PRINCIPLES OF MARKETING Philip Kotler and Gary Armstrong

PRINCIPLES OF MARKETING Philip Kotler and Gary Armstrong
Eighth Edition Philip Kotler and Gary Armstrong Chapter 1 Marketing in a Changing World: Creating Customer Value and Satisfaction

What is Marketing? Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. More simply: Marketing is the delivery of customer satisfaction at a profit.

Core Marketing Concepts
Core Concepts This CTR corresponds to Figure 1-1 on p. 4 and relates to the discussion on pp Also to the CTRs numbers which follow. Core Marketing Concepts Products and Services Core Concepts Needs. These emerge from a state of felt deprivation. Ask students to distinguish among physical, social, and individual needs. Wants. These are the form taken by human needs as they are shaped by culture and individual experience. Have students provide examples for different wants based upon geographical differences, gender, age, wealth. Link culture to socio-economic standing, education. Demands. These are wants backed by buying power. Discuss such popular items as dream vacations or favorite cars to illustrate the difference between wants and demands. You may want an Acura Legend but drive a Subaru Justy. Introduce the idea that demands are often for a bundle or group of benefits and may address a number of related needs and wants. Products. These are anything offered for sale to satisfy a need or want. Have students discuss an extended view of products to include services and ideas. Discuss the role of value in distinguishing products. Discussion Note: Ask students to identify their product choice set for cars, vacations, dating partners, or college professors. Exchanges. These are the act of obtaining desired objects by offering something in return. Link to barter economies and promises to pay (i.e., credit, checks). Transactions. These are an actual trade of value between at least two parties. Transaction marketing is part of the larger concept of relationship marketing in which parties build long-term, economic ties to enhance quality and customer-delivered value. Markets. These are the set of actual and potential buyers of a product. Markets may be decentralized or centralized. Markets exist wherever something of value is desired, such as in the labor market, the money market, even the donor market - for human “products” such as blood or organs. Needs, wants, and demands Core Marketing Concepts Markets Value, satisfaction, and quality Exchange, transactions, and relationships

What Motivates a Consumer to Take Action?
Needs - state of felt deprivation for basic items such as food and clothing and complex needs such as for belonging. i.e. I am thirsty Wants - form that a human need takes as shaped by culture and individual personality. i.e. I want a Coca-Cola. Demands - human wants backed by buying power. i.e. I have money to buy a Coca-Cola.

What Will Satisfy Consumer’s Needs and Wants?
Products - anything that can be offered to a market for attention, acquisition, use or consumption and that might satisfy a need or want. Examples: persons, places, organizations, activities, and ideas. Services - activities or benefits offered for sale that are essentially intangible and don’t result in the ownership of anything. Examples: banking, airlines, haircuts, and hotels.

How Do Consumers Choose Choose Among Products and Services?
Customer Value - benefit that the customer gains from owning and using a product compared to the cost of obtaining the product. Customer Satisfaction - depends on the product’s perceived performance in delivering value relative to a buyer’s expectations. Linked to Quality and Total Quality Management (TQM).

How do Consumers Obtain Products and Services?
Exchanges - act of obtaining a desired object from someone by offering something in return. Transactions - trade of values between parties. Usually involves money and a response. Relationships - building long-term relationships with consumers, distributors, dealers, and suppliers.

Who Purchases Products and Services?
Actual Buyers Market - buyers who share a particular need or want that can be satisfied by a company’s products or services. Potential Buyers

Modern Marketing System
Suppliers Modern Marketing System Modern Marketing System This CTR corresponds to Figure 1-3 on p.11 and relates to the material on p. 10. Competitors Company (Marketer) The Marketing System A modern marketing system consist of four levels of activity. In a very real sense, each level influences the other levels. Each level adds value to the system. Discussion Note: Consumers add value to the system when they buy products. Their purchase price in turn funds the efforts (as profits) of each of the other layers to create more value as the system continues the cycle. Suppliers. This level provides the inputs to the production of goods and services. Company and Competitors. Each company adds value to supplies to create the products (goods, services, or both) offered to various markets. Marketing Intermediaries. Because of specialization, one or more other firms can get products to consumers more efficiently than most producers can (though there are important exceptions). End User Market. The consumer is the “final cause” of the efforts of each level of the marketing system. Discussion Note: Ask students to comment on whether the schematic should have “dotted line” feedback connection from the end user to each level of the system. What form of communication does that feedback take? Purchase? Satisfaction level? Brand loyalty? Brand switching? You might encourage students to remember this system perspective throughout the course and relate examples back to this CTR from time to time. Marketing Intermediaries Environment Environment End User Market

Marketing Management Marketing Management Demand Management
This CTR corresponds to the material on pp Marketing Management Implementing programs to create exchanges with target buyers to achieve organizational goals The Marketing Management Process The marketing concept suggests that businesses must actively manage an on-going relationship with customers. Key concepts of this perspective include: Marketing Management. The text defines marketing management as “the analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives.” Discussion Note: You might point out to students the influential role played by Professor Kotler in the development of marketing management, in both business and academic settings. Demand Management. Matching supply and demand can be a difficult balancing act. Traditional views of marketing were simplistic: build demand. Now marketers recognize the need to manage demand so that infrastructure resources are not overburdened. Discussion Note: It might help to compare demand management with Just-in-Time Inventory or Supply management. JIT lowers costs by not requiring extra capacity to hold things -- supplies or inventory -- before they are needed. By matching consumer demand to the systems designed to meet needs and wants, overall costs of marketing, and hence, the price of products, is reduced. Building Customer Relationships. Growing markets traditionally mean a plentiful supply of new customers. But as consumers become more sophisticated and as market growth slows, maintaining existing customers is the key to long term marketing success. As pointed out in the text, a continuing customer relationship means years of revenues for a company, not one time only sales. Further, existing customers are less expensive to promote to as they have already processed a great deal of product-specific information. Demand Management Finding and increasing demand, also changing or reducing demand Profitable Customer Relationships Attracting new customers and retaining current customers

Marketing Management Philosophies
Five Marketing Philosophies This CTR relates to the material on pp Teaching Tip: You may find it useful to ask students to give their definitions of philosophy. How do they use philosophies for studying? dating? planning their time? Work from their examples to the idea that businesses too have philosophies about how to get things done. Marketing Management Philosophies Production Concept Consumers favor products that are available and highly affordable Improve production and distribution Consumers favor products that offer the most quality, performance, and innovative features Consumers will buy products only if the company promotes/ sells these product Focuses on needs/ wants of target markets & delivering satisfaction better than competitors markets & delivering superior value Society’s well-being Product Concept The Production Concept. One of the oldest concepts, it holds that consumers favor products that are available and affordable. Management emphasizes production and distribution efficiency. Examples from the text include Ford's Model T and Texas Instruments. The Product Concept . This concept focuses on the actual product in an effort to continuously improve quality, performance, and features. May lead to marketing myopia or the tendency to too narrowly define the scope of one's business. Consumers buy products for their benefits, not their features. The Selling Concept. This concept views consumers as unwillingly customers whose inherent opposition must be overcome to make a sale. It is most often used today for unsought goods. The selling concept tends to encourage sellers to misrepresent the true nature of their products or services and can lead to problems in maintaining high customer satisfaction. The Marketing Concept. This concept links the company's success with the consumer's continuing satisfaction. Its "outside-in" approach starts with a well defined target market, an analysis of their needs and wants, and then builds the company's offering around meeting those needs better than the competition (Note: the selling and marketing concepts are contrasted on the following CTR of Figure 1-4). The Societal Marketing Concept. This concept adds to the marketing concept the idea that the company should contribute to the betterment of society as a whole (Note: The societal marketing concept is developed in more detail on a following CTR of Figure 1-5 and the accompanying notes). Selling Concept Marketing Concept Societal Marketing Concept

Marketing & Sales Concepts Contrasted
Marketing and Sales Concept Contrasted This CTR corresponds to Figure 1-4 on p. 15 and to the material on pp The Selling Concept Starting Point Focus Means Ends Factory Existing Products Selling and Promoting Profits through Volume Comparisons and Contrasts: The Selling Concept takes an inside-out perspective -- looking at the company’s needs and wants in terms of existing products and ways to find customers for them. The Marketing Concept takes an outside-in perspective - identifying the needs and wants of a clearly defined market and adjusting company efforts to make products that meet the needs. Discussion Note: Promotional tone may help indicate whether a company practices the selling or the marketing concept. Selling involves persuasion -- convincing the customer of their need to buy existing products. Marketing, at its best, involves information -- bringing the developed product to the awareness of a target market that recognizes need satisfying products. As the text notes, companies can let their own success lock them into a rigid selling structure. As times change, and they always do, those companies fail to see the need for meeting new and emerging consumer needs. The marketing concept helps companies focus on customer need satisfaction, leading to long-term success by customer retention. The Marketing Concept Market Customer Needs Integrated Marketing Profits through Satisfaction

Societal Marketing Concept
This CTR corresponds to Figure 1-5 on p. 16 and relates to the material on pp Society (Human Welfare) Societal Marketing Concept The Societal Marketing Concept The Societal Marketing Concept holds that the organization should determine the needs, wants, and interests of target markets. In delivering the desired satisfactions more effectively and efficiently than the competition, the company should also maintain or improve both the consumer’s and society’s well being. Discussion Note: You may wish to consider extra-textual class discussion identifying the pros and cons of the societal marketing concept. Pros: Reasons for adopting the societal marketing concept include: 1. Public expectations. Social expectations of business have increased. 2. Long-run profits. Socially responsible marketing may lead to more secure long-run profits Ethical obligation. Business should recognize that responsible actions are right for their own sake Public image. A good public image helps firms gain more customers, better employees, access to money markets, and other benefits Better environment. Involvement by business can help solve difficult social problems, creating a better quality of life and a more desirable community in which to attract and hold skilled employees Balance of responsibility and power. Marketers have a large amount of power in society that requires an equally large amount of responsibility Stockholder interests. Socially responsible companies are considered less risky and safer investments 9. Possession of resources. Business has the financial resources, technical experts, and managerial talent to provide to support public causes. Cons: Reasons for not adopting the societal marketing concept include: 1. Violation of profit maximization. 2. Dilution of purpose. The pursuit of social goals dilutes business’s primary purpose Costs. Many socially responsible activities don’t pay their way. 4. Too much power. Business is already one of the most powerful institutions in society Lack of skills. Marketers may be poorly qualified to deal with social issues Lack of accountability. There are no direct lines of social accountability from the business sector to the public Lack of broad public support. Even favorable attitudes are general and lack consensus on specific actions marketers should take on social issues. Consumers (Wants) Company (Profits)

New Marketing Challenges
This CTR relates to the material on pp Teaching Tip: Challenge students to see marketing as an exciting and creative field needing new ideas and new solutions to emerging business opportunities. New Marketing Landscape & Information Technology Nonprofit Marketing Emerging Challenges Growth of Nonprofit Marketing. More and more charitable firms and businesses that hold nonprofit status, like colleges and hospitals, are adopting a marketing orientation toward serving their constituencies. Globalization. Technological and economic developments continue to shrink the distances between countries. Computer and communications technology make possible truly global businesses that buy, sell, manufacturer, market, and service customers easily across international borders. Rising affluence creates new markets. Similarly, more European and Asian companies now compete successfully in the US. market. Changing World Economy. Even as new markets open to rising affluence in such countries as the “newly industrialized” pacific rim, poverty in many areas and slowed economies in previously industrial nations has already changed the world economy. Americans increasingly maintain living standards only by having two incomes per household. Value is hunted for by penny-wise consumers. Ethics and Responsibility. The greed of the 1980s and other problems has spurred a new interest in ethical conduct in business. Many consumers feel business in general has more of an obligation to those who generate profits -- the consumer! New Landscape and Information Technology. The new marketing landscape is a dynamic, fast-paced, and evolving function of all these changes and opportunities. More than ever, there is no static formula for success. Only strategies that incorporate and implement constant improvement in product quality and higher delivered customer value stand any chance of long-term success. Information and the internet have created a technology boom. Ethical Concerns Globalization Changing World Economy

Strategic Planning and the Marketing Process
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 2 Strategic Planning and the Marketing Process

Strategic Planning Process
Strategic Planning involves developing an overall company strategy for long-run survival and growth. This process involves: Defining a Mission: Statement of an organization’s purpose; should be market oriented. Setting Company Objectives: Supporting goals and objectives to guide the entire company. Designing a Business Portfolio: Collection of businesses and products that make up the company. Planning Functional Strategies: Detailed planning for each department designed to accomplish strategic objectives.

Designing the Business Portfolio
The best portfolio is the one that best fits the company’s strengths and weaknesses to the opportunities in the environment. The company must: analyze its current business portfolio or Strategic Business Units (SBU’s) decide which SBU’s should receive more, less, or no investment develop growth strategies for adding new products or businesses to the portfolio

Analyzing Current SBU’s: Boston Consulting Group Approach
This CTR corresponds to Figure on p. 39 and relates to the discussion on pp Analyzing Current SBU’s: Boston Consulting Group Approach Relative Market Share High Low Designing the Business Portfolio The business portfolio is the collection of businesses and products that make up the company. In portfolio analysis, management evaluates the businesses for their strategic fit in meeting company objectives. Strategic Business Units (SBUs) consist of separate units of the company that can be planned independently from other company businesses. The BCG Matrix Stars. High growth, high share businesses. Stars often require heavy investment to build/maintain share in rapidly expanding markets. You may wish to discuss the importance of market share to product profitability at this point. Cash Cows. Low growth, high share businesses. Cows generate profits for investment in other businesses. Question Marks. High growth, low share businesses. Strategy must decide between further investment to move question marks to star status or phasing the product out. Dogs. Low growth, low share. Dogs are often targets for divestment, but may still be profitable and/or contribute to other organizational goals. Stars High growth & share Profit potential May need heavy investment to grow Question Marks High growth, low share Build into Stars/ phase out Requires cash to hold market share Market Growth Rate Low High Cash Cows Low growth, high share Established, successful SBU’s Produces cash Dogs Low growth & share Low profit potential

Analyzing Current SBU’s: GE Strategic Business-Planning Grid
The GE Planning Grid This CTR corresponds to Figure 2-3 on p. 40 and relates to the material on pp Business Strength High Medium Low Strong Average Weak A B C D The General Electric Approach This matrix uses two dimensions of three zones each: Industry attractiveness is an index made up of such factors as market size, market growth, industry profit margin, amount of competition, seasonality & cyclicality of demand, and industry cost structure. Business strength is an index of factors like relative market share, price, competitiveness, product quality, customer & market knowledge, sales effectiveness, and geographic advantages. Which elements within these categories are utilized may vary from product to product and market to market. Strategies appropriate for each group of zones: Invest/Grow. This zone consists of the three green cells in the upper left corner and indicate strong SBUs. Selectivity/Earnings. This zone consists of the three yellow diagonal cells from the lower left to the upper right and represent SBUs of medium overall attractiveness. Sell or Reposition. This zone consists of the three red cells in the lower right corner and indicated SBUs with low overall attractiveness. Industry Attractiveness

Developing Growth Strategies
Product/Market Expansion Grid This CTR corresponds to Figure 2-4 on p. 41 and relates to the material on pp Developing Growth Strategies Product/ Market Expansion Grid 1. Market Penetration 3. Product Development Existing Products New Products Developing Growth Strategies Market Penetration. A penetration strategy involves increasing sales to present target customers. The product itself remains unchanged although there may be a substantial change in how the product is promoted. You may wish to link market penetration with other company-wide strategies such as market leader if appropriate to course progress at this time. Market Development. A market development strategy involves identifying new segments for the current products offered by the company. Market development can be successful for old products like Arm & Hammer Baking Soda (used as a refrigerator deodorant). You may wish to link market development to emerging technologies such as geodemographics for identifying new market segments. Product Development. A product development seeks growth by modifying existing products or introducing new products to serve an existing market. Line extensions in snack foods are often useful for illustrating this strategy to students. You may ask your class how many flavors of Doritos they can name as an example. Diversification. This strategy involves taking profits from existing products or businesses to acquire or enter new markets, usually in different industries from previous company efforts. RJR buying Nabisco is an example. Existing Markets 2. Market Development 4. Diversification New Markets

Product/ Market Expansion Grid
Market Penetration: increase sales to present customers with current products. How? Cut prices, increase advertising, get products into more stores. Market Development: develop new markets with current products. How? Identify new demographic or geographic markets. Product Development: offering modified or new products to current customers. How? New styles, flavors, colors, or modified products. Diversification: new products for new markets. How? Start up or buy new businesses.

Marketing’s Role in Strategic Planning
Process of Selecting Target Consumers Market Segmentation: determining distinct groups of buyers (segments) with different needs. Market Targeting: evaluating and selecting which target segments to enter. Market Positioning: products distinctive and desirable place in the minds of target segments compared to competing products. Marketing Strategies for Competitive Advantage Market-Leader Market Challenger Market-Follower Market-Nicher

The Marketing Process Target Consumers Product Place Price Competitors
This CTR corresponds to Figure 2-5 on p. 45 and to material on pp Teaching Tip: This material previews the focus on later chapters. You may wish to show this CTR as an introduction to the following discussion on target consumers. The lecture information below is provided if you wish to cover the strategic background information prior to coverage of details. The Marketing Process Target Consumers Product Place Price Promotion Implementation Marketing Planning Control Analysis Competitors Intermediaries Publics Suppliers Demographic- Economic Environment Technological- Natural Political- Legal Social- Cultural The Marketing Process This begins an extended discussion of planning, organization, and specific-actions that includes slide transparencies on the 4 Ps, factors affecting marketing strategy decisions, and a general outline of the contents of a marketing plan. These topics are covered in more detail on subsequent CTRs. Marketing Analysis (and Planning). Marketing must conduct a complete analysis of its situation and all relevant environmental influences. Further, marketing must provide each functional area of the company with the information from this analysis that affects their area-specific tasks. Selecting Target Markets. In evaluating analysis, it should become clear that the company cannot service each market opportunity equally well. Target market selection occurs by matching strengths and weaknesses identified in analysis to particular target markets. Marketing Implementation. Plans must be coordinated and launched with realistic logistical support if they are to succeed. Marketers must be able to translate plans into concrete action. Marketing Control. The need to measure, assess and evaluate performance all relate to control issues. These are discussed in more detail later.

Marketing Mix- The Four P’s
The Four Ps of Marketing This CTR corresponds to Figure 2-6 on p. 49 and the material on pp Product “Goods-and-service” combination that a company offers a target market Price Amount of money that consumers have to pay to obtain the product The Marketing Mix Product. In the contemporary mix, product is the term for the "goods and service" offering sold by the company. As technology makes everything from stereos to computers more accessible to the average buyer, service increasingly makes the competitive difference, especially in creating brand loyalty and generating repeat customers. Place. Place refers as much to how the product arrives to the final outlet as where the customer actually buys it. Later in the course, when students distinguish between convenience, shopping, and specialty goods the logistics of getting the product to the "place" of purchase can be emphasized again. Discussion Note: You may wish to discuss the role of infrastructure on placing decisions -- highway, rail, and waterway conditions and/or airfreight costs. Price. Price too is an excellent source of discussion content. Students will undoubtedly know about list and discount prices as many will have had shopping experiences in discount malls. The manipulation of price in the channel of distribution through allowances, credit, and payment arrangements may be new to them. Promotion. Promotion covers most of what students will stereotypically identify as "real marketing." While the role of promotion is important you may remind them the dangers of too much emphasis on a single component of the mix. Target Customers Intended Positioning Activities that persuade target customers to buy the product Promotion Company activities that make the product available Place

Managing the Marketing Effort
Marketing Analysis of Company’s Situation Managing the Marketing Effort This CTR corresponds to Figure 2-7 on p. 50 and relates to the material on pp Managing the Marketing Effort Managing the Marketing Effort Analysis. Tools of analysis include marketing research, marketing information systems, demand forecast models, and systematic if more subjective sources of information such as sales force composites and expert judgments. Even while taking advantage of constantly improving technologies, marketers must know when their own judgment must be relied on as well. If there is much science to marketing, there remains a great deal of art to it as well. Planning. Planning involves deciding on the marketing strategies that will help the company attain its overall objectives. The marketing plan is discussed on the following CTR. Implementation. Through implementation, the company turns the strategic and marketing plans into actions that will achieve the company’s strategic objectives. You may wish to remind students that planning can become a self-absorbing activity that needs constant re-connection to real world marketing constraints. Control. Control consists of measuring and evaluating the results of marketing plans and activities and taking corrective actions to make sure objectives are being reached. Discussion Note: Ask students to discuss how these steps in managing the marketing effort are interdependent and mutually influencing. How example, how does the experience a manager gains from taking corrective actions influence the planning process? Does it in turn affect how analysis is conducted? Resources used for analysis? Control Marketing Implementation Turn Marketing Plans into Action Plans to Achieve Objectives Marketing Planning Develop Marketing Strategies to Achieve Marketing Objectives Develop Marketing Plans & Budget Measure Results Evaluate Results Take Corrective Action

Elements of a Marketing Plan
Executive Summary Current Marketing Situation Threats and Opportunities Objectives and Issues Marketing Planning This CTR relates to the material on pp and corresponds to the information in Table 2-2 on p. 51. Teaching Tip: If you are using a term marketing project in the course, you may wish to handout the assignment at this time. Elements of a Marketing Plan Marketing Strategy Action Programs Budgets Marketing Plan Components Executive Summary. This opening section provides a short summary of the main goals and recommendations for action. It should prepare the reader in anticipation of full explanations later. Teaching Tip: Hint for students: Write this section after completing the plan. Current Marketing Situation. This section describes the market and the company's position in it. A product review should compare all market entries. A distribution section reports sales trends and channel developments. Threats and Opportunities. This section distills environmental scanning efforts into an appraisal of how those forces and trends affect the company. Marketing plans should both identify and rank threats and opportunities. Objectives and Issues. This section begins the process whereby the manager translates analysis into terms for action. Based upon the preceding two steps the manager can set goals that will successfully implement company strategy. Marketing Strategies. Just as the company has strategies for growth, the manager must define the marketing logic or "game plan" to be used in running the specific business or product. The marketing plan here must provide specific strategies for target markets, the marketing mix, expenditures, and how strategies complement and support overall marketing goals. Action Programs. This section tells the who, what , when, and how much of the plan. Budgets. This section is essentially a projected profit-and-loss statement. You may wish to use it as part of a diagnostic if student plans are used with a simulation. Controls. All marketing plans must specify the means for evaluating their effectiveness. Financial goals by market by quarter are common. Controls

Marketing Implementation
Marketing Strategy Marketing Implementation This CTR relates to the material on p. 52. Teaching Tip: Students may have initial difficulty in developing a solid approach to implementing marketing plans. After working through the planning process itself it is often hard for students to focus again on the more concrete activities required to implement their ideas. Marketing Implementation Organizational Structure Decision and Reward Human Resources Marketing Implementation Marketing Implementation is the process that turns marketing strategies and plans into actions in order to accomplish strategic marketing objectives. Action Program. This element of the implementation process coordinates the activities -- what people do -- of the plan. Decisions and deadlines for actions are specified. Lines of authority and reporting are specified. Procedures for resolving conflicts should also be provided. Organization Structure. It should be emphasized to students that there is no one "right" organization structure. Structure is appropriate to the kind of market and competitive conditions that exist. Fast changing markets in high technology are best served by decentralized structures. Management styles from formal to informal serve company interests better if they are linked to the kind of decisions that need to be made rather that personal preferences of management. While decentralized, informal approaches are popular in fast changing markets, formal and centralized structures are often more competitive for organizations in stable markets. Decision and Reward Systems. These must include issues of compensation but management will also benefit from attention to information networking opportunities and the role of praise and honor as effective additional roles that build a sense of company identity. Human Resources. Recruitment and training of motivated people with the necessary skills and abilities to perform specific tasks is crucial to successful implementation of marketing plans. Combined with reward systems, you may wish to introduce extra-textual discussion of theories of management such as Herzberg’s motivators and hygiene factors here. Climate and Culture. Company culture is a system of values and beliefs shared by people in the organization that provide collective meaning and identity. This system serves as the context for determining meaning and guides decision making. Action Programs Marketing Performance Climate and Culture Implementation

Marketing Control Set Marketing Goals Measure Performance Evaluate
This CTR corresponds to Figure 2-8 on p. 53 and relates to the material on pp Marketing Control Measure Performance Evaluate Performance Marketing Control Marketing control is the process of measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that marketing objectives are attained. Four Steps of Control Include: Set Goals. It is important that students understand that the control process is proactive in nature. Management starts by deciding which goals it wants to reach. Goals are integrated into all marketing plans and should be reasonable and specific. Measure Performance. In determining the success of the marketing efforts, performance in the marketplace and the company must be objectively measured. The measurements then become the basis for considering how things are working out for the company. Evaluate Performance. Many students will bring with them a negative connotation of the evaluation process. You may want to encourage them to think that the evaluation step is a diagnostic one. Few companies use this step or the following one for strictly punishing marketing personnel. Evaluation may identify a need for improvement for the marketers, but it also may indicated changed environmental conditions, new competitive threats, unrealistic goals, or faulty strategic assumptions. Encourage your students to articulate and discuss evaluation as a beneficial professional experience as well as an inevitable necessary part of strategic planning. Take Corrective Action. Again, many students will see “corrective” as a necessary evil. Invite them to consider that all organizations seek feedback on performance in order to make changes in their competitive behavior. Coaches use half-time and time outs to take corrective action. Marketing managers use the control process to “tinker” with the plans in order to help all members of the marketing team perform well. Take Corrective Action

Marketing Audits Environment Function Strategy Types of Marketing
This CTR relates to the material on pp and summarizes the information in Table 2-3 on p. 56. Marketing Audits Organization Productivity Environment Systems Function Strategy Types of Marketing Audits Topical Areas for Marketing Audits Marketing Environment. This includes the macroenvironment and the task environment. Macroenvironmental questions address demographic, economic, natural, technological, political, and cultural questions that affect the companies marketing efforts. Task environment questions address markets, customers, competitors, channels, suppliers, and publics in relation to how the company interacts and responds to them Marketing Strategy. This audit questions the business mission, marketing objectives, marketing strategy, and budgetary issues. Audits here seek to ensure a clear sense of mission and strategic fit for the company. Marketing Organization. This audit examines the formal structure, functional efficiency, and interface efficiency of the company. Marketing Systems. This audit deals with the adequacy of the marketing information system, marketing planning system, marketing control system, and new-product development. In particular, audits in this area seek to identify whether or not each of these functions work well and meshes synergistically with the others. Marketing Productivity. This audit examines profitability and cost-effectiveness. Marketing Function. This audit evaluates the products, price, distribution, advertising, sales promotion, publicity, and salesforce efforts of the company. Efforts here correspond to a strategic review of the elements of the marketing mix with traditional promotional elements broken down into two related categories.

The Global Marketing Environment
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 3 The Global Marketing Environment

Marketing Environment
All the actors and forces influencing the company’s ability to transact business effectively with it’s target market. Includes: Microenvironment - forces close to the company that affect its ability to serve its customers. Macroenvironment - larger societal forces that affect the whole microenvironment.

The Marketing Environment
Demographic Company Economic Cultural Company Publics Suppliers Competitors Customers Natural Political Intermediaries Technological

The Microenvironment Company Publics Competitors Intermediaries
Suppliers Forces Affecting a Company’s Ability to Serve Customers Microenvironmental Forces Suppliers. Suppliers are the firms and persons that provide the resources needed by the company and competitors to produce goods and services. Company. Marketing plans must accommodate the needs of other functional areas of the firm to coordinate product/service delivery effectively (See following CTR and notes. Competitors. Competitors are usually considered those companies also serving a target market with similar products and services, although broader definitions may apply. Publics. Publics consist of any group that perceives itself having an interest in the actions of the firm. Publics can have positive as well as negative influences on the company's objectives. Intermediaries. Intermediaries include various middlemen and distribution firms as well as marketing service agencies and financial institutions. Customers. Customers consist of consumer, industrial, reseller, government, and international markets. Competitors Intermediaries Customers

The Company’s Microenvironment
Company’s Internal Environment- functional areas such as top management, finance, and manufacturing, etc. Suppliers - provide the resources needed to produce goods and services. Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.

The Company’s Microenvironment
Customers - five types of markets that purchase a company’s goods and services. Competitors - those who serve a target market with similar products and services. Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.

Customer Markets Company International Markets Consumer Markets
This CTR corresponds to Figure 3-2 on p. 73 and relates to the material on p. 72. International Markets Consumer Markets Types of Customer Markets The company is concerned with five types of customer markets, including: Consumer Markets. These consist of individuals and households that buy goods and services for personal consumption. Business Markets. These buy goods and services for further processing or for use in their production process. Reseller Markets. Resellers buy goods and services for repackaging and reselling at a profit. Discussion Note: Students may have heard that these “middlemen” raise costs to end-users. You might point out that in most cases, resellers actually lower costs by performing marketing functions less expensively than could manufacturers. Government Markets. Governments buy goods and services to produce public services or to transfer them to needy constituents. International Markets. A growing concern for almost all marketers, these consist of those various types of buyers located in other countries. Company Government Markets Business Markets Reseller Markets

The Macroenvironment Demographic Cultural Economic Political Natural
This CTR corresponds to Figure 3-4 on p. 75 and relates to the material on pp Teaching Tip: This CTR overviews the major forces in the company’s macroenvironment. You might use it as an introduction before exploring each area in detail. Each of the six major forces is covered in greater detail on subsequent CTRs. Demographic Cultural Economic Forces that Shape Opportunities and Pose Threats to a Company Macroenvironmental Forces Demographic. The demographic environment monitors population characteristics on such items as size, density, age, location. Economic. The economic environment includes income and spending pattern concerns. Natural. The natural environment addresses pollution concerns, energy costs, raw materials availability, and growing government roles in resource management. Technological. The technological environment includes such issues as the fast pace of change, emerging product forms, and high R&D. Political. The political environment addresses the role of government and policy in the regulation of business. Cultural. The cultural environment recognizes the influence of values and beliefs of a society on purchase decisions and consumption patterns. Political Natural Technological

The Company’s Macroenvironment
Demographic - monitors population in terms of age, sex, race, occupation, location and other statistics. Economic - factors that affect consumer buying power and patterns. Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

Key U.S. Demographic Trends
This CTR relates to the material on pp Changing Age Structure Population is getting older Changing Family Structure Marrying later, fewer children, working women, and nonfamily households Demographic Environment Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other aggregate statistics. Key Aspects of the US demographic environment include: Age Structures (esp.. Baby Boomers). The post W.W.II Baby Boom is the most significant demographic feature by its sheer size: 75 million or over 1/3 of the US population. This bulge in age distribution leads growth strategies in industries serving age-specific markets. Where boomers go, marketers must follow. Discussion Note: More proactively, marketers need to identify emerging boomer needs to plan strategically for an aging population that also lives longer than previous ones. Family Structure. The typical American family rarely exists anymore. Increasing age of those marrying, delayed child-bearing, increased two- income families, and non-family households are key demographic trends. Geographic Population Shifts. Americans are mobile. Trends include movement to Sunbelt states, rural to urban shifts, and present urbanites moving to suburbs. Trends in Education. Americans are becoming more educated and white-collar. Increasing Ethnic Diversity. The United States population is 73% white, 12% black, with the remaining percentage mostly Hispanic (22 million) and Asian (7 million). Geographic Shifts Moving to the Sunbelt and suburbs (MSA’s) Increased Education Increased college attendance and white-collar workers Growing Ethnic and Racial Diversity 73% Caucasian, 12% African-American, 10% Hispanic & 3.4% Asian

Economic Environment Key Economic Concerns for Marketers Economic
This CTR relates to the material on pp Economic Development Changes in Income Key Economic Concerns for Marketers The Economic Environment The Economic Environment consists of factors that affect consumer purchasing power and spending patterns. Key considerations include: Economic Development. Nations vary greatly in their levels of and distribution of income, often as a result of their stage of economic development. Typical distinctions include: Subsistence Economies. These consume most of their own agricultural and industrial output. These countries are poor targets for most products. Industrial Economies. These offer rich markets for many different kinds of goods. Changes in Income. Rising incomes for most consumers have only kept pace with inflation. As a result, consumers are more sensitive to Value Marketing - the careful promotion of a high degree of quality and performance for the price. Income distribution is also of key importance: Upper-class consumers are not affected by current economic events. Middle-class consumers can afford the “good life” most of the time, but are careful about spending. Working-class consumers must budget carefully. Underclass consumers are often unable to participate fully in the marketing system. Changing Consumer Spending Patterns. Knowledge of Engel’s Laws remains important: As income rises, the percentage spent on food declines, the percentage spent on housing remains constant, and the percentage spent on savings and other categories increases. Changes in Consumer Spending Patterns

Natural Environment More Government Intervention Factors Affecting the
Higher Pollution Levels Shortages of Raw Material Natural Environment There are several areas affecting marketing that stem from the natural environment. Shortages of Raw Materials. Shortages both increase demand and sprout counter-movements aimed at conservation. Discussion Note: Both sides of the "green" movement utilize sophisticated database marketing and lobbying techniques. Energy Costs. The cost of energy makes long-term growth of high energy industries and goods difficult to predict. Increased Pollution. Industrial growth almost always damages the natural environment. The so-called “green movement” seeks to operate businesses in such a way so as not to damage the natural environment. The varying political power of “greens” in different countries is a consideration in global marketing efforts. Government Intervention in Natural Resource Management. Changing philosophies on the role of government in managing natural resources also blends into the legal environment. Marketers must take care in identifying natural environmental trends. Discussion Note: You might further expand this discussion by pointing out that even agencies like the EPA vary greatly in the amount of environmental regulation they perform depending upon funding and the agenda of whoever occupies the White House. Increased Costs of Energy

The Company’s Macroenvironment
Technological - forces that create new product and market opportunities. Political - laws, agencies and groups that influence or limit marketing actions. Cultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors.

Technological Environment
Rapid Pace of Change High R & D Budgets Technological Environment Technological Environment This CTR relates to the material on pp Issues in the Technological Environment Technological Environment Key forces operating in the technological environment include: Fast Pace of Technological Change. Anyone trying to learn all the features of their current software programs before they are updated and outdated understands this force. Teaching Tip: You might point out to students raised on Star Trek and Star Wars how much of yesterday's sci-fi is already coming true. Cellular phones as Star Trek-type communicators might get class discussion going. High R&D Budgets. The United States spends more on research and development than any other country. Placing marketing personnel on research teams can help focus research efforts on consumer needs and practical applications. Focus on Minor Improvements. Risk factors associated with high costs of development often lead to minor improvements over substantive product changes. Discussion Note: While minor improvements help keep products "fresh" to the market, marketers must anticipate that changing consumer needs will limit the competitiveness of too little innovation. Increased Government Regulation. Faster introduction of increasingly complex products often leads to greater regulation as consumers seek assurances that products are tested and safe. Focus on Minor Improvements Increased Regulation

Political Environment
This CTR relates to the material on pp Increased Legislation Changing Enforcement Key Trends in the Political Environment Political Environment The political macroenvironmental forces consist of laws, government agencies, and interest groups that seek regulation of business activities to forward their own interests. Business in general, more than other groups, uses lobbying efforts to try and obtain legislation favorable to their competitive interests. Key considerations include: Legislation. Laws generally attempt to protect companies from each other to create more competition that in turn creates more value for the consumer. Laws also aim at protecting consumers from unfair and sometimes dangerous business practices. Laws sometimes seek to protect society as a whole from practices that endanger whole communities or other publicly owned resources such as rivers, forests, and parks. Enforcement. The effect of laws depends upon the emphasis given to enforcing them within the regulatory agency responsible for administering the law. Regulation varies in intensity with political agendas of sitting presidents and budget allocations. Public interest groups too affect the degree of legislative activity and administrative enforcement. Increased Emphasis on Ethics. At both the grassroots and corporate level, more US companies are showing a greater concern for more ethical conduct and more socially responsible action. Discussion Note: Ethical companies often enjoy better consumer relations and public image. Bottom line contributions can be defensive. For example, when Johnson & Johnson behaved responsibly after the Tylenol poisonings, they did not suffer expensive lawsuits and were able to recapture all of their original market share when the product was re-introduced. Greater Concern for Ethics

Cultural Environment Of Organizations Nature Oneself Society
Technological Environment This CTR relates to the material on pp Of Organizations Nature Oneself Society the Universe Others Views That Express Values Cultural Environment The key elements of the cultural macroenvironment include: Persistence of Cultural Values. Core beliefs and values are relatively enduring and must be considered by marketers positioning products. For example, product innovations that conflict with core values are unlikely to be adopted. Shifts in Secondary Values. These change over time and change more often than core values and may provide positioning opportunities. Cultural values are expressed in people’s views on the following: View of Themselves. People vary in their emphasis on how important serving themselves is compared to serving others. Personal ambition and materialism have increased significantly over time in the US. View of Others. Recently, there has been a trend toward more altruistic behavior, at least among some segments of the population. Discussion Note: You might link ambition and altruism to baby boomers and baby busters, respectively. It wont’ hold up forever, but might generate class participation. View of Organizations. Most people are willing to work for large companies but also believe that the companies are out for themselves. View of Society. Trends like “Buy American” are reflects of this view. View of Nature. This trend has changed over the last few decades from dominate and control to coexist and preserve. View of Universe. Linked in the US to religious observance, this trend has seen an overall decline among most and a simultaneous passionate activism among a small, but powerful group, usually called the “religious right.”

Responding to the Marketing Environment
Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macroenvironment to affect changes that are favorable for the company. How? Hire lobbyists , run “advertorials”, file law suits and complaints, and form agreements.

Marketing Research and Information Systems
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 4 Marketing Research and Information Systems

The Importance of Information
This CTR relates to the material on p. 99 and provides a context for discussing marketing research and marketing information systems. Instructor’s Note: This information is extra- textual. Marketing Environment The Importance of Information A marketing information system is valuable for the information tools it provides in relation to the following areas: The Marketing Environment. Companies compete in an environment of social, legal, cultural, technological, natural, and competitive forces. Information on each aspect of the environment is crucial to effective market planning. Discussion Note: You may wish to discuss the role of environmental monitoring or scanning in class. Information gathering can be serendipitous or it can be planned. While not all environmental information needs can be identified in advance, it is possible to approach research and information systems planning with an eye to setting up ways of collecting information in an on-going fashion. Customer Needs and Wants. If environmental forces cause the company to seek information in a larger context, customer needs and wants focus the attention on the target market. Without information, identifying need and wants is guesswork -- or fortune telling. Competitors. The actions of competitors cannot go unnoticed by the company. Innovative companies not only identify competitive actions and offerings, they also consume competitors products -- in small quantities of course! For example, to understand the value of a competitors automobile it makes sense to drive it for awhile as a customer would and evaluate it in that fashion. Strategic Decision Making. Strategy formulation depends upon accurate & timely information most of all. Why Information Is Needed Competition Customer Needs Strategic Planning

What is a Marketing Information System (MIS)?
Consists of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute needed, timely, and accurate information to marketing decision makers. Function: Assess, Develop and Distribute Information.

The Marketing Information System
Marketing Managers The Marketing Information System This CTR corresponds to Figure 4-1 on p. 99 and relates to the material on pp Discussion Note: The MIS Concept is one of those exciting new areas for marketing careers you may wish to discuss with your students. The Marketing Information System Distributing Information Assessing Information Needs Marketing Information System Components of the Marketing Information System The MIS consists of people, equipment, and procedures to gather, sort, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. Key components and functions include: Assessing Information Needs. Knowing what is needed or likely to be needed is a key feature of the MIS that underscores the importance of information. Quantity alone is not the answer as too much information can obscure important details. Also, not all desirable information is available. Competitors seldom volunteer information on their results. Distributing Information. This function requires organizing the MIS in a flexible and responsive manner that allows each user access to the combinations of information they need to make better decisions. Internal Records. An effective MIS organizes and summaries balance sheets, orders, schedules, shipments, and inventories into trends that can be linked to management decisions on marketing mix changes. Information Analysis. This function requires that the MIS director anticipate how the information is to be used. For example, if users from all business functions use the MIS on-line for short deadline decisions, then the analytical tools each area needs must be available on demand. Marketing Intelligence. This function provides the everyday information about environmental variables that managers need as the implement and adjust marketing plans. Marketing Research. This function links the consumer, customer, and public to the marketer through an exchange of information. Research is often project oriented and discussed in more detail on the following CTR. Information Analysis Marketing Environment Internal Data Developing Information Marketing Decisions and Communications Marketing Research Marketing Intelligence

Functions of a MIS: Assessing Information Needs
Conduct Interviews and Determine What Information is Desired, Needed, and Feasible to Obtain. Monitors Environment for Information Managers Should Have Examine Cost/ Benefit of Desired Information

Functions of a MIS: Developing Information
Obtains Needed Information for Marketing Managers From the Following Sources Internal Data Collection of Information from Data Sources Within the Company From: Accounting, Sales Force, Marketing, Manufacturing, Sales Marketing Intelligence Collection and Analysis of Publicly Available Information about Competitors and the Marketing Environment From: Employees, Suppliers, Customers, Competitors, Marketing Research Companies Marketing Research Design, Collection, Analysis, and Reporting of Data about a Situation

Functions of a MIS: Distributing Information
Information Must be Distributed to the Right Managers at the Right Time. Distributes Routine Information for Decision Making Distributes Nonroutine Information for Special Situations

The Marketing Research Process
Defining the Problem and the Research Objectives Developing the Research Plan The Marketing Research Process The Marketing Research Process This CTR corresponds to Figure 4-2 on p. 104 and relates to the material on pp Instructor’s Note: The CTR presents an overview of the research process. Details of each step are presented on subsequent CTR’s. Implementing the Research Plan Interpreting and Reporting the Findings The Research Process Defining the Problem and Research Objectives. Before researcher can provide managers with information, they must know what kind of problem the manager wishes to solve. Specifying a behaviorally-based information problem clearly is often hard to do. Objectives for research may be exploratory, descriptive, or causal. Discussion Note: One key is to remind students that people report problem symptoms more often than they identify problems. Objectives for research can only be linked to clear problem definitions. Developing the Research Plan and Collecting Information. Developing the plan includes the following steps: (1) Determining specific information needs; (2) Surveying secondary information sources; (3) Planning the primary data collection if necessary; (4) Choosing the contact method and sampling procedure appropriate; and (5) Presenting the plan to the client for approval. Implementing the Plan - Collecting and Analyzing the Data. In implementing the plan care must be taken that all personnel involved in collecting and analyzing data understand clearly the purpose of the research and are adequately trained and experienced to complete it professionally. Interpreting and Reporting the Findings. Interpreting research findings may involve statistical analyses or not but these tools of analysis should not be confused with the action-oriented information needed by marketing managers. Research is valuable only in its use to make better marketing decisions. Reports of findings should always be in the style and language of how the information will be used by the manager.

Marketing Research Process Step 1. Defining the Problem &
Marketing Research Process Step 1. Defining the Problem & Research Objectives Gathers preliminary information that will help define the problem and suggest hypotheses. Exploratory Research Descriptive Research Describes things as consumers’ attitudes and demographics or market potential for a product. Causal Research Test hypotheses about cause- and-effect relationships. Tests hypotheses about cause-

Marketing Research Process Step 2. Develop the Research Plan
This CTR relates to the material on pp Teaching Tip: Students may not realize research seeks both primary and secondary information for marketing decision making. The need for careful and complete research information requires attention to both kinds of information. Determine the Specific Information Needed Secondary Data Data collected from other sources for other reasons serves as secondary data. Key factors to consider when using secondary information include: Relevant. Secondary research must fit the needs of the project. It is especially important that categories used previously match the same definitions you are using (like target market). Also, measurement units must be the same. Teaching Tip: For example, you cannot determine an “average” income from secondary research that reports respondents as having incomes as: Group 1: $10,000 to $14,999; 10 members Group 2: $15,000 to $19,999; 20 members Group 3: $20,000 to $24, members This is categorical, not interval-scaled data. An average cannot be determined. Accurate. You must be able to determine that the data were reliably collected and reported. Current. The information must be up-to-date enough for the current project decisions. Impartial. The information must have been objectively collected and reported. Discussion Note: Impartiality also refers to ensuring that the researcher had no a priori agenda. For example, the Tobacco Institute continues to fund research projects designed to not find a relationship between cigarette smoking and lung cancer. Secondary Primary Information collected for the specific purpose at hand. Information that has been previously collected. Both Must Be: Relevant Accurate Current Impartial

Primary Data Collection Process Step 1. Research Approaches
This CTR relates to information on pp Observational Research Gathering data by observing people, actions and situations (Exploratory) Primary Data Decisions on primary information needs include: Research Approaches. There are three common approaches for gathering primary data. Observations are linked to actual behaviors but may not help in understanding why people act as they do. Surveys can help describe reasons for people's behavior and provide the research with flexibility. But surveys can be plagued by problems in completion and demand characteristics from several factors. Experimental methods help identify cause and effect relationships but controlling for extraneous variables is usually difficult in real world situations. Survey Research Asking individuals about attitudes, preferences or buying behaviors (Descriptive) Experimental Research Using groups of people to determine cause-and-effect relationships (Causal)

Primary Data Collection Process Step 2. Contact Methods
Collecting Information This CTR corresponds to the material in Table 4-3 on p. 112 and relates to the material on pp Contact Methods Data Collection Methods Mail Questionnaires. This method provides excellent control over the effects of having an interviewer influencing the respondents answers. Since no interviewer is present, no interpersonal influences are possible. Mail questionnaires may elicit more honest and in-depth information. Discuss with your class the kind of problems that may require this kind of information, such as social marketing issues on health care concerns. Still, lack of ability to distinguish respondents from nonrespondents makes inference to the general population difficult. Telephone Interviewing. Being able to control the sample and complete the data collection quickly are assets of telephone interviewing. Many marketing contexts, such as person marketing in political campaigns, need almost overnight information on the effectiveness of the latest promotions. Telephone technology can reach diverse geographic markets of interest and can be linked to computers for easy data analysis. Problems with respondent cooperation may becoming increasingly important over time. Personal Interviewing. Personal interviewing is very flexible and can provide a rich and deep volume of data for the researcher. Also, personal interviewers can follow-up unexpected or unusual responses that other collection methods are not prepared to handle. Using groups in personal interviews can also reveal social influences that may be important in consumer decision making.

Primary Data Collection Process Step 3. Developing a Sampling Plan
Who is to be surveyed? Probability or Non-probability sampling? Sample - representative segment of the population How should the sample be chosen? How many should be surveyed?

Primary Data Collection Process Step 4. Research Instruments
Questionnaire What to ask? Form of each question? Wording? Ordering? Mechanical Devices People Meters Grocery Scanners Galvanometer Tachistoscope

Marketing Research Process Step 3. Implementing the Research Plan
Collection of Data Research Plan Processing of Data Analyzing the Data

Marketing Research Process Step 4. Interpreting and Reporting Findings
Interpret the Findings Draw Conclusions Report to Management

Chapter 5 Consumer Markets and Consumer Buyer Behavior
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 5 Consumer Markets and Consumer Buyer Behavior

Consumer Buying Behavior
Consumer Buying Behavior refers to the buying behavior of final consumers (individuals & households) who buy goods and services for personal consumption. Study consumer behavior to answer: “How do consumers respond to marketing efforts the company might use?”

Model of Consumer Behavior
Marketing and Other Stimuli Model of Consumer Behavior Model of Consumer Behavior This CTR corresponds to Figure 5-1 on p. 135 and to the material on pp Product Price Place Promotion Economic Technological Political Cultural Buyer’s Black Box Consumer Behavior Consumer behavior refers to the buying behavior of final consumers -- individuals and households who buy goods and services for personal consumption. Model of Consumer Behavior Marketers control the stimuli or inputs consisting of the four Ps: Product, Place, Price, and Promotion. Environmental and situational influences, though perhaps beyond the control of the marketer, also influence many consumer choices. But what happens between the marketing stimuli input and the buyer’s response or output? That “black box” processing is the central question for marketers. Teaching Tip: You may wish to discuss the “buyer’s black box” in more detail at this stage. Students sometimes become involved in the controversy regarding the presence or absence of consciousness in consumers. Consider using a two-side in-class discussion: Side A: Experimental psychologists argue that what we call consciousness is merely a set of complex learned responses -- an ordinary physiological function. Side B: Sociologists and social psychologists argue that consciousness is greater than the sum of its physiological parts. For marketers, the issue is sometimes linked to free will: Do marketers create needs by conditioning consumers? Do marketers offer need-fulfillers to needs consumer’s create in their “black box?” Characteristics Affecting Consumer Behavior Buyer’s Decision Process Buyer’s Response Purchase Timing Purchase Amount Product Choice Brand Choice Dealer Choice

Characteristics Affecting Consumer Behavior
This CTR relates to Figure 5-2 on p.135 and previews the material on pp Culture Social Influences on Consumers Cultural. Culture is the most basic influence on a person's values, priorities, and beliefs. Cultural shifts make marketing opportunities although most such changes are in secondary rather than core cultural values. Subcultures are important markets as these groups are often significantly different in their needs to warrant different marketing approaches. Social. Social class is determined by a combination of income, occupation, education, wealth and other variables. Social factors within one's class that affect consumer behavior include reference groups & aspirational groups. Families also exert strong social influences. Finally, each relationship a person has with his or her group carries with it certain roles and status that may carry consumptive responsibilities. Personal. Major personal factors are age and life cycle stage, occupation, economic situation, life style and personality/self-concept. Texts vary in their treatment of the PLC stages but it is clear that singles buy different products than do young marrieds with small children. Occupations differ in time constraints and social pressures to conform that affect consumption decisions. Lifestyles measured by AIO or VALS typologies can reveal different consumption patterns across otherwise dissimilar groups. The unique characteristics of each person that make up their personality also affect behavior. Psychological. Maslow's hierarchy reminds marketers that need states vary in their intensity or motivation. Perception is the process of organizing stimuli and is influenced by selective exposure, distortion, & retention. Learning occurs in response to the presentation of information linked to relevant drives, cues, responses, and reinforcement only some of which is under the control of the marketer. Beliefs and attitudes, though shaped by cultural and social forces, may vary considerably on the individual level. Personal Psychological Buyer

Factors Affecting Consumer Behavior: Culture
Most basic cause of a person's wants and behavior. Values Perceptions Subculture Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers Social Class People within a social class tend to exhibit similar buying behavior. Occupation Income Education Wealth

Factors Affecting Consumer Behavior: Social
Social Factors This CTR relates to the material on pp Factors Affecting Consumer Behavior: Social Groups Membership Reference Family Husband, wife, kids Influencer, buyer, user Social Factors Group Influence on Brand Choice Groups vary in their influence on product and brand purchases as illustrated on the CTR. Consumers belong to several different membership groups. Primary Groups. Primary groups are those with which we have regular but informal interaction. These include family, friends, neighbors, and co-workers. Secondary Groups. Secondary groups are those with which we have more formal and less regular interaction such as religious groups, professional associations, and trade unions. Reference Groups. These groups serve as direct (face-to-face) or indirect points of comparison and evaluation in a person’s formation of attitudes or behavior. Aspirational Groups. This type of group is one to which the individual wishes to belong and emulates in adopting behaviors appropriate to that group. Opinion Leaders. These are people within a reference group who exert influence over others due to special knowledge, skill, personality, or other characteristic. Roles and Status

Factors Affecting Consumer Behavior: Personal
Personal Influences Factors Affecting Consumer Behavior: Personal This CTR corresponds to Table 5-2 on p. 142 and the material on pp Factors Affecting Consumer Behavior: Personal Lifestyle Identification Age and Family Life Cycle Stage Occupation Economic Situation Personality & Self-Concept Personal Factors Age and Family Life-Cycle Stage. Buyers’ choices are affected by changes in their age and family structure over time. Young singles have different tastes in clothes, furniture, food, and recreation than do middle aged persons with their own children. Older consumers continue to change in their preferences and additionally acquire new buyer needs such as increased health care needs. Occupation. A person’s occupation carries with it distinct consumptive needs. White collar workers need different clothes than blue collar workers. Also, occupations usually carry their own subcultural norms and values that influence buyer behavior. Economic Situation. Means constrain buyer behavior for almost everyone except for the most wealthy. Personality and Self-Concept. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting response to one’s own environment. Self-concept is the basic perception that people have about who they are. Lifestyle Lifestyle is a person’s pattern of living as expressed in her or his activities, interests, and opinions. Determining lifestyle involves measuring AIO dimensions -- the Activities, Interests, and Opinions of consumers. Psychographics. Lifestyle measures combined with demographic information can identify distinct market segments for consumer products and services. The best known of these methods, VALS 2, is addressed on the following CTR. Activities Opinions Interests

VALS 2 Abundant Resources Actualizers Principle Oriented
VALS 2 Segments This CTR corresponds to Figure 5-3 on p. 144 and relates to the material on pp VALS 2 Actualizers VALS 2 Segments The VALS 2 Segmentation by lifestyle incorporates both psychological aspects such as principles, status, and action orientations as well as resource-based orientations (abundant versus minimal). Descriptions of each area include: Fulfilleds. Fulfilleds are principles oriented individuals who are mature responsible well-educated professionals. Leisure centers around the home but they are also well-informed about the world. High income but practical, value-oriented consumers. Believers. Believers principles oriented individuals who have more modest incomes, are conservative and predictable consumers who favor American products. Achievers. Achievers are status oriented individuals who get satisfaction from jobs and families. Conservatives who respect authority. Products show off success. Strivers. Strivers are status oriented individuals who seek to emulate achievers but have fewer resources. Experiencers. Experiencers are action oriented individuals who like to affect the environment in tangible ways. This group is active and outgoing and likes new things. Makers. Makers are action oriented individuals who also like to affect their environment but in more practical ways. They value self-sufficiency, family, and have little interest in the larger world. Actualizers. Actualizers are resource oriented individuals with the highest incomes and so many resources that they can indulge any or all self-orientations. Image is an expression of taste, independence, and character. They can buy anything; need nothing. Strugglers. Strugglers are resource oriented individuals who have the lowest income and tend to be brand loyal. Strugglers are concerned with survival. Principle Oriented Status Oriented Action Oriented Fulfilleds Achievers Experiencers Believers Strivers Makers Minimal Resources Strugglers

Factors Affecting Consumer Behavior: Psychological
Motivation Psychological Factors Perception Beliefs and Attitudes Learning

Maslow’s Hierarchy of Needs
This CTR relates to the material on p and corresponds to Figure 5-4. Self Actualization (Self-development) Esteem Needs (self-esteem, status) Maslow’s Hierarchy of Needs Maslow suggests that lower level needs must be satisfied before individuals become motivated to satisfy higher level needs. Thus consumers will respond to lower level products and promotions until those needs are met. Only then can other marketing offers be of interest. Needs include: Physiological. Physical needs such as hunger, thirst, and bodily functions are the lowest level need and require satisfaction before other needs become important to the individual. Sometimes this helps students understand the difference between needs and wants. A thirsty person may still want an expensive car but if thirsty enough will take a drink of water. Safety. Safety needs for security and protection are the next level needs in the hierarchy. So long as physiological needs are met, safety needs will take precedence over other needs. Fear appeals for consumer products are often linked to safety needs. Social. Human beings are social, gregarious animals. We group together in part to fulfill physiological and safety needs but also because we enjoy and need the company of others. Going to malls to "hang out" fulfills social needs. Esteem. To be recognized as an individual fulfills esteem needs. Self-esteem is the value a person places on himself or herself. As lower level needs become more stable, esteem needs become more important to the individual. Self-actualization. Beyond esteem needs very successful people may still be driven to improve themselves and "accomplish something." These people are driven to self-actualize their potential. Social Needs (sense of belonging, love) Safety Needs (security, protection) Physiological Needs (hunger, thirst)

Types of Buying Decisions
This CTR corresponds to Figure 5-5 on p. 151 and relates to the material on pp Types of Buying Decisions Complex Buying Behavior Variety- Seeking Behavior High Involvement Low Involvement Types of Buying Decision Behavior Complex Buying Behavior. Consumers undertake this type of behavior when they are highly involved in a purchase and perceive differences among brands. Involvement increases with the product is expensive, infrequently purchased, risky, and highly self-expressive. Dissonance-Reducing Buying Behavior. Consumers engage in this behavior when they are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands. Without objective differentiation to confirm the purchase, buyers often seek support to reduce postpurchase dissonance -- the feeling they may have made the wrong decision. Habitual Buying Behavior. This behavior occurs under conditions of low consumer involvement and little significant brand differences. Consumers do not search extensively for information about brands. Brand familiarity aids in promoting products under essentially passive learning conditions. Variety-Seeking Buying Behavior. Consumers may seek variety when involvement is low and there are significant perceived differences among brands. Differences may be product features -- new taste, improvements, extra ingredients -- or promotional benefits such as coupons, rebates, and price reductions. Significant differences between brands Dissonance- Reducing Buying Behavior Habitual Buying Behavior Few differences between brands

The Buyer Decision Process
Need Recognition Information Search The Buyer Decision Process The Buyer Decision Making Process This CTR corresponds to Figure 5-6 on p. 153 and relates to the material on pp Teaching Tip: Consider asking students to describe some of their purchases decisions made at the beginning of the term and link them to steps in the process. Evaluation of Alternatives Purchase Decision Postpurchase Behavior Stages in the Buyer Decision Process Need Recognition. Problems are recognized when people sense a difference between an actual state and some desired state. Problem recognition can be triggered by either internal or external stimuli. Information Search. Consumers vary in the amount of information search they conduct. Information search may be a survey of information stored in memory or may be based upon information available externally. Search effort varies from heightened awareness corresponding to increased receptivity for relevant information to active information search modes where the person expends some energy to obtain information that is desired. External information vary in their informational and legitimizing characteristics. Riskier decisions usually elicit more search behavior than non-risky decisions. Evaluation of Alternatives. Following information search, the person compares decisional alternatives available. Criterion for evaluation compares product attributes of the alternatives against degrees of importance each attribute has in meeting needs, beliefs about the product or brand's ability and utility, and an evaluation procedure that ranks the alternatives by preference that forms an intention to buy. Purchase Decision. - The individual buys a product. Purchasing other than the intended product may be due to attitudes of others exerted after the evaluation of alternatives is completed or unexpected situational factors such as point of purchases promotions that affect the alternatives' ranking. Post-purchase Behavior. This involves comparing the expected performance of the product against the perceived performance received. Cognitive dissonance describes the tendency to accentuate benefits and downplay shortcomings.

Difference between an actual state and a desired state
The Buyer Decision Process Step 1. Need Recognition Need Recognition Difference between an actual state and a desired state Internal Stimuli Hunger Thirst A person’s normal needs External Stimuli TV advertising Magazine ad Radio slogan Stimuli in the environment

The Buyer Decision Process Step 2. Information Search
Personal Sources The Buyer Decision Process Step 2. Information Search Commercial Sources Family, friends, neighbors Most influential source of information Public Sources Advertising, salespeople Receives most information from these sources Experiential Sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product

The Buyer Decision Process Step 3. Evaluation of Alternatives
Product Attributes Evaluation of Quality, Price, & Features Degree of Importance Which attributes matter most to me? Brand Beliefs What do I believe about each available brand? Total Product Satisfaction Based on what I’m looking for, how satisfied would I be with each product? Evaluation Procedures Choosing a product (and brand) based on one or more attributes.

The Buyer Decision Process Step 4. Purchase Decision
Purchase Intention Desire to buy the most preferred brand Unexpected situational factors Attitudes of others Purchase Decision

Consumer’s Expectations of Product’s Performance Dissatisfied Customer
The Buyer Decision Process Step 5. Postpurchase Behavior Consumer’s Expectations of Product’s Performance Product’s Perceived Performance Satisfied Customer! Dissatisfied Customer Cognitive Dissonance

Stages in the Adoption Process
Awareness Stages in the Adoption Process Stages in the Adoption Process This CTR relates to the material on p. 157. Interest Evaluation Stages in the Adoption Process The new product adoption process parallels the buyer decision process but focuses more on the interaction of consumer needs with product adoption. The new product adoption process may work best to explain how regularly used products requiring re-purchase are considered for inclusion in the consumer's consumptive behavior patterns but may also apply to some durables as well. Awareness. In this stage the consumer is aware of the new product but lacks further information about it. Interest. The consumer is motivated to seek information about the new product. Evaluation. The consumer determines whether or not to try the new product. Trial. The consumer tries the new product on a small scale to test its efficacy in meeting his or her needs. Trial can be imagined use of the product in some cases. Adoption. The consumer decides to make use of the product on a regular basis. Trial Adoption

Adoption of Innovations
This CTR corresponds to Figure 5-7 on p. 157 and relates to the material on pp Adoption of Innovations Individual Differences in Innovativeness Innovators. Innovators include the first 2.5% of buyers who adopt a new product idea. Innovators help get the product exposure but are not often perceived by the majority of potential buyers as typical consumers. Innovators like risk taking and enjoy buying new products. Innovators may purchase at skimming prices. Discussion Note: You might discuss the ethical implications of skimming. Is it fair? Also, are there cost considerations associated with new product development that make skimming to recover high start up costs more ethical than it may seem? Early Adopters. Early Adopters comprise about 13.5% of the buyers who adopt new products. This group serves as opinion leaders to the rest of the market and their product usage outcomes serve as motivation to later buyers to get the product. Early Majority. Early Majority are some 34% of buyers adopting the product. They are deliberate consumers who adopt new ideas before the average person but seldom lead the market. Late Majority. Late Majority comprise another 34% of buyers adopting the product. This group is skeptical of new products and only buys after the majority of the market has tried it. Laggards. Laggards are the final 16% of adopters and are tradition-bound. They are suspicious of change and only adopt innovation that have already become something of a tradition. Early Majority Late Majority Percentage of Adopters Early Adopters Innovators Laggards 34% 34% 13.5% 16% 2.5% Time of Adoption Early Late

Influences on the Rate of Adoption of New Products
This CTR relates to the material on pp Teaching Tip: The adoption of innovations may be initially confusing to students but they will usually become involved in discussion when new products of importance to them are used as examples. Influences on the Rate of Adoption of New Products Communicability Can results be easily observed or described to others? Relative Advantage Is the innovation superior to existing products? Product Characteristics Influences Relative Advantage. This refers to the degree to which the innovation appears superior to existing products. The greater the perceived relative advantage, the sooner the innovation will be adopted. Compatibility. This refers to the degree to which the innovation fits the values and experiences of the potential consumers. Increased compatibility will accelerate adoption of the innovation. Complexity. This refers to the degree to which the innovation is difficult to understand or use. Greater complexity will slow the rate of adoption of the innovation. Divisibility. This refers to the degree to which the innovation can be tried on a limited basis. Greater divisibility will help increase the rate of adoption of the innovation. Communicability. This refers to the degree to which the results of using the innovation can be observed or described to others. Greater communicability will increase the rate of adoption of innovation. Product Characteristics Compatibility Does the innovation fit the values and experience of the target market? Divisibility Can the innovation be used on a trial basis? Complexity Is the innovation difficult to understand or use?

Chapter 6 Business Markets and Business Buyer Behavior
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 6 Business Markets and Business Buyer Behavior

What is a Business Market?
The Business Market - all the organizations that buy goods and services to use in the production of other products and services that are sold, rented, or supplied to others. Business markets involve many more dollars and items do consumer markets.

Characteristics of Business Markets
This CTR corresponds to Table 6-1 on p. 171 and relates to the material on pp Market Structure and Demand Fewer, larger buyers Geographically concentrated Demand derived from consumers Inelastic demand Fluctuating demand Characteristics of Organizational Markets Market Structure and Demand. Business markets have far fewer buyers than consumer markets. Business markets are much more geographically concentrated. Business demand is derived demand coming from the demand for the consumer goods the organization produces. Demand is more inelastic and more fluctuating. Nature of the Buying Unit. Business markets have more buyers and more professional purchasing procedures. Purchasing agents may be career professionals highly trained in how to buy better. As purchases become more complex, more people are likely to become involved in the purchase decision. Types of Decisions. Business buying decisions may be more complex due to the large amounts of money involved, technical specification considerations, and the interaction and coordination of more people in the buying process. Decision Process. Beyond the complexity of the decision business buying is more formalized, often with written procedures. Also, business buying decisions feature buyer-seller relationships that are more dependent upon each other than consumer buying situations. Both buyer and seller have fewer options to do business elsewhere than do consumer buyer and sellers. Other Characteristics Direct Purchasing. Business buyers usually buy direct from producers. Reciprocity. Business buyers often practice reciprocity, selecting suppliers who also buy from them. Leasing. Many businesses lease rather than buy equipment. Leasing gains a number of advantages over buying such as having more capital, having newer products, and tax incentives. Nature of the Buying Unit More buyers More professional purchasing effort Types of Decisions & the Decision Process More complex decisions Process is more formalized Buyer and seller are more dependent on each other Build close long-term relationships with customers

The Buying Organization
Marketing and Other Stimuli A Model of Business Buyer Behavior This CTR corresponds to Figure 6-1 on p. 173 and the material on pp Model of Business Buyer Behavior Product Price Place Promotion Economic Technological Political Cultural The Buying Organization A Model of Business Buyer Behavior The Environment. The business buyer operates in a competitive environment consisting of two categories: Marketing Stimuli. Marketer controlled stimuli consist of the product, place, price, and promotion. Other Stimuli. As with consumer markets, other stimuli consist of the forces in the economic, technological, political, cultural, and competitive environments. However, group membership in the business organization and participation in the business buying process affects how these environmental forces influence decision making. The Buying Organization. The buying organization is influenced by the overall organization -- its corporate culture and values, traditions, and procedures and regulations. The buying center and the business buying decision process also differs from consumer buying influences and is discussed on a following CTR. Buyer Responses. Buyer responses in business buying situations often consist of more alternatives than those available to consumers. Supplier choice, order quantities, delivery terms, service options, and payment terms are often more negotiable than they are to the consumer. Interpersonal and Individual Influences Organizational Influences The Buying Center Buying Decision Process Buyer’s Response Delivery Terms and Times Service Terms Payment Product or Service Choice Supplier Choice Order Quantities

Business Buying Situations
This CTR relates to the material on pp Business Buying Situations New Task Buying Major Types of Buying Situations Straight Rebuy. This is an industrial buying situation in which the buyer routinely reorders something without any modifications in the order. Marketers of industrial supplies seek to establish this type of relationship with the customer. When buyers place straight rebuys, competitors have little or no chance of making a sale. Modified Rebuy. This is an industrial buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. This increases the number of participants in the buying decisions thus increasing the combination of influences on the decision. "In" suppliers worry that competitors will gain some business. "Out" suppliers recognize the situation as an opportunity. New Task Buying. This is an industrial buying situation in which the buyer purchases a product or service for the first time. New task buying is the most complex of buying decision processes made by a company. It is also both the greatest opportunity and challenge to the marketer. Marketers must consider that new task buying situations often arise in response to still-emerging problems seeking solutions. Modified Rebuy Involved Decision Making Straight Rebuy

Participants in the Business Buying Process: The Buying Center
Buying Centers This CTR relates to the material on pp Participants in the Business Buying Process: The Buying Center Gatekeepers Users Participants in Business Buying Centers Users. These are members of the organization who will use the product or service. Users often initiate the buying proposal and help define product specifications. Influencers. These are people who affect the buying decision. They often help define specifications and provide information for evaluating alternatives. Technical personnel are particularly important influencers. Buyers. These are the people with the formal authority to select the supplier and arrange terms of purchase. Buyers may influence product specifications, but their major role is in selecting vendors and negotiating. Deciders. These are the people who have the formal or informal power to select or approve the final suppliers. Gatekeepers. Gatekeepers are those people who control the flow of information to others. Gatekeepers are extremely important to anyone trying to gain the cooperation of buying center members, especially in widely-dispersed organizations. Buying Center Deciders Influencers Buyers

Major Influences on Business Buying
Environmental Economic, Technological, Political, Competitive & Cultural Organizational Objectives, Policies, Procedures, Structure, & Systems Major Influences on Business Buying Major Influences on Business Buying This CTR corresponds to Figure 6-2 on p. 178 and the material on pp Interpersonal Authority, Status, Empathy & Persuasiveness Individual Age, Education, Job Position, Personality & Risk Attitudes Major Influences on Business Buying Environmental Factors. Industrial Buyers are heavily influenced by the economic environment especially the level of primary demand, economic outlook, and the cost of money. Materials shortages are also increasing in importance. Organizational Factors. These factors stem from each organization's objectives, policies, procedures, and ways of doing business. Marketers must identify how each of these elements are manifest in a particular company. Interpersonal Factors. Interpersonal influences center on group dynamics and the interplay of personalities and organizational roles. Buyer roles within the buying unit may differ not only from organizational factors but from the interpersonal interaction of the individuals involved as well. Individual Factors. A person's age, status, education, professional specialty, and overall personality and attitudes affect how they participate in organizational buying decisions. It may be difficult for the marketer to identify individual factors directly. Buyers

Stages in the Business Buying Process
Problem Recognition Stages in Business Buying Process This CTR corresponds to Table 6-2 on p. 179 and relates to the material on pp Stages in the Business Buying Process General Need Description Product Specification Supplier Search Proposal Solicitation Stages in Business Buying Problem Recognition. Problem recognition can result from internal or external stimuli. They may emerge from an identified shortage or ideas for improvements recognized by buyers. General Need Description. The buyer describes the overall characteristics and quantities of the needed item. For complex items, this step may require coordinating the efforts of many specialists. Product Specification. A developmental team must translate general needs into product specifications. An engineering value analysis team may look at alternative designs to reduce production costs. Supplier Search. The buyer conducts a search for the best vendors for the product specifications. Proposal Solicitation. The buyer invites qualified suppliers to submit proposals covering the terms of supply and support. Selected proposals may be asked to make formal presentations. Supplier Selection. The buyer selects suppliers based upon a combination of technical competence and service record and reputation. Negotiation of specific terms may occur before final selection, especially on price. Order Routine Specification. The buyer specifies the details of the supplier's contract listing technical specifications, delivery terms, policies for return and warranties, and quantities needed. Sellers will seek blanket contracts binding them closer to the buyer. Performance Review. The buyer will review how the supplier contract is working for the company and may continue, amend, or drop the seller. Supplier Selection Order Routine Specification Performance Review

Institutional and Government Markets
Institutional Markets Government Markets Institutional and Government Markets This CTR relates to the material on pp Institutional and Government Markets Low Budgets Captive Patrons Institutional Markets Characteristics of Institutional Markets. Institutional markets are characterized by low budgets and captive patrons. Those marketing to institutions need to be aware that buyers may not be seeking strict cost minimization nor addressing profit maximization. Government Markets Characteristics of Government Markets. Governments engage in centralized buying. Governments are also carefully watched by outside publics and subject to public review. Noneconomic criteria also influence government buying decisions. Governments require suppliers to submit bids. Identifying who participates in government buying decisions is important. Each agency has some say in how it buys and the General Services Administration attempts to centralize common purchases. Major Influences. Major Influences on government buying decisions include not only employees charged with buying responsibilities but also lobbying for political favors by professional lobbyists. Government paperwork is also a significant influence on the process. Discussion Note: How government makes decisions is frustrating to many business people. The red tape, bureaucracy, regulation, cost over value emphasis, delays and personnel changes often discourage small suppliers from attempting to crack government markets. Specialized Buying Public Review Outside Publics Open Bids Negotiated Contracts

Targeting, and Positioning for Competitive Advantage
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 7 Market Segmentation, Targeting, and Positioning for Competitive Advantage

Steps in Segmentation, Targeting, and Positioning
This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196. Steps in Segmentation, Targeting, and Positioning 6. Develop Marketing Mix for Each Target Segment Steps in Segmentation, Targeting, and Positioning Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes. Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them. Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy. Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer. Discussion Note: The product's position is defined by how consumers view it on important attributes. Market Positioning 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) Market Targeting 3. Develop Measures of Segment Attractiveness 2. Develop Profiles of Resulting Segments Market Segmentation 1. Identify Bases for Segmenting the Market

Step 1. Market Segmentation Levels of Market Segmentation
Mass Marketing Same product to all consumers (no segmentation) Segment Marketing Different products to one or more segments (some segmentation) Step 1. Market Segmentation Levels of Market Segmentation Stages in Market Orientation This CTR relates to the discussion on pp Niche Marketing Different products to subgroups within segments ( more segmentation) Micromarketing Products to suit the tastes of individuals or locations (complete segmentation) Stages in Market Orientation Sellers traditionally have passed through three stages of orientation or philosophy of identifying markets that lead to greater use of segmentation, targeting, and positioning strategies: Mass Marketing. In mass marketing, the seller produces, mass distributes, and mass promotes one product to all buyers. The argument for mass marketing is that it [should] lead to the lowest costs (through economies of scale) and prices and create the largest potential market. Segment Marketing. Here the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to meeting the needs of those selected segments. As more competitors adopt this practice, fragmentation of the market leads to Niche Marketing. Here the seller focuses on subgroups within market segments who may seek a special combination of benefits. Micromarketing. This is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

Step 1. Market Segmentation Bases for Segmenting Consumer Markets
This CTR relates to Table 7-1 on p. 203 and the material on pp Step 1. Market Segmentation Bases for Segmenting Consumer Markets Geographic Nations, states, regions or cities Bases for Segmenting Consumer Markets Geographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes. Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation. Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves. Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude. Demographic Age, gender, family size and life cycle, or income Psychographic Social class, lifestyle, or personality Behavioral Occasions, benefits, uses, or responses

Using Multiple Segmentation Bases: Geodemographics
This CTR combines text and extra-textual information and relates to material on pp Using Multiple Segmentation Bases: Geodemographics Geodemographics Geodemographics combine demographic, geographic, psychographic, and behavioristic segmentation variables to identify markets for products much more narrowly than other segmentation strategies. Geodemographics lends itself best to marketing mix strategies utilizing technological innovation to reach consumers with product information. The two marketing areas that benefit most from geodemography are direct marketing via mail and telephone and computer-based marketing. Direct Marketing. The direct marketing industry benefits from increasingly specific information on potential customers. Use of telephones and postal mailings without prior qualification of leads is generating grass roots movements for regulation. Geodemography makes it more likely that direct marketers will contact more people who have already expressed an interest in the product or are very likely, statistically speaking, to appreciate information on a relevant product for their geodemographic group. In discussion, you may want to raise questions about the role of marketing ethics in generating and using these increasingly specific databases. Computer-based Marketing. Millions of people now subscribe to computer shopping services such as AMERICA ON-LINE and PRODIGY that provides consumers with on-line information and services via their personal computer and modem. PC Consumers can bank, order from catalogs, receive information, check stock prices and do trades -- all right at their desktop. While the user requests information on-line, mainframe computers track their information search patterns and record orders and requests for more detailed information to create more databases segmentation.

Step 1. Market Segmentation Bases for Segmenting Business Markets
This CTR corresponds to Table 7-3 on p. 213 relates to the material on pp Step 1. Market Segmentation Bases for Segmenting Business Markets Personal Characteristics Demographics Major Segmentation Variables for Business Markets Demographics. Industry segmentation focuses on which industries buy the product. Company size can be used. Geographic location may be used to group businesses by proximity. Operating Variables. Business markets can be segmented by technology (what customer technologies should we focus on?), user/nonuser status (heavy, medium, light), or customer capabilities (those needing many or few services). Purchasing Approaches. Five approaches are possible. Segmentation can be by purchasing function organization (centralized or decentralized), power structure (selecting companies controlled by a functional specialty), the nature of existing relationships (current desirable customers or new desirable customers), general purchase policies (focus on companies that prefer some arrangements over others such as leasing, related support service contracts, sealed bids), or purchasing criteria (focus on noncompensatory criteria such as price, service, or quality). Situational Factors. Situational segmentation may be based upon urgency (such as quick delivery needs), specific application (specific uses for the product) or size of order (few large or many small accounts). Personal Characteristics. Personal comparisons can lead to segmentation by buyer-seller similarity (companies with similar personnel and values), attitudes toward risk (focus on risk-taking or risk-avoiding companies), or loyalty (focus on companies that show high loyalty to their suppliers. Bases for Segmenting Business Markets Situational Factors Operating Characteristics Purchasing Approaches

Step 1. Market Segmentation Bases for Segmenting International Markets
This CTR relates to the discussion on pp Industrial Markets Segmenting International Markets Geographic Segmentation. This works well when proximity is the critical segmentation variable. Economic Factors. Countries might be grouped by population income levels or by overall level of economic development. Political and Legal Factors. Segmentation may be most appropriate in terms of the level of government stability, monetary regulations, receptivity to foreign firms, or the amount of bureaucracy encountered when conducting business. Cultural Factors. Segmentation by common language, religion, or values might be the best way to proceed. Intermarket Segmentation. This involves forming segments of consumer who have similar needs and buying behavior even though they are located in different countries. Geographic Economic Political/ Legal Cultural Intermarket

Step 1. Market Segmentation Requirements for Effective Segmentation
Measurable Effective Segmentation This CTR relates to the material on pp. 215. Step 1. Market Segmentation Requirements for Effective Segmentation Accessible Substantial Size, purchasing power, profiles of segments can be measured. Requirements for Effective Segmentation Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important. Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer. Substantiality. This refers to the degree to which the segments are large or profitable enough to service. Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues. Segments must be effectively reached and served. Differential Segments must be large or profitable enough to serve. Actionable Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Step 2. Market Targeting Evaluating Market Segments
This CTR relates to the material on pp Segment Size and Growth Analyze sales, growth rates and expected profitability. Segment Structural Attractiveness Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers. Company Objectives and Resources Company skills & resources relative to the segment(s). Look for Competitive Advantages. Evaluating Market Segments Segment Size and Growth. The company must collect and analyze data on current dollar sales, projected sales-growth, and expected profit margins for each market segment. Segment Structural Attractiveness. Long run attractiveness includes an assessment of current and potential competitors, the threats of substitutes, and the power of buyers and suppliers. Company Objectives and Resources. The company’s resources and core business strengths should also fit well with the market segment opportunities.

Step 2. Market Targeting Market Coverage Strategies
This CTR corresponds to Figure 7-4 on p. 217 and relates to the discussion on pp Company Marketing Mix Market Company Marketing Mix 1 Segment 1 Company Marketing Mix 2 Segment 2 A. Undifferentiated Marketing Market Coverage Strategies Undifferentiated Marketing. This strategy uses the same marketing mix for the entire market. This strategy focuses on the common needs of the market rather than differences in it. Undifferentiated marketing provides economies of scale on product costs but may be limited in application. Differentiated Marketing. This strategy targets several market segments and designs separate marketing mixes for each of them. Product and marketing variation also helps company image and may produce loyalty in consumers as they change segments. Concentrated Marketing. This strategy commits a company to pursue a large share of one or more submarkets. Economies and segment knowledge and service are strengths of this approach but risk due to smaller market size is greater. Company Marketing Mix 3 Segment 3 Segment 1 Company Marketing Mix Segment 2 B. Differentiated Marketing Segment 3 C. Concentrated Marketing

Step 2. Market Targeting Choosing a Market-Coverage Strategy
This CTR relates to the discussion on pp Company Resources Choosing a Market-Coverage Strategy Factors to consider in choosing a market-coverage strategy include: Company Resources. Sometimes the resources of a firm make a strategy decision fairly simple. For example, a small firm with limited resources is more likely to be successful implementing a concentrated strategy than a full coverage one. Product Variability. The higher the degree of product variation or differentiation, the greater the likelihood that a differentiated or concentrated strategy will be necessary to meet consumer demands for choice. Stage in Life Cycle. Introduction and early growth stages of the product life cycle are more likely to support single-version products. As the market matures, greater consumer numbers and a wider variety of tastes demand more differentiation. Discussion Note: The cost of developing new products is often given as a reason for single-version rollouts. But it is important to remember that consumers don’t know how to use new products as well and so it makes sense to keep a product simple to help consumer learn about its benefits first and then let their experience with product use guide the introduction of additional features. Market Variability. If taste differences in the market are small, then undifferentiated marketing is appropriate. Competitor’s Marketing Strategies. Selecting a coverage strategy is not done in a vacuum. When the market is already served by competitor using a segmentation strategy, undifferentiated marketing is less likely to be successful. However, competitors using undifferentiated strategies may be vulnerable to a well-planned and executed differentiation strategy. Product Variability Product’s Stage in the Product Life Cycle Market Variability Competitors’ Marketing Strategies

Step 3. Positioning for Competitive Advantage
Product’s Position - the place the product occupies in consumers’ minds relative to competing products; i.e. Volvo positions on “safety”. Marketers must: Plan positions to give products the greatest advantage Develop marketing mixes to create planned positions

Step 3. Positioning for Competitive Advantage: Strategies
Product Positioning This CTR relates to the material on pp. 220. Step 3. Positioning for Competitive Advantage: Strategies Product Class Product Attributes Away from Competitors Benefits Offered Market Positioning Strategies A product's position is the way the product is defined by consumers on important attributes. More directly, product position is the place the product occupies in the consumers’ minds relative to competing products. Discussion Note: Students may need prompting to realize that marketers don’t control the product’s position, consumers do. The strategies discussed below represent the inputs marketers make to influence how the consumer ultimately determine the product’s position. A product's position can be based on a number of variables including: Product Attributes. This positions the product on unique or distinguishing features it possesses such as a low price, unique technology, versatility or other features. Benefits Offered. Positioning can be based upon the specific value provided. Usage Occasions. The product usage associated can with special occasions or values ("Andre for the Holidays") Users. A product can be positioned to its most important users (Miller Beer's heavy user positioning, "Tastes Great Less Filling") Against a Competitor. This strategy is appropriate for substitutes that cost less. Away from Competitors. This positions the product as unique in some respect and/or worth it. Product Class. The company may vary positioning as needed in relation to one or more competitors. B A E D C H G F Against a Competitor Usage Occasions Users

Steps to Choosing and Implementing a Positioning Strategy
Step 1. Identifying a set of possible competitive advantages: Competitive Differentiation. Step 2. Selecting the right competitive advantage. Step 3. Effectively communicating adn delivering the chosen position to the market.

Developing Competitive Differentiation
Product Service Developing Competitive Differentiation Positioning for Competitive Advantage This CTR relates to the discussion on pp Areas for Competitive Differentiation Competitive Advantage Competitive Advantage is created by differentiating the product from those of competitors. Key areas for competitive differentiation include: Product Differentiation. This can be based upon features or performance. Teaching Tip: Drive a Hyundai and a Lexus on the same afternoon to experience performance differentiation. Services Differentiation. This may come from delivery, installation, repair, or training advantages. Teaching Tip: Does anyone think that television cable service would not improve if there were more than one cable provider per area? Personnel Differentiation. This is derived from a superior workforce. Teaching Tip: Surely students appreciate their experience in your class versus those marketing classes at that other school in state? Image Differentiation. This can be generated from effective use of symbols in association with product consumption. Teaching Tip: Examples of effective use of symbols include Prudential Securities, “Rock Solid - Market Wise” and Merrill Lynch “Bullish on America.” Personnel Image

Selecting the Right Competitive Advantages
Promoting Differences This CTR relates to the material on pp Discussion Note: The key to selecting the right competitive advantage is to develop a unique selling proposition (USP) for the product and stick to it. Selecting the Right Competitive Advantages Important Profitable Distinctive Selecting the Right Competitive Advantage Differences selected to promote competitive advantage should satisfy the following criteria: Important. The difference must deliver a highly valued benefit to target buyers. Distinctive. Competitors do not offer the difference, or the company offers the difference in a more distinctive way. Superior. The difference should be superior to other ways that customers might obtain the same benefit. Communicable. The difference is communicable and visible to buyers. Preemptive. Competitors cannot easily copy the difference. This may be a result of innovative technology, production economies, distribution economies, and/or proprietary rights. Affordable. Buyers in the target market must be able to pay for the difference. Profitable. The difference must be profitable for the company to offer. Criteria for Determining Which Differences to Promote Affordable Superior Communicable Preemptive

Product and Services Strategy
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 8 Product and Services Strategy

What is a Product? Anything that can be offered to a market for attention, acquisition, use or consumption. Satisfies a want or a need. Includes: Physical Products Services Persons Places Organizations Ideas Combinations of the above

Levels of Product Core Benefit or Service Augmented Product
Product Levels This CTR corresponds to Figure 8-1 on p. 239 and relates to the material on pp Levels of Product Installation Packaging Features Brand Name Product A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products can be physical objects, services, persons, places, organizations, and ideas. Product Levels Core Product. This concept refers to the use-benefit, problem-solving service that the consumer is really buying when purchasing a product. Actual Product. The actual product is the tangible product or intangible service that serves as the medium for receiving core product benefits. Five characteristics: Quality Level refers to product performance. Features include combinations of product attributes. Design consists of aesthetic or ergonomic aspects of the product. Brand Name may help consumers position and identify the product. Packaging serves to both protect the product and to promote it to consumers. Augmented Product. The augmented consists of the measures taken to help the consumer put the actual product to sustained use. Measures can include installation, delivery & credit, warranties, and after sale service. Delivery & Credit After- Sale Service Core Benefit or Service Quality Level Design Warranty Actual Product Core Product

Product Classifications Consumer Products
Consumer Product Classifications This CTR corresponds to Table 8-1 on p. 240 and relates to the material on pp Product Classifications Consumer Products Convenience Products Buy frequently & immediately Low priced Many purchase locations Includes: Staple goods Impulse goods Emergency goods Shopping Products Buy less frequently Gather product information Fewer purchase locations Compare for: Suitability & Quality Price & Style Consumer Goods Consumer products are those bought by final consumers for personal consumption. Marketers typically classify these products based on how consumer go about buying them. Classifications include: Convenience Products. These products are purchased frequently with a minimum of comparison and buying effort. Convenience products may be further divided: Staples. Staples are products that consumers buy on a regular basis. Impulse Products. Impulse products are purchased “on the spur of the moment” and without much, if any, prior consideration. Emergency Products. Emergency products are purchased to fill an urgent and immediate need. These products are prompted by some unexpected external event like a flood or heavy snow fall. Shopping Products. These products are compared on such bases as suitability, quality, price, and style. Shopping products may be further distinguished homogeneous and heterogeneous shopping products. Price negotiation is more common for homogeneous shopping products. Specialty Products. These products have unique characteristics or identification with buyers and are generally specifically sought by the consumer. Unsought Products. These products may be unknown to the buyer or not normally considered for purchase. Unsought goods require special marketing effort. Specialty Products Special purchase efforts Unique characteristics Brand identification Few purchase locations Unsought Products New innovations Products consumers don’t want to think about Require much advertising & personal selling

Product Classifications Industrial Products
Industrial Product Classifications This CTR relates to the discussion on pp. 241. Materials and Parts Industrial Product Classifications Industrial Products are those purchased for further processing or for use in conducting a business. Three groups of industrial products include: Materials & Parts. These products enter the manufacturer's product in production. They include: Raw Materials. These include farm products (wheat, vegetables, fruit, livestock) and natural products (fish, lumber, oil, mineral ores). Manufactured Materials and Parts. Manufactured materials, such as steel, are used with further refinement or processing to become part of a product. For example, sheet metal is used to make car bodies. Component parts are complete products in themselves, such as machine-tooled cogs, that are used as is within the finished product. Capital Items. Capital items indirectly contribute to production by aiding the buyer’s operations but do not end up in the resulting products themselves. Categories include: Installations. These consist of buildings and fixed equipment. Accessories. These include portable equipment and office equipment. Supplies & Services. do not enter into production at all. Supplies include operating supplies and repair and maintenance items. Business services are often offered under contract to do the actual repair and maintenance. Many equipment manufacturers include repair and maintenance agreements in combination with installations. Capital Items Supplies and Services

Product Classifications Other Marketable Entities
Marketed to create, maintain, or change the attitudes or behavior toward the following: Organizations - Profit (businesses) and nonprofit (schools and churches). Person - Political and sports figures, entertainers, doctors and lawyers. Place - Business sites and tourism. Social - Reduce smoking, clean air, conservation.

Individual Product Decisions
Product Attributes Branding Individual Product Decisions This CTR corresponds to Figure 8-2 on p. 244 and relates to the material on pp Instructor’s Note: The CTR provides an overview on each of the decision areas. Each area is covered in more detail on subsequent CTRs. Individual Product Decisions Packaging Labeling Product Attribute Decisions Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management, first by the Japanese and now increasingly by U.S. firms. Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value. Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance. Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone. Product Support Services

Product Attribute Decisions
This CTR relates to the material on pp Product Attribute Decisions Features Quality Product Attribute Decisions Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management. Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value. Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance. Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone. Design

Brands Consistency Quality & Value Attributes Identification
This CTR relates to the material on pp Consistency Quality & Value Attributes Identification Advantages of Brand Names Brand Equity Brands A brand is a name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Powerful brands names have consumer franchise -- they command consumer loyalty. Levels of Brand Meaning Attributes. A brand elicits certain product attributes in the minds of consumers. The company may use one or more of these attributes in its advertising to reinforce these perceptions in the consumer. Benefits. Consumers buy benefits, not attributes. A key aspect of a successful marketing program is linking attribute perceptions to tangible product benefits. The benefits may produce objective need-satisfiers, such as increased safety, or psychological benefits, such as enhanced self-esteem. But in both cases, the actual benefit must be available in the product. Values. Brands communicate information about the buyer’s values. The benefits of the brand indicate that these things are important to the consumer who chooses them. Some consumers, especially those of luxury goods, often select a particular brand in part because of what it communicates to others about the owners values. Personality. Brands project a personality. People personify brands and products. Psychologists have pointed out that we tend to be attracted to those like us, those we aspire to be like, and those we want others to view us as being like. Brands can help people, almost literally, become the type of person the want to be. Brand Equity Brands are used to create awareness, build preference, and ultimately, to command loyalty among consumers. Companies with strong brands often attempt to build brand portfolios by acquiring brands with strong brand equity from other companies. Association Loyalty Credibility Awareness

Major Brand Decisions Brand Name Selection Brand Sponsor
Protection Major Branding Decisions This CTR corresponds to Figure 8-3 on p. 247 and relates to the material on pp Major Brand Decisions Brand Sponsor Manufacturer’s Brand Private Brand Licensed Brand Co-branding Major Branding Decisions Brand Decision. At this stage, the company must decide whether or not to place a brand name on its product. Brands usually command higher profit margins than non-brands. Brand Name Selection. Desirable qualities for a brand name include: 1. It should suggest something about the product’s benefits. 2. It should be easy to pronounce and remember. 3. It should be distinctive. 4. It should translate easily into foreign languages. 5. It should be eligible for registration and legal protection. Brand Sponsor. Who sponsors the brand must also be decided. Manufacturer's or National brands are owned by the producer. Private brands are created and owned by a reseller. Mixed-brand strategies combine both approaches. Brand Strategy. This decision area consists of at least four choices, covered in greater detail on the following CTR. Brand Strategy Line Extensions Brand Extensions Multibrands New Brands

Brand Strategy Product Category Line Brand Extension Extension
This CTR corresponds to Figure 8-4 on p. 251 and relates to the discussion on pp Line Extension Brand Extension Product Category Existing New Brand Strategy Companies may implement at least four brand-name strategies, including: Line Extension. This strategy occurs when a company introduces additional items in a given product category under the same brand name. The vast majority of new product introductions are line extensions. Brand Extension. This strategy seeks to extend existing brand qualities to launch new products or modified products in a new category. Multibrand. This strategy develops two or more products in the same product category. P & G pioneered multibranding. New Brands. Here a company creates a new brand name when it enters a new product category for which none of the company’s current brand names are appropriate. Multibrands New Brands Existing Brand Name New

Brand Strategy Line Extension Brand Extension Multibrands New Brands
Existing brand names extended to new forms, sizes, and flavors of an existing product category. Brand Extension Existing brand names extended to new product categories. Multibrands New brand names introduced in the same product category. New Brands New brand names in new product categories.

Packaging Sales Tasks Competitive Advantages Product Safety Packaging
Packaging Decisions This CTR relates to the material on pp Packaging Sales Tasks Competitive Advantages Product Safety Packaging Concept The packaging concept states what the package should be or do for the product in support of marketing objectives. Packaging includes the activities of designing and producing the container or wrapper for a product. The package includes the immediate container (that holds the product for use), a secondary package that is discarded prior to use, and a shipping package necessary for storage and shipping. Discussion Note: Both environmentalists and consumer groups have complained about unnecessary packaging. Environmentalists point out the ecological costs of more packages to throw away. Many firms now recycle packages to reduce wastes and save money. Consumer groups, such as Consumer’s Union (publisher of Consumer Reports), express concern that unnecessary packaging costs consumers more. Labeling Decisions Labels perform several functions. Labels identify, describe, and promote the product. Also, labels must meet the demands of legal regulations. Identifies. Especially in support of brand strategies, labels distinguish the product from others. Describes. Labels can provide information about contents, production, freshness, and instructions on safe and effective use. Promotes. Use of color and graphics can stimulate and arouse consumer attention for the product. Legal Regulation Mis-use of labels has lead to regulation on product claims, the addition of unit prices, open dating, and nutritional labeling for processed foods. Including all required information is necessary to ward off governmental investigations. Packaging Labeling Identifies Promotes Describes

Product - Support Services
Companies should design its support services to profitably meet the needs of target customers. How? Step 1. Survey customers to determine satisfaction with current services and any desired new services. Step 2. Assess costs of providing desired services. Step 3. Develop a package of services to delight customers and yield profits.

Product Line Decisions
This CTR relates to the material on pp Product Line Length Number of Items in the Product Line Product Line Decisions Product Line Length. This refers to the number of products in the line. The line is too short if adding items increases profits; too long if dropping items increases profits. Company objectives of full-line offerings may decrease strict profit criterion on length. Product Line Stretching. This occurs when a company lengths is product line beyond its current range. Downward stretch offers items to lower end of the market. Upward stretch introduces items to high end of market. Two-way stretch extends the line both upward and downward. Product Line Filling. This adds items within the existing product range of the line. Stretching Lengthen beyond current range Filling Lengthen within current range Downward Upward

Product Mix Decisions Consistency
This CTR relates to the material on pp Width - number of different product lines Length - total number of items within the lines Product Mix - all the product lines offered Product Mix Decisions Mix Width. This refers to how many product lines the company carries. Mix Length. This refers to the total number of products the company carries. Mix Depth. This refers to how many versions are offered of each product in the line. Mix Consistency. This refers to how closely related the various product lines are in end use, production requirements, distribution channels, or other ways. Consistency Depth - number of versions of each product

Characteristics of Services
Intangibility Inseparability Can’t be seen, tasted, felt, heard, or smelled before purchase. Can’t be separated from service providers. Quality depends on who provides them and when, where and how. Can’t be stored for later sale or use. Variability Perishability

Internal Service Quality
The Service-Quality Chain Health Service Profits and Growth Satisfied and Productive Service Employees Satisfied and Loyal Customers Greater Service Value

Marketing Strategies for Service Firms
Managing Service Differentiation Develop offer, delivery and image with competitive advantages. Managing Service Quality Empower employees Become “Customer obsessed” Develop high service quality standards Watch service performance closely Managing Service Productivity Train current or new employees Increase quantity by decreasing quality Utilize technology

New Product Development and Product Life-Cycle Strategies
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 9 New Product Development and Product Life-Cycle Strategies

New-Product Development Strategies
Strategies for Obtaining New Product Ideas Acquired Companies Original Products Acquired Patents Product Improvements Acquired Licenses Product Modifications New Brands

Causes of New Product Failures
Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: understand it’s customers, markets and competitors develop products that deliver superior value to customers.

New Product Development Process
This CTR corresponds to Figure 9-1 on p. 275 and relates to the discussion on pp Marketing Strategy Business Analysis Stages in New Product Development Idea Generation. This stage is the systematic search for new product ideas. Sources for new product ideas include internal sources, customers, competitor's products, distributors & suppliers, and other sources. Screening. This stage focuses on reducing the number of ideas by dropping poor ideas as soon as possible. This helps reduce costs and focus attention more productively. Concept Development and Testing. This stage involves translating ideas into product concepts or detailed versions of the ideas stated in meaningful consumer terms. Concepts are then tested on target consumers. Marketing Strategy. This stage consists of three parts. The first part describes the target market, the second part outlines the product's projected price, distribution, and budget for the first year, the third part describes long-term sales, profit goals, and marketing mix strategy. Business Analysis. This stage reviews the sales, costs, and profit projections for the product to find out if they satisfy overall company objectives. Product Development. This stage involves bringing the product concept into existence as a physical product to ensure that the idea is a workable product. Test Marketing. This is the stage at which the product and marketing program are implemented in one or more realistic market settings. Commercialization. This stage involves actually introducing the new product into the competitive marketplace. In this stage, the company must make decisions involving when to introduce, where, to whom, and how. Concept Development and Testing Product Development Idea Screening Test Marketing Idea Generation Commercialization

New Product Development Process Step 1. Idea Generation
Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From: C U S T O M E R C O M P E T I R S D I S T R B U O S U P L I E R

New Product Development Process Step 2. Idea Screening
Process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return Then, the idea is evaluated against a set of general company criteria.

New Product Development Process Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts 2. Concept Testing - Test the Product Concepts with Groups of Target Customers 3. Choose the Best One

New Product Development Process Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation Part One Describes Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share Part Two Describes Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three Describes Long-Term: Sales & Profit Goals Marketing Mix Strategy

New Product Development Process Step 5. Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives New Product Development Process Step 5. Business Analysis Step 6. Product Development If No, Eliminate Product Concept If Yes, Move to Product Development

Full marketing campaign representative cities.
New Product Development Process Step 7. Test Marketing Test Marketing This CTR relates to the discussion on pp Controlled Test Market A few stores that have agreed to carry new products for a fee. Standard Test Market Full marketing campaign in a small number of representative cities. Test Marketing Standard Test Markets. Under this approach, the company finds a small number of representative test cities, conducts a full marketing campaign in those cities, and then measures and evaluates performance. This provides a “real world” picture of how the product performs. But there are drawbacks. Standard testing is expensive, long, and tips competitors to company strategy. Controlled Test Markets. This approach uses a research firm that has designated store placement space for their clients. Participating stores receive a fee. Some services like Scantrack (Nielsen) and BehaviorScan (IRI) offer computerized monitoring of individual consumer panels whose television viewing is cross-tabulated with store purchases. Controlled testing is quicker and less expensive than standard testing. Concerns revolve around representativeness of the test markets (small size) and tipping off competitors. Simulated Test Markets. This approach creates a simulated shopping environment by the company or research firm. Consumers are exposed to promotions and then given money to shop with. Purchase patterns are observed and consumers are interviewed afterward by researchers. Simulated test marketing is inexpensive and quick. Representativeness and demand characteristics are concerns and this approach might be used as a pretest for a go-no go decision on further testing. Simulated Test Market Test in a simulated shopping environment to a sample of consumers.

New Product Development Process Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace. When? Where? To Whom? How?

Speeding Up Development
This CTR relates to the material on p Sequential Simultaneous Step 1 Step 2 Step 3 Step 4 Step 1 Speeding Up New-Product Development Sequential Product Development. Isolated groups in each stage work on the new product until the stage is completed. This completed stage is then passed to the next group or department to begin its stage in the process. This organization brings control to complex development projects and reduces the risk associated with costly mistakes. But it is also extremely slow and subjects the company to greater competitive risk and potential lost sales while the process is completed. Simultaneous Product Development. This approach organizes new product development into a more flexible integration of each stage in the process. Simultaneous organization features close communication and coordination of departments and groups working on different stages, more overlap of work on steps to save time and increase effectiveness. Coordination facilitates each stage benefiting from the developmental process of the other stages while still planning what the product should be and will become. Step 2 Step 3 Step 4

Sales and Profits Over the Product’s Life From Introduction to Decline
Product Life Cycle The Product Life-Cycle This CTR corresponds to Figure 9-2 on p. 288 and relates to the material on pp Instructor’s Note: This CTR can be used to overview the life cycle concept. Strategies appropriate for each stage are discussed on the following CTRs. Sales and Profits Over the Product’s Life From Introduction to Decline Sales and Profits ($) Product Life Cycle Stages Product Development. Development begins when the company finds and develops a new product idea. During development the product has costs but no sales. Development costs must be strategically weighed against the projected length of the product's PLC. Introduction. During the introduction of new products initial sales growth is slow as the market is just becoming aware of the product. Profits are usually nonexistent at this stage due to heavy promotional spending. Growth. This stage is characterized by rapid market acceptance of the product and increasing profits. Maturity. In maturity there is a slowdown in sales growth as the product has achieved acceptance by most potential customers. Profits may level off or decline as marketing costs increase to defend existing market share. Decline. In this period sales begin to fall off and profits decline dramatically. Sales Profits Time Product Develop- ment Introduction Growth Maturity Decline Losses/ Investments ($)

Introduction Stage of the PLC
Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293. Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Low sales Product Life Cycle Strategies Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Costs High cost per customer Profits Negative Create product awareness and trial Marketing Objectives Product Offer a basic product Price Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers

Product Life-Cycle Strategies
This CTR relates to the material on pp and 293. Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Rapidly rising sales Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments. Costs Average cost per customer Profits Rising profits Marketing Objectives Maximize market share Product Offer product extensions, service, warranty Price Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market

Maturity Stage of the PLC
Product Life-Cycle Strategies This CTR relates to the material on pp and 293. Summary of Characteristics, Objectives, & Strategies Sales Peak sales Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Costs Low cost per customer Profits High profits Marketing Objectives Maximize profit while defending market share Product Diversify brand and models Price Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits

Decline Stage of the PLC
Product Life-Cycle Strategies This CTR relates to the material on pp Summary of Characteristics, Objectives, & Strategies Sales Declining sales Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether. Costs Low cost per customer Profits Declining profits Marketing Objectives Reduce expenditure and milk the brand Product Phase out weak items Price Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers

Pricing Products: Pricing Strategies
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 11 Pricing Products: Pricing Strategies

Price - Quality Strategies
Higher Lower Premium Strategy Good-Value Strategy Higher Overcharging Strategy Economy Strategy Quality Lower

New Product Pricing Strategies
This CTR relates to the material on pp New Product Pricing Strategies Market Skimming Pricing Innovative Products Market Skimming Pricing. Market skimming pricing is the strategy of setting high initial prices to skim maximum profits from each successive layer of the target market. Market Penetration Setting a High Price for a New Product to Maximize Revenues from the Target Market. Results in Fewer, More Profitable Sales. Setting a Low Price for a New Product in Order to Attract a Large Number of Buyers. Results in a Larger Market Share. Skimming strategies typically set a price as high as some segments will bear. Once all customers within this segment have purchased, prices are lowered only so far as the next segment needs to be persuaded to buy. Skimming usually works well only when: Product Distinctiveness. Product quality, image, and innovation are sufficiently distinct to support a high price. Costs of Small Production Runs. The costs of producing small volume are not prohibitive. Barriers to Entry. Competitors should not be able to enter the market easily and undercut the high price. Market Penetration Pricing. Some innovations are priced low upon introduction in order to capture large market share quickly thus penetrating the market. High volume results in lower costs, which helps keep prices low. Several conditions favor penetration pricing: Price Sensitive Markets. Highly price-sensitive markets with very large volume potential so that low price produces more market growth are needed. Falling Costs. Production and distribution costs must fall as sales volume increases. Barriers to Entry. Here the low costs must generate a sustainable advantage that cannot easily be duplicated by competitors. Discussion Note: Penetration pricing may also accelerate overall market adoption rates thus supporting low price continuance that may discourage competitors from entering the market.

Product Mix Pricing Strategies
Product Line Pricing Setting Price Steps Between Product Line Items i.e. $299, $399 Optional-Product Pricing Pricing Optional or Accessory Products Sold With The Main Product i.e. Car Options Product Mix Pricing Strategies Product-Mix Pricing Strategies This CTR corresponds to Table 11-1 on p. 331 and the relates to the material on pp Captive-Product Pricing Pricing Products That Must Be Used With The Main Product i.e. Razor Blades, Film, Software By-Product Pricing Pricing Low-Value By-Products To Get Rid of Them i.e. Lumber Mills, Zoos Product-Mix Pricing Strategies Product Line Pricing. Companies usually develop product lines rather than single products. In product line pricing, management must decide on the price steps to set between each product in the line. Companies often use price points to target distinctive combinations of product features and value represented by a particular price. Optional-Product Pricing. Under this strategy, the company offers a base product and prices differently for each combination of additional features or options added to the base product as desired by the customer. Automobile pricing is famous -- or infamous -- for this practice. But many manufacturers use optional-product pricing, such as personal computer makers. Captive-Product Pricing. Under this strategy, producers price products that must be used with a main product. The text describes razor blades as an example. The razor is priced low while high markups are attached to the price of the blades. Discussion Note: Students should distinguish captive pricing from optional pricing on the basis of need versus convenience. When Apple Computer prices its keyboards separately from its computers, it is practicing captive-product pricing. When it offers additional RAM beyond the included board memory, it is practicing optional-product pricing. By-Product Pricing. Waste from production and distribution may be marketable as by-products. Selling by-products allows producers to lower prices and costs on their main products. Otherwise, the prices of main products must cover the disposable or storage of by- products. Product-Bundle Pricing. This strategy combines several products and offers them at a reduced price from the cost of each product purchased separately. Season tickets and group rates are examples. Product Mix Pricing Strategies Product-Bundle Pricing Pricing Bundles Of Products Sold Together i.e. Season Tickets, Computer Makers

Price-Adjustment Strategies
Price Adjustment Strategies I This CTR corresponds to Table 11-2 on p. 334 and relates to the material on pp Price-Adjustment Strategies Segmented Adjusting Prices to Allow for Differences in Customers, Products, or Locations. Discount & Allowance Reducing Prices to Reward Customer Responses such as Paying Early or Promoting the Product. Price Adjustment Strategies Companies typically adjust their prices to account for various customer differences and changing situations: Cash Discount Discount and Allowance Pricing. Several forms of discount and allowance pricing are used by marketers: Cash Discounts. These are price reductions to buyers who pay bills promptly. Quantity Discounts. These refer to price reductions per unit on large volumes. Functional Discounts. These are granted to channel members who perform various marketing functions. Seasonal Discounts. These are granted to buyers who purchase merchandise out of season. Allowances. These are discounts such as trade-ins for turning in old items on new purchases or promotional allowances for participating in seller sponsored advertising can also lower buyer prices. Segmented Pricing. Segmented pricing refers to pricing differences not based on costs and takes several forms: Customer-segment pricing. These target a specific segment, as in senior citizen discounts. Product-form pricing. This varies costs on versions of a product by features but not production costs. Location pricing. This stems from preferences where different locations have different perceived values, such as seating in a theater. Time pricing. This refers to price breaks given at times of lower demand. Customer Quantity Discount Product Form Functional Discount Location Seasonal Discount Time Trade-In Allowance

Adjustment Strategies - II This CTR corresponds to Table 11-2 on p. 334 and relates to the discussion on pp Psychological Pricing Promotional Pricing Adjusting Prices for Psychological Effect. Price Used as a Quality Indicator. Geographical Pricing Psychological Pricing. A key component in psychological pricing is the reference price consumers carry in their mind when considering sellers prices. Promotional Pricing. Promotional prices are temporary reductions below list and sometimes below costs, used to attract customers: Loss leaders. These may be offered below costs to attract attention to an entire line. Special event. This type of pricing may be used during slow seasons. Cash rebates or low financing. These “extras” may bring in customers “on the brink” and help them to decide to finally purchase. Geographical Pricing. Several forms of geographical pricing are common: FOB-Origin. Free On Board has customer pay freight. Uniform Delivered. Here the company charges the same price to all. Zone. Zone uses different areas pay different prices on freight but all customers within the same area pay the same freight charges. Basing-Point. Under this system, all customers charged freight from a specified billing location. Freight-Absorption. Here the seller pays all or part of the shipping costs to get the desired business. International Pricing. Firms may charge the same price throughout the world, especially for high-ticket, high-tech products like jetliners. Or it may offer different prices based upon differing taxes, tariffs, distribution, and promotion costs. Temporarily Reducing Prices to Increase Short-Run Sales. i.e. Loss Leaders, Special-Events International Pricing Adjusting Prices to Account for the Geographic Location of Customers. i.e. FOB-Origin, Uniform-Delivered, Zone Pricing, Basing-Point, & Freight-Absorption. Adjusting Prices for International Markets. Price Depends on Costs, Consumers, Economic Conditions & Other Factors.

Initiating and Responding to Price Changes
This CTR relates to the material on pp Initiating and Responding to Price Changes Competitor Reactions to Price Changes Initiating Price Cuts Initiating Price Changes Price changes may be initiated for several reasons, including: Price Cuts. Reasons for cutting prices may stem from overcapacity, falling market share, or attempts to dominate the market through lower costs. Price Increases. Inflation is a major source of price increases but so is the tendency to speculate on inflationary trends and raise prices beyond the rate of inflation. Over demand may also cause prices to rise. Higher prices can also increase profit margins. Buyer Reactions to Price Changes. Buyer reactions usually respond directly to price changes but not always. Usually lower prices pleases consumers, higher prices do not. But sometimes higher prices support quality improvements and lower prices mean company or product problems. Whether the buyer is correct or not in these perceptions will not immediately change their inclination to act on them. Competitor Reactions to Price Changes. Competitors most often react in industries with a small number of firms, uniform products in the market, and buyers are well informed. Competitive reactions may be similar price changes or increased non price competition. Companies should anticipate probable competitive moves prior to initiating price changes. Price Changes Buyer Reactions to Price Changes Initiating Price Increases

Has Competitor Cut Price? Price-Adjustment Strategies Hold Current Price; Continue to Monitor Competitor’s Price. No Will Lower Price Negatively Affect Our Market Share & Profits? Reduce Price No Can/ Should Effective Action be Taken? Raise Perceived Quality Improve Quality & Increase Price No Launch Low-Price “Fighting Brand” Yes

Distribution Channels and Logistics Management
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstong Chapter 12 Distribution Channels and Logistics Management

What is a Distribution Channel?
A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.

Why are Marketing Intermediaries Used?
Greater efficiency in making goods available to target markets. Offer the firm more than it can achieve on it’s own through the intermediaries: Contacts Experience Specialization Scale of operation Match supply and demand.

Distribution Channel Functions
This CTR relates to the material on pp Distribution Channel Functions All Use Up Scarce Resources All May Often Be Performed Better Through Specialization All Can Often Be Shifted Among Channel Members Risk Taking Information Financing Promotion Distribution Channel Functions Information. This function involves gathering and distributing marketing research and intelligence about the environment for planning purposes. Discussion Note: The use of scanner technology has dramatically changed this function in the last few years. Promotion. This involves developing and spreading persuasive communications about an offer. Contact. Contact involves finding and communicating with prospective buyers. Matching. This function consists of shaping and fitting the offer to the buyer’s needs by manufacturing, grading, assembling, and packaging. Negotiation. This involves reaching an agreement on price and other terms. Physical Distribution. This function consists of the transporting and storing of goods. Financing. This function addresses the acquiring and using of funds to cover the costs of channel work. Risk Taking. This function assumes the risk of carrying out the channel work. Discussion Note: Students often assume business is risk-free. You might expand upon the link between risk and value-added services as the justification for profits. Contact Physical Distribution Negotiation Matching

Consumer Marketing Channels & Levels
Channel Levels and Channel Conflict This CTR corresponds to Figure 12-2 (A) on p. 355 and relates to the material on pp Consumer Marketing Channels & Levels Channel Level - A Layer of Intermediaries that Perform Some Work in Bringing the Product and it’s Ownership Closer to the Buyer. Direct Indirect Channel 1 Channel Levels Distribution channels can be described by the number of channel levels involved. A channel level is defined as each of the marketing intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. Distribution channels can be categorized broadly as: Direct Marketing Channel. This is a marketing channel that has no intermediary levels. The company sells directly to final consumers. Discussion Note: The company may not be the actual producer. Land’s End only makes a small fraction of its clothes but coordinates the sale and ships from its warehouses. Dell Computer assembles its computers on site but from component parts made elsewhere. Indirect Marketing Channels. These contain one or more intermediary levels. M W J R C  Channel 2 Channel 3 Channel 4

Channel Behavior & Conflict
The channel will be most effective when: each member is assigned tasks it can do best. all members cooperate to attain overall channel goals and satisfy the target market. When this doesn’t happen, conflict occurs: Horizontal Conflict occurs among firms at the same level of the channel. Vertical Conflict occurs between different levels of the same channel. For the channel to perform well, conflict must be managed.

Types of Vertical Marketing Systems
Corporate Common Ownership at Different Levels of the Channel Types of Vertical Marketing Systems Types of Vertical Marketing Systems This CTR relates to the discussion on pp Greater Contractual Contractual Agreement Among Channel Members Channel Organization As traditional channel organization lacks a specified controlling authority, new approaches have been developed: Vertical Marketing Systems. A vertical marketing system consist of producers, wholesalers, and retailer acting in as a unified system. Three main types of VMS are: Corporate VMS. The corporate combines successive stages of production and distribution under a single ownership. Contractual VMS. The contractual VMS consists of independent firms at different levels of production and distribution to obtain more economies and sales than members could achieve alone. Three types of contractual VMS are wholesaler-sponsored chain, retailer cooperative, franchise organization. Administered VMS. This coordinates distribution by the power exerted by of one of its members in the marketplace, not by contract or ownership. Degree of Direct Control Administered Leadership is Assumed by One or a Few Dominant Members Lesser

Vertical Marketing Systems
Systems (VMS) Administered VMS Corporate VMS Contractual VMS Wholesaler Sponsored Voluntary Chain Retailer Cooperatives Franchise Organizations Manufacturer- Sponsored Retailer Franchise System Manufacturer- Sponsored Wholesaler Franchise System Service-Firm- Sponsored Franchise System

Innovations in Marketing Systems
Horizontal Marketing System Hybrid Marketing System Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments. Example: Retailers, Catalogs, and Sales Force

Channel Design Decisions
Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Channel Design Decisions This CTR relates to the material on pp Channel Design Decisions Identifying Major Alternatives Identifying Major Alternatives Number of Channel Members Intensive Distribution. This approach utilizes as many outlets as possible and is especially appropriate for convenience goods and common raw materials. Exclusive Distribution. This approach consists of a very limited number of outlets hold all the rights to distribute a product line. This strategy is appropriate for many high prestige goods. Distributor selling effort is usually very strong. Selective Distribution. This approach uses more than one outlet per market but less than all available outlets. This strategy gains good market coverage and gains better than average selling effort. Teaching Tip: Ask students to name their favorite store for: gifts, computer supplies, sporting goods, hobbies. Many will name selective distribution outlets. Evaluating the Major Alternatives Intensive Distribution Selective Distribution Exclusive Distribution

Channel Management Decisions
Selecting Channel Management Decisions This CTR relates to the material on pp Channel Management Decisions Motivating Channel Management Decisions Selecting Channel Members. Choosing middlemen will vary in difficulty be product and producer. Very large and well known companies often have more qualified middlemen seeking to carry their products than the company can effectively use. Some new products will be resisted by existing channels and may require adopting new channel members to carry the line. Motivating Channel Members. Channel members must be motivated to perform. Positive motivators come from high margins, special deals, premiums, cooperative advertising allowances, display allowances, and sales contests. Negative motivators may include threatening margins, delaying delivery, or ending the relationship. Long term cooperation is enhanced by distribution programming which involves building a planned, professionally managed, VMS that meets al channel member needs. Evaluating Channel Members. Assessing channel members requires regular measurement of performance against established criteria such as sales quotas, inventory levels, customer delivery time, training, and overall customer service for each channel member. Effective channel management rewards superior performance and seeks to improve substandard performance in a cooperative professional partnership. Channel member replacement should be used as a last resort with sincere efforts to improve performance have not succeeded. FEEDBACK Evaluating

Nature and Importance of Marketing Logistics
Involves getting the right product to the right customers in the right place at the right time. Companies today place greater emphasis on logistics because: effective logistics is becoming a key to winning and keeping customers. logistics is a major cost element for most companies. the explosion in product variety has created a need for improved logistics management. information technology has created opportunities for major gains in distribution efficiency.

Goals of the Logistics System
Provide a Targeted Level of Customer Service at the Least Cost. Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels

Logistics Systems Order Processing Costs Logistics Functions
This CTR relates to the material on pp Instructor’s Note: Transportation is covered separately on the following CTR. Logistics Systems Order Processing Submitted Processed Shipped Costs Minimize Costs of Attaining Logistics Objectives Nature of Logistics Systems Costs. Distribution costs stem from factors other than just size. How products are transported, stored, sorted, inventoried, ordered, and tracked can all affect distribution costs over and above the sheer volume being distributed. Modern facilities utilizing technology to help innovate what it means to physically distribute goods both save on costs and become a viable promotional tool in providing customer service. Order Processing. Processing orders is an area of distribution that benefits from the application of computer technology. Innovative applications of hardware and software can streamline order processing by connecting the salesperson with dispatchers and warehouses. Warehousing. Storage of products to best meet demand requires decisions on stocking locations, estimation of time to be stored and distinguishing between storage warehouse needs and distribution centers utilizing automation to move goods quickly. Inventory. The cost of holding inventory requires developing accurate knowledge on when to order and how much to order to meet demand but not overburden inventory processing capacity. Logistics Functions Warehousing Storage Distribution Transportation Water, Truck, Rail, Pipeline & Air Inventory When to order How much to order Just-in-time

Transportation Modes Rail Truck Water Pipeline Air
This CTR relates to the material on pp Transportation Modes Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Transportation Rail. Rail is the largest carrier mode with 37% of the total cargo shipped. Rail is especially cost effective for large amounts of bulk products shipped over long distances. Truck. Trucks account for some 25% of the total cargo shipped. Trucks are the largest movers of within city shipping. Truck are highly flexible in routing and scheduling. Trucks are an efficient short-haul mode. Water. Water is very inexpensive for shipping high bulk nonperishable goods but is also the slowest transportation mode. Pipeline. Pipelines are specialized modes for such goods as oil and natural gas. Pipelines are usually owned by companies that also own the raw materials being piped. Air. Air is the most expensive mode of transportation but also the quickest. Extremely perishable goods, high-value, low-bulk, and time-sensitive goods often require air transport. Containerization Containerization consists of putting goods in boxes or trailers that are designed for easy transfer between two transportation modes. Key forms include: Piggyback describes the use of rail and trucks. Fishyback refers to the use of water and trucks. Tranship involves water and rail. Airtruck combines air and trucks. Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items

Choosing Transportation Modes
This CTR corresponds to Table 13-2 on p. 416 and relates to the discussion on p. 416. Checklist for Choosing Transportation Modes 1. Speed. Choosing Transportation Modes Deregulation in the 1970s of the transportation industry has made each mode more flexible, competitive, and responsive to customer needs. In choosing transportation mode, shippers consider up to five criteria: Speed. Speed is measured in door-to-door delivery time. Dependability. Dependability involves meeting schedules on time. Capability. Capability refers to the ability to handle various products. Availability. Availability refers to the number of geographic points served. Cost. Costs are usually figured in per ton-mile. 2. Dependability. 3. Capability. 4. Availability. 5. Cost.

Integrated Logistics Management
Cross-Functional Teamwork inside the Company Integrated Logistics Management Building Channel Partnerships Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Third-Party Logistics

Retailing and Wholesaling
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 13 Retailing and Wholesaling

What is Retailing? All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. Retailers - businesses whose sales come primarily from retailing. Retailers can be classified as: Store retailers such as Home Depot, Sears, Walmart Nonstore retailers such as the mail, telephone, and Internet.

Classification of Retail Stores
Amount of Service Self-Service, Limited-Service and Full-Service Retailers Classification of Retail Stores This CTR relates to the material on pp Classification of Retail Stores Product Line Length and Breadth of the Product Assortment Relative Prices Pricing Structure that is Used by the Retailer Retail Organizations Independent, Corporate, or Contractual Ownership Organization Store Retailing Classifications Retailing includes all the activities in selling goods or services directly to final consumers for their personal, nonbusiness use. Retailers may be divided into two types: store retailing and non store retailing. Store retailing accounts for most retail business. Typical store classifications include: Amount of Service. Self-service retailing is used by convenience goods sellers and most discounters. Limited-service retailers provide sales service to support shopping goods lines carried and may offer additional services such as credit. Full-service retailers are often specialty stores with narrow product lines with deep assortment and knowledgeable salespeople. Product Line Sold. Specialty stores carry narrow product lines. Department stores carry a wide variety of lines. Supermarkets feature low-cost, high-volume, self-service on food, laundry, and household items. Convenience stores are small units that carry a limited line of high turnover items. Superstores, Combination Stores, and Hypermarkets are variations on much larger versions of supermarkets also offering other lines and/ore services. Relative Prices. Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volumes. Off-price Retailers buy at lower than regular wholesale and sell under regular retail. The three major off-price retailers are: Factory Outlets that are owned & operated by manufacturers; Independents owned by entrepreneurs or divisions of larger corporations; and Wholesale clubs selling deeply discounted merchandise to paying members. Catalog Showrooms sell high-markup, fast-moving brand names at discount prices. Retail Organization % of retail operations are independents, although larger chains control a much larger share of the market (See following CTR).

Classification By Product Line
Store Type Length and Breadth of Product Assortment Specialty Stores Narrow Product Line, Deep Assortment Department Stores Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items Supermarkets Wide Variety of Food, Laundry, & Household Products Convenience Stores Limited Line of High-Turnover Convenience Goods Superstores Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services Category Killers Giant Specialty Store that Carries a Very Deep Assortment of a Particular Line Hypermarkets Huge Superstores

Classification By Retail Organization
This CTR relates to the discussion on pp Merchandising Conglomerates Corporate Chains Control of Outlets Major forms of categorization of retailers by control of outlets include: Corporate Chains Corporate chains consist of two or more outlets that are commonly owned and controlled, employ central buying, and sell similar lines. Voluntary Chains. These are wholesaler sponsored chains that nominally independent outlets join to save in costs. The wholesaler controls centralized planning, buying, and promotion decisions. Retailer Cooperatives. These are jointly owned wholesale operations controlled by the retail members. Franchise Organizations. A franchise is a contractual association between a manufacturer, wholesaler, or service organization and independent businesspeople. Merchandising Conglomerates. These are corporations that combine several different retailing forms under central ownership and share distribution and management functions. Franchise Organizations Voluntary Chains Retail Organizations Retailer Cooperatives

Characteristics of Direct Marketing
This CTR relates to the material on p. 398. Characteristics of Direct Marketing Privacy Targeted Individuals Response Measurement Customized Offer Key Characteristics of Direct Marketing Direct Marketing Benefits to sellers include: Targeted Individuals. Customers can be selected from compiled list by almost any segmentation variable. Customized Offer. Specific characteristics of individual customers can be addressed in the offer. Immediate Orders. It is used to obtain immediate orders from targeted customers. Continuous Customer Relationship. Actual customer patterns of behavior and indicated preferences can be tracked, further narrowing subsequent offers to product known to be wanted by the customer. Higher Response. Direct marketing materials receive higher response rates than other forms of marketing communication. Testing. Variations on the marketing mix can be readily tested. Response Measurement. As customer response is directly related to specific materials, measurement is facilitated. Privacy. Some forms of direct media can be protected from viewing by competitors. Testing Immediate Orders Higher Response Continuous Relationship

Types of NonStore Retailing
This CTR refers to the discussion on pp Direct Marketing Nonstore Retailing Accounts for More Than 14% of All Consumer Purchases, and May Account for 33% of All Sales by 2000. Direct Selling Automatic Vending Catalogs & Direct Mail Direct Marketing Direct Marketing. Direct marketing uses various media to interact with consumers, generally calling for the consumer to make a direct response to the offer being made in real time. Direct marketing offers consumers the benefits of greater convenience and time and place utility. Direct Selling. Door-to-door retailing offers consumers products at their door. Automatic Vending. Automatic vending involves selling directly to customers through machines. This form offers time and place utility. Other forms include: Catalogs and Direct Mail. TV Shopping Shows. Online Shopping. Home and Office Parties. TV Shopping Shows Online Shopping Home & Office Parties

Retailer Marketing Decisions
This CTR relates to the material on pp Retailer Marketing Decisions Retailer Marketing Mix Retailer Strategy Product and Service Assortment Prices Promotion Place (Location) Retailer Marketing Decisions Target Market Decision. These decisions require that the retailer carefully consider exactly what kind of customer they want to serve. Store image should support the needs and expectations of the target market in every respect. Product Assortment and Services Decision. These decisions include matching product assortment width and depth and quality levels to shopper expectations. Variations in service mixed offerings can help retailers differentiate. Store atmosphere should be considered an assortment/service mix variable. Price Decision. These decisions revolve around high margin/low volume vs. low margin/high volume approaches. May include traffic builders or loss leader tactics. Promotion Decision. Promotions tools available to retailers include all elements of the promotional mix . Major decisions may include tie-ins with producer promotions. Place . Key place decisions remain three: location, location, location! Target Market Retail Store Positioning

Key Tool of Nonprice Competition for Setting One Store Apart From
Product Assortment Decisions Width and Depth of Assortment Quality of Products Product Differentiation Strategies Click to add title Retailer’s Product Assortment and Services Decisions Services Mix Key Tool of Nonprice Competition for Setting One Store Apart From Another. Store’s Atmosphere Physical Layout “Feel” That Suits the Target Market and Moves Customers to Buy

Product & Services Assortment
Click to add title Retailer’s Price, Promotion, and Place Decisions Price Decisions Target Market Product & Services Assortment Competition Promotion Decisions Using Advertising, Personal Selling, Sales Promotion and Public Relations to Reach Customers. Place Decisions Shopping Centers, Central Business Districts, Power Centers, or Outlet Malls. Location!

The Wheel of Retailing High Margin High Price High Status 1 3 2 2 3 1
This CTR relates to the discussion on pp. 406. Instructor’s Note: The CTR and Notes contain substantial extra-textual material for expanded in-class discussion. High Margin High Price High Status The Future of Retailing The wheel of retailing concept states that new retailing forms begin as low-margin, low-price, high volume, low status operations that slow evolve and upgrade their facilities over time. The advent of category killers and inventory tracking using high technology may signal a new development whereby value pricing retailers stay on the low-margin, high-volume end of the retailing scale while constantly improving product quality and consumer value. The Wheel of Retailing is a theory that attempts to explain how new retail institutions enter the marketplace and how they tend to evolve and eventually decline. Outlined and summarized briefly, the theory is presented below: Entry. New retail forms emerge on the low-price end of the market. These stores offer low-price, usually supported by poor location related to convenience, and few services. Evolution. As the store form becomes more popular, customer demands increase the pressure to offer more services and better location. As the store form incorporates these needs into their product offerings, costs rise. Decline. Continuing increases in costs eventually make the store form vulnerable to low-price, bare-bones store forms. Each generation of new store form entrants modifies the formula somewhat, so that low-margin store forms continue to innovate . Teaching Tip: Many new upscale store forms do not fit into the wheel of retailing schema. For example, Wal-Mart continues to grow by not allowing costs to rise. You may wish to point out to students the descriptive, rather than predictive, nature of the model. 1 3 2 2 3 Low Margin Low Price Low Status 1 1 = Discount 2 = Superstore 3 = Warehouse Club 4 = Combination Store 1 2 3 4

The Future of Retailing
New Retail Forms and Shortening Retail Lifecycles Growth of Nonstore Retailing Increasing Intertype Competition The Future of Retailing Rise of Megaretailers Growing Importance of Retail Technology Global Expansion of Major Retailers Retail Stores as “Communities” or “Hangouts”

What is Wholesaling? All the activities involved in selling goods and services to those buying for resale or business use. Wholesaler - those firms engaged primarily in wholesaling activity.

Why are Wholesalers Used?
Wholesaling This CTR relates to the material on p Why are Wholesalers Used? Wholesalers are Often Better at Performing One or More of the Following Channel Functions: Wholesaler Functions Management Services & Advice Selling and Promoting Market Information Buying and Assortment Building Risk Bearing Bulk Breaking Transporting Financing Warehousing Wholesaling Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use. Wholesaler Functions Selling and Promoting. Contacts and small retailer connections help wholesalers reach more buyers than distant manufacturers. Buying and Assortment Building. Wholesalers can select items and build assortments needed by their customers better than manufacturers. Bulk-Breaking. Wholesalers save customers money by buying large quantities and lots and breaking them into smaller lots. Warehousing. Wholesalers hold inventories, reducing inventory costs and risks to suppliers and customers. Transportation. Wholesalers provide quicker transport of orders to customers than do producers. Financing. Wholesalers extend credit. Risk Bearing. Wholesalers take title and absorb risks for loss, damage, or theft. Market Information. Wholesalers provide information to suppliers and customers about competitors, new products, and price developments. Management Services and Advice. Wholesalers provide training to retailers on sales, improved store layouts, displays, and accounting and inventory control procedures.

They Don’t Take Title to Wholesaling by Sellers
Types of Wholesalers Brokers/ Agents They Don’t Take Title to the Goods, and They Perform Only a Few Functions. Merchant Wholesaler Independently Owned Business that Takes Title to the Merchandise it Handles. Manufacturers’ Sales Branches and Offices Wholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers.

Product and Service Assortment Retail Store Positioning
Wholesaler Marketing Decisions Wholesaler Marketing Decisions This CTR relates to the discussion on pp Wholesaler Marketing Mix Wholesaler Strategy Product and Service Assortment Prices Promotion Place (Location) Wholesaler Marketing Decisions There are important differences among the marketing decisions made by wholesalers, retailers, and manufacturers, although each element of the marketing system addresses the five key decision areas: Target Market Decision. Like all marketing operations, wholesaling needs focus. Wholesalers may target by size of customer, need for service, or other factors. Product Assortment and Services Decision. Assortment is the product of the wholesaler. Still immediate availability of items made possible through large inventory is giving way to better stocking of faster-moving items. Inventory costs are balanced against the profitability of each line. Price Decision. Traditionally, wholesalers markup products by a fixed percentage. Costs are deducted from this markup, leaving low single digit profits. Volume is the key. Discussion Note: The Sam’s Club membership wholesaler chain aims that pricing to exactly cover costs. Profit is to come from the sale of memberships alone. Promotion Decision. In general, wholesalers are not promotion-minded. But as competition increases and the wholesale market becomes more fragmented, more attention to promotion tools, especially nonpersonal ones, is likely. Place Decision. Traditional place decisions were made on low cost factors, with little investment in facilities. Modern inventory tracking, loading, and routing systems are making place locations more strategic than simply finding large, empty, low-cost buildings. Target Market Retail Store Positioning

Trends in Wholesaling Wholesaling Developments to Consider
Must Learn to Compete Effectively Over Wider and More Diverse Areas Trends in Wholesaling Increasing Consolidations Will Reduce Number of Wholesalers Wholesaling Developments to Consider Surviving Wholesalers Will Grow Larger Through Acquisitions and Mergers Vertical Integration Will Remain Strong Global Expansion

Integrated Marketing Communication Strategy
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 14 Integrated Marketing Communication Strategy

The Marketing Communications Mix
This CTR relates to the material on pp The Marketing Communications Mix Advertising Personal Selling Any Paid Form of Nonpersonal Presentation by an Identified Sponsor. Tools of The Marketing Communications Mix Advertising. Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertising often utilizes mass media and may be adapted to take advantages of a given mediums strengths to convey information. Sales Promotion. Sales promotions consist of short-term incentives to encourage purchase of sales of a product or service. Limited time offers or dated coupons are common sales promotions. Public Relations. Public relations is an on-going process of building good relations with the various publics of the company. Key elements in the process are obtaining favorable publicity, building and projecting a good "corporate image," and designing an information support and response team to respond proactively to unfavorable rumors, stories, or events. Personal Selling. Personal selling describes the use of oral presentations in a conversation with one or more prospective buyers for the purposes of making a sale. Personal selling combines product information and benefits with the interpersonal dynamics of the sales person. Good interpersonal relationship skills and effective oral communication skills are needed for personal selling. Direct Marketing. Directed communications with carefully targeted individual consumers to obtain an immediate response. Personal Presentations by a Firm’s Sales Force. Sales Promotion Short-term Incentives to Encourage Sales. Building Good Relations with Various Publics by Obtaining Favorable Unpaid Publicity. Public Relations Direct Communications With Individuals to Obtain an Immediate Response. Direct Marketing

Noise Noise Noise Noise Noise Noise
The Communication Process This CTR corresponds to Figure 14-1 on p. 424 and relates to the material on pp The Communication Process Sender Noise Noise Noise Noise Noise Noise Encoding Feedback Media The Communication Process Sender. The sender is one of two major parties in communication. It is the sender who decides how to encode a message aimed at a particular target market or receiver. Senders need to anticipate what information receivers need and how receivers will interpret different kinds of information. Receiver. The receiver in marketing communication is the target market or audience. Receivers not only "accept" information; they process and act on it according to their own needs. Message. The message is the information content about product benefits transmitted by the sender as a set of symbols whose meaning is generally understood by other senders and receivers. Media. The media are the means by which messages move from senders to receivers. Mass media such as television and radio are examples. These are also called communication channels. Encoding. Encoding is the process of putting the sender's message into a symbolic form capable of being carried by the selected media of transmission. Decoding. Decoding is the process by which the receiver assigns meaning to the transmitted message. Marketers must remember that this is an interpretative activity and may use different ways of assigning meaning than the sender used in encoding the message. Response. Responses are reactions and can include behavioral changes, attitude changes, or no indications of change. Feedback. Feedback consists of the part of the consumer's response that is communicated back to the sender. Feedback is a valuable but incomplete picture of the consumer's response to the marketing communication. Noise. Noise is any distortion during the transmission process and is always present to some degree. Noise also occurs in the feedback stage. Message Decoding Response Receiver

Steps in Developing Effective Communication
Step 1. Identifying the Target Audience Step 2. Determining the Communication Objectives Buyer Readiness Stages Steps in Developing Effective Communication Awareness Knowledge Liking Preference Conviction Purchase

Step 3. Designing a Message
Steps in Developing Effective Communication Designing a Message This CTR relates to the discussion on p Choosing a Message Marketers must make decisions in several areas when choosing or creating a message, include areas related to Message Content, Message Structure, and Message Format. Key message content decisions include one of three types of appeals: Rational Appeals. These relate to the audience’s self-interest. Rational appeals are grounded in objective, logical reasons for purchasing a product such as improved performance, increased quality, better reliability, and increased productivity. Emotional Appeals. These attempt to elicit either positive or negative feelings that will facilitate a purchase. Moral Appeals. These are directed to the consumer’s sense of right and wrong and are often used in conjunction with the marketing of social causes. To be effective, marketers must very narrowly and very accurately target their consumer market. Moral appeals may work extremely well with groups that share the same morals, but will very likely outrage groups whose moral values differ from those in the message. Message Structure Marketers deal with three message structure issues. Conclusions. First, marketers must decide whether or not to draw a conclusion in the message. Effectiveness depends upon both the nature of the information being communicated and the relative level of experience with the product concept on the part of the audience. Argument Type. Second, marketers must decide on the type of argument to be used: One-sided arguments or Two-sided arguments . Argument Order. Third, argument order must be decided. When many arguments are being used, placing the strongest argument either first or last can affect persuasiveness. Marketers must also make message format decisions. Format issues involve sensory qualities, color in visual ads, sound in radio, and effective use of novelty and contrast in the message. Message Content Rational Appeals Emotional Appeals Moral Appeals Message Structure Draw Conclusions Argument Type Argument Order Message Format Headline, Copy, Color, Words, & Sounds, Body Language Attention Interest Desire Action

Steps in Developing Effective Communication
Step 4. Choosing Media Steps in Developing Effective Communication Choosing Media This CTR relates to the discussion on pp Step 5. Selecting the Message Source Choosing Media Personal Communication Channels. Personal channels involve two or more people in direct communication. Strategic usage of personnel communication channels should consider the following influences: Word of Mouth. Word of mouth is especially credible to consumers -- either positive or negative. Opinion Leaders. Opinion leaders are people whose opinions on products are sought by others. Marketers can make use of and even create opinion leaders for consumer’s reference. Discussion Note: Is it ethical to create opinion leaders, especially fictional ones? For example, Mr. Goodwrench of General Motors is not a real person and his genuine GM parts lack quality control as many of them aren’t really made by GM, but by overseas suppliers. Nonpersonal Communication Channels. Nonpersonal channels are characterized by an impersonal method of communication, which lacks the face to face interactive nature of personal channels or feedback. Major forms of nonpersonal communication include: Major media include print, broadcast and display. Atmospheres are designed environments that create or reinforce the buyer’s leanings to buy a product. Events are occurrences staged to communicate messages to target audience. Personal Communication Channels Nonpersonal Communication Channels Step 6. Collecting Feedback

Setting the Total Promotion Budget
This CTR relates to the material on pp Setting the Total Promotion Budget Percentage- of-Sales Method Affordable Competitive- Parity Objective- and-Task Setting the Total Promotion Budget Affordable Method. This method involves setting a promotion budget based upon what management thinks the company can afford. This method often places promotion budget decisions in the hands of managers unfamiliar with what promotion does for the product. It also ignores the effect of promotion on sales volume and/or possible value-added to the product in the mind of the consumer by the promotion effort. Percentage-of-Sales Method. This method sets promotion budgets at a certain percentage of current or projected sales or price of the product. While it does link sales and promotion together it tends to make promotion an effect of sales rather than a positive influence on it. Also, falling sales under this method will decrease promotional expenditures which might need to be increased to halt the sales decline. Competitive-Parity Method. This method sets promotion budgets in line with what the competition spends on promotion. This "collective wisdom" philosophy suggests that management is unwilling or unable to decide what level of spending is needed to promote the product to the consumer. Objective-and-Task Method. This method sets budgets by defining specific objectives, determining what tasks are necessary to meet them, estimates the cost of performing the tasks, and sets the promotion budget according to the estimates. In approach assumes that promotion is a resource to be allocated to meet company goals and managed proactively to compete successfully.

Setting the Promotion Mix
Advertising Reaches Many Buyers, Expressive Impersonal Setting the Promotion Mix This CTR relates to the material on pp Setting the Promotion Mix Personal Selling Personal Interaction, Builds Relationships Costly Nature of Each Promotion Tool Sales Promotion Provides Strong Incentives to Buy Short-Lived Public Relations Believable, Effective, Economical Underused by Many Companies The Nature of Each Promotion Tool Advertising. Advertising’s public nature helps legitimize the product. It also allows marketers to repeat the message to a wide audience. Large-scale campaigns communicate something positive about the seller’s size, popularity, and success. Advertising is also very expressive and can make use of powerful symbols and sensory appeals. Its shortcoming include expense, one-way communication, being impersonal, and lack of control over situational reception. Personal Selling. Personal selling is the most effective promotion tool at certain stages in the buying process, especially in building preferences, convictions, and actions. The personal contact is two-way and allows adaptation to buyer reactions and the establishment of relationships. Personal selling is also the most expensive promotion tool and requires a long-term commitment to build an effective salesforce. Sales Promotion. Sales promotion includes coupons, contests, cents-off deals, premiums, rebates, and other techniques designed to elicit a quick response. Sales promotions usually influence the timing of a purchase rather than the decision to purchase. Public Relations. Public relations includes news stories, features, and reporting on company activities from objective and credible third-party sources. These events are perceived as more believable than company-controlled promotions. Difficulties include the lack of message content, format, and structure control over the public relations event. Further, public relations are generally under used by marketers both strategically and tactically. Direct Marketing. Direct marketing includes such things as direct mail, telemarketing, electronic marketing, online marketing, and others. Direct Marketing Nonpublic, Immediate, Customized, Interactive

Factors in Developing Promotion Mix Strategies
This CTR relates to the material on pp Factors in Developing Promotion Mix Strategies Push Strategy - “Pushing” the Product Through Distribution Channels to Final Consumers. Pull Strategy - Producer Directs It’s Marketing Activities Toward Final Consumers to Induce Them to Buy the Product. Factors in Setting the Promotion Mix Push or Pull Strategy. The promotion mix is also affected by the company's decision on either a push or pull strategy. Push strategies rely on personal selling and sales promotions to encourage intermediaries to take the product and promote, thus "pushing" it through the channel. Pull strategies rely on advertising and consumer promotions to build up demand in the target market of ultimate consumer whose behavior effectively "pulls" the product through the channel. Type of Market. The type market, consumer or industrial, varies the importance of the promotion tools available to marketers. Advertising weighs heavily in consumer markets whereas personal selling plays the greatest role in industrial markets. Buyer Readiness State. The buyer will be more receptive to some promotion tools than others depending upon their particular buyer readiness state. Advertising and public relations help create awareness and increase knowledge. Liking and preference are more affected by personal selling and advertising together. Conviction and purchase come first from advertising and then personal selling to close depending upon the kind of product being considered. Product Life Cycle Stage. The stage in the product life cycle also describes different appropriate promotion mix variations. Introduction utilizes advertising and public relations to build awareness and personal selling to facilitate motivate channel members to carry it. In growth, the need for personal selling diminishes. In maturity, personal selling helps differentiate it again in distribution. In decline, sales promotion may be the most emphasized of the promotion mix tools. Type of Product/ Market Product Life-Cycle Stage Buyer/ Readiness Stage

Changing Face of Marketing Communications
New Marketing Communications Realities Changing Face of Marketing Communications Marketers Have Shifted Away From Mass Marketing Less Broadcasting Improvements in Information Technology Has Led to Segmented Marketing More Narrowcasting

Integrated Marketing Communications
Company Carefully Integrates and Coordinates Its Many Communication Channels to Deliver a Clear, Consistent, Compelling Message. Packaging Advertising Event Marketing Personal Selling Message Direct Marketing Sales Promotion Public Relations

Advertising, Sales Promotion and Public Relations
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 15 Advertising, Sales Promotion and Public Relations

What is Advertising? Any form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. U.S. advertisers spend in excess of $175 billion each year. Advertising is used by: Business firms, Nonprofit organizations, Professionals, Social Agencies.

Major Decisions in Advertising
Objectives Setting Major Decisions in Advertising Major Decisions in Advertising This CTR corresponds to Figure 15-1 on p. 451 and relates to the material on pp Instructor’s Note: This CTR and Notes provide an overview of advertising decisions. Each decision area is covered in greater detail on subsequent CTRs. Budget Decisions Major Decisions in Advertising Setting Objectives. Advertising objectives are specific communications tasks to be accomplished for a specific target audience during a specified time period. Advertising objectives can be to inform (build primary demand), persuade (selective demand), or remind (brand loyalty). Advertising objectives are often linked to specific sales objectives. Budget Decisions. Advertising budgets are set for each product consist with the advertising objectives. The details of budget decisions are covered in greater detail on the following CTR. Message Decisions. Advertisers must construct their messages carefully to reach target markets. The details of message decisions are covered in greater detail on a subsequent CTR. Media Decisions. In selecting media for ads, advertisers must consider the several factors to reach consumer when, how, and how often it takes to reach promotional objectives. The details of media decisions are covered in greater detail on a subsequent CTR. Campaign Evaluation. Measures of communication effects and sales effects should be employed. Discussion Note: You might wish to tell students of the controversy involved in measuring campaign effectiveness. Traditionally, advertisers measured effectiveness in terms of recall or recognition. Management wants a behavioral change in purchases. Marketers who successfully merge the two have a bright career ahead of them. Message Decisions Media Decisions Campaign Evaluation

Setting Objectives Advertising Objectives Specific Communication Task
Accomplished with a Specific Target Audience During a Specific Period of Time Informative Advertising Build Primary Demand Persuasive Advertising Build Selective Demand Comparison Advertising Compares One Brand to Another Reminder Advertising Keeps Consumers Thinking About a Product. Tugas : Cari 4 iklan yang memiliki tujuan di atas. Analisislah….!

Setting the Advertising Budget
This CTR relates to the discussion on pp Advertising Budget Methods Affordable, Percentage of Sales, Competitive-Parity and Objective-and-Task Stage in the Product Life Cycle Product Differentiation Budget Decisions Advertising budgets are set for each product consist with the advertising objectives. To implement objectives, budgets must be set in consideration of the products position in terms of: Stage in the Product Life Cycle. New product usually require larger advertising budgets to build awareness and induce product trial. Mature brands may have large dollar amounts in their budgets, but are lower in terms of advertising as a ratio of sales. Market Share. High share products need more advertising as a percent of sales than do low-share brands. Competition and Clutter. Highly competitive markets with high spending rivals require more advertising expenditures than other markets. Advertising Frequency. The greater the frequency needed to reach the target consumer, the higher the advertising budget. Product Differentiation. Brands that closely resemble other brands in a product class (like soft drinks) require high advertising budgets to create product differentiation. Advertising Frequency Market Share Factors in Setting the Advertising Budget Competition and Clutter

Click to add title Advertising Strategy Creating Advertising Messages
Plan a Message Strategy General Message to Be Communicated to Customers Click to add title Advertising Strategy Creating Advertising Messages Develop a Message Focus on Customer Benefits Creative Concept “Big Idea” Visualization or Phrase Combination of Both Advertising Appeals Meaningful Believable Distinctive

Advertising Strategy Message Execution
This CTR relates to the discussion on pp Turning the “Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest. Testimonial Evidence Slice of Life Message Decisions Advertisers must construct their messages carefully to reach target markets. Three areas are important: Typical Message Execution Styles Scientific Evidence Lifestyle Message Generation. This consists of creative brainstorming to generate several alternative ways of communicating to the target market. Message Evaluation and Selection. This process ranks and then chooses among messages on the how meaningful, distinctive, and believable they are. Message Execution. Execution involves determining how to best communicate with the target market. Typical message styles include: Slice of Life. This shows people using the product in a normal setting. Lifestyle. This matches product use to a targeted lifestyle. Fantasy. This creates an escape or flight of fancy with the product. Mood or image. Here a specific mood or image is suggested as an outcome of or experience similar to product use. Musical. This uses music to promote the product. Personality Symbol. This style creates a character (animated or real) to represent the product. Technical Expertise. This style emphasizes the company’s successful experience as making it better able to offer a superior product. Scientific Evidence. This offers survey or scientific study as proof that the product outperforms others. Testimonial Evidence. This uses a likely or highly believable source to endorse the product. Technical Expertise Fantasy Personality Symbol Mood or Image Musical Tugas : ……….???? Tugas : Cari beberapa iklan dan analisislah jenis eksekusi pesannya….!

Advertising Strategy Selecting Advertising Media
Step 1. Decide on Reach, Frequency, and Impact Advertising Strategy Selecting Advertising Media Advertising Strategy Selecting Advertising Media This CTR relates to the discussion on pp Step 2. Choosing Among Major Media Types Media Habits of Target Consumers Nature of the Product Type of Message Cost Step 3. Selecting Specific Media Vehicles Specific Media Within a Given Type, i.e. Magazines. Must Balance Media Cost Against Media Factors: Audience Quality & Attention, Editorial Quality Selecting Advertising Media In selecting media for ads, advertisers must consider the factors that will influence reception of the message. Not all such factors are under the control of the marketer. Of those that are, the following concepts are important: Reach. Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time. Frequency. Frequency is a measure of the how many times the average person in the target market is exposed to the message. Media Impact. Impact refers to the qualitative value of a message exposure through a given medium. Media Vehicles. Vehicles are specific media within a general category. Thus, “The Tonight Show” is a media vehicle on television, whereas a single magazine, The Economist, is a media vehicle in magazine print media. Media Timing. Timing involves the how and when of presenting a campaign. Advertisements should support strategic decisions based upon such factors as peak seasons and demand. Also, the pattern of the ads while shown must be considered: Continuity. This schedules ads evenly within a given period. Pulsing. This schedules ads unevenly within a given period. Step 4. Deciding on Media Timing Scheduling of Advertising Over the Course of a Year Pattern of Ads: Continuity or Pulsing

Advertising Evaluation
Advertising Program Evaluation Advertising Evaluation Communication Effects Is the Ad Communicating Well? Sales Effects Is the Ad Increasing Sales?

Advertising Departments Firm that Assists Companies
Ways to Handle Advertising Advertising Departments in Larger Companies Sales Departments in Small Companies Advertising Agency Firm that Assists Companies in Planning, Preparing, Implementing and Evaluating Their Advertising Programs.

Advertising Media Costs Advertising Practices
Adaptation of Global Advertising International Advertising Decisions Advertising Media Costs & Availability Regulation of Advertising Practices

What is Sales Promotion?
This CTR relates to the material on pp What is Sales Promotion? Mass communication technique that offers short-term incentives to encourage purchase or sales of a product or service. Rapid growth in the industry has been achieved because: Product managers are facing more pressure to increase their current sales, Companies face more competition, Advertising efficiency has declined, Consumers have become more deal oriented. Sales Promotion Sales Promotion. Sales promotion consists of short term incentives to encourage purchase or sales of a product or service. Areas of sales promotion include: Rapid Growth of Sales Promotion. Key factors contributing to the use of sales promotion include: Top management acceptance of sales promotion as an effective element in the marketing mix. Increased competition and decreased differentiation. Decreased advertising effectiveness has also put pressure on companies to shift more emphasis to sales promotion. Consumers have become more deal oriented and retailers are demanding more deals from manufacturers.

Consumer - Promotion Tools
This CTR relates to the discussion on pp Short-Term Incentives to Encourage Purchase or Sales of a Product or Service. Consumer-Promotion Tools Consumer-Promotion Objectives Consumer Promotion Tools A number of tools are used by marketers to reach consumers directly, including: Samples. Samples offer consumers a trial amount of a product. Coupons. Coupons give buyers a savings on specified products. Rebates. Rebates consist of cash back after the purchase. Price Packs. Price packs offer reductions in price for special combinations of products or quantities of the product. Premiums. Premiums are goods offered free or at low cost as an incentive to buy the product. Advertising Specialties. Advertising specialties are useful items imprinted with the advertiser’s name or logo. Patronage Rewards. Patronage rewards are cash or prizes offered for the regular use of the product or service. Point-of-Purchase. Point-of-purchase promotions include displays and demonstrations at the retail level. Contests, Sweepstakes, and Games. These give consumers a chance to win something and draw attention to the product. Samples Advertising Specialties Entice Consumers to Try a New Product Coupons Lure Customers Away From Competitors’ Products Patronage Rewards Patronage Rewards Cash Refunds Get Consumers to “Load Up’ on a Mature Product Contests Price Packs Sweepstakes Hold & Reward Loyal Customers Premiums Games Consumer Relationship Building Point-of-Purchase Displays

Trade - Promotion Tools
This CTR relates to the discussion on pp Short-Term Incentives That are Directed to Retailers and Wholesalers. Trade-Promotion Tools Trade-Promotion Objectives Price-Offs Premiums Persuade Retailers or Wholesalers to Carry a Brand Trade Promotion Tools. A discount is a reduction in the price from the manufacturer to a member of the channel of distribution. An allowance is an authorized reduction in the amount paid to the manufacturer in return for performing one or more marketing channel functions. Allowances Give a Brand Shelf Space Patronage Rewards Displays Buy-Back Guarantees Promote a Brand in Advertising Discounts Push Money Push a Brand to Consumers Free Goods Specialty Advertising Items Contests

Business - Promotion Tools
This CTR relates to the discussion on pp Short-Term Incentives That are Directed to Industrial Customers. Business-Promotion Tools Business-Promotion Objectives Generate Business Leads Conventions Business Promotion Tools. Conventions and trade shows provide a stage for showing products and meeting the salesforce. Sales contests provide the salesforce with incentives for performance over a given period. Stimulate Purchases Trade Shows Reward Customers Sales Contests Motivate Salespeople

Developing the Sales Promotion Program
This CTR relates to the material on p. 468. Developing the Sales Promotion Program Decide on the Size of the Incentive Set Conditions for Participation Evaluate the Program Determine How to Promote and Distribute the Promotion Program Determine the Length of the Program Developing the Program Incentives. All sales promotions must recognize that a certain minimum level of incentive is needed to have any effect. Conditions of Participation. These may be both legally mandated in some areas and/or linked to specific goals. Sweepstakes may restrict some participants or be linked to other behaviors such as prior purchases or bulk buys. How to inform participants must also be considered, for example, direct mailing of coupons or placing them on the package. Length of Time. Time considerations must be weighed between too short to have much effect or penetration of the market versus too long so as to lose any sense of immediacy to "act now." Budget . Sales promotion budgeting suffers from the same organizational problems faced by marketers in other areas. Percentage of sales approaches do not see promotion as a cause of sales. Objective-based budgeting often fails to consider cost effectiveness. Pretesting and Implementation Sales promotion tools benefit from pretesting their effectiveness prior to implementation. Unfortunately, pretesting is seldom done. You may challenge students to come up with suggestions about how to do a "mini pretest" that managers might use within the time constraints of sales promotion deadlines. Implementation requires coordinating effective lead time and sell off time resources to manage the sales promotion effectively. Evaluating the Results A key part of evaluation is determining whether the promotion affected the total demand for the product or only its timing. Consumers may be surveyed or experiments conducted to ascertain the long-term impact of the promotion.

What is Public Relations?
This CTR relates to the material on pp Building good relations with the company’s various publics by obtaining favorable publicity, building up a good “corporate image” and handling or heading off unfavorable rumors, stories and events. Major functions are: Press Relations or Press Agentry Product Publicity Public Affairs Lobbying Investor Relations Development Press Relations is an on-going process of establishing and maintaining good relations with the news media reporters and editors to help place newsworthy information about company products or objectives in their vehicles. Product Publicity. Product Publicity seeks news coverage of specific products usually in conjunction with other promotional efforts. Public Affairs/ Investor Relations. Public Affairs and Investor Relations involves creating and managing internal and external communications promoting understanding the of company and its objectives. Counseling of management on public issues may be included in corporate communications functions in some companies. Lobbying. Lobbying involves dealing with legislators and government administrators. Discussion Note: Lobbying has justly earned a bad reputation for the “special interest” favors awarded some companies. But it is also true that a great deal of lobbying is ethical and fair -- a point not typically found in the popular press. Also, federalism is designed precisely so that “special interests” can be taken into consideration. Not all “special interests” are bad for society as a whole.

Major Public Relations Tools
This CTR relates to the material on pp Web Site Public Service Activities News Key tools of Public Relations include: News and Speeches. Finding or creating favorable news stories about the company or products. Giving talks at trade association meetings or sales meetings. Special Events. Special Events consist of public service activities sponsored and controlled by public relations in-house. Written and Audiovisual Materials. Materials include written information for reporters, and audio-visual information such as slide, sound programs, and videos on corporate identity. Corporate spokespersons also make public speeches to promote the views important to the company. Public Service Activities. Public Service Activities include contributions of time and money for community projects and programs. Discussion Note: Many companies donate land and equipment to towns and cities for parks and recreational areas as part of PR. Corporate Identity Materials Speeches Audiovisual Materials Special Events Written Materials

Major Public Relations Decisions
Click to add title Setting Public Relations Objectives Choosing the Public Relations Messages and Vehicles Implementing the Public Relations Plan Evaluating Public Relations Results Major Public Relations Decisions Major Public Relations Decisions This CTR relates to the discussion on pp Public Relations Decisions Objectives. Objectives are the first order of public relations business. PR must determine what it wants to accomplish and how these objectives support the overall promotion objectives. Messages. Messages require that the PR department creates the "story" it wants to tell about the company and finds the appropriate media for transmitting it. Teaching Tip: Students may wonder if editors will be angry that PR people are trying to manipulate them. If PR is open and honest, editors are willing to consider the merits of the message. Of course the company has its point of view -- but that’ legitimate and PR people can provide sources of information that save reporters time and are unavailable elsewhere. Implementation. Implementation relies as much on the personal working relationships the PR people have with media editors as the content of the stories themselves. Good relations are built on trust over time thus implementation is but one step in the on-going process of media relations. Teaching Tip: In short, PR people have to do something for editors if they expect editors to do something for them. Evaluation. Evaluation of PR efforts is difficult because so much PR is designed to support other promotion efforts. Traditional evaluation includes clippings books counting the number of media exposures.

Personal Selling and Sales Management
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 16 Personal Selling and Sales Management

The Nature of Personal Selling
Involves an individual acting for a company by performing one or more of the following activities: Prospecting, Communicating, Servicing, Information Gathering. The term salesperson covers a wide spectrum of positions from: Order Taking (department store salesperson) Order Getting (someone engaged in creative selling) Missionary Selling (building goodwill or educating buyers)

The Role of the Sales Force
Personal Selling is effective because salespeople can: probe customers to learn more about their problems, adjust the marketing offer to fit the special needs of each customer, negotiate terms of sale, build long-term personal relationships with key decision makers. The Sales Force serves as a critical link between a company and its customers since they: represent the company to customers, and represent customers to the company.

Managing the Salesforce
This CTR corresponds to Figure 16-1 on p. 483 and relates to the material on pp Instructor’s Note: This CTR provides an overview of the salesforce management process with following CTR covering each key area in greater detail. Managing the Salesforce Designing Salesforce Strategy and Structure Recruiting and Selecting Salespeople Training Salespeople Compensating Salespeople Supervising Salespeople Evaluating Salespeople Major Steps Salesforce Management Sales Force Management is the analysis, planning, implementation, and control of sales force activities. Major decisions include: Designing Strategy and Structure. Strategy requires decisions on salesforce structure, size, and compensation. Variations in this mixture are appropriate for differing industries, markets and sales objectives. Strategy and structure issues are covered in greater detail on a subsequent CTR. Recruiting and Selecting. Knowing in advance what characteristics will always produce good salespeople is very difficult. Selecting procedures should attempt to screen candidates for both ability and retention-related issues. Recruiting and selecting issues are covered in greater detail on a subsequent CTR. Training Salespeople. Issues in training center on skills such as order taking and order getting, seeing customers as unwilling to seeing them as people needing problem solutions. Training issues are covered in greater detail on a subsequent CTR. Compensating Salespeople. Compensation is made up of several elements -- a fixed amount, a variable amount, expenses, and fringe benefits. Compensation is covered in greater detail on a subsequent CTR. Supervising Salespeople. Supervision addresses problems in directing and coordinating salespeople's organization, time management, motivation, and customer relationships. Supervision issues are covered in greater detail on a subsequent CTR. Evaluating Salespeople. Evaluation requires both qualitative and quantitative measures of salesforce performance. Evaluation issues are covered in greater detail on a subsequent CTR.

Designing Sales Force Strategy and Structure
Types of Sales Force Structure Designing Sales Force Strategy and Structure Designing Sales Force Strategy and Structure This CTR relates to the discussion on pp Territorial Exclusive Territory to Sell the Company’s Full Product Line Complex Combination of Above Types of Sales Force Structures Designing Strategy Designing strategy requires decisions on salesforce structure: Territorial Salesforce Structure. Under this structure, each salesperson is assigned to an exclusive geographic region. This structure provides clear responsibility and encourages the building of relationships between the salesperson and the retailer. Product Sales Force Sells Along Product Lines Customer Sales Force Sells Along Customer/ Industry Lines Product Structure. Some companies organize separate sales forces for each product line. This is especially appropriate for complex products as it allows the salesperson to become expert on features and benefits. Customer Salesforce Structure. This structure organizes salespeople by customer levels, such as large, medium, and small companies or by different industries. Complex Structures. This approach combines variations of some or all of the previous structures. Very large companies that compete in many markets and have very different types of customers may find complex structures to be more adaptive and flexible to their needs.

Designing Sales Force Strategy and Structure
Sales Force Size Designing Sales Force Strategy and Structure This CTR relates to the discussion on pp Designing Sales Force Strategy and Structure Other Sales Force Strategy and Structure Issues Designing Strategy Designing strategy requires decisions on salesforce size, and other key issues:. Salesforce Size. Setting sales force size is an important consideration as the salesforce is an important, and expensive asset. The workload approach sets size according to the number of people needed to call on a specified number of customers during a specific time period. Other Issues. Sales management must make other decisions of strategic importance that affect sales force structure, including: Outside and Inside Sales Forces. Outside or field sales forces visit customers in person, inside sales forces make contact by telephone. The latter may include technical support people, sales assistants, and telemarketers. Team Selling. This approach services accounts with a team of specialists rather than a single salesperson. This is especially appropriate for large, complex accounts and products. Who Will Be Involved in the Selling Effort? Outside Sales Force Inside Sales Force How Will Sales and Sales Support People Work Together? Team Selling

Recruiting Procedures Salesperson Selection
Recruiting and Selecting Salespeople This CTR relates to the material on pp Some Characteristics of Salespeople Recruiting Procedures Salesperson Selection Process Enthusiasm and Self-Confidence Persistence Initiative Job Commitment Recruiting and Selecting Salespeople Current Salespeople Employment Agencies Classified Ads College Campuses Sales Aptitude Analytical & Organizational Skills Personality Traits Other Characteristics Recruiting and Selecting The traits of effective salespeople are not easy to identify, yet the decision is of critical importance for the company. Focusing on behavioral job duties may help set priorities. Areas to consider include: Who To Select. By linking traits to specific tasks, recruiters can more readily identify and screen potential employees. Recruitment must also address images of selling as a job versus a professional and legal requirements. Discussion Note: College students especially often have unrealistic expectations about selling and their initial role in the company. The demands of many customers for integrated performance-based knowledge about products often require the skills of a college educated salesperson. Recruiting Procedures. Many companies also face legal oversight in hiring and recruitment and/or they have their own agenda to match salesforce backgrounds to changing customer markets such as emerging minority and foreign owned businesses. Selecting Salespeople. For many large companies, tests are used to help select candidates from among recruits. Discussion Note: While tests can be useful, it is crucial that the content of the tests be related to Bona Fide Occupational Qualifications (BFOQs), or the company may be vulnerable to illegal discrimination suits.

Training Salespeople Help Salespeople Know & Identify With the Company Learn How the Products Work Learn About Competitors’ and Customers’ Characteristics Learn How to Make Effective Presentations Understand Field Procedures and Responsibilities The Average Sales Training Program lasts for Four Months and Has the Following Goals: Training Salespeople This CTR relates to the discussion on p. 488. Training Training issues involve teaching selected recruits good selling principles and instilling in them a good philosophical orientation about selling. The selling process is detailed on a following CTR. Training programs have several goals, including learning about the following: The Company. Salespeople need to know and identify with the company. Most programs begin by describing the company’s history and objectives, its organization, financial structure, facilities, chief products, and markets. The Products. Salespeople must know all they can about the company’s products. Training programs typically include learning about how the products are made and how they work. The Customers. Training programs teach salespeople about the types of customers targeted by the company, their needs, buying motives, and buying habits. The Competition. Training programs teach salespeople about the strategies and tactics of the competition. Presentation Skills. Effective presentation techniques are taught. Field Procedures. Trainees learn time management and record keeping responsibilities.

Compensating Salespeople
This CTR relates to the material on p. 489. Compensating Salespeople Sales Force Compensation Plans Can Both Motivate Salespeople and Direct Their Activities. Salary PAYCHECK Compensating Salespeople Compensation can be by salary, commission or bonus, and benefits. Variations in this mixture are appropriate for differing industries, markets and sales objectives. The sales force compensation plan can (and should) be designed to motivate and direct the salesperson. This can be accomplished by adjusting the combination of the following components accordingly: Salary. This is base rate of compensation. Salary levels communicate the importance the company places on the salesperson as an individual professional. High salaries tend to encourage company loyalty. Commission. This is a set percentage of compensation earned on the dollar amount of products sold. High commissions encourage higher volume per salesperson. Bonus. This is an incentive paid after reaching some specified goal. Discussion Note: Bonuses are an extremely flexible compensation tool because they can be added to reward a broad range of goal-related behaviors. For example, a bonus added to a commission rewards individual incentive and increases effort on a product or line in which it is offered. A bonus added to group, division, or department performance encourages teamwork. A bonus based on overall company profits encourages a total systems effort. Benefits. Benefits are compensation elements provided by the company that are not related to performance. An expense account covers costs. Medical and dental plans provide security. Components of Compensation Benefits Bonus Commission

Supervising Salespeople
This CTR relates to the material on pp Supervising Salespeople Directing Salespeople Motivating Salespeople Identify Customer Targets & Set Call Norms Develop Prospect Targets Use Sales Time Efficiently Annual Call Schedule Time-and-Duty Analysis Sales Force Automation Organizational Climate Sales Quotas Positive Incentives Honors Awards Merchandise/ Cash Trips Supervising Salespeople Issues in supervision of the sales force include: Directing Salespeople. Supervisors must determine how best to focus the efforts of salespeople to meet the needs of their customers in relation to the industry and competitive conditions. Developing Customer Targets and Call Norms. Companies often specify how much time their salesforce should spend prospecting for new accounts. Calls to accounts are often a function of how large or important the account is. Using Sales Time Efficiently. The annual call schedule is a tool that shows which customers and prospects to call on in which months. The time-and-duty analysis helps salespeople identify when they are selling versus waiting, traveling, eating and doing administrative work. Motivating Salespeople Organizational Climate. Climate describes the feeling that salespeople have about their opportunities, value, and rewards for a good performance within the company. Sales Quotas. Quotas are the standards stating the amount salespeople should sell and how sales should be divided among the company’s products. Positive Incentives. Companies can use other incentives to increase effort, including: Sales meetings. These provide social occasions, breaks from routine, and chances to meet and talk with others. Sales contests. These spur the salesforce to make a selling effort above what is normally expected.

How Salespeople Spend Their Time
Administrative Service Calls Tasks 12% 17% Companies Look For Ways to Increase the Amount of Time Salespeople Spend Selling. Telephone Selling 21% Face-to-Face Selling 30% Waiting/ Traveling 20%

Evaluating Salespeople
This CTR relates to the discussion on pp Expense Reports Sales Report Sources of Information Evaluating Salespeople Sources of Information. Managers get information on sales force performance from several sources, including: The Sales Report. This is the most important source of information managers have on their salesforce. The Work Plan. This is submitted and describes the calls and routing for the coming week or month. Annual Territory Marketing Plans. These are outlines for building new accounts and increasing sales. Call Reports. These log sales calls and Expense Reports. These provide information on activity and expenses to be reimbursed. Formal Evaluation of Performance. Many techniques are used to evaluate sales force performance for formal company objectives, including: Comparing Salespeople’s Performance. Comparisons are helpful although many other factors influence performance such as differing conditions in each territory. Comparing Current Sales with Past Sales. Past sales help identify trends. Interpretation is needed to evaluate trends with company expectations. Qualitative Evaluation of Salespeople. These subjective evaluations look at a salesperson’s knowledge of the company, products, customers, competitors, territory, and tasks. Call Reports Work Plan Annual Territory Marketing Plan

Steps in the Selling Process
Step 1. Prospecting and Qualifying Steps in the Selling Process Steps in the Selling Process This CTR corresponds to Figure 16-3 on p. 496 and relates to the material on pp Step 2. Preapproach Identifying and Screening For Qualified Potential Customers. Learning As Much As Possible About a Prospective Customer Before Making a Sales Call. Knowing How to Meet the Buyer to Get the Relationship Off to a Good Start. Telling the Product “Story” to the Buyer, and Showing the Product Benefits. Step 3. Approach Steps in the Selling Process Prospecting and Qualifying. This step involves identifying qualified potential customers. Salespeople must always contact more people than will end up becoming a customer. Prospecting is the process of obtaining good sources of information on who might be interested in or need the product. Qualifying seeks to improve that list by separating more likely leads from poor ones. Preapproach. This step consists of doing the background research and preparation needed to understand the needs of the potential customer. Salespeople should set specific call objectives to accomplish when contacting the prospect. Approach. In this step consists of the first contact with the buyer and seeks to establish a good working relationship. The salesperson must be aware of the effect of his or her appearance, opening remarks, listening style, and closing comments. Presentation and Demonstration. In this stage the salesperson presents the product "story" to the buyer and demonstrates product benefits. Step 4. Presentation/ Demonstration

Steps in the Selling Process
Step 5. Handling Objections Steps in the Selling Process Steps in the Selling Process This CTR corresponds to Figure 16-3 on p. 496 and relates to the material on p. 497. Step 6. Closing Seeking Out, Clarifying, and Overcoming Customer Objections to Buying. Asking the Customer for the Order. Following Up After the Sale to Ensure Customer Satisfaction and Repeat Business. Step 7. Follow-Up Steps in the Selling Process Handling Objections. This requires seeking out and resolving concerns that would stop a customer from purchasing. Closing. This requires seeking out and resolving concerns that would stop a customer from purchasing. Follow-up. Follow-up is a necessary part of good selling to ensure satisfaction and repeat business.

Relationship Marketing
Process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders. Based on the idea that important accounts need focused and continuous attention.

Direct and Online Marketing
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 17 Direct and Online Marketing

Benefits of Direct Marketing
Direct Marketing Consists of Direct Communications with Carefully Targeted Individual Consumers to Obtain an Immediate Response. Fun, Convenient & Hassle-Free Mailing Lists for Almost Any Market Benefits of Direct Marketing to Customers Benefits of Direct Marketing to Companies Saves Time Customized Offers Larger Merchandise Selection Ongoing Relationships with Customers Comparison Shopping Timed to Achieve Higher Readership & Response Order Products for Themselves or Others Privacy

Trends Leading to the Growth of Direct Marketing
Increasing Number of Market Niches with Distinct Preferences Trends Leading to the Growth of Direct Marketing Higher Costs of Driving, Traffic and Parking Congestion Consumers Lack of Time Convenience of Ordering From Direct Marketers Growth of Customer Databases

Customer Databases and Direct Marketing
Customer Databases are an Organized Collection of Comprehensive Data About Individual Customers or Prospects Including: Geographic, Demographic, Psychographic, and Behavioral Data. Identifying Prospects Deciding Which Customers Should Receive a Particular Offer How Companies Use Their Databases Deepening Customer Loyalty Reactivating Customer Purchases

Forms of Direct Marketing Communication
Face-to-Face Selling Online Marketing Direct-Mail Marketing Kiosk Marketing Catalog Marketing Direct-Response TV Marketing Telemarketing

Online Marketing and Electronic Commerce
Online Marketing is conducted through interactive online computer systems, which link consumers with sellers electronically. Two types of Online Marketing Channels: Commercial Online Services offer online information and marketing services to subscribers who pay a monthly fee. (i.e. AOL, CompuServe & Prodigy) The Internet (the Net) is the vast global and public web of computer networks. The explosion of Internet usage has created a new world of electronic commerce, a term that refers to the buying and selling process supported by electronic means.

The Benefits of Online Marketing
Convenient Consumer Relationship Building Consumers Companies Private Reduces Costs Abundance of Information Increases Efficiency Interactive Provides Flexibility Immediate Global Medium

Online Marketing Channels
Creating an Electronic Storefront Buy Space on a Commercial Online Service Open It’s Own Web Page Placing Advertisements Online Place Ads in Special Sections of Online Services Place Ads in Certain Internet Newsgroups Buy Online Ads That Pop Up While Consumers are Surfing Online Marketing Channels Participating in Forums, Newsgroups & Web Communities Forums: Discussion Groups on Commercial Online Services Newsgroups: Internet Version of Forums Web Communities: Sites Where Members Exchange Views Online Using and Webcasting Customers Send Questions, Suggestions & Complaints Via Webcasting: Automatic Downloading of Information to PC’s

Challenges of Direct Marketing
Limited Consumer Exposure and Buying Skewed User Demographics and Psychographics Chaos and Clutter Ethical Concerns Security

Integrated Direct Marketing
Direct marketing campaigns that use multiple vehicles and multiple stages to improve response rates and profits. Marketers seek to improve response rates and profits by adding media and stages that contribute more to additional sales than to additional costs.

Public Policy and Ethical Issues in Direct Marketing
Irritation to Consumers Unfairness, Deception, or Fraud Invasion of Privacy

Competitive Strategies: Building Lasting Customer Relationships
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 18 Competitive Strategies: Building Lasting Customer Relationships

Defining Customer Value
This CTR corresponds to Figure 18-1 on p. 545 and relates to the material on pp Instructor’s Note: This material previews the concepts that underlie the following discussion on Porter’s Value Chain (Slide 18-7). Defining Customer Value - = Total Customer Value Cost (Product, Service, Personnel, & Image Values) (Monetary, Time, Energy, & Psychic Costs) Customer Delivered Value (Profit to the Consumer) Elements of Customer Value Customer Value is a multi-faceted concept marketers should consider in preparing the total marketing offer. Key dimensions to the customer value concept include: Customer-Centered. To win in today’s marketplace, companies must excel at becoming more customer-centered in delivering superior value to their target customers. A key concept is market engineering - the process of designing the whole company system to deliver customer value at every level. Customer Delivered Value. Delivered value is defined as the difference between total customer value and total customer cost. Discussion Note: The text example emphasizes the dollar value of customer costs. Consumers also weigh psychological costs such as image, reputation, and decision-time.

Customer Satisfaction
This CTR relates to the discussion on pp Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations. Performance Exceeds Expectations- Customer is Delighted Customer Satisfaction Closely tied to delivering customer value is the concept of customer satisfaction. Again, the elements involved in how customer’s determine what products are satisfying or unsatisfying are of critical importance to marketers. Key considerations in understanding customer satisfaction include: Expectations. Customer satisfaction with a purchase depends upon the product’s performance relative to a buyer’s expectations. Expectations are based upon the customer’s past buying experiences, the opinions of friends and associates, and marketer and competitor information. Expectations may be realistic or unrealistic. Further, as the text observes, satisfaction alone doesn’t retain customers. Buyer’s Expectations Are Based On: Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises Product’s Actual Performance Performance Below Expectations - Customer is Dissatisfied

Total Customer Satisfaction
This CTR relates to the discussion on pp Highly satisfied (delighted) customers produce benefits: They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others. Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. Therefore, the purpose of Marketing is to generate customer value profitably. Total Customer Satisfaction Total Customer Satisfaction. Satisfaction aims at meeting, exceeding, and then continually raising customer expectations for product performance. Satisfaction at this level of performance can lead to competitive advantage. To achieve this end, companies must track their customer’s expectations, perceived company performance, and customer satisfaction. The Goal: Customer Delight. The goal is to create customer delight - an emotional affinity for a product or service, not just a rational preference. This kind of bond is required for obtaining high customer loyalty in an increasingly competitive marketplace.

The Need for Customer Retention
This CTR relates to the discussion on pp The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider: New Customer Costs Lost Lifetime Value Retaining Customers Getting New Customers Costs Money. Marketers need to think in terms of how much of each aspect of the promotion mix and marketing mix must be spent each time a new customer is recruited. Common sense tells us that current customers will need fewer of these expensive resources to make their buying decisions than will potential customers. Cost of Lost Customers. Once marketers realize that losing customers is expensive, they need to determine how to identify why customers are lost to measure the actual cost of customer loss. Discussion Note: Even small businesses can use focus groups and surveys to identify loss centers on a personal computer database. Customer’s Lifetime Value. When the revenues of each customer are factored in, it is possible to determine the customer’s lifetime value -- the amount of profit generated each year for the company over the lifetime of that customer’s business with the company.

Building Customer Satisfaction and Loyalty by Relationship Marketing
This CTR relates to the material on pp Building Customer Satisfaction and Loyalty by Relationship Marketing Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with Customers and Other Stakeholders. Methods for Building Relationships Include Offering: Customer Satisfaction and Loyalty Building Relationship Approaches A company can adopt any of three customer relationship-building approaches to use in developing stronger customer bonding and satisfaction: Financial Benefits. Companies can add financial benefits to the customer relationship. These can consist of frequency marketing programs such as frequent flyer programs, money-back guarantees, and club marketing programs. Discussion Note: Financial benefits literally put a dollar figure or worth on the customer’s continuing relationship and patronage. Social Benefits. Here company personnel work to increase their social bonds with customers by learning individual customer’s needs and wants and then individualizing and personalizing their products and services. Structural Ties. Under this approach, the company supplies customers with special equipment or computer linkages that help them to manage their orders, payroll or inventory. Discussion Note: Financial services companies routinely offer software that helps investors make trades or obtain market information electronically. Sometimes the software is available for a nominal fee or offered free to investors opening a minimum account. Financial Benefits Social Benefits Structural Ties

Human Resource Management Technology Development
Firm Infrastructure Human Resource Management Technology Development Procurement Value Chain This CTR relates to the material on pp Teaching Tip: Ask students to identify the primary and support activities operating at your school. Value Chain Support Activities The Generic Value Chain Michael Porter’s value chain identifies nine value-creating activities undertaken by companies seeking to provide products that meet customer needs. Activities include: Primary Activities: Inbound Logistics. Inbound logistics consists of those activities and their coordination that bring needed materials into the business. Value is added in the choice of materials and their integration into the business operations in a timely manner. Operations. Operations is the first step in developing materials into value-added products. Operations add value through manufacturing innovations and processes. Outbound Logistics. Outbound logistics refers to the distribution system set up by the business. As with inbound logistics, coordination and integration of the firm’s products with the needs of retailers and customers creates value. Marketing and Sales. Marketing and sales educate consumers and position the firm’s products and image to create value. Service. Service creates value both by keeping the product’s performance in line with customer expectations and by demonstrating to the customer the firm’s commitment to meeting customer needs. Support Activities: These activities occur within each primary activity. Firm Infrastructure. How the firm is set up permeates each primary activity and determines the parameters of action each activity can take. Human Resource Management. Recruitment, training, and evaluation add value in relation to the competition’s efforts. Technology Development. All primary activities must develop and maintain technological advantages. Procurement. Every primary activity procures inputs of both material and expertise. Margin Operations Outbound Logistics Marketing and Sales Inbound Logistics Service Primary Activities

Customer Value-Delivery Network
Customer Value-Delivery System This CTR relates to the discussion on p. 554. Retailer Delivery Order Producer Value Delivery Systems To enhance competitive advantage, firms look beyond their own value chains for ways of improving customer value. In linking the company’s value chain with those of its suppliers and resellers, the company improves the performance of the entire customer value delivery system. A key concept of the value delivery system is partnering. Partnering. Partnering involves merging key aspects of two or more companies in the delivery system to increase customer value. The text relates the example of Honda headquarters working with Donnelly Corporation employees to reduce their costs and improve quality. Other examples include sharing sales information with suppliers by manufacturers and retailers, coordinating promotional activities throughout the chain, and sharing new technological developments in inventory and database ordering systems with other chain members. Order Delivery Vendor Delivery Order Raw Material Supplier Delivery Order Order Delivery

Total Quality Marketing
This CTR relates to the material on pp Total Quality Marketing Quality is in the Eyes of the Customer Necessary But May Not Be Sufficient Pursuing a Total Quality Marketing Strategy Does Not Cost More Every Company Activity Quality and Performance Quality. Quality is defined as the totality of features and characteristics of a product or service bear on its ability to satisfy stated or implied needs. Quantum Leaps Total Employee Commitment Performance Quality refers to the level at which a product performs its functions. Conformance Quality refers to the freedom from defects and the consistency with which a product delivers a specified level of performance. Marketing Highlight 18-2: Pursuing a Total Quality Marketing Strategy 1. Quality is in the Eyes of the Customer. A quality program must begin with the customer’s needs and end with customer perceptions. 2. Quality must reflect Every Company Activity. Each functional area and each company activity must understand and embody the total quality concept. A system cannot consistently deliver quality if one or more of its components is not operating effectively. 3. Quality requires Total Employee Commitment. All company employees must be personally committed to the total quality program. Commitment requires both professional and personal pride in the outcome. 4. Quality requires High-Quality Partners. Value chain members of the customer delivery system must also embody total quality commitment. 5. A Quality Program Cannot Save a Poor Product. Companies must recognize that poor product cannot be “quality imaged” successfully. If the product cannot be changed, it should be dropped. 6. Quality can Always be Improved. Nothing is ever perfect. 7. Quality Improvement may Require Quantum Leaps. Competitive conditions may demand vast and immediate improvements over small and incremental ones. 8. Quality Does Not Cost More. Cost savings come from lower rejection rates, better customer satisfaction, and often new technologies that reduce manufacturing costs. 9. Quality is Necessary But May Not Be Sufficient. More demanding buyers have ever higher expectations for performance. Companies cannot assume that quality alone will be competitive. High Quality Partners Continuous Improvement Cannot Save Poor Product

Competitor Analysis Identifying Competitors Assessing Competitors
This CTR corresponds to Figure 18-4 on p. 557 and relates to the material on pp Assessing Competitors Determining Objectives Competitor Analysis Identifying Competitors. Competitors include those who make products that compete directly against those of the company and more broadly those that meet the same needs. Companies are more threatened by latent competitors than current ones. Competitors may be identified by industry or by markets. Determining Competitors’ Objectives. Competitors differ in the relative emphasis they put on variables such as technological innovation, cost leadership, quality, and market share. Identifying Competitors’ Strategies. A strategic group is a group of firms in an industry that follows the same or similar strategy in a given target market. Assessing Competitors’ Strengths and Weaknesses. Companies keep data records on competitors’ performance to assess likely future moves and capabilities. Benchmarking involves identifying the top performance features of a given product and measuring company performance against that standard. Estimating Competitors’ Reaction Patterns. Beyond capability, competitors must be assessed in terms of how they respond to the company’s strategies. Each competitor will have preferences based upon a combination of functional specialties, management preferences, and historical patterns. Selecting Competitors to Attack and Avoid. Companies typically classify competitors for possible strategic action. Strong or Weak Competitors may be attacked. Weak competitors are easier targets but less profitable. Close or Distant Competitors may be targeted. Well-Behaved or Disruptive Competitors also provide different opportunities and pose different threats. Identifying Strategies Assessing Strengths and Weaknesses Estimating Reaction Patterns Selecting Competitors to Attack and to Avoid

Basic Competitive Strategies
Developing Competitive Marketing Strategies This CTR relates to the material on p. 561. Developing Competitive Marketing Strategies Overall Cost Leadership Focus Competitive Positions Cost-Leadership. Cost-leadership is gained by being the lowest-cost producer in the industry. This affords the company flexibility in responding to competitive moves by always being able to offer the lowest price to the consumer. Differentiation. This strategy creates competitive advantage by offering products with unique customer benefits or features not available from competitive offerings. Here the company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry. This image helps it to compete against lower cost rivals. Focus. This narrow-focus strategy achieves competitive advantage by concentrating on a narrow segment of a larger market. Emphasis is often on quality or benefits in a tightly defined market subsegment. Middle-of-the-Road. Firms that do not pursue one of the three general strategies above lack strategic focus. While they may survive, they are extremely vulnerable to more focused competitors and will be poorly positioned to react successfully to environmental changes such as economic downturns. Differentiation Middle of the Road

Developing Additional Competitive Marketing Strategies
Value Disciplines Developing Additional Competitive Marketing Strategies This CTR relates to the discussion on pp Developing Additional Competitive Marketing Strategies Operational Excellence Customer Intimacy Value Disciplines Treacy and Wiersema offer another classification for competitive strategies. They suggest that companies gain leadership positions by delivering superior value to their customers. Under this perspective, companies can pursue any of three strategies: Operational Excellence. Here the company provides superior value by leading its industry in price and convenience. Examples include Wal-Mart and Dell Computer. Customer Intimacy. Here the company provides superior value by precisely segmenting its markets and then tailoring its products or services to match exactly the needs of targeted customers. These companies build detailed and relevant customer databases for targeting and segmentation purposes. Their customers are willing to pay a premium for their very-well defined needs and wants. Companies employing this strategy will do almost anything to build long-term customer loyalty. Examples include Nordstrom and Land’s End. Discussion Note: Nordstrom sales representatives are authorized to give customers the direct telephone number of the company CEO and President. Customer are encouraged to call with complaints, suggestions, or comments. When the phone is answered, it is the chief executive himself -- not an assistant. Product Leadership. Here the company provides superior value by offering a continuous stream of leading-edge products or services that make their own and competing products obsolete. Examples include Intel and Motorola. Discussion Note: Most of the ten most active trading stocks on any given day, especially on the NASDAQ exchange, are information technology companies successfully pursuing this approach, including Intel and Motorola. Product Leadership

Competitive Positions
This CTR corresponds to Table 18-1 on p. 564 and relates to the discussion on p Market Leader Firm with the Largest Market Share Competitive Positions Competitive Strategies Expand Total Market Protect Market Share Expand Market Share Market Challenger Runner-Up Firms that Fight Hard to Increase Market Share Competitive Positions It may be useful to classify competitive positions on the basis of the roles companies play in the marketplace. Four key positions include: Market Leader. This is the firm with the largest market share. It typically leads other firms in price changes, new product introductions, distribution coverage, and promotion spending. Market Challenger. The challenger is the runner-up firm in the industry. It is aggressively seeking to expand its market share. Challengers may be a somewhat distant second or they may be very close to the leader’s share. Discussion Note: The distance between the leader and the challenger may have a very strong influence on the strategies selected by each. Market Follower. A follower is another runner-up firm that seeks to hold its share. It does not attempt to gain share at the expense of the leader, often to avoid competitive retaliation from its more powerful rivals. Market Nicher. The nicher is a firm that serves very small, tightly defined segments, or even a single segment. Often the segments are ignored or overlooked by larger firms. Market Followers Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Full Frontal Attack Indirect Attack Follow Closely Follow at a Distance Market Nichers Firms that Serve Small Segments Not Being Pursued by Other Firms By Customer, Market, Quality-Price, Service Multiple Niching

Balancing Customer and Competitor Orientations
Balancing Customer and Company Orientations This CTR corresponds to Figure 18-5 on p. 569 and relates to the discussion on pp Product Orientation Competitor Customer Market Competition-Centered No Yes Customer-Centered Evolving Company Orientations Companies must consider and follow closely the movements of its competition in a given market. On the other hand, it must also monitor other factors in the environment and - always - what the customer needs and wants. A critical strategic decision involves balancing these various orientations. Orientations can be classified as the following: Competitor-Centered Company. This is a company whose moves are mainly based on competitors’ actions and reactions. Competitor-centered companies spend most of their time tracking competitors’ moves and market share and trying to find strategies to counter them. Customer-Centered Company. This is a company that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers. Teaching Tip: The customer-centered approach seems the best in theory, but in practice it is seldom so simple. When Apple/IBM/Motorola tested the new RISC-based PowerPC chip, rival Intel did nothing. Tests results indicated success, and at a much lower cost that Intel’s Pentium. But before the PowerPC went to market, Intel cut prices (up to 40%) on the Pentium and introduced more powerful versions. Market-Centered Company. This is a company that pays balanced attention to both customers and competitors in designing its marketing strategy. Product-Centered Company. This is a company that is neither customer- nor competitor-centered. Although the nature of some products and/or industries may make this orientation a successful one, it is generally not a good approach for most companies.

The Global Marketplace
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 19 The Global Marketplace

Global Marketing Into the Twenty- First Century
Global competition is intensifying and few U.S. industries are now safe from foreign competition. To compete, many U.S. companies are continuously improving their products, expanding into foreign markets and becoming Global Firms. Global firms face several major problems: Variable exchange rates, Unstable governments, Protectionist tariffs and trade barriers, Corruption.

Decisions in International Marketing
Looking at the Global Marketing Environment Decisions in International Marketing Decisions in International Marketing This CTR corresponds to Figure 19-1 on p. 580 and relates to the material on pp Instructor’s Note: This CTR and Notes serve as an overview of the chapter. Each decision area is discussed in greater detail on subsequent CTRs. Deciding Whether to Go International Deciding Which Markets to Enter Deciding How to Enter the Market Major International Marketing Decisions Looking at the Global Marketing Environment. Understanding comes from looking at the international marketing environment. Multinational companies operating in many countries have proliferated and in a global economy more companies must consider international markets if they are to grow. Deciding Whether to Go International. Global expansion may be the best growth opportunity, even for relatively small companies. More foreign markets can increase volume. Deciding Which Markets To Enter. The decision on which markets to enter is based upon many factors, including environmental conditions. Deciding How to Enter the Market. This involves choices about how to compete in the selected markets. Deciding on the Global Marketing Program. Companies must make appropriate mix adjustments suitable for international markets. Deciding on the Global Marketing Organization. Companies have several structural choices available including the use of an export department, an international division, and a global organization. Deciding on the Global Marketing Program Deciding on the Global Marketing Organization

Looking at the Global Marketing Environment
This CTR relates to the discussion on pp The International Trade System The World Trade Organization and GATT Regional Free Trade Zones Looking at the Global Environment Trade System. The international trade system concerns identify opportunities and obstacles for US firms abroad. Companies should investigate several trade system factors, including: Tariffs. These are taxes on imported goods. Quotas. These restrict import amounts. Nontariff Barriers. These include other conditions, such as cultural preferences, that may affect ability to compete. GATT. The General Agreement of Tariffs and Trade (GATT), begun in 1948, attempts to set rules for increasing trade worldwide by bringing down projectionist policies. Regional Free Trade Zones. These economic communities consist of a group of nations organized to work as a single common market. Trade internally is tariff-free and all participating countries share the same tariffs on outside goods.

Economic Environmental Factors
This CTR relates to the discussion on pp Subsistence Economies Country’s Industrial Structure The Economic Environment The Industrial Structure of a country shapes its product and service needs, income levels, and employment levels. Four types of industrial structures are: Subsistence Economies. In subsistence economies, most people engage in simple agriculture, consuming most of their output. Barter is the typical form of exchange. Subsistence economies offer few market opportunities. Raw-Material Exporting Economies. These economies are rich in one or more valuable natural resources but poor in other areas. They tend to be good markets for the large capital equipment and machinery needed to extract the natural resources, which are purchased by foreign firms and exported for further processing abroad. Industrializing Economies. Industrializing economies are characterized by an emerging manufacturing base that accounts for 10% to 20% of the country’s economy. The manufacturing sectors produces some finished products for export. A small but very wealthy new rich class emerges with a small buy growing middle class. These groups demand more imported consumer goods. Industrial Economies. Industrialized economies are major exporters of manufacturing goods and investment funds. They are rich markets for all sorts of goods. Income Distribution. Patterns range from very low family incomes to very high family incomes, all which affect their buying decisions. Industrial Economies Raw Material Exporting Economies Industrializing Economies Income Distribution

Political-Legal Environmental Factors
This CTR relates to the discussion on pp Attitudes Toward International Buying Government Bureaucracy The Political-Legal Environment Because nations differ greatly in their political-legal environments, marketers considering global expansion should carefully analyze the following four political-legal factors: Attitudes Toward International Buying. Some nations are quite receptive to foreign firms, and other quite hostile. A key consideration for marketers is to assess whether or not the firm can work to improve the host country’s attitude toward foreign operations and so create a new competitive advantage. Government Bureaucracy. A key consideration is the degree to which the host country runs an efficient system for processing foreign trade. Political Stability. Countries different greatly in the way power is transferred. Some countries can change dramatically, even through direct election. Political change may even be violent. It is also possible that the company’s property may be taken by a new or even existing government. Monetary Regulations. Sellers want to take their profits in a currency of value to them. This may or may not be possible. While most international trade involves cash transactions, several other forms of exchange or countertrade, are possible, including: Barter. This involves the direct exchange of goods or services between firms. Buyback. Here the seller takes payment in the form of resulting products from the seller’s activity, such as building a factory. Counterpurchase. Here the seller takes cash payment in the local currency and agrees to buy other products in the country with it. Those products are exported for resale to take profits in another currency. Monetary Regulations Political Stability

Cultural Environmental Factors
How Customers Think About and Use Products Business Norms and Behavior Cultural Traditions, Preferences, Behaviors Cultural Environmental Factors This CTR relates to the discussion on pp The Cultural Environment Cultural Differences. Cultural differences are very important in international marketing. Most advertising and even product images are culturally-based and may be inappropriate, ineffective, and even offensive in another culture.

Deciding Whether to Go International
Reasons companies might consider International expansion: Global competitors attacking the domestic market, Foreign markets might offer higher profit opportunities, Domestic markets might be shrinking, Need an enlarged customer base to achieve economies of scale, Reduce dependency on any one market, Customers might be expanding abroad. Most companies do not act until some situation or event thrusts them into the international market.

Deciding Which Markets to Enter
This CTR corresponds to Table 19-1 and relates to the discussion on pp Marketer’s Checklist for Identifying Market Potential 1. Demographic Characteristics. Factors Affecting Market Entry Marketers should consider six factors as indicators of market potential in deciding which markets to enter: Demographic Characteristics. Demographic concerns address the size of the population, the rate of urban population growth, the degree of urbanization, the population density, and the age structure and composition of the population. Geographic Characteristics. Geographic considerations include the physical size of the country, topographical features, and climate conditions. Economic Factors. Economic factors include the GNP (and/or GDP), income distribution, rate of growth of GNP, and ratio of investment to the GNP. Technological Factors. Technological factors include the level of technological skill, existing production technology, existing consumption technology, and the education levels of the population at large. Sociocultural Factors. Sociocultural concerns include the dominant value system of the country, lifestyle pattern related to consumption, the presence and importance of different ethnic groups, and any linguistic fragmentation. Teaching Tip: For example, in Jordan the Palestinians make up 60% of the population but are ruled by the Jordanian minority. In both China and in Italy, linguistic fragmentation is so severe that local dialects cannot understand each other and the “official language” is the version spoken around the national capital. National Goals and Plans. National industrial priorities and infrastructure investment plans are very important. 2. Geographic Characteristics. 3. Economic Factors. 4. Technological Factors. 5. Sociocultural Factors. 6. National Goals and Plans.

Deciding How to Enter the Market
Direct Investment Deciding How to Enter the Market This CTR corresponds to Figure 19-2 on p. 591 and relates to the material on pp Deciding How to Enter the Market Greater Joint Venturing Market Entry Strategies Exporting. Exporting may be of two kinds: Indirect Exporting works through independent international intermediaries and involves less investment by the exporter. Risk is also smaller. Direct Exporting involves more risk and investment as the firm sets up its own presence in the host country but the potential return is also greater. Joint Venturing. Firms have four types of joint venture available to them: Licensing. Licensing occurs when a company enters into an agreement with a licensee in the foreign market. Licensing means little risk but also little control. Contract Manufacturing. Here the firm arranges for a foreign producer to make products in the host country for that market. Management Contracting. Here the firm provides the management team and the host country supplies the capital. Joint Ownership. This consists of one company joining with another in the host country to create a local business in which they share owner ship and control. While this option commits both companies to the enterprise, it demands close agreement on both the goals and the methods for doing business. Direct Investment. This option occurs when the exporting firm enters a foreign market by developing foreign-based assembly or manufacturing facilities. Direct investment can be especially attractive when the firm needs firm local control and when there are substantial cost savings. Amount of Commitment, Risk, Control, and Profit Potential Exporting Lesser

Deciding on the Global Marketing Program
This CTR corresponds to Figure 19-3 on p. 594 and relates to the material on pp Deciding on the Global Marketing Program Five International Product and Promotion Strategies Straight Extension Communication Adaptation Product Dual Promotion Don’t Change Adapt Don’t Change Product Invention Develop New Product Product Strategies Straight Product Extension. This involves marketing a product in the foreign market without making any changes. Some products may have very strong brand awareness and already be desired as is in the new market. Product Adaptation. This involves changing the product to meet local conditions or wants. Often product forms need to be altered. Size and tastes, for example, are usually at least partially preferred on some culturally related dimensions. Product Invention. This consists of creating something entirely new for the foreign market. Promotion Strategies Communication Adaptation. Adapting communication is often required. Although some companies can use a single theme and meaning internationally, it is often the case that the local variation on even a universal theme may require some modification. Dual Adaptation. This involves a combination of promotion and product alternations for the foreign market.

Whole-Channel Concept for Distribution
Seller Seller’s Headquarters Whole-Channel Concept for Distribution Whole-Channel Concept for Distribution This CTR corresponds to Figure 19-4 on p. 597 and relates to the discussion on pp Channels Between Nations Channels Within Nations International Distribution Channels The international company must take a Whole Channel View of the problem of distributing products to final consumers. This approach takes into account all the necessary links in distributing the seller’s products. Typically, this requires special attention to three major links between the seller and the final buyer: Seller’s Headquarters' Organization. This is the link that supervises the channels and is part of the channel itself. Channels Between Nations. This link includes the infrastructure that moves the products to the borders of the foreign nation. Channels Within Nations. This link encompasses the infrastructure that moves the products from the entry point of the foreign country to the final consumers. Teaching Tip: Students may have trouble recognizing the distribution problems associated with between nations exporting. For example, Czarist Russia built its entire railroad on a narrow-gauge track system so that potential invaders could not cross on the standard-gauge trains. But then neither could goods from other European countries. Final User or Buyer

Deciding on the Global Marketing Organization
This relates to the material on p. 598. Export Department International Division Global Organization Three Organizational Structures Export Department. During early international marketing efforts, companies typically just create a new department to coordinate international operations. The sales manager may take on larger staff if and as the international business grows in importance and more marketing services are needed to support it. International Division. As the level of involvement in and complexity of international operations increases, companies commonly organize an international division. In addition to running international operations, the division oversees strategic growth and investigates different types of foreign entry opportunities in new countries. Operating units in foreign markets under division control may be organized by geographical organization, world product groups, or international subsidiaries. Global Organization. For many large companies, the scope of operations grows to the point where they are no longer a firm involved in many foreign markets, they are a truly a multinational company. Recruitment, management, suppliers, manufacturing, and financing are no longer linked to a single-country mentality. The entire world becomes a single market whose segmentation is base upon strategic and tactical competitive advantage, not national affiliation. Degree of Involvement in International Marketing Activities

Marketing and Society: Social Responsibility and Ethics
PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong Chapter 20 Marketing and Society: Social Responsibility and Ethics

Social Criticisms of Marketing
This CTR relates to the material on pp High Prices Marketing's Impact on the Consumer High Prices. Marketing is blamed for high prices due to: Deceptive Practices Poor Service Marketing’s Impact on Individual Consumers High Costs of Distribution. The distribution system performs marketing functions consumers want. Costs are actually lower than they would be if the same services were performed by either the producer or the retailer. Consumers who don’t want such services have alternatives available in membership warehouses. High Advertising and Promotion Costs. Branding and differentiation provide psychological assurances of quality and reliability that consumers are willing to pay for. Again, no-brand choices are available as ready substitutes. Further, marketing communication remains the primary source of product information for most consumers. Excessive Markups. Large markups may cover the costs of development for other products or support loss leaders in the companies product line. Abuses do exist, but a systemic analysis of the company’s practices should be conducted before “conviction.” Discussion Note: You may point out that most of the examples of high costs come from uncompetitive industries that do not much use the marketing concept, such as the medical and legal professions. Deceptive Practices. Pricing, promotion, and packaging are areas where deception may occur. Laws prohibit such practices but this remains an area where unethical behavior occurs -- though not it is not in the majority. High Pressure. The bottom line is that in addition to being illegal in many cases, these practices tend to drive customers to seek other suppliers and eventually self-terminate. Unsafe Products. Truly unsafe products receive publicity out of proportion to their numbers. Still, producers and sellers have a legal, ethical, and moral obligation not to endanger consumers. Most companies take this responsibility very seriously. Planned Obsolescence. To the extent that consumers like change, and style, not functional features, are subjective, most products are not guilty of planned obsolescence. Those that are eventually lose out to more competitive offers by innovative companies. Poor Service to Disadvantaged Customers. Again, while this problem area is not often as simple as it seems, it is true that better marketing systems must be built to service low-income areas. Planned Obsolescence High Pressure Selling Shoddy or Unsafe Products

Marketing’s Impact on Society
This CTR relates to the discussion on pp The Marketing Function is Accused by Society of Creating: Marketing's Impact on Society as a Whole Marketing activities, and advertising in particular, have been accused of adding several “evils” to American society, including: False Wants and Too Much Materialism Too Few Social Goods False Wants and Too Much Materialism. Critics charge that the marketing system urges too much interest in material possessions. Such charges apparently down play the role of other influences on consumers, including family values and social interaction. Too Few Social Goods. Many private goods, such as desert golf courses, have social costs, such as irrigation drawn from publicly-owned rivers. The marketing system needs to restore more of a balance between private and public goods. Cultural Pollution. Some critics charge that commercial practices are a form of cultural pollution. This attack overlooks much of the self-selection by consumers to use marketing communication and the choice not to use it. Too Much Political Power. Many critics are concerned that the economic and political power of marketing forces curbs independent and objective reporting by the mass media and buys “special interest” favoritism from government. In terms of media independence, it should be remembered that these private enterprises always answer to some for-profit agenda. Regarding political power -- the right of company’s to lobby and petition government is guaranteed. Laws against undue influence more often than not counter-balance practices that threaten the social well being. Too Much Political Power Cultural Pollution

Marketing’s Impact on Other Businesses
This CTR relates to the discussion on p. 614. Critics Charge that a Company’s Marketing Practices Can Harm Other Companies and Reduce Competition Through: Acquisitions of Competitors Marketing Practices that Create Barriers to Entry Marketing's Impact on Other Businesses Again, much of this criticism attacks straw man positions. Poor business decisions in mergers, acquisitions, and entering new markets are not due to marketing efforts. Moreover, most blatantly exploitative ventures require better laws. Unfair Competitive Marketing Practices

The Right to Be Informed
The Right to Be Safe Consumerism This CTR relates to the material on pp Basic Consumer Rights Consumerism Consumerism Consumerism is an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers. President Kennedy's Consumer's "Bill of Rights" included the following provisions: Right to Be Safe. This refers to consumer's expectation that the product and its proper use should not endanger the user. Right to Be Informed. This means that the consumer should have access to relevant and reasonable product information. Companies should not hide information about products but nor should consumers assume that they have no responsibilities for their own behavior. Right to Be Heard. This means that consumers should have the means to tell companies of their satisfaction or complaints and reasonably expect that producer will respond to their wants. Right to Choose. This means both that consumers should not be coerced into buying and that a competitive marketplace will provide them with some selection among products. Producer’s Rights. Producer’s too have rights in the American system of government and its fundamental belief that free enterprise, however, imperfect, provides the best system for creating the greatest good for the greatest number. Consumer Responsibility. Lost all too often in the attacks on marketing is the fundamental premise that a free people must take it upon themselves to be better consumers -- to seek out information on products and to make wise decisions in the marketplace. When producers mislead, they should be curbed. When consumers abdicate their responsibilities, they should face up to the consequences. The Right to Be Heard The Right to Choose

Plan for New Environmental
Environmentalism Environmentalism Practice Pollution Prevention Practice Product Stewardship Adopt Designs for the Environment Have a Sustainability Vision Plan for New Environmental Technologies

Enlightened Marketing
Consumer-Oriented Marketing Enlightened Marketing This CTR relates to the material on pp Enlightened Marketing Innovative Marketing Value Marketing Enlightened Marketing The Enlightened Marketing Concept holds that a company's marketing should support the best long-run performance of the marketing system. Enlightened marketing and marketing ethics ( work together to create socially responsible marketing practices. Enlightened marketing consists of five key principles: Consumer-Oriented Marketing. This means the company should view and organize its marketing activities from the consumer's point of view. Innovative Marketing. This requires that a company seek real product and marketing improvements. Overlooking improvements or settling on "bells and whistles" eventually leads to a loss of competitive advantage. Value Marketing. Value marketing holds that a company should put most of its resources into value-building marketing investments. This principle would re-prioritize marketing decisions from using incentives to affect reapportionment of demand to long-term incentives to create brand loyalty by constant improvement in the value consumers receive from the firm's offer. Sense-of-Mission Marketing. This means that a company defines its mission in broad social terms rather than narrow product terms. Product use by the target consumer should help advance those social goals to the benefit and profit of consumer, company, and society alike. Societal Marketing. Societal marketing holds that a company should make marketing decisions by considering consumer's wants, the company's requirements, and society's long-run interests. This topic is covered in greater detail on the following CTR. Sense-of-Mission Marketing Societal Marketing

Societal Classification of Products
Societal Classification of Marketing This CTR corresponds to Figure 20-3 on p. 623 and relates to the discussion on p Immediate Satisfaction Low High Societal Marketing Societal Marketing holds that a company should make marketing decisions by considering consumer's wants, the company's requirements, and society's long-run interests. From this perspective, four types of products can be identified: Desirable Products. Desirable products give both immediate satisfaction and long term benefits. Pleasing Products. Pleasing products satisfy in the short term but may harm consumers. Salutary Products. Salutary products are good for consumers but have low present appeal. Deficient Products. Deficient products provide neither short term satisfaction nor long term benefits. Salutary Products Deficient Desirable Pleasing High Long-Run Consumer Benefit Low

Marketing Ethics Distributor Relations Product Advertising Development
This CTR relates to the material on pp Instructor’s Note: This material provides additional extra-textual information on Marketing Ethics for in-class discussion. Marketing Ethics Customer Service Pricing Distributor Relations General Code Product Development Advertising Standards Corporate Marketing Ethics Policies Marketing Ethics Distributor Relations. A comprehensive implementation of marketing ethics should include policies and guidelines for defining the company's relationship with distributors. Ethical standards help build trust and confidence in the channel and can be an asset in tough economic times. Advertising Standards. When considered in light of increasing activism among consumer groups to regulate advertising, marketers have a unique opportunity to proactively address the needs for strong advertising ethical standards. While protecting free speech, marketers could adopt a statement on ethics in advertising that promotes accurate information exchange, encourages creative and innovative message generation. Advertising ethics could go further by denouncing exploitation of women as objects in ads, minorities as stereotypically inferior to whites, and violence as problem-solving or socially acceptable. Without legal regulation, marketers could publicly promise to cease using advertisers who fail to meet the standards. With marketers in the vanguard of ethics improvement of advertising, companies could rightfully claim to be protecting and furthering societal interests. Customer Service . How to respond to customers and how to treat them while responding says a lot about a company. Customer ethics might be posted or mailed to customers to encourage all employees to live up to a standard known to the customer before the sale. General Code of Ethics. A clear statement on corporate marketing policies can provide broad guidelines that everyone in the organization must follow. Pricing. Ethics can influence strategic decisions on such pricing decisions as market penetration versus market skimming. Product Development. This area may be influenced by ethical codes seeking more desirable products or changes is salutary product concepts to make them more desirable.

Principles For Public Policy Toward Marketing
Consumer and Producer Freedom Principles for Public Policy Toward Marketing This CTR relates to the material on pp Principles For Public Policy Toward Marketing Curbing Potential Harm Meeting Basic Needs Economic Efficiency Toward a Public Policy for Marketing The Principle of Consumer and Producer Freedom. When consumer and producer freedom drive the marketplace, needs are met more efficiently and profitably than under any other system. Consumer and producer freedom has lead to the highest standard of living in history. The Principle of Curbing Potential Harm. Political intervention is warranted if and when a transaction or potential transaction creates harm to either party or any third party. The Principle of Meeting Basic Needs. The marketing system should serve disadvantaged consumers as well as affluent ones. The marketing system should work to solve problems created when large groups lack purchasing power. The Principle of Economic Efficiency. This principle is essentially “enlightened self-interest.” Producers are motivated to cut costs and raise quality to meet the needs of value-seeking consumers. The Principle of Innovation. Authentic innovation is the most reliable source of long-term profits and business success. The marketing system encourages innovation by constantly monitoring consumer expectations and needs. The Principle of Consumer Education and Information. An effective marketing system invests heavily in consumer education and information to increase long-run consumer satisfaction and welfare. The Principle of Consumer Protection. Modern products are so complex that consumers need help in understanding them. Companies have a vested interest in protecting their customers. Key Principles for a Public Policy Toward Marketing Innovation Consumer Education Consumer Protection

PRINCIPLES OF MARKETING Philip Kotler and Gary Armstrong

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PRINCIPLES OF MARKETING Philip Kotler and Gary Armstrong

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Presentation on theme: "PRINCIPLES OF MARKETING Philip Kotler and Gary Armstrong"— Presentation transcript:

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