Chapter 1 Marketing in the Twenty-first Century Marketing Management

Chapter 1 Marketing in the Twenty-first Century Marketing Management
Tenth Edition Philip Kotler

Objectives Course Organization Tasks of Marketing
Major Concepts & Tools of Marketing Marketplace Orientations Marketing’s Responses to New Challenges

Course/Text Organization
Part I - Understanding Marketing Management Part II - Analyzing Marketing Opportunities Part III - Developing Marketing Strategies Part IV - Shaping the Market Offering Part V - Managing & Delivering Marketing Programs

Defining Marketing Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. - Philip Kotler (p. 7)

Core Concepts of Marketing
Target Markets & Segmentation Needs, Wants, and Demands Product or Offering Value and Satisfaction Exchange and Transactions Relationships and Networks Marketing Channels Supply Chain Competition Marketing Environment

Simple Marketing System
Communication Industry (a collection of sellers) Market of Buyers) Goods/services Money Information

Structure of Flows Resource markets Government markets Manufacturer
Resources Resource markets Money Taxes Taxes, goods Services, money Government markets Services Manufacturer markets Consumer markets Intermediary Goods, services Money

The Four Ps The Four Cs Marketing Mix Product Place Promotion Price
Conven- ience Customer Solution Customer Cost Communication

Company Orientations Towards the Marketplace
Consumers prefer products that are widely available and inexpensive Production Concept Consumers favor products that offer the most quality, performance, or innovative features Product Concept Consumers will buy products only if the company aggressively promotes/sells these products Selling Concept Focuses on needs/ wants of target markets & delivering value better than competitors Marketing Concept

Customer Delivered Value
Factory Existing products Selling and promotion Profits through sales volume Starting point Focus Means Ends (a) The selling concept Market Integrated marketing Profits through customer satisfaction Customer needs (b) The marketing concept

Traditional Organization Chart
Top Management Middle Management Front-line people Customers

Customer-Oriented Organization Chart
Customers Front-line people Customers Middle management Top management

Evolving Views of Marketing’s Role
b. Marketing as a more important function Finance Human resources Marketing Production a. Marketing as an equal function Finance Production Marketing Human resources

c. Marketing as the major function Marketing Finance resources Human Production d. The customer as the controlling factor Customer Human resources Finance Production Marketing

e. The customer as the controlling function and marketing as the integrative function Customer Marketing Production resources Human Finance

Review Course Organization Tasks of Marketing
Major Concepts & Tools of Marketing Marketplace Orientations Marketing’s Responses to New Challenges

through Quality, Service, and Value
Chapter 2 Building Customer Satisfaction through Quality, Service, and Value Marketing Management Tenth Edition Philip Kotler

Objectives Define value & satisfaction - understand how to deliver them The nature of high-performance businesses How to attract & retain customers Improving customer profitability Total quality management

Determinants of Customer Delivered Value
Image value Personnel value Services value Product value Total customer value Customer delivered value Monetary cost Time cost Energy cost Psychic cost Total customer cost

Satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.

High Performance Business
Stake- holders Set strategies to satisfy key... Processes By improving critical business... Resources Organization and aligning...

The Generic Value Chain
Firm infrastructure Out- bound Logistics Inbound Logistics Opera- tions Market- ing and sales Margin Primary Activities Support Activities Human resource management Technology Development Procurement Serv- ice

Levi Strauss’ Value-Delivery Network
Du Pont (Fibers) Order Delivery Order Milliken (Fabric) Levi’s (Apparel) Order Order Sears (Retail) Customer Delivery Delivery Delivery Competition is between networks, not companies. The winner is the company with the better network.

Satisfied Customers: Are loyal longer
Buy more (new products & upgrades) Spread favorable word-of-mouth Are more brand loyal (less price sensitive) Offer feedback Reduce transaction costs

Levels of Relationship Marketing
High margin Medium Low Many customers/ distributors Medium number of Few Accountable Reactive Basic or reactive Proactive Accountable Reactive Accountable Proactive Partnership

Customer Development Suspects Prospects Clients Advocates Partners
First-time customers Repeat customers Clients Advocates Partners Inactive or ex-customers Disqualified prospects

Customer/Product Profitability Analysis
Customers P1 Highly profitable product P2 Profitable P3 Losing P4 Mixed-bag Products + High profit customer + - Mixed-bag customer + - Losing customer

Competitive advantage
The Profit Triangle Profit Value creation Internal operations Competitive advantage

Quality Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. #1

Review Define value & satisfaction - understand how to deliver them
The nature of high-performance businesses How to attract & retain customers Improving customer profitability Total quality management

Market-Oriented Strategic Planning
Chapter 3 Winning Markets: Market-Oriented Strategic Planning Marketing Management Tenth Edition Philip Kotler

Objectives Corporate and division strategic planing
Business unit planning The marketing process Product level planning The marketing plan

Objectives Resources Skills Opportunities

Objectives Resources Profit and Growth Skills Opportunities

Corporate Headquarters Planning
Define the corporate mission Establish strategic business units (SBUs) Assign resources to SBUs Plan new business, downsize older businesses

Strategic-Planning, Implementation, and Control Process
Corporate planning Division Business Product Organizing Implementing Measuring results Diagnosing Taking corrective action

Good Mission Statements:
Limited number of goals Stress major policies & values Define competitive scopes

The Boston Consulting Group’s Growth-Share Matrix
20%- 18%- 16%- 14%- 12%- 10%- 8%- 6%- 4%- 2%- Market Growth Rate Stars 5 4 3 ? Question marks 2 1 Cash cow 6 Dogs 8 7 10x x 2x 1.5x 1x Relative Market Share .5x .4x .3x .2x .1x

Market Attractiveness: Competitive- Position Portfolio Classification
Strong Medium Weak BUSINESS STRENGTH 1.00 2.33 3.67 5.00 MARKET ATTRACTIVENESS 5.00 3.67 2.33 1.00 Low Medium High Clutches Hydraulic pumps Joints Flexible diaphragms Fuel pumps Aerospace fittings Relief valve Invest/grow Selectivity/earnings Harvest/divest

The Strategic-Planning Gap
Sales 10 5 Time (years) Desired sales Strategic- planning gap Diversification growth Integrative growth Intensive growth Current portfolio

Three Intensive Growth Strategies: Ansoff’s Product/Market Expansion Grid
penetration Existing markets products 3. Product development New products 2. Market development New markets 4. Diversification

Opportunity Matrix 1 2 3 4 Success Probability Opportunities
High Low 1. Company develops a more powerful lighting system 2. Company develops a device for measuring the energy efficiency of any lighting system 3. Company develops a device for measuring illumination level 4. Company develops a software program to teach lighting fundamentals to TV studio personnel 1 2 High Attractiveness 3 4 Low

Probability of Occurrence
Threat Matrix Threats Probability of Occurrence High Low 1. Competitor develops a superior lighting system 2. Major prolonged economic depression 3. Higher costs 4. Legislation to reduce number of TV studio licenses 1 2 High Seriousness 3 4 Low

The McKinsey 7-S Framework
Strategy Structure Systems Skills Shared values Staff Style

The Value-Delivery Process
(a) Traditional physical process sequence Make the product Sell the product Procure Design product Make Price Sell Advertise/ promote Distribute Service (b) Value creation & delivery sequence Choose the Value Provide the Value Communicate the Value Strategic marketing Tactical marketing

The Marketing Plan Executive Summary & Table of Contents
Current Marketing Situation Opportunity & Issue Analysis Objectives Marketing Strategy Action Programs Projected Profit-and-loss Controls

Factors Influencing Company Marketing Strategy
Competitors Marketing intermediaries Publics Suppliers Marketing information system planning organization organization and implementation Demographic/ economic environment Social/ cultural Technical/ physical Political/ legal Product Promotion Place Price Target customers

Review Corporate and division strategic planing Business unit planning
The marketing process Product level planning The marketing plan

Chapter 4 Gathering Information and Measuring Market Demand
Marketing Management Tenth Edition Philip Kotler

Objectives Components of a marketing information system
Criteria of good marketing research Decision support systems for marketing management Demand measurement and forecast

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. A marketing intelligence system is a set of procedures and sources used by managers to obtain everyday information about developments in the marketing environment.

Defining the Problem & Research Objectives
Sheds light on problem - suggest solutions or new ideas. Exploratory Research Descriptive Research Ascertain magnitudes. Causal Research Test cause- and-effect relationships. Tests hypotheses about cause- and-effect relationships.

Research Approaches Observational Focus-group Survey Behavioral
Experimental

Secondary-Data Sources
Internal Sources Government Publications Periodicals and Books Commercial Data On-Line Associations Business Information

The Marketing Research Process
Defining the problem and research objectives Developing the research plan Collect the information Analyze the information Present the findings

Good Marketing Research:
Is scientific Is creative Uses multiple methods Realizes the interdependence of models & data Acknowledges the cost & value of information Maintains “healthy” skepticism Is ethical

Ninety Types of Demand Measurement (6 x 5 x 3)
Territory Region U.S.A. Customer World Space level Short run Medium run Long run Time level All sales Company sales Product line sales Product form sales Product item sales Industry sales Product level

Demand Company Demand Market Demand

Estimating Current Demand
Total Market Potential Area Market Potential Industry Sales Market Share

Estimating Future Demand
Survey of Buyers’ Intentions Composite of Sales Force Opinion Expert Opinion Past Sales Analysis Market Test Method

Review Components of a marketing information system
Criteria of good marketing research Decision support systems for marketing management Demand measurement and forecast

Marketing Environment
Chapter 5 Scanning the Marketing Environment Marketing Management Tenth Edition Philip Kotler

Objectives Tracking & Identifying Opportunities in the Macroenvironment Demographic, Economic, Natural, Technological, Political, & Cultural Developments

Macroenvironmental Forces
World trade enablers Asian economic power Rise of trade blocs International monetary crises Use of barter & countertrade Move towards market economies “Global” lifestyles

Macroenvironmental Forces
Opening of “new” markets Emerging transnational firms Cross-border strategic alliances Regional ethnic & religious conflict Global branding

Demographic Environment
Worldwide Population Growth Population Age Mix Ethnic Markets Educational Groups Household Patterns Geographical Shifts in Population Shift from Mass Market to Micromarkets

Economic Environment Income Distribution Savings, Debt, &
Subsistence economies Raw-material-exporting economies Industrializing economies Industrial economies Savings, Debt, & Credit Availability

Changing Role of Government Natural Environment Higher Pollution Levels Shortage of Raw Materials Increased Costs of Energy

Issues in the Technological
Environment Accelerating Pace of Change Unlimited Opportunities for Innovation Varying R & D Budgets Increased Regulation

Increased Legislation Political- Legal Environment Special- Interest Groups

Social/Cultural Environment
Of the Universe Of Oneself Of Others Views That Express Values Of Nature Of Organizations Of Society

Social/Cultural Environment
High Persistence of Core Cultural Values Existence of Subcultures Shifts of Secondary Cultural Values Through Time

Review Tracking & Identifying Opportunities in the Macroenvironment
Demographic, Economic, Natural, Technological, Political, & Cultural Developments

Chapter 6 Analyzing Consumer Markets and Buying Behavior

Objectives Influences on Buying Behavior Buyer Decision Making

Simple Response Model Stimulus Organism Response

Model of Buying Behavior
Marketing stimuli Product Price Place Promotion Other stimuli Economic Technological Political Cultural Buyer’s characteristics Cultural Social Personal Psychological Buyer’s decision process Problem recognition Information search Evaluation Decision Postpurchase behavior Buyer’s decisions Product choice Brand choice Dealer choice Purchase timing Purchase amount

Cultural Factors Culture Subculture Social Class Buyer

Social Factors Reference Groups Family Roles & Statuses

Influences on Consumer Behavior
Personal Influences Influences on Consumer Behavior Age and Family Life Cycle Stage Lifestyle Occupation & Economic Circumstances Personality & Self-Concept

Psychological Factors
Motivation Perception Beliefs & Attitudes Learning

Maslow’s Hierarchy of Needs
Self- actualization (self-development and realization) 5 Esteem needs (self-esteem, recognition) 4 Social needs (sense of belonging, love) 3 Safety needs (security, protection) 2 Psychological needs (food, water, shelter) 1

Four Types of Buying Behavior
Complex Buying Behavior Variety- Seeking Behavior High Involvement Low Involvement Significant differences between brands Few Dissonance- Reducing Buying Behavior Habitual Buying Behavior

Consumer Buying Process
Problem recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior

Decision Making Sets Total Set Aware- ness Consid- Set eration Set
Choice Set Decision

Steps Between Evaluation of Alternatives and a Purchase Decision
Unanticipated situational factors Attitude of others Purchase intention Purchase decision

How Customers Use or Dispose of Products
To be used (re)sold Give it away Trade it Sell it Throw it Loan it Rent it Get rid of it temporarily permanently Keep it Product Direct to consumer To intermediary Through middleman Store it Convert to new purpose Use for original

Review Influences on Buying Behavior Buyer Decision Making

Chapter 7 Analyzing Business Markets & Business Buying Behavior

Objectives How Business & Consumer Markets Differ
Organizational Buying Situations Participants in the Business Buying Process Major Influences on Organizational Buyers Business Buyer Decision Making Institutional & Government Buying

Business vs. Consumer Markets
Fewer buyers Larger buyers Close supplier-customer relationship Geographically concentrated Derived demand Inelastic demand Fluctuating demand

Business vs. Consumer Markets
Professional purchasing Several buying influences Multiple sales calls Direct purchasing Reciprocity Leasing

New Task Buying Modified Rebuy Straight Rebuy
Custom furniture Installed components Buildings Weapon systems Involved Decision Making New vehicles Elec. Equip Consultants Computer equip. Modified Rebuy Straight Rebuy Utilities Office Supplies Bulk chemicals

Participants in the Business Buying Process
Users Initiators Influencers Gatekeepers Buyers Deciders Approvers

Major Influences on Industrial Buying Behavior
Level of demand Economic outlook Interest rate Rate of technological change Political and regulatory developments Competitive Social responsibility concerns Environmental Objectives Policies Procedures Organizational structures Systems Interests Authority Status Empathy Persuasive- ness Interpersonal Age Income Education Job position Personality Risk attitudes Culture Individual Business Buyer

Organizational Factors
Purchasing- Department Upgrading Cross- Functional Roles Centralized Purchasing Decentralized Purchasing of Small Ticket Items Internet Purchasing Long-Term Contracts Purchasing- Performance Evaluation & Pro. Buyers Lean Production

Info Search/ Eval Purchase Post Purchase
Problem Recognition Need Recognition General Need Description Product Specification Info Search/ Eval Supplier Search Proposal Solicitation Supplier Selection Purchase Order Routine Specification Post Purchase Performance Review

Institutional Markets
Low Budgets Captive Patrons

Government Markets Domestic Suppliers Cost Minimization Paperwork
Open Bids Public Review

Review How Business & Consumer Markets Differ
Organizational Buying Situations Participants in the Business Buying Process Major Influences on Organizational Buyers Business Buyer Decision Making Institutional & Government Buying

Chapter 8 Dealing with the Competition Marketing Managment
Tenth Edition Philip Kotler

Objectives Identifying Competitors Evaluating Competitors
Competitive Intelligence Systems Competitive Strategies Customer vs. Competitor Orientation

Induce your competitors not to invest in those products, markets and services where you expect to invest the most … that is the fundamental rule of strategy. Bruce Henderson, Founder of BCG There is nothing more exhilarating than to be shot at without result. Winston Churchill

Five Forces Determining Segment Structural Attractiveness
Potential Entrants (Threat of Mobility) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Buyers (Buyer power) Substitutes (Threats of substitutes)

Barriers and Profitability
Entry Barriers Exit barriers High, stable returns High Low High, risky returns High Low, stable returns Low Low, risky returns

Industry Competition Number of Sellers - Degree of Differentiation
Entry, Mobility, Exit barriers Cost Structure Degree of Vertical Integration Degree of Globalization

Strategic Groups in the Major Appliance Industry
High Low Quality Vertical Integration Group A Narrow line Lower mfg. cost Very high service High price Group C Moderate line Medium mfg. cost Medium service Medium price Group B Full line Low mfg. cost Good service Medium price Group D Broad line Medium mfg. cost Low service Low price

Analyzing Competitors
Objectives Competitor Actions Strategies Strengths & Weaknesses Reaction Patterns

Competitor’s Expansion Plans
Markets Products Individual Users Commercial & Industrial Educational Personal Computers Hardware Accessories Software Dell

Hypothetical Market Structure & Strategies
10% Market nicher 40% Market leader 30% Market challenger 20% Market follower Expand Market Attack leader Special- ize Imitate Defend Market Share Status quo Expand Market Share

Defense Strategies (2) Flank defense Attacker Defender (3) Preemptive
(4) Counter- offensive (1) Position defense (6) Contraction defense (5) Mobile defense

Optimal Market Share Profitability Market share Optimal market share
0% 25% 50% 75% 100%

Attack Strategies (4) Bypass attack (2) Flank attack
Attacker Defender (1) Frontal attack (5) Guerilla attack (3) Encirclement attack

Specific Attack Strategies
Price-discount Cheaper goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion

“Nichemanship” End-user specialist Vertical-level specialist
Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist

Balance Customer Competition + ID opportunities + Fighter orientation
+ Long-run profit + Alert + Emerging needs & groups + Exploit weaknesses - Reactive

Review Identifying Competitors Evaluating Competitors
Competitive Intelligence Systems Competitive Strategies Customer vs. Competitor Orientation

Segments and Selecting
Chapter 9 Identifying Market Segments and Selecting Target Markets Marketing Management Tenth Edition Philip Kotler

Objectives Identifying Market Segments Choosing Target Markets

Steps in Market Segmentation, Targeting,and Positioning
1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments Market Segmentation 3. Evaluate attractiveness of each segment 4. Select the target segment(s) Market Targeting 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen concept Market Positioning

Basic Market-Preference Patterns
(a) Homogeneous preferences Sweetness Creaminess (b) Diffused preferences Creaminess Sweetness (c) Clustered preferences Creaminess Sweetness

Market-Segmentation Procedure
Survey Motivations Attitudes Behavior Analysis Factors Clusters Profiling

Bases for Segmenting Consumer Markets
Geographic Region, City or Metro Size, Density, Climate Demographic Age, Gender, Family size and Life cycle, Race, Occupation, or Income ... Lifestyle or Personality Psychographic Occasions, Benefits, Uses, or Attitudes Behavioral

Bases for Segmenting Business Markets
Demographic Operating Variables Purchasing Approaches Situational Factors Personal Characteristics

Effective Segmentation
Measurable Effective Segmentation Substantial Size, purchasing power, profiles of segments can be measured. Accessible Segments must be large or profitable enough to serve. Differential Segments can be effectively reached and served. Actionable Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Heavy and Light Users of Common Consumer Products
HEAVY HALF LIGHT HALF PRODUCT (% USERS) 75% 71% Soups and detergents (94%) 25% 29% 79% 21% Toilet tissue (95%) Shampoo (94%) 75% 25% 17% Paper towels (90%) Cake mix (74%) Cola (67%) 83% 13% 5% 87% 19% Beer (41%) Dog food (30%) Bourbon (20%) 81% 95%

Additional Segmentation Criteria
Ethical Choice of Market Targets Segment Interrelationships & Supersegments Segment-by-Segment Invasion Plans Intersegment Cooperation

Five Patterns of Target Market Selection
Single-segment concentration Selective specialization M1 M2 M3 P1 P2 P3 Product specialization M1 M2 M3 P1 P2 P3 P1 P2 P3 M1 M2 M3 P = Product M = Market Market specialization M1 M2 M3 P1 P2 P3 M1 M2 M3 Full market coverage P1 P2 P3

Segment-by-Segment Invasion Plan
Customer Groups Truckers Railroads Airlines Company B Company C Company A Large computers Product Varieties Personal Mid-size

Review Identifying Market Segments Choosing Target Markets

Differentiating Market Offerings
Chapter 10 Positioning and Differentiating Market Offerings over the Life Cycle Marketing Management Tenth Edition Philip Kotler

Objectives Identify Differentiating Attributes
Choosing & Communicating Effective Positioning Marketing Strategies Along the Product Life Cycle Marketing Strategy & Market Evolution

The BCG Competitive Advantage Matrix
Number of Approaches to Achieve Advantage Few Many Volume Specialized Size of the Advantage Small Large Stalemated Fragmented

Product Differentiation
Form Fea- tures Perfor- mance Quality Conform- ance Quality Dura- bility Relia- bility Repair- ability Style Design

Services Differentiation
Ordering Ease Installation Customer Consulting Miscellaneous Services Delivery Customer Training Maintenance & Repair

Differentiation Personnel Channel

Image Differentiation
Media Symbols Atmosphere Events

Differences Worth Establishing
Important Profitable Distinctive Differences Worth Establishing Affordable Superior Preemptive

Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the the target market’s mind. P 298

Perceptual Map Live shows Easy to reach Little waiting Good food
1.0 0.8 0.6 0.4 0.2 -0.2 -0.4 -0.6 -0.8 Economical Fun rides Exercise Fantasy Good food Easy to reach Educational, animals Little waiting Live shows Magic Mountain Japanese Deer Park Busch Gardens Knott’s Berry Farm Lion Country Safari Marineland of the Pacific Disneyland

Sales & Profit Life Cycles
Time Sales & profits ($) Introduction Growth Maturity Decline

Four Introductory Marketing Strategies
Price Low High Promotion Rapid- skimming strategy Slow- skimming strategy Rapid- penetration strategy Slow- penetration strategy

Maturity Stage Market Modification Product Modification
Marketing-Mix Modification

Decline Stage Decrease investment
Resolve uncertainties - stable investment Selective niches Harvesting Divesting

Market Evolution Emergence Growth Maturity Decline

Market-Fragmentation and Market-Consolidation Strategies
(a) Market-fragmentation stage M C J XYZ K FG L DE AB H (b) Market-consolidation stage X M C AB DE FG JK L YZ H

Review Identify Differentiating Attributes
Choosing & Communicating Effective Positioning Marketing Strategies Along the Product Life Cycle Marketing Strategy & Market Evolution

Chapter 11 Developing New Market Offerings

Objectives Challenges in New Product Development (NPD)
Organizational Structure & NPD Stages & Management of NPD Diffusion & Adoption of New Products

Why New Products Fail “Over Championing” Overestimated Demand
Poor Design Poor Marketing Execution High Development Costs Strong Competitive Reaction

Challenges in NPD Idea Shortage Fragmented Markets
Social & Governmental Constraints Cost Capital Shortage Need for Speed Shorter Product Life Cycles

New Product Development Process
Marketing Strategy Development Business Analysis Product Development Concept Development and Testing Market Testing Idea Screening Commercialization Idea Generation

Probability of Success
commercialization given technical completion X Probability of economic success given commercialization X Overall probability of success = Probability of technical completion

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

Product & Brand Positioning
(a) Product-positioning map (breakfast market) b) Brand-positioning map (instant breakfast market) Expensive Slow Inexpensive Quick High price/oz. Low in calories Low price/oz. High in calories Brand C Brand B Brand A Bacon and eggs Pancakes Instant breakfast Cold cereal Hot

Good Housekeeping Seal?
Conjoint Analysis Brand name -- Utility 1.0 | | | K2R Glory Bissell Retail Price $ $ $1.59 Good Housekeeping Seal? | | No Yes Money-Back Guarantee?

Consumer-Goods Market Testing
Sales- Wave Research Test offering trail to a sample of consumers in successive periods. Simulated Test Market Test in a simulated shopping environment to a sample of consumers. Standard Full marketing campaign in a small number of representative cities. Controlled A few stores that have agreed to carry new products for a fee.

Commercialization Whom Product Price Place Promotion When Where

Time of adoption innovations
Adopter Categorization of the Basis of Relative Time of Adoption of Innovations 2 1/2% Innovators 13 1/2% Early adopters 34% Early majority 34% Late majority 16% Laggards Time of adoption innovations

Characteristics of the Innovation Rate of Adoption
Relative advantage Compatibility Complexity Divisibility Communicability

Global Market Offerings
Chapter 12 Designing Global Market Offerings

Objectives Factors to Consider Before Going Global
Selecting Foreign Markets Foreign Market Entry Product Adaption for Global Marketing Management & Organization of Global Activities

Major Decisions in International Marketing
Deciding whether to go abroad Deciding which markets to enter Deciding how to enter the market Deciding on the marketing program marketing organization

Challenges in Going Global
Shifting borders Unstable governments Foreign-exchange Corruption Technological pirating

Criteria for Entry Market Attractiveness Risk Competitive Advantage

Five Models of Entry Into Foreign Markets
Direct investment Joint ventures Licensing exporting Indirect Exporting Amount of commitment, risk, control, and profit potential

Joint Venture Licensing: Sell rights to name brand.
Contract Manufacturing: make item in host country; manufacturer of product only. Management Contracting: hired as Mgmt. Consultant to host company Joint Ownership: truly partnering with a company in host country, to share expertise and mutual gains.

Internationalization Process
No Export Export via Agents Sales Subsidiaries Production Abroad

Five International Product and Promotion Strategies
Straight extension Do not change product promotion Develop new product Product invention Product adaptation Adapt product Communi- cation adaptation Adapt promotion Dual adaptation

$ Pricing Challenges >Price Escalation >Transfer prices
>Dumping charges >Gray markets

Whole-channel Concept for International Marketing
Seller Seller’s international marketing headquarters Channels between nations Channels within foreign nations Final buyers

Marketing Organization
Export Department International Division Global Organization

Lines, Brands, and Packaging
Chapter 13 Managing Product Lines, Brands, and Packaging

Objectives Product Characteristics
Building & Managing the Product Mix & Product Lines Brand Decisions Packaging & Labeling

Components of the Market Offering
Value-based prices Services mix and quality Product features Attractiveness of the market offering

Five Product Levels Potential product Augmented product
Expected product Basic product Core benefit

Consumer-Goods Classification
Convenience Products Shopping Products Buy frequently & immediately Low priced Many purchase locations Includes: Staple goods Impulse goods Emergency goods Buy less frequently Gather product information Fewer purchase locations Compare for: Suitability & Quality Price & Style Specialty Products Unsought Products Special purchase efforts Unique characteristics Brand identification Few purchase locations New innovations Products consumers don’t want to think about. Require much advertising & personal selling

Product Mix Width - number of different product lines
Consistency Length - total number of items within the lines Product Mix - all the product lines offered Depth - number of versions of each product

Product-Line Length Line Stretching Downmarket Upmarket Two-way
Line Filling Line Modernization Line Featuring & Line Pruning

Two-Way Product-Line Stretch: Marriott Hotels
Quality Economy Standard Good Superior Marriott Marquis (Top executives) High Marriott (Middle managers) Above average Price Average Courtyard (Salespeople) Fairfield Inn (Vacationers) Low

What is a Brand? Attributes Benefits Values Culture User Personality

Satisfied & Switching Cost (customer will change)
Brand Equity Devoted to Brand Values the Brand (brand as friend) Satisfied & Switching Cost Satisfied Customer (no reason to change) No Brand Loyalty (customer will change)

An Overview of Branding Decisions
Repositioning Decision Brand- Sponsor Decision Brand- Name Decision Brand- Strategy Decision Branding Decision Brand No brand Manu- facturer brand Distribu- tor (private) Licensed Individual brand names Blanket family name Separate Company- individual Line extension Brand Multi- brands New Cobrands Reposi- tioning No reposi-

Brand Strategies Brand Extension New Brand Name Product Category Line
Existing Multibrands Brands

Good Brand Names: Suggest Product Benefits Distinctive Lack Poor
Foreign Language Meanings Qualities Easy to: Pronounce Recognize Remember

Why Package Crucial as a Marketing Tool
Self-service Consumer affluence Company & brand image Opportunity for innovation

Labels Identify Describe Promote

Chapter 14 Designing and Managing Services

Objectives Service Definitions & Classifications
How Services Differ Goods Improving Service Differentiation, Quality, & Productivity Improving Customer Support Services

Categories of Service Mix
Pure Service Tangible Good w/ Services Major w/ Goods Hybrid

Four Service Characteristics
Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase Inseparability Services cannot be separated from their providers Services Variability Quality of services depends on who provides them and when, where, and how Perishability Services cannot be stored for later sale or use

Overcoming Service Challenges
Intangibility Use cues to make it tangible Inseparability Increase productivity of providers Services Variability Standardize service production & delivery Perishability Match supply and demand

Three Types of Marketing in Service Industries
Company Customers External marketing Internal marketing Cleaning/ maintenance services Financial/ banking services Restaurant industry Employees Interactive marketing

Service Differentiation
Offer Delivery Image

Service-Quality Model
Expected service Management perceptions of consumer expectations Marketer Consumer Gap 1 Service delivery (including pre- and post-contacts) Gap 3 Translation of perceptions to service-quality specifications Gap 2 Gap 5 Perceived service External communications to consumers Gap 4 Personal needs Past experience Word-of-mouth communications

Determinants of Service Quality
Reliability Responsiveness Assurance Empathy Tangibles

Service Excellence Strategic Concept Top-Management Commitment
High Standards Monitoring Systems Satisfying Customer Complaints Satisfying Both Employees & Customers Managing Productivity

Importance-Performance Analysis
A. Concentrate here B. Keep up the good work D. Possible overkill C. Low priority Extremely important Slightly important Excellent performance Fair performance 1 2 9 11 13 12 14 3 4 5 6 7 8 10 # = Attributes

Complaint Resolution Hiring Criteria & Training for Employees
Develop Guidelines for Fairness Remove Complaint Barriers Analyze Types & Sources of Complaints

Chapter 15 Designing Pricing Strategies and Programs

Objectives Setting the Price Adapting the Price
Initiating & Responding to Price Changes

Price - Quality Strategies
High Medium Low Premium Value Medium Economy High Value Super Good-Value High Product Quality Overcharging Med Rip-Off False Economy Low

Setting Pricing Policy
1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price

Sum of the Fixed and Variable Costs for a Given
Types of Costs Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production

The Three C’s Model for Price Setting
Costs Competitors’ prices and prices of substitutes Customers’ assessment of unique product features Low Price No possible profit at this price High Price demand at

Pricing Methods Markup Pricing Target Return Pricing
Perceived Value Pricing Value Pricing Going-Rate Pricing Sealed-Bid Pricing

Some important pricing definitions
Utility: The attribute that makes it capable of want satisfaction Value: The worth in terms of other products Price: The monetary medium of exchange. Value Example: Caterpillar Tractor is $100,000 vs. Market $90,000 $90,000 if equal 7,000 extra durable 6,000 reliability 5,000 service 2,000 warranty $110,000 in benefits - $10,000 discount!

Promotional Pricing Loss-leader pricing Special-event pricing
Cash rebates Low-interest financing Longer payment terms Warranties & service contracts Psychological discounting

Psychological Pricing
Most Attractive? Better Value? Psychological reason to price this way? A 32 oz. $2.19 B 26 oz. $1.99 Assume Equal Quality

Discriminatory Pricing
Time Product-form Customer Segment Location

Price-Reaction Program for Meeting a Competitor’s Price Cut
No Hold our price at present level; continue to watch competitor’s price Has competitor cut his price? No No Is the price likely to significantly hurt our sales? Yes Is it likely to be a permanent price cut? Yes How much has his price been cut? Yes By less than 2% Include a cents-off coupon for the next purchase By 2-4% Drop price by half of the competitor’s price cut By more than 4% Drop price to competitor’s price

Managing Marketing Channels
Chapter 16 Selecting and Managing Marketing Channels

Objectives Work Performed by Marketing Channels
Channel-Design Decisions Channel-Management Decisions Channel Dynamics

How a Distributor Reduces the Number of Channel Transactions
A. Number of contacts without a distributor M x C = 3 X 3 = 9 1 3 2 4 5 6 7 8 9 = Manufacturer = Customer

How a Distributor Reduces the Number of Channel Transactions
B. Number of contacts with a distributor M x C = = 6 Store 1 2 3 4 5 6 = Manufacturer = Customer = Distributor

Distribution Channel Functions
Ordering Payments Communication Transfer Negotiation Financing Risk Taking Physical Distribution Information

Consumer Marketing Channels
Manufacturer 0-level channel Consumer Manufacturer 1-level channel Retailer Consumer  2-level channel Mfg Wholesaler Retailer Consumer  3-level channel Mfg Wholesaler Jobber Retailer Consumer 

Industrial Marketing Channels
distributors Manufacturer Consumer Manufacturer’s representative sales branch

Customers’ Desired Service Levels
Lot size Waiting time Spatial convenience Product variety Service backup

Level of sales (dollars)
Break-Even Cost Chart Selling costs (dollars) Level of sales (dollars) Manufacturer’s sales agency Company sales force SB

Channel Management Decisions
Selecting FEEDBACK Motivating Training Evaluating

Common Ownership at Different
Corporate Common Ownership at Different Levels of the Channel Types of Vertical Marketing Systems Administered Leadership is Assumed by One or a Few Dominant Members Contractual Contractual Agreement Among Channel Members

Conventional Distribution Channel vs. Vertical Marketing Systems
Manufacturer Manufacturer Wholesaler Wholesaler Retailer Retailer Consumer Consumer

Causes of Channel Conflict
Legal & Ethical Issues in Channel Relations Incompatibility Difference in Perception Dependence Exclusive Dealing Exclusive Territories Tying Agreements Dealers’ Rights

Chapter 17 Managing Retailing, Wholesaling, and Market Logistics

Objectives Retailing Wholesaling Market Logistics

Four Levels of Retail Service
Self-service Self-selection Limited-service Full-service

Retail Positioning Map
Bloomingdale’s Kinney Shoe Wal-Mart Tiffany Broad Narrow Breadth of product line Value added Low High

Classification Of Retailer Types
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 Discount Stores Broad Product Line, Low Margin, High Volume Off-Price Retailer Inexpensive, Overruns, Irregulars, and Leftover Goods Superstores Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services Catalog Showroom Broad Selection, Fast Turnover, Discount Prices

Types of NonStore Retailing
Direct Selling Types of NonStore Retailing Direct Marketing NonStore Retailing Accounts for More Than 12% of All Consumer Purchases, and is trending up. Automatic Vending Buying Services

New Entrants Wheel of Retailing Mid Price Mid Status Mid Margin
Low Price Low Status Low Margin High Price High Status High Margin New Entrants

Why are Wholesalers Used?
Functions Management Services & Advice Selling and Promoting Market Information Buying and Assortment Building Risk Bearing Bulk Breaking Transporting Financing Warehousing

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 Submitted Minimize Costs of
Processed Shipped Costs Minimize Costs of Attaining Logistics Objectives 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 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 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

Checklist for Choosing
Transportation Modes 1. Speed. 2. Dependability. 3. Capability. 4. Availability.

Rating Transportation Modes
Rail Water Truck Pipeline Air Source: See Carl M. Guelzo; Introduction to Logistics Management Englewood Cliffs, NJ: Prentice Hall, 1986), p. 46. (Door-to- door delivery time) (Meeting Schedules on Time) (Ability to Handle Various Products) (No. of Geographic Points Served) (Per Ton- Mile) Speed Dependability Capability Availability Cost

Designing and Managing
Chapter 18 Designing and Managing Integrated Marketing Communications

Objectives The Communications Process
Developing Effective Communications Deciding on the Marketing Communications Mix Managing and Coordinating Integrated Marketing Communications

The Marketing Communications Mix
This CTR relates to the material on pp The Marketing Communications Mix Advertising 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. Sales Promotion Short-term Incentives to Encourage Trial or Purchase. Personal Selling Public Relations Protect and/or Promote Company’s Image/products. Personal Presentations. Direct Marketing Direct Communications With Individuals to Obtain an Immediate Response.

Elements in the Communication Process
SENDER Media Message RECEIVER Encoding Decoding Response Noise Feedback

Message Problems Selective Attention Selective Distortion
Selective Retention

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

Response Hierarchy Models
AIDA Model a Hierarchy-of- Effects Model b Innovation- Adoption Model c Communi- cations Model d Stages Cognitive stage Affective Behavior Attention Interest Desire Action Awareness Knowlege Awareness Trial Adoption Interest Evaluation Behavior Attitude Intention Exposure Reception Cognitive response Liking Preference Conviction Purchase

Step 3. Designing the Message
Message Source Expertise, Trustworthiness, Congruity Message Format Layout, Words, & Sounds, Body Language Message Structure Draw Conclusions Argument Type Argument Order Message Content Rational Appeals Emotional Appeals Moral Appeals

Step 4. Select Communications Channel
Personal Communication Channels Nonpersonal Communication Channels

Step 5. Establish the Budget
Affordable % Of Sales Competitive Parity Objective & Task

Step 6. Decide on Communications Mix
Advertising Public, Pervasive, Expressive, Impersonal Sales Promotion Communication, Incentive, Invitation Public Relations & Publicity Credibility, Surprise, Dramatization Personal Selling Personal Confrontation, Cultivation, Response Direct Marketing Nonpublic, Customized, Up-to-Date, Interactive

Step 8. Manage the IMC Process
Step 7. Measure Results Step 8. Manage the IMC Process

Factors in Developing Promotion Mix Strategies
Product Life-Cycle Stage Type of Product/ Market Push vs. Pull Strategy Buyer/ Readiness Stage

Push Versus Pull Strategy
Producer Interme- diaries Marketing activities End users Demand Push Strategy Pull Strategy Marketing activities

Chapter 19 Managing Advertising, Sales Promotion and Public Relations

Objectives Developing & Managing an Advertising Program
Deciding on Media & Measuring Effectiveness Sales Promotion Public Relations

Major Decisions in Advertising
Objectives Setting Budget Decisions Message Decisions Media Decisions Campaign Evaluation

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.

The Five Ms of Advertising
Mission Sales goals Adver- tising objectives Money Factors to consider: Stage in PLC Market share and consumer base Competition and clutter Advertising frequency Product substitutability Message Message generation Message evaluation and selection Message execution Social-responsibility review Media Reach, frequency, impact Major media types Specific media vehicles Media timing Geographical media allocation Measure- ment Communi- cation

Advertising Budget Factors
Stage in the Product Life Cycle Market Share & Consumer Base Competition & Clutter Advertising Frequency Product Substitutability

Profiles of Major Media Types
Newspapers Advantages: Flexibility, timeliness; good local market coverage; broad acceptance, high believability Limitations: Short life; poor reproduction quality; small pass-along audience Television Advantages: Combines sight, sound, motion; high attention; high reach; appealing to senses Limitations: High absolute costs; high clutter; fleeting exposure; less audience selectivity Direct Mail Advantages: Audience selectivity; flexibility, no ad competition within same medium; allows personalization Limitations: Relative high cost; “junk mail” image

Profiles of Major Media Types
Radio Advantages: Mass use; high geographic and demographic selectivity; low cost Limitations: Audio only; fleeting exposure; lower attention; nonstandardized rates; fragmented audiences Magazines Advantages: High geographic and demographic selectivity; credibility and prestige; high-quality reproduction; long life; good pass-along readership Limitations: Long ad purchase lead time; waste circulation; no guarantee of position Outdoor Advantages: Flexibility; high repeat exposure; low cost; low message competition Limitations: Little audience selectivity; creative limitations

Classification of Advertising Timing Patterns
Month Number of messages per month Concen- trated (1) (2) (3) Level Rising Falling Alternating (4) Continuous (8) (7) (6) (5) (9) Inter- mittent (10) (11) (12)

Simplified Rating Sheet for Ads
(Attention) How well does the ad catch the reader’s attention? __20 (Read-through) How well does the ad lead the reader to read further? __20 (Cognitive) How clear is the central message or benefit? __20 (Affective) How effective is the particular appeal? __20 (Behavior) How well does the ad suggest follow-through action? __20 Poor ad Mediocre Average Good Great 20 40 60 80 100 __Total

Advertising Strategy Message Execution
Testimonial Evidence Slice of Life Turning the “Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest. Lifestyle Scientific Evidence Typical Message Execution Styles Fantasy Technical Expertise Mood or Image Personality Symbol Musical

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

Why the increase in Sales Promotion?
Growing retailer power Declining brand loyalty Increased promotional sensitivity Brand proliferation Fragmentation of consumer market Short-term focus Increased managerial accountability Competition Clutter Retailer - scanner data, industry consolidation -MFGs want to break through Loyalty & Sensitivity & proliferation - we did that Frag - more media, more targeted Short-term&Account - US Business, stock mkt, not BE

Long-Term Promotional Allocation
10 20 30 40 50 60 1986 88 90 92 94 1996 Year %t of total - 3 yr.MA Trade Promo Media Adv Cons. Promo Cox Direct 19th Annual Survey of Promotional Practices

Channels of Sales Promotions
MANUFACTURER RETAILER Trade Promotions CONSUMER Consumer Push Pull Retail

Consumer Promotion Consumer-Promotion Objectives
Consumer-Promotion Tools Entice Consumers to Try a New Product Point-of-Purchase Displays Premiums Price Packs Cash Refunds Coupons Samples Patronage Rewards Games Sweepstakes Contests Advertising Specialties Lure Customers Away From Competitors’ Products Get Consumers to “Load Up’ on a Mature Product Hold & Reward Loyal Customers Consumer Relationship Building

“Deal Proneness,” Liechtenstein, Burton, & Netemeyer
“Deal Proneness,” Liechtenstein, Burton, & Netemeyer, Journal of Retailing, Summer 1997 “Deal Proneness,” Liechtenstein, Burton, & Netemeyer Examination of “deal proneness” among consumers in a supermarket setting Surveys & Grocery Receipts used Eight types of deals: Cent-off, One-free, Gift, Display, Rebate, Contest, Sale, & Coupon Cluster analysis yielded two interpretable results: 49% are “deal prone,” 51% not 24% High “Deal prone,” 50% intermediate, 26% deal insensitive “Deal-proneness” a generalized construct - (crosses type of promotion) Younger & Less educated more likely to be deal prone

Trade Promotions Trade-Promotion Tools Trade-Promotion Objectives
Specialty Advertising Items Contests Free Goods Buy-Back Guarantees Allowances Price-Offs Patronage Rewards Push Money Discounts Premiums Displays Persuade Retailers or Wholesalers to Carry a Brand Give a Brand Shelf Space Promote a Brand in Advertising Push a Brand to Consumers

Business-to-Business Promotion
Business-Promotion Objectives Business-Promotion Tools Generate Business Leads Conventions Trade Shows Sales Contests Stimulate Purchases Reward Customers Motivate Salespeople

Major Public Relations Tools
Special Events Written Materials Corporate Identity Speeches News Audiovisual Public Service Activities Web Site Father of PR was Edward Bernays, turns out he was Freud’s nephew! Value of some good brand publicity/movie placements: SPECIAL EVENTS: Reeses Pieces sales jumped 85% after E.T. Mumford High sold $1M in school shirts after Beverly Hills Cop CA. Raisin Board paid $25K for bus-stop sign and raisin eating scene in Back to the future. Coke and Pepsi scout out roles full time.

Chapter 1 Marketing in the Twenty-first Century Marketing Management

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