AB112 Principles of Marketing

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LECTURE 1 – CHAPTERS 1 AND 2

Chap 1 Marketing is the process by which companies create value for customers and build strong
customer relationships in order to capture value from customers in return
 Deal with customers, satisfying customers’ needs
 Attract new customers by promising superior value
 Keep and grow current customers by delivering satisfaction

Marketing Process

Understand the Design a Construct an Build profitable Capture value

marketplace and customer-driven integrated marketing relationships and from customers to
customer needs marketing program that delivers create customer create profits and
and wants strategy superior value delight customer equity

Create value for customer and build customer relationships Create value from
customers in return

Understand the marketplace and customer needs and wants

 Customer needs, wants and demands
- Needs: status of felt deprivation, Maslow hierarchy of needs (Physiological, Safety,
Belonging – Love, Self-esteem, Self-actualisation)
- Wants: form that human needs take as they are shaped by culture and individual
personality
- Demands: humans wants that are backed by buying power
- Conduct consumer research and analyse the large amount of data
 Marketing offerings
- Combination of products, services, information or experiences offered to a market to
satisfy a need or want
- Marketing myopia: mistake of sellers paying more attention to the specific products
offered by a company rather than to the benefits and experiences produced by these
products ~ focus on existing wants and lose sight of the underlying needs
 Value and satisfaction
- Satisfied customers will make repeated purchases and tell others about their good
experience
- Dissatisfied customers will switch to competitors and disparage the product to others
 Exchanges and relationships
- Exchange: act of obtaining a desired object from someone by offering something in
return
 Markets
- Set of all actual and potential buyers of a product or service
- Managing markets to bring about profitable customer relationship
o Depends on own actions as well as entire system that serves the final customers
o Wal-mart cannot fulfill its promise of low prices unless its suppliers provide
merchandise at low costs
o Ford cannot deliver high quality to car buyers unless its dealers provide outstanding
sales and service

Design a customer-driven marketing strategy Pg 6, 13

 Selecting customers to serve
- Market segmentation: dividing market into segments of customers
- Target marketing: selecting which segments it will go after

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 Choosing a value proposition

- Set of benefits or values it promises to deliver to consumers to satisfy their needs
- Differentiation and positioning in the market place
 Marketing management orientations
- Production concept: idea that consumers will favour products that are available and
highly affordable and that the organisation should therefore focus on improving
production and distribution efficiently
o Lenovo dominates the Highly competitive, price-sensitive Chinese PC market
o May lead to marketing myopia – focusing on own operations
- Product concept: idea that consumers will favour products that offer the most quality
performance and features and that the company should therefore devote its energy in
making continuous product improvements
o May lead to marketing myopia – customers want solutions, not just better products
- Selling concept: idea that consumers will not buy enough of the firm’s products unless it
undertakes a large-scale selling and promotion effort
o Unsought goods – buyers do not normally think of buying, insurance
o Focus on creating sales transactions rather than on building long-term, profitable
customer relationships
o Sell what company makes rather than making what market wants
- Marketing concept: achieving organisation goals depends on knowing the needs and
wants of target market and delivering the desired satisfactions better than competitors do
o Customer-driving marketing: understanding customer needs even better than
customers themselves do and creating products and services that meet existing and
latent needs now and in the future

- Societal marketing concept: principle of enlightened marketing that holds that a company
should make good marketing decisions by considering consumers’ wants, company’s
requirements, consumers’ long run interest and society’s long run interests Pg 79
o Giant fast food chains offering tasty and convenient food at reasonable prices –
unhealthy food contributing to a national obesity epidemic, convenient packaging
leads to waste and pollution: satisfying consumers’ short terms needs but harming
consumers’ health and causing environmental problems in the long run
o Johnson and Johnson does this well – ‘our credo’ stresses honesty, integrity and
putting people before profits

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Construct an integrated marketing program that delivers superior value

 Delivering intended values to target customers
 Marketing mix 4Ps: Price, product, promotion, place Pg 7

Build profitable relationships and create customer delight

 Customer relationship management: overall process of building and maintaining profitable
customer relationships by delivering superior customer values and satisfaction
- Customers act on customer perceived value: customer’s evaluation of the difference
between all the benefits and all the costs of a market offering relative to those of
competing offers
- Customer satisfaction: extent to which a product’s perceived performance matches a
buyer’s expectations Pg 26
o Customer-centred firms seek to deliver high customer satisfaction relative to
competitors without compromising its profits ~ generate only customer value
profitability
- Retaining customers and building profitable long term relationships with them ~
developing customer loyalty and retention programs
o Highly satisfied customers:
 Are less price sensitive
 Remain customers longer
 Talk favourably about the company and its products to others
 Changing nature of customer relationships
- Relating with more carefully selected customers ~ targeting fewer but more profitable
customers (selective relationship management)
- Relating for the long term ~ cost of acquiring a new customer is rising, hence, better and
cheaper to keep a current customer satisfied
- Relating directly with customers
 Partner relationship management: working closely with partners in other company
departments and outside the company to jointly bring greater value to customer
- Partners inside companies ~ Procter and Gamble’s cross functional teams Pg 6
- Partners outside companies ~ networked companies in a supply chain, eg. Lexus, strategic
alliances, eg. Dell with software creators like Microsoft and Oracle Pg 6

Capture value from customers to create profits and customer equity

 Creating customer loyalty and retention
- Capture customer’s lifetime value: value of the entire stream of purchases that a customer
would make over a lifetime of patronage
 Growing share of customer
- Increase share of customers: portion of the customer’s purchasing that a company gets in
its product categories
- Firms can offer greater variety to current customers, train employees to cross-sell and up-
sell in order to market more products and services to existing customers eg. Amazon.com
 Building customer equity
- Customer equity: total combined customer lifetime values of all of the company’s
customers
- Building right relationships with the right customers

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Butterflies True Friends

High Good fit between company’s Good fit between company’s
Profitability offerings and customer’s needs; offerings and customer’s needs;

Potential Profitability
high profit potential highest profit potential

Strangers Barnacles
Little fit between company’s Little fit between company’s
offerings and customer’s needs; offerings and customer’s needs;
Low lowest profit potential low profit potential
Profitability “Don’t invest in them” “Improve profitability by selling
them more, raising their fees or
reduce service to them. If cannot
be made profitable, they should be
fired”

Short-term Customers Long-term Customers

Projected Loyalty

The New Marketing Landscape

 New digital age
- Boom in computer, telecommunications, information, transportation, internet and other
technologies having a major impact on the ways companies bring value to customers
- Brick and mortar to click and mortar
- Biz to biz e-commerce
 Rapid globalisation Pg 88
- Connecting globally with customers and marketing partners
- Selling locally produced goods in international markets and buying more supplies abroad
 Taking greater ethical and social responsibility
- Consumerism and environmentalism Pg 79 resulting in companies taking responsibility
for the social and environmental impacts of their actions
- Corporate ethics and social responsibilities Pg 76
- Eg. Ben & Jerry’s, Honest Tea practicing caring capitalism
 Growth of non-profit organisations marketing
- Attract membership, support, donations, funds or to convey a message or to influence
- Eg. schools, hospitals, zoos, museums, symphony orchestras, churches

Chap 2 Strategic Planning is the process of developing and maintaining a strategic fit between the
organisation’s goals and capabilities and its changing marketing opportunities

Strategic Planning Process

Planning
Defining the Setting company Designing the marketing and
company mission objectives and goals business portfolio other functional
strategies

Corporate Level Business unit, product,

and market level

Defining a market-oriented mission

 Statement of the organisation purpose, what it wants to accomplish in the larger environment
 Market oriented: define biz in terms of satisfying basic customers’ needs

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 Examples:
- Ritz Carlton Hotels
o Product oriented: we rent rooms
o Market oriented: we create the Ritz Carlton experience
- Disney
o Product oriented: we run theme parks
o Market oriented: we create fantasies
- Wal-mart
o Product oriented: we run discount stores
o Market oriented: we deliver low prices everyday and give ordinary folks the chance
to buy the same things as rich people
 Specific, realistic, motivating, distinctive competencies, fit into the market environment

Setting company objectives and goals

 Turn mission into detailed supporting objectives for each level of management
- Goals: beat the competition, survival, growth, market share, profitability
 Marketing strategies and programs must be developed to support marketing objectives Pg 6
- Corporate strategy: establishes the direction to be heading
- Strategic biz unit strategy: establishes action plans to achieve the SBU goals
- Functional strategy: tactics to respond to plans

Designing the biz portfolio

 Biz portfolio: collection of biz and product that makes up the company, fits the company’s
strengths and weaknesses to opportunities in the environment
 Analyse the current biz portfolio: process by which management evaluates the products and
businesses making up the company
- Portfolio planning
o Identify the SBUs
o Assess the competitive position of each SBUs
o Forming an optimum portfolio of SBUs
o Allocating resources
- BCG (Boston Consulting Group) Model
o Growth-share matrix: portfolio planning method that evaluates a company’s strategic
biz units in terms of their market growth rate and relative market share

Star Question Mark

High growth; strong SBUs High growth; weak SBUs
High
(measure of market attractiveness)

Require heavy investments to Require heavy investments to hold

finance rapid growth their share and to decide to build
Market Growth

them into Stars or to phrase them

out
Cash Cow Dog
Low growth; strong SBUs Low growth; weak SBUs
Low Require lesser investments to hold Generate enough to maintain
market share, producing a lot more themselves but do not promise to
cash on hand be large sources of cash
High Low

Relative Competitive Position

(measure of company’s strength in the market)

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o Limitations
 Difficult, time consuming, costly to implement
 Focus on classifying current businesses but provide little advice for future
planning
 Developing strategies for growth and downsizing
- Product/market expansion grid: portfolio planning tool for identifying company growth
opportunities through market penetration, market development, product development or
diversification eg. Pg 35, 45

Market Penetration Product Development

Existing Strategy for company growth by Strategy for company growth by
markets increasing sales of current products offering modified or new products
to current market segments without to current market segments
changing the product
Market Development Diversification
New Strategy for company growth by Strategy for company growth
identifying and developing new through starting up or acquiring
markets
market segments for current businesses outside the company’s
company products current products and markets
Existing products New products

- Downsizing: reducing the biz portfolio by eliminating products of biz units that are no
longer profitable or that no longer fit the company’s overall strategy

Planning marketing: Partnering to build customer relationships

 Marketing key roles
- Provides a guiding philosophy that suggests that company’s strategies should revolve
around building profitable relationships with important consumer groups
- Provides inputs to strategic planners by helping to identify attractive market opportunities
and by assessing the firm’s potential to take advantage of them
- Designs strategies for reaching unit’s objectives and help company to carry them out
 Partners with other company departments Pg 3
- Effective value chain: series of departments that carry out value-creating activities to
design, produce, market, deliver and support a firm’s products
- Success depends on how well each department performs its work of adding customer
value and on how well the activities of various departments are coordinated
 Partners with others in the marketing system Pg 3
- Effective value delivery network: network made up of the company, suppliers,
distributors and ultimately customers who ‘partner’ with each other to improve the
performance of the entire system

Marketing Strategy and Marketing Mix

Marketing strategy is the marketing logic by which the biz unit hopes to achieve its marketing
objectives Pg 1, 13, 34
 Market segmentation: dividing a market into distinct groups of buyers who have distinct
needs, characteristics, or behaviour and who might require separate products or marketing
programs
 Market segment: a group of consumers who respond in a similar way to a given set of
marketing efforts

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 Market targeting: process of evaluating each market segment’s attractiveness and selecting
one or more segments to enter
- Target segments where it can profitably generate the greatest customer value and sustain
it overtime
- Company with limited resources might decide to serve only one or a few special
segments ~ market niches: specialise in serving customer segments that major
competitors overlook or ignore eg. Ferrari
 Market differentiation and positioning
- Differentiation: actually differentiating the firm’s market offering to create superior
customer value
- Positioning: arranging for a product to occupy a clear distinctive, and desirable place
relative to competing products in the minds of target consumers

Marketing mix is the set of controllable tactical tools – product, price, place, promotion – that
the firm blends to produce the response it wants in the target market

Product = Consumer Solution

Price = Consumer Cost
The goods and services
The amount of money customers
combination the company offers to
have to pay to obtain the product
the target market
(list price, discounts, allowances,
(variety, quality, design, features,
payment period, credit terms)
brand name, packaging, services)
Target
customers

Intended
positioning
Place = Convenience
Promotion = Communication
Company activities that make the
Activities that communicate the
product available to target
merits of the product and persuade
consumers
target customers to buy it
(channels, coverage, assortments,
(advertising, personal selling, sales
locations, inventory,
promotion, public relations)
transportation, logistics)

Managing the Marketing Effort

 Marketing analysis
- Obtaining a complete analysis of the company’s situation
- Encompass both internal and external
- TOWS analysis: Threats, opportunities, weaknesses, strengths

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Opportunities

Aggressive Growth Concentration/turnaround

• Acquisitions • Cost cutting
• Product development • Downsizing
• Market development • Downgrading
• Market penetration • Re-engineering
Strengths Weaknesses

Diversification Defensive
• Divest
• Harvest
• Retrench
• Liquidate

Threats

 Marketing planning
- Detailed marketing strategies and plans
- Good strategies is often easier to carry them out
 Marketing implementation
- Turn marketing strategies and plans into marketing actions to accomplish strategic
marketing objectives
 Marketing departmental organisation
- Functional marketing organisation: different marketing activities headed by a functional
specialist
- Geographic organisation: company that sells internationally
- Product management organisation: company with many very different products and
brands
- Market management organisation: company that sell one product line to many different
types of markets and customers that have different needs and preferences
 Marketing control
- Process of measuring and evaluating the results of marketing strategies and plans and
taking corrective action to ensure that objectives are achieved
- Operating control: checking ongoing performance against annual plan and take corrective
action when necessary
- Strategic control: looking at whether company’s basic strategies are well matched to its
opportunities
- Marketing audit: comprehensive, systematic, independent and periodic examination of a
company’s environment, objectives, strategies and activities to determine problem areas
and opportunities and to recommend a plan of action to improve the company’s
marketing performance, covers all major areas of a biz
 Measuring and managing return on marketing investments
- Ensuring marketing dollars are well spent
- Return on marketing investment (ROI): net return from a marketing investment divided
by costs of the marketing investment
o Difficulties in measuring though
- Other measures
o Standard marketing performance measure: brand awareness, sales, market share
o Customer-centered measures: customer acquisition, customer retention, customer
lifetime value

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LECTURE 2 – CHAPTER 3

Chap 3 Marketing environment is the actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful relationships with target customers
 Microenvironment is the actors close to the company that affect its ability to serve its
customers – the company, suppliers, marketing intermediaries, customer markets, competitors
and publics
 Macroenvironment is the larger societal forces that affect the microenvironment –
demographic, economic, natural, technological, political and cultural forces

Microenvironment

The Company
 Includes company’s several departments and management levels
 Marketing managers have to work closely with other company departments

Suppliers
 Treat them as partners in creating and delivering customer value

Marketing intermediaries Pg 48
 Firms that help the company to promote, sell and distribute its goods to final consumers
 Includes wholesalers, retailers, physical distribution firms, marketing service agencies,
financial intermediaries
 Cooperate to create customer value

Customers
 Includes consumer markets Pg 23, biz markets Pg 28, reseller markets, government markets,
international markets Pg 88

Competitors
 Vie with company in an effort to serve customers better Pg 32

Publics: any group that has an actual or potential interest in or impact on an organisation’s ability
to achieve its objectives
 Financial publics: influence company’s ability to obtain funds eg. banks, investment houses,
stock holders
 Media publics: carry news, features and editorial opinions eg. newspapers, magazines, radio
and television stations
 Government publics: management must take government developments into account and
often consult lawyers on issues of product safety, truth in advertising and other matters
 Citizen-action publics: company’s marketing decision may be questioned by consumer
organisations, environmental groups, minority groups and others ~ appoint public relation
department
 Local publics: neighbourhood residents and community organisations ~ appoint a community
relations officer to deal with community issues
 General public: company needs to be concerned about the general public’s attitude and image
towards its products and activities
 Internal publics: employees, managers, volunteers and the board of directors

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Macroenvironment

Demographic environment
 Demography: the study of human populations in terms of size, density, location, age, gender,
race, occupation and other statistics
 Changing age structure of the population
- Baby boomers: 78m people born during the baby boom following WW2, lasting until
early 1960s
- Generation X: 45m people born between 1965 and 1976 in the birth dearth following the
baby boom
o Sceptical, more cautious economic outlook due to growing up in times of recessions
and corporate downsizing, care about the environment, less materialistic
- Generation Y: 72m children of the baby boomers, born between 1977 and 1994
o Fluency and comfort with computer, digital and internet technology
 Changing American family
- Increasing non-family households: single live-alones or adults live-togethers of one or
both sexes
- More people are divorcing, separating, choosing not to marry, marrying later or marrying
without intention to have children
- Increasing women in workforce
 Geographical shifts in population
- Great migratory movements between and within countries
- Shift in where people live causes a shift in where people work
 Better educated and more white-collar population
- Increasing demand for quality products, books, magazines, travel, personal
computers and internet services
- Increasing proportion of managers and professionals in the workforce (more
affluence)
 Increasing diversity
- Countries varying in their ethnic and racial makeup
o Eg US: diverse groups from many nations and cultures have melted into a single,
more homogenous whole
- Facing increasing diverse markets as their operations become more international in scope
o Eg. Procter and Gamble, Wal-mart, Bank of America target specially designed
products, ads and promotions
- Gays and lesbians
- People with disabilities

Economic environment
 Factors that affect consumer buying power and spending patterns
 Changes in income
- Value marketing: the right combination of product quality and good service at a fair price
- Income distribution: upper class, middle class, working class, underclass
o Rich have grown richer, middle class has shrunk, poor have remained poor  two-
tiered market
 Changing consumer spending patterns
- How people shift their spending across food, housing, transportation, health care and
other goods and services categories as family income rises ~ Engel’s Law
- Changes in major economic variables have a large impact on the marketplace: Income,
cost of living, interest rates and savings and borrowing patterns

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Natural environment
 Natural factors that are needed as inputs by marketers or that are affected by marketing
activities
 Several trends in the natural environment
- Growing shortage of raw materials
o Air pollution chokes and water shortages
o Renewable resources – forests and food – to be used wisely
o Non-renewable resources – oil, coal and various minerals – getting scarce
- Increased pollution
o Disposal of chemical and nuclear wastes
o Littering environment with non-biodegradable bottles, plastics
 Increase government intervention in natural resource management
- Governments of different countries vary in their concern and efforts to promote a clean
environment
 Developing environmentally sustainable strategies and practices in an effort to create a world
economy that the planet can support indefinitely
 Responding to customer demands with more environmentally responsible products eg.
General Electric using ‘ecomagination’ to create products for a better world – cleaner
aircraft engines, cleaner locomotives, cleaner fuel technologies, Hewlett Packard pushing
legislation to force recycling of old TVs, computers and other electronic gear

Technological environment
 Forces that create new technologies, creating new product and market opportunities
 New technology replace old technology

Market leaders New market leaders

Products enhanced
Nature of the overtaken by which capitalised
by the disruptive
industry changing on the changing
technologies
technology technologies

Computer IBM Digital Mini computers

Computer Digital Apple Personal computers

Computer Apple Compaq Portable computers

 Companies that fail to keep up with technological change will miss out on new product and
marketing opportunities ~ Depends
- Dependent on what technology that is
o If company does not require that specific technology then by implementing it, the
benefits do not outweigh the costs
o Insufficient research done on the technology and its implementation process will
result in having the technology not operating as it is expected even after spending
large amount of money
- Service industry where human touch is still important
o Technology can aid in streamlining process, making services provided more
efficiently , recording and tracking history/trends, aiding in decision making
- Technology, when used appropriately, will prove to be useful and helpful to all biz
o Hard to find industry segments that does not require technology

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Political and Social environment

 Laws government agencies and pressure groups that influence and limit various organisations
and individuals in a given society
 Legislation regulating biz
- Increasing legislation
o Protect companies from each other by defining and preventing unfair competition
o Protect consumers from unfair biz practices
o Protect the interests of the society against unrestrained biz behaviour such as social
costs of company’s production or products
- Changing government agency enforcement
o Enforce trade policies and regulations
o Different government agencies each have their own discretions in enforcing the laws
 major impact on the company’s marketing performance
 Increased emphasis on ethics and socially responsible actions Pg 76
- Socially responsible behaviour of firms to actively seek out ways to protect the long-run
interests of their consumers and the environment
o Eg. Biz scandals and increased concerns about the environment, boom in internet
marketing
- Cause-related marketing: companies linking themselves to worthwhile causes or
charitable organisations
o Eg. Buy a pink mixer from KitchenAid and support breast cancer
o Eg. Launched in early 2006, Product Red is an example of one the largest cause-
related marketing campaigns to date given the number of companies and
organizations involved as participants as well as its reach worldwide. It is also an
example of a cause marketing campaign that is also a brand on its own. Product Red
was created to support The Global Fund to Fight AIDS, Tuberculosis & Malaria
(aka "The Global Fund") and includes companies such as Apple Computer,
Motorola, Giorgio Armani, and The Gap as participants.
- Controversy – ‘cause-related’ marketing is actually ‘cause-exploitative’ marketing: more
a strategy for selling than a strategy for giving
- If handled well, benefits both company (building a positive image) and the cause (gains
greater visibility and important sources of funding)

Cultural environment
 Institutions and other forces that affect society’s basic values, perceptions, preferences and
behaviours
 Persistence of cultural values
- Primary core beliefs and values have a higher degree of persistence
- Secondary beliefs and values are more open to changes
 Shifts in secondary cultural values
- Predict cultural shifts to spot new opportunities or threats
- Expressed in people’s views about themselves, others, organisations, society, nature,
universe
 Trends towards digital ‘cocooning’, a lessening trust of institutions, increasing patriotism,
greater appreciation for nature, a new spiritualism, search for more meaningful and enduring
values
 Lifestyles of Health and Sustainability (LOHAS): A 41-million person market who seek out
everyhing from antural, organic, and nutritional products to fuel-efficient cars and alternative
medicine.
o E.g. Wal-Mart Live Better Index

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Responding to Market Environment

 Passively accepting the marketing environment as an uncontrollable element to which they
must adopt, avoid threats and take advantage of opportunities as they arise
 Proactive stance by working to change the environment rather than simply reacting to it
 To be proactive rather than reactive

Significant Trends in the Next 10 Years

 Demographic environment: ageing population, smaller families
 Natural environment: people are getting more and more environmentally conscious
 Technological environment
 Political environment: emphasis on ethics and social responsibilities Pg 76, CSR

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LECTURE 3 – CHAPTER 7 Pg 1, 6

Chap 7 Customer-Driven Marketing Strategies designed to build the right relationships with the right
customers

4 Major Steps in Designing a Customer-Driven Marketing Strategy

 Market segmentation: dividing a market into smaller group with distinct needs,
characteristics, or behaviour who might require separate products or marketing mixes
 Market targeting: process of evaluating each market segment’s attractiveness and selecting
one or more segments to enter
 Market differentiation: actually differentiating the firm’s market offering to create superior
customer value
 Market positioning: arranging for a product to occupy a clear distinctive, and desirable place
relative to competing products in the minds of target consumers

Market Segmentation

Segmenting consumer markets

 Geographic segmentation: dividing a market into different geographical units ~ nations,
states, regions, countries, cities, neighbourhoods
- Eg. Procter and Gamble carrying different flavoured Pringles in different countries –
curry flavour in England, funky soy sauce flavour in Japan
 Demographic segmentation: dividing a market into groups based on variables ~ age
(cinemas), gender (UOB cards), family size, family life cycles (zoo membership cards),
income (credit cards), occupation (specialisation), education, religion (halai food), race
(language in newspapers), generation (MTV channels) and nationality (Germans – sausage)
 Psychographic segmentation: dividing a market into different groups based on social class,
lifestyle or personality characteristics
 Behavioural segmentation: dividing a market into groups based on knowledge, attitude, use
or response to a product  best starting point for building marketing segments
- Occasion segmentation: dividing a market into groups according to occasions when
buyers get the idea to buy, actually make their purchase, or use the purchased item
- Benefit segmentation: dividing a market into groups according to the different benefits
that consumers seek from the product eg. airlines
- User status: dividing a market into nonusers, ex-users, potential users, first-time users and
regular users of a product eg. California fitness
- Usage rate: dividing a market into light, medium and heavy product users eg. HPs’ lines
- Loyalty status: dividing a market by consumer loyalty eg. airlines – loyalty points,
loyalty to brands
 Using multiple segmentation bases
- To identify smaller, better defined target groups
- Help companies to better understand key customer segments, target them more efficiently
and tailor market offerings and messages to their specific needs

Segmenting biz markets

 Geographic, demographic, behavioural segmentation – best basis for market segmentation
 Additional variables include operating characteristics, purchasing approaches, situational
factors and personal characteristics
 By going after segments instead of entire market, companies can deliver just the right value
proposition to each segment served and capture more value in return

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 Eg. American Express targets biz in 3 segments – merchants: focus on convincing new
merchants to accept the card and maintaining relationships with those that already do,
corporations: offers corporate card program, wide range of asset management, retirement
planning and financial education services, small businesses: small biz can access a network
created by them for various services  distinct marketing programs for each segment

Segmenting international markets Pg 88

 Geographic, economic factors, political and legal factors, cultural factors  segments consist
of clusters of countries
 Intermarket segmentation: forming segments of consumers who have similar needs and
buying behaviour even though they are located in different countries
- Eg. Mercedes-Benz targets the world’s well-to-do regardless of their country, IKEA
targets the aspiring global middle class, MTV targets world’s teenagers

Requirements for effective segmentation

 Measurable: size, purchasing power, profiles of segments can be measured
 Assessable: market segments can be effectively reached and served
 Substantial: segments are large or profitable enough to serve
 Differential: segments must respond differently to different marketing mix elements and
programs
 Actionable: effective programs can be designed for attracting and serving the segments

Market Targeting

Evaluating market segments

 Segment size and growth: Analyze current sales, growth rates and expected profitability for
various segments
 Segment structural attractiveness: Consider effects of: competitors, availability of substitute
products and the power of buyers & suppliers
 Company’s objectives and resources: Compatibility with company’s long-run objectives,
company skills and resources needed to succeed in that segment

Selecting target market segments

 Target market: a set of buyers sharing common needs or characteristics that the company
decides to serve

Differentiated Micromarketing
Undifferentiated Concentrated
(segmented) (local or individual
(mass) marketing (niche) marketing
marketing marketing)

Targeting Targeting
broadly narrowly

 Undifferentiated (mass) marketing: market-coverage strategy in which a firm decides to

ignore market segment differences and go after the whole market with one
- Mass producing, mass distributing, mass promoting about the same product in about the
same way to all customers
 Differentiated (segmented) marketing: market-coverage strategy in which a firm decides to
target several market segments and designs separate offers for each eg. Estee Lauder, Procter
and Gamble, Nokia
- Increase costs of doing biz

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 Concentrated (niche) marketing: market-coverage strategy in which a firm goes after a large
share of one or a few segments or niches eg. Apple, Southwest Airlines
- Appealing when resources are limited
- With greater knowledge of consumer needs, companies can market more effectively and
efficiently
- Niches are small markets and may attract only one or a few competitors
- Can be highly profitable but involves higher-than-normal risks
 Micromarketing: the practice of tailoring products and marketing programs to the needs and
wants of specific individuals and local customers groups
- Local marketing: tailoring brands and promotions to the needs and wants of local
customer groups – cities, neighbourhoods, specific stores eg. Wal-mart
o Drive up manufacturing and marketing costs by reducing economics of scales
o Create logistic problems as companies try to meet the varied requirements of
different regional and local markets
o Dilution of brand’s overall image if products and messages vary too much in
different localities
- Individual marketing: tailoring products and marketing programs to the needs and
preferences of individual customer – also labelled as ‘markets-of-one marketing’,
‘customised marketing’ and ‘one-to-one marketing’
o Relationships with customers is crucial and essential
o Move towards consumer self-marketing where individual customers are taking more
responsibilities for determining which products and brands to buy  marketers have
less influence
 Choosing a targeting strategy depends on various factors:
- Company resources
o Limited resources  concentrated marketing
- Product variability
o Uniform products  undifferentiated marketing
o Products that vary  differentiated marketing, concentrated marketing
- Product lifecycle stage Pg 44
o Introductory stage  undifferentiated marketing, concentrated marketing
o Mature stage  differentiated marketing
- Market variability
o If most buyers have the same tastes, buy the same amounts and react the same way to
marketing efforts  undifferentiated marketing
- Competitive marketing strategies
o If competitors use differentiated marketing, concentrated marketing  using
undifferentiated marketing is suicidal
o If competitors use undifferentiated marketing  firm can gain an advantage by using
differentiated marketing, concentrated marketing

Socially responsible target marketing

 Issues involving the targeting of vulnerable or disadvantaged consumers with controversial or
potentially harmful products eg. children toys
 Issues arising when marketing of adult products spills over into the kid segment, intentionally
or unintentionally eg. tobacco and beer companies targeting underage smokers and drinkers
 Meteoric growth of the Internet and other carefully targeted direct media has raised fresh
concerns about potential targeting abuses
 Controversies arise when marketers attempt to profit at the expense of targeted segments –
unfairly target vulnerable segments or target them with questionable products or tactics
 Segmentation and targeting that serves the interests of those targeted as well

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Differentiation and Positioning

Product position: the way the product is defined by the target market segment on important
attributes – the place the product occupies in consumers’ minds (based in perceptions,
impressions and feelings) relative to competing products

Identifying possible value differences and competitive advantages

 Competitive advantage: an advantage over competitors gained by offering consumers greater
value, either through lower prices or by providing more benefits that justify higher prices
 Product differentiation: ie. Features, performance, style, design, attributes – consistency,
durability, reliability, reparability
 Service differentiation: ie. Delivery, installation, repair services, customer training services –
commerce bank 7 days a week, including evenings
 Channel differentiation: ie. Designing their channels’ coverage, expertise and performance
 People differentiation: ie. Hiring, training better people that competitors do – S’pore Airlines
 Image differentiation: ie. Symbols, atmospheres, events – Nike, Coca-cola, Ritz Carlton

Choosing the right competitive advantages

 How many differences to promote
- Too many will lead to risk of disbelief and a loss of clear positioning
 Which differences to promote depends on the satisfactory of the following criteria:
- Important – difference delivers a highly valued benefit to target buyers
- Distinctive – unique ownership, competitors do not offer the difference
- Superior – difference is superior to other ways that customer might obtain the same
benefit
- Communicable – difference is communicable and visible to consumers
- Pre-emptive – competitors cannot easily imitate the difference
- Affordable – buyers are able to pay for the difference
- Profitable – worthwhile for the company

Selecting an overall positioning strategy

 Value proposition: the full positioning of a brand – the full mix of benefits upon which it is
positioned
 More benefits for more price
- Providing the most upscale product and service and charging a higher price to cover the
higher costs
- Usually in an undeveloped product or service category
- Vulnerable, invites imitators
- Eg. Ritz Carlton
 More benefits for the same price
- Offering comparable quality but at a lower price
- Eg. Toyota’s Lexus line
 Same benefits for less price
- Powerful as everyone likes a good deal
- Development of imitations
- Eg. Dell, Wal-mart
 Less benefits for much less price
- Meeting consumers’ lower performance or quality requirements at a much lower price
- Eg. Southwest Airlines
 More benefits for less price
- Achieve lofty positions in the short run
- Difficulty to sustain such best-for-both positioning in the long run

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Dimensions for product positioning

 Attributes or benefits eg. Colgate fights bacteria, Darlie give white teeth
 Price or quality eg. Handphones, Rolls Royce
 Use/application eg. DOM good for confinement, Rejoice 2-in-1 shampoo and conditioner
 User eg. Johnson & Johnson
 Product class eg. Nestle NAN closer to mother’s milk, Saab
 Reference to competitors eg. Hertz vs Avis

Developing a positioning statement

 Positioning statement: statement that summarises company or brand positioning – it takes this
form, ‘To (target segment and need) our (brand) is (concept) that (point of different)’
 Effectively communicate and deliver chosen position to the market

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CHAPTER 4

Chap 4 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

Assessing Marketing Information Needs

Marketing means satisfying your customer’s needs and wants better than your competitors. Hence
to be successful, marketers need to have a complete understanding of the marketplace and their
customers’ needs and wants
 Sound information to produce superior value and satisfaction for customers
 Requires information on competitors, resellers and other actors and forces in the marketing
environment
 Viewing information as an important strategic asset and marketing tool
Managers do not need more information, they need better information

Developing Marketing Information

Internal data
 Internal databases: electronic collections of consumer and market information obtained from
data sources within the company network
- Sources include financial statements and reports, operations reports (production
schedules, shipments, inventories), marketing information (customer transaction,
demographics, psychographics and buying behaviours), customer service records
(customer satisfaction or service problems), sales force report (reseller reactions,
competitors’ activities), marketing channel partners (data on point-of-sale transactions)
 Assessable quickly and cheaply
 Incomplete or in the wrong form for making marketing decisions as they are collected for
other purposes
 Data ages quickly, keeping database current requires major effort
 Require highly sophisticated equipments and techniques to manage the large amount of data
and turn them into information that are well integrated and readily assessable
- Data mining: method that extracts patterns of, and individualised, information from large
masses of data, that are organised in a data warehouse eg. Amazon.com
o Benefits:
 Better understanding of customers
 Provide appropriate levels of service
 Enhance customer relationship
 Target customers more effectively
 Identify cross selling opportunities
 Develop customised products
o Differences:
Mass Marketing One-to-one Marketing
• Average customer • One-way message • Individual customer • Two-way messages
• Customer anonymity • Economies of scale • Customer profile • Economics of scope
• Standardised product • Share of market • Customised product • Share of customer
• Mass production • All customers • Customised production • Profitable customers
• Mass advertising • Customer attraction • Individualised message • Customer retention
• Mass promotion • Individualised incentives

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Market intelligence
 Systematic collection and analysis of publicly available information about competitors and
developments in the marketing environment
 Goal is to improve strategic decision making, assess and track competitors’ action and
provide early warning of opportunities and trends
 Primary sources of information – people inside the company, suppliers, resellers, key
customers, consultants
 Secondary sources of information – local newspaper, annual reports, patent/trademark filings,
biz publications, news releases, promotional literature, trade press, employee
communications, trade associates, government sources, electronic date services/Internet
 Serious ethically questionable sources of competitive information – help-wanted
advertisements, plant tours, reverse engineering, monitoring test markets, hiring key
employees, aerial reconnaissance, buying/stealing trash, printers, running phony wants ads,
snooping, surveillance
 Should take advantage of publicly available information but use them ethically Pg 76

Market research
 Systematic design, collection, analysis and reporting of data relevant to a specific marketing
situation facing an organisation

Defining the Developing the Implementing the

Interpreting and
problem and research plan for research plan –
reporting the
research collecting collecting and
findings
objectives information analysing the data

 Defining the problem and research objective

- Explanatory research objective: marketing research to gather preliminary information that
will help problems and suggest hypotheses (unaware of problem)
- Descriptive research objective: marketing research to better describe marketing problems,
situations or markets such as the market potential for a product or the demographics and
attitudes of consumers (aware of problem)
- Causal research objective: marketing research to test hypotheses about cause-and-effect
relationships (problem clearly defined)
- Guides the entire research process

 Developing the research plan for collecting information

- Gathering secondary data: information that already exists somewhere, having been
collected for another purpose
o Obtained more quickly and at a lower cost
o Needed information might not exist
o Evaluated to ensure relevance, accuracy, current and impartial
o Eg. online databases: computerised collections of information available from online
commercial sources or via the Internet
- Gathering primary data: information collected for the specific purpose at hand
- Measure attitude (scale), accessibility (top of the mind), recognition

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- Research approaches
Research Approaches Advantages Disadvantages
• Observational research: gathering of • Glean insights that cannot be obtained • Feelings, attitudes, motive or private
primary data by observing relevant through asking questions behaviour are difficult to observe
people, actions and situations • Obtain information that people are • Long term and infrequent behaviour is
(explanatory) unwilling or unable to provide difficult to observe

• Ethnographic research: a from of • Provides richer understanding of

observational research that involves consumers
sending trained observers to watch and • Focus on customers’ unarticulated desires
interact with consumers in their ‘natural
habitat’
• Survey research: gathering of primary • Most widely used • Inability of people to answer certain
data by asking people questions about • Flexibility – ability to obtain many questions – cannot remember, never
their knowledge, attitudes, preferences different kinds of information in different though of it before
and buying behaviour (descriptive) situations • Unwilling to response
• Giving biased responses – do not know
but answer the question to appear more
informed, just give pleasing answers
• Busy people
• Resentment to intrusion of privacy
• Experimental research: gathering of • Tries to explain the cause-and-effect
primary data by selecting matched groups relationship
of subjects, giving them different
treatments, controlling related factors and
checking for differences in group
responses (causal)

- Contact methods
Mail Telephone Personal Online
Flexibility Poor Good Excellent Good
Quantity of data collected Good Fair Excellent Good
Control of interviewer Excellent Fair Poor Fair
Control of sample Fair Excellent Fair Poor
Speed of data collection Poor Excellent Good Excellent
Response rate Fair Good Good Good
cost Good Fair Poor Excellent

*personal interviewing – individual, group, focus group: personal interviewing that

involves inviting 6 to 10 people to gather for a few hours with a trained interviewer to
talk about a product, service or organisation (Pros: useful for generating ideas or
hypotheses, more efficient than individual interviews, ‘brainstorming’ effect Cons:
affected by researcher or respondents bias – social pressure, hard to interpret)

*online interviewing – internet surveys, online panels, experiments and online focus
group

- Sampling plans
o Sample: a segment of the population selected for marketing research to represent the
population as a whole
o Ask: sampling unit? Sampling size? Sampling procedures? Probability or non-
probability samplings?

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- Research instrument
o Questionnaires
 Most common
 Administered in person, by phone, or online
 Flexible
 Must be careful with wording and ordering of questions
Ask: what to ask? Open-end or close-end? Wording of questions? Ordering of
questions?
o Mechanical devices
People meters, supermarket scanners, galvanometer (pulse), tachistoscope
(heartbeat), cameras (pupil dilation)
Eg. eye-tracking technology – make decisions on packaging or placements/spots that
are more attractive to customers’ attention
Weakness: dwelling too much on the relationship between items and customer,
technology results might differ from other results, different consumers have different
preferences, and consumers might give biased responses

 Implementing the research plan

- Collecting, processing and analysing the information
- Data collection ~ most expensive and prone to errors (guard against problems with
contacting respondents, respondents who refuse to cooperate or who give biased answers,
interviewers who make mistakes or take shortcuts)
- Process and analyse collected data to isolate important information and findings
- Check for accuracy and completeness and code it for analysis

 Interpreting and reporting the findings

- Apply information and provide researchers with sophisticated statistical procedures and
models from which to develop more rigorous findings
- Interpret findings, draw conclusions and report them to management in a way that is
agreed upon between the researcher and management

Analysing and Distributing Marketing Information

 Customer relationship management: managing detailed information about individual
customers and carefully managing customer ‘touch points’ in order to maximise customer
loyalty
- Development of data warehouses and use sophisticated data mining techniques to unearth
the riches hidden in customer data Pg 18
- Integrate, analyse and apply the mountains of individual customer data that help
marketers make better decisions
- Better understanding of customers leading to higher levels of customer service and
develop deeper customer relationships
- Pinpoint high-value customers, target them more effectively, cross-sell the company’s
products and create offers tailored to specific customer requirements
 Distributing and using marketing information
- Making the information readily available to the managers and others who make
marketing decisions or deal with customers
- Use of company intranet to share customers’ information within the organisation
- Use of company extranet to allow key customers and value-network members to assess
account, product and other data on demand eg. Wal-mart’s RetailLink extranet system

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Other Marketing Information and Considerations

 Marketing research in small businesses and non-profit organisations
- Can be conducted effectively as well even with limited budgets
- By simply observing, conducting informal surveys, conducting simple experiments
o Less complex and less costly
- Ability to obtain most of the secondary data
 International marketing research Pg 88
- Following almost the same steps but faced greater difficulties
o Diverse markets in many different countries
o Difficulty in finding good secondary data Pg 19 – must be obtain from many different
sources on a country-by-country basis, making it hard to compare or combine
o Difficulty in collecting primary data – hard to reach respondents in the sample
constructed
 Public policy and ethics Pg 76 in marketing research
- Intrusions on consumer privacy
o Fear of researches probing consumers’ deepest feelings or peeking over their
shoulders and then use the knowledge to manipulate their buying
o Increasing customer resentment
o Options to mitigate problem
 Educate consumers on the benefits of marketing research and to distinguish it
from telephone selling and database building
 Adopting broad standards outlining researchers’ responsibilities to respondents
and general public
- Misuse of research findings
o Subtle manipulations of the study’s sample or the choice or wording of questions can
greatly affect the conclusions reached
o Development of codes of research ethics Pg 76 and standards of the conduct –
privacy, confidentiality, avoidance of harassment

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CHAPTERS 5 AND 6

Chap 5 Consumer buying behaviour is the buying behaviour of final consumer – individuals and
households who buy goods and services for personal consumption

Consumer market comprises all the individuals and households who acquires goods and
services for personal consumption situates

Model of Consumer Buying Behaviour

Marketing and other Stimuli Buyer’s Black Box Buyer’s Responses

Marketing Other Product choice
Product Economic Buyer characteristics Brand choice
Price Technological Buyer decision process Dealer choice
Place Political Purchase timing
Promotion Cultural Purchase amount

Characteristics Affecting Consumer Behaviour

Cultural Social Personal Psychological Buyer

Culture Reference Age and life- Motivational
groups cycle stage
Subculture Perception
Family Occupation
Social class Learning
Roles and Economic
status situation Beliefs and
attitudes
Lifestyle
Personality and
self-concept

Cultural factors
 Culture: the set of values, perceptions, wants and behaviours learned by a member of society
from family and other important institutions
- Spot cultural shifts in order to discover new products that might be wanted
- Eg. Disneyland in Paris – France employee working for Disneyland drinking wine during
lunch is not acceptable in Paris ~ cultural mistake, Disneyland in Hong Kong – too small
while Asians like ‘big’ things
 Subculture: a group of people with shared value systems based on common life experiences
and situations
- Race, religion, nationality, geographic regions (Western vs Asian)

Western Cultures Asian Cultures

• Expression of opinions • Straight forward, direct • Go around way
• Way of life • Individual is more important than group • Group is more important
• Punctuality • Very punctual • Flexible, except for Japanese
• Contacts • Simple relationships • Complex, complicated networks
• Queue when waiting • Orderly • Everyone for himself
• Sundays on the road • Staying at home is important • Going out shopping is important
• Party • Clutter groups everywhere, speaking to • Bigger groups, table for 10
people around you only
• Noise level in the restaurant • Softer • Louder
• Traveling • Using the sense of sight to see and observe • Snapping photos is significant
• Handling of problems • Direct • Round about
• The child • Treated just as any other person • Significant attention given
• Transportation • Car to bicycle – environment friendly • Bicycle to car – increase in power, wealth
• Shower timing • In the morning • At night
• The Boss • Just like any other employee • Very, very important personnel

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 Social class: Relatively permanent and ordered divisions in a society whose members share
similar values, interests, and behaviours
- Measured by occupation, income, education, wealth or a combination of factors
o Upper class, Middle class, Working clss, Lower class
- Members within a given social class tend to exhibit similar buying behaviour

Social factors
 Groups and Social Network
- Group: 2 or more people who interact to accomplish individual or mutual goals
- Membership: group that have direct influence and to which a person belongs
- Reference: serve as a direct/indirect point of reference in forming a person’s attitude or
behaviour eg. Harvey Davidson
o People are often influenced by reference groups to which they do not belong
- Reach out to opinion leader - person within the reference group who, because of skills,
knowledge, personality or other characteristics, exerts social influence on others - to
create word of mouth and influence mass opinions eg. Procter and Gamble
- Buzz marketing: enlist or even create opinion leaders to serve as “brand ambassodors” to
spread the word about their products
- Online Social Network: marketers are using social network to interact with consumers
and become a part of their conversations and lives eg. Victoria Secret’s Facebook group
 Family
- Most important consumer buying organisation
- Factors include, husband-wife involvement, evolving consumer lifestyles, children
influencing buying decisions eg. Johnson & Johnson, LEGO wear
 Roles and status
- Role: activities people are expected to perform according to the persons around them
- Role carries a status reflecting the general esteem given to it by society
- Usuallu choose products appropriate to their roles and status

Personal factors
 Age and life-cycle stage
- People change the goods and services they buy over their lifetimes
- To develop appropriate products and marketing plans for each stage
- Eg. RBC Royal Bank identifies 5 life-stage segments
 Occupation
- Blue-collar: more rugged work clothes eg. Carhartt – rugged, durable, no-nonsense
- White-collar: more biz suits
 Economic situation
- Notice trends in personal income, savings and interest rates
- Economic indicators ~ recessions, booms
- Undertake steps to redesign, reposition and re-price products accordingly
 Lifestyle
- A person’s pattern of living as expressed in his or her activities, interest and opinions
- Measures consumers’ activities (work, hobbies, shopping, sports, social event), interests
(good, fashion, family, recreation) and opinions (about themselves, social issues, biz,
products)
 Personality and self-concept
- Personality: unique psychological characteristics that lead to relatively consistent an
lasting responses to one’s own environment
- Brand personality: specific mix of human traits that may be attributed to a particular
brand

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- 5 brand personality traits:

o Sincerity: down to earth, honest, wholesome, cheerful eg. Titan, Campbell, Dove
o Excitement: daring, spirited, imaginative, up-to-date eg. Swatch, MTV, Apple
o Competence: reliable, intelligent, successful eg. Senko, CNN, BBC
o Sophistication: upper class and charming eg. Party Philips
o Ruggedness: outdoorsy, tough eg. Tag Heuger, Levi’s

Psychological factors
 Motivation
- A need that is sufficiently pressing to direct the person to seek satisfaction of the need
- Sigmund Freud (psychologist)
o People are largely unconscious about the real psychological forces shaping their
behaviour
o Person’s buying decisions are affected by subconscious movies that even the buyer
do not understand
o Uses variety of probing techniques to uncover underlying emotions and attitudes
toward brands and buying situations
- Maslow hierarchy of needs (Physiological, Safety, Social, Self-esteem, Self-actualisation)
o Satisfying the most important need first then move up the ladder
 Perception
- Process by which people select, organise and interpret information to form a meaningful
picture of the world
- Forming different perceptions of the same stimulus
o Selective attention: tendency for people to screen out most of the information to
which they are exposed to
o Selective distortion: tendency for people to interpret information in a way that will
support what they already believe
o Selective retention: tendency for people to remember good points made about a brand
they favour and forget the good points made about competing brands
- Work harder in getting their message through – repetition and drama
- Subliminal advertising: being affected by marketing messages without even knowing
about it ~ consumers fear of being manipulated by subliminal messages
 Learning
- Changes in individual’s behaviour arising from experience
- Occurs through the interplay of dirves, stimuli, cues, responses and reinforcement
o Drive: strong internal stimulus that calls for action
o Becomes a motive when it is directed toward a stimulus object
o Cues: minor stimuli that determine when, where, and how the person responds
o Influence a consumer’s response to his or hr interest in buying a product
 Beliefs and attitudes
- Belief: a descriptive though that a person has about something
o Based on real knowledge, opinion of faith
- Attitude: a person’s relative consistent evaluations, feeling and tendencies toward an
object or idea
o Frame of mind of liking or disliking things, moving towards or moving away from
them
o Hard to change attitude and hence company usually try to fit ins products into
existing attitudes rather than an attempt to change attitudes eg. Coca-Cola’s Fuze

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Situational Influences that Impact Purchase Decision:

 Purchase task and sponsor: whether purchase is for a gift or own consumption? Who is
paying?
 Social surroundings: presence of other people when the purchase is made
 Physical surroundings: store’s decorations, music, lighting and how crowded it is
 Temporal effects: time of the day or the amount of time available to make the purchase
 Antecedent states: consumer’s mood or the amount of cash in hand can influence the
purchase behaviour and choice

Types of Buying Behaviour (4 Types)

Complex buying behaviour Variety-seeking buying

Differences in Brands

Significant Require more information – behaviour

differences expensive, risky items A lot of brand switching – eg.
deciding what to eat in a foodcourt
Dissonance-reducing buying Habitual buying behaviour
behaviour Usually choosing the same item
Few
differences Buy relatively quickly, respond to out of habit rather than brand
a good price or purchase loyalty – eg. low cost, frequent
convenience – eg. carpets purchase items

High Involvement Low Involvement

Level of Involvement

The Buying Decision Process (5 Stages)

Need Information Evaluation of Purchase Post purchase

recognition search alternatives decision behaviour

Need recognition
 Consumer recognises a need or a problem
 Triggered by internal stimuli, rising to a level high enough to become a drive
 Can also be triggered by external stimuli : an advertisement or discussion with a friend

Information search
 Consumer is aroused to search for more information – have heightened attention or may go
into active information search
 Sources: personal (family, friends, neighbours, acquaintances), commercial (advertising,
salespeople, websites, dealers, packaging, displays), public (mass media, internet),
experiential (handling, examining, using the product)
 Personal source: most effective
 Commercial source: inform the buyer, but Personal sources legitimise or evaluate products
for the buyer

Evaluation of alternatives
 Consumer uses information to evaluate brands in the choice set
 Careful calculations and logical thinkings or buying on impulse and relying on intuitions
 Considering potential attributes of interests, brand beliefs and brand image

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 However, at times consumers do little or no evaluating; instead they buy on impulse and rely
on intuition

Purchase decision
 Consumer’s decision about which brand to purchase
 Factors between purchase intention and purchase decision
- attitudes of others
- unexpected situational factors ie. Economic downturn, close competitor drop its price

Post purchase behaviour

 Consumer takes further action after purchase, based on satisfaction or dissatisfaction
 Relationship between consumer’s expectation and product’s perceived performance Pg 3
- Product falls short of expectation ~ dissatisfaction
- Product matches expectation ~ satisfaction
- Product exceeds expectation ~ high satisfaction or delighted
 Cognitive dissonance: buyer discomfort caused by post purchase conflict
 Important to satisfy customers
 Customer satisfaction is a key to building profitable relationships with consuermers – to
keeping and growing consumers and reaping their lifetime value
 A company should set up systems that encourage customers to complain

Adoption Process

 Mental process through which an individual passes from first hearing about an innovation to
final adoption
 5 Stages:
- Awareness: consumer becomes aware of the new product but lacks information about it
- Interest: consumer seeks information about the new product
- Evaluation: consumer considers whether trying the new product makes sense
- Trial: consumer tries the new product in a small scale to improve his or her estimate of its
value
- Adoption: consumer decides to make full and regular use of the new product

Individual Differences in Innovativeness

 5 Adopter categories
- Innovators: try new ideas at some risk, venturesome Pg 61
- Early adopters: opinion leader in their communities and adopt new ideas early but
carefully
- Early majority: adopt new ideas before the average person, deliberate
- Late majority: adopt innovation after majority of the people have tried it, sceptical
- Laggards: suspicious of changes and adopt the innovation only when it has become
something of a tradition itself

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Influence of product characteristics on rate of adoption

- Relative advantage: degree to which innovation appears superior to existing products
- Compatibility: degree to which innovation fits the values and experiences of potential
consumers
- Complexity: degree to which innovation is difficult to understand and use
- Divisibility: degree to which innovation may be tried on a limited basis
- Communicability: degree to which the results of using the innovation can be observed or
described to others

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Chap 6 Biz buying behaviour is the buying behaviour of organisations that buy goods and services for
use in the production of other products and services or for the purpose of reselling or renting them
to others at a profit

Biz market comprises all the organisations that buy goods and services for use in the production
of other products and services that are sold, rented, or supplied to others

 Market structure and demand

- Contain fewer but larger buyers
- Customers are more geographically concentrated
- Buyer demand is derived from final consumer demand
- More inelastic: not affected as much in the short run by prior changes
- Demand fluctuates more and quickly
 Nature of buying unit
- Purchases involved more buyers
- Involves a more professional purchasing effort
 Types of decision and decision process
- Faced more complex buying decisions
- Process is more formalised
- Close supplier-customer relationship: buyers and sellers work closely together and build
long-term relationships
- Supplier development is practised by many customer companies

Model of Biz Buying Behaviour

The Environment The Buying Organisation Buyer’s Responses

Marketing Other Product or service choice
Product Economic The buying center Supplier choice
Price Technological Buying decision process Order quantities
Place Political Interpersonal and individual Delivery terms and times
influences
Promotion Cultural Service terms
Organisational influences
Competitive Payment

Major Types of Buying Situations

 Straight rebuy: a biz buyer situation in which the buyer routinely reorders something without
any modifications
- Based on past purchasing satisfaction, buyer chooses the various suppliers on its list
- Few decisions made
 Modified rebuy: a biz buyer situation in which the buyer wants to modify product
specifications, terms, prices or suppliers
- Involves more decision participants
 New task: a biz buyer situation in which the buyer purchases a product or service for the first
time
- The greater the cost and risk, the more decision participants involved with greater efforts
to collect information
- Marketer’s greatest opportunity and challenge
- Much more complicating buying situation

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 System selling: buying a packaged solution to a problem from a single seller, thus avoiding
all the separate decisions involved in a complex buying situation  key biz marketing
strategy for winning and holding accounts

Participants in the Biz Buying Process

Buying center: all the individual and units that play a role in the purchase decision-making
process

 Users: members of the buying organisation who will actually use the purchased product or
service
 Influencers: people in an organisation’s buying center who affect the buying decision – help
to define specifications and also provide information for evaluating alternatives
 Buyers: people in an organisation who have the formal authority to select the supplier and
arrange terms of purchase
 Deciders/approvers: people in an organisation who have the formal or informal power to
select or approve the final suppliers
 Gatekeepers: people in an organisation who control the flow of information to others
Marketers to know who participates in the decision, each participant’s relative influence and the
evaluation criteria used by each decision participant

Major Influences on Biz Buyer Behaviour

Environmental Organisational Interpersonal Individual Buyer

Economic Objectives Authority Age
developments
Policies Status Education
Supply
conditions Procedures Empathy Job position
Technological Organisational Persuasiveness Personality
change structure
Risk attitudes
Political & Systems
regulatory
developments
Competitive
developments
Culture and
customs

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The Biz Buying Process (8 Stages)

1 Problem recognition  Someone in the company recognises a problem or need that can be met by acquiring a
good or a service
 Results from both internal or external stimuli
2 General need description  Company describes the general characteristics and quantity of a needed item
 Standard items – few problems
 Complex items – to work with others
 Rank the importance of reliability, durability, price and any other attributes
3 Product specification  Company decides on and specifies the best technical product characteristics for a
needed item
 Value analysis: approach to cost reduction in which components are studied carefully
to determine if they can be redesigned, standardised or made less costly methods of
production
4 Supplier search  Buyer tries to find the best vendors
 Compile a list of qualified suppliers through trade directories, internet or phoning
other companies for recommendations
5 Proposal solicitation  Buyer invites qualified suppliers to submit proposals
 If item is expensive and complex, require detailed written proposals and/or formal
presentation

6 Supplier selection  Buyer reviews proposals and selects a supplier or suppliers

 Based on a list of desired supplier attributes and their relative importance drawn up
 Carrying out negotiations with preferred suppliers
7 Order-routine specification  Buyer writes the final order with the chosen supplier(s), listing the technical
specifications, quantity needed and expected time of delivery, return policies and
warranties
 Blanket contract – long term relationship in which supplier promises to resupply the
buyer as needed at agreed prices for a set time period
 Vendor-managed inventory – sharing ordering and inventory responsibilities with key
suppliers
8 Performance review  Buyer assesses the performance of the supplier and decides to continue, modify or
drop the arrangement

Seven Common Organisational Buying Criteria

 Price
 Ability to meet the quality specifications
 Ability to meet the required delivery schedule
 Technical capability
 Warranties and claims policies
 Past performance on previous contracts
 Production facilities and capacity
 What other factors or which factor is more important varies from case to case ~ depends on
each biz’ needs and wants

E-Procurement: Buying on the Internet

 Online purchasing has grown rapidly – increasingly connecting with customers online to
share marketing information, sell products and services, provide customer support services
and maintain ongoing customer relationships eg. General Electrics, Dell, Hewlett Packard
 Benefits:

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- Shaves transaction costs and results in a more efficient purchasing for both buyers and
suppliers
- Reduces the time between order and delivery
- Frees purchasing people to focus on more strategic issues
 Problems:
- Erode decades-old customer-supplier relationships
- Create potential security disasters

Institutional and Government Markets

 Institutional market
- Schools, hospitals, nursing homes, prisons and other institutions that provide goods and
services to people in their care
- Characterised by low budgets and captive patrons
 Government market
- Governmental units – federal, state and local – that purchase or rent goods and services
for carrying out the main functions of government
- Purchase products and services for defence, education, public welfare and other public
needs
- Government buying practices are highly specialised and specified, with open bidding or
negotiated contracts characterising most of the buying
- Carefully watched by outside public on how taxpayers’ money is spent  require more
forms and signatories and to respond more slowly and deliberately when placing orders
- Suppliers have to master the system and find ways to cut through the red tapes as
purchases made by governments are huge
- Government buyers are asked to favour depressed business firms and areas
- However, many companies that sell to government are not very marketing oriented:
o Government spending not determined by their marketing effort
o Government emphasied on LOW price  suppliers invest in bringing the cost down
instead

Consumer Buying Process versus Biz Buying Process

Consumer Buying Process Business Buying Process

• Buyer has little or no bargaining power • Buyer has greater bargaining power ~ buying in bulks
• Not required to know or question seller’s reputation • Need to know and question seller’s reputation as buyer’s
business reputation depends on the quality of the seller’s
products
• Little or no procedures and formalities involved • Proper procedures and more formalities involved
• Little or no negotiations involved • More negotiations involved
• Elastic demand – customers tend to buy more if there is • Inelastic demand
a discount
• Simple ~ consumer, himself is involved in the decision • Complex ~ more people involved in the decision
making only making
• No close supplier-customer relationship • Close supplier-customer relationship

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LECTURE 6 – CHAPTERS 2 AND 18

Chap 2 Customer relationship management is the overall process of building and maintaining
profitable customer relationships by delivering superior customer values and satisfaction
 Relating for long term Pg 3
- Costs 5 times as much to attract a new customer as to keep a current one satisfied
- Losing a customer means losing the entire stream of purchases over a lifetime of
patronage = customer lifetime value
 Customer satisfaction model Pg 3, 26
 Customer value

Customer Value
Benefits
=
Costs
Emotional benefits + Functional benefits (product value, service value, personnel value, image value)
=
Monetary costs + Non-monetary costs (monetary cost, time cost, energy cost, psychic costs)

 Marketing Mix – MICE Pg 7

- Matching prices, Innovative products, Creative promotions, Effective placing
 Building customer relationships important?
- Yes ~ root of networking, ability to retain customers for long term
- No ~ product must be appropriate and of certain quality, ability to identify the correct
customer first
 Customer loyalty and Retention Pg 3

Chap 18 The Need to Understand Competitors and Customers

 Effective marketing strategy – consider both competitors and customers

 Building profitable customer relationships – satisfying target consumer needs better than
competitors do
 Gaining a competitive advantage (providing greater value than competitors) – continuously
analyse competitors and develop competitive marketing strategies that position it effectively
against competitors

Competitor Analysis

Identifying the Assessing competitors’ objectives, Selecting which

company’s strategies strengths and weakness competitors to
competitors and reaction patterns attach or avoid

Identifying Competitors
 Identifying competitors from industry point of view or market point of view
 Types of direct/indirect competition
- Brand ~ most direct eg. mac vs burger king
- Form ~ has some similarities eg. mac vs pizza hut
- Generic ~ satisfy same needs eg. mac vs food court
- Desire ~ competing for limited resources eg. mac vs movie

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 Avoid competitor myopia: company is more likely to be buried by its latent competitors than
its current ones

Assessing competitors
 Determining competitor’s objectives
- Know the relative importance that a competitor places on current profitability, market
share growth, cash flow, technological leadership, service leadership and other goals
- Know if competitor is satisfied with current situation and how it might react to different
competitive actions
 Identify competitors’ strategies
- Look at all dimensions that identify strategic groups: a group of firms in an industry
following the same or a similar strategy
- Understand how each competitor delivers value to customers
o Know its product, quality, features and mix, customer service, pricing policy,
distribution coverage, sales force strategy, advertising and sales promotion programs,
R&D, manufacturing, purchasing, financial and other strategies
 Assessing competitors’ strengths and weaknesses
- Learn through word of mouth, secondary data and personal experience
- Conduct primary marketing research with customers, dealers and suppliers
- Benchmarking: process of comparing the company’s products and processes to those of
competitors or leading firms in other industries to find ways to improve quality and
performance
 Estimating competitor’s reaction
- Require a deep understanding of a competitor’s mentality to anticipate how they act or
react

Selecting competitors to attack and avoid

 Strong or weak competitors
- Compete against weak competitors ~ require fewer resources and time
- Compete against strong competitors ~ sharpen abilities, succeeding them brings about
greater returns
- Customer value analysis: analysis conducted to determine what benefits target customers
value and how they rate the relative value of various competitors’ offers
o Identifies major attributes that customers value and the importance customers place
on these attributes
o Assesses company’s and competitors’ performance on the valued attributes
 Close or distant competitors
- Compete with close competitors – those who resemble them most eg. Nike against
Adidas rather than Timberland
- Avoid trying to destroy close competitors
o Weak competitors to sell out to larger firms and as a result, company face larger
competitors and tougher competitors eg. Bausch & Lomb and Johnson & Johnson
 ‘good’ or ‘bad’ competitors
- ‘good’ competitors play by the rules of the industry
- ‘bad’ competitors break the rules ~ try to buy shares instead of earning it, take big risks
and play by their own rules
- Eg. Yahoo! Music Unlimited sees Napster, Sony Connect as ‘good’ competitors but
‘Apple’s iTune music store as a ‘bad’ competitor
- Implication: ‘good’ competitors would like to shape the industry that consists of only
well-behaved competitors  support ‘good’ competitors, aiming attacks at ‘bad’
competitor

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Designing a competitive intelligence system

 Information must be collected, interpreted, distributed and used consistently
 Design in a cost-effective way
 Ability to obtain full and reliable information about any competitor affecting their decisions

Competitive Strategies

Approaches to marketing strategies

 Entrepreneurial marketing: individuals visualise an opportunity, construct flexible strategies
to gain attention
 Formulated marketing: develop formal marketing strategies and adhere to them more closely
 Intrepreneurial marketing: re-establish the entrepreneurial spirit and actions, encouraging
more initiative and refresh their marketing strategies and try new approaches

Basic competitive strategies

 Overall cost leadership ~ secure price value advantage, good value for money eg. Wal-mart,
Dell, Texas Instruments
 Differentiation ~ gaining competitive advantage by creating a highly differentiated product
line and marketing programs, frequent innovations eg. IBM, Caterpillar
 Focus ~ niche market, focusing its effort on serving a few market segments well rather than
going after entire market eg. Ritz Carlton
 Middle-of-the-roaders ~ do not pursue a clear strategy, try to be good on all strategic counts,
but end up being not good at anything, should not use this eg. Sears, Holiday Inn

3 disciplines of a market leader

 Operational excellence
- Leading its industry in price and convenience
- Works to reduce costs and to create a lean and efficient value delivery system
- Eg. Wal-mart, Washington Mutual, Dell, Southwest Airlines
 Customer intimacy
- Precisely segmenting its markets and tailoring its products or services to match exactly
the needs of targeted customers
- Specialise in satisfying unique customer needs through a close relationship with and
intimate knowledge of the customer
- Build long term customer loyalty and to capture customer lifetime value
- Eg. Nordstrom, Ritz Carlton, Lexus
 Product leadership
- Offering a continuous stream of leading-edge products or services
- Open to new ideas, relentlessly pursue new solutions and work to get new products to
market quickly
- Serve customers who want state-of-the-art products and services
- Eg. Nokia, Microsoft

Competitive Positions
 Market leader: firm in an industry with the largest market share
 Market challenger: runner-up firm that is fighting hard to increase its market share in the
Do not apply to
industry entire company,
 Market follower: runner-up firm that wants to hold its share in an industry without rocking only to its position
the boat in a specific
industry
 Market nicher: firm that serves small segments that the other firms in an industry overlook or
ignore

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Market Leader Strategies Market Challenger Strategies Market Follower Strategies Market Nicher Strategies
 Expand total market  Full frontal attack  Follow closely  By customer, market,
 Protect market share  Indirect attack  Follow at a distant quality-price, service
 Expand market share  Multiple niching

Market leader strategies

 Expanding total market
- Ansoff’s Product/Market expansion grid Pg 6
- Developing new uses, new uses and more usage of product Pg 45
 Protect market share
- Prevent or fix weaknesses that provide opportunities for competitors, fulfill its value
promises
- Defence strategies
o Position defence ~ not much of a defence, thinking that company is strong
o Flanking ~ do not want to leave any areas open or unprotected, allowing competitors
to move in
o Pre-emptive ~ attack before competitor attacks
o Counter attack ~ Avis vs Hertz: ‘we try harder’, ‘keep trying’
o Mobile ~ moving into other areas
o Strategic withdrawal ~ pulls out when company feels that biz is not worth the effort
eg. Fisherprice
 Expand market share
- Profitability increases as biz gains share relative to competitors in its served market
- Eg. Lexus: hold small market share but earning high profits as it is the leading brand in
the luxury-performance car segment
- High shares leading to high profits only when unit costs fall or company offers a superior
quality product and charges a premium price that more than covers the costs

Market challenger strategies

 Define which competitors to attack and its strategic objective
 Full frontal attack
- Head on attack on competitor’s product, advertising, price and distribution efforts
- Attacks on its strengths rather than weaknesses
- Outcome depends on who has the greater strength and endurance
 Indirect attack
- Flanking ~ identify areas that are open or unprotected in the competitor’s market
coverage, competitor’s weakness and move in
- Encirclement
- Bypass ~ avoid competitor, avoid its area of expertise eg. colgate vs crest

Market follower strategies

 Follow closely or follow at a distant
- Imitator ~ copies legally but differentiates slightly from the leader eg. Mikoyan, Indian
- Adaptor ~ adapts the leader’s products eg. jollybeans, mac, JOC v Dunking Donuts
- Cloner ~ emulates the leader’s products eg. Roda vs Roda watch
 Benefits
- Market leader bears the huge expenses of developing new products and new markets,
expanding the distribution and educating the market
- Uses less investments yet able to copy market leader
- Probably not able to overtake market leader, but is generally profitable

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Market nicher strategies

 Small firm with limited resources, not likely to attract attention of larger firms
 Specialists in some end use, customer size, specific customer, geographical area or service
 Profitable – knowing the target customer group so well that it meets their needs better than
other firms that sell casually to that niche
 Charging a substantial mark-up over costs because of the added value
 Strategies
- Premium price: Bulthaup (kitchen fittings)
- High value: Patek Philippe
- High quality: HP calculators
- High service: Oriental Hotel, Bangkok
- Specialisation: Neville Clark (helping company achieve their ISO 9000)

Balancing Customer and Competitor Orientations

 Watch competitors closely and find the competitive marketing strategy that positions it most
effectively
 Adapt strategies to fast changing competitive environment

Customer-centered

No Yes
Product Orientation Customer Orientation
Company that pays little attention Company that focuses on customer
Competition-centered

to both competitors and customers developments in designing its

No
marketing strategies and on
delivering superior value to its
target customers
Competitor Orientation Market Orientation
Company whose moves are mainly Company that pays balanced
Yes based on competitors’ actions and attention to both customers and
reactions competitors in designing its
marketing strategies

 Competitor oriented company

- Develops fighting orientation, watches for its own weaknesses and searches out
competitors’ weaknesses
- Too reactive, ending up simply matching or extending industry practices rather than
seeking innovative new ways to create more value for customers
 Customer oriented company
- Better position to identify new opportunities and set long-run strategies
- Ability to decide what customer groups and what emerging need are the most important
to serve
- Concentrate resources on delivering superior value to target customers
 Market oriented company
- Must not let competitor watching blind them to customer focusing

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LECTURE 7 – CHAPTERS 8 AND 9

Chap 8 Product is anything that can be offered to a market for attention, acquisition, use, or consumption
that might satisfy a want or need

3 Levels of Product and Service

 Core benefit: core, problem-solving benefits

that consumers seek
 Actual product: turning the core benefit into
something tangible
 Augmented product: offering additional
customer services and benefits  complex
bundle of benefits
 Providing the most satisfying customer
experience

Product and Service Classifications

Consumer products: products and services bought by final consumers for personal consumption

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 Convenience product – consumer product that the customer usually buys frequently,
immediately and with minimum of comparison and buying effort
 Shopping product – consumer good that the customer, in the process of selection and
purchase, characteristically compares on such bases as suitability, quality, price and style
 Specialty product – consumer product with unique characteristics or brand identification for
which a significant group of buyers is willing to make a special purchase effort
 Unsought product – consumer product that the consumer either does not know about or
knows about but does not normally think of buying

Industrial products: product bought by individuals and organisations for further processing or for
use in conducting a biz
 Materials and parts – raw materials and manufactured materials and parts
 Capital items – industrial products that aid in the buyer’s production or operations, including
installations and necessary equipments
 Supplies and services – operating supplies, repair and maintenance items  under contracts

Product and Service Decisions Pg 47

Individual product decisions

Product Product
Branding Packaging Labeling
attributes support svs

 Product attributes
- Product or service benefits are communicated and delivered to customers through
attributes such as quality, features, style and design
 Branding Pg 39
- Name, term, sign, symbol, design or a combination of these that identifies the products or
services of one seller or a group of sellers and differentiates them from those of
competitors
- Giving company competitive advantages:
o Help consumers identify products that might benefit them
o Says something about product quality and consistency
o Brand name and trademark provide legal protection for unique product features that
otherwise might be copied by competitors
o Help sellers to segment the market
 Packaging
- Activities of designing and producing the container or wrapper for a product
- Good packaging creates instant consumer recognition of the company or brand
- Innovative packaging can give a company an advantage over competitors and boost sales
- Examples:
o Heinz revolutionised by inverting the ketchup bottle to allow customers to squeeze
out every last bit of ketchup
o Kraft: hard-to-use, end opening bags and often transferred out – create resealable
nag that opens from the top
- Reminder not to overdo and waste resources
 Labelling
- Identifies the product or brand, describes several things about the product, promote
product and support its positioning

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- Set mandatory labelling requirements to prevent misleading customer or failing to

describe important details or include safety warnings
 Product support services
- Survey customers periodically to assess the value of current services and to obtain ideas
for new ones
- Assess the costs of providing these services
- Now, with use of sophisticated mix of phone, e-mail, fax, Internet, interactive voice and
data technologies

Product line decisions

 A group of products that are closely related because they function in a similar manner, are
sold to the same customer groups, are marketed through the same types of outlets, or fall
within given price ranges
 Product line length: increasing the number of items in the line of product
- Line stretching: lengthen product line beyond its current range to serve both ends of the
market – upwards, downwards, both
- Line filling: adding more items within the present range of the product line
o Reaching for extra profits, satisfying dealers, using excess capacity, being the leading
full-line company, plugging holes to keep competitors out

Product mix decisions

 Set of product lines and items that a particular seller offers for sale
 4 important dimensions:
- Product mix width: number of different product lines the company carries
o Colgate: personal and homecare products, Wal-mart: 100k to 120k products
- Product mix length: total number of items company carries within its product lines
o Colgate: many brands within one line  personal care line: Softsoap liquid soaps
and body washes, Liquid Spring bar soaps, Speed Stick deodorants
- Product mix depth: number of versions offered of each product in the line
o Colgate toothpastes come in 11 varieties eg. Colgate Total, Colgate Sensitive
- Product mix consistency: refers to how closely related the various product lines are in end
use, product requirements, distribution channels or some other ways
 Tools for developing company’s product strategy

Branding Strategy Pg 38

Brand equity
 The positive differential effect that knowing the brand name has on customer response to the
product or service
 Represents customers’ perceptions and feelings about a product and its performance –
everything that the product or service means to a consumer
 The extent to which customer are willing to pay more for the brand
 Brand with strong brand equity is a very valuable asset
- Capture customer preference and loyalty ~ deep connections with consumers
- High consumer awareness
- Company having more leverage in bargaining with resellers
- Carrying high credibility ~ easy for company to launch line and brand extensions
- Forms the basis for building strong and profitable customer relationships ~ customer
equity (value of customer relationships that the brand creates)
 Brand valuation: process of estimating the total financial value of a brand ~ hard to measure

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Building strong brands

Brand Positioning Brand Name Selection Brand Sponsorship Brand Development

Attributes Selection Manufacturer’s brand Line extensions
Benefits Protection Private brand Brand extensions
Beliefs and values Licensing Multibrands
Co-branding New brands

Brand positioning
 Branding on product attributes
- Easy to be imitate, customers are not interested in attributes, but more interested in what
the attributes will do for them
- Eg. The Body Shop
 Branding on desirable benefits
- Talking on resulting ‘beauty’ benefits
- Eg. Volvo (safety), Nike (performance), Lexus (quality)
 Branding on beliefs and values
- Engaging customers on a deep, emotional level
- Eg. Starbucks, Godiva
 Establish a mission for the brand and a vision of what the brand must be and do
 Company’s promise to deliver a specific set of features, benefits, services and experiences
consistently to the buyers
 Kept simple and honest

Brand name selection

 Careful review of the product and its benefits, target market and proposed marketing
strategies
 Desirable qualities
- Suggest something about the product’s benefits and qualities eg. Craftsman, Beautyrest
- Easy to pronounce, recognise and remember eg. Tide, Silk
- Distinctive eg. Lexus, Oracle
- Extendable eg. Amazon.com
- Easily translates into other foreign language
- Capable of registration and legal protection, not infringing on existing brand names
 Carefully protecting the brand name once established ~ brand with registered trademark
symbol

Brand sponsorship
 Manufacturer’s brands
- Eg. Kellogg, Apple
 Private brand eg. Sears
- A brand created and owned by a reseller of a product or service
- Retailers control what products they stock, where they go on the shelf and what prices
they charge
- Hard to establish, costly to stock and promote
- Yield higher profit margins for retailers and give retailers exclusive products  greater
store traffic and loyalty
- Invest in R&D to bring out new brands, features and continuous quality improvements to
fend off other private brands

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 Licensing
- Name or character or symbols previously created by other manufacturers, names of well-
known celebrities or characters from popular movies and books ~ instant and proven
brand name just for a fee
- Eg. Calvin Klein, Gucci, Sesame Street, Disney, Scooby Doo, Peanuts
- Name and character licensing has grown rapidly in the recent years
- Can be a highly profitable biz
 Co-brand
- Practice of using the established brand names of 2 different companies on the same
product
- Eg. Bravo! Food co-brand with MasterFood  M&Ms, Snickers, Starburst
- Advantages
o Broader consumer appeal
o Greater brand equity
o Efficient means of expansion into new product categories
- Limitations
o Complex legal contracts
o Requires careful coordination of advertising, sales promotion and other marketing
efforts
o Requires that partners trust one another

Brand development

Product category

Existing New
Line Extension Brand Extension
Existing Extending an existing brand name Extending an existing brand name
to new forms, colours, sizes, to new product categories
Brand name

ingredients or flavours of an
existing product category
Multibrands New Brands
New

 Line extension
- Eg. Yoplait  new yogurt flavours, yogurt smoothie, Morton Salt  Morton sea salt,
Morton lite salt
- As a low cost, low risk way to introduce new products, meet customer desires for variety,
use excess capacity, command more shelf space from resellers
- Overextended brand might lose its specific meaning, come at an expense of other items in
the product line eg. Hershey’s Kisses ~ brand seems like just another flavour
 Brand extension
- Eg. Kimberly-Clark  Huggies diapers to full line of toiletries
- Give new product instant recognition and faster acceptance
- Higher advertising costs to build new brand name, involving higher risks of confusing
image of main brand, harming consumer attitudes toward other products carrying the
same brand name, not appropriate for the particular new product

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 Multibrands
- Eg. Procter and Gamble
- Establish different features and appeal to different buying motives
- Obtain only small market share where non may be very profitable, spreading resources
over many brands instead of building a few brands to a highly profitable level
- Company should reduce number of brands and set up tighter screening procedures for
new brands
 New brands
- Power of existing brand is waning and a new brand is required or create new brand name
when it enters a new product category as none of the current brand names are appropriate
- Eg. Toyota created Scion brand targeted toward GenY consumers Pg 10
- Offering too many new brands might result in company spreading its resources too thin,
too many brands with little differences
- Should weed out weaker brands and focusing on brands that can achieve number-one or
number-two market share positions in their categories eg. Procter and Gamble

Managing brands
 Brand’s positioning must be continuously communicated to consumers
- Major brand marketers often spend huge amounts on advertising to create brand
awareness and to build preference and loyalty
- Create name recognition, brand knowledge and some brand preference
 Maintaining by brand experience
- Personal experience with the brand, word of mouth, company websites and others
 Carry on internal brand building to help employees understand and be enthusiastic about the
brand promise
 Managing company’s brand as asset is a long term strategy
- Brand asset management team, brand equity managers
- Maintain and protect brand’s image, associates and quality
- Prevent short term actions from hurting the brand
 Periodically audit their brands’ strengths and weaknesses
- Brand needing more support or need to be dropped or to be rebrand or reposition because
of changing customer preferences or new competitors

Chap 9 New product development is the development of original products, product improvements,
product modifications and new brands through the firm’s own R&D efforts

New product
 Newness compared with existing products
 Newness in legal terms ~ product up to 6 months after it enters regular distribution
 Newness from the company’s perspective
 Newness from the consumer’s perspective

Marketing reasons for failures

 Insignificant point of different ~ so-so kind of product, not special
 Incomplete market and product definition ~ did not segment or target market well
 Too little market attractiveness ~ market too small, too many competitors, low profit margins
 Poor execution of the marketing mix ~ 4Ps not established Pg 7
 Poor product quality or sensitivity ~ do not know consumers well enough to determine
products that satisfy their needs
 Bad timing ~ no window of opportunity
 No economical access to buyers

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The New Product Development Process

1 Idea generation  Systematic search for new-product ideas

 Internal sources – formal R&D, pick the brains of its executives, scientists, engineers, manufacturing staff and
salespeople eg. 3M, Samsung
 External sources – customers (conducting surveys and focus groups and analyse customer questions and complaints
~ do not rely too heavily on customers’ input) eg. LEGOs, competitors (tracking their offerings and inspect new
products, dismantling them, analysing their performance and deciding whether to introduce similar of improved
product), distributors and suppliers (close to the market and can pass along information about consumer problems
and new product possibilities), trade magazines, fairs and seminars, government agencies, new product consultants,
advertising agencies, marketing research firms
2 Idea screening  Screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible
3 Concept Concept development:
development and  Attractive idea to be developed into a product concept
testing  Product idea ~ idea for a possible product that the company can see itself offering to the market
 Product concept ~ detailed version of the idea stated in meaningful consumer terms
 Product image ~ way that consumers perceive an actual or potential product
Concept testing:
 Testing new product concepts with a group of target consumers to find out if the concepts have strong consumer
appeal
 Presented to consumers symbolically or physically
 Routinely test new product concepts before attempting to turn them into actual products
4 Marketing strategy  Designing an initial marketing strategy for a new product based on the product concept
development  1 ~ describes the target market, planned product positioning, sales, market share and profit goals for the first few
years
 2 ~ outlines the product’s planned price, distribution and marketing budget for the first year
 3 ~ describes the planned long-run sales, profit goals and marketing mix strategy
5 Business analysis  A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the
company’s objectives
 To estimate sales  look at sales history of similar products and conduct surveys of market opinion
6 Product  Developing the product concept into a physical product in order to ensure that the product idea can be turned into a
development workable product
 Design prototype that satisfy and excite consumers and that can be produced quickly and at budgeted costs
 New product must have the required functional features and convey the intended psychological characteristics
7 Test marketing  Product and marketing program are tested in more realistic market setting to determine market response
 Test the product and entire marketing program – positioning strategy, advertising, distribution, pricing, branding,
packaging and budget levels
 High costs and time involved ~ allow competitors to move in
 New product is confident, little or no market testing
3 approaches
 Standard test market: small number of representative test cities to conduct full marketing campaigns – costly, time
consuming, competitors are able to monitor test results, allow competitors to take a good look at product even before
it is introduced in the market
 Controlled test markets: controlled panels of stores that have agreed to carry new products for a fee – costs less,
completed much more quickly, allow companies to evaluate their specific marketing efforts, allow competitors to
take a good look at product even before it is introduced in the market, limited number of controlled test markets are
not representatives of their target markets
 Stimulated test markets: stimulated shopping environment – provides measure of trial and the commercial’s
effectiveness against competing commercials, used widely, cost much less, completed quickly, keep products out of
competitors’ sights, might not be accurate or reliable due to its small samples and stimulated shopping environment
8 Commercialisation  Introducing a new product into the market
 Deciding on introduction timing, place to launch product, planned market rollout

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Managing New Product Development

Customer-centered new product development

 New product development that focuses on finding new ways to solve customer problems and
create more customers-satisfying experience
 Begins and ends with solving customer problems

Term-based new product development

 A approach to developing new products in which various company departments work closely
together, overlapping the steps in the product development process to save time and increase
effectiveness
 Assemble a team of people from various departments that stay with the new product from
start to finish
 Limitations – creates more organisational tension and confusion than the more orderly
sequential approach

Systematic new product development

 Holistic and systematic
- Holistic approach to find new ways to create valued customer experiences, from
generating and screening new product ideas to creating and rolling out want satisfying
products to customers
- Systematically developed, producing more new product successes
 Install an innovation management system – collect, review, evaluate and manage new product
ideas
 Assign a cross functional innovation management committee to evaluate proposed new
product ideas and help bring good ideas to market
- Create an innovation-oriented company culture
- Yields a larger number of new product ideas
 Eg. Apple, Google, 3M, Procter and Gamble, General Electric

Product Lifecycle is the course of a product’s sales and profit over its lifetimes

Inform Persuade Remind

Product development stage

 Company finds and develops a new product idea ~ sales are zero and company’s investment
costs mount

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Introductory stage
 New product is first distributed and made available for purchases
 Period of slow sales growth as the product is introduced in the market ~ profits are
nonexistent because of the heave expenses of product introduction
- Much money is needed to attract distributors and build their inventories, promote product
and inform consumers
 Company and few competitors produce basic versions of the product
 Market pioneer – launch strategy consistent with the intended product positioning (slowly
accelerates upwards)

Growth stage
 Product’s sales start climbing quickly
 Period of rapid market acceptance ~ increasing profits
 New competitors entering the market upon seeing opportunities for profits
 Introduce new features, improve quality, enter new market segments and new distribution
channels, keeping prices fixed or reducing slightly, keeping promotion spending at the same
or slightly higher
 Educating the market and meet competition as well
 Trade-off between high market share and high current profit

Maturity stage
 Period of slowdown in sales growth because product has achieved acceptance by most
potential buyers
 Profits level off or decline because of increased marketing outlays to defend product against
competition
 Lasts longer than the rest of the stage
 Need to modify the market – increase consumption of current product Pg 6, 35
- Look for new users and new market segments
- Increase usage among present users eg. Amazon.com
 Need to modify the product – changing characteristics of the product
- Eg. quality, features, style, packaging, product performance, durability, reliability, speed,
taste, product’s styling and attractiveness
 Adding new features that expand product’s usefulness, safety or convenience
 Modifying marketing mix Pg 7

Decline stage
 Period when sales fall off ~ profits drop
 Reasons for declines – technological advances, shifts in consumer taste and increased
competition
 Carrying weak product can be rather costly ~ profit term, management time involved, require
frequent price and inventory adjustments, requiring advertising and salespeople’s attention,
delays the search for replacements, creates a lopsided product mix, hurts current profits and
weakens company foothold on the future
 Decide whether to maintain, harvest of drop the declining products
- Maintain its brand without change in hope that competitors will leave industry
- Harvest the product, reducing various costs and hoping that sales hold up
- Drop the product from the line by selling it off to another firm or simply liquidate it at
salvage value

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Summary:

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 PLC concept is a useful framework for describing how products and markets work
 Help in developing good marketing strategies for different stages of the product lifecycle Pg15
 Practical problems
- Difficult to forecast the sales level
- Difficult to develop marketing strategies because strategy is both a cause and result of the
PLC
 Should not blindly push products through the traditional stages of the PLC
- Defy ‘rules’ of the lifecycle and position products in unexpected ways ~ rescue products
foundering in the maturity stage and return to growth stage, not going into the decline
stage

Additional Product and Service Considerations

Product decisions Pg 38 and social responsibilities

 Public policy issues and regulations involving acquiring or dropping products, patent
protection, product quality and safety and product warranties
- Prevent companies from adding products through acquisitions if the effect threatens to
lessen competition
- Companies dropping products are to be aware of the legal obligations to suppliers,
dealers and customers who have a stake in the dropped product
- Company cannot make its product illegally similar to another company’s established
product
- Complying with specific laws regarding product quality and safety
o Ability to sue manufacturers or dealers if consumers have been injured by a product
that has been designed defectively
o Increasing product liability insurance premiums  passing costs to consumers
- Offering written warranties to convince customers of their product quality
o Full warranties to meet certain minimum standards otherwise, to only offer limited
warranties

International product and services marketing Pg 88

 Decide what product and service to introduce in what countries
 Decide how much to standardise or adapt their offerings for world markets
- Will want to standardise offerings as it lowers cost and develops a consistent worldwide
image
- Markets and consumers differ widely around the world
 Packaging issues can be subtle
- Tailored to meet the physical characteristics of the consumers in various parts of the
world
 The need to go global as trend toward growth of global companies will increase  face
challenges when going global

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LECTURE 8 – CHAPTERS 12 AND 13

Chap 12 Marketing channel (distribution channel) is a set of interdependent organisations that help
make a product or service available for use or consumption by the consumer or biz user
 Long term commitments to other firms
 Eg. Mac, Hewlett Packard, Ford

Marketing Intermediaries

Value created by intermediaries

 Buy large quantity from

producers and break them into
small quantities and broad
assortment s wanted by
customers
 Bridging major time, place and
possession gaps that separate
goods and services

Marketing channel functions

 Information: gathering and distributing marketing research and intelligence information about
actors and forces in the marketing environment needed for planning and aiding exchange
 Promotion: developing and spreading persuasive communications about an offer
 Contact: finding and communicating with prospective buyers
 Matching: shaping and fitting the offer to the buyer’s needs, including activities such as
manufacturing, grading, assembling and packaging

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 Negotiation: reaching an agreement on price and other terms of the offer so that ownership or
possession can be transferred
 Physical distribution: transporting and storing the goods
 Financing: acquiring and using funds to cover the costs of the channel work
 Risk taking: assuming the risks of carrying out the channel work

Channel levels
 layers of intermediaries that performs some work in bringing the product and its ownership
closer to the final buyer
- Direct marketing Pg 83 channel: marketing channel that has no intermediary levels eg.
Selling products door to door or via telephone
o Allow consumers to buy products by interacting with various media
- Indirect marketing channel: channel containing one or more intermediary levels eg.
General Motors, Mars
o Greater number of levels result in lesser control and greater channel complexity
- Electronic marketing channel eg. Amazon.com, Travelocity.com, dell.com

Channel Behaviour

 Success of individual channel members depends on overall channel success

 All channel firms should work together smoothly  understand and accept their roles,
coordinate their goals and activities and cooperate to attain overall channel goals
 However, individual channel members tend to act alone in their own short run interests giving
rise to channel conflicts: disagreements among marketing channel members on goals and
roles – who should do what and for what rewards
- Horizontal conflicts occur among firms at the same level of the channel
- Vertical conflicts occur between different levels of the same channel

Channel Structure

Vertical marketing system

 Distribution channel structure in which producers, wholesalers and retailers act as a unified
system where one channel members owns the other, has contracts with them of has so much
power that they all cooperate
 Corporate VMS
- Vertical marketing system that combines successive stages of production and distribution
under single ownership – channel leadership is established through common ownership
 Contractual VMS
- Vertical marketing system in which independent firms at different levels of production
and distribution join together through contracts to obtain more economies of scale impact
than they could achieve alone
- Franchise organisation: a contractual vertical marketing system in which a channel
member, called a franchiser, links several stages in the production-distribution process
o Manufacturer-sponsored retailer franchise system eg. Ford
o Manufacturer-sponsored wholesaler franchise system eg. Coca-cola
o Service-firm-sponsored retailer franchise system eg. Hertz, Avis, Mac, Burger King
 Administered VMS
- Vertical marketing system that coordinates successive stages of production and
distributions, not through common ownership or contractual ties, but through the size and
power of one of the parties eg. Procter and Gamble, Kraft, General Electrics

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Horizontal marketing system

 Channel arrangement in which 2 or more companies at 1 level join together to follow a new
marketing opportunity
 Eg. Mac ‘express stores’ at Wal-mart, Coca-cola and Nestle formed a joint venture

Multichannel distribution systems

 Distribution system in which a single firm sets up 2 or more marketing channels to reach one
or more customer segments eg. Hewlett Packard
 Advantages: expand its sales and market coverage (more ways to reach customers) and gains
opportunities to tailor its products and services to the specific needs of diverse customer
segments (offering customers more options), ‘cutting out’ the middleman
 Disadvantages: harder to control, generate more conflict as more channels compete for sales,
increasing costs, investments in technological interfaces, may have price wars when
following competitors’’ channels

Changing Channel Organisation

 Changing environmental, consumer, product and company factors

 Major trend of disintermediation: the cutting out of marketing channel intermediaries by
product or service producers or the displacement of traditional resellers by radical new types
of intermediaries
 Eg. Online marketing growing rapidly, taking biz from traditional brick-and-mortar retailers
- iTunes, Amazon.com

Channel Design Decisions

Analysing consumer needs

 Determining the target market coverage
 Balancing consumer needs against feasibility and costs of meeting these needs and against
customer price preferences

Setting channel objectives

 State marketing channel objectives in terms of targeted levels of customer service
 Influence by the nature of the company ~ its products, marketing intermediaries, competitors
and environment

Identifying major alternatives

 Types of intermediaries
- Identifying the types of channel members available to carry out its channel work
 Number of marketing intermediaries
- Intensive distribution: stocking the product in as many outlets as possible ~ products
must be available where and when consumers want them eg. Commodity items
- Extensive distribution: giving a limited number of dealers the exclusive right to distribute
the company’s products in their territories eg. luxurious products
- Selective distribution: use of more than one, but fewer than all, of the intermediaries who
are willing to carry the company’s products
 Responsibilities of channel members
- Agreement on the terms and responsibilities of each channel member
- Price policies, conditions of sales, territorial rights and specific services to be performed,
list of price, fair set of discounts, mutual services and duties

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Evaluating the major alternatives

 Evaluate against economic, control and adaptive criteria

Designing international distribution channels Pg 88

 Global marketers to adapt their channel strategies to the existing structures within the country
 Some distribution system is complex and hard to penetrate, consisting of many layers and
large number of intermediaries
 Distribution systems in developing countries may be scattered, inefficient and altogether
lacking

Channel Management Decisions

Setting channel members

 Producers vary in their abilities to attract qualified marketing intermediaries eg. Toyota had
no trouble attracting new dealers for its Lexus line in US
 Determine what characteristics distinguish the better ones ~ channel member’s years in biz,
other lines carried, growth and profit record, cooperativeness, reputation

Managing and motivating channel members

 Practice strong partner relationship management to forge long term partnerships with
channel members
 Convince distributors that they can succeed better by working together as a part of a cohesive
value delivery system eg. Wal-mart, Procter and Gamble
 Installation of integrated high-tech partner relationship management systems to coordinate
their whole-channel marketing efforts ~ recruit, train, organise, manage, motivate, evaluate
relationships with channel partners

Evaluation channel members

 Regularly check channel member performance against standards
 Recognise and reward intermediaries who are performing well and adding good values to
customers
 Assist or replace those who are performing poorly

Marketing Logistics and Supply Chain Management

Nature and importance of marketing logistics

 Logistics: activities that focus on getting the right amount of the right products to the right
place at the right time at the lowest possible price
 Logistics management: tasks involved in planning, implementing and controlling the physical
flow of materials, final goods and related information from points of origin to points of
consumption to meet customer requirements at a profit
 Involves inward distribution, outward distribution and reverse distribution
 Supply chain management: managing upstream and downstream value-added flows of
materials, final goods and related information among suppliers, company, resellers and final
consumers
 Importance:
- Ability to gain a powerful competitive advantage by using improved logistics to give
customers better service or lower prices
- Yield tremendous cost savings to both company and customers
- Explosion in product variety has create a need for improved logistics management

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- Improvements in information technology have created opportunities for major gains in

distribution efficiency

Goals of the logistics system

 Minimising logistics cost while delivering maximum customer service
 Providing a targeted level of customer service at the least cost
 Research the importance of various distribution service to customers and then set desired
service levels for each segment

Major logistic functions

 Warehousing
- Distribution center: a large, highly automated warehouse designed to receive goods from
various plants and suppliers, take orders, fill them efficiently and deliver goods to
customers as quickly as possible ~ moving goods rather than storing them eg. Wal-mart
- Replacing by newer, single storied automated warehouses with advanced, computer-
controlled materials-handling systems requiring few employees
 Inventory management
- Maintain delicate balance between carrying too little inventory and carrying too much
- Using Just-in-time logistic systems eg. Dell
o Require accurate forecasting along with fast, frequent and flexible delivery so that
new suppliers will be available when needed
- Fully automated handling of inventories using RFID or smart tag technology e. Procter
and Gamble, Levi, Best Buy, IBM, Wal-mart
 Transportation
- Truck: highly flexible in routing and time schedule, offer faster service than railroads,
efficient for short haul of high-value merchandise
- Railroads: cost effective for shipping large amount of bulky products over long distances
- Water carriers: very low cost but slowest mode of transportation and easily affected by
the weather
- Pipeline: specialised mean of shipping petroleum, natural gas and chemicals from sources
to markets
- Air carriers: most important mode of transportation, high cost but is ideal when speed is
needed or distant markets must be reached
- Intermodal transportation: combining 2 or more modes of transportation
- Consider factors such as speed, dependability, availability, costs and others
- Digital products  internet?
 Logistics information management
- Combining supply chains through information  sharing information to make better
joint logistics decisions
- Electronic data interchange (EDI) eg. Wal-mart, vendor-managed inventory (VMI)
systems or continuous inventory replenishment systems eg. Wal-mart working closely
with Procter and Gamble or Black & Decker

Integrated logistics management: logistics concept that emphasizes teamwork, both inside the
company and among all marketing channel organisations, to maximise the performance of the
entire distribution system
 Cross-functional teamwork within the company
- Logistics harmony among functions by creating cross-functional logistics teams,
integrative supply manage positions and senior-level logistics executives with cross-
functional authority

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 Building logistics partnerships

- Cross-functional, cross-company teams eg. Procter and Gamble joining with Wal-mart,
shared projects eg. Home Depot and information sharing system
- Working together to improve customer service, bringing more value to customers, and to
reduce channel costs
 Third-party logistics: independent logistics provider that performs any or all of the functions
required to get their client’s product to the market eg. UPS Supply Chain Solutions, FedEx
Logistics, Roadway Logistics Services
- Growing number of firms outsourcing some or all of their logistics to third-party logistics
(3PL) providers as many loath the associated logistics ‘grunt’ work
- Save costs and increase efficiency, gaining faster and more effective access to global
markets
- Frees company to focus more intensely on its core biz
- Integrate logistics companies understand increasing complex logistic environments better
~ helpful to companies attempting to expand their global market coverage

Chap 13 Wholesaling includes all activities in selling goods and services to those buying for resale or biz
use

Wholesaler is a firm engaged primarily in wholesaling activities

Wholesaler adds value to customers by performing the following channel functions:

 Selling and promoting: reaching small customers at a low cost as they have more contacts and
is often more trusted by the buyer than the distant manufacturer
 Buying and assortment building: selecting items and building assortments needed by their
customers, thereby saving the consumers much work
 Bulk-breaking: saving consumers money by buying in large quantity and breaking them into
smaller quantities
 Warehousing: holding inventories thereby reducing inventory costs and risks of suppliers and
customers
 Transportation: providing quicker delivery to buyers because they are located closer to them
than the producers
 Financing: financing customers by giving credit, financing suppliers by ordering early and
paying bills on time
 Risk bearing: absorbing risks by taking title and bearing cost of theft, damage, spoilage and
obsolescence
 Market information: giving information to suppliers and customers about competitors, new
products and price developments
 Management services and advice: helping retailers to train their salesclerk, improve store
layouts and displays and set up accounting and inventory control systems

Types of wholesalers
 Merchant wholesaler
- Independently owned biz that takes title to the merchandise it handles
- Full service wholesalers: provide a full set of services ~ wholesale merchants, industrial
distributors
- Limited service wholesalers: offer fewer services to suppliers and customers ~ cash-and-
carry wholesalers, truck wholesalers, drop shippers, rack jobbers, producers’
cooperatives, mail-order wholesalers

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 Brokers and agents

- Broker: does not take title of goods and whose function is to bring buyers and sellers
together and assist in negotiation
- Agent: represent buyer or seller on a relatively permanent basis, performs only a few
functions and does not take title of goods
- Manufacturer’s agents, selling agents, purchasing agents, commission merchants
 Manufacturers’ and retailers’ branches and offices
- Wholesaling by sellers or buyers themselves rather than through independent wholesalers
- Sales branches and offices and purchasing officers

Wholesaler marketing decisions

 Target market and positioning decision
- Define target market and decide how to position themselves in these markets
- Identify more profitable customers, design stronger offers and build better relationships
with them
- Discourage less profitable customers by requiring larger orders or adding service charges
to smaller one
 Marketing mix decisions
- Product and service assortment
- Price decision
o Marking up the cost of goods by a standard percentage
o Try new pricing approaches ~ cutting margins on some lines in order to win
important new customers
- Promotion decision
o Trade advertising, personal selling, sales promotion, public relations is largely
scattered
o Adopting some non-personal promotion techniques used by retailers Pg 57
o Develop overall promotion strategy and to make greater use of supplier promotion
materials and programs
- Place decision
o Investing in automated warehouse and online ordering system

Trends in wholesaling
 Fierce resistance to price increases and the windowing out of suppliers who are not adding
value based on cost and quality
 To add value by increasing the efficiency and effectiveness of the entire marketing channel
 Continue to increase services provided to retailers - retail pricing, cooperative advertising,
marketing and management information reports, accounting services, online transactions and
others
 Facing slow growth in their domestic markets and as such, many wholesalers are going global

Retailing includes all activities involved in selling goods or services directly to final consumers
for their personal, non-biz use

Retailer is a biz whose sales come primarily from retailing

Types of retailers
 Amount of service
- Self-service: serving customers who are willing to perform their own ‘locate-compare-
select’ process to save money eg. Discount stores, convenience goods, branded, fast
moving shopping goods ~ Wal-mart

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- Limited service: providing more sales assistance because they carry more shopping goods
about which customers need information
- Full service: assisting customers in every phrase of the shopping process, usually
carrying more specialty goods for which customers like to be ‘waited on’, more services
provided result in higher operating costs and higher prices passed along to customers
 Product line - breadth and length of product assortment Pg 39
- Specialty store: carry a narrow product line with a deep assortment within that line ~
market segmentation and targeting and product specialisation eg. GAP, the Athlete’s Foot
- Departmental store: carry a wide variety of product lines where each line is operated as a
separate department managed by specialist buyers or merchandisers eg. Sears, Macy’s
- Supermarket: large, low cost, low margin, high volume, self service store that carries a
wide variety of grocery and household products
- Convenience store: small store, located near a residential area that is open long hours
seven days a week and carries a limited line of high-turnover convenience goods eg. 7-11
- Superstore: store much larger than a regular supermarket that offers a large assortment of
routinely purchased food products, non-food items and services eg. Wal-mart
- Category killer: giant specialty store that carries a very deep assortment of a particular
line and is staffed by knowledgeable employees
 Relative prices
- Discount store: sell standard merchandise at lower prices by accepting lower margins and
selling at higher volume eg. Wal-mart
- Off-price retailer: buy at less-than-regular wholesale prices and sell at less than retail
o Independent off-price retailer: either owned and run by entrepreneurs or is a division
of a larger retail corporation
o Factory outlet: owned and operated by a manufacturer and that normally carry the
manufacturer’s surplus, discontinued or irregular goods
o Warehouse club: sell a limited selection of brand name grocery items, appliances,
clothing and a hodgepodge of other goods at deep discounts to members who pay
annual membership fees
 Organisational approach
- Corporate chain store: 2 or more outlets that are commonly owned and controlled employ
central buying and merchandising and sell similar lines of merchandise - ability to buy in
large quantities at lower prices and gain promotional economies eg. Sears, CVS
- Voluntary chain store: wholesaler-sponsored groups of independent retailers engaged in
bulk buying and common merchandising eg. Do-It best hardware, True Value
- Retailer cooperatives: groups of independent retailers who set up a central buying
organisation and conduct joint promotion efforts eg. Ace (hardware), Associated Grocers
- Franchise organisation: contractual association between a manufacturer, wholesaler or
service organisation (franchiser) and independent businesspeople (franchisees) who buy
the right to own or operate 1 or more units in the franchise system - based on unique
products or services, method of doing biz or trade name eg. 7-11, Mac, Pizza Hut
- Merchandising conglomerates: free-form corporations that combine several diversified
conglomerates retailing lines and forums under central ownership, along with some
integration of their distribution and management functions eg. Limited Brands

Retailer marketing decisions

 Target market and positioning decision
- Define target market and decide how to position themselves in these markets

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 Product assortment and services decision

- Product assortment
o Differentiate retailer while matching target shoppers’ expectations
o Offer merchandise that no other competitors carry ~ private brands, national brands
eg. Saks gets exclusive rights to carry a well-known designer’s labels
o Feature blockbuster merchandising events
o Offering a highly targeted product assortment
- Services mix
o Eg. Nordstrom, Home Depot
- Store atmosphere
o Designed to suit the target market and moves customers to buy eg. Apple
o Experiential retailing
 Price decision
- Seeking either high mark-ups on lower volume (most specialty stores) or low mark-ups
on higher volume (mass merchandisers and discount stores)
- Decide on the extent of using sales and other price promotions
 Promotion decision
- Use of promotional tools to reach customers: advertising, personal selling, sales
promotion, public relations and direct marketing Pg 69-76, 83
 Place decision
- Selecting locations that are accessible to the target market in areas that are consistent with
the retailer’s positioning
- Central biz districts: main form of retail cluster
- Shopping center: group of retail businesses planned, developed, owned and managed as a
unit

The future of retailing

 New retail forms and shortening retail life cycles

Wheel-of-retailing concept
Concept of retailing that states that new
types of retailers usually begin as low-
margin, low-price, low-status
operations but later evolve into higher-
priced, higher-service operations,
eventually becoming like that
conventional retailers they replaced

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Stages of life cycle

 Growth of non-store retailing

- Automatic vending, direct mail and catalogs, television home shopping, online retailing,
telemarketing, direct selling
 Retail convergence
- Merging of consumers, products, prices and retailers
 Rise of mega-retailers
- Huge mass merchandisers and specialty superstores, formation of vertical marketing
systems Pg 49 and a rash of retail mergers and acquisitions
- Shifting balance of power between retailers and producers
 Growing importance of retail technology
- Using advance information technology and software systems to produce better forecasts,
control inventory costs, order electronically from suppliers, sell information between
stores and even sell to customers within stores
 Global expansion of major retailers
- Eg. Wal-mart, Mac, Carrefour Group
 Retail stores as ‘communities’ or ‘hangouts’
- Providing a place for people to get together

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LECTURE 9 – CHAPTERS 10 AND 11

Chap 10 Price is the amount of money charged for a product or service or the sum of the values that
consumers exchange for the benefits of having or using the product or service

 Only marketing mix element that produces revenue

 Most flexible element as price can be raised or lowered quickly
 Pricing problems
- Managers are too quick to reduce prices
- Prices are too cost oriented rather than customer-value oriented or are not consistent with
the rest of the marketing mix

Considerations in Setting Prices

Effective, customer-oriented
pricing involves
understanding how much
value customers place on the
benefits they receive from the
product and setting a price
that captures this value

Value-based pricing
 Setting prices based on buyers’ perceptions of value rather than on the seller’s costs
 Analyse customer needs and value perceptions and price is set to match consumers’ perceived
value
 Measuring perceived value can be difficult
 Good value pricing
- Offering just the right combination of quality and good service at a fair price
- Introducing less expensive versions of established brand names
- Redesigning existing brands to offer more quality for a given price or the same quality
for less
- Everyday low pricing (EDLP): charging a constant, everyday low price with few or no
temporary price discounts eg. Wal-mart
- High-low pricing: charging higher prices on everyday basis but running frequent
promotions to lower prices temporary on selected items
 Value added pricing
- Attaching value-added features and services to differentiate a company’s offers and to
support charging higher prices

Company and product costs

 Types of costs
- Fixed costs: costs that do not vary with production or sales level eg. Rent, heat, salaries
- Variable cost: costs that vary directly with the level of production
- Total costs: sum of fixed and variable costs for any given level of production
 Costs at different levels of production
- Management needs to know how its cost varies with different levels of production eg.
Fixed costs spreading over a large quantity of supplies produce, reducing its average
cost
 Costs as a function of production experience
- Experience curve: the drop in the average unit production cost that comes with
accumulated production experience

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- Eg. workers learning shortcuts and become more familiar with their equipment, work
becomes better organised, better equipment and production processes are used, higher
volume results in more efficiency and gains economies of scale
- Costs will fall much faster if company makes and sells more during a given time period,
provided that there is a market for the products
- Taking advantage by increasing market share early in the product’s life cycle
- Eg. Bausch & Lomb
- Risks: give the product a cheap image, assume competitors are weak and not willing to
fight it out by meeting the company’s price cuts, competitor might find a lower cost
technology that lets it start at prices lower than those of the market leader
 Cost based pricing
- Cost based pricing is setting prices based on the costs for producing, distributing and
selling the product plus a fair rate of return for effort and risk
- Cost plus pricing: adding a standard mark-up to the cost of the product
- Mark-up price = unit cost / (1 - desired return on sales)
- Eg. Lawyers, accountants, construction companies
- Ignores demand and competitor prices, assumes that prices can be set without affecting
sales volume
- Remains popular: sellers are more certain about costs than demand, simplified pricing
process (do not have to adjust prices as demands changes), fairer to both buyers and
sellers where sellers earn a fair return on their investments but do not take advantage of
buyers when buyers’ demand becomes great
 Breakeven analysis and target profit pricing
- Setting pricings to break even on the costs of making and marketing a product or setting
prices to make a targeted profit
- Breakeven analysis: analysis to determine the unit volume and dollar sales needed to be
profitable given a particular price and cost structure
- Use of a break even chart, showing total costs and total revenue expected at different
sales volume levels
- Breakeven volume = Fixed costs / (price - variable costs)
- Eg. General Motors

Other internal and external considerations

 Overall marketing strategy, objectives and mix (internal)
- Marketing strategy: selecting its target market and positioning
- Marketing mix strategy should be fairly straightforward
- Common pricing objectives: survival, current profit maximisation, market share
leadership, customer retention and relationship building
- Price decisions must be coordinated with product design, distribution and promotion
decisions to form a consistent and effective marketing program
- Some companies position their products on price and then tailor other marketing mix
decisions to the prices they want to charge
o Target costing: pricing starts with an ideal selling price, then target costs that will
ensure that the price is met eg. Procter and Gamble
- Others deemphasize price and use other marketing mix tools to create non-price positions
eg. Viking
 Organisational considerations (internal)
- Management must decide who within the organisation is responsible for setting prices
 The market and demand (external)
- Understanding the relationship between price and demand for its products

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- Pricing in different types of markets

o Pure competition: market consists of many buyers and sellers trading in a uniform
commodity where no single buyer or seller has much effect on the going market
price (seller cannot charge more as buyers can obtain as much as they need at the
going price, sellers do not want to charge less as they can sell all they want at this
price) – do not spend much time on marketing strategy
o Monopolistic competition: market consists of many buyers and sellers who trade over
a range of prices rather than a single market price as different sellers are able to
differentiate their offers to buyers – many competitors and hence each firm is less
affected by competitors’ pricing strategies
o Oligopolistic competition: market consists of a few sellers (due to difficulty in
entering the market) who are highly sensitive to each other’s pricing and marketing
strategies
o Pure monopoly: market consists of 1 seller – do not always charge the full price as
they do not want to attract competitors or that they want to penetrate the market faster
with a low price or the fear of government regulation (government only permit rates
to be set that will ‘yield’ a fair return)
- Analysing the price-demand relationship
o Demand curve: a curve that shows the number of units the market will buy in a given
time period at different prices that might be changed
o Price and demand are inversely related
o Using demand curves to estimate demand at different prices
o If company faces competition, its demand at different prices will depend on whether
competitors’ prices stay constant or change with company’s own prices
o Prestige goods – demand curve slopes upwards as consumers think that higher prices
mean more quality eg. Gibson Guitar Corporation
- Price elasticity of demand
o Measure of the sensitivity of demand to changes in prices
o Price elasticity of demand = % change in quantity demanded / % change in price
(E > 1 – elastic demand, E < 1 – inelastic demand)
o Buyers are less price sensitive when the products that they are buying is unique or
when it is high in quality, prestige or exclusiveness or that substitute products are
hard to find or when they cannot easily compare the quality of substitutes or when the
total expenditure for a product is low relative to their income or when the cost is
shared by another party
o If demand is elastic, sellers will consider lowering their prices  a lower price will
produce more total revenue
 Competitors’ strategies and prices (external)
- Consider competitors’ costs, prices and market offerings
- If customers perceive that the company’s product or service provides greater value,
company can charge a higher price
- If company faces a host of smaller competitors charging high prices relative to the value
they deliver, it might charge a lower price to drive weaker competitors out of the market
- Competitive landscape influence customer price sensitivity
 Other external factors
- Economic conditions: booms, recessions, inflation, interest rates
- Resellers: setting prices that give resellers a fair profit, encourage their support and help
them sell the product effectively
- Government
- Social concerns: company’s short term sales, market share and profit goals may have to
be tempered by broader societal considerations

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Summary: Steps in Setting Prices

Chap 11 Pricing is a dynamic process where companies design a pricing structure that covers all their
products

Pricing strategies usually change as a product passes through its life cycle

New Product Pricing Strategies

Market skimming pricing

 Setting a high price for a new product to skim maximum revenues layer by layer from the
segments willing to pay the high price
- Price discrimination
- Quickly launch products and go as high as possible
 Company makes fewer but more profitable sales
 Target at the ‘innovators’ Pg 27
 Under certain conditions:
- Product’s quality and image must support the higher price and enough buyers must want
the product at that price
- Costs of producing a smaller volume cannot be so high that they cancel the advantage of
charging more
- Competitors should not be able to enter the market easily and undercut the high price

Market penetration pricing

 Setting a low price for a new product in order to penetrate the market quickly and deeply,
attracting a large number of buyers and a large market share
 High sales volume results in falling costs, allowing the company to cut its price even further
 Eg. Dell, Wal-mart, Apple, IBM, discount retailers
 Under certain conditions:
- Market must be highly price sensitive so that a low price produces more market growth
- Production and distribution costs must fall as sales volume increases
- Low price must help keep out the competition and the penetration pricer must maintain
its low price position

Product Mix Pricing Strategies

Product line pricing

 Setting price steps for the entire set of products it offers
 Takes into account cost differences between the products in the line, customer evaluations of
their different features and competitors’ prices
 Using well-established price points for the products in their line  establish perceived
quality differences that support the price differences

Optional product pricing

 Pricing of optional or accessory products along with a main product
 Eg. Computer software

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Captive product pricing

 Setting a price for products that must be used along with a main product where high margins
are set for supplies eg. Blades for a razor, film for a camera, ink cartridge for a printer
 2 parts pricing for services – fixed fee plus a variable usage rate where the fixed amount
should be low enough to induce usage of the service and profit can be made in the variable
fees eg. M1, Singtel - phone and phone plans

By-product pricing
 Setting a price for by-products in order to make the main product’s price more competitive
 Pricing low value by-products to get rid of them

Product bundle pricing

 Combining several products and offering the bundle at a reduced price
 Promotes the sales of products consumers might not otherwise buy, but the combined price
must be low enough to get them to buy the bundle
 Eg. Resorts, fast-food restaurants

Price Adjustment Strategies

Discount and allowance pricing

 Reducing prices to reward customer responses such as paying early or promoting the product
 Discounts: cash discount (price reduction to buyers who pay their bills promptly), quantity
discount (purchases in bulk), functional (trade) discount (offered to trade channels who
perform certain functions), seasonal discount (purchases of out of season merchandises or
services)
 Allowances: trade-in allowance, promotional allowance (price reductions to reward dealers
for participating in advertising and sales support programs

Segmented pricing
 Adjusting prices to allow difference in customers, products or locations
 Customer-segment (senior citizens, children), product-form pricing (Evian mineral water),
location pricing (theatre seats), time pricing (season, airline tickets)
 Revenue management: selling the right product to the right customers at the right time for the
right price
 Under certain conditions:
- Market must be segmentable and the segments must show different degrees of demand
- Costs of segmenting and watching the market should not exceed the extra revenue
obtained from the price difference
- Segmented pricing must be legal and should not lead to consumer resentment or ill will

Psychological pricing
 Adjusting prices for psychological effects - say something about the product
 Price-quality relationship
 Reference prices
- Prices that buyers carry in their minds and refer to when they look at a given product
- Eg. Placing products next to the more expensive ones to imply that they belong in the
same classes
 Small differences in price can signal product differences
 Numerical digits may have symbolic and visual qualities that psychologically influence the
buyer
- Eg. $1.99, $299.99, Sales!

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Promotional pricing
 Temporarily reducing prices to increase short run sales
 Loss leaders ( low prices to attract customers into the store), special-event pricing (S’pore
sales), cash rebates (purchases made within a specific time), interest financing, longer
warranties, free maintenance
 Having adverse effects
- Easily copied by competitors
- Create ‘deal prone’ where consumers wait till brands go on sale before buying them
- Reduced prices can erode a brand’s value in the eyes of the consumers
- A short term strategy
- Frequent use might lead to price wars within the industry

Geographical pricing
 Adjusting prices to account for the geographical location of customers
 FOB-origin pricing: goods are placed free on board a carrier and the customer pays the
freight from the factory to the destination
 Uniform-delivered pricing: company charges the same price plus freight to all customers,
regardless of their locations
 Zone pricing: company sets up 2 or more zones where all customers within a zone pay the
same total price; the more distant the zone, the higher the price
 Basing-point pricing: seller designates some city as a basing point and charges all customers
the freight cost from that city to the customers, regardless of the city from which the goods
are actually shipped
 Freight-absorption pricing: seller absorbs all or part of the freight charges in order to get the
desired biz
- If it gets more biz, its average costs will fall and more than compensate for its extra
freight cost
- Used for market penetration and to hold on to increasingly competitive markets

Dynamic pricing
 Adjusting prices continually to meet the characteristics and needs of individual customers and
situations

International pricing Pg 88
 Adjusting prices for international markets
 Considering factors such as economic conditions, competitive situation, laws / regulations,
distribution system, consumer perceptions, corporate marketing objectives, cost
considerations

Price Changes

Initiating price changes

 Initiating price cuts
- Excess capacity
- Faces falling market share due to price competition
- Desires to be a market share leader
 Initiating price increases
- Greatly increase profits
- Faces cost inflations
- Faces greater demand than can be supplied

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- Avoid being perceived as a price gouger: charging excessive prices

o Maintain a sense of fairness surrounding any price increase
o Consider other ways to meet higher costs or demand without raising prices: cost
effective ways of production or distribution ‘unbundle’ its market offerings,
removing features, packaging or services and separately pricing elements that were
formally part of the offer
 Buyers’ reactions to price changes
- Influenced by the meaning customers see in the price change
 Competitor reactions to price changes
- Flow from a set reaction policy or a fresh analysis of each situation

Responding to price changes

 Evaluate the competitors’ reason for the price change
 Evaluate marketplace response to the price change
 Considers own product’s strategy

Eg. Dell, Southwest Airlines, Procter

and Gamble

Public Policy and Pricing

Pricing within channel levels

 Price fixing
- Competitors must set prices without talking to competitors
- Price collusion and price fixing is illegal
- Eg. Samsung and 2 other computer memory-chip makers constricting the supply of D-
Ram chips
 Predatory pricing
- Selling below price with the intention of punishing a competitor or gaining higher long-
run profits by putting competitors out of biz
- Protects small sellers from larger ones who might sell items below cost temporarily to
drive them out of biz
- Hard to prove ‘intention’

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Pricing across channel levels

 Unfair price discrimination
- Sellers cannot offer different prices to customers at a given level of trade unfairly
- Only allowed if seller can prove that its costs are different when selling to different
customers or that different products contain different qualities
o Must be to ‘match competition’ in ‘good faith’
o Price discrimination is temporary, localised and defensive
 Retail price maintenance
- Manufacturer cannot require dealers to charge a specific retail price for its products
 Deceptive pricing Pg 76
- Seller states prices or price savings that mislead consumers or are not actually available
to consumers
- Bogus reference or comparison price: sets artificially high ‘regular’ prices then
announces ‘sale’ prices close to its previous everyday price
o Only legal if claims made are truthful
- Scanner fraud: intentional and unintentional overcharging customers
- Price confusion: firms employing pricing methods that make it difficult for consumers to
understand just what price they are paying

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LECTURE 10 – CHAPTERS 14, 15, 16 AND 20

Chap 14 Integrated Marketing Communications

Changing marketing communication

 Shift towards targeted or one-to-one marketing
 Vast improvements in information and communication technology - richer media and
promotional mixes to reach diverse markets
- Risk creating a communication hodgepodge for consumers: conflicting message from
different sources resulting in confused company images, positions and consumer
relationships
 Need for integrated marketing communication
- Carefully integrating and coordinating the company’s many communication channels to
deliver a clear, consistent and compelling message about the organisation and its products
 Overall IMC strategy
- Determine roles of various promotional tools and the extent to which each will be used
- Carefully coordinate the promotional activities Pg 69-76, 83 and the timing of when major
campaigns take place
- Appoints a marketing communications director who has overall responsibility for the
company’s communications efforts

Developing Effective Communication

Identifying the target audience

 Clear target audience and their characteristics in mind

Determining the communication objectives

 Determine communication objectives and define response sought
 Buyer-readiness stages: stages consumers normally pass through on their way to purchase
- Know where consumers stand and attempt to move on to the next level

Designing a message  get attention, hold interest, arouse desire and obtain action
 Message content
- Rational appeal: relates to consumer self-interest, showing that product will produce the
desired benefits eg. Tylenol
- Emotional appeal: stir up either positive or negative emotions that can motivate purchase
eg. Safety & security, family closeness, patriotism, optimism, giving to others
- Moral appeal: directed at consumers’ sense of what is ‘right’, ‘proper’ eg. Salvation army
 Message structure
- Draw a conclusion or leave it with a question?
- Presenting strongest arguments first or last ~ presenting first gets strong attention but
may lead to an anticlimactic ending

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- Presenting 1-sided argument or 2-sided argument? Eg. 2-sided: ‘Heinz Ketchup is slow
good’, ‘Listerine tastes bad twice a day’
 Message format
- Print ad: headline, illustration, copy, colour
- Radio: choice of words, sounds, voices
- Television: body language

Choosing media
 Personal communication channels
- Channels through which 2 or more people communicate directly with each other
- Includes face-to-face, phone, mail, é-mail, internet chat, word of mouth influence
(personal communication about a product between target buyers and neighbours, friends,
family members and associates), buzz marketing (cultivating opinion leaders and getting
them to spread information about a product or service to others in their communities)
- Effective as it allows personal addressing and feedback
 Non-personal communication channels
- Media that carry messages without personal contact or feedback
- Includes print media (billboards, signs, posters), online media (é-mail, websites),
atmospheres (designed environments that create or reinforce the buyer’s leanings toward
buying a product), events (staged occurrences that communicate messages to target
audiences)

Selecting the message source

 Highly credible sources to deliver the message as they tend to be more persuasive
 Eg. Food companies promote to doctors, dentists, healthcare providers, marketers hire
celebrity endorsers

Collecting feedback
 Collect feedback through researching its effects on the target audience how much of the
market becomes aware, tries the product and is satisfied in the process
 Suggest changes in the promotion program or in the product offer itself

Setting the Total Promotion Budget and Mix

Setting the total promotion budget ~ Determining how much to spend on promotion
 Affordable method
- Setting the promotion budget at the level management thinks the company can afford
- Completely ignores the effects of promotion on sales, leads to an uncertain annual
promotion budget, more often results in under spending
- Eg. small businesses
 Percentage-of-sales method
- Setting the promotion budget at a certain percentage of current or forecasted sales or as a
percentage of the unit sales price
- Simple to use, helps management to think about the relationship between promotion
spending, selling price and profit per unit
- Wrongly view sales as the cause of promotion, does not provide any basis for choosing a
specific percentage
 Competitive-parity method
- Setting the promotion budget to match competitors’ outlays

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 Objective-and-task method
- Setting the promotion budget by (1) defining specific promotion objectives (2)
determining the tasks needed to achieve these objectives (3) estimating the costs of
performing these tasks where the sum of these costs is the proposed promotion budget
- Forces management to spell out it assumptions about the relationship between dollars
spent and promotion results
- Difficult to use as it is hard to figure out what specific tasks will achieve stated objectives

Shaping the overall promotion mix

 Nature of each promotion tool

 Promotion mix strategies

- Target audience: consumers, biz buyers, intermediaries, first time buyers
- Product life cycle Pg 44
- Product characteristics: complex, risk, ancillary services
- Type of markets: consumer market, biz market
- Stages of the buying decision Pg 26

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- Channel strategies
o Push strategy: promotion strategy that calls for using the sales force and trade
promotion to push the product through channels
Manufacturer  wholesaler  retailer  consumer
o Pull strategy: promotion strategy that calls for spending a lot on advertising and
consumer promotion to induce final consumers to buy the product
Consumer  retailer  wholesaler  manufacturer (when strategy is successful)

Integrating the promotion mix

 Analyse trends – internal and external – that
can affect the company’s ability to do business:
determine areas where communications can
help the most
 Audit the pockets of communications spending
throughout the organisation
 Identify all customer touch points for the
company and its brands
 Team up in communication planning: engage
all relevant stakeholders
 Create compatible themes, tones and quality
across all communications media
 Create performance measures that are shared by
all communications elements
 Appoint a director responsible for the
company’s persuasive communications efforts

Direct Marketing Pg 83
 Direct connections with carefully targeted individual consumers to both obtain an immediate
response and cultivate lasting customer relationships

Chap 15 Advertising
 Any paid form of non-personal presentation and promotion of ideas, goods or services by an
identified sponsor
 Effective way to inform and persuade
 Used by both biz firms and wide range of non-profit organisations (promote their causes to
various target public)

Major advertising decisions

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 Setting advertising objectives

- A specific communication task to be accomplished with a specific target audience during
a specific period of time
- Information advertising: when introducing a new product category, company informs
market about the new product, telling customers about its quality and benefits
- Persuasive advertising: as competition increases, company aims to build brand preference
where it directly or indirectly compares its brand with 1 or more other brands
- Reminder advertising: important for mature products where the company maintains
customer relationships and keep consumers thinking about the product
- Goal: move consumers through the buyer-readiness stages Pg 66 or to immediate actions

 Setting the advertising budget

- Dollars and other resources allocated to a product or company advertising program
- 4 common method used: affordable method, percentage-of-sales method, competitive-
parity method, objective-and-task method Pg 67
- Factors to be considered: product life cycle (new products need more money to create
awareness) Pg 44, market share (building market share requires more money than
maintaining current share), number of competitors, advertising clutter, undifferentiated
products (need more money to set them apart),

 Developing advertising strategy

- Strategy by which company accomplishes its advertising objectives
- Creating advertising messages
o Breaking through the clutter: do not want your ads to be sandwiched in with a glut of
other commercials, announcements and network promotions
 Better planned, more imaginative, entertaining and rewarding to customers
 New emerging advertising and entertainment ‘Madison & Vine’: term
representing the merging of advertising and entertainment in an effort to break
through the clutter and create new avenues for reaching consumers with engaging
messages
o Message strategy
 Identifying consumer benefits
 Compelling creative concept: compelling ‘big idea’ bringing the advertising
message strategy to life in a distinctive and memorable way
 Choice of advertising appeals: meaningful, believable, distinctive
o Message execution: approach, style, tone, words and format used for executing an
advertising message
 Slice of life: 1 or more ‘typical’ people using product in a normal setting eg. Mac
 Lifestyle: product fitting in with a particular lifestyle eg. timberland
 Fantasy: creates fantasy around product and its use eg. cosmetic products
 Mood and image: builds a mood or image around the product such as beauty,
love, serenity eg. Banyan Tree Resort
 Musical: people or characters singing about the product eg. Carlsberg, Heineken
 Personality symbol: creates character to represent product eg. Harvey Davidson
 Technical expertise: displays co’s expertise in making the product eg. Lexus
 Scientific evidence: presents survey or scientific evidence that brand is better or
better liked than others eg. Colgate
 Testimonial evidence: highly believable and likeable source endorsing product
eg. Nike

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- Selecting advertising media

o Vehicles through which advertising messages are delivered to their intended
audiences
o Deciding on reach (% of people in the target market who are exposed to the ad),
frequency (how many time an average person is exposed to the ad) and impact
(qualitative value of a message exposure)
o Choosing among major media types

o Selecting specific media vehicles – specific media within each general media type
 Eg. magazines vehicle: newsweek, 8 days, people, female
o Deciding on media timing
 Decide how to schedule the advertising over the course of a year
 Choose the patterns of the ad: continuity (scheduling ads evenly within a given
period) or pulsing (scheduling ads unevenly over a given time period)
- Create good advertisements and get the media dept to select and purchase the best media
for carrying these advertisements

 Evaluating advertising effectiveness and return on advertising investment

- Evaluating the communication and sales effect of advertising before, during and after the
advertising is placed
- Return on advertising investment: net return on advertising investment divided by the
costs of the advertising investment
- Communication effects: are the ads and media communicating the ad message well?
- Sales effects: are the ads increasing the sales level?

Public Relations
 Building good relations with the company’s various publics by obtaining a good corporate
image and handling or heading off unfavourable rumours, stories and events

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Functions of public relations

 Press relations or press agency: creating and placing newsworthy information in the news
media to attract attention to a person, product or service
 Product publicity: publishing specific products
 Public affairs: building and maintaining national or local community relations
 Lobbying: building and maintaining relations with legislators and government officials to
influence legislation and regulation\
 Investor relations: maintaining relationships with shareholders and others in the financial
community
 Development: public relations with donors or members of non-profit organisations to gain
financial or volunteer support

Role and impact of public relations

 Strong impact on public awareness at a much lower cost than advertising ( do not require
media space or time, just a staff to develop and circulate information and manage events)
 Greater credibility than advertising - spectacular results
 Often underused – staff is busy dealing with various stakeholder (stockholders, employees,
legislators, press) that public relations programs may be ignored
 Plays an increasingly important brand-building role

Major public relations tools

 News
 Speeches: company executives field questions from the media or give talks at trade
associations or sales meetings
 Special events: conferences, press tours, grand openings, fireworks display, laser shows etc.
 Written materials: annual reports, brochures, articles, company newsletter, magazines
 Audiovisual materials: films, slide-and-sound programs, DVDs, online videos
 Corporate identity materials: logos, stationery, signs, biz forms, biz cards, uniform etc
 Public service activities: contributing money and time
 Buzz marketing: social networking process - generate excitement and favourable word of
mouth for their brands
 Mobile marketing: travelling promotional tours that bring the brand to cust. eg. road shows
 Internet: for information and entertainment
 Management should set PR objectives, choose PR messages and vehicles, implement the PR
plan and evaluate results
 Blended smoothly with other promotion activities within the company’s overall IMC efforts

Chap 16 Personal Selling

 Personal presentation by the firm’s sales force for the purpose of making sales and building
relationships

The role of the sales force

 Critical link between the company and the customers
- Represent the company to customers: selling to consumers
- Represent customer to company: providing feedback from consumer to company
 Very effective in achieving certain marketing objectives and carrying out activities:
prospecting, communicating, selling and servicing, information gathering
 Build long-term personal and profitable customer relationships
 Works to build both customer satisfaction and company profits

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Sales force management: analysis, planning, implementation and control of sales force activities

 Designing sales force strategy and structure

- Sales force structure
o Territorial sales force structure: assigns each salespeople to an exclusive
geographical territory in which the salesperson sells the company’s full line (selling 1
product to 1 industry) eg. Campbell soup
o Product sales force structure: salesperson specialised in selling only a portion of the
company’s products (company products are numerous and complex) eg. Kodak
o Customer sales force structure: salesperson specialised in selling only to certain
customers eg. Lear Corporation - Ford, general motors, fiat divisions
o Complex sales force structure: company sells wide variety of products to many types
of customers over broad geographical area eg. Hewlett Packard - grew complex,
inefficient and unresponsive to customers’ needs
- Sales force size
o Use of workload approach: group accounts into different classes according to factors
related to the amount of effort required to maintain them and determine the number
of salespeople needed to call on each class of accounts the desired number of times
- Other issues
o Outside and inside sales force
o Team selling: using teams of people from sales, marketing, engineering, finance,
technical support and even upper management to service large, complex accounts eg.
Procter and Gamble, IBM, Xerox

 Recruiting and selecting salespeople

- Look to job duties and characteristics of its most successful sales people to suggest the
traits it wants: intrinsic motivation, discipline work style, ability to close the sale, ability
to build customer relationships
- Look for applicants through recommendations, employment agencies, classified ads,
internet or attract top sales people from other companies
- Selection process: informal interviews to lengthy testing and interview
o Evaluate person’s fundamental characteristics (integrity, motivation, capacity,
understanding, experience), sales attitude, analytical and organisational skills,
personality traits

 Training salespeople
- Familiarise with the art of selling
- Learn about the different types of customers and their needs, buying motives and buying
habits
- Know how to identify with the company, products and its competitors
- Increasing trend of web-based training

 Compensating salespeople
- Appealing compensation plans: fixed and variable amount, expenses and fringe benefits

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 Supervising and motivating salespeople

- Supervision: work smart, doing things in the right ways
o Call plan, time-and-duty analysis
- Motivating: work hard, energetically towards the sales force goals
o Organisational climate, sales quota, positive incentives, sales meetings, sales contests

 Evaluating salespeople and sales force performance

- Feedback: sales report, monitor sales and profits performance, observation, customer
surveys, talks and conversations with other salespeople

Personal selling process: steps that salesperson follows when selling

 Prospecting and qualifying: identify qualified potential customers (looking at their financial
ability, volume of biz, special needs, location and possibilities for growth
 Preapprocah: learns as much about the prospective customers before making sales call
 Approach: meets customer for the first time, building goodwill from the beginning
 Presentation and demonstration: tells ‘product story’ to customer, highlighting customer
benefits and showing how product solves customer’s problems
- Need-satisfaction approach: good listening and problem-solving skills
 Handling objections: seeks out, clarifies and overcomes customer’s objections to buying
- Stay positive, turning objections into reasons to buy
 Closing: ask customer for an order
- Confidently identify the ‘right’ moment
 Follow-up: follow up after sale to ensure customer satisfaction and repeat biz
- Details such as delivery, purchase terms, installation, servicing etc to assume buyer’s
interests and reduce buyer’s concerns

Personal selling vs customer relationship management

 Transaction-oriented vs relationship marketing
- Transaction-oriented: to close specific deal with customer
 Company sales force should help to orchestrate a whole-company effort to develop profitable
long term relationships with key customers based on superior customer value and satisfaction

Sales Promotion
 Short term incentives to encourage the purchase or sale of a product or service
 Consumer relationship building

Reasons for rapid growth of sales promotion

 Product managers faced greater pressure to increase current sales and promotion is viewed as
an effective short-run sales tools
 Company faces more competition and competing brands are less differentiated
 Advertising efficiency has declined due to increasing costs, media clutter and legal restraints
 Consumers are more deal-oriented and ever-larger retailers are demanding more deals from
manufacturers

Steps in the sales promotion process

 Setting sales promotion objectives Pg 75-76
 Selecting tools

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 Developing and implementing sales promotion program Pg 75-76

 Deciding on incentive size, conditions for participation, how to promote and distribute the
promotion package, length of promotion
 Evaluate the sales promotion results

Sales promotion objectives and tools

 Consumer promotions
- Urge short term customer buying or to enhance long term customer relationships
- Samples (offer trial amount of product), coupons (certifications given for purchasing
specific products), cash refunds (price reductions occur after purchase of products), price
packs/deals (offer consumer savings eg. 2 units for the price of 1), premiums (goods
offered for free or at lower cost as an incentive to buy a product eg. Mac free gifts),
advertising specialities (giving useful articles with advertiser’s logo, name, message
printed), patronage rewards/continuity programs (cash or other rewards offered for
regular use of a certain product/service eg. frequent flyer, NTUC member), point of
purchase displays and demonstrations, contests, sweepstakes and games (offer customers
a chance to win something)

 Trade promotions
- Persuading retailers to carry new items and more inventory, buy ahead or advertise
company’s products and give them more shelf space
- Allowances (in return for retailer’s agreement to feature the manufacturers’ product in
some way), discounts (price-off, off-invoice, off-list), offer free speciality advertising
goods, cooperative advertising, training of distributor’s sales force

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 Sales force/biz
- Getting more sales force support for current or new products or getting salespeople to
sign up new accounts
- Trade associations to organise conventions and trade shows to promote products
- Sales contests for salespeople or dealers to motivate them to increase their sales
performance over a given period of time

Chap 20 Marketing Ethics and Social Responsibility

Social Criticisms of Marketing

Marketing’s impact on individual consumers

 Criticisms of the competitive marketing system
- High prices
o High costs of distributions: too many intermediaries and intermediaries are inefficient
and greedy, marking prices beyond the value of their services
o High advertising and promotion costs: being accused of pushing up prices to finance
heavy advertising and sales promotion
o Excessive mark-ups on goods
- Deceptive practices
o Deceptive pricing: falsely advertising ‘factory’ or ‘wholesale’ prices or a large price
reduction from a phoney high retail list price Pg 65
o Deceptive promotion: misrepresenting the product’s features or performance or
luring customers to the store for a bargain that is out of stock
o Deceptive packaging: exaggerating package contents through subtle design, using
misleading labelling or describing size in misleading terms
o Boost short term sales, earning profits quickly but harming company in the long run
and decreases the brand equity of the company
- High-pressure selling
o Persuades people to buy goods they had no thought of buying
o Short term gain, not building long term relationships with valued customers
- Shoddy, harmful or unsafe products
o Poor product quality or function, products that are not made well and services not
performed well
o Products deliver little benefit or that they are harmful
o Unsafe products
- Poor service to disadvantaged consumers
o Being accused of serving the disadvantaged consumers poorly
o Eg. urban poor have to shop in smaller stores that carry inferior goods and charge
higher prices, home and auto insurers assigning higher premiums to people with
poor credit ratings
 Ethical problems in marketing research
- Alleged invasions of personal privacy
- Gathering marketing information in exchange for money or free offers
 Ethical problems in product strategy
- Product quality
- Planned obsolescence: having products becoming obsolete before they actually should
need replacements
o Producers continually changing consumer concepts of acceptable styles to encourage
more and earlier buying eg. clothing fashions

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o Producers holding back attractive functional features then introducing them later to
make older models obsolete eg. consumer electronics and computer industries
o Response validity – seeking continuous improvements instead?
- Brand similarity
- Packaging
 Ethical problems in distribution strategy
- Determining the appropriate degree of control over a channel
- Determining whether a company should distribute its products in marginally profitable
outlets that have no alternative source of supply
 Ethical problems in pricing
- Probably the most regulated aspect
- Most unethical pricing behaviour is also illegal eg. price-fixing, dumping
 Ethical problems in promotional strategy
- The source of the majority of ethical questions
- Ethically questionable personal selling ~ Gifts vs bribes
- Questionable advertising
- Promotion of questionable features eg. air bags in the cars

Marketing’s impact on society as a whole

 False wants and too much materialism
- Urges too much interest in material possessions
- View that the interest in material things is not a natural state of mind but a matter of false
wants created by marketing
- Benefits the industry more than consumers
- Defences against advertising and other marketing tools
o Marketers are most effective when they appeal to existing wants
o People seek information when making important purchases and often do not rely on
single sources
o One’s wants and values are influenced not only by marketers but also by family, peer
groups, religion, cultural background and education
 Too few social goods
- Being accused of overselling private goods at the expense of public goods and incurs
social costs at the same time
- Eg. an increase in automobile ownership (private goods) requires more highways, traffic
control, parking spaces (public goods) and results in traffic congestion, air pollution,
gasoline shortages, death and injuries from car accidents (social costs)
- To restore the balance between private and public goods
o Producers to bear full social costs of their operations
o Make consumers pay the social costs
 Cultural pollution
- Interruptions of serious programs, pages of ads obscuring magazines, billboards mar
beautiful scenery, spam fills é-mail boxes  continually pollute people’s minds with
messages of materialism, sex, power or status
 Too much political power
- Support for an industry’s interests against public interests
- Advertisers being accused of holding too much power over the mass media, limiting
media freedom to report independently and objectively

Marketing’s impact on other businesses

 Harming competitors and reducing competition
- Acquisitions of competitors

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o
- Marketing practices that create barriers to entry eg. large companies using patents, heavy
promotion spending and tying up suppliers or dealers to keep or drive out competitors
- Unfair competitive marketing practices with the intention of hurting or destroying other
firms eg. setting prices below costs, threaten to cut off biz with suppliers, discourage the
buying of a competitor’s products ~ Wal-mart, American Airlines, Intel, Microsoft

Citizen and Public Actions to Regulate Marketing

Consumerism
 An organised movement of citizens and government agencies to improve the rights and
power of buyers in relation to sellers
 Consumers’ need for addition consumer rights
- The right to be well informed about important aspects of the market eg. the true cost, true
ingredients, truth in advertising etc.
- The right to be protected against questionable products and marketing practices
- The right to influence products and marketing practices in ways that will improve the
‘quality of life’
 Consumers’ responsibilities to protect themselves
- Remedies when consumers believe they got a bad deal: contacting the company or the
media, contacting local/governmental agencies and going to small-claims court
 View it as an opportunity to serve customers better by providing more consumer information,
education and protection

Environmentalism
 An organised social movement seeking to minimise the harm done to the environment and
quality of life by marketing practices
- Driven by modern environmental groups and concerned consumers
- Driven by government, which passed laws and regulations governing industrial practices
impacting the environment
- Companies are accepting responsibility for doing no environmental harm
 Adopting policies of environmental sustainability: developing strategies that both sustain the
environment and produce profits for the company
- Pollution prevention: eliminating and minimising waste after it has been created eg. Sony
reduced the amount of heavy metals in its electronic products, Nike produces PVC-free
shoes and recycle old sneakers
- Practice product stewardship: minimising all environmental impacts throughout the full
product life cycle and all the while, reducing costs eg. Xerox Corporation’s Equipment
Remanufacture and Parts Reuse Program
- Look into the future and plan for new environmental technologies eg. Wal-mart
- Develop sustainability vision: serves as a guide to the future, providing a framework for
pollution prevention, product stewardship and environmental technology

Biz Actions toward Socially Responsible Marketing

Enlightened marketing: a marketing philosophy holding that a company’s marketing should

support the best long-run performance of the marketing system
 Consumer-oriented marketing
- Holds that the company should view and organise its marketing activities from the
consumer’s point of view
- An all-consuming passion for delivering superior value to carefully chosen customers

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 Customer-value marketing
- Holds that a company should put most of its resources into customer value-building
marketing investments
- Building long term consumer loyalty and relationships by continually improving the
value consumers receive from the firm’s market offering
- By creating value for consumers, company will be able to capture value back from
consumers
 Innovative Marketing
- Requires that a company seek real product and marketing improvements to retain existing
and attract new customers
- Eg. Samsung Electronics
 Sense-of-mission marketing
- Holds that a company should define its mission in broad social terms rather than narrow
product terms
 Societal marketing Pg 2
- Holds that a company should make decisions by considering consumers’ wants, the
company’s requirements, consumers’ long run interests and society’s long-run interests
- Design products that are not only pleasing but beneficial as well

Marketing ethics
 Corporate marketing ethics policies
- Difficult ethical issues should be decided by the free market and legal system
- Responsibilities lie in the hands of the companies and managers, not the system
- Each company and marketing manager must work out a philosophy of socially
responsible and ethical behaviour
- Under the societal marketing concept Pg 2, 79 , each manager must look beyond what is
legal and allowed and develop standards based on personal integrity, corporate conscious
and long-run consumer welfare
- Biz standards and practices vary a great deal from 1 country to another ~ issue of ethics
poses special challenges for international marketers
- Companies should make a commitment to a common set of shared standards worldwide
eg. American Marketing Association, PwC
 General norms
- Marketers must do no harm
- Marketers must foster trust in the marketing system
- Marketers must embrace, communicate and practice the fundamental ethical values that
will improve consumer confidence in the integrity of the marketing exchange system

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 Ethical values
- Honesty: to be truthful and forthright in our dealings with customers and stakeholders
- Responsibility: to accept the consequences of our marketing decisions and strategies
- Fairness: to try to balance justly the needs of the buyer with the interests of the seller
- Respect: to acknowledge the basic human dignity of all stakeholders
- Openness: to create transparency in our marketing operations
- Citizenship: fulfill the economic, legal, philanthropic and societal responsibilities that
serve stakeholders in a strategic manner

The 4-step pyramid of

corporate social responsibility

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LECTURE 11 – CHAPTERS 8 AND 17

Chap 8 Service is any activity or benefit that one party can offer to another that is essentially intangible
and does not result in the ownership of anything

3 Levels of Product and Service Pg 37

Product and Service Classifications Pg 37
Product and Service Decisions Pg 38
Additional Product and Service Considerations Pg 47

Services Marketing

Nature and characteristics of a service

 Intangibility: service cannot be seen, tastes, felt, heard or smelled before purchase
 Variability: quality of services depends on who provides them and when, where and how
 Inseparability: services cannot be separated from their providers
- Provider-consumer interaction
 Perishability: services cannot be stored for later sale or use

3 types of marketing in service industries

 Internal marketing: orienting and motivating customer-contact employees and the supporting
service people to work as a team to provide customer satisfaction
 External marketing
 Interactive marketing: training service employees in the fine art of interacting with customers
to satisfy their needs

Service classifications

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Marketing strategies for service firms

 The service-profit chain
- The chain that links service firm profits with employee and customer satisfaction
- Customer satisfaction is seen as one of the keys to competitive success

 Managing service differentiation

- Differentiated offer: innovative features that set one company’s offer apart from
competitors’ offers eg. airlines have frequent flyer award programs and special services
- Differentiated delivery: having more able and reliable customer-contact person or
develop a superior physical environment in which the service product is delivered or
design a superior delivery process eg. grocery chains offer online shopping and home
delivery
- Differentiated image: symbols and brands eg. Mac’s golden arches
 Managing service quality
- Delivering consistently higher quality than its competitors
- Setting high service-quality standards
- Empower front-line service employees to give them the authority, responsibility and
incentives they need to recognise, care about and tend to customers’ needs
- Good service recovery ~ turn angry customers into loyal ones
 Managing service productivity
- Train current employees better or hire new ones who will work harder or more skilfully
- Increase quantity of service by giving up some quality
- Harness the power of technology
- Avoid pushing productivity so hard that it reduces quality or reduces the long-run ability
to innovate, maintain service quality or respond to consumer needs and desires
- Stay mindful of how companies create and deliver customer value

Measuring services performance

 Service-quality model
Gap 1: gap between consumer
expectation and management
perception
Gap 2: gap between management
perception and service-quality
specification 84
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 Service gap analysis

- Measurement of how ‘big/large’ the gap is
- Satisfaction score = Perception score (P) - Expectation score (É)
- Positive satisfaction score is deemed to be satisfaction of the customers
 5 dimensions for measuring quality
- Tangibles: the appearance and functionality of a company’s facilities and equipment, and
the general appearance of its personnel
- Reliability: company’s ability to perform the promised service dependably and accurately
- Responsiveness: company’s willingness to help customers and provide prompt service
- Assurance: the knowledge and courtesy of a company’s employees and their ability to
convey trust and confidence
- Empathy: the caring, individualised attention a company provides its customers

Chap 17 Direct marketing

 Direct connections with carefully targeted individual consumers to both obtain an immediate
response and cultivate lasting customer relationships
 Customer database: organised collection of comprehensive data about individual customers
or prospects, including geographic, demographic, psychographic and behavioural data
- Use for locating good potential customers and to generate sales lead
- Mine databases to learn about customers in detail and fine-tune their marketing offerings
and communications to the special preferences and behaviours of targeted segments
- Tool for building stronger long-term customer relationships
- Requires special investments and must be user-friendly and available to various
marketing groups

Growth and benefits of direct marketing

 Benefits to buyers
- Convenience and easy
- Private, no sales people to bother you
- Ready to access to many products
- Access to comparative information about companies, products and competitors
- Interactive and immediate
 Benefits to sellers
- Tool to build customer relationships
- Low cost, efficient, fast alternative to reach markets

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- Flexible, allowing marketers to make ongoing adjustments to its price and programs or to
make immediate and timely announcements and offers
- Access to buyers not reachable through other channel ~ cross country

Forms of direct marketing

 Direct-mail marketing: sending an offer, announcement, reminder or other item to a person at
a particular address
- Suited for direct, one-to-one communication, permits high target market selectivity, can
be personalised, flexible and allows easy measurement of results
 Catalogue marketing: print, video or electronic catalogues that are mailed to select customers,
made available in stores or presented online
- Effective sales and relationship builder, intrusive and creates its own attention
- Web-based catalogues save on production, printing and mailing costs, are able to offer an
almost unlimited amount of merchandise and are real-time, passive and must be marketed
in order to attract new customers

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 Telephone marketing: using the telephone to sell directly to customers and biz customers
- Outbound telephone marketing to sell directly to consumers and inbound toll-free to
receive orders
- Purchasing convenience and increased product and service information
- Unsolicited outbound telephone marketing annoyed many consumers
- Developing ‘opt-in’ calling systems to provide useful information and offers to customers
who have invited the company to contact them by phone or é-mails
 Direct-response television marketing
- Direct response television advertising: marketers persuasively describe a product and
give customers a toll-free number or web-site for ordering
o Less costly, easier for marketers to track the impact of their pitches
- Home shopping channels: television programs or entire channels dedicated to selling
goods and services
 Kiosk marketing: information and ordering machines that direct marketers place in stores,
airports and other locations eg. Kodak, Fuji let customers transfer pictures from digital
storage devices, edit them and make high-quality colour prints
 New digital marketing technology ~ allows the reach and interaction with consumers
everywhere and at anytime
- Mobile phone marketing
- Podcasts and vodcasts
- Interactive TV (ITV): allow viewers to interact with television programming and
advertising using remote controls

Online Marketing
 Company efforts to market products and services and build customer relationships over the
Internet
 Internet: a vast public web of computer networks that connects users of all types all over the
world to each other and to an amazingly large ‘information repository’

Online marketing domains

Types of online marketers

 Click-only companies
- So-called dot-coms which operate only online without any brick-mortar market presence
- É-tailers: sell directly to final buyers via Internet eg. Amazon.com, Expedia
- Search engines and portals: ports of entry to the Internet eg. Yahoo! Google
- Shopping or price comparison sites: provide product and price comparison information
- Internet service providers (ISP): provide Internet connections for a fee eg. AOL, Earthlink
- Transaction sites: take commissions for transactions conducted on their sites eg. eBay

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- Content sites: provide financial, news, research, and other information eg. New York
Times.com, ESPN.com
 Click-and-mortar companies
- Traditional brick-and-mortar companies that have added online marketing to their
operations eg. Office Depot
- Many firms enjoy greater success (more credibility) than their click-only competition
o Trusted brand names eg. Office Depot, Best Buy, Barnes & Nobles
o Greater financial resources
o Larger customer base, industry knowledge and strong supplier relationships
- Offer customers more options

Setting up an online marketing presence

 Creating a website
- Types of websites
o Corporate websites: designed to build customer goodwill and to supplement other
sales channels, rather than to sell the company’s products directly eg. Ben & Jerry
 Provide information, create excitement, build relationships
o Marketing websites: designed to engage consumers in interactions that will move
them closer to a direct purchase or other marketing outcome eg. SonyStyle.com
- Designing effective websites requires designing an attractive site and developing ways to
get consumers to visit the site, remain on the site and return to the site
o Context: sites layout and design
o Content: text, pictures, sound and video that website contains
o Community: ways that the site enables user-to-user communication
o Customisation: site’s ability to tailor itself to different users or to allow users to
personalise the site
o Communication: site enables site-to-user, user-to-site or 2-way communication
o Connection: degree that the site is linked to other sites
o Commerce: site’s capabilities to enable commercial transactions
o Constantly change and updated
 Placing ads and promotions online
- Online advertising: advertising that appears while consumers are surfing the web
o Display ads
 Banners: banner-shaped ads found on a website
 Interstitials: ads that appear between screen changes on a website
 Pop-ups: ads that suddenly appear in a new window in front of the window being
viewed
 Using rich media ads – incorporate animation, video, sound and interactivity

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o Search-related ads
 Ads in which text-based ads and links appear alongside search engines result on
sites such as Google, Yahoo!
 Effective in linking consumers to other forms of online promotions
o Online classifieds
- Other forms of online promotions
o Content sponsorships: provide companies with name exposure through sponsorship
of special content such as news or financial information eg. weather report
o Alliances and affiliate programs: companies work together, online and offline, to
promote each other eg. Amazon.com
o Viral advertising: Internet version of word- of-mouth marketing and involves the
creation of a Web site, an e-mail message, or another marketing events that
customers pass along to friends
- Future of online advertising
o Useful purpose as a supplement to other marketing efforts
o Playing an increasingly important role in the marketing mix
 Creating or participating in web communities
- Web communities: websites upon which members can congregate online and exchange
views on issues of common interest
- Develop a strong sense of community
- Attractive to marketers as they draw frequent, lengthy visits from consumers with
common interests and well-defined demographics
- Eg. iVillage.com, MyFamily.com, Facebook.com
 Using é-mail
- Marketers are developing enriched messages, rich media that include animation,
interactivity and personal messages with streaming audio and video to compete with the
cluttered é-mail environment
- Be careful not to cause resentment: explosion of spams, unsolicited and unwanted
commercial é-mail messages, has caused consumer frustration and anger
- Development of ‘opt-in’ and ‘opt-out’ of é-mail promotions approach ~ permission-based
marketing

Promises and challenges of online marketing

 Successes: Amazon.com, eBay, Google, Dell
 Integrating online marketing into their marketing strategies and mixes
 Online marketing will prove to be a powerful direct marketing tool for building customer
relationships, improving sales, communicating company and product information and
delivering products and services more effectively and efficiently

Integrated direct marketing

 Direct-marketing campaigns that use multiple vehicles and multiple stages to improve
response rates and profits
 Marketers must work hard to integrate the different direct marketing tools into a cohesive
marketing effort

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Public policy issues in direct marketing Pg 76

 Irritation, unfairness, deception and fraud
- Internet fraud: identity theft, financial scams
- Phishing: identity theft that uses deceptive é-mails and fraudulent websites to fool users
into divulging their personal data
- Online security: unscrupulous snoopers will eavesdrop on their online transactions or
intercept their credit card numbers and make unauthorised purchases
- Access by vulnerable or unauthorised groups
 Invasion of privacy
- Knowing too much about consumers’ lives and that they may use this knowledge to take
advantage of consumers
- Ready ability of information may leave consumers open to abuse if companies make
unauthorised use of information in marketing their products or exchanging databases with
other companies
 A need for action
- Building an environment of mutual trust and openness will keep the Internet a free,
comfortable and richly diverse community
- Honest and well-designed marketing offers targeted only toward consumers who will
appreciate and response to them

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LECTURE 12 – CHAPTER 19

Chap 19 Global firm is a firm that, by operating in more than 1 country, gains R&D, production,
marketing and financial advantages in its costs and reputation that are not available to purely
domestic competitors
 Minimises the importance of national boundaries and develops ‘transnational’ brands
 Raises capital, obtains materials and components, manufactures and markets its goods
wherever it can do the best job
 Small biz  practice global niching

Major International Marketing Decisions

Looking at the Global Marketing Environment

The international trade system

 Charge tariffs, set quotas, exchange control, embargo, non-trade barriers
 The world trade organisation
- Enforce ‘general agreement on tariffs and trade’ rules, mediating global disputes and
imposing trade sanctions
 Regional free trade zones
- A group of nations organised to work toward common goals in the regulation of
international trade
- Eg. European Union (EU) ~ 27 member countries, North American Free Trade
Agreement (NAFTA) ~ US, Mexico, Canada, APEC ~ pacific rim, Central American Free
Trade Agreement (CAFTA) ~ US and Costa Rica, Free Trade Area of Americas (FTAA)

Economic environment
 Country’s industrial structure: shapes its product and service needs, income levels and
employment levels
- Subsistence economies: vast majority of the people engage in simple agriculture where
they consume most of their output and barter the rest for simple goods and services
- Raw material exporting economies: rich in 1 or more natural resources and much of their
revenue comes from exporting these resources
- Industrialising economies: increasing manufacturing result in requiring more imported
goods
- Industrial economies: major exporters of manufactured goods, services and investment
funds where they trade among themselves and also export them to other economies for
raw materials and semi-finished goods
 Country’s income distribution
- Low, medium, high income households

Political-legal environment
 Country’s attitude toward international buying, government bureaucracy, political stability
and monetary regulations
 Growing practice of countertrade: international trade involving the direct or indirect exchange
of goods for other goods instead of cash
- Barter: direct exchange of goods or services

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- Compensation: seller sells a plant, equipment or technology to another country and agree
to take payment in the resulting goods
- Counter purchase: seller receives full payment in cash but agrees to spend some of the
money in the other country

Cultural environment
 Impact of culture on marketing strategy
- Examine the ways consumers in different countries think about and use certain products
before planning a marketing program
- Companies that ignore cultural norms and differences can make some very expensive and
embarrassing mistakes
- Cultural traditions, preferences and behaviours
- Biz norms and behaviours
 Impact of marketing strategy on cultures
- Adapting to local cultural values and traditions rather than trying to force your own

Demographic environment Pg 10

Technology environment Pg 11

Deciding whether to Go Global

Reasons for global marketing

 Growth – access to resources and new markets
 Survival – against severe domestic competition , achieve economies of scale
 Global competitors at home
 Opportunities in foreign markets
 Domestic markets might be stagnant or shrinking
 Company’s customers expanding abroad and require international servicing
 Need an enlarged customer base
 Reduce dependency on any one market
 Cost reduction

Deciding which Markets to Enter

 Define organisation’s international marketing objectives and policies

 Determine the volume of foreign sales
 Determine the number of countries the firm should go into
 Determine the types of countries the firm should enter
 Consider factors: market size, market growth, cost of doing biz, competitive advantage, risks

Deciding how to Enter the Market

Exporting
 Entering a foreign market by selling goods produced in the country’s home country, often
with little modification
 Indirect exporting: working through independent international marketing intermediaries
- Less risk, making fewer mistakes
 Direct exporting: sellers handle their own exports
- Domestic export department, overseas sales branch, home-based salespeople abroad,
foreign-based distributors

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Licensing
 Entering foreign market in which the company enters into an agreement with a licensee in the
foreign market eg. Coca-cola
- Firm has less control over the licensee than it would over its own operations, firm has to
give up profits and when contract ends, it may find that it has created a competitor
 Contract manufacturing: company contracts with manufacturers in a foreign market to
produce the product or provide the service eg. Sears
- Advantages: start faster, lower risks, opportunity to form partnership with or buy out the
local manufacturer
- Disadvantages: decreased control over manufacturing process, loss of potential profits in
manufacturing
 Management contracting
- Domestic firm supplies the management know-how to a foreign company that supplies
the capital eg. Hilton
- Low risk, yields income, more attractive if the contracting firm has an option to buy some
share in the managed company
- Not sensible,, prevents company from setting up its own operations for a period of time
 Franchising

Joint venture
 Entering foreign markets by joining with foreign companies to produce or market a product
or service
 Joint ownership
- Company joins investors in a foreign market to create a local biz in which the company
shares joint ownership and control
- Partners may disagree over investment, marketing and other policies

Direct investment
 Entering foreign market by developing foreign-based assembly or manufacturing facilities
 Lower costs – cheaper labour or raw materials, foreign government investment incentives,
freight savings, improve image in the host country, developing deeper relationship with
government, customers, local suppliers and distributors, keeps full control over investment
 Faces many risks – restricted or devalued currencies, falling markets or government changes

Summary:

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Deciding on the Global Marketing Program

Standardised marketing mix

 International marketing strategy for using basically the same product, advertising, distribution
channels and other marketing mix elements in the company’s international markets

Adapted marketing mix

 International marketing strategy for adjusting the marketing mix elements to each
international target market, bearing more costs but hoping for a larger market share and return

‘Think globally but act locally  corporate level to seeka balance between standardisation and
adaptation
 Corporate level to gives global strategic direction
 Regional or local units to focus on individual consumer differences across global markets
 Seeking a balance between standardisation and adaptation

Product

Promotion
 Communication adaptation: a global communication strategy of fully adapting advertising
messages to local markets

Price
 Consider the actual costs from country to country
 Consider setting a price for goods that a company ships to its foreign subsidiaries
- Charging too high results in having to pay higher tariff duties
- Charging too low may be charged with ‘dumping’: when a firm sells a product in a
foreign country below its domestic price or below its actual cost
 Economic, technological forces and the increasing trend of Internet have had an impact on
global pricing

Distribution channel
 Whole-channel view: designing international channels that take into account all the necessary
links in distributing the seller’s products to final buyers, including the seller’s HQ
organisation, channels among nations and channels within nations

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 AB112 Principles of Marketing
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 Channels of distribution within countries vary greatly from nation to nation

- Number and types of intermediaries serving each foreign market
- Size and character of retail units abroad

Deciding on the Global Marketing Organisation

 Degree of involvement in international marketing activities
- Export department to simply ship goods out
- International department to handle all its international activities: international markets
and ventures
o Geographical organisations
o World product groups
o International subsidiaries: responsible for its own sales and profits
- Global organisation with worldwide marketing planned and managed by the top officers
of the company, viewing the entire world as a single, borderless market

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