MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE

MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE
1 Marketing in the New Economy

Challenges and Opportunities In the New Economy
Power Shift to Customers Massive Increase in Product Selection Changing Value Propositions Shifting Demand Patterns New Sources of Competitive Advantage Privacy, Security, and Ethical Concerns

Discussion Question The fact that customers have more power is one of the major shifts taking place in the new economy. In what ways have you personally experienced this shift in power? Is this shift uniform across all industries and markets? How so?

The Children’s Online Privacy Protection Act (COPPA)
Protects the privacy of children under 13 Five Privacy Criteria: Placement of Notice Full Disclosure Parental Control Reasonable Necessity Security Exhibit 1.1

Basic Marketing Concepts
Marketing (AMA definition): “…the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.”

Basic Marketing Concepts
A collection of buyers and sellers Marketspace: Electronic marketplaces that are not bound by time or space Metamarket: A cluster of closely related goods and services that center around a specific consumption activity Metamediary: Provides a single access point where buyers can locate and contact many different sellers in the metamarket

Common Metamarkets and Participants
Exhibit 1.2

Example of a Metamediary

What is Exchange? Exchange: Five Conditions for Exchange:
Process of obtaining something of value by offering something in return Five Conditions for Exchange: (1) There must be at least two parties to the exchange. (2) Each party has something of value to the other party. (3) Each party must be capable of communication and delivery. (4) Each party must be free to accept or reject the exchange. (5) Each party believes it is desirable to exchange with the other party.

What is a Product? Product: Examples:
Something that can be acquired via exchange to satisfy a need or a want. Examples: Goods People -Services -Places Ideas -Experiences and Events Information -Real or Financial Property -Digital Products Organizations

The Concept of Utility Utility: Four Types of Utility:
Ability of a product to satisfy a customer’s desires. Four Types of Utility: (1) Form Utility (2) Time Utility (3) Place Utility (4) Possession Utility

Discussion Question Through exchange, marketing creates four different types of utility for customers. Is it possible to excel in all four types of utility? Explain why or why not and give examples.

Major Marketing Activities and Decisions (1 of 4)
Strategic Planning Strategy Tactical Planning Research and Analysis Internal Analysis Competitive Intelligence Environmental Scanning Situation Analysis

Developing Goals and Objectives SWOT Analysis Developing and Maintaining Customer Relationships Transactional Marketing Relationship Marketing Marketing Strategy Decisions Competitive Advantage

Characteristics of Transactional and Relationship Marketing
Exhibit 1.3

Market Segmentation and Target Marketing Market Segmentation Target Markets Product Decisions Product Positioning Pricing Decisions Leads to revenue and profit Directly connected to customer demand Easy to change Major quality cue for customers

Distribution and Supply Chain Decisions Distribution and Supply Chain Management Supply Chain Promotion Decisions Integrated Marketing Communications (IMC) Implementation and Control Marketing Implementation Social Responsibility and Ethics Social Responsibility Marketing Ethics

Corporate Culture Matters

Taking On the Challenges of Marketing Strategy (1 of 2)
Unending Change Customers change, competitors change, and marketing organizations change Evolution of Marketing and Business Practices in Society Increasing Demands of Customers Overall Decline in Brand Loyalty of Customers Increasing Price Sensitivity Among Customers Increasing Customer Cynicism about Business and Marketing Activities

Discussion Question How concerned are you about privacy and security in the new economy? How have businesses responded to these concerns? Which is safer and more secure: online transactions or face-to-face transactions? Explain.

American Customer Satisfaction Index
Exhibit 1.4

Taking On the Challenges of Marketing Strategy (2 of 2)
Competing in Mature Markets Little Real Differentiation Among Product Offerings Increasing Expansion into Foreign Markets Increasing Numbers and Strength of Foreign Competitors Aggressive Cost-Cutting Measures in Order to Increase Competitiveness Increasing Cooperation with Supply-Chain Partners and Competitors

Marketing Strategy in Action
Increasing expansion into foreign markets is becoming a necessity to compete in the global marketplace. What kinds of opportunities and threats are presented by the increasing global nature of the marketplace?

2 Strategic Marketing Planning

The Strategic Planning Process
Marketing Plan “…a written document that provides the blueprint or outline of the organization’s marketing activities, including the implementation, evaluation, and control of those activities.”

Discussion Question What role, if any, should customers play in the strategic planning process? Should they have a voice in developing the organizational mission, marketing goals, or the marketing strategy?

Exhibit 2.1

Organizational Mission vs. Organizational Vision (1 of 2)
Elements of the Mission Statement Five basic questions to be answered: Who are we? Who are our customers? What is our operating philosophy? What are our core competencies or competitive advantages? What are our concerns and interests related to our employees, our community, society in general and our environment?

Organizational Mission vs. Organizational Vision (2 of 2)
Mission Width and Stability Width: Too broad or too narrow? Stability: Frequency of modifications Customer-Focused Mission Statements Ben and Jerry’s 3-part Mission Statement Product Mission Economic Mission Social Mission Tylenol

As this 1946 ad demonstrates, railways were once a prominent way to travel across the country. How did narrow mission statements lead to missed opportunities for the railroad industry?

Ben & Jerry’s 3 Part Mission

Corporate or Business-Unit Strategy
The central means for: Utilizing and integrating the organization’s resources Carrying out the organization’s mission Achieving the organization’s desired goals and objectives Associated with developing a competitive advantage Determines the nature and future direction of each business unit Essentially the same as corporate strategy in small businesses

Functional Goals and Objectives
All business functions must support the organization’s mission and goals. Functional objectives should be expressed in clear, simple terms. All functional objectives should be reconsidered for each planning period.

Functional Strategy Functional strategies are designed to integrate efforts focused on achieving the area’s stated objectives. The strategy must: (1) Fit the needs and purposes of the functional area (2) Be realistic with the organization’s resources and environment (3) Be consistent with the organization’s mission goals, and objectives. The effects of each functional strategy must be evaluated.

Implementation Involves activities that execute the functional strategy. Functional plans have two target markets: (1) External market (2) Internal market A company must rely on its internal market for a functional strategy to be implemented successfully.

Discussion Question Defend or contradict this statement: Developing marketing strategy is more important than implementing marketing strategy because if the strategy is flawed, it doesn’t matter how well it is implemented.

Evaluation and Control
Designed to keep activities on target with goals and objectives Coordination among functional areas is a critical issue Open lines of communication is the key Evaluation and control is both an ending and beginning: Occurs after a strategy has been implemented Serves as the beginning point for planning in the next cycle

The Marketing Plan Detailed formulation of the actions needed to carry out the marketing program An action document: The handbook for marketing implementation, evaluation and control Not the same as a business plan Requires a great deal of information from many different sources

Marketing Plan Structure (1 of 5)
Should be well organized A good marketing plan outline is: Comprehensive Flexible Consistent Logical

Marketing Plan Structure
Exhibit 2.3

I. Executive Summary Synopsis of the overall marketing plan Introduces major aspects of the marketing plan II. Situation Analysis Summarizes information about 3 key environments: Internal environment Customer environment Firm’s external environment

III. SWOT Analysis Strengths Weaknesses Opportunities Threats Analysis of the SWOT matrix Establishing a strategic focus

IV. Marketing Goals and Objectives: Formal statements of desired and expected outcomes of the marketing plan Goals: Broad, simple statements of what is to be accomplished Objectives More specific and essential to planning V. Marketing Strategy: Primary target market and marketing mix Secondary target market and marketing mix

VI. Marketing Implementation 1. What specific marketing activities will be undertaken? 2. How will these activities be performed? 3. When will these activities be performed? 4. Who is responsible for the completion of these activities? 5. How will the completion of planned activities be monitored? 6. How much will these activities cost? VII. Evaluation and Control Formal marketing control Informal marketing control Financial assessments

Using the Marketing Plan Structure
Tips for using the marketing plan framework to develop a marketing plan: Plan ahead Revise, revise, revise Be creative Use common sense and judgment Think ahead to implementation Update regularly Communicate with others

Purposes and Significance of the Marketing Plan
A good marketing plan will: (1) Explain both the present and future situations of the organization (2) Specify the outcomes that are expected (3) Describe the specific actions that are to take place (4) Identify the resources that will be needed (5) Permit the monitoring of each action and its results Communicating the strategy to top executives is paramount.

Organizational Aspects of the Marketing Plan
Top managers ask two questions: (1) Will the marketing plan achieve the desired goals and objectives? (2) Are there alternative uses of resources that would better meet objectives? The marketing plan is most often prepared by the Marketing Director or VP of Marketing The final approval lies with the President, Chairman or CEO

Major Problems in Developing and Implementing the Marketing Plan
Exhibit 2.4

Apple’s Changing Strategic Focus

Strategic Planning in the Market-Oriented Organization
A Market-Oriented Organization: Shifts its focus: From products to the requirements of market segments From transactions to relationships From competition to collaboration Puts customer’s needs and wants first Focuses on long-term, value-added relationships Instills a corporate culture that puts customers at the top of the organizational hierarchy Cooperates with suppliers and competitors to serve customers better

Traditional Organizations
Customers Frontline Employees Middle Managers CEO Competition Exhibit 2.5 – Part One

Market-Oriented Organizations
Customers Frontline Employees Middle Managers CEO Cooperation Exhibit 2.5 – Part Two

Discussion Question In many organizations marketing is not given a place of importance in the organizational hierarchy. Why do you think this happens? What other business functions get more importance? Why?

3 MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE
Situation Analysis Collecting and Analyzing Marketing Information

Issues to be Considered in a Situation Analysis
Exhibit 3.1

Conducting a Situation Analysis (1 of 2)
Analysis Alone is Not the Solution Data and Information are Not the Same Data: A collection of numbers or facts that have the potential to inform Information: Data that has been transformed or combined with other data in a manner that makes it useful to decision makers

Conducting a Situation Analysis (2 of 2)
The Benefits of Analysis Must Outweigh the Costs Conducting a Situation Analysis is a Challenging Exercise One of the most difficult parts of the marketing plan Should provide a complete picture of three key environments: (1) Internal, (2) Customer, and (3) External

The Relationships Among Environments in a Situation Analysis
Internal Environment Customer Environment Culture Competition Economy Politics Legal Technology Exhibit 3.2

Discussion Question Of the three major environments in a situation analysis (internal, customer, external), which do you think is the most important in a general sense? Why? What are some situations that would make one environment more important than others?

The Internal Environment (1 of 2)
Review of Current Objectives, Strategy and Performance An important input to later stages in the planning process Poor or declining performance must be the result of: (1) Goals or objectives that are inconsistent with customer or external environments (2) Flawed marketing strategy (3) Poor implementation (4) Changes in the customer or external environment beyond the control of the firm

The Internal Environment (2 of 2)
Availability of Resources Includes review of financial, human and experience resources as well as resources from key relationships Financial resources tend to get most attention Labor shortages are expected to be a major problem in the coming years Organizational Culture and Structure Problems can arise when marketing does not hold a prominent position in the political hierarchy Culture and structure are relatively stable but can be affected by mergers

Mergers Affect Corporate Culture

The Customer Environment
Who are our Current and Potential Customers? What do our Customers do with our Products? Where do Customers Purchase our Products? When do Customers Purchase our Products? Why (and How) do Customers Select our Products? Why do Potential Customers not Purchase our Products?

The External Environment (1 of 2)
Competition (1) Brand competitors (2) Product competitors (3) Generic competitors (4) Total budget competitors

Major Types of Competition
Exhibit 3.6

Discussion Question Do you think brand competitors are always the most important type of competition? How would economic conditions affect the importance of brand competitors? In bad economic times, would total budget competitors become more important? Why or why not?

Stages of Competitive Analysis
(1) Identify all current and potential competitors. (2) Assess each key competitor. (3) Assess each key competitor’s strengths and weaknesses. (4) Focus the analysis on each key competitor’s marketing capabilities. (5) Estimate each key competitor’s most likely strategies and responses under different environmental situations.

The External Environment (2 of 2)
Economic Growth and Stability Political Trends Legal and Regulatory Issues Technological Advancements Sociocultural Trends Demographic Trends Lifestyle Trends Trends in Cultural Values

Examples of Trends in the Sociocultural Environment
Demographic Trends Aging of the American population Increasing population diversity Population growth in the Sun Belt states Lifestyle Trends Clothing has become more casual, especially at work Growing focus on health and nutrition Time spent watching television has declined Trends in Cultural Values Less focus on “me-oriented” values Increasing importance of family and children Greater focus on ethics and social responsibility From Exhibit 3.7

This 1977 ad for a Technics turntable discusses its advanced technology. In less than a decade the compact disc would render devices for playing vinyl records obsolete. How does this illustrate the importance of being aware of the technological environment? How can companies like Panasonic prepare for the possible obsolescence of products that are currently state-of-the-art?

Collecting Environmental Data and Information (1 of 2)
Secondary Information Sources Internal Data Sources Government Sources Periodicals/Book Sources Commercial (Fee-Based) Sources

Government Sources of Secondary Data

Collecting Environmental Data and Information (2 of 2)
Primary Data Collection Direct Observation Focus Groups Surveys Experiments Overcoming Problems in Data Collection

Discussion Question Do you think the Internet has made it easier or more difficult to collect data and information? Why? How might the major data collection issues of today compare to the issues that occurred in the pre-Internet era?

4 MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE SWOT Analysis
A Framework for Developing Marketing Strategy

SWOT Analysis “A widely used framework for organizing and utilizing the pieces of data and information gained from the situation analysis…” Encompasses both internal and external environments One of the most effective tools in the analysis of environmental data and information

Effectiveness of Analysis Tools
Exhibit 4.1

Major Benefits of SWOT Analysis
Simplicity Lower Costs Flexibility Integration and Synthesis Collaboration From Exhibit 4.2

Directives for a Productive SWOT Analysis
Stay Focused Search Extensively for Competitors Collaborate with other Functional Areas Examine Issues from the Customers’ Perspective Look for Causes, Not Characteristics Separate Internal Issues from External Issues From Exhibit 4.3

Stay Focused It is a mistake to complete one generic SWOT analysis for the entire organization or business unit. When we say SWOT analysis, we mean SWOT analyses.

Search Extensively for Competitors
Information on competitors is an important aspect of a SWOT analysis. Look for all four types of competition: Brand competitors Product competitors Generic competitors Total budget competitors

This 2002 ad for Fruitopia, a fruit drink by the makers of Coke, shows that even the soft drink giants have had to respond to other sources of competition than traditional brand competitors. Can you think of other products that illustrate the effects of competition other than the effects of brand competitors?

Collaborate with Other Functional Areas
Information generated from the SWOT analysis can be shared across functional areas. SWOT analysis can generate communication between managers that ordinarily would not communicate. Creates and environment for creativity and innovation.

Examine Issues from the Customers’ Perspective
To do this, the analyst should ask: What do customers (and non-customers) believe about us as a company? What do customers (and non-customers) think of our product quality, customer service, price, overall value, convenience, and promotional messages in comparison to our competitors? What is the relative importance of these issues as customers see them? Taking the customers’ perspective is the cornerstone of a well done SWOT analysis.

Look for Causes, Not Characteristics
Causes for each issue in a SWOT analysis can often be found in the firm’s and competitors’ resources. Major types of resources: Financial -Organizational -Intellectual -Informational Legal -Relational Human -Reputational

Separate Internal from External Issues
Failure to understand the difference between internal and external issues is one of the major reasons for a poorly conducted SWOT analysis. Socratic Advice: “Know thyself” “Know thy customer” “Know thy competitors” “Know thy environment”

Discussion Question Why are industries and firms often so reluctant to adapt to changes in their external environments? Other than the music recording industry, what other industries or firms seem to be slow to change? Why?

The Elements of a SWOT Analysis
Strengths and Weaknesses Scale and Cost Economies Size and Financial Resources Intellectual, Legal, and Reputational Resources Opportunities and Threats Trends in the Competitive Environment Trends in the Technological Environment Trends in the Sociocultural Environment

The Starbucks Experience

SWOT-Driven Strategic Planning
Four issues the marketing manager must recognize: (1) The assessment of strengths and weakness should look beyond products and resources to examine processes that meet customer needs. Offer solutions to customer problems instead of specific products. (2) Achieving goals and objectives depends on transforming strengths into capabilities by matching them with opportunities. (3) Weaknesses can be converted into strengths with strategic investment. Threats can be converted into opportunities with the right resources. (4) Weaknesses that cannot be converted become limitations which must be minimized if obvious or meaningful to customers.

Analysis of the SWOT Matrix
A four-cell array used to categorize information at the conclusion of a SWOT analysis. Should be based on customer perceptions, not the perceptions of the analyst. Elements with the highest total ratings should have the greatest influence in marketing strategy. Focus on competitive advantages by matching strengths with opportunities.

The SWOT Matrix Exhibit 4.6

Quantitative Assessment of Elements Within the SWOT Matrix
Exhibit 4.7

Discussion Question Strengths, weaknesses, opportunities, and threats: Which is the most important? Why? How might your response change if you were the CEO of a corporation? What if you were a customer of the firm? An employee? A supplier?

Leveraging Competitive Advantages
Competitive advantages can arise from many external or internal sources. Competitive advantages refer to real differences between competing firms. Three basic strategies for competitive advantage: (1) Operational Excellence (2) Product Leadership (3) Customer Intimacy

Common Sources of Competitive Advantage
· Relational Advantages · Product Advantages · Legal Advantages · Pricing Advantages · Organizational Advantages · Promotion Advantages · Human Resources Advantages · Distribution Advantages From Exhibit 4.8

Discussion Question Support or contradict this statement: “Given the realities of the new economy and the rapid changes occurring in business technology, all competitive advantages are short lived. There is no such thing as a sustainable competitive advantage that lasts over the long term.” Defend your position.

Establishing a Strategic Focus
Four major directions for strategic efforts: Aggressive (many internal strengths / many external opportunities) Diversification (many internal strengths / many external threats) Turnaround (many internal weaknesses / many external opportunities) Defensive (many internal weaknesses / many external threats) These are the most common, but other combinations of strengths and weaknesses are possible.

Strategic Turnaround at Chrysler

Developing Marketing Goals and Objectives
Attainability Consistency Comprehensiveness Intangibility Developing Marketing Objectives Continuity Time Frame Assignment of Responsibility Moving Beyond Goals and Objectives

2003 Baldrige Award Criteria for Performance Excellence
Exhibit 4.10

5 Managing Customer Relationships

Understanding Customer Behavior
The Consumer Buying Process: Depicts the possible range of activities that may occur in making purchase decisions Involves considering which product to buy AND considering where to buy it Choice of a suitable merchant may take precedence over the choice of a specific product

The Consumer Buying Process
Exhibit 5.1

Need Recognition Need: Want: Demand:
Occurs when the consumer’s current level of satisfaction does not equal their desired level of satisfaction. Want: A consumer’s desire for a specific product that will satisfy the need. Demand: When the want for a specific product is backed up by the customer’s ability and willingness to pay for the product.

Targeting Consumer Wants - Sportiness

Discussion Question Many people criticize marketing as being manipulative based on the argument that marketing activities create needs where none previously existed. Marketers that are often implicated include the makers of SUVs, tobacco products, diet programs, exercise equipment, and luxury products. Also, any marketer that targets children or the elderly is often seen as manipulative. Are consumers being manipulated into believing that they need certain products, or are marketers creating products that fulfill previously unmet needs? Explain.

Information Search (1 of 2)
Marketing stimuli can stimulate a desire for information: Passive Information Search Active Information Search Sources of information: Internal Sources Personal Sources External Sources

Information Search (2 of 2)
Time, effort and expense dedicated to information search depends on: Degree of risk involved in the purchase Financial risk Social risk Emotional risk Personal risk Amount of expertise with the product category Actual cost of the search Evoked set: A narrowed down set of alternatives that the customer is considering

Evaluation of Alternatives
Customers evaluate products as bundles of attributes Brand attributes Product features Aesthetic attributes Price Customers place different levels of importance on attributes Important considerations in the evaluation stage: Products must be in the evoked set Consumers’ choice criteria must be understood Marketing programs must be designed to influence consumers’ opinions about product or brand image

Purchase Decision Purchase intention and the act of buying are distinct concepts Potential intervening factors between intention and buying (car example): Unforeseen circumstances Angered by the salesperson or sales manager Unable to obtain financing Customer changes mind Key issues in the purchase decision stage: Product availability Possession utility

Postpurchase Evaluation
Four possible outcomes in the postpurchase stage: (1) Delight (2) Satisfaction (3) Dissatisfaction (4) Cognitive Dissonance Cognitive dissonance is more likely to occur when: Dollar value of the purchase increases Opportunity cost of rejected alternatives is high Purchase decision is very involving or emotional Firm’s ability to manage dissatisfaction and cognitive dissonance is: A key to creating customer satisfaction A major influence on word-of-mouth communication

Factors Affecting the Consumer Buying Process
Decision-Making Complexity High/Low Complexity Individual Differences Demographics, perceptions, motives, interests, attitudes, opinions, lifestyles, etc. Social Influences Culture, subculture, social class, reference groups, opinion leaders, etc. Situational Influences

Common Situational Influences
Exhibit 5.2

Understanding Business Buying Behavior
Four types of Business Markets: Producer markets (a.k.a. commercial markets) Reseller markets Government markets Institutional markets Unique Characteristics of Business Markets The Buying Center Hard and Soft Costs Reciprocity Mutual Dependence

The Business Buying Process
(1) Problem Recognition (2) Develop Product Specifications (3) Vendor Identification and Qualification (4) Solicitation of Proposals or Bids (5) Vendor Selection (6) Order Processing (7) Vendor Performance Review

Managing Customer Relationships
Customer Relationship Management (CRM): “A holistic process of identifying, attracting, differentiating, and retaining customers.” CRM Stakeholders: Employees Supply Chain Partners Lateral Partners Customers

Strategic Shift from Acquiring Customers to Maintaining Clients
Exhibit 5.3

Discussion Question One of the common uses of CRM in consumer markets is to rank customers on profitability or lifetime value measures. Highly profitable customers get special attention, while unprofitable customers get poor service or often “fired.” What are the ethical and social issues involved in these practices? Could CRM be misused? How and why?

Developing Relationships in Consumer Markets
Increase share of customer rather than market share Serve current customers rather than focus on acquiring new customers The 80/20 Rule: 20% of the customers provide 80% of the profit

Stages of Customer Relationship Development
Exhibit 5.4

“The Relationship People”

Developing Relationships in Business Markets
Relationships must be built on win-win strategies Changes in business relationships: A change in buyers’ and sellers’ roles An increase in sole sourcing An increase in global sourcing An increase in team-based buying decisions An increase in productivity through better integration

Quality and Value: (1 of 2) The Keys to Developing Customer Relationships
Understanding the Role of Quality The core product is not enough Supplemental products are critical Delivering Superior Quality (four issues) Understand customers’ expectations, needs, and wants Translate customer research into specifications for quality Deliver on specifications Promise only what can be delivered

Components of the Total Product Offering
Exhibit 5.5

This Mercedes ad illustrates the power of the Mercedes brand in making its products instant classics. What other name brands can you think of that exude quality? What separates these firms from other companies making similar products?

Quality and Value: (2 of 2) The Keys to Developing Customer Relationships
Understanding the Role of Value A simple formula for value: A more useful formula for value: Core Product, Supplemental Product, and Experiential Quality Monetary and Nonmonetary Costs Competing on Value

Customer Satisfaction: Retaining Customers Over the Long Term
Satisfaction vs. Quality vs. Value Expectations Customer Satisfaction and Customer Retention Understand what can go wrong Focus on controllable issues Manage customer expectations Offer satisfaction guarantees Make it easy for customers to complain Create loyalty programs Make customer satisfaction measurement an ongoing priority

Examples of Customer Satisfaction Guarantees
Exhibit 5.7

Customer Satisfaction Metrics
Lifetime Value of a Customer (LTV) Average Order Value (AOV) Customer Acquisition/Retention Costs Customer Conversion Rate Customer Retention Rate Customer Attrition Rate Customer Recovery Rate Referrals Viral Marketing

Discussion Question Why do you think many firms do such a poor job of understanding the needs, wants, and expectations of their customers? Do they buy into the “better mousetrap” philosophy and believe that quality is the only necessary requirement of maintaining customer relationships? Explain.

Market Segmentation, Target Marketing, and Positioning

Market Segmentation Strategies (1 of 2)
Traditional Approaches to Market Segmentation Mass Marketing Differentiated Marketing Multisegment Approach Market Concentration Approach Niche Marketing

Mass Marketing Strategy
From Exhibit 6.1 (1 of 4)

Multisegment Strategy

Market Concentration Strategy

Niche Marketing Strategy

Discussion Question Can you think of a product that could be marketed effectively using a mass marketing approach? If so, explain and justify your answer. If not, what types of changes would have to be made to the product to make it appropriate for a mass marketing approach?

Multisegment Approach

Market Segmentation Strategies (2 of 2)
Emerging Approaches to Segmentation One-to-One Marketing Mass Customization Permission Marketing Criteria for Successful Segmentation Identifiable and Measurable Substantial Accessible Responsive Viable

Discussion Question Many consumers and consumer advocates are critical of the one-to-one marketing approach due to personal privacy concerns. Marketers counter that one-to-one marketing can lead to privacy abuses, but that the benefits to both consumers and marketers far outweigh the risks. Where do you stand on this issue? Why?

Bases for Segmenting Consumer Markets
Behavioral Segmentation Segments based on actual behavior or product usage Demographic Segmentation Segments based on demographic factors (e.g., gender, age, income, education, etc.) Psychographic Segmentation Segments based on state-of-mind issues (e.g., motives, attitudes, opinions, values, lifestyles, interests, personality, etc.) Geographic Segmentation Segments based on geographic location

Demographic segmentation strategies, such as the one utilized in this Virginia Slims advertising campaign, are common because their ease of use and measurement. What are the limitations of demographic segmentation? What can marketers do to compensate for these limitations?

Benefit Segmentation of the Snack Food Market
Exhibit 6.4

Discussion Question What are some of the ethical and legal issues involved in targeting sensitive groups such as children and seniors?

Bases for Segmenting Business Markets
Type of Organization Organizational Characteristics Benefits Sought or Buying Processes Personal and Psychological Relationship Intensity

Target Marketing Strategies
Five basic strategies for target market selection: (1) Single Segment Targeting (2) Selective Targeting (3) Mass Market Targeting (4) Product Specialization (5) Market Specialization

Basic Target Marketing Strategies
Exhibit 6.6

Differentiation and Positioning (1 of 2)
Relative perception Process of creating favorable relative position: (1) Identification of target market (2) Determination of needs, wants, preferences and benefits desired (3) Examination of competitors’ characteristics and positioning (4) Comparison of product offerings with competitors (5) Identification of unique position (6) Development of a marketing program (7) Continual reassessment

Differentiation and Positioning (2 of 2)
Differentiation Strategies Product Descriptors Product features Advantages Benefits Customer Support Services Image Positioning Strategies Strengthen the Current Position Repositioning Reposition the Competition

Using Product Descriptors for Product Differentiation
Exhibit 6.7

7 Product Strategy

Product Classification (1 of 3)
Consumer Product Classifications Convenience Products Shopping Products Specialty Products Unsought Products (1) Products of which consumers are unaware (2) Products that consumers do not consider purchasing until a need or emergency arises

Specialty Products

Business Product Classifications Raw Materials Component Parts Process Materials MRO Supplies Accessory Equipment Installations Business Services

Product Lines and Mixes Product Line Product Mix Benefits of offering a wide variety and deep assortment of products: Economies of Scale Package Uniformity Standardization Sales and Distribution Efficiency Equivalent Quality Beliefs

Product Lines and Product Mixes at Gillette
Exhibit 7.1

Discussion Question Consider the number of product choices that are available in the U.S. consumer market. In virtually every product category, consumers have many, many options to fulfill their needs. Are all of these options really necessary? Is having this many choices a good thing for consumers? Why or why not?

New Product Development
Six strategic product development options: (1) New-to-the-world products (discontinuous innovations) (2) New product lines (3) Product line extensions (4) Improvements or revisions of existing products (5) Repositioning (6) Cost reductions Customer perception of differentiation is critical

Avis: “We Try Harder”

Product Strategy Throughout the Life Cycle
Development Stage Introduction Stage Growth Stage Maturity Stage Decline Stage

Stages of the Product Life Cycle
Exhibit 7.2

Marketing Strategy During the Product Life Cycle
Exhibit 7.3

Development Stage No sales revenue during this stage
Components of the product concept: An understanding of desired uses and benefits A description of the product The potential for creating a complete product line An analysis of the feasibility of the product concept Customer needs should be discerned before developing marketing strategy

Introduction Stage Begins when development is complete
Ends when customers widely accept the product Marketing strategy goals during this stage: Attract customers by raising awareness and interest Induce customers to try and buy Engage in customer education activities Strengthen or expand channel and supply relationships Build on availability and visibility Set pricing objectives

Growth Stage (1 of 2) Be ready for sustained sales increases
Rapid increase in profitability early in the growth stage that decreases at the end of this stage Length depends on nature of product and competitive reactions Two strategies: (1) Establish a strong, defensible marketing position (2) Achieve financial objectives

Growth Stage (2 of 2) Marketing strategy goals in this stage:
Leverage the product’s perceived differential advantages Establish a clear product and brand identity Create unique positioning Maintain control over product quality Maximize availability of the product Maintain or enhance the product’s profitability to partners Find the ideal balance between price and demand Keep an eye focused on the competition

Maturity Stage (1 of 2) Few, if any, new firms will enter the market
Still an opportunity for new product features and variations Typically the longest stage in the product life cycle

Maturity Stage (2 of 2) Four general goals in this stage:
(1) Generate Cash Flow (2) Hold Market Share (3) Steal Market Share (4) Increase Share of Customer Four options to achieve these goals: (1) Develop a new product image (2) Find and attract new users to the product (3) Discover new applications for the product (4) Apply new technology to the product

Decline Stage Two options: Factors to be considered during this stage:
(1) Attempt to postpone the decline (2) Accept its inevitability Harvesting Divesting Factors to be considered during this stage: Market segment potential The market position of the product The firm’s price and cost structure The rate of market deterioration

Ford has been creative in restyling the 2005 Mustang with retro styling cues to keep the model viable despite decreasing interest in “muscle cars.” What other ways can marketers combat the inevitability of the decline stage of the product life cycle?

Discussion Question Describe the different product decisions that impact each phase of the product life cycle. If you were losing money with a product in the decline stage, why might you consider retaining that product? Why would a firm or brand manager become sentimental about a product and hold on to it even in the face of monetary losses?

Branding Strategy Key Issues In Branding Packaging and Labeling
Brand Loyalty Brand Equity Brand Alliances Packaging and Labeling Packaging Protection, storage, convenience, etc. Labeling The Nutritional Labeling and Education Act of 1990 Food Choking Prevention Act

Advantages of Branding
Exhibit 7.4

The World’s Twenty-Five Most Valuable Brands
Exhibit 7.5

Product Strategy for Services
Characteristics of Services Marketing Strategy for Services Product Issues Pricing Services Promoting Service Benefits Distributing Services

Unique Characteristics of Services and Resulting Marketing Challenges
Exhibit 7.6

Discussion Question Given the unique characteristics of services, what potential ethical issues could arise in service marketing and delivery? How can a service marketer prevent ethical challenges and convey a sense of trust to customers?

8 Pricing Strategy

The Role of Pricing in Marketing Strategy (1 of 2)
The Seller’s Perspective on Pricing Four key issues: (1) Costs (2) Demand (3) Customer value (4) Competitors’ prices The Buyer’s Perspective on Pricing Two key issues: (1) Perceived value (2) Price sensitivity

The Role of Pricing in Marketing Strategy (2 of 2)
A Shift in the Balance of Power Buyer’s market Large number of sellers in the market Many substitutes for the product Economy is weak Seller’s market Products are in short supply High demand Economy is strong The Relationship Between Price and Revenue Myth #1: When business is good, a price cut will increase market share. Myth #2: When business is bad, a price cut will stimulate sales.

Major Determinants of Pricing Strategy
Pricing Objectives Supply and Demand The Firm’s Cost Structure Competition and Industry Structure Four basic competitive market structures: Pure Competition Monopolistic Competition Oligopoly Monopoly Stage of the Product Life Cycle Other Elements of the Marketing Mix

Regulated Utilities as Monopolies

Description of Common Pricing Objectives
Exhibit 8.1

Pricing Strategy Over the Product Life Cycle
Exhibit 8.2

Price Elasticity of Demand (1 of 2)
Formula for calculating price elasticity: Situations That Increase Price Sensitivity Availability of product substitutes Higher total expenditure Noticeable differences Easy price comparison

Price Elasticity of Demand
Exhibit 8.3

Price Elasticity of Demand (2 of 2)
Situations That Decrease Price Sensitivity Real or perceived necessities Lack of product substitutes Complementary products Product differentiation Perceived product benefits Situational influences Price Elasticity and Yield Management Allows simultaneous control of capacity and demand Control capacity by limiting available capacity at certain price points Control demand through price changes and overbooking capacity

Yield Management for a Hypothetical Model
Exhibit 8.4

Discussion Question Discuss the variety of situational factors that could come into play and impact elasticity in the purchase of each of the following products: a) sporting event or concert tickets, b) staple goods such as milk, eggs, or bread, c) an electric razor, d) eye surgery to improve vision.

Pricing Strategies (1 of 2)
Base Pricing Strategies Price Skimming Penetration Pricing Prestige Pricing Value-Based Pricing (EDLP) Competitive Matching Non-Price Strategies Adjusting Prices in Consumer Markets Promotional Discounting Reference Pricing Odd-Even Pricing Price Bundling

Chrysler’s price skimming strategy for the Pacifica model has not been successful in attracting customers. Why do you think the $40,000 price tag has not been successful for the Pacifica? What do you think Chrysler should do in rethinking its pricing strategy for this model?

Price Bundling

Pricing Strategies (2 of 2)
Adjusting Prices in Business Markets Pricing techniques unique to business markets: Trade discounts Discounts and allowances Geographic pricing Transfer pricing Barter and countertrade Price discrimination

Fixed vs. Negotiated Pricing
Three pricing levels in a negotiated price situation: (1) Opening position (2) Aspiration price (3) Limit Guidelines for making concessions: Avoid being the first side to make a concession Start with modest concessions and make them smaller as you proceed Avoid making concessions early in the negotiation Do not give up anything without something in return

Discussion Question If you were trying to sell your used car through the newspaper, what factors would determine how you might set your opening position, your aspiration price, and your limit during the negotiation process?

Major Online Auction Strategies
Exhibit 8.5

Legal and Ethical Issues in Pricing
Price Discrimination Price Fixing Predatory Pricing Deceptive Pricing

Discussion Question One of the key decisions that managers often make is to change prices that have been set inappropriately. What issues should be considered in deciding whether it is the price that is wrong, or whether the problem lies in another element of the marketing mix?

Distribution and Supply Chain Management

Distribution and Supply Chain Concepts
Marketing Channels “An organized system of marketing institutions through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user.” Physical Distribution “Coordinating the flow of information and products among members of the channel to ensure that products are available in the right places, in the right quantities, at the right times, and in a cost-efficient manner.”

Graphical Depiction of a Supply Chain
Exhibit 9.1

Marketing Channel Functions
Channel Function Specializations Sorting Breaking Bulk Maintaining Inventories Maintaining Convenient Locations Providing Services Channel Effectiveness and Efficiency Distribution Decision Criteria (1) Is the channel effective? (2) Is the channel efficient?

Discussion Question Some manufacturers and retailers advertise that customers should buy from them because they “eliminate the middleman.” Evaluate this comment in light of the functions that must be performed in a marketing channel. Does a channel with fewer members always deliver products to customers at lower prices? Defend your position.

Strategic Issues in Distribution and Supply Chain Management
Marketing Channel Structure Exclusive Distribution Selective Distribution Intensive Distribution Channel Integration (three key factors) Connectivity Community Collaboration Creating and Enhancing Value in the Supply Chain

Discussion Question Describe the characteristics of a product that represent something you would go to great lengths to acquire, thus supporting a manufacturer’s use of an exclusive distribution strategy. How much more knowledgeable are the salespeople at an exclusive distribution location versus those at an intensive distribution location? Why is this so?

Clinique cosmetics uses a selective distribution strategy as their primary marketing channel structure. What is the motivation for using this strategy for this type of product line? What are the apparent benefits that Clinique receives from this strategy?

Maximizing Profit Margin Performance
Exhibit 9.2

Conflict and Collaboration in the Supply Chain (1 of 2)
The Basis of Conflict in the Supply Chain Five basic sources of power: Legitimate Power Reward Power Coercive Power Information Power Referent Power

Factors in Successful Supply Chain Collaboration
Exhibit 9.3

Conflict and Collaboration in the Supply Chain (2 of 2)
Collaborative Supply Chains Category management must be: Customer driven Strategically driven Multifunctional Financially based Systems dependent Focused on immediate consumer response

Major Components of Category Management
Exhibit 9.4

Trends in Marketing Channels (1 of 2)
Advancing Technology Growth of Internet and e-commerce Radio frequency identification (RFID) Shifting Power in the Channel Discount mass merchandise retailers Wal-Mart, Kmart, and Target Category focused retailers (category killers) Toys “R” Us, Lowe’s, Office Depot, AutoZone, and Best Buy Outsourcing Channel Functions Outsourcing is growing rapidly

Category Killers - AutoZone

The Trend in Outsourcing
Exhibit 9.5

Trends in Marketing Channels (2 of 2)
The Growth of Direct Distribution and Nonstore Retailing Examples of Nonstore Channels Catalog and Direct Marketing Direct Selling E-Commerce Home Shopping Networks Vending Direct Response Advertising The Growth of Dual Distribution

Discussion Question What are the major differences you have experienced in buying a product through a physical retail store, a manufacturer’s physical store, a catalog, and an online merchant? What have some retailers in your area done to justify their ongoing presence in the channel?

Legal and Ethical Issues in the Supply Chain
Dual Distribution Exclusive Channel Arrangements Tying Arrangements Counterfeit Products

FDA Against Counterfeit Drugs

10 Integrated Marketing Communications

Integrated Marketing Communication
Integrated Marketing Communication (IMC) “…the strategic, coordinated use of promotional elements to ensure maximum persuasive impact on the firm’s current and potential customers.” Reasons that IMC is important: Fosters long-term relationships Reduces or eliminates promotional redundancies Technology allows better targeting of customers

Promotional Elements Used in IMC
Exhibit 10.1

Discussion Question How might the IMC strategy for a dot-com company differ from a traditional company? Would the dot-com company have an advantage or a disadvantage relative to its offline competitors? Explain your answer.

Strategic Issues in Integrated Marketing Communications
IMC must have clear promotional goals and objectives The AIDA Model Attention Interest Desire Action Promotional goals with respect to the supply chain Push or pull strategy?

Discussion Question Review the steps in the AIDA model. In what ways has promotion affected you in various stages of this model? Does promotion affect customers differently when the product is inexpensive versus when it is expensive? Explain your answer.

Promotion Strategy Over the Product Life Cycle
Exhibit 10.2

Advertising Types of Advertising Determining the Advertising Budget
Institutional advertising Advocacy advertising Product advertising Determining the Advertising Budget Objectives and task approach Percentage of sales approach Competitive matching approach Arbitrary approach

Focusing on Women’s Issues

The Dairy Board’s “Got Milk” campaign is a good example of successful pioneer advertising. How does this type of advertising benefit all sellers in the market? What is the primary goal of pioneer advertising?

Spending on National Advertising: 2003 Projections
Exhibit 10.3

Top Ten Fortune 500 Online Advertisers
Exhibit 10.4

Top Ten Web Properties Hosting Online Advertising
Exhibit 10.5

Evaluating Advertising Effectiveness
Methods Evaluating the achievement of advertising objectives Assessing the effectiveness of advertising copy, illustrations, and layouts Evaluating the effectiveness of various media Timing of Evaluation Pretest During campaign Posttest

Discussion Question How does the highly visible nature of advertising relate to the development of brand image? If all advertising for a well-known brand were to stop suddenly, would the image of the brand suffer? Why or why not?

Public Relations Public Relations Methods Negative Public Relations
News (or press) releases Investor relations - Feature articles - Employee relations White papers - Event sponsorship Press conferences - Product placement Lobbying

Degree of Customer Trust in Selected U.S. Industries
Exhibit 10.6

Degree of Customer Trust in Selected Corporations and Nonprofits
Exhibit 10.7

Personal Selling and Sales Management
The Sales Management Process Developing Sales Force Objectives Determining Sales Force Size Recruiting Salespeople Training the Sales Force Controlling and Evaluating the Sales Force The Impact of Technology on Personal Selling

Comparison of Sales Force Compensation Methods
Exhibit 10.8

Sales Promotion in Consumer Markets
Types of Sales Promotion to Consumers Coupons Rebates Samples Loyalty programs Point-of-purchase promotion Premiums Contests and sweepstakes

Coupons: Sales Promotion to Consumers

Sales Promotion in Business Markets
Sales Promotion Methods Unique to Business Markets Trade allowances Free merchandise Training assistance Cooperative advertising Selling incentives

Marketing Implementation and Control

Strategic Issues in Marketing Implementation (1 of 2)
The Link Between Strategic Planning and Implementation Interdependency Evolution Separation

Southwest: Improving Customer Service

Strategy and Implementation: A Two-Way Relationship
Exhibit 11.1

Discussion Question Forget for a moment that planning the marketing strategy is equally as important as implementing the marketing strategy. What arguments can you make for one being more important than the other? Explain your answers.

The Separation of Planning and Implementation
Exhibit 11.2

Strategic Issues in Marketing Implementation (2 of 2)
The Elements of Marketing Implementation Shared Goals and Values Marketing Structure Systems and Processes Resources People (Human Resources) Employee selection and training Employee evaluation and compensation policies Employee motivation, satisfaction and commitment Leadership

Home Depot Employees

The Elements of Marketing Implementation
Exhibit 11.3

Approaches to Marketing Implementation
Implementation By Command Implementation Through Change Implementation Through Consensus Implementation as Organizational Culture

Chrysler Corporation’s acquisition of Jeep/Eagle was a critical step in the process of rebuilding Chrysler. How can an implementation through change strategy alter the success of a company? Can you think of other mergers/acquisitions that improved the company’s competitive position?

Discussion Question If you were personally responsible for implementing a particular marketing strategy, which implementation approach would you be most comfortable using given your personality and personal preferences? Why?

Internal Marketing and Marketing Implementation
The Internal Marketing Approach Goals of Internal Marketing (1) Help employees understand their roles (2) Create motivated and customer-oriented employees (3) Deliver external customer satisfaction The Internal Marketing Process Internal Customers External Customers Putting Internal Marketing Into Action

The Internal Marketing Process
Exhibit 11.5

Discussion Question What do you see as the major stumbling blocks to the successful use of the internal marketing approach? Given the hierarchical structure of employees in most firms, is internal marketing a viable approach for most organizations? Why or why not?

Evaluating and Controlling Marketing Activities
Four possible causes of differences between intended strategy and realized strategy: (1) The marketing strategy was inappropriate or unrealistic. (2) The implementation was inappropriate for the strategy. (3) The implementation process was mismanaged. (4) Substantial changes occurred in the environment between development and implementation.

A Framework for Marketing Control
Exhibit 11.6

Formal Marketing Controls
Input Controls Recruiting, selecting, and training employees Resource allocation decisions Process Controls Commitment to the strategy System for evaluating and compensating employees Output Controls Formal performance standards Marketing audits

Informal Marketing Controls
Employee Self-Control Employees manage their own behaviors Establish personal objectives and monitor results Social Control Standards, norms, and ethics found in workgroups Peer pressure causes employees to conform Cultural Control Behavioral and social norms of the entire firm Shared values throughout the firm

Scheduling Marketing Activities
Basic steps in creating a schedule and timeline: (1) Identify the activities to be performed (2) Determine the time required to complete each activity (3) Determine which activities must precede other activities (4) Arrange the proper sequence and timing of all activities (5) Assign responsibility

A Hypothetical 3-Month Marketing Implementation Schedule
Exhibit 11.8

Marketing Ethics and Social Responsibility

The Role of Ethics and Social Responsibility in Marketing Strategy
Dimensions of Social Responsibility Social responsibility Marketing ethics Marketing Ethics and Strategy The Challenges of Being Ethical and Socially Responsible

R.J. Reynolds has been accused by critics of using its “Joe Camel” cartoon character, as shown in this 1988 ad, to target children for cigarette consumption. How has society acted to protect children from advertising such as this? What obligations do companies have to protect children?

The Pyramid of Social Responsibility
Exhibit 12.1

Potential Ethical Issues in Marketing
Exhibit 12.2

Perceived Values in the Workplace
Exhibit 12.3

Discussion Question Why is marketing ethics a strategic consideration in organizational decisions? Who is most important in managing marketing ethics: the individual or the firm’s leadership? Explain your answer.

Deceptive Practices in Marketing
Deceptive Communication and Promotion False/deceptive statements Exaggerated claims Ambiguous statements Product labeling issues Fraud Regulating Deceptive Marketing Practices Trade associations Better Business Bureau (BBB)

Better Business Bureau

Organizational Determinants of Marketing Ethics and Social Responsibility (1 of 2)
Ethical Climate Codes of Conduct Six highly desirable core values: 1) Trustworthiness 2) Respect 3) Responsibility 4) Fairness 5) Caring 6) Citizenship

Key Considerations in Developing and Implementing a Code of Ethical Conduct
Exhibit 12.4

Texas Instruments

Discussion Question Why are we seeing more evidence of widespread ethical marketing dilemmas within firms today? Is it necessary to gain the cooperation of marketing managers to overstate revenue and earnings in a corporation?

Organizational Determinants of Marketing Ethics and Social Responsibility (2 of 2)
Marketing Ethics and Leadership Great leaders: 1) Create a common goal or vision 2) Obtain “buy in” 3) Motivate others to be ethical 4) Use available resources 5) Enjoy their jobs Ethics training can ensure that everyone: 1) Recognizes ethical decision making situations 2) Understands the culture and values of the firm 3) Is able to evaluate the impact of ethical decisions

Ethics, Social Responsibility, and Marketing Performance
Firms that are ethical and socially responsible are rewarded with greater marketing performance. Having a strong ethical climate: Increases employee commitment Is conducive to a strong market orientation Creates trust among a firm’s stakeholders Increases customer loyalty

Discussion Question What is the relationship between marketing ethics and organizational performance? What are the elements of a strong compliance program to support responsible marketing and a successful marketing strategy?

Incorporating Ethics and Social Responsibility Into Strategic Planning
AMA Code of Ethics Federal Sentencing Guidelines for Organizations (FSGO) Marketing strategy and implementation plans should reflect an understanding of: 1) The ethical and social consequences of strategic choices 2) The values of organizational members and stakeholders

AMA Code of Ethics for the Internet
Exhibit 12.6

Frequency of Misconduct and Penalties Under the FSGO
Exhibit 12.7

MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE

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MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE

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