MARKETING: A FOCUS ON CUSTOMER RELATIONSHIPS AND VALUE

MARKETING: A FOCUS ON CUSTOMER RELATIONSHIPS AND VALUE
C H A P T E R O N E MARKETING: A FOCUS ON CUSTOMER RELATIONSHIPS AND VALUE Irwin/McGraw-Hill

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Define marketing and explain the importance of (1) discovering and (2) satisfying consumer needs and wants. Distinguish between marketing mix elements and environmental factors. Understand how organizations build strong customer relationships using current thinking about customer value and relationship marketing. (continued)

Describe how today’s market orientation era differs from prior eras oriented to production and selling. Understand the meaning of ethics and social responsibility and how they relate to the individual, organizations, and society. Know what is required for marketing to occur and how it creates customer value and utilities for consumers.

PP1-AA Rollerblade Skates
Conversations with in-line skaters indicated that using Rollerblade skates: was incredible fun was a great aerobic workout and made the skater stronger and healthier was quite different from traditional skating, which was practiced alone, mostly inside, and by young girls would have great appeal to people other than just off-season ice hockey skaters and skiers.

PP1-1 Number of in-line skaters in the United States
35 David Samuels and his Rollerblade team target new opportunities 30 25 20 15 10 5 29.1 First Extreme Games features in-line skating competition 27.5 Number of U.S. in-line skaters passes 10,000,000 22.5 18.8 Number of U.S. in-line skate participants (millions) Two brothers reinvent in-line skates Rollerblade’s “guerilla marketing” launches in-line skate industry 12.6 9.4 6.2 4.3 3.0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

PP1-2a The see-if-you’re-really-a-marketing-expert test
1. In a magazine article, a well-known actress said she often “Rollerbladed” for fun and exercise. What was Rollerblade, Inc.’s reaction? (a) delighted, (b) upset, or (c) somewhere in between. Why? 2. What is “Polavision”? (a) a new breathable contact lens, (b) a TV network that competes with Home Box Office, (c) special bifocal glasses, (d) instant movies, or (e) a political newspaper. (continued)

PP1-2b The see-if-you’re-really-a-marketing-expert test
3. Right after World War II, IBM commissioned a study to estimate the total market for electronic computers. The study’s results were (a) less than 10, (b) 1,000, (c) 10,000, (d) 100,000, or (e) 1 million or more. 4. True or false: Building good customer relationships is a critical marketing issue today, as illustrated by having a loyal Kleenex customer spending more than $1,000 during his or her lifetime, in today’s dollars. 5. True or false: “Grinding” done by city kids today uses a skateboard with bad wheels or bearings.

PP1-BB Definition of Marketing
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 objectives.

PP1-CC Definition of Market Orientation
An organization that has a market orientation focuses its efforts on (1) Continuously collecting information about customers’ needs and competitors’ capabilities, (2) sharing this information across departments, and (3) using the information to create customer value.

PP1-DD Definition of Exchange
Exchange is the trade of things of value between buyer and seller so that each is better of after the trade.

The Organization Society Society
PP1-3 An organization’s marketing department relates to many people, groups, and forces The Organization Society Society Alliances Ownership Research and Development Human Resources Other Organizations Shareholders (owners) Information Systems Manufacturing Management Partnerships Relationships Suppliers Customers Finance Marketing Environmental Forces Social Economic Technological Competitive Regulatory

PP1-EE Requirements for Marketing to Occur
For marketing to occur, at least 4 factors are required: 1. Two or more parties (individuals or organizations) with unsatisfied needs, 2. a desire and ability on their part to be satisfied, 3. a way for the parties to communicate, and 4. something to exchange.

PP1-FF Concept Check 1. What is marketing? 2. Marketing focuses on __________ and _________ consumer needs. 3. What four factors are needed for marketing to occur?

PP1-GG Some Product Disasters
1. New Coke 2. Polavision 3. The Edsel 4. Players Beer 5. Crystal Pepsi

PP1-HH Needs & Wants Should marketing try to satisfy consumer needs or
A need occurs when a person feels physiologically deprived of basic necessities such as food, clothing, and shelter. A want is a felt need that is shaped by a person’s knowledge, culture, and personality. What are the legal, ethical, and moral implications of satisfying wants and needs?

Organization’s marketing department
PP1-4 Marketing’s first task:discovering consumer needs Organization’s marketing department Discover consumer needs Information about needs Potential consumers: The market

PP1-II What is a Market? Potential consumers make up a market,
which is: 1. People 2. with the desire and 3. with the ability to buy a specific product.

PP1-JJ The Target Market
Because the organization obviously can’t satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential consumers. This is the target market -- one or more specific groups of potential consumers toward which an organization directs its marketing program.

PP1-KK The Four Ps: Controllable Marketing Mix Factors
Product Price Promotion Place

PP1-LL The Uncontrollable, Environmental Factors
Social Factors Economic Factors Technological Factors Competitive Factors Regulatory Factors

PP1-A Summary of factors that affect an organization’s
PP1-A Summary of factors that affect an organization’s marketing program Competitive forces Economic forces Marketing program Product Promotion Consumer Regulatory forces Social forces Price Place Technological forces Environmental forces

Customer value is. . . . PP1-MM Customer Value
the unique combination of benefits received by target buyers that includes quality price convenience on-time delivery after-sale service

PP1-NN Relationship Marketing
Relationship marketing is linking the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefits. Mutual long-term benefits between the organization and its customers require links to other vital stakeholders-- including suppliers, employees, and “partners” such as wholesalers or retailers in a manufacturer’s channel of distribution.

PP1-OO Mass Customization
Mass Customization is tailoring goods or services to the tastes of individual customers in high volumes at a relatively low cost.

PP1-PP Definition of Marketing Program
A marketing program is a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers.

Organization’s marketing department
PP1-5 Marketing’s Second Task: Satisfying Consumer Needs Organization’s marketing department Concepts for products Satisfy consumer needs Find the right combination of: Product Price Promotion Place Discover consumer needs Information about needs Goods, services, ideas Potential consumers: The market

Marketing Program Activity to Reach
PP1-6a Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Product Offer the Xten-plus Offer the Outback Use new-product skate for children that X skate with research, the latest “extends” so that it trapped air filled technology, and changes four shoe sizes wheels & a full extensive testing to as the children grow suspension frame offer high-quality that cushions the skates that satisfy ride on rough the wants & needs roads & cracked of carefully defined pavement customer segments (continued)

PP1-6b Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments -- Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Price $99/pair $199/pair Attempt to set prices that provide genuine value to the customer segment that is targeted

PP1-6c Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Promotion Use demo vans & blade- Feature R’blade Continue to increase mobiles to introduce brand in ESPN awareness of in-line children to in-line in-line sports skating to those new skating while working competitions & to the sport while with R’blade dealers magazines such offering specific to place ads in local as Shape, Fitness, skate designs for newspapers Mademoiselle, and more advanced inline & local segments want them newspapers (continued)

PP1-6d Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Place Distribute the Xten- Distribute the Make it easy for plus through sporting Outback X buyers in the goods stores through specially segment to buy in-line sporting at an outlet that is goods stores convenient and where they feel comfortable

Courtesy Rollerblade, Inc.
PP1-B A Rollerblade Ad to Show In-Line Skating as Giving Both Exercise and Fun from the Early 1990’s Courtesy Rollerblade, Inc.

Courtesy Rollerblade, Inc.
PP1-C A Rollerblade Ad From the Late 1990’s to Show Specific Benefits of a Rollerboard Skate Courtesy Rollerblade, Inc.

PP1-D An UltraWheels Ad for Its Expander Line of Expandable Skates
Courtesy First Team Sports

Main marketing mix actions
PP1-E How Rollerblade®, Inc.’s marketing mix actions today differ from those in 1986 Main marketing mix actions SITUATION IN 1986 BASIS OF COMPARISON TODAY Almost none Number of competitors Over 30 Inform/educate potential buyers; gain awareness Stress Rollerblade’s brand differences from competitors; maintain brand loyalty Only a few models Product Many models targeted at different market segments Main Rollerblade marketing objective Relatively high, narrow range Price Wide variations, depending on model and retail outlet “Guerilla marketing” promotions on tiny budget to gain product exposure Promotion More diverse promotions, ads to stress Rollerblade’s brand differences/advantages Place Sporting goods stores Broadened distribution to include chains, mass retailers

PP1-QQ Concept Check 1. An organization can’t satisfy the
needs of all consumers, so it must focus on one or more subgroups, which are its ______________. 2. What are the four marketing mix elements that make up the organization’s marketing program? 3. What are uncontrollable variables?

PP1-7 Four different orientations in the history of American business
Production era Sales era Marketing concept era Market orientation era

PP1-RR Ethics & Social Responsibility -- Key Terms
societal marketing concept macromarketing micromarketing

PP1-SS The Breadth & Depth of Marketing
How marketing affects every person and organization Who markets? What do they market? Who buys and uses what is marketed? Who benefits from these marketing activities? How do they benefit?

PP1-TT Who buys and uses what is marketed?
Ultimate Consumers Organizational Buyers

Examples of Marketing Actions that Create Utility
PP1-UU How Do Consumers Benefit? Utility Examples of Marketing Actions that Create Utility Form Place Time Possession Product design, packaging Distribution, store location Inventory management, warehouses, delivery Transactions, transfer of ownership

PP1-F American Liver Foundation Ad

PP1-VV Concept Check 1. Like Pillsbury, many firms have gone
through four distinct orientations for their business: starting with the _______ era and ending with today’s _______ era. 2. What are the two key characteristics of the marketing concept? 3. In this book the term product refers to what three things?

LINKING MARKETING AND CORPORATE STRATEGIES C H A P T E R T W O
Irwin/McGraw-Hill

Describe the three organizational levels of strategy and their components. Describe how the three organizational levels of strategy relate to each other and how they influence the marketing function. Describe the strategic marketing process and its three key phases: planning, implementation, and control. (continued)

Understand how organizations search for new marketing opportunities and select target markets. Explain how the marketing mix elements are blended into a cohesive marketing program. Describe how marketing control compares actual results with planned objectives and acts on deviations from the plan.

PP2-1 Three levels of strategy in an organization
Corporate strategy Vision Corporate goals Philosophy and culture Business unit strategy Mission Business goals Competencies Functional strategy Information systems Research & development Manufacturing Finance Marketing Human resources

1. What are the three levels in today’s large organizations?
PP2-AA Concept Check 1. What are the three levels in today’s large organizations? 2. What is the difference between corporate vision and corporate goals?

PP2-2 The Organization ’ s Success Quality Efficiency Customer
Innovation Relationships

PP2-BB Definition of Corporate Vision
Corporate vision is a clear word picture of the organization’s future, often with an inspirational theme. It sets the overall direction for the organization, describing what it strives to be--stretching the organization, but not beyond reason.

PP2-CC Definition of Corporate Goals
A goal is a targeted level of performance set in advance of work. Therefore, corporate goals provide strategic performance targets that the entire organization must reach to purse its vision.

PP2-DD Types of Corporate Goals
Corporate goals may be articulated in terms of: - profits quality - sales revenue employee welfare - market share social responsibility - unit sales

PP2-EE Corporate Philosophy and Culture
Corporate philosophy establishes the values and “rules of conduct” for running the organization. Corporate culture refers to a system of shared attitudes and behaviors held by the employees that distinguish it from other organizations.

PP2-FF Business Unit Mission and Goal
The business unit mission is a statement that specifies the markets and product lines in which a business will compete. It communicates the scope of a business unit. A business unit goal is a performance target the business unit seeks to reach in an effort to achieve its mission. Goals that are more specific and quantifiable are called objectives.

BUSINESS UNIT GOALS (Strategic Initiatives)
PP2-3 Mission and Goals of Domestic Merchandising Group, Sears, Roebuck & Co. BUSINESS UNIT MISSION To be a compelling place to shop, work, and invest. BUSINESS UNIT GOALS (Strategic Initiatives) Focus on core businesses Serve the target customer Be market driven Achieve consistent productivity improvement Drive organizational transformation

PP2-GG The Boston Consulting Group Matrix
The Boston Consulting Group (BCG) Matrix The BCG business portfolio analysis analyzes a firm’s business units (SBUs) as though they were a collection of separate investments. The technique locates SBUs on a market growth-relative market share matrix. Then the SBUs are classified as either “question marks,” “stars,”“cash cows,” or “dogs.”

? PP2-4 Boston Consulting Group growth-share matrix Market growth rate
20% High 10% Low 0% ? Question mark Star A Market growth rate D B Cash cow Dog C 10x High 1x Low 0.1x Relative market share (share relative to largest competitor)

PP2-HH Specifying the SBU’s Competencies: Some important definitions
competitive advantage is . . . quality is . . . benchmarking is

PP2-II Concept Check 1. “Make Sears a compelling place to
shop, work, and invest” is an example of what kind of business unit statement? 2. What is business portfolio analysis? 3. What is a competitive advantage, and why is it important?

PP2-5 The strategic marketing process
Step 2 Planning phase Situation (SWOT) analysis Market-product focus and goal setting Marketing program Corrective Action Marketing plan Implementation Phase Results Control Phase

PP2-6 Ben & Jerry’s: A “SWOT” Analysis to Get It Growing Again
TYPE OF FACTOR Location of Factor Favorable Unfavorable Internal -Prestigious, well known brand -Danger that B&J’s social responsi- name among U.S. consumers bilities actions may add costs, -40% share of the U.S. super reduce focus on core business premium ice cream market -Need for experienced managers to -Strong position among customers help growth built on reputation for pure -Flat sales & profits in recent years ingredients & social responsibility (continued)

PP2-6 Ben & Jerry’s: A “SWOT” Analysis to Get It Growing Again
TYPE OF FACTOR Location of Factor Favorable Unfavorable External -Growing demand for quality -Consumer concern with fatty ice cream in overseas markets desserts; B&J’s customers are -Increasing U.S. demand for the type who read new frozen yogurt & other low fat government-ordered desserts nutritional labels -Success of many U.S. firms in -Competes with giant Pillsbury extending successful brand in & its Haagen-Dazs brand one product category to others -International downturns increase the risks for B&J in European & Asian markets (continued)

Current Market Penetration Product Development
PP2-7 Four market-product strategies: alternative ways to expand sales revenues for Ben & Jerry’s PRODUCTS MARKETS CURRENT NEW Current Market Penetration Product Development Selling more Ben & Jerry’s Selling a new product super premium ice cream such as children’s to Americans clothing under the Ben & Jerry’s brand to Americans New Market Development Diversification Selling B&J’s super Selling a new product premium ice cream to Asian such as children’s markets for the first time clothing in Asian markets for the first time

Cohesive marketing mix
PP2-8 Elements of the marketing mix that compose a cohesive marketing program Marketing manager Product Features Brand name Packaging Service Warranty Price List price Discounts Allowances Credit items Payment period Promotion Advertising Personal selling Sales promotion Publicity Place Outlets Channels Coverage Transportation Stock level Cohesive marketing mix Promotion Place Price Product

PP2-JJ Concept Check 1. What is the difference between a
strength and an opportunity in a SWOT analysis? 2. What is market segmentation? 3. If Ben & Jerry’s attempts to enter Asian markets with its super premium ice cream, which market-product strategy would it be using?

PP2-A General Electric’s stoplight strategy chart
Market attractiveness Business position Strong Medium Weak High Low Green band = “Go” signal = Build Yellow band = “Caution” signal = Hold High overall attractiveness overall Low overall attractiveness attractiveness B A C Red band = “Stop” signal = Divest

PP2-B PIMS chart showing impact of relative market share
PP2-B PIMS chart showing impact of relative market share expense/sales revenue ratio on a firm’s ROI 20 21 13 7 34 19 31 Relative market share Marketing expense/sales revenue ratio Note: Numbers in cells represent ROI. Low 26% 63% High 6% 11%

PP2-C Sears Ad Reflecting Its Search for a New Mission and Focus
Courtesy of Sears, Roebuck & Co.

PP2-D Nokia Digital Cellular Phone Ad
Courtesy of Nokia Americas.

PP2-E Kodak Enhance Station Ad
Courtesy of Eastman Kodak Co.

Element of the plan Marketing plan Business plan 1. Executive summary
PP2-F Elements in typical marketing and business plans targeted at different audiences Element of the plan Marketing plan Business plan For internal audience (to direct firm) For external audience (to raise capital) For internal audience (to direct firm) For external audience (to raise capital) 1. Executive summary     2. Description of organization   3. Strategic plan/focus   4. Situation analysis    5. Market-product focus     6. Marketing program strategy and tactics     7. R&D and operations program   8. Financial projections     9. Organization   10. Implementation plan     11. Evaluation and control   A. Appendices    

PP2-9 Organization of a Typical Manufacturing Firm, Showing a
PP2-9 Organization of a Typical Manufacturing Firm, Showing a Breakdown of the Marketing Department President Vice President Research and Development Department Vice President Manufacturing Department Vice President Marketing Department Vice President Account and Finance Department Vice President Human Resources Department Manager Marketing Research Manager Sales Manager Product Planning Manager Advertising & Sales Promotion Sales Regions and Representatives

PP2-10 Evaluation & Control of Kodak’s Marketing Program
Target sales revenues with new plans and actions $32 28 24 20 16 12 8 4 D + + Actual sales revenues + + + Planning Gap + B + + + + B C + A Sales revenues without new plans and actions Past Future

PP2-KK Steps in the Strategic Marketing Process
Step 1: Situation (SWOT) Analysis Step 2: Market-Product Focus & Goal Setting Step 3: Marketing Program Step 4: Implementation Phase Step 5: Control Phase

PP2-LL Marketing Strategy and Tactics
A marketing strategy is a means by which a marketing goal is to be achieved, usually characterized by a specific target market and a marketing program to reach it. Marketing tactics are detailed day-to-day operational decisions essential to the overall success of marketing strategies.

PP2-MM Concept Check 1. What is the control phase of the strategic marketing process? 2. How do the objectives set for a marketing program in the planning phase relate to the control phase of the strategic marketing process?

THE CHANGING MARKETING ENVIRONMENT
C H A P T E R T H R E E THE CHANGING MARKETING ENVIRONMENT Irwin/McGraw-Hill

Understand how environmental scanning provides information about social, economic, technological, competitive, and regulatory forces. Explain how social forces such as demographics and culture and economic forces such as macroeconomic conditions and consumer income affect marketing. (continued)

Describe how technological changes can affect marketing. Understand the forms of competition that exist in a market, key components of competition, and the impact of competition on corporate structures. Explain the major legislation that ensures competition and regulates the elements of the marketing mix.

PP3-AA The Digital Revolution
The Digital Revolution: one of the biggest changes in the world of marketing. Changes in technology are transforming the ways we: communicate, buy, sell, learn, and work.

PP3-BB The Net Generation
80 million people under the age of 22 who have grown up with the new technologies, becoming authorities in their use. As the Internet has become the focus of the digital age, the Net Generation has become the first group to use it consistently for: - entertainment - communication - education - shopping

PP3-1 Environmental forces affecting the organization,
PP3-1 Environmental forces affecting the organization, as well as its suppliers and customers Suppliers Organization Customers Marketing department Other departments Employees Environmental forces Social Economic Technological Competitive Regulatory Demographic shifts Cultural changes Macroeconimic conditions Consumer income Changing technology Ecological impact of technology Alternative forms of competition Components of competition Increasing foreign competition Laws protecting competition Laws affecting marketing mix actions Self-regulation Consumerism

PP3-2a An Environmental Scan of the United States Social Trends
move toward “natural” and healthful products and lifestyles growing number and importance of older Americans population shifts to remote suburbs and small towns greater desire for product simplicity and honesty in advertising

PP3-2b An Environmental Scan of the United States Economic Trends
dramatic growth of electronic commerce increase in per-capita income and standard of living U.S. firms adjust to crises in international markets economic growth reduces concern about inflation and budget deficit

PP3-2c An Environmental Scan of the United States Technological Trends
increased use of information and communication technology growing focus on the internet as consumers and businesses go online expanded computer power and growth of “smart” products growing use of electronic money or “e-cash”

PP3-2d An Environmental Scan of the United States Competitive Trends
new flexible employment agreements and growth of telecommuting the emergence of fast, responsive “network corporations” mergers reduce costs through economies of scale more international competition from emerging countries

PP3-2e An Environmental Scan of the United States Regulatory Trends
increasing emphasis on free trade and deregulation greater concern for pollution and global warming new legislation related to information collection and privacy new legislation to encourage consumer savings

PP3-CC Definition of Demographics
Demographics is describing the population according to selected characteristics such as their age, sex, ethnicity, income, and occupation.

PP3-DD The Population Trend
1999 U.S. Population estimated at 272 million number of people ages has declined since 1990 and the number over 65 has increased mature households (age 50+) represent the fastest growing age segment and possess 75% of the net worth of U.S. households

PP3-3 The Changing Distribution of the Over-65 Population of
PP3-3 The Changing Distribution of the Over-65 Population of the United States 100 90 80 70 60 50 40 30 20 10 1995 1990 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Millions Age 85 and over Age 75 to 84 Age 65 to 74

PP3-EE Major Population Segments
Baby Boomers: generation of 78 million born between 1946 and 1965, accounts for percent of purchases of most consumer product and service categories. Generation X: 17 % of the U.S. population born between 1965 and Consumers who are self-reliant, entrepreneurial, supportive of diversity; better educated than previous generations; not prone to extravagance and likely to prefer lifestyles, products, and services that are very different from baby boomers. Baby Boomlet: Americans born after 1976; also described as Generation Y or the Net Generation.

PP3-FF Changes in the American Family
30 years ago 40% of all households consisted of married couples with children; this number has declined to 25%. 25% of all households consist of people who live alone 28% of married households are without children the fastest growing types of households are those with single parents other family members unrelated persons

PP3-GG Population Shifts in the U.S.
In the 1980s and 1990s the U.S. population has shifted toward Western and Sunbelt states. Through 2025 three states--California, Texas, and Florida--will account for 45 percent of the net population change in the U.S. From the 1930s to 1980s the population shifted from cities to suburbs. 1990s the population is shifting again from suburbs to more remote suburbs called exurbs and to smaller towns called penturbia.

PP3-HH Racial and Ethnic Diversity
Slightly more than one in four U.S. residents is African-American, Hispanic, Asian, or a representative of another racial or ethnic group. The racial and ethnic composition of the U.S. population is expected to change even more by 2010, as since 1990: Hispanic population growth % Asian population growth % African-American population growth 11+% white population growth %

PP3-4 Racial and Ethnic Composition and Trends in the United States
1999 U.S. population (millions) White Asian and Pacific Islander African- American Hispanic Other 196 10 33 31 2 Percentage change: 1990 – 1999 40% 3.6% 39.6% 11.5% 36.3% 6.0%

PP3-II Definition of Regional Marketing
Regional marketing is focuses not only on the shifting of consumers geographically but also on the differences in their product preferences based on where they live. Regional marketing involves developing marketing plans to reflect specific area differences in taste preferences, perceived needs, or interests.

PP3-JJ Definition of Culture
Culture is incorporates the set of values, ideas, and attitudes of a homogenous group of people that are transmitted from one generation to the next.

PP3-KK The Changing Role of Women
The percentage of women in the work force rose from 46 to 60 percent between 1975 and 1998. Women account for 11% of the officers and directors of the 500 largest corporations in the U.S. Women account for more than half of all: financial managers accountants and auditors technical writers economists public relations specialists authors

PP3-LL Definition of Value Consciousness
Value consciousness is is the concern for obtaining the best quality, features and performance of a product or service for a given price.

PP3-MM Concept Check 1. Explain the term regional marketing. 2. What are the marketing implications of blended families? 3. The work ethic of today may best be stated as “I work __________.”

PP3-NN Definition of the Economy
pertains to the income, expenditures, and resources that affect the cost of running a business and household.

PP3-OO Consumer Expectations
Consumer expectations of an inflationary or recessionary U.S. economy is an important element of environmental scanning. Consumer spending, which accounts for two-thirds of U.S. economic activity, is affected by expectations of the future.

PP3-5 University of Michigan Consumer Sentiment Index and
PP3-5 University of Michigan Consumer Sentiment Index and Automobile Sales 50 70 90 110 130 150 170 190 30 6.0 8.0 10.0 12.0 14.0 18.0 16.0 Consumer Sentiment Index (CSI) Vehicle sales (millions of units) CSI Vehicle sales Note: The consumer sentiment index is calculated by subtracting the share of consumers who think it is a bad time to buy from those who think it is a good time to buy and then adding 100. 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

A consumer’s ability to buy is related to income, which consists of:
PP3-PP Consumer Income A consumer’s ability to buy is related to income, which consists of: gross income: the total amount of money made in one year by a person, household, or family unit; disposable income: the money a consumer has left after paying taxes, to use for food, shelter and clothing; discretionary income: the money that remains after paying for taxes and necessities.

PP3-B Average Annual Household Spending by Category
Source: Bureau of Labor Statistics, 1987 and 1997, Consumer Expenditure Surveys; calculations by the Author $ Food Alcoholic Beverages Housing Apparel and Services Transportation Health Care Entertainment Personal Care Products and Services Readings Education Tobacco Products Miscellaneous 1997 1987

PP3-6 Income distribution of U.S. households PP
Under $10,000: 11 % $10,000 – $14,999: 8 $25,000 $34,999: 13 $35,000 $49,999: 16 $50,000 $74,999: 18 $75,000 $99,999: 9 $100,000 or more: $15,000 $24,999: 15

PP3-QQ Technological Forces
Technology is a major environmental force and refers to inventions or innovations from applied science or engineering research. Some of the most dramatic technological changes occurring now are: the declining cost and size, and increasing power, of microprocessors; the convergence of television, personal computer, and telephone technologies; the pervasive trend toward “connectedness” through the World Wide Web; the emergence of biotechnology as a key component of the economy.

PP3-RR Information Technology
One of the most important developments for marketers may be related to information technology via improved methods of collecting, storing, analyzing, and distributing information, with the ultimate goal of better understanding and serving customers.

PP3–C Continuum of competition
Many Number of sellers One BASIS OF COMPARISON PURE COMPETITION MONOPOLISTIC COMPETITION OLIGOPOLY MONOPOLY Number of sellers Product differences Importance of market mix Large number of sellers Similar products Distribution is important Large number of sellers Unique but substitutable Pricing is important A few large competitors Similar products Promotion is key to achieve perceived product differences Single producer Unique and unsubstitutable Unimportant

PP3-SS Components of Competition
Entry (barriers) Power of Buyers and Suppliers Existing Competitors and Substitutes

PP3-TT Competing on the Internet
The Internet is changing customers’ expectations about convenience, price, quality, and service. As a result a new model--the “network organization” or “e-corporation”--is evolving as a new form of competition. These firms combine computer, the Web, and software to change everything about they way they operate.

PP3-E American Airlines Website Advertisement
Courtesy AMR Corporation/American Airlines

PP3-UU Concept Check 1. What is the difference between a
consumer’s disposable and discretionary income? 2. In pure competition there are _______ number of sellers. 3. What is a network organization?

PP3-VV Legislation Protecting Competition
Major legislation has been passed to encourage competition, which is deemed desirable because it permits the consumer to determine which competitors will succeed or fail. Relevant legislation includes: Sherman Antitrust Act (1890) Clayton Act (1914) Robinson-Patman Act (1936)

PP3-WW Other Legislation
Other Federal legislation is aimed at: products companies consumers (consumerism) both company and consumer pricing (fixing/unfair/discriminatory) distribution (exclusive dealing, requirement contracts, exclusive territorial distributorships, and typing arrangements) Advertising and promotion controls self-regulation

PP3-A American Plastics Advertisement
Courtesy American Plastics Council

PP3-XX Concept Check 1. The __________ Act was punitive
toward monopolies, whereas the __________ Act was preventive. 2. Describe some of the recent changes in trademark law. 3. How does the Better Business Bureau encourage companies to follow its standards for commerce?

RESPONSIBILITY IN MARKETING
C H A P T E R F O U R ETHICS AND SOCIAL RESPONSIBILITY IN MARKETING Irwin/McGraw-Hill

AFTER READING CHAPTER 6 YOU SHOULD BE ABLE TO:
Appreciate the nature and significance of ethics in marketing. Understand the differences between legal and ethical behavior in marketing. Identify factors that influence ethical and unethical marketing decisions. Distinguish among the different concepts of ethics and social responsibility. Recognize the importance of ethical and socially responsible consumer behavior.

PP4-AA Anheuser Busch’s campaign for responsible drinking
PP4-AA Anheuser Busch’s campaign for responsible drinking and environment-conscious disposition of packaging “Know When to Say When” campaign for responsible drinking appeared first via posters in 1983 and two years later with TV commercials. Such efforts have contributed to a sizeable decline in fatal drunk-driving accidents and a 64% drop in teen drunk-driving deaths since 1982. Anheuser Busch is an advocate and sponsor or numerous efforts to preserve the environment and is the world’s largest recycler of aluminum cans.

PP4-C Trends in alcoholic consumption by high school seniors
Percentage Year 4

PP4-A Definition of Ethics
Ethics are the moral principals and values that govern the actions and decisions of an individual or group. They serve as guidelines on how to act rightly and justly when faced with moral dilemmas. 9

PP4-1 Classifying marketing decisions according to ethical and
PP4-1 Classifying marketing decisions according to ethical and legal relationships Ethical but illegal Ethical and legal Ethical Ethicality Unethical and illegal Unethical but legal Unethical Illegal Legal Legality 1

2. What are 4 possible reasons for the present state of ethical
PP4-BB Concept Check 1. What are ethics? 2. What are 4 possible reasons for the present state of ethical conduct in the United States?

PP4-CC Understanding Ethical Marketing Behavior
Consider the use of another’s ideas: In the US copyrights, trademarks and patents are considered intellectual property, and unauthorized use is illegal and unethical. Outside the US, sometimes due to the culture of a country, unauthorized use of copyrights, patents and trademarks is not considered unethical or illegal. Such is the case in countries like China, Mexico and Korea.

PP4-D International comparison of the percent of U. S
PP4-D International comparison of the percent of U.S software package sales that are illegal copies 2 4 6 8 1 Percentage China Taiwan Iberia Switzerland Korea Italy Japan Benelux Germany Benelux 5

PP4-2 A framework for understanding ethical behavior
Societal culture and norms Personal moral philosophy and ethical behavior Business culture and industry practices Organizational culture and expectations 2

PP4-Ea Consumer Bill of Rights
In 1962 President John F. Kennedy outlined the Consumer Bill of Rights that codified the ethics of exchange between buyers and sellers. (continued)

PP4-Eb Consumer bill of rights - continued
Safety Be informed Right to Choose Be heard 6

PP4-DDa Two kinds of unethical behavior
1. Industrial Espionage is the clandestine collection of trade secrets or proprietary information about a company’s competitors. Industrial espionage is most prevalent in high- technology industries, such as electronics, specialty chemicals, industrial equipment, aerospace, and pharmaceuticals, where technical know-how and trade secrets separate industry leaders from followers. (continued)

PP4-DDb Two kinds of unethical behavior
2. The giving and receiving of bribes and kickbacks is the second form of unethical competitive behavior. Bribes and kickbacks are often disguised as gifts, consultant fees and favors. They are more common in business-to-business and government marketing than in consumer marketing.

PP4-EE Foreign Corrupt Practices Act
This act makes it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country. Generally, ethical standards are more likely to be compromised in industries experiencing intense competition and in countries in earlier stages of economic development.

PP4-3 American Marketing Association Code of Ethics
Members of the American Marketing Association have joined together in subscribing to its code of ethics embracing the following topics: 1. Responsibilities of the Marketer 2. Rights and Duties of Parties in the Marketing Exchange Process 3. Organizational Relationships

PP4-F Personal moral philosophies
MORAL IDEALISM Considers certain individual rights or duties universal regardless of the outcome UTILITARIANISM Considers the “greatest good for the greatest number” by assessing the costs and benefits of the consequences 7

PP4-FF Concept Check 1. What rights are included in the Consumer Bill of Rights? 2. What ethical practice is addressed in the Foreign Corrupt Practices Act? 3. What is meant by moral idealism?

Profit responsibility
PP4-4 Three concepts of social responsibility Societal responsibility Stakeholder responsibility Profit responsibility Owners/ Stockholders General public Customers Employees Ecological environment Suppliers/Distributors Public interest groups 3

PP4-G Elements of a social audit
Recognition Of social expectations and rationale for engaging in social responsibility endeavors Identification Of causes or programs consistent with the company’s mission Determination Of objectives and priorities for programs and activities to be undertaken Specification Of the type and amount of resources necessary to achieve objectives Evaluation Of programs and activities and assessment of future involvement 8

PP4-GGa Valdez Principles
The Valdez Principles encourage companies to: 1. eliminate pollutants, minimize hazardous wastes, and conserve nonrenewable resources; 2. market environmentally safe products and services; 3. prepare for accidents and restore damaged environments; 4. provide protection for employees who report environmental hazards; (continued)

PP4-GGb Valdez Principles
5. appoint an environmentalist to their boards of directors, name an executive for environmental affairs, and develop an environmental audit of their global operations to be made available for public inspection.

PP4-HH Concept Check 1. What is meant by social responsibility?
2. Marketing efforts to produce, promote, and reclaim environmentally sensitive products are called ________________ . 3. What is a social audit?

GLOBAL MARKETING AND WORLD TRADE C H A P T E R F I V E
Irwin/McGraw-Hill

AFTER READING CHAPTER 5 YOU SHOULD BE ABLE TO:
Describe the nature and scope of world trade from a global perspective and its implications for the United States. Explain the effects of economic protectionism and the implications of economic integration for global marketing practices. Understand the importance of environmental factors (cultural, economic, and political) in shaping global marketing efforts. Describe alternative approaches firms use to enter and compete in global markets. Identify specific challenges marketers face when crafting worldwide marketing programs.

PP5-1 Illustrative world trade flows (billions of dollars)
Western Europe intratrade: 1430 194 227 241 North America intratrade: 465 200 Asia / Pacific Rim intratrade: 632 393 382 279 365 Rest of world intratrade: 175 381 140 137 313

PP5-AA Countertrade Effect
The practice of using barter rather than money for making global sales. 20% of world trade involves countertrade. Popular with many Eastern European nations.

PP5-BB Trade Feedback Effect
As a country’s exports increase, its national output and income increase, which leads to a increase in the demand for imports. Hence, imports affect exports and vice versa. This Trade Feedback Effect is one argument for free trade among nations.

PP5-CCa United States Perspective
US is the world’s leader in gross domestic product (GDP), which is the monetary value of all goods and services produced in a country during one year. US % share of world exports has shifted downward over the past 25 years, while its % share of world imports has increased. (continued)

PP5-CCb United States Perspective
Balance of trade is the difference in the monetary value of a nation’s imports and exports. Since 1975 imports to the US have significantly exceeded exports each year. Japan and China combine for about half of the total US trade deficit. The three largest importers of US goods are Canada, Japan, and Mexico. The three largest exporters to the US are Japan, Canada, and Mexico.

PP5-2 Porter’s “diamond” of national competitive advantage
Company strategy structure and rivalry Number of companies in an industry Intensity of competition Public or private owner Factor conditions Demand conditions Natural resources Education and skill levels Wage rates Size of market Sophistication of consumers Media exposure of products Related and supporting industries Existence of supplier clusters

PP5-DD Concept Check 1. What is the trade feedback effect? 2. What variables influence why some companies and industries in a country succeed globally while others lose ground or fail?

PP5-3 How protectionism affects world trade
Tariffs Quotas Increase Prices Limit Supply Decreased Global Trade

PP5-EE Economic Protectionism
Protectionism is the practice of shielding one or more sectors of a country’s economy from foreign competition through the use of tariffs or quotas. Tariffs are a government taxes on goods and services entering a country, primarily to raise the price on imports. Quotas are restrictions placed on the amount of a product allowed to enter or leave a country.

PP5-4 15 Countries of the European Union
Great Britian Ireland Sweden Finland Belguim Denmark Germany Luxembourg Netherlands Austria Spain Portugal France Italy Greece

PP5-FF Rise of Economic Integration
European Union (EU) 15 European countries forming a single market composed of 390 million consumers with a GDP only slightly less than that of the US. The EU has resulted in: 1. fewer government regulations and tariffs 2. greater uniformity in product and packaging standards 3. fewer regulatory restrictions on transportation, advertising, and promotion 4. removal of most tariffs that directly affect pricing

PP5-GG North American Free Trade Agreement (NAFTA)
NAFTA became effective in 1994 and consists of the US, Canada and Mexico, creating a marketplace of about 380 million consumers. Provisions are similar to those of the EU Negotiations are under way to expand NAFTA to a 34 country Free Trade Area of the Americas by 2005, and will include the US, Canada, Mexico, and Latin American and Caribbean countries.

PP5-HH Global Competition among Global Companies for Global Customers
Exists when firms originate, produce, and market their products and services worldwide. The automobile, pharmaceutical, apparel, electronics, aerospace, and telecommunication fields represent industries with sellers and buyers on every continent.

PP5-II Strategic Alliances
Strategic alliances are agreements among two or more independent firms to cooperate for the purpose of achieving common goals such as competitive advantage or customer value creation. They are becoming a common way in which firms are meeting the demands of global competition.

PP5-B Global companies and marketing strategies
Type of Global Company Type of Marketing Strategy Extension of its home country marketing strategy International Firm Multi-domestic marketing strategy Multinational Firm Global marketing strategy Transnational Firm

PP5-JJa Three Types of Global Companies
International Firm: engages in trade and marketing in different countries as an extension of the marketing strategy in its home country. Generally, they market their existing products and services in other countries the same way they do in their come country. Multinational Firm: views world as consisting of unique parts and markets to each part differently. Multinationals use multi-domestic marketing strategies, which means they have many different product variations, brand names, and advertising programs as countries in which they do business. (continued)

PP5-JJb Three Types of Global Companies
Transnational Firm: views world as one market and emphasizes cultural similarities or universal consumer needs and wants more than differences. They employ global marketing strategies, which means standardized strategies adapted as cultures dictate.

PP5-KK Global Consumers
Global Consumers consist of customer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products and services.

PP5-LL Concept Check 1. What is protectionism? 2. NAFTA was designed to promote free trade among which countries? 3. What is the difference between a multi- domestic marketing strategy and a global marketing strategy?

PP5-C Cultural Appreciation
Values Customs Aspects of culture Symbols Language

PP5-MMa Cultural Diversity
Values represent personal or socially preferable modes of conduct or states of existence that are enduring. Why doesn’t McDonald’s sell hamburgers in India? Customs are norms and expectations about the way people do things in a specific country. Why were 3M executives perplexed concerning lukewarm sales of Scotch-Brite floor cleaner in the Philippines? (continued)

PP5-MMb Cultural Diversity
Cultural Symbols are things that represent ideas and concepts. By wisely using cultural symbols, global marketers can tie positive symbolism to their products and services. Language: Global marketers should not only know the native tongues of countries in which they market, but also the nuances and idioms of a language.

PP5-NN Economic Considerations
Stage of Economic Development Economic Infrastructure Consumer Income and Purchasing Power Currency Exchange Rates

PP5-OO Political-Regulatory Climate
Political Stability PRS Group is an agency that tracks the risk associated with trading in various countries. Generally, trade among nations depends upon political stability. Trade Regulations ISO 9000 standards refer to standards for registration and certification of a manufacturer’s quality management and quality assurance system.

PP5-PP Concept Check 1. Semiotics involves the study of ____________? 2. When foreign currencies can buy more US dollars, are US products more or less expensive for the foreign customer?

PP5-5 How Purchasing Power differs Around the World
Less than $5,000 $10,000 to $19,999 $5,000 to $9,999 $20,000 and above Established market economies Note: Consumption is in U.S. dollars on a purchase-power-parity basis. Percentages may add to more than 100 percent due to rounding. Percent Distribution of Households by Annual Purchasing Power Level South Asia Sub-Saharan Africa East Asia/Pacific Former Socialist Middle Eastern Crescent Latin America 75% 16% 7% 2% 73% 17% 4% 30% 32% 21% 28% 18% 22% 26% 27% 24% 23% 65% 8% 1% 0% 20% 40% 60% 80% 100% 3%

PP5-6 Alternative global market-entry strategies
High • Amount of a firm’s financial commitment, risk, marketing control, and profit potential Low Joint Venture Direct Ownership Exporting Licensing

PP5-QQ Crafting a Worldwide Marketing Effort
Product and Promotion Strategies Selling Products Globally 1. Product Extension 2. Product Adaptation 3. Product Invention By recognizing cultural and buying motive differences, firms can sell the same products to different countries by adapting their advertising. Some companies use dual adaptation, which means modifying both product and promotion messages.

PP5-7 5 Product & Promotion Strategies for Global Marketing
Same Product Adapt Product Create New Product Same Promotion Adapt Product Extension Strategy Product Adaptation Strategy Product Invention Strategy Communication adaptation strategy Dual Adaptation Strategy

PP5-8 Channels of Distribution in Global Marketing
Seller Channels Within Foreign Nations Final Consumer Seller’s International Marketing Headquarters Channels Between Nations

PP5-RR Crafting a Worldwide Marketing Effort
Pricing Strategy Countries may impose considerable competitive, political, and legal constraints of the pricing latitude of global companies. Economic factors such as the costs of production, selling, and tariffs, plus transportation and storage costs, also affect global pricing decisions. Dumping is when a firm sells a product in a foreign country below its domestic price or below its actual cost. Gray Market (parallel importing) is a situation where products are sold through unauthorized channels of distribution.

PP5-D Global Marketing Practices That Affect Pricing
Dumping is when firms sell a product in a foreign country below its domestic price or below its actual cost. Gray Marketing or Parallel Importing is a situation where products are sold through unauthorized channels of distribution.

PP5-SS Concept Check 1. Products may be sold globally in three ways. What are they? 2. What is dumping?

C H A P T E R S I X CONSUMER BEHAVIOR Irwin/McGraw-Hill

Outline the stages in the consumer decision process. Distinguish among three variations of the consumer decision process: routine, limited, and extended problem solving. Explain how psychological influences affect consumer behavior, particularly purchase decision processes. Identify major sociocultural influences on consumer behavior and their effects on purchase decisions. Recognize how marketers can use knowledge of consumer behavior to better understand and influence individual and family purchases.

PP6-AA The Female Automobile Customer
Females: will buy 60% of all new cars in 2001 spend $81 billion+ on new & used cars prefer inexpensive sporty vehicles buy American 75% of the time often utilize internet-based information place a higher value on low price & safety than men 2/3 of whom dislike the car-buying process

PP6-1 Purchase Decision Process
Problem recognition: Perceiving need Information search: Seeking value Alternative evaluation: Assessing value Purchase decision: Buying value Post-purchase behavior: Value in consumption of user

PP6-BB The Evoked Set The evoked set is the group of brands, based on
one’s evaluative criteria, that a consumer would consider acceptable from all the brands in the product class which he or she is aware of.

PP6-2 Consumer Reports’ Evaluation of Portable Compact Disk Players
Error Locate Brand Model Price Headphones Correction Bumps Speed Panasonic SL-SX500 $ 150 Phillips AZ7383 100 Rating: (A CR best buy) Phillips AZ7583 120 Excellent Sony D-E409CK 140 Aiwa XP-SP1200 145 Very Good Sony D-E401 100 Panasonic SL-SW505 150 Good JVC XL-P34 80 Fair Sony D-ES55 200 Panasonic SL-S230 80 Poor Aiwa XP-570 75

Factor Percent Saying Factor is Most Important
PP6-A What New Car Buyers Consider Most Important in Deciding What New Car To Buy Factor Percent Saying Factor is Most Important Warranty/guarantee % Ease of maintenance/repair % Quality compared to other brands % Price compared to other brands % High-quality brand % Style/look of brand %

PP6-CC Computer-Mediated Buying
Consumer computer-mediated buying, or online buying, is the use of Internet technology to: a. Seek information b. Evaluate alternatives & c. Make purchase decisions This technology also allows marketers to customize their offering to the specific needs of individuals, thereby increasing customer value and satisfaction.

PP6-DD Cognitive Dissonance
Cognitive Dissonance is a feeling of post-purchase psychological tension or anxiety. To alleviate cognitive dissonance, consumers often search for information to reinforce their purchase decision.

PP6-EEa High versus Low Involvement
High Involvement purchase occasions can be expensive, have serious personal consequences, and/or reflect one’s social image. These occasions typically involve extensive information search, consideration of several product attributes and brands, the formation of attitudes, and word-of-mouth communication. An example would be the purchase of an automobile or stereo system. (continued)

PP6-EEb High versus Low Involvement
Low Involvement purchase occasions typically involve little information search or consideration of various brands, except on the basis of price. They usually don’t involve any personal consequences. They tend to be privately consumed. An example would be the purchase of soap or toothpaste.

PP6-3 Comparison of problem-solving variations
High Low Characteristics of Extended Limited Routine purchase decision problem problem problem process solving solving solving Number of brands Many Several One examined Number of sellers Many Several Few concerned Number of product Many Moderate One attributes evaluated Number of external Many Few None information sources used Time spent searching Considerable Little Minimal Consumer Involvement

PP6-B Consumer involvement, knowledge, and problem-solving variations
Low Routine problem solving (e.g., milk and bread) Limited problem solving (e.g., small appliances) Consumer involvement Extended problem solving (e.g., stocks and bonds) High High Consumer knowledge Low

PP6-4 Influences on the consumer purchase decision process
Marketing mix influences Product Price Promotion Place Psychological Influences Sociocultural Influences Consumer Decision Process Motivation Personality Perception Learning Values, beliefs and attitude Lifestyle Problem recognition Information search Alternative evaluation Purchase decision Postpurchase behavior Personal influence Reference groups Family Social class Culture Subculture Promotion Influences Purchase task Social surroundings Physical surroundings Temporal effects Antecedent states

PP6-FF Concept Check 1. What is the first step in the consumer decision process? 2. The brands a consumer considers buying out of the set of brands in a product class of the consumer is aware is called the ____________. 3. What is the term for post-purchase anxiety?

PP6-5 Hierarchy of Needs Self-Actualization Needs Self-Fulfillment
Personal Needs Status, respect, prestige Social Needs Friendship, belonging, love Safety Needs Freedom from harm, financial security Physiological Needs Food, water, sex, oxygen

PP6-GG Psychological Influences on Consumer Behavior
motivation and personality perception learning values, beliefs, and attitudes lifestyle

Messages Selective exposure Selective comprehension
PP6-C Selective perception filters Messages Selective exposure Selective comprehension Selective retention

PP6-HH Subliminal Perception
Subliminal perception means that you see or hear messages without being aware of them. The presence and effect of subliminal perception on behavior is a hotly debated issue, with more popular appeal than scientific support. Evidence suggests that subliminal messages have some effect on behavior. If so, is their use an ethical practice? See the accompanying Ethics and Responsibility Alert.

PP6-II Perceived Risk Perceived Risk represents anxieties felt because the consumer cannot anticipate the outcomes of a purchase but believes that there may be negative consequences. Perceptions of greater perceived risk are usually accompanied by a more extensive external information search concerning a purchase. Types of Perceived Risk: financial physical psychosocial

PP6-JJ Learning Learning refers to those behaviors that result from:
1. repeated experience 2. thinking Behavioral Learning is the process of developing automatic responses to a situation built up through repeated exposure to it. Cognitive Learning is learning via thinking, reasoning, and mental problem solving without direct experience.

PP6-KK Brand Loyalty Brand Loyalty is a favorable attitude toward and consistent purchase of a single brand over time. It results from positive reinforcement of previous actions. There is evidence of brand loyalty in many commonly purchased products in the U.S. and the global marketplace. However, the incidence of brand loyalty appears to be declining in North American, Mexico, European Union nations, and Japan.

Baked macaroni & cheese
PP6-D Brand loyalty tendency by product category (Percent of U.S. consumers with strong brand preference) Mayonnaise Soft drinks Bar soap Canned soup Cigarettes Baked macaroni & cheese Dry cereals Spaghetti sauce Pain relievers Toilet paper Facial tissue Cold remedies Dog food Cake mix Paper towels Frozen vegetables Frozen entries Cat food 70 67 66 62 60 59 57 57 56 54 53 51 49 45 43 43 41 41

PP6-LL Attitudes, Values and Beliefs
An attitude is a learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way. Attitudes are shaped by our values and beliefs. Beliefs are a consumer’s subjective perception of how well a product or brand performs on different attributes. Beliefs are based on personal experience, advertising, and discussions with other people. Values are deeply held attitudes and beliefs, which are resistant to change, but which may change over time.

PP6-MM Lifestyle & VALS Lifestyle is a mode of living that is identified by how people spend their time and resources (activities), what they consider important in their environment (interests), and what they think of themselves and the world around them (opinions). Lifestyle analysis focuses on identifying consumer profiles. The most prominent example of this type of analysis is the Values and Lifestyles (VALS) Program developed by SRI International.

PP6-6 VALS2 Psychographic Segments
ACTUALIZERS Most resources Enjoy the "finer things." Receptive to new products, technologies, distribution. Skeptical of advertising. Frequent readers of wide variety of publications Light TV viewers. Principle Oriented Status Oriented Action Oriented FULFILLEDS ACHIEVERS EXPERIENCERS Little interest in image or prestige Attracted to premium products Follow fashion and fads. Spend much of disposable income on socializing. Above-average consumers of products for the home Prime target for variety of products Average TV watchers, read business, news, and self-help publications Buy on impulse. Like educational and public affairs programming Attend to advertising. Listen to rock music. Read widely and often BELIEVERS STRIVERS MAKERS Buy American. Image conscious. Shop for comfort, durability, value. Slow to change habits. Look for bargains. Limited discretionary incomes, but carry credit balances. Unimpressed by luxuries. Watch TV more than average. Buy the basics, listen to radio. Spend on clothing and personal care products. Read retirement, home and garden, and general interest magazines. Read auto, home mechanics, fishing, outdoor magazines. Prefer TV to reading. Least resources STRUGGLERS Brand loyal. Use coupons and watch for sales. Trust advertising. Watch TV often. Read tabloids and women’s magazines.

PP6-NN Concept Check 1. The problem with Toro Snow Pup was an example of selective ____________. 2. What three attitude change approaches are most common? 3. What does lifestyle mean?

PP6-OO Sociocultural Influences
Sociocultural influences, which evolve from a consumer’s formal and informal relationships with other people, can exert significant impact on consumer behavior. Sociocultural influences include: 1. Personal influence 2. Reference groups 3. The Family 4. Social Class 5. Culture 6. Subculture

PP6-PP Personal Influence
Personal Influence includes two aspects that are very important to marketers: 1. Opinion Leadership 2. Word of Mouth

PP6-E Word of mouth influence
(Percent of men and women who seek advice regarding selected products and services) 50% 40% 30% 20% 10% Men Women Car mechanic Where to eat out What movies to see What car to buy Where to get hair cut 49% 39% 38% 26% 28% 15% 22% 24% Men

PP6-QQ Reference Groups
Reference groups are people to whom an individual looks as a basis for self-appraisal or as a source of personal standards. Three kinds of reference groups that have clear marketing implications are: 1. Membership group 2. Aspiration group 3. Dissociative group

PP6-F Where children between the ages of 4 and 12 spend
PP6-F Where children between the ages of 4 and 12 spend spend their money 8% Movies & sports 11% Other 15% Clothes 6% Video arcades 33% Food and beverages 27% Play items

PP6-RR The Family Life Cycle
The family life cycle concept describes the distinct phases that a family progresses through from formation to retirement, each phase bringing with it identifiable purchasing behaviors.

Traditional family flow
PP6-7 Modern family life cycle Young single Middle-aged divorced without children Middle-aged married without children Young divorced with children Young married without children Young married with Middle-aged divorced with Middle-aged divorced without dependent children Young divorced without children Usual flow Recycled flow Traditional family flow Middle-aged married with Middle-aged married without dependent children Older married unmarried

PP6-SS Social Class Social Class may be defined as the relatively
permanent, homogeneous divisions in a society into which people sharing similar values, interests, and behavior can be grouped. Social class is determined by: 1. Occupation 2. Source of income (not level) 3. Educational attainment

PP6-TT Culture & Subculture
Culture refers to the set of values, ideas, and attitudes that are accepted by a homogeneous group of people and transmitted to the next generation. Subcultures are subgroups within a larger, or national culture with unique values, ideas, and attitudes.

PP6-G Ownership of consumer electronics among African-
PP6-G Ownership of consumer electronics among African Americans, Hispanics, and Asian-Americans Percent owning among Product African- Americans Hispanics Asian- Americans VCR Answering machine Compact disk player Personal computer Camcorder Cellular telephone 73.5% 47.2 31.9 19.8 15.0 10.3 73.1% 27.5 26.7 9.6 17.1 6.7 89.4% 50.0 45.5 30.5 35.6 24.4

PP6-UU Concept Check 1. What are the two primary forms of personal influence? 2. Marketers are concerned with which types of reference groups? 3. What two challenges must marketers overcome when marketing to Hispanics?

ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR
C H A P T E R S E V E N ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR Irwin/McGraw-Hill

Distinguish among industrial, reseller, and government markets. Recognize key characteristics of organizational buying that make it different from consumer buying. Understand how types of buying situations influence organizational purchasing. Recognize similarities and differences in industrial and reseller purchase behavior.

PP7-AA Laser Technology is Bright at Honeywell
Gary Null believes Honeywell, MICRO SWITCH division, is poised to capture a significant share of the multi-billion dollar global market for laser technology and products. However, successful commercialization of their innovative laser technology depends on a coordinated worldwide team of engineers and marketing and sales professionals. The key is to show the advantages of VCSEL over existing technology to a diverse worldwide market.

PP7-BB Business Marketing
Business marketing is the marketing of goods and services to: 1. commercial enterprises, 2. Governments, and 3. other profit and not for profit organizations, for use in the creation of goods and services that they then produce and market to other business customers, as well as individuals and ultimate consumers.

PP7-CC Organizational Buyers
Organizational buyers are those manufacturers, wholesalers and retailers, and government agencies that buy goods and services for their own use or for resale. EXAMPLE: Buying computers and telephones for the firm’s own use.

PP7-1 Type and Number of Organizational Customers
Type of Organization Number Kind of Market Manufacturers ,000 Mining ,000 Construction ,000 Farms, forestry, and fisheries 955,000 Industrial (business) Service ,594,000 markets --(11,552,000) Finance, insurance, and real estate 617,000 Transportation and public utilities 276,000 Not-for-profit associations 23,000 Wholesalers ,000 Reseller markets -- Retailers ,564,000 2,076,000 Government units ,000 Government markets -- 85,000

PP7-DD North American Industry Classification System (NAICS)
NAICS provides common industry definitions for Canada, Mexico, and the U.S., which facilitate the measurement of economic activity in the three member countries of NAFTA. NAICS replaced the Standard Industrial Classification system, a system which had been in place more than 50 years. NAICS is consistent with the International Standard Industrial Classification of All Economic Activities, published by the United Nations, to facilitate measurement of global economic activity.

PP7-2 NAICS breakdown for broadcasting and
PP7-2 NAICS breakdown for broadcasting and telecommunications industries 2 Digit Industry Subsector 3 Digit Industry Group 4 Digit Industry 5 Digit U.S. National Industry Broadcasting and telecommunications Radio and television broadcasting Wire telecommunication carriers Paging Cable networks and program distribution Wireless telecommunication carriers, except satellite paging Cellular and other wireless telecommunications Telecommunications Telecommunications resellers Satellite telecommunications Other telecommunications

1. What are the three main types of organizational buyers?
PP7-EE Concept Check 1. What are the three main types of organizational buyers? 2. What is the North American Industry Classification System (NAICS)?

PP7–3 Key characteristics of organizational buying behavior
Market Characteristics Demand for industrial products and services is derived. Few customers typically exist, and their purchase orders are large. Product or Service Characteristics Products or services are technical in nature and purchased on the basis of specifications. There is a predominance of raw and semi-finished goods purchased. Heavy emphasis is placed on delivery time, technical assistance, postal service, and financing assistance.

PP7–3 Key characteristics of organizational buying behavior --
PP7–3 Key characteristics of organizational buying behavior continued Buying Process Characteristics Technically qualified and professional buyers exist and follow established purchasing policies and procedures Buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and products (services). Multiple buying influences exist, and multiple parties participate in purchase decisions. Reciprocal arrangements exist, and negotiation between buyers and sellers is commonplace.

Other Marketing Mix Characteristics
PP7–3 Key characteristics of organizational buying behavior continued Other Marketing Mix Characteristics Direct selling to organizational buyers is the rule, and physical distribution is very important Advertising and other forms of promotion are technical in nature. Price is often negotiated, evaluated as part of broader seller and product (service) qualities, typically inelastic owing to derived demand, and frequently affected by trade and quality discounts.

PP7-FF Other Organizational Buyer Terminology
Reverse Marketing involves the deliberate effort by organizational buyers to build relationships that shape suppliers’ products, services, and capabilities to fit a buyer’s needs and those of its customers. Reciprocity is an industrial buying practice in which two organizations agree to purchase each other’s products and services. A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost and/or increasing the value of products and services delivered to the ultimate consumer.

PP7–A Key Organizational Buying Criteria
Quality Specifications Technical Capability Past Performance Organizational Buying Criteria Delivery Schedules Price Warranty/ Claim Policies Production Facilities/Capacity

2. What is the relative influence of each member of of the group.
PP7-GG Four Questions to Provide Guidance in Understanding the Buying Center 1. Which individuals are in the buying center for the product or service? 2. What is the relative influence of each member of of the group. 3. What are the buying criteria of each member? 4. How does each member of the group perceive our firm, our products and services, and our salespeople?

PP7–B Five roles in the buying center
Initiator User Decision Maker Influencer Gatekeeper

PP7-4a Comparing the stages in consumer and organizational purchases
Stage in the Buying Consumer Purchase: Portable Organizational Purchase: Decision Process CD Player for a student Headphones for CD player Problem recognition Student doesn’t like the sound Marketing research and sales of the stereo system now owned departments observe that and desires a portable CD competitors are including player headphones on their models. The firm decides to include headphones on their own new models, which will be purchased from an outside supplier. (continued)

PP7-4b Comparing the stages in consumer and organizational
PP7-4b Comparing the stages in consumer and organizational purchases -- continued Stage in the Buying Consumer Purchase: Portable Organizational Purchase: Decision Process CD Player for a student Headphones for CD player Information search Student uses past experience, Design and production that of friends, ads, and engineers draft specifications Consumer Reports to collect for headphones. The information and uncover purchasing department alternatives Identifies suppliers of CD player headphones. Alternative evaluation Alternative portable CD Purchasing and engineering players are evaluated on the personnel visit with suppliers basis of important attributes and assess (1) facilities, (2) desired in a CD player and capacity, (3) quality control, several stores are visited (4) financial status. They drop any suppliers not satisfactory on these factors. (continued)

PP7-4c Comparing the stages in consumer and organizational
PP7-4c Comparing the stages in consumer and organizational purchases -- continued Stage in the Buying Consumer Purchase: Portable Organizational Purchase: Decision Process CD Player for a student Headphones for CD player Purchase decision A specific brand of portable CD They use (1) quality, (2) price, player is selected, the price is (3) delivery, and (4) technical paid, and the student leaves capability as key buying the store criteria to select a supplier. Then they negotiate terms and award a contract. Postpurchase behavior Student reevaluates the They evaluate suppliers purchase decision, may return using a formal vendor rating the portable CD player to the system and notify supplier if store if it is unsatisfactory, and headphones do not meet its looks for supportive quality standard. If the information to justify the problem is not corrected, purchase they drop the firm as a future supplier.

PP7-5 How the buying situation affects buying center behavior
Buying-Class Situation Buying Center Dimension New Buy Straight/Modified Rebuy People involved Many Few Decision Time Long Short Problem definition Uncertain Well-defined Buying objective Good solution Low-price supplier Suppliers considered New/present Present Buying influence Technical/operating Purchasing Agent personnel

PP7-C Three Types of Buying Situations
Decision time and problem definition Short/ well defined Few Many Number of people in buying center and number of suppliers considered Straight rebuy Modified buy New buy Long/ uncertain

1. What one department is almost always represented by a person in
PP7-HH Concept Check 1. What one department is almost always represented by a person in the buying center? 2. What are the three types of buying situations or buy classes?

PP7-IIa Stages in the Industrial Buying Process
Problem Recognition often involves a make-buy decision -- an evaluation of whether components and assemblies will be purchased from outside suppliers or built by the company itself. Information Search often involves value analysis -- a systematic appraisal of the design, quality, and performance of a product to reduce purchasing costs. Alternative Evaluation often involves the generation of a bidders list -- a list of firms believed to be qualified to supply a given item. (continued)

PP7-IIb Stages in the Industrial Buying Process
Purchase Decision -- The period from supplier selection to order placement to product delivery can take several weeks or even months, as negotiations regarding price, performance and delivery terms will continue. Additional negotiations may involve warranties, indemnities, and payment schedules. Postpurchase Behavior -- Evaluation occurs in the industrial purchase decision process, but is formal and often sophisticated. The performance of the supplier is monitored and recorded.

decision? 2. What is a bidders list? 1. What is a make-buy
PP7-JJ Concept Check 1. What is a make-buy decision? 2. What is a bidders list?

INTERACTIVE MARKETING AND ELECTRONIC COMMERCE
C H A P T E R E I G H T INTERACTIVE MARKETING AND ELECTRONIC COMMERCE Irwin/McGraw-Hill

Understand what electronic commerce and interactive marketing are and how they create customer value. Distinguish among the different types of electronic networks that make electronic commerce and interactive marketing possible. Identify online consumers and their purchasing behaviors. (continued)

Recognize why certain types of products & services are particularly suited for electronic commerce. Explain how companies create a presence in the electronic marketplace through different kinds of Web sites and different forms of online advertising. Describe how companies benefit from electronic commerce and interactive marketing.

PP8-AA America Online (AOL) Shopping Mall
AOL’s powerhouse shopping channel is the world’s largest virtual shopping mall. Merchants in AOL’s shopping channel include: mainstream brick and mortar retailers including J. C. Penny, Macy’s, The Gap, Toys’R’Us, etc. most of the top electronic retailers such as Video Now, Digital Chef, Flowers, etc. AOL is a great success story. Its success is due in part to a revolutionary change in technology that has made possible electronic commerce & interactive marketing.

PP8-BB Definition of Marketspace
Marketspace is is an information- and communication-based electronic exchange environment mostly occupied by sophisticated computer and tele-communication technologies and digitized offerings. You enter marketspace whenever you access the World Wide Web or log onto a commercial online service such America Online.

PP8-A Definition of Electronic Commerce
Electronic Commerce is Any activity that uses some form of electronic communication in the inventory, exchange, advertisement, distribution and payment of goods and services

PP8-B Definition of Interactive Marketing
Interactive Marketing is . . . Buyer-seller electronic communications in a computer-mediated environment in which the buyer controls the kind and amount of information received from the seller.

PP8-CC The Internet The internet is an integrated global network of computers that gives users access to information and documents. Anyone with a personal computer, a modem, and proper software can access the Internet free and can obtain and share information with others via , electronic messages transmitted to and from Internet host computers.

PP8-DD The World Wide Web
The World Wide Web (WWW) is a part of the Internet that supports a retrieval system that formats and documents information into Web pages. The “Web” uses hypertext markup language (html) to format documents viewed by users with a browser program, such as Netscape’s Navigator or Microsoft’s Internet Explorer.

PP8-EE Commercial Online Services Defined
Systems with much of the popular appeal of the WWW, but not dependent upon the Internet, are commercial online services. Commercial online services offer electronic information and marketing services to subscribers who are charged a monthly fee. AOL, CompuServe, and Prodigy are well-known commercial online services.

PP8-FF Concept Check 1. What is the difference between a corporate Web site and a marketing Web site? 2. Why is webcasting expected to improve the effectiveness of online advertising? 3. How do companies benefit from electronic commerce and interactive marketing?

PP8-C Networks of the E-Corporation
Internet/World Wide Web [Customers] Intranet [Internal Corporate Functions] Extranet/EDI [Suppliers, Distributors, Corporate Partners] The E-Corporation of the 21st Century

PP8-D Creating a Web Site Presence in the New Market Space
Major Types of Web Sites Major Types of Web Sites Corporate Marketing Promotional Transactional

PP8-Ea The Economics of Book Superstores and Online Retailers
Superstores Online Retailer Average Sale $ $100.00 (Discount) Shipping & Handling Sales Tax Customer Pays $ $ Minus Cost of Sales $ $ Shipping & Handling Equals Gross Profit $ $ (continued)

PP8-Eb The Economics of Book Superstores and Online Retailers
Superstores Online Retailer Minus Operating Expenses: Rent $ $ Labor & Store Cost Web Site Cost Advertising & Promotion Total Operating Expenses $ $ Equals Average Profit per Order $ $

PP8-1 Growth of U. S. business-to-consumer electronic commerce:
Estimated number of online consumers (millions) Estimated total online consumer expenditures ($ billions) 96 97 98 99 00 01 02 6 10 16 23 33 45 61 $0.7 $2 $12 $20 $26 $31 $42

PP8-2 Growth of U. S. business-to-business electronic commerce:
$100 Estimated number of businesses with Web sites (millions) Estimated total online business expenditures ($ billions) 96 97 98 99 00 01 02 1.0 1.5 1.8 2.3 2.8 3.3 3.8 $4 $8 $17 $42 $250 $325

PP8-GG Definition of an Intranet
An Intranet is . . . an Internet/Web-based network used within the boundaries of an organization. It is essentially a private Internet that may or may not be connected to the public Internet. Those that are connected are protected by “firewalls” from outside intrusion (“hacking”) by millions of Internet users.

PP8-HH Electronic Data Interchange
Electronic data interchanges (EDI) combine proprietary computer and telecommunications technologies to exchange electronic invoices, payments, and information between businesses, such as suppliers, manufacturers, and retailers.

PP8-II Definition of Extranet
An Extranet is . . . an Internet/Web-based network that permits private business- to-business communication between a company and its suppliers, distributors, and other partners (such as advertising agencies).

PP8-JJ Concept Check 1. What is electronic commerce?
2. Online U.S. consumer expenditures for products and services are expected to increase ____% between 1998 & 2002, while online U.S. business-to-business expenditure for goods and services is projected to increase ___-fold between 3. How can electronic commerce create customer value?

PP8-3 Demographics of Internet/World Wide Web Users
Income $25,001 – $35,000 $15,001 $25,000 Below $15,000 Age 18 24 18% 25 29 14% 30 39 23% 40 49 26% 50 64 65 + 5% No response Education Post grad. High school degree 27% Some college 32% College $75,001 and over 22% $50,001 $75,000 20% $35,001 $50,000 21% 12% 6% 7%

PP8-4 iVALS Internet User Segments
Wizard Worker Pioneer Seeker Surfer Immigrant Mainstreamer Sociable Socialite Upstreamer

PP8-5 Online Consumer Sales by Product/Service Category
1999 percent of online sales Product/Service Category percent of online sales 37% Travel reservations (air, car, lodging) PC hardware & software & consumer electronics Groceries Music & books Specialty gifts (flowers & wine) Ticket event sales Clothing Other 20% 23% 30% 8% 15% 12% 7% 7% 5% 4% 5% 6% 3% 11% 7%

PP8-6 Why Consumers Buy Online
Convenience Cost Choice Control Customization Communication

PP8-KK Corporate Web Site
A corporate web site is designed to accommodate interactive communication initiated by a company’s employees, investors, suppliers and customers. These sites provide information about the company such as its history, mission and corporate values, products and services, annual report, recent news releases, and may offer opportunities for visitors to ask questions and make comments via .

PP8-LL Marketing Web Site
A marketing Web site is designed to engage consumers in interactive communication or dialogue that will result in the sale of a company’s product or service or move the consumer closer to the purchase. In contrast to corporate Web sites, marketing Web sites initiate interactive communication with prospective buyers. There are two general forms of marketing Web sites: 1. Transactional sites 2. Promotional sites

PP8-MM Online Advertising
A primary objective for online advertising is to generate sales directly and quickly through a marketer’s transactional Web site. However, other objectives exist such as creating awareness and a favorable image of a company and its products and services. Online advertising is also used to support a company’s traditional sales channel, including retail stores and building customer relationships.

PP8-NN Two Approaches for Placing Online Advertising
Buying space on a heavily trafficked Web portal, such as Yahoo!, or a commercial online service. 2. Buying space on commercially sponsored Web Communities, which are Web sites that cater to a particular group of individuals who share a common interest.

PP8-OO Webcasting A supplement to a company’s online advertising via the practice of pushing out corporate and marketing Web information to online consumers rather than waiting for them to find the site on their own.

PP8-PP How Companies benefit from Electronic Commerce &
PP8-PP How Companies benefit from Electronic Commerce & Interactive Marketing Enhanced/value added exchange relationship between customers and companies; lower costs in inventory handling, order processing, and communications via corporate Intranets, Extranets, and EDIs; greater flexibility in managing and altering the elements of the marketing mix on a per customer basis; and because the new marketspace has no geographical boundaries, marketers can benefit from its global reach.

PP8-QQ Concept Check 1. Which iVALS segment is the least
promising group for online buying? Why? 2. Why is it that travel reservations account for such a large percentage of online buying. 3. What are the six reasons consumers prefer to buy online?