentiate customers in terms of needs and value to the company, and build stronger relationships with key customers.
Because of a change in the loci of focus for the firm, strategies, and actions based upon which would provide the best return on its marketing investments would be implemented. MARKETING SPOTLIGHT—Dell Discussion Questions: 1) What have been the key success factors for Dell? a. Dell information about its customers. b. Its production process. c. JIT inventory practices. 2) Where is Dell vulnerable? a. Changes in usage of computers. b. Changes in technology that makes the personal computer obsolete. c. A lapse of marketing research caused by corporate changes or financial setbacks. ) What should it watch out for? a. Corporate complacency due to success. b. The effectiveness of its marketing research in identifying emerging trends. c. The temptation to expand into other consumer products outside of its core competencies. 4) What recommendations would you make to senior marketing executives going forward? a. Accept your competencies, accept your limitations, and capitalize on your strengths. b. Continue to believe that marketing research is the underlying foundation of your product development processes and marketing successes. 5) What should they be sure to do with their marketing? . Continue to target their marketing to identify those segments of the total market that are receptive to new and innovative products and ideas. DETAILED CHAPTER OUTLINE Q1. What are customer value, satisfaction, and loyalty, and how can companies deliver them? ANSWER Today, companies face their toughest competition ever. The cornerstone of a wellconceived marketing orientation is strong customer relationships. Marketers must connect with customers—informing, engaging, and energizing them in the process. Customer Perceived Value A) Customers tend to be value-maximizers.
B) Customers estimate which offer will deliver the most perceived value and act on it. C) Customer perceived value (CPV) is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. D) Total customer value is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering. E) Total customer cost is the bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychic costs.
F) Customer perceived value is thus based on the difference between what the customer gets and what he or she gives for different possible choices Applying Value Concepts A) The customer adds up values from the four sources for Caterpillar—product, services, personnel, and image and compares them to Komatsu. B) The buyer evaluates these elements together with the monetary cost to form a total customer cost. C) The buyer will choose whichever source he thinks delivers the highest perceived customer value. Delivering High Customer Value
A) Loyalty is defined as “a deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. ” B) The key to generating high customer loyalty is to deliver high customer value. C) The value proposition consists of the whole cluster of benefits the company promises to deliver, it is more than the core positioning of the offering. D) Whether the promise is kept depends on the company’s ability to manage its valuedelivery system.
E) The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. F) Whether customers will actually receive, the promised value proposition will depend upon the marketer’s ability to influence various core business processes. Customer Expectations A) How do buyers form their expectations? 1) From past buying experiences. 2) Friends and associates advice. 3) Marketers’ and competitors’ information and promises. A customer’s decision to be loyal or to defect is the sum of many small encounters with the company. Companies need to create a “branded ustomer experience. ” Product and Service Quality Satisfaction will also depend on product and service quality. Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. A) We can say that a seller has delivered quality whenever the seller’s product or service meets or exceeds the customers’ expectations. B) Distinguish between conformance quality and performance quality. C) Total quality is the key to value creation and customer satisfaction. D) Marketing managers have two responsibilities in a quality-centered company. ) First, they must participate in formulating strategies and policies to help the company win through total quality excellence. Second, they must deliver marketing quality alongside production quality. Q2. What is the lifetime value of customer? ANSWER Customer Lifetime Value (CLV) describes the net present value of the stream of future profits expected over the customer’s lifetime purchases. CLV calculations provide a formal quantitative framework for planning customer investment and helps marketers to adopt a long-term perspective. Q3. How can companies both attract and retain customers?
ANSWER Attracting, Retaining, and Growing Customers A) Customers are becoming harder to please. B) Companies seeking to expand profits and sales have to spend considerable time and resources searching for new customers. 1) Suspects are people or organizations that might conceivably have an interest in buying but many not have the means or real intention to buy. 2) Prospects—customers with the motivation, ability, and opportunity to make a purchase 3) Customer churn—high customer defection 4) Two main ways to strengthen customer retention: a. Erect high switching costs. b.
Deliver high customer satisfaction. C) Most companies now recognize the importance of satisfying and retaining customers. D) Satisfied customers constitute the company’s customer relationship capital. 1) Acquiring new customers cost five times more than the costs involved in satisfying and retaining current customers. 2) The average company loses 10 percent of its customers each year. 3) A 5 percent reduction in customer defection rate can increase profits by 25 percent to 85 percent depending on the industry. 4) Customer profit rate tends to increase over the life of the retained customer.
E) The starting point is everyone who might conceivably buy the product or service (suspects). 1) Prospects. 2) First-time customers. 3) Repeat customers. 4) Clients—people whom the company treats very specially and knowledgeably. 5) Members. 6) Advocates—customers who enthusiastically recommend the company. 7) Partners. F) Markets can be characterized by long-term buying dynamics and how easily customers can enter and leave. 1) Permanent capture markets—once a customer always a customer. 2) Simple retention markets—customers lost after each period. Customer migration markets—customers can leave and come back.. Q4.
How can companies cultivate strong customer relationship? ANSWER Customer Relationship Management (CRM) Customer relationship management (CRM) is the process of managing detailed information about individual customers and carefully managing all customer “touch points” to maximize customer loyalty. A) A customer “touch point” is any occasion on which a customer encounters the brand and product—from actual experience to personal or mass communications to casual observation. B) Customer relationship management enables companies to provide excellent real-time customer service through the effective use of individual account information.
C) Peppers and Rogers outlined a four-step framework for one-to-one marketing that can be adapted to CRM marketing: 1) Identify your prospects and customers. 2) Differentiate customers in terms of: (1) their needs and (2) their value to your company. 3) Interact with individual customers to improve your knowledge about individual needs and to build stronger relationships. 4) Customize products, services, and messages to each customer. D) A key driver of shareholder value is the aggregate value of the customer base. Winning companies improve the value of their customer base by xcelling at strategies such as: 1) Reducing the rate of customer defection. 2) Increasing the longevity of the customer relationship. 3) Enhancing the growth potential of each customer through “share-of-wallet, crossselling, and up-selling. ” 4) Making low-profit customers more profitable or terminating them. 5) Focusing disproportionate effort on high-value customers. Q5. How can companies deliver total quality? ANSWER Total Quality Management A) Total quality management (TQM) is an organization-wide approach to continuously improve the quality of all the organization’s processes, products, and services.
B) Product and service quality, customer satisfaction, and company profitability are intimately connected. C) TQM ran into implementation problems as firms became overly focused on how they were doing business and not the why they were in business. Companies lost sight of consumer needs and wants. D) Companies are now concentrating efforts on “return on quality” or ROQ. E) ROQ advocates improving quality only on those dimensions that produce tangible customer benefits, lower costs, or increased sales. F) Marketers play several roles in helping their companies define and deliver high-quality goods and services to target customers. ) They bear the major responsibility for correctly identifying the customers’ needs and requirements. 2) They must communicate customer expectations properly to product designers. 3) They must check that customers’ orders are filled correctly and on time. 4) They must make sure that customers have received proper instructions, training, and technical assistance in the use of the product. 5) They must stay in touch with customers after the sale to ensure that they are satisfied and remain satisfied. 6) They must gather customer ideas for product and service improvements and convey them to the appropriate departments.
Q6. What is database marketing? ANSWER A) A customer database is an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable, for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. A) Database marketing is the process of building, maintaining, and using customer databases and other databases for the purpose of contacting, transacting, and building customer relationships. Customer Databases
A) Customer databases are not customer mailing lists. 1) A customer mailing list is simply a set of names, addresses, and telephone numbers. a. Ideally, a customer database contains the consumer’s past purchases, demographics, income, family members, psychographics, mediagraphics, and other useful information. 2) A business database would contain business customers’ past purchases, past volumes, prices, and profits, buyer team members’ names, and other useful information. Using the Database A) To identify prospects. B) To decide which customers should receive a particular offer.
C) To deepen customer loyalty. D) To reactivate customer purchases. E) To avoid serious customer mistakes. CHAPTER 6 :- ANALYZIMG CONSUMER MARKETS MARKETING DEBATE—Is Target Marketing Ever Bad? As marketers increasingly develop marketing programs tailored to certain target market segments, some critics have denounced these efforts as exploitative. For example, the preponderance of billboards advertising cigarettes, alcohol, and other voices in low-income urban areas is seen as taking advantage of a vulnerable market segment.
Critics can be especially harsh in evaluation marketing programs that target African Americans and other minority groups, claiming that they often employ cliched stereotypes and inappropriate depictions. Others counter with the point of view that targeting and positioning is critical to marketing and that these marketing programs are an attempt to be relevant to a certain consumer group. Take a position: Targeting minorities is exploitative versus targeting minorities is a sound business practice.
Suggested Responses: Pro: When marketers use their advance knowledge of specific target markets, such as minorities that preys upon the target market’s weaknesses and lack of information, then marketing can be said to be exploiting the said target market for gains. Marketers should always be aware that information is a powerful tool that has to be used responsibly and prudently. Products and services that cater to minorities that cause adverse health effects or pejorative social action(s) because of their usage need to be marketed in a socially responsible way.
Just because a marketer has information on the buying habits, social styles, motivation, perception, and purchase criteria specific to a target market does not automatically permit the marketer to use this information freely. Con: Marketers do not create social systems nor does marketing create social ills. Marketers cannot assume the responsibility for lack of personal choice, lack of information or knowledge, and the lack of personal responsibility. It is the role of marketing to deliver to the target market the goods and services they want and need.
Marketing is “amoral” in its delivery of information to target markets and the target markets must decide for themselves the use or non-use of the products marketed. Using advanced research methods to uncover motivation, purchase intent, post-purchase usage, and the like is sound business practice and the marketer owes its stakeholders the responsibility to use this information that increases sales. MARKETING SPOTLIGHT—Disney Discussion Questions Student answers may vary but all should include the following points: 1) What have been the key success factors for Disney? . Marketing family entertainment, products, and services targeted to specific age groups within the family. 2) Where is Disney vulnerable? a. Claims of exploitation of products to the very young, and uninformed consumers (children). 3) What should they watch out for? a. Societal changes regarding marketing to children as expressed by protest groups, churches, and local or national laws. 4) What recommendations would you make to their senior marketing executive going forward? a. Monitoring societal opinions regarding marketing to children. b.
Monitor the proliferation of Disney co-branding so as not to over saturate the brand’s exposure. 5) What should Disney be sure to do with its marketing? a. Continue to understand the culture of its target markets (especially the growing Hispanic community). b. Continue to understand consumer buying decision-making and consumer behavior. c. Continue to understand the buying processes of its target market(s) especially the post-purchase use and disposal of their products. DETAILED CHAPTER OUTLINE Q1. How do consumer characteristics influence buying behavior? ANSWER
A consumer’s buying behavior is influenced by cultural, social, and personal factors. Cultural factors exert the broadest and deepest influence. Cultural Factors Culture is the fundamental determinant of a persons’ wants and behaviors. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members. A) Subcultures include nationalities, religions, racial groups, and geographic regions. B) Multicultural marketing grew out of careful marketing research that revealed that different ethic and demographic niches did not always respond favorable to massmarket advertising.
C) Virtually all human societies exhibit social stratification. Social stratification sometimes takes the form of a caste system where members of different castes are reared for certain roles and cannot change their caste membership. D) One class depiction of social classes in the United States defined seven ascending Levels:1) Lower lowers. 2) Upper lowers. 3) Working class. 4) Middle class. 5) Upper middles. 6) Lower uppers. 7) Upper uppers. Social Factors In addition to cultural factors, a consumer’s behavior is influenced by such social factors as reference groups, family, and social roles and statuses.
A person’s reference groups consists of all the groups that have a direct (face-to-face) or indirect influence on his/her attitudes or behavior. A) People are significantly influenced by their reference groups in at least three ways: 1) Reference groups expose an individual to new behaviors and lifestyles, influencing attitudes and self-concept. 2) They create pressures for conformity that may affect actual product and brand choices. 3) People are also influenced by groups to which they do no belong: a. Aspirational groups are those a person hopes to join. b.
Dissociative groups are those whose values or behavior an individual rejects. The buyer evaluates these elements together with the monetary cost to form a total customer cost. B) Manufacturers of products and brands where group influence is strong must determine how to reach and influence opinion leaders in these reference groups. Family The family is the most important consumer-buying organization in society, and family members constitute the most influential primary reference group. A) We can distinguish between two families in the buyer’s life. 1) The family of orientation consists of parents and siblings. ) A more direct influence on everyday buying behavior is the family of procreation –namely, one’s spouse and children. Roles and Statuses A) A person participates in many groups and a person’s position in each group can be defined in terms of role and status. B) Each role carries a status. C) Marketers must be aware of the status symbol potential of products and brands. Personal Factors A buyer’s decisions are also influenced by personal characteristics. These include the buyer’s age and stage in the life cycle; occupation and economic circumstances; personality and self-concept; and lifestyle and values.
Age and Stage in the Life Cycle People buy different goods and services over a lifetime. A) Consumption is also shaped by the family life cycle. B) In addition, psychological life cycle stage may matter. Q2. what major psychological processes influence consumer responses to the marketing program? ANSWER Motivation: Freud, Maslow, Herzberg A person has many needs at any given time. Some needs are: A) Biogenic (arise from physiological states of tension such as hunger). B) Others are psychogenic and arise from a need for recognition, esteem, or belonging.
C) A motive is a need that is sufficiently pressing to drive the person to act. Freud’s Theory Sigmund Freud assumed that the psychological forces shaping people’s behavior are largely unconscious, and that a person cannot fully understand his or her own motivations. A) A technique called laddering can be used to trace a person’s motivations from the stated instrumental ones to the more terminal ones. B) Motivation researchers often collect “in-depth interviews” to uncover deeper motives triggered by a product. 1) Projective techniques such as word association, sentence completion, and roleplaying are used.
Customer 2 is mixed profitability. Maslow’s Theory Abraham Maslow sought to explain why people are driven by particular needs at particular times. A) Maslow’s answer is that human needs are arranged in a hierarchy, from the most pressing to the least pressing. B) In order of importance, they are: 1) Physiological needs. 2) Safety needs. 3) Social needs. 4) Esteem needs. 5) Self-actualization needs. Herzberg’s Theory Frederick Herzberg developed a two-factor theory that distinguishes dissatisfiers (factors that cause dissatisfaction) from satisfiers (factors that cause satisfaction).
The absence of dissatisfiers is not enough; satisfiers must be present to motivate a purchase. A) Herzberg’s theory has two implications: 1) Sellers should do their best to avoid dissatisfiers. 2) Sellers should identify the major satisfiers or motivators of purchase in the market and supply them. These satisfiers will make the major difference as to which brand the customer buys. Perception How the motivated person actually acts is influenced by his or her view or perception of the situation. Perception is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world.
Selective Attention It has been estimated that a person is exposed to over 1,500 ads or brand communications a day. Because a person cannot possibly attend to all of these, most stimuli will be screened out—a process called selective attention. Selective attention means that marketers have to work hard to attract consumers’ notice. Selective Distortion Selective distortion is the tendency to interpret information in a way that will fit our preconceptions. Consumers will often distort information to be consistent with prior brands and product beliefs. Selective Retention
People will fail to register much information to which they are exposed in memory, but will tend to retain information that supports their attitudes and beliefs. Because of selective retention, we are likely to remember good points about a product we like and forget good points about competing products. Q3. How does consumers make purchasing decision? ANSWER Problem Recognition The buying process starts when the buyer recognizes a problem or need. Information Search A) An aroused consumer will be inclined to search for more information. We can distinguish between two types of arousal.
B) The most effective information often comes from personal sources or public sources that are independent authorities. C) The Internet has changed information search. Most consumers are hybrid consumers Evaluation of Alternatives No single process is used by all consumers or by one consumer in all buying situations. The most current models see the process as cognitively orientated. A) First, the consumer is trying to satisfy a need. B) Second, the consumer is looking for certain benefits from the product solution. C) Third, the consumer sees each product as a bundle of attributes with varying