Creating Value for Customers Marketing Creating Value for Customers Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1 1

Marketing: Creating Value for Customers Chapter 1 Marketing: Creating Value for Customers Gilbert A. Churchill, Jr. J. Paul Peter 2 2 2

Slide 1-1 What is Marketing 1948 AMA 1985 AMA Marketing is the performance of business activities directed towards, and incident to, the flow of goods and services from the producer to consumer or user. 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. 2 3 3 3

Necessary Conditions for Exchange Slide 1-2 Necessary Conditions for Exchange Ability to Communicate Offer At Least Two Parties Exchange Process Freedom to Accept or Reject Desire to Deal With Other Party The interchange of something of value between parties 9 9 9

Importance of Marketing Slide 1-3 Importance of Marketing Distribution Selling Expense Packaging Research and Development Communications Raw Materials and Production Entry level salaries range between $30,000 to $50,000

Major Types of Marketing Slide 1-4 Major Types of Marketing Table 1.1 TYPE DESCRIPTION EXAMPLE Product Marketing designed to create exchange for tangible products Marketing designed to create exchanges for intangible products Marketing designed to create favorable actions toward persons Marketing designed to attract people to places Marketing designed to create support for ideas or issues or to get people to change socially undesirable behaviors Marketing designed to attract donors, members, participants or volunteers Strategies to sell Gateway computers Strategies by Hertz to rent cars to travelers Strategies to get votes for Bill Clinton Strategies to get people to vacation in Puerto Rico Strategies to get people to stop using illicit drugs Strategies to increase membership in the National Rifle Association Service Person Place Cause Organization 2 3 3 3

Levels of Marketing Analysis Slide 1-5 Levels of Marketing Analysis Macromarketing The study of marketing processes, activities, institutions, and results at a societal level. Social responsibility Business ethics Micromarketing The study of marketing processes and activities at organizational, product, or brand levels. Product development Product distribution Product pricing

Marketing Management Philosophies Slide 1-6 Marketing Management Philosophies Table 1.1 TYPE DESCRIPTION EXAMPLE Production Focus on efficiency of internal operations (not wants and needs) Focus on aggressive selling techniques for overcoming customer resistance Focus on satisfying customer needs and wants, long-term profitability, and integrating all organizational functions while achieving organizational objectives. Focus on developing and delivering superior value to customers as a way to achieve organizational objectives. Make the best black car you can and people will buy it You don’t like the black car? I’ll throw in a free radio What type of car do you want? You will get a 5 year 100,000 mile warranty. This car is better than the one made 3 years ago. Sales Marketing Value 2 3 3 3

Stakeholders in Marketing Activities Slide 1-7 Stakeholders in Marketing Activities Figure 1.1 at Society Large Suppliers Competitors Resellers Organizational Activities Customers Agencies Govt. Marketing Activities Owners Employees Lenders Special Interest Groups Local Communities 5 4 4 4

Creating Value for Customers Slide 1-8 Creating Value for Customers Figure 1.3 6 5 5 5

The Consequences of Superior Customer Value Slide 1-9 The Consequences of Superior Customer Value Figure 1.4 Superior Customer Value Customer Satisfaction and Delight Customer Loyalty Long Term Profitable Relationships 7 6 6 6

Transactional vs Relationship Marketing Slide 1-10 Transactional vs Relationship Marketing Transactional Marketing Strategy that focus on attracting new customers individual isolated exchanges making the sale Relationship Marketing Strategy that entails forging long-term partnerships with customers offering value providing satisfaction

Slide 1-11 Marketing Management Figure 1-5 Implement and control Marketing Activities Develop Marketing Plan and Strategies Understanding Customers and Markets Developing Marketing Mix The process of setting marketing goals for an organization and planning, implementing, and controlling strategies to meet them. 7 6 6 6

Marketing Plan Executive Summary Introduction Situation Analysis Slide 1-12 Marketing Plan Executive Summary Introduction Situation Analysis Competitive Analysis Marketing Planning Implementation and Control Summary Appendix References

Target Market Target Market Slide 1-13 Target Market Target Market The portion of a market that an organization attempts to serve with its marketing mix. The group most likely to buy a firm’s product 7 7 7

Marketing Mix Four P’s Product Price Placement Promotion Slide 1-14 Marketing Mix Product Price Four P’s Placement Promotion The strategic tools a firm uses to create value for customers and achieve organizational objectives. Elements created by management to satisfy mutually satisfying exchanges. 8 8 8

Marketing Mix - Product Slide 1-15 Marketing Mix - Product Product Price Target Market Placement Promotion Something offered by marketers to customers for exchange. It may be a good, service, or an idea. 9 9 9

Marketing Mix - Price Target Market Product Price Placement Promotion Slide 1-16 Marketing Mix - Price Product Price Target Market Placement Promotion The amount of money or other resources required to exchange for goods and services. Sometimes called rent, fee, tuition, toll, etc. 10 10 10

Marketing Mix - Placement Slide 1-17 Marketing Mix - Placement Product Price Target Market Placement Promotion The channels of distribution used to get products and services to market. Including wholesalers and retailers. 11 11 11

Marketing Mix - Promotion Slide 1-18 Marketing Mix - Promotion Product Price Target Market Placement Promotion The personal and impersonal means used to inform, persuade, and remind customers about products and services. This includes advertising, sales promotion, publicity, and personal selling. 12 12 12

Environmental Analysis Marketing Chapter 2 Environmental Analysis Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1 1

Factors in the Environment Slide 2-1 Factors in the Environment Marketing Mix Ever-Changing Marketplace Social Natural Economic Target Market Competition Product Place Promotion Price Political & Legal Factors Technology Environmental Scanning

Environmental Scanning Slide 2-2 Environmental Scanning Opportunity Threat Personal Computer Industry Technological Advances (Positive Change) Typewriter Industry Home Security Industry Tourism Industry Increase in Crime Rate (Negative Change) The practice of tracking external changes that can affect markets, including demand for goods and services. 2 2 2 2

Economic Environment P P P P Economic Environment Slide 2-3 Economic Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The overall economy, including business cycles, consumer income and spending pattern. 3 3 3 3

Basic Pattern of a Business Cycle Slide 2-4 Basic Pattern of a Business Cycle Figure 2.2 Level of Business Activity Prosperity Prosperity Recovery Recession Recession Time The pattern of the level of business activity 4 4 4 4

Consumer Factors Indicators Consumer Income Inflation Gross Income Slide 2-5 Consumer Factors Indicators Consumer Income Inflation A rise in the overall price level. Gross Income The total amount of money earned in one year by an individual or household. Disposable Income The money an individual or household has left after paying taxes. Discretionary Income The money an individual or household has left after paying taxes and living expenses.

Political and Legal Environment Slide 2-6 The Political and Legal Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The laws, regulations and political pressures affecting marketers. 5 5 5 5

Political & Legal Factors Slide 2-7 Political & Legal Factors Legislation Impact on Marketing Sherman Act (1890) Prohibits combination, contracts, or conspiracies to trade or monopolization Clayton Act (1914) Prohibits, price discrimination, tying clauses, and exclusive dealer arrangements FTC Act (1914) Created the FTC and gave it investigatory power to deal with antitrust powers Robinson-Patman Act (1936) Prohibits sellers from offering different deals to different customers for like grade & quantity

The Social Environment Slide 2-8 The Social Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Social Environment Technological Environment Natural Environment The people in a society and their values, beliefs and behaviors. 6 6 6 6

Population Changes: 1990-2010 Alaska Percent gain 15.0 to 50.1 Hawaii Slide 2-9 Population Changes: 1990-2010 Figure 2.4 Alaska Percent gain 15.0 to 50.1 5.0 to 14.9 0 to 4.9 Loss Hawaii Source: U.S. Bureau of the Census, Current population Reports, Series P-25. No. 1053, Projections of the population of States by Age, Sex, and race: 10\990 7 7 7 7

Social Responsibility & Ethics Slide 2-10 Social Responsibility & Ethics Issues Definition Social Responsibility Concern for the social consequences of a person’s or institution’s acts as they may affect the interests of others. Ethics The moral principles and values that govern the way an individual or group conducts its activities. Marketing Ethics The principles, values, and standards of conduct considered appropriate for marketers. Morals Vs Laws Morals - rules people develop as a result of cultural values and norms. Laws - values and standards enforced by the courts.

The Natural Environment Slide 2-11 The Natural Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The natural resources available to or affected by the organization. 8 8 8 8

Natural Environment Issues Definition Demarketing Green Marketing Slide 2-12 Natural Environment Issues Definition Demarketing A marketing strategy used to decrease the consumption of a product (e.g., electricity). Green Marketing Marketing efforts designed to minimize negative effects on the physical environment or to improve its quality (e.g., Gillette, P & G, Post). Cause-related Marketing Marketing designed to promote a cause or an issue (e.g., Target). Social Marketing Firms attempt to encourage positive behavior (e.g., increase literacy, discourage drunk driving).

Technological Environment Slide 2-13 The Technological Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment Scientific knowledge, innovations and inventions that result from research. 9 9 9 9

Technology Environment Slide 2-14 Technology Environment Issues Definition Internet An international network of computers that provides people global communication and access to million of information resources. HTML Hyper Text Mark-up Language - the language used to design web pages. World Wide Web A hypertext system that allows users to receive text, graphics, video, and sound by clicking on particular words and images. Browser A software program that runs on a personal computer and provides graphical user interface to the WWW (e.g., Netscape Navigator, Microsoft Internet Explorer).

Where Are WWW Users Located? Slide 2-15 Where Are WWW Users Located? Oceania 4% Other 2% Asia 2% Canada & Mexico 8% Europe 11% United States 73% Source: GVU’s Fifth WWW User Survey, 1996

Internet Security and Privacy Issues Slide 2-16 Internet Security and Privacy Issues Electronic Cash Key Security/Privacy Internet Considerations Cookies Firewalls Spamming

Competitive Environment Slide 2-17 Competitive Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment All the organizations that could potentially create value for the organization’s customers. 10 10 10 10

Competitive Factors Type Description Monopoly Monopolistic Competition Slide 2-18 Competitive Factors Type Description Monopoly One Seller, No Close Substitutes Monopolistic Competition Large Number of Sellers, Products Distinguishable Oligopoly Few Sellers, High Barriers to Entry, Seek Nonprice Advantage Pure Competition Many Sellers, Identical Products, Focus on Lower Product and Distribution Costs

Types of Competitive Forces Slide 2-19 Types of Competitive Forces Figure 2.5 Threat of New Entrants Rivalry among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products Source: Adapted with permission from Michael F. Porter, “Industry Structure and Competitive Strategy: Keys to Productivity:, Financial Analysts Journal, July-August 1980. ©1980. The Financial Analysts Federation, Charlottesville, VA. All rights reserved. 5 11 11 11 11

Global Marketing Challenges Chapter 3 Global Marketing Challenges Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1

A Process for Deciding Whether to Enter International Markets Slide 3-1 Figure 3.1 Start No No Concentrate Domestically Must we? Should we? Yes Yes No Improve Capability Can we? Yes Identify Specific Opportunities Select Entry Option Source: Betty Jane Punnett and David A. Ricks, International Business (Boston: PWS-Kent Publishing Co., 1992) p. 257 2 2 2

Major Trading Partners of the U.S. Slide 3-2 Major Trading Partners of the U.S. Figure 3.2 Imports and Exports in Billions of Dollars Canada Exports = $114 Imports = $129 Exports = $53 U.K. Exports = $27 Japan Imports = $25 Imports = $119 Exports = $19 World trade is currently at $7 trillion U.S. exports 20% of its industrial production U.S. exports 35% of its farm production 7% of all U.S. jobs are supported by exports 33% of corporate profits is derived from International trade & Foreign investment (80% for Coca-Cola) 250 companies account for 85% of all U.S. exports Exports = $51 Imports = $32 Imports = $49 Europe Mexico Source: U.S. Department of Commerce, Statistical Abstract of the United States, 115th ed. (Washington Government Printing Office, 1995) pp. 819-822. 3 3 3

Environmental Analysis Issues in Global Markets Slide 3-3a Table 3.1 Environment Analysis Issues Economic Environment Stage of Development Buying Power of Consumers Type of Currency; exchange rate Political and Legal Environment Political Stability Laws limiting international trade Laws of host nations General Agreement on Tariffs and Trade (GATT) 4 4 4

Environmental Analysis Issues in Global Markets Slide 3-3b Table 3.1 Environment Analysis Issues Social Environment Cultural influences on buying behavior Language differences Population sizes and distribution Socioeconomic status Impact on marketing on the culture Ethical considerations such as bribery and human rights Natural Environment Resources available Impact of resources on natural resources Technological Environment Levels of technological development Available infrastructure Competitive Environment Degrees of government involvement in competition Ownership of competitors-local, foreign or government 5 5 5

Economic/Technological Development Slide 3-4 Economic/Technological Development Type of Society Description Traditional Agricultural, Little Upward Mobility, Little Technology, Custom-bound (e.g., Ghana) Pre-Industrial Social and Economic Change, Rising Middle-class (e.g., Peru, Uganda) Takeoff New Industries, Healthy Social and Economic Climate (e.g., Thailand, Malaysia) Industrializing Spread of Technology (e.g., China, Mexico, India, Brazil) Fully Industrial Exporter, Technology as Driver of New Innovation (e.g., original G-7)

Legal Considerations of Global Marketing Slide 3-5a Legal Considerations of Global Marketing Legal Structures Either Encourage or Limit Trade Tariff - tax levied on imported products Quota - limit on the amount of specific product that can enter a country Boycott (embargo) - a prohibition of trade Exchange Control - laws compelling foreign exchange earnings to be sold to the central bank Per Capita Income - income per person in a particular country Trade Agreement - agreements to stimulate international trade

Important Trade Agreements Slide 3-6 Important Trade Agreements Trade Agreements Description NAFTA The North American Free Trade Agreement between Canada, U.S., and Mexico is designed to phase out trade barriers. EU An agreement between 15 Western European countries to lower trade barriers ASEAN An agreement between Southeast Asian Nations to lower trade barriers. GATT The General Agreement on Tariffs and Trade is an International framework of rules to lower trade barriers among 110 member nations WTO The World Trade Organization is designed to further negotiations and oversee resolution of disputes related to GATT

Political Considerations of Global Marketing Slide 3-5b Political Considerations of Global Marketing Political Structures Dumping - practice of pricing products sold in foreign markets at less than their fair market price in the domestic market Counter Trade - form of trade in which all or part of the payment for goods and services is in the form of other goods and services Devaluation - decreasing the value of the domestic currency in relation to the foreign currency

Examples of Cultural Differences that Could Lead to Marketing Problems Slide 3-7 Table 3.2 Body Language Standing with your hands on your hips is a gesture of defiance in Indonesia. Physical Contact Patting a child on the head is a grave offense in Thailand or Singapore since the head is revered as the location of the soul. Promptness In Latin countries, your host or business associate would be surprised if you arrived at the appointed hour. Eating and Cooking It is rude to leave anything on your plate when eating in Norway, Malaysia or Singapore. Other Social Customs In Sweden, nudity and sexual permissiveness are quite all right, but drinking is really frowned on. Source: William J. Stanton, Michael J. Etzel and Bruce J. Walker, Fundamentals of Marketing, 9th ed.. (New York: McGraw-Hill, 1991), p. 536. ©1991 by the McGraw-Hill Companies, Inc., and reproduced by permission of the publisher. 6 6 6

Exporting Exporting Risk Control High Low High Slide 3-8 Exporting High Risk Exporting Low Control High A mode of entry involving production of a product in one country and shipping it to another country for sale. 7 7 7

Licensing Licensing Exporting Risk Control High Low High Slide 3-9 Licensing High Risk Licensing Exporting Low Control High An agreement in which an organization grants another organization the right to use a trademark, a patented product or a process. 8 8 8

Joint Ventures Joint Ventures Licensing Exporting Risk Control High Slide 3-10 Joint Ventures High Joint Ventures Risk Licensing Exporting Low Control High A business agreement in which two or more organizations share management of an enterprise. 9 9 9

Direct Ownership Direct Ownership Joint Ventures Licensing Exporting Slide 3-11 Direct Ownership High Direct Ownership Joint Ventures Risk Licensing Exporting Low Control High A mode of entry involving an organization setting up new facilities or acquiring a foreign firm in the same line of business. 10 10 10

Mechanisms for Serving Global Markets: Some Pros and Cons Slide 3-12 Mechanisms for Serving Global Markets: Some Pros and Cons Table 3.3 Mechanism Advantages Disadvantages Exporting Simple; minimal financial risk May be less profitable than other mechanisms Licensing Minimal capital outlay; useful for serving countries with export restrictions Difficult to control licensee; when licensing agreement ends, licensee may become a competitor; may be less profitable than other mechanisms Joint Venture Risk limited to the organization’s share in the venture; foreign partner contributes expertise the organization lacks; useful when the host country limits foreign ownership Share control with venture partner; partner may learn technology or secrets that it uses to compete with the organization Mode of Entry - ways in which organizations can enter foreign markets. Direct Ownership Maximum control over foreign operations; ability to be close to customers Expensive to set up; requires extensive knowledge of foreign markets and contacts overseas Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10. 11 11 11

The Largest Multinational Corporations Slide 3-13 The Largest Multinational Corporations Annual Revenues Rank* Company Country in Billions of U.S. $   1 Mitsubishi Japan 184   2 Mitsui Japan 182  3 Itochu Japan 169   4 G.M. U.S. 169  5 Sumitomo Japan 168   6 Marubeni Japan 161   7 Ford Motor U.S. 137  8 Toyota Motor Japan 111   9 Exxon U.S. 110 10 Royal Dutch Britain/ Shell Group Netherlands 110 *Ranked by 1995 sales volume. Source: “The Fortune Global 500,” Fortune, 5 August 1996, p. F1.

Globalization vs Customization Slide 3-14 Globalization vs Customization Globalized Product Customized Product 12 12 12

Marketing Planning and Organization Strategy Chapter 4 Marketing Planning and Organization Strategy Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1 1 1

Strategic Planning Responsibilities Slide 4-1a Strategic Planning Responsibilities Top Management Strategic Planning Long Term Activities that lead to the development of a clear organizational mission, organizational objectives and the strategies that enable the organization to achieve its objectives. 2 2 2 2 2

Tactical Planning Responsibilities Slide 4-1b Tactical Planning Responsibilities Top Management Strategic Planning Middle Management Tactical Planning MediumTerm Involves the creation of objectives and strategies aimed at attaining goals for specific divisions or departments over a medium time frame (1-5 years). 3 3 3 3 3

Operational Planning Responsibilities Slide 4-1c Operational Planning Responsibilities Top Management Strategic Planning Middle Management Tactical Planning Lower Management Operational Planning Short Term Involves the creation of objectives and strategies for individual operating units over a short time span (less than 1 year). 4 4 4 4 4

The Strategic Planning Process I Slide 4-2a The Strategic Planning Process I Figure 4.1 Information Implementation The Environment The Organizations Strategic Plan Organizational Mission Organizational Objectives Organizational Strategies Organizational Portfolio Plan Activities by which people in an organization get the marketing job done. Source: J. Paul Peter and James H. Donnelly, Jr., A Preface to Marketing Management, 7th ed. (Burr Ridge, Ill.: Irwin, 1997), p. 10. 5 5 5 5 5

The Strategic Planning Process II Slide 4-2b The Strategic Planning Process II Business Mission Statement Business Objectives Situation Analysis Business Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Source: Lamb, Hair, and McDaniel, Marketing, 5th ed. (ITP p. 20.)

Slide 4-3 Mission Statement A statement of the organization’s distinct purpose (i.e., what business are we in). A good mission statement must: Define and satisfy the key stakeholders (i.e., customers, shareholders, employees) Not suffer from marketing myopia (i.e., defining it in terms of the offering rather than benefits; e.g., “railway business”, “slide-rule business”) Not depart too radically from history Fit the market environment (e.g., GSA - “To prepare young girls for motherhood and wifely duties”) Specific and Realistic (e.g., SIA - “to become the worlds largest airline”)

Criteria for Organizational Objectives Slide 4-4 Criteria for Organizational Objectives Realistic Measurable - 15% ROI, Increase sales by 10% Clear - for a Defined Period of Time Consistent with Organizational Objectives A statement of what is to be accomplished through marketing activities.

Strategic Opportunity Matrix Slide 4-7 Growth Strategies: Product Market Matrix Figure 4.3 Strategic Opportunity Matrix Present Products New Products Products Markets Market Penetration (Arm & Hammer) Product Development (McDonald’s Pizza) Present Customers Market Development (Taco Bell) Diversification (Mrs. Tea) New Customers 6 6 6 6 6

Situation Analysis To Identify Marketing Opportunities Slide 4-5 S Internal Strengths - Things the company does well (e.g., production, marketing, brand image, employees, brand loyalty). W Internal Weaknesses - Things the company does not do well (e.g., high production costs). O External Opportunities - Conditions in the environment that favor strengths (e.g., unmet demand, technology). T External Threats - Conditions in the environment that do not relate to existing strengths or favor areas of current weakness (e.g., stronger competitors).

Examples of SWOT Issues Slide 4-6 Examples of SWOT Issues Table 4.1 Internal Environment Strengths Weaknesses Financial Resources Well-known brands Technological Skills Lack of Strategic Direction High Costs Obsolete Facilities External Environment Opportunities Threats Potential New Markets Potential New Products Falling International Trade Barriers New Competition Slow Market Growth New Regulations 7 7 7 7 7

BCG Portfolio Matrix Star High Market Growth Rate Cash Cow Dog Low Slide 4-8b BCG Portfolio Matrix Market Growth Rate Relative Market Share High Low 10% 10x 0.1x 1x Star Cash Cow Dog Problem Child (question mark)

The Boston Consulting Group Matrix Slide 4-8a The Boston Consulting Group Matrix High Industry Growth Rate Low High Low Market Share 8 8 8 8 8

Market/Industry Attractiveness Business Strength/Position Slide 4-9 GE Portfolio Matrix High Market/Industry Attractiveness Medium Low Strong Medium Weak Business Strength/Position

Some Questions for Evaluating a Marketing Plan Slide 4-10 Some Questions for Evaluating a Marketing Plan Table 4.2 Are the objectives clear? Specific? Measurable? Challenging, but achievable? Written? Have the industries that are growing been identified? Those that are stagnant? Those that are declining? Who are the principal competitors? What are the organization’s strengths? Weaknesses? Does the plan take advantage of the organization’s special competencies and vulnerabilities? What are the target markets? Do our products and services appeal to the needs and wants of the target markets? What are the best ways to promote the products to customers? Where do customers like to purchase? How do our prices compare with the competition? What are the costs and benefits of the plan? 9 9 9 9

Forecasting Techniques Slide 4-11a Forecasting Techniques Table 4.3 Technique Benefits Limitations Qualitative Methods Jury of Executive Opinion Quick; simple; opinions come from executives with expertise in different departments; useful for new or innovative products Data typically must be broken down by product. region, etc.; consumes time of executives; may not give greatest weight to those with most expertise. Sales Force Composite Providing number can motivate salespeople; salespeople know customers, product and competitors. Salespeople have a vested interest, so they may give biased estimates. Survey of Buyer Intentions Based on estimates obtained directly from buyers; can provide detailed information; often provides insight into buyer’s thinking; can be used for new products. Intention to buy may not result in actual purchase; expensive; time consuming; useful only when there are a few, well-defined potential customers. Delphi Technique Estimators less likely to succumb to group pressure. Time consuming; expensive. 10 10 10 10 10

Forecasting Techniques Slide 4-11b Forecasting Techniques Table 4.3 Technique Benefits Limitations Quantitative Methods Trend Analysis Quick; inexpensive; effective when demand and environmental factors are stable. Assumes future is continuation of past; does not consider marketing plans or changes in environment; not useful for new or innovative products. Exponential Smoothing Same benefits as trend analysis but emphasizes more recent data. Same limitations as trend analysis but not as severe because of emphasis on more recent data. Market Tests Provide more realistic information because based on actual purchases rather than intent to buy; permits assessment of effects of marketing plan; useful for new or innovative products. Time consuming; expensive; alerts competition to organization’s plans. Source: J. Paul Peter and James H. Donnelly, Jr., A Preface to Marketing Management, 7th ed. (Burr Ridge, Ill.: Irwin, 1997), p. 10. 11 11 11 11 11

Marketing Research: Information and Technology Chapter 5 Marketing Research: Information and Technology Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1 1 1 1

Marketing Research Definition Slide 5-1 Marketing Research Definition The function that links the consumer, customer, and public to the marketer through information. The process of planning, collecting, and analysis of data relevant to marketing decision making. The process of designing, gathering, analyzing and reporting of information that may be used to solve a specific marketing problem. The systematic and objective process of generating information for aid in making marketing decisions.

Questions Marketing Research Can Help Answer Slide 5-2 Questions Marketing Research Can Help Answer Table 5.1 Questions about Markets Buyers Demand Channels What kinds of people buy our products? Is demand for our products increasing or decreasing? Do channels of distribution for our products need changing? Questions about Marketing Mix Product Pricing Placement Promotion Which product design is likely to be most successful? What price should we charge for our new products? Where, and by whom, should our products be sold? How much should we spend on promotion? Questions about Performance Market Share Customer Satisfaction Reputation What is our market share overall? Are customers satisfied with our products? How does the public perceive our organization? 2 2 2 2 2 2

Data used to make decisions Slide 5-3 Basics of a Marketing Decision Support System Figure 5.1 Data in Database Models in Model Base Dialogue System Information Data used to make decisions A coordinated collection of data, system tools, and techniques with supporting software and hardware by which an organization gathers and interprets relevant information and turns it into a basis for making management decisions. 3 2 3 3 3 3

Primary Data Advantages • Up-to-date • Directly Relevant Slide 5-4 Advantages • Up-to-date • Directly Relevant • Known Source Disadvantages • More Expensive • More Time Consuming Types • Observation • Survey • Experimental Data collected specifically for the purpose of the investigation at hand 4 3 4 4 4 4

Data collected for some purpose other than the immediate study at hand Secondary Data Slide 5-5 Advantages • Less Expensive • Requires Less Time Disadvantages • May Be Obsolete • May Not Be Relevant Types • Internal • External Data collected for some purpose other than the immediate study at hand 5 4 5 5 5 5

Sources of Secondary Data Slide 5-6 Sources of Secondary Data Source Description Internal Information Sales Invoices, Accounting Records, Previous Market Research Market Research Firms Companies Such As A.C. Nielsen, Arbitron, IMS International, Prizm Trade Associations Associations Such As National Industrial Conference Board, National Retail Merchants Association University Research Bureaus, Professional Associations, Foundations Variety of Nonprofit Organizations Commercial Publications Advertising Age, Sales Management, Product Marketing, Buying Power Index Government Data Federal Government publications such as Census of Housing, Census of Manufacturers, Economic Indicators

Information Available from the Population Census Slide 5-7 Information Available from the Population Census Table 5.3 Population Housing Household relationship Sex Race Age Marital status Hispanic Origin Education - enrollment and attainment Place of birth, citizenship, and year of entry Ancestry Language spoken at home Migration Disability Fertility Veteran status Employment and unemployment Occupation, industry and class of worker Number of units in structure Number of rooms in unit Unit owned or rented Vacancy characteristics Value of owned unit or rent paid Source of water and method of sewage disposal Autos, light trucks and vans Kitchen facilities Year structure built Year moved into residence Number of bedrooms Shelter costs, including utilities Condominium status Plumbing Telephone 6 5 6 6 6 6

Steps in the Marketing Research Process: Step 1 Slide 5-8 Steps in the Marketing Research Process: Step 1 Figure 5.3 Formulate the Problem Plan a Research Design Analyze and Interpret Data Prepare the Research Report Collect Data 7 6 7 7 7 7

Steps in the Marketing Research Process: Step 2 Slide 5-9 Steps in the Marketing Research Process: Step 2 Figure 5.3 Formulate the Problem Plan a Research Design Analyze and Interpret Data Prepare the Research Report Collect Data 8 7 8 8 8 8

Basic Research Designs Slide 5-10 Basic Research Designs Initial research conducted to clarify & define the problem and generate hypotheses Research designed to describe characteristics of a population Research conducted to identify cause-and-effect relationships among variables Exploratory Research Descriptive Research Causal Research (Unaware of Problem) (Aware of Problem) (Problem Clearly Defined) “Our sales are declining and “What kind of people are buying “Will buyers purchase more of we don’t know why.” our product? Who buys our our products in a new package? competitor’s product?” “Would people be interested “What features do buyers prefer “Which of two advertising in our new product idea?” in our product?” campaigns is more effective?” possible situation The plan for how to collect and analyze data

Steps in the Marketing Research Process: Step 3 Slide 5-11 Steps in the Marketing Research Process: Step 3 Figure 5.3 Formulate the Problem Plan a Research Design Analyze and Interpret Data Prepare the Research Report Collect Data 9 8 9 9 9 9

Observational Research Slide 5-12 Observational Research Common Forms of Observational Research Mystery shopping The collection of data by recording the actions of consumers or events in the marketplace One way mirror Shopper Patterns Physical trace evidence Traffic counters Physiological measurement People Meters

Telephone (Interviewer) Slide 5-13 Survey Research Common Forms of Survey Research In-Home Interview The researcher interacts with people to obtain facts, opinions, and attitudes Mall Intercept Telephone (Interviewer) Telephone (Central) Focus Group Interview One-Time Mail Survey Mail Panel Surveys

Steps in the Marketing Research Process: Step 4 Slide 5-14 Steps in the Marketing Research Process: Step 4 Figure 5.3 Formulate the Problem Plan a Research Design Analyze and Interpret Data Prepare the Research Report Collect Data 10 9 10 10 10 10

Analyze and Interpret Data Slide 5-15 Analyze and Interpret Data Data Sample Sampling Error Census Descriptive Statistics Key Terms and Concepts Probability Sample Statistical Inference Nonprobability Sample Coding Editing

Steps in the Marketing Research Process: Step 5 Slide 5-16 Steps in the Marketing Research Process: Step 5 Figure 5.3 Formulate the Problem Plan a Research Design Analyze and Interpret Data Prepare the Research Report Collect Data 11 10 11 11 11 11

Application of New Technology Slide 5-17 Application of New Technology Geographic Information System (GIS) is a term used when we combine various kinds of demographic data with geographic information on maps. Electronic Data Interchange (EDI) is the term used when one company’s computer systems is integrated directly with another company’s proprietary computer system. Technical-market Research is research incorporating customers by demonstrating a product in 3-D on a computer screen and asking customers to evaluate it. Usenet is a network of Internet addresses for electronic mail.

Areas of Ethical Concern in Marketing Research Slide 5-18a Areas of Ethical Concern in Marketing Research Table 5.5 Area of Concern Example Ethical Standards Preserving participant’s anonymity Keeping the names of survey respondents anonymous, even though the client would like to use them to create a mailing list This is a basic standard of ethical research/ Exposing participants to mental stress Arriving late for a scheduled interview; conducting experiments in which subjects are embarrassed at their lack of knowledge about products When stress is unavoidable, researcher should debrief subjects afterward. Asking participants questions against their self-interest Asking about the acceptability of various prices in order to plan a price increase Such issues tend to place ethical standards in conflict with technical standards for accurate research. Using special equipment and techniques Using equipment to measure physiological responses to a product or promotional message These must be properly maintained to avoid injury. 12 11 12 12 12 12

Areas of Ethical Concern in Marketing Research Slide 5-18b Areas of Ethical Concern in Marketing Research Table 5.5 Area of Concern Example Ethical Standards Involving participants in research without their knowledge Secretly observing the behavior of shoppers Informed consent is a basic ethical standard unless minimal risk to subjects is involved and the research could not be practically carried out with consent. Using deception Showing subjects sample advertisements without telling them that they will have to take a recall test afterward Incompletely informed consent is considered ethical only if there is minimal risk to subjects and research cannot be practically carried out another way. Using coercion Harassing by repeatedly requesting telephone interviews Coercion is unethical and tends to bias results. Depriving participants of their right to self-determination Changing participants in ways they could not expect, such as a taste test in which they cannot identify their preferred brand and unexpectedly lose confidence in their ability to judge Researchers should try to restore participants to their original condition when this occurs. Source: Adapted from Gilbert A. Churchill, Jr. Basic Marketing Research, 3rd ed. (Fort Worth: The Dryden Press, 1996), pp.67-71. © 1992 by the Dryden Press, reprinted by permission of the publisher. 13 12 13 13 13 13

Marketing Chapter 6 Consumer Behavior Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1 1

Slide 6-1 Consumer Behavior “The thoughts, feelings, and actions of consumers and the influences on them that determine changes.” “The activities people engage in when selecting, seeking, purchasing, using, and disposing goods and services so as to satisfy needs and wants.”

A Model of Consumer Buying Process Slide 6-2 A Model of Consumer Buying Process Figure 6.1 Social Influences Marketing Influences Situational Influences Consumer Buying Process Need/problem Recognition Information Search Alternative Evaluation Purchase Decision Postpurchase Evaluation 2 2 2 2

Maslow’s Hierarchy of Needs Slide 6-3 Maslow’s Hierarchy of Needs Figure 6.2 Needs Products Self-Actualization Needs: Self-Fulfillment Vacations, College Courses Charitable Organizations Esteem Needs: Status, Respect, Self-esteem Prestige Brands Auxiliary Needs: Friendship and Belonging Club Memberships Greeting Cards Safety Needs: Physical and Financial Security Locks, Insurance Physiological Needs: Food, Water, Rest, Sex, Air Flour, Green Beans, Water Supply 3 3 3 3

Information Search Internal Experiential Group Information Sources Slide 6-4 Information Search Internal Experiential Group Information Sources Public Marketing 4 4 4 4

Alternative Evaluation Slide 6-5 Alternative Evaluation Subjective Criteria Attitudes Objective Criteria “Sporty Image” “Popular” “Great Stereo” “Rugged Image” “Four Wheel Drive” “Ability to Tow 10,000 lbs” “Compact Disc Player” “Seats Seven” Alternative Evaluation 5 5 5 5

Purchase Decision Purchase Decision Alternative Evaluation Slide 6-6 Purchase Decision Alternative Evaluation Purchase Decision Purchase Later Not Purchase Purchase Now 6 6 6 6

Postpurchase Evaluation Slide 6-7 Postpurchase Evaluation Figure 6.4 How Value Perceptions Can Influence Postpurchase Behavior High Value Long Term Relationship Satisfaction Loyalty Low Value Need Recognition Information Search, etc. Dissatisfaction 7 7 7 7

Types of Consumer Buying Decisions Slide 6-8 Types of Consumer Buying Decisions Routine (automatic) Decision Making (milk, toothpaste) (50%) Limited Decision Making (different candy) (38%) Extensive Decision Making (home, car) (12%) Less Involvement More Involvement

Characteristics of Three Types of Consumer Decision Making Slide 6-9 Table 6.1 Consumer Involvement In Purchase Information Sources Consulted Consumer Involvement In Purchase Types of Decision Characteristics of Consideration Set Routine Low One of a few brands, sellers and product characteristics evaluated Internal sources used As little as possible Limited Moderate Several brands, sellers and product characteristics evaluated Internal and some external sources Some time invested Extensive High Many brands, sellers and product characteristics evaluated Internal and many external sources Much time invested 8 8 8 8

Influences on Consumer Behavior: Social Influences Slide 6-10 Figure 6.5 Social Influences • Culture • Subculture • Social Class • Reference Groups • Family Situational Influences • Physical Surroundings • Social Surrounding • Time • Task • Momentary Conditions Marketing Influences • Product • Price • Placement • Promotion Consumer Buying Process 9 9 9 9

Reference Groups Reference Groups Primary Direct Secondary (influence Slide 6-11 Reference Groups Primary family, friends, neighbors Direct Secondary clubs, professional associations Reference Groups (influence behavior) Aspirational Chicago Bulls Indirect Nonaspirational Leather-jacket bikers

Slide 6-12 The Family Life Cycle series of life stages defined by a combination of age, marital status, children Middle-aged divorced without children Young divorced without children Middle-aged married without children Middle-aged married without dependent children Middle-aged married with children* Young single* Young married without children* Young married with children* Older married* Older unmarried* Usual flow Recycled flow Traditional flow Middle-aged divorced without dependent children Young divorced with children Middle-aged divorced with children *

Influences on Consumer Behavior: Marketing Influences Slide 6-13 Figure 6.5 Social Influences • Culture • Subculture • Social Class • Reference Groups • Family Situational Influences • Physical Surroundings • Social Surrounding • Time • Task • Momentary Conditions Marketing Influences • Product • Price • Placement • Promotion Consumer Buying Process 10 10 10 10

Influences on Consumer Behavior: Situational Influences Slide 6-14 Figure 6.5 Social Influences • Culture • Subculture • Social Class • Reference Groups • Family Situational Influences • Physical Surroundings • Social Surrounding • Time • Task • Momentary Conditions Marketing Influences • Product • Price • Placement • Promotion Consumer Buying Process 11 11 11 11

Organizational Buying Behavior Marketing Chapter 7 Organizational Buying Behavior Gilbert A. Churchill, Jr. J. Paul Peter “A transaction in which a product is sold for any use other than personal consumption” 1 1 1

A Comparison of Organizational Buyers and Consumers Slide 7-1 Figure 7.1 Characteristic Organizational Buyers Consumers Number of buyers in market Few Many Size of Purchases Large Small Decision Criteria Primarily Rational Rational and emotional Location Concentrated Dispersed Distribution More Direct More Indirect Interdependence between buyer and seller Strong Weak Number of people involved in purchase decisions Many Few Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10. 2 2 2

Categories of Organizational Buyers Slide 7-2 Categories of Organizational Buyers Purchase goods & services for carrying out the main functions of the government National & local organizations providing goods & services to people in their care Buy goods & services to produce other goods & services Buy finished goods & sell them to other businesses or customers for a profit Government Agencies Producers Intermediaries Institution General Motors Boeing Crown Books Campus Store Amazon.com Air Force Park Service New York City Harvard University St Mary’s Hospital United Way 3 3 3

Business Classification Systems Slide 7-3 Business Classification Systems Standard Industrial Classification Code US Government System Thomas Register Private System 4 4 4

Demand Principles Derived Demand Slide 7-4 Demand Principles Derived Demand Demand for organizational goods that is dependent on the demand for consumer goods. Accelerated Principle A small change in consumer demand for a product can result in a large change in the demand for organizational goods and services to produce the product. Joint Demand Demand for one organizational good is dependent on the demand for another organization good. 5 5 5

The Organizational Buying Process Slide 7-5 The Organizational Buying Process Figure 7.5 Recognize a Need or Problem Assign Responsibility for Making a Purchase Decision Search for Alternatives Evaluate and Select an Alternative Make a Purchase Evaluate Performance of Product and Supplier 6 6 6

Types of Business Products Slide 7-6 Types of Business Products Major Categories of Business-to- Business Products Major Equipment (machinery, generators) Accessory Equipment (drills, fax machines) Raw Materials (lumber, wheat, vegetables Component Parts (tires spark plugs) Processed Materials (corn syrup, sheet metal) Supplies (pencils, paper towels) Business Services (janitorial & legal services)

Types of Organizational Purchases Slide 7-7 Table 7.2 Low Involvement Purchase Type Complexity Time Frame Number of Suppliers Applications Straight rebuy Simple Short One Frequently purchased routine products, such as printer cartridges Modified buy Moderate Medium Few Routine purchase that has changed in some way, such as air travel (new fares, flights, destinations) New task purchase Complex Long Many Expensive, seldom-purchased products, such as new production equipment High Involvement 7 7 7

Vendor Analysis - Compare Suppliers Slide 7-8 Vendor Analysis - Compare Suppliers Example of Vendor Analysis in a Microcomputer Buying Situation Rating scale Attributes Unacceptable (0) Poor (1) Fair (2) Good (3) Excellent (4) Compatibility X Affordability X Reliability X Product line depth X Service/support X Flexibility X Total score: 4 + 2 + 4 + 2 + 4 + 3 = 19 Average score: 19 ÷ 6 = 3.17

Functional Areas and Their Key Purchasing Concerns Slide 7-9 Table 7.3 Functional Area Key Concerns in Purchasing Decision Making Design and development engineering Name reputation of vendor; ability of vendors to meet design specifications Production Delivery and reliability of purchases Sales/Marketing Impact of purchased items on marketability of the company’s products Maintenance Compatibility with existing facilities, maintenance service and installation arrangements Finance/accounting Effects of purchases on cash flow, financial statements and existing budgets Purchasing Obtaining lowest possible price at acceptable quality levels; maintaining good relations with vendors Quality Control Assurance that purchased items meet prescribed specifications 8 8 8

Approaches to Organizational Buying Slide 7-10 Office Space Inspection Buying Government Contracts Competitive Bidding Sampling Buying Fruits & Vegetables Buyer Contract Buying Description Buying New Building Bolts 9 9 9

Slide 7-11 Ethical Issues Source Loyalty Ethics Reciprocity 4 4 4

The Buying Center Initiator Identifies Need User Uses Product Slide 7-12 Figure 7.8 Initiator Identifies Need User Uses Product Gatekeeper Controls Information Flow Influencer Affects Buying Decision Decider Has Expertise or Power to Make or Approve Selection Buyer Has Responsibility to Select Vendor and Negotiate Terms 10 10 10

Marketing Chapter 8 Market Segmentation Gilbert A. Churchill, Jr. J. Paul Peter 1 1

Basic Definitions Approach Definition Market Slide 8-1 Approach Definition Market Individuals or organizations with the desire and ability to buy goods and services Market Segmentation The process of dividing a market into groups of potential buyers who have similar needs and wants, value perceptions, or purchasing behavior The particular market segment that the organization selects to serve. Target Market 2 2

Differentiated Marketing Approaches to Serving Markets Slide 8-2 Table 8.1 Approach Description Examples Mass Marketing A single marketing mix for the entire market Phone service, WEB pages Women's Workout World (exercise facilities for women); American Association for Retired Persons (lobbying and membership services for people over 50) Niche Marketing A single marketing mix for one segment of the market Segment Marketing McDonald’s (Happy Meals for young children, Big Macs for Teens, Arch Deluxe for adults); Toshiba copiers (several sizes and features to meet different levels of business needs) Differentiated Marketing Separate marketing mixes for two or more segments of the market Individual Marketing A marketing mix customized for an individual or organization Personalized amenities for repeat guests at Ritz-Carlton hotels; management consulting services tailored to an organization’s needs 2 2

Market Segmentation used to develop a competitive advantage Slide 8-3 Market Potential - the total purchases that buyers in a segment will likely make during a specified period of time, given a specified level of marketing activity Measurability - be able to measure its size and characteristics Criteria for Successful Market Segmentation Accessibility - be able to reach members of target segment with customized marketing mixes Responsiveness - respond differently to some aspect of the 4P than other segments

Slide 8-4 P & G Segmentation - Detergent Market 53% market share of the $3.2 billion market TIDE - “Tide’s in, dirt out” IVORY SNOW - “mild, gentle soap for baby clothes ARIEL - “tough cleaner” CHEER - “all temperature - Cheer” DREFT - “a clean you can trust” BOLD - “cleans, soften,and controls static” SOLO - “liquid detergent with fabric softener GAIN - “freshens like sunshine” ERA - “built-in stain remover” DASH - “attack tough dirt” OXYDOL - “makes clothes bright”

Mass/Undifferentiated Marketing Slide 8-5 The Market Product Price Everyone Placement Promotion 3 3

Niche Marketing Market Segment The Market Product Price Placement Slide 8-6 The Market Product Price Market Segment Placement Promotion 4 4

Differentiated Marketing Slide 8-7 The Market Product Price Market Segment Placement Promotion Product Price Market Segment Placement Promotion 5 5

Individual Marketing The Market Customer Customer Customer Customer Slide 8-8 The Market Product Price Customer Placement Promotion Product Price Customer Placement Promotion Product Price Customer Placement Promotion Product Price Customer Placement Promotion 6 6

Some Bases for Segmenting Consumer Markets Slide 8-9 Table 8.2 Levis Dockers Demographic Geographic Campbell Soup Behavior Southwest Airlines Segmentation Benefit Psychological Colgate Toothpaste Frito-Lay Snacks 7 7

VALS2 Lifestyle Categories - Consumer Markets Slide 8-10 Figure 8.2 Resources Abundant Actualizers Fulfilleds Achievers Experiencers Believers Strivers Makers Strugglers Minimal Principal Oriented Status Oriented Action Oriented Self-Orientation 8 8

Organizational Buyer Behavior Some Bases for Segmenting Organizational Markets Slide 8-11 Table 8.3 Intel Computer Chips Geographic Segmentation Organizational Buyer Behavior Customer Type Apple Computer Newton Pocket Computer Flowers Industries Baked Goods 9 9

The Process of Market Segmentation Slide 8-12 Figure 8.5 Analyze Customer Product Relationship Investigate Segmentation Bases Develop Product Positioning Select Segmentation Strategy 10 10

Slide 8-13 Product Position Attribute BMW - performance The perception of the product relative to competing products in the minds of potential buyers. Price and Quality Dillards VS KMart Use or Application Gatorate Positioning Bases Product User J&J Baby Shampoo Product Class Parkay, Caress Competitor VISA VS AMEX

Sample Positioning Map: Automobiles Slide 8-14 Figure 8.6 Luxurious •Lexus •Mercedes Cadillac• •Porsche Lincoln• •BMW •Chrysler •Pontiac •Buick Oldsmobile• Traditional Sporty •Chevrolet Mercury• Ford• •Nissan Dodge• •Toyota Plymouth• •Saturn •VW Functional 11 11

Managing Existing Products Marketing Chapter 9 Managing Existing Products Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1

Types of Products Products Consumer Products Business Products Slide 9-1 Types of Products Products Consumer Products Business Products Intended use Convenience Products Shopping Products Specialty Products Unsought Products A product is a good , service, or idea that offers a wide range of tangible and intangible benefits. It includes both the core, the auxiliary, and anything else that adds value to customers

Basic Categories of Consumer Products Slide 9-2 Table 9.1 Type of Purchase Decision Placement or Distribution Category Price Promotion Convenience Little information sought Relatively low Mass media Widely available Shopping More information sought Moderate Mass media; some personal selling Selectively available Specialty Lots of information sought Mass media; more personal selling Exclusively available Relatively expensive Unsought Do not seek information and unaware May or may not be expensive Persuasive advertising; aggressive personal selling Varies 2 2 2

Goods and Services Durable Goods Non-Durable Goods Services Slide 9-3 Kleenex Tissues Scott Towels Sealy Mattress Maytag Washer Pair of Glasses Durable Goods Non-Durable Goods Auto Repair Restaurant Meal Services Fantastic Sam’s Haircut Airline Taxi Ride 4 4 4

Product Terminology Slide 9-4 • Product Class - a broad group of products that differ somewhat but provide similar benefits. household cleaners, beer Product Category - subset of a product class containing products of a certain type. Household cleaners - liquid, powder, spray, gel Beer - light, imported, regular, nonalcoholic Product Item - a specific version of a product that can be designated as a distinct offering among an organization’s products. Product Line - a group of closely related products offered by the organization. P & G - soaps, detergents, toothpaste Product Mix - all the product offerings of an organization. Width of the product mix - number of product lines that an organization offers. Gillette - blades and razors, writing instruments, toiletries, lighters Depth of a product line - number of product items in a product line. Gillette’s blades and razors - mach 3, sensor, track II, atra, etc. 7 7

The Product Life Cycle (PLC) A graphical description of a product’s history Slide 9-5 Introductory Stage Growth Stage Maturity Stage Decline Stage Product Category Sales Total Market Sales Dollars Product Category Profits Total Market Profits Time

Slide 9-6 INTRODUCTION STAGE A full-scale launch of a new product into the marketplace (trying to gain a foothold). Typically we have High failure rates (slow sales initially) Little to no competition Frequent product modification Limited distribution (try to attract intermediaries) Price is generally high (to recover high marketing & production costs) Main customers are Innovators Negative profits(due to high initial costs) Durables (one product); non-durables (variety) Strategy Developing product awareness (informing customers of benefits - lead to trial) Stimulate primary demand for the product category Intensive personal selling Pioneering Advantage - benefit of being the first one in the market

GROWTH STAGE Begins when the product begins to break even Slide 9-7 GROWTH STAGE Begins when the product begins to break even Typically we have sales grow at an accelerated (increasing) rate Many competitors enter the market Large companies may acquire small pioneering firms Profits are healthy (because of demand) R & D costs have been recovered; sales begin to level off; sales volume create economies of scale Strategy Promotion stresses brand preference & brand loyalty Promotion is targeted towards attracting the mass market Product quality will be stressed & improved Wider distribution will be gained and costs will be lowered

Slide 9-8 MATURITY STAGE This is where most products spend most amount of time at. Typically we have Sales continue to increase but at a decreasing rate Marketplace is approaching saturation Marginal competitors begin dropping out Both price and profits begin to fall Strategy Heavy promotion is necessary to both dealers and consumers (by increasing usage) Product lines are widened; annual models with emphasis on style rather than function; products require little technological improvements Market share can be increased by either taking it away from the competitors or manufacturing private brands for channel members

DECLINE STAGE Signaled by a long-run drop in sales Slide 9-9 DECLINE STAGE Signaled by a long-run drop in sales Product looses market acceptance Change in consumers taste Wide availability of substitutable products Typically we have Few competitors remain Decreased profits industry wide Price generally stabilizes Strategy Do very little if any promotion Minimize distribution costs Drop the product completely

Adopter Categories Innovators (2.5%) Early Adopters (13.5%) Slide 9-10 Figure 9.2 Innovators (2.5%) Early Adopters (13.5%) Early Majority (34%) Late Majority (34%) Laggards (16%) 6 6 6

Relationship of the Diffusion Process to the PLC Slide 9-11 Relationship of the Diffusion Process to the PLC Introduction Growth Maturity Decline 100 90 80 70 60 50 40 30 20 10 Product life cycle curve Early majority Cumulative Percentage of Adoption Late majority Early adopters Innovators Laggards Diffusion curve Time of Adoption of Innovations

Branding Terminology Slide 9-12 • Brand - a name, term, design, symbol, or another feature that identifies one seller’s good or service as distinct from other sellers. (e.g. Coca Cola) Brand Name - that part of a brand that can be spoken. (e.g. the word Coke) • Brand Mark - that part of a brand that cannot be spoken. (e.g. the flowing script used to write Coca Cola) • Trademark - a brand that has legal status by virtue of it’s being registered with the federal government. (e.g. Coca Cola) • Trade name - the legal name under which a company operates. (e.g. The Coca Cola Company) • Brand extension - the practice of using an existing brand name for a new product. (e.g. Cherry Coke, Diet Coke, Caffeine Free Coke) • Service mark - a brand for a service that has legal status by virtue of its being registered with the federal government. • Family brand - the use of the same brand name for an entire product line. Co-Branding - placing two or more brand names on a product (e.g., ConAgra + Kellogg = Healthy Choice) 7 7

Manufacturer’s Brands Types of Brands Slide 9-13 Old El Paso Salsa A & P Masterchoice Salsa Manufacturer’s Brands Private Brands Brand Structure Generic Brands Salsa 8 8 8

Selecting a Brand A good brand name has several characteristics. Slide 9-14 A good brand name has several characteristics. 1. It should imply product benefits. 2. It should be positive, distinctive, easy to say and easy to remember. 3. It should be consistent with the image of the product and manufacturer. 4. It should be legally protectable and permissible. 5. It should translate well, if the product is to be offered globally. 9 9

Elements of Brand Equity Slide 9-15 Figure 9.5 Perceived Quality Name Awareness Brand Associations Brand Loyalty Other Proprietary Brand Assets Brand Equity Name Symbol Provides value to firm by Enhancing: Efficiency and effectiveness of Marketing Programs Brand Loyalty Prices/Margins Brand Extensions Trade Leverage Competitive Advantage Provides value to customer by Enhancing Customer’s: Interpretation/Processing of information Confidence in the Purchase Decision Use Satisfaction 10 10 10

Product Mixes and Product Lines Slide 9-16 Figure 9.7 Width Ready-to-Eat Cereals Convenience Foods Snack Foods Baking Products Dairy Products Total Wheaties Lucky Charms Cinnamon Toast Crunch Cheerios Kix Trix Hamburger Helper Suddenly Salad Betty Crocker Cake Mixes Creamy Deluxe Frosting Dessert Mixes Pop Secret Popcorn Fruit Rollups Nature Valley Granola Bars Bisquick Gold Medal Flour Yoplait Yogurt Colombo Yogurt D E P T H Source: Courtesy of P. Gayle Fuguitt, Marketing Research Director, Big “G” Division, General Mills 11 11 11

Developing New Products Marketing Chapter 10 Developing New Products Gilbert A. Churchill, Jr. J. Paul Peter 1 1

Types of New Products New! Slide 10-1 Figure 10.1 DVD & HD-TV New-to-the-World Products New Category Entries Kodak Royal Gold Repositionings Lysol drain opener New! Product Improvement Additions to the Product Line Windows 98, Autofocus camera Barbie on wheelchair, playing soccer, etc. A product that is new to the marketing organization in any way 2 2

The New Product Development Process Slide 10-2 Figure 10.2 Idea Generation Idea Screening Business Analysis Product Development Test Marketing Commercialization 3 3

Step 1: Techniques for Generating Ideas Slide 10-3a Table 10.1 Technique Description Delphi Method A panel of experts fills out a questionnaire; a researcher tabulates the results and sends them to panel members. Repeat the process until the panel reaches a consensus or an impasse. Benefit Analysis List all the benefits customers receive from the product under study. Think of benefits that are currently missing from the list. Use Analysis Ask customers how they use the product under study. List the various uses. Relative Brand Profile Ask target markets whether the brand name makes sense for other product categories under consideration. A stretch of the brand name that makes sense to potential buyers can be the basis for a new product. Unique properties List all the properties held in common by a product or material currently on the market. Look for unique properties of the organization’s product. 4 4

Techniques for Generating Ideas Slide 10-3b Table 10.1 Technique Description Achilles heel List the weaknesses of a product or product line (for the organization and its competitors). Prune the list to the one or two weaknesses most likely to inspire a response from competitors. Identify product concepts that could result from correcting these weaknesses. Free Association Write down one aspect of the product situation–a product attribute, use or user. Let the mind roam and jot down every idea that surfaces. Repeat the process for other aspects of the product situation. Stereotype activity Ask, “How would ________do it?” –referring to how a member of some group or a particular person would use the product. Example: What type of bicycle would a senator ride? Can also ask what the stereotype would not do. Study of other people’s failures Study products that have failed. Look for ways to solve the problems that led to failure. 5 5

Step 2: Idea Screening Idea Screening Slide 10-4 Step 2: Idea Screening Idea Screening Done to avoid Drop Error and Go Error

Step 3: Business Analysis Slide 10-5 Step 3: Business Analysis Business Analysis Concept Testing Having potential customers evaluate pictures or written descriptions of the product

Step 4: Product Development Slide 10-6 Step 4: Product Development Product Development Simultaneous/concurrent Engineering simultaneous product development

Step 5: Types of Test Markets Slide 10-7 Step 5: Types of Test Markets • A standard test market is the practice of offering a new product through normal distribution channels in a limited area. • A controlled test market is the practice of offering a new product through a set of retailers who have been paid to set aside shelf space for the product in a desirable area of the store. • A simulated test market is an experiment in which a sample of consumers has an opportunity to select products. 6

Step 6: Commercialization Slide 10-8 Step 6: Commercialization Commercialization

New Product Introductions in 1997 Slide 10-9 New Product Introductions in 1997 Food 4,883 Beverages 1107 Health and Beauty 3,655 Household Products 578 261 Pet Products Miscellaneous 117 Source: Statistical Abstract of the United States (1998), p. 548.

Selecting New Product Characteristics Slide 10-10 Decisions Description Quality level Need to consider what criteria(s) potential customers use to determine their perceptions of quality Product Features Select specifications by determining what it is that customers want from the product and what they are likely to need Product Design Design products for both ease of use and aesthetic appeal Product Safety Customers must not be harmed by using the product as intended. 5 5

The Eight Dimensions of Quality Slide 10-11 Walt Disney World Performance Perceived Quality Singapore Airlines Overall Evaluation Features Ralph Lauren Aesthetics Reliability Sears Die Hard Serviceability Durability Midas DuraCell Conformance Chrysler 7 7

Auxiliary Dimension of New Product Slide 10-12 Decisions Description Warranty A producer’s statement of what it will do to compensate the buyer if the product is defective. Magnuson-Moss Warranty FTC Act (1975) Guarantee An assurance that the product is as represented and will perform properly. Packaging Used for functional, promotional, and facilitating exchange. Labeling The plastic or paper sticker attached to a product. Nutritional Labeling & Educational Act (1990) 5 5

Universal Product Codes Slide 10-13 A code imprinted on the product or its package 0 12345 67890 5 Check Digit Identify Manufacturer Assigned by the Uniform Code Council Identify Product Assigned by the Manufacturer 8 8

Three Types Of Product Failures Slide 10-14 Three Types Of Product Failures RELATIVE Profits are less than company target PARTIAL Sales cover all the variable costs but no fixed costs ABSOLUTE Sales do not cover variable costs DEGREE OF FAILURE

Why Some New Products Succeed Slide 10-15 Why Some New Products Succeed SUCCESS FACTORS Good match between product and market needs Adequate target market size Offers a clear, meaningful benefit Distinguishable from substitute products Offers unique, superior value Organizational commitment to new product development FAILURE FACTORS Poor match between product and market needs Overestimation of market size Incorrect positioning Inappropriate price Inadequate distribution Poor promotion

Organizational Forms for New Product Development Slide 10-16 Figure 10.5 Options Functional Functional Matrix Balanced Matrix Project Matrix Venture With or Without Committee Inside/ Outside Percentage of Employee Time Devoted to the New Product Almost None Almost All Source: Adapted from C. Merle Crawford, New Products Management, 4th ed. (Burr Ridge, Ill.:Irwin, 1994), p. 411 9 9

Shortening Development Time Slide 10-17 • Use cross-functional teams • Applying technology • Delegate authority • Build on specialized knowledge 10

Marketing Chapter 11 Marketing Services Gilbert A. Churchill, Jr. J. Paul Peter Products, such as bank loans or home security, that are intangible or substantially so. 1 1

Services Receipts (in billions) Slide 11-1 Services Receipts 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Services Receipts (in billions) 900 800 700 600 500 400 300 200 100 1967 1972 1977 1982 1987 1991 1994 Year Source: Statistical Abstract of the United States (1996), p. 783.

The Economic Importance of Services Slide 11-2 The Economic Importance of Services Jobs in Great Britain Jobs in Germany Jobs in Japan 27% 43% 38% 73% 57% 62% Jobs in U.S. in 1992 Jobs in U.S. in 2005 21% 18% Goods Producing Service Producing 82% 79% Source: Arlington Star Telegram, September 2, 1996, p. B9.

Characteristics that Distinguish Services from Goods Slide 11-3a Table 11.1 Characteristic Services Goods Client relationship Services often involve an ongoing personal relationship. Especially when dealing with a doctor, lawyer, etc. Goods often involve an impersonal, short-term relationship, although relationship strength and duration are increasing. Perishability Services can be used only at the time they are offered. Goods can be placed in inventory for use at another time. Intangibility The customer owns only memories or outcomes, such as greater knowledge or styled hair. The customer owns objects that can be used, resold, or given to others. 2 2

Characteristics that Distinguish Services from Goods Slide 11-3b Table 11.1 Characteristic Services Goods Inseparability Services often cannot be separated from the person providing them. Goods typically are produced and sold by different people. Customer effort Customer can be more involved in production of services. Customer’s involvement may be limited to buying completed product and using it. Uniformity Because of inseparability and high involvement, each service may be unique, with the quality likely to vary. Variations in quality and variance from standards can be corrected before customers purchase products. 3 3

Goods/Service Continuum Slide 11-4 Mostly Tangible Goods Lumber Computer with Service Contract Restaurant Dinner Oil Change Maid Service Mostly Intangible Services 4 4

Categorizing Services by Means of Delivery Slide 11-5 Equipment Based People Based Automated Unskilled Operators Skilled Operators Unskilled Labor Skilled Labor Professionals America Online Kelly Services 5 5

The Marketing Environment for Services Slide 11-6 The Marketing Environment for Services Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The same dimensions of the marketing environment that affects goods also affects marketers of services 3 3 3 3

The Marketing Mix for Services: Product Slide 11-7 Standardized Goods Customized Services Camping Equipment Camping Trips Identical for each Customer Varies by Customer 6 6

The Marketing Mix for Services: Pricing Slide 11-8 Tools – Massachusetts Highway Department Road Use Fees – Yellowstone Park Entrance Rent – Kroger Center Office Space Fare – Taxi Ride Rate – Marriott Hotel Room Tuition – Harvard Degree 7 7

The Marketing Mix for Services: Placement Slide 11-9 Table 11.3 Nature of Interaction between Customer and Service Organization TYPE DESCRIPTION EXAMPLE Availability of Service Outlets Product Single Site Multiple Sites Customer goes to service organization Theater Barbershop Bus service Fast-food chain Service organization comes to customer Lawn care service Pest Control service Taxi service Mail Delivery Emergency repair service Customer and service organization transact at arm’s length (by mail or electronic communications Credit card company Local TV station Broadcast TV network Telephone company Sources: Reprinted from Christopher H. Lovelock, Services Marketing, 2nd ed. (Englewood Cliffs, N.J.: Prentice Hall, 1991), p. 33. An earlier version of this figure appeared in Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing (Summer 1983), p. 18. 8 8

The Marketing Mix for Services: Promotion Slide 11-10 Table 11.3 Promotion Advertising Personal Selling Intangibles require promotion to explain what the service is and how it will benefit the buyer. 8 9

Types of Nonprofit Organizations Slide 11-11 Public - local, state, federal governments, post office Cultural - museums, symphonies, libraries, and operas Education - school, colleges, universities Religious - churches, temples, mosques Philanthropic - foundations, charities, Social causes - environmental, consumerism 7 7

Characteristics that Distinguish Services from Goods Slide 11-12 Decisions Difficulties Product Can not adjust product to increase marketability Market complex ideas - with no direct benefit to donor (e.g.,MADD) Range of involvement can be low (don’t litter) to high (stop smoking) Price Indirect payment through taxes - public parks and libraries Break even pricing (Post office) or below cost pricing (university) Place Need to provide better time and place utility (e.g., salvation army; museums go on tour, universities provide better schedules) Promotion Many can not do it all all (because its illegal or lack of resources) Public Service Advertisement (PSA) - an announcement that promotes the message (“a public service message from the ad council”) 3 3

Fundamentals of Pricing Marketing Chapter 12 Fundamentals of Pricing Gilbert A. Churchill, Jr. J. Paul Peter The amount of money, good, or services that must be given up to acquire ownership or use of a product. 1 1

Sample Demand Curve Price per Unit Quantity Demanded in Units 60 50 40 Slide 12-1 Figure 12.1 A graphical representation of the quantity of a product demanded at various prices. Price per Unit 60 50 40 30 20 10 10,000 20,000 30,000 40,000 50,000 Quantity Demanded in Units 2 2

Estimating Demand - Demographic Pricing Factors Slide 12-2 How many potential buyers are in the market? • What is the location of potential buyers? • Are they organizational buyers or consumers? • What is the consumption rate of potential buyers? • What is the financial condition of potential buyers? What is the general trend in the industry? 3

Estimating Demand - Psychological Pricing Factors Slide 12-3 Will potential buyers use price as an indicator of the product’s quality? • Will potential buyers be favorably attracted by odd pricing such as 99 cents instead of $1, or $177 instead of $180? • Will potential buyers perceive the price to be too high relative to what the product offers? • Are potential buyers concerned enough with prestige to pay more for the product? • How much will potential buyers be willing to pay for the product? 4

Elastic Demand: European Vacations Inelastic Demand: Gasoline Demand Curves Showing Different Price Elasticities Slide 12-4 Figure 12.2 Elastic Demand: European Vacations Inelastic Demand: Gasoline Price per trip Price per gallon Quantity Demanded (Number of Trips) Quantity Demanded (Gallons) 5 5

Key Terms Total Revenues Slide 12-5 Terms Definition Total Revenues The total amount of money received from the sale of all units of a product. Total Costs The total amount of money spent in the sale of all units of a product. Profits The positive difference between total revenues and total costs. Marginal Analysis The technique for finding the greatest profits by measuring the economic effect of producing and selling each additional unit of a product. Marginal Revenues The change in total revenues that results from selling one additional units of a product Marginal Costs The net addition to a firm’s total costs that result from the reduction of one additional unit of a product 2 2

Marginal Analysis Relationships Slide 12-6 Figure 12.4 Profit Dollars Total Cost Total Revenue Quantity Produced and Sold Marginal Cost Dollars Marginal Revenue Quantity Produced and Sold 6 6

Pricing Based on Cost Slide 12-7 Markup on cost pricing a pricing approach that adds a percentage of the cost price to the producer’s cost in order to arrive at a selling price. Markup on selling price a pricing approach that adds a percentage of the selling price to the producer’s cost in order to arrive at a selling price. Cost-plus pricing a markup pricing approach that adds on a dollar amount to the producer’s cost in order to arrive at a selling price. Rate of return pricing a pricing approach that involves total costs and then adding a desired rate of return to them to determine the selling price. Breakeven analysis a technique for determining the sales volume needed to cover all costs at a specific rate. 7 7

Breakeven Analysis Slide 12-8 Figure 12.5 Dollars Total Revenue Total Cost Profit Breakeven Point Loss Quantity Produced and Sold Breakeven point - the level of sales at which total revenues = total costs 8 8

Pricing Based on Competition Slide 12-9 Pricing Below Competition pricing to gain market share and attract cost-conscious buyers. Especially useful to companies with low cost positions. Matching Competition pricing at competitor’s levels with the intent of distinguishing the product in other ways. Common in oligopolies. Pricing Above Competition pricing for products that offer greater value, quality, convenience or prestige. Sealed-Bid Pricing pricing in which the buyer asks potential sellers to submit sealed bids containing the seller’s pricing and availabilities. 9 9

Pricing Based on Customer Value Slide 12-10 Reference Price the price that buyers use to compare the offered price of a product or service. Demand-backward Pricing a pricing approach that involves setting a price by starting with the estimated price customers will pay and working backwards with retail and wholesale margins. Value Pricing a pricing approach that involves setting prices so that the exchange value is higher than the value of competing exchanges. 10 10

Comparison of the various pricing approaches Slide 12-11 Advantage Limitations Cost-based Pricing Easy to use Intuitively appealing Used when you have many different products Do not take into consideration the effects of price on consumer demand Does not take into account competitor’s prices Competition-based pricing Intuitively appealing Try to offer customers greater value Since costs are not considered, at what price can the firm generate profits Does not take into account what customers value most Value-based pricing Ideal if a match can be found between what customers value most and it does well Offer customers greater value Does not take both costs and competitors into account 2 2

Laws Limiting Pricing Practices Slide 12-12 Table 12.3 Law Pricing Practices Sherman Antitrust Act Consumer Goods Pricing Act Federal Trade Commission Act Robinson-Patman Act Laws of most countries Price Fixing Resale Price Maintenance Deceptive Pricing Practices Price discrimination that lessens or damages competition; discrimination in the use of promotional pricing Dumping 11 11

Illegal Pricing Practices Slide 12-13 Table 12.3 Pricing Practices Definition An illegal agreements among competitors to set the price of a product An illegal pricing tactic that involves misleading customers about the relative goodness of an asking price The illegal practice of charging different prices to buyers that do not reflect cost differences to the seller An illegal pricing approach that involves setting very low prices in order to hurt competitors. The illegal practice of pricing products below its costs or below the going rate in a market. An illegal pricing tactic by which customers are attracted to a store by an advertised low-priced product that is then reported to be out-of-stock in order to sell a more expensive product Price Fixing Deceptive Pricing Price Discrimination Predatory Pricing Dumping Bait and switch 11 11

Pricing Goods and Services Marketing Chapter 13 Pricing Goods and Services Gilbert A. Churchill, Jr. J. Paul Peter 1 1

The Pricing Process - I Slide 13-1 Figure 13.2 Evaluate Customer Response and other Pricing Constraints Set Pricing Objectives Make Price Adjustments as Needed Analyze Profit Potential Set Initial Price 3 3

Pricing Objectives Segmentation and Positioning Objectives Slide 13-2 Pricing Objective Examples Segmentation and Positioning Objectives Support Efforts to Position Product for Market Target Sales and Profit Objectives Achieve desired levels of sales and earn targeted level of profits Compete in terms of relative price or market share Competitive Objective Survival Objective Enable organization to survive Social Responsibility Objective Meet a standard of social responsibility 2 2

Segmentation and Positioning Objectives Slide 13-3 Table 13.1 Price Level Value Position Examples High relative to product class High value because of quality and prestige. Nike athletic shoes (such as Air Jordans); dental work by a widely respected specialist. Around average for product class High value because of good quality at a reasonable price. Keds tennis shoes; dental work by the neighborhood family dentist. Low relative to product class High value because of acceptable quality at a low price. Generic or private-label shoes at a drugstore or discount store; dental work by students being trained at a university clinic. 2 2

The Pricing Process - II, III, IV Slide 13-4 Figure 13.2 Evaluate Customer Response and other Pricing Constraints Set Pricing Objectives Make Price Adjustments as Needed Analyze Profit Potential Set Initial Price 3 3

Set Initial Price - Strategies for Pricing New Products Slide 13-5 Price Skimming $ Penetration Pricing Time 4 4

Set Initial Price - Strategies for Pricing Existing Products Slide 13-6 Product Characteristics Examples Perishability This includes physical perishability (bananas) as well as demand running out over time (Christmas cards) Distinctiveness The product must be distinct enough from the competition in terms of quality, branding, design, and features Life Cycle Stage As the product goes from the introductory, growth, maturity and decline, the price must continuously decrease 2 2

Pricing Product Lines Price Lining Uniform Pricing all books $40.00 Slide 13-7 Price Lining Uniform Pricing all books $40.00 $1.00 all CD’s $15.95 $1.00 all Cassettes $9.95 $1.00 5 5

The Pricing Process - V Slide 13-8 Figure 13.2 Evaluate Customer Response and other Pricing Constraints Set Pricing Objectives Make Price Adjustments as Needed Analyze Profit Potential Set Initial Price 3 3

Adjusting Prices - Discounting Slide 13-9a Table 13.2 Discount Definition Example Quantity discount Reduction in the price per unit for purchasing a larger quantity A catalog for Gardener’s Supply Company offers 1 cedar planter for $32.95 and 2 or more for $30.00 each. Seasonal discount Price reduction offered during times of slow demand A ski resort offers lower prices during the summer. Trade discount Percentage reduction from list price offered to resellers A publisher sells books to a chain of stores for a fraction of the retail price. Cash discount Incentive for buyers to pay quickly or a lower price for payment of cash An organization receives an invoice that reads, “2/10 net 30.” 6 6

Adjusting Prices - Allowances Slide 13-9b Table 13.2 Discount Definition Example Trade-in allowance Discount for providing a product along with monetary payment A car dealer offers $1,000 off the list price in exchange for a buyer trading in her used car. Promotional allowance Price reduction in exchange for the reseller performing certain promotional activities A frozen-pizza maker gives a price break to a supermarket that promises to feature the product in its advertising. 7

Adjusting Prices - Others Slide 13-9c Table 13.2 Discount Definition Example Promotional discount Short-term discount to stimulate sales or convince buyers to try a product A Jiffy Lube franchise passes out flyers offering $5 off on an oil change; the discount is good for 30 days. Loss leader pricing Setting prices near or below cost in order to attract customers to a store A supermarket features bananas at 20 cents a pound and Pampers diapers at 50 percent off; the price is below cost, but the store expects buyers to purchase additional items selling at a profit. 8

Every-Day Low Price Promotional Discount Strategy EDLP Strategy Slide 13-10 Promotional Discount Strategy EDLP Strategy Sell100$10.99 Sell 10 $15.99 Sell 20 $11.99 Sell 70 $9.99 5 5

Psychological Pricing Slide 13-11 Table 13.3 Pricing Technique TYPE DESCRIPTION EXAMPLE Definition Example Product Prestige Pricing Setting a high price to convey an image of high quality or exclusivity The Porsche 911 turbo coupe has a base price of $105,000. Table 13.3 missing Odd-even pricing Setting prices a few dollars or cents below a round number Office Depot advertises a GE cellular phone for $39.99. Bundle pricing Offering several products as a package at a single price A hotel quotes a rate for an over-night stay that includes breakfast the next morning. 7 9

Geographic Pricing Slide 13-12 Geographic Pricing Pricing a good or service according to where it is delivered. FOB Origin Pricing Seller’s price is for the goods at point of shipment, where title passes from buyer to seller. Uniform Delivered Pricing Seller’s price includes shipping; title passes where buyer receives the goods. Single-zone Pricing Pricing in which all buyers pay the same price, including delivery. Multiple-zone pricing Pricing in which buyers in different zones pay different delivery prices. FOB with freight allowed Pricing in which the seller allows the buyer to deduct shipping costs from the quoted price of the product. Basing point pricing Pricing in which the seller charges the quoted price plus the cost of delivering from a basing point where the product is made. 8 10

Evaluating Pricing Table 13.3 missing Response Example Slide 13-13 TYPE DESCRIPTION EXAMPLE Response Example Product Competitor Response Response to Low Prices Price war - repeated price reductions Reposition as being higher quality Table 13.3 missing Response to High Prices Increase their own prices Consumer Response Light Demand A signal that the price may be too high May have to modify other elements of the marketing mix Heavy Demand A signal that the price may be too low May have to modify other elements of the marketing mix 7 9

Managing Distribution Channels Marketing Chapter 14 Managing Distribution Channels Gilbert A. Churchill, Jr. J. Paul Peter 1 1

Channel of Distribution Slide 14-1 Source Definition Lamb, Hair, and McDaniel A set of interdependent organizations that facilitate the transfer of ownership as products move from producer to business user or consumer An array of exchange relationships that create customer value in the acquisition, consumption, and disposition of products and services Pelton, Strutton, and Lumpkin An organized network (system) of agencies and institutions that perform all the functions required to link producers with end users to accomplish the marketing task Churchill and Peter 9 9

How Intermediaries Improve Channel Efficiency Slide 14-2 Figure 14.1 Sales Contacts without an Intermediary Sales Contacts with an Intermediary Bike Shop Intermediary Manufacturers of Bicycle Helmets Bike Riders Manufacturers of Bicycle Helmets Bike Riders 2 2

Essential Channel Functions Slide 14-3 Essential Channel Functions Transactional Functions Contacting and Promoting Negotiating Risk Taking Logistical Functions Physical Distribution Sorting Sorting out Accumulation Allocation Assorting Facilitating Functions Research Financing

Common Channels for Consumer Goods Slide 14-4 Figure 14.2 Direct Channel Producer Consumer Indirect Channels Producer Retailers Consumer Producer Wholesalers Retailers Consumer Producer Agents Wholesalers Retailers Consumer 3 3

Common Channels for Consumer Goods - Examples Slide 14-5 Corky’s Bar-B-Q Consumer Frito Lay Safeway Consumer Interstate Beverage Corporation Soft Drink Retailers Snapple Consumer Small Houseplant Grower Willow Rum Wholesale Florists Retail Florists Consumer 4 4

Common Channels for Organizational Goods Slide 14-6 Figure 14.3 Direct Channel Organizational buyer Producer Indirect Channels Organizational buyer Producer Distributors Organizational buyer Producer Agents Organizational buyer Producer Agents Distributors 3 3

Alternative Channel of Distribution Slide 14-7 Definition Example Type Multiple/dual channel a manufacturer distributing the same product to target market through two or more channels Penn. tennis Balls, Cdico caller Id equipment Nontraditional channel channels used to differentiate itself from the competition Internet, infomercial using one manufacturer’s already established channel to reach customers Blockbuster and Coca-Cola Strategic alliance channel Recycling (plastics, batteries), product recalls Reverse/backward channel products move in the opposite direction to traditional channels 9 9

Types of Vertical Marketing Systems Slide 14-8 Figure 14.5 Vertical Marketing Systems (VMSs) Administered VMSs Corporate VMSs Contractual VMSs Wholesalers Sponsored Cooperatives Retailer Sponsored Cooperatives Franchising 5 5

Three Categories of Contractual Vertical Marketing Systems Slide 14-9 McDonalds Franchises Retailer Sponsored Cooperatives Wholesaler Sponsored Cooperatives True-Value Hardware Independent Grocers Alliance (IGA) 6 6

Factors to Evaluate for Selecting a Distribution Channel Slide 14-10a Figure 14.6 Customer Characteristics Product Characteristics Intermediary Characteristics Number Geographic Dispersion Channel Preferences Buying Behavior Use of Technology Cost per Unit Pershability Bulkiness Standardization Need for Installation and Maintenance Availability Willingness to Carry Product Market Serviced Distribution Functions Performed Potential for Conflict and Cooperation Other Product Offerings Financial Condition Strengths and Weaknesses 7 7

Factors to Evaluate for Selecting a Distribution Channel Slide 14-10b Figure 14.6 Competitor Characteristics Environmental Characteristics Organization Characteristics Number and Size Distribution Strategies Financial Conditions Sizes of Product Lines, Product Mixes Objectives, Strategies and Budgets Strengths and Weaknesses Economic Conditions Political Issues Laws, Regulations and Ethics Cultural and Social Changes Technological Changes Size and Market Share Financial Condition Size of Product Lines, Product Mix Ability to Perform Distribution Functions Objectives, Strategies and Budgets Channel Experience Strengths and Weaknesses 8 8

Levels of Market Coverage Slide 14-11 Table 14.2 Number of Intermediaries in Trading Area Level Objective Examples Exclusive Work with a single intermediary for a product that requires special resources or positioning; distribute luxury goods effectively. One Electronic Liquid Fillers packaging systems; Rolex watches Selective Work closely with intermediaries who meet certain criteria; distribute shopping goods effectively. Several Bose speakers; Compaq computer systems Intensive Support mass selling; distribute convenience goods effectively. Many Classic Coke; disposable writing pens 9 9

Channel Leadership Power Channel Captain Information Expert Reward Slide 14-12 Information Expert Reward Channel Power Captain Referent Coercive Legitimate 10 10

Channel Options for Global Markets Slide 14-13 Table 14.8 Domestic Manufacturers Least Control Most Control License Foreign Manufacturers License Foreign Manufacturers Domestic Exporters Global Intermediaries Global Branches Global Markets Global Markets Global Markets Global Markets Global Markets 11 11

Legal, Political and Ethical Issues Slide 14-14 Exclusive Dealing A restriction imposed by a supplier on a customer forbidding the customer from purchasing some type of product from any other supplier. Closed Sale Territories A producer specifies a geographic area and assigns one intermediary to serve it. Tying Contracts An agreement under which a marketer sells a particular product only if the buyer also purchases another specific product. Full Line Forcing A type of tying arrangement in which an intermediary that wants to carry a particular product must buy the entire line. Gray Market The situation in which foreign distributors sell foreign versions of U.S. products in the United States. Slotting Allowances A fee paid by a manufacturer for space in a retail store. 12 12

Managing Marketing Communications Chapter 17 Managing Marketing Communications Gilbert A. Churchill, Jr. J. Paul Peter 1 1

Primary Tasks of Communication Slide 17-1 Primary Tasks of Communication INFORMING During the introduction stage of the PLC Explain the purpose & benefits of the product REMINDING During the growth stage of the PLC Convenience the customer to buy company’s brand over the competition Target Audience PERSUADING During the maturity stage of the PLC Used to trigger memory (brand specific)

Some Strategic Goals of Marketing Communications Slide 17-2 Table 17.1 Strategic Goal Description Create awareness Inform markets about products, brands, stores or organizations. Build positive images Develop positive evaluations in people’s minds about products, brands, stores or organizations. Identify prospects Find out the names, addresses and possible needs of potential buyers. Build channel relationships Increase cooperation among channel members. Retain customers Create value for customers, satisfy their wants and needs, and earn their loyalty. 2 2

The Communication Process Slide 17-3 Figure 17.1 Source Encodes Message Receiver Decodes Message Source Transmits Message via Medium Receiver Provides Feedback to Source Noise 3 3

Marketing Communications The AIDA Model Slide 17-4 Figure 17.2 Marketing Communications Attention Interest Desire Action 4 4

The Communications Mix Slide 17-5 Advertising Personal Service Sales Promotion Publicity 5 5

Comparing the Elements of the Communications Mix Slide 17-6 Advertising Personal Selling Sales Promotion Publicity Communications Mode One-Way Two-Way One-Way One-Way Marketer Control Over Message High Medium-High High Low Long Term, Ongoing Activity Yes Yes No No Considered an Unbiased Source No No No Yes Message can be Customized for each Customer No Yes No No Short Term Focus No No Yes No Cost per Contact Low High Varies No Direct Cost Overall Cost High Low Varies No Direct Cost 6 6

When Elements of Communication Mix (Promotion) Are Most Useful Slide 17-7 Advertising Personal Selling Effectiveness Sales Promotion Public Relations Attention Interest Desire Action Very effective Somewhat effective Not effective

Managing Communications Strategy Slide 17-8 Set Communications Objectives Select the Communications Mix Set Communications Budgeting Implementation and Control 7 7

Factors that Affect the Communication Mix Slide 17-9 Factors that Affect the Communication Mix Nature of the Product Industrial products are expensive, complex, customized Consumers products depend upon costs and risks Stage in the Product Life Cycle Early - advertising & publicity Later - sales promotions Target Market Characteristics Widely scattered markets Highly informed buyers Type of Buying Decision Routine - advertising Complex - personal selling Available Funds Lack of money - publicity, commission based personal selling Plenty of money - advertising $ $ $ Push–and–Pull Strategies Push - suppliers promote to intermediaries Pull - suppliers promote to ultimate consumer

Two Marketing Communications Approaches Slide 17-10 Figure 17.3 Push Strategy Marketing Communications Marketing Communications Producer Resellers End Users Pull Strategy Marketing Communications Producer Request Products Resellers Request Products End Users 8 8

Methods for Setting Communications Budgets Slide 17-11a Table 17.3 Method Advantage Disadvantage Percentage of sales Simple to use Budgeting based on expected sales implies communications can’t improve sales performance Fixed sum per unit Marketer likely to benefit from increasing the budget during times of rising sales Decreasing the communications budget during periods of falling sales could be disastrous in some cases Competition-based Takes into account competitors’ activities Amounts budgeted will be reasonable if competitors are budgeting effectively Can be difficult to get competitors’ budget information Can lead to ever-increasing communications budgets Assumes competitors have the same objectives 9 9

Methods for Setting Communications Budgets Slide 17-11b Table 17.3 Method Advantage Disadvantage All you can afford Takes into account limited resources May stimulate creativity in making funds work hard Doesn’t consider marketing objectives Borrowing may be worthwhile to fund some communications strategies Objective and task Based on achieving communications objectives Focusing on objectives uses funds most efficiently No basis for setting priorities among objectives Treats all objectives as equally worthy of funding Hard to estimate what will it cost to achieve a particular objective 10 10

? ? What Happened Why it Happened Evaluating the Effectiveness of Marketing Communications Slide 17-12 Sales Changes What Happened ? Sales Changes Marketing Research Why it Happened ? 13 11

Regulation of Communication Slide 17-13 Regulation of Communication Self-Regulation - complaints • National Advertising Division (NAD) of BBB • National Advertising Review Board (NARB) Federal Regulation - deceptive & misrepresentation • Federal Trade Commission (FTC)