Principles All Slides Not Illustrated

Principles of Marketing
KHAN Muhammad Asif QADER Muhammad Zeeshan
CESEMED 1, 2011-2012(S2)
Kotler on Marketing
The future is not ahead of us. It has already happened. Unfortunately, it is unequally distributed among companies, industries and nations.
Marketing in the 21th century

How Business and Marketing are Changing Substantial increase in buying power A greater variety of goods and services A greater amount of information about practically anything A greater ease in interacting and placing and receiving orders An ability to compare ratings/opinions on products and services Companies can collect fuller and richer information about markets, customers, prospects and competitors Technological push Globalization
Major Consequences
Internet Marketing Pure players: Amazon, Dell Computers Click and Mortar Stores: Barnes and Nobles, FNAC Internet communications, Complaint Sites Lesser role of big media (TV, Radio, Billboards) On line Marketing Research Design your own product One to one marketing Brand Communities More control by the market
Session Overview
Defining Marketing and the Marketing Process The Marketing Environment and Managing Marketing Information Session 3: Markets and Buyer Behavior Session 4: Customer Driven Marketing Strategy: Creating Value for Target Customers Session 5: Product, Services and Branding Strategy Session 6: Pricing Products: Understanding and Capturing Customer Value Session 7: Marketing Channels and Supply Chain Management Session 8: Integrated Marketing Communication Session 9: Direct Marketing & Sales Force Management Session 10: Final Exam Session 1: Session 2:
Session #1: Defining Marketing and the Marketing Process

Marketing: Managing Profitable Customer Relationships Company and Marketing Strategy: Partnering to Build Customer Relationships Marketing in the Digital Age: Making New Customer Connections
Marketing: Managing Profitable Customer Relationships

Kotler and Armstrong (2008) Chapter 1
Objectives
Be able to define marketing and discuss its core concepts. Be able to define marketing management and compare the five marketing management orientations. Understand the role of Marketing in the strategic planning process
Objectives
Understand customer relationship management and strategies. Realize the major challenges facing marketers in the new connected millennium.
Example
Amazon.com
Provides great Strong sales, no profits selection, good Customer-driven to its core value, discovery and Each customers convenience experience is unique A true online community
Discussion: Will Amazon.com Survive?
What is Marketing?
Marketing is managing profitable customer relationships
Attracting new customers Retaining and growing current customers
Marketing is NOT synonymous with sales or advertising
What is Marketing?
Kotlers social definition:
Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.
What is Marketing?
Many Things Can Be Marketed!
Goods Services Experiences Events Persons Places Properties Organizations Information Ideas
What is Marketing?
Core Marketing Concepts
Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets
Marketing Management
Marketing management is the art and science of choosing target markets and building profitable relationships with them.
Creating, delivering and communicating superior customer value is key.
Marketing Management
Customer Management:
Marketers select customers that can be served well and profitably.
Demand Management:
Marketers must deal with different demand states ranging from no demand to too much demand.
Marketing Management Marketing Management

Management Orientations
Production concept Product concept Selling concept Marketing concept
Societal marketing concept
CRM
CRM Customer relationship management . . .
is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
CRM
It costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied. Marketers must be concerned with the lifetime value of the customer.
CRM
Customer value/satisfaction
Perceptions are key Meeting/exceeding expectations creates satisfaction
Key Concepts
Attracting, retaining and growing customers Building customer relationships and customer equity
Loyalty and retention

Benefits of loyalty Loyalty increases as satisfaction levels increase Delighting consumers should be the goal
Growing share of customer

Cross-selling
CRM
Key Concepts
Customer equity The total combined customer lifetime values of all customers. Measures a firms performance, but in a manner that looks to the future.
CRM
Key Concepts
Customer relationship levels and tools
Target market typically dictates type of relationship
Basic relationships Full relationships
Customer loyalty and retention programs

Adding financial benefits Adding social benefits Adding structural ties
Marketing Challenges
Technological advances, rapid globalization, and continuing social and economic shifts are causing marketplace changes. Major marketing developments can be grouped under the theme of Connecting.
Connecting
Via technology With customers With marketing partners With the world
Advances in computers, telecommunications, videoconferencing, etc. are major forces. Databases allow for customization of products, messages and analysis of needs. The Internet Facilitates anytime, anywhere connections Facilitates CRM Creates marketspaces
Connecting
Selective relationship management is key.
Customer profitability analysis separates winners from losers.
Growing share of customer

Cross-selling and up-selling are helpful.
Direct sales to buyers are growing.
Connecting
Partner relationship management involves: Connecting inside the company Connecting with outside partners
Supply chain management Strategic alliances
Connecting
Globalization
Competition New opportunities
Greater concern for environmental and social responsibility Increased marketing by nonprofit and public-sector entities
Social marketing campaigns
Company and Marketing Strategy: Partnering to Build Customer Relationships

28
Objectives
Understand marketings role in strategic planning
Example
Walt Disney Company
Known for films, animation, theme parks and customer orientation Parks offer a variety of attractions as well as cleanliness, order, and warmth Satisfying the customer is everyones job Disney has grown via diversification Sales and net income have fallen
Discussion: How Can Disney Recover?
Strategic Planning
Business portfolio: the collection of businesses and products that make up the company. Designing the business portfolio is a key element of the strategic planning process.
Planning Marketing
Marketing plays a key role in the strategic planning process. Marketers must practice CRM and Partner Relationship Management.
Partnering with other departments in the company as well as other firms in the marketing system helps to build a superior value delivery-network.
The Marketing Process

Key Elements
Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort The strategic planning and business portfolio analysis processes help to identify and evaluate marketing opportunities. The purpose of the marketing process is to help the firm plan how to capitalize on these opportunities.

Key Elements
Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort The segmentation process divides the total market into market segments. Target marketing determines which segment(s) are pursued. The market positioning for the product is then determined.

Key Elements
Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort
Competitor analysis guides competitive marketing strategy development. Strategy leads to tactics by way of the marketing mix:
The Four Ps product, price, place, promotion (seller viewpoint) The Four Cs customer solution, cost, convenience, and communication (customer viewpoint)

Key Elements
Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort
Marketing analysis
Provides information helpful in planning, implementation, and control
Marketing planning
Strategies and tactics
Marketing implementation
Turns plans into action
Marketing control
Operating control Strategic control
Marketing audit
Marketing in the Digital Age: Making New Customer Connections

37
Objectives
Be able to identify the major forces shaping the new digital age. Understand how companies have responded to the Internet with e-business strategies. Be able to describe the four major ecommerce domains.
Objectives
Understand how companies use ecommerce to profitably deliver greater value to customers. Realize the promise and challenges that e-commerce presents for the future.
Example
Charles Schwab
Invented discount brokerage category First U.S. major player to go online Initially offered two-tiered trading system to protect profits / stop cannibalization Later became first true clickand-mortar full-service brokerage Now worlds largest e-commerce site 85% online trades; 21% of trade volume; Strong stock return
Major Forces Shaping the Digital Age

Digitalization and Connectivity
The flow of digital information requires connectivity
Intranets, Extranets, and the Internet
The Internet Explosion

Key driver of the new economy
Major Forces Shaping the Digital Age

New Types of Intermediaries
Brick-and-mortar firms often face disintermediation from click-only competitors The click-and-mortar business model has been highly successful
Customization and Customerization
Marketing Strategy in the Digital Age

E-business:
uses electronic means and platforms to conduct business.
E-commerce:
facilitates the sale of products and services by electronic means.

E-marketing:
Includes efforts that inform, communicate, promote, and sell products and services over the Internet.
E-commerce benefits both buyers and sellers

Buyer Benefits of E-Commerce:
Convenience Easy and private Greater product access/selection Access to comparative information Interactive and immediate

Seller Benefits of E-Commerce:
Relationship building Reduced costs Increased speed and efficiency Flexibility Global access, global reach
E-Commerce Domains
E-Marketing Domains
Targeted to consumers Initiated by businesses Initiated by consumers Targeted to businesses
B2C
B2B
C2C
C2B
E-Commerce Domains
Major Domains
B2C B2B C2C C2B
Online consumers Now more mainstream and diverse
Has created new targeting opportunities Online behavior differs by age
Online consumers differ from traditional off-line consumers

They initiate and control the exchange process Value information highly
E-Commerce Domains
Major Domains
B2C B2B C2C C2B
B2B sales far exceed B2C sales B2B sales are estimated to reach $4.3 trillion in 2005 Open trading networks E-marketspace bringing sellers and buyers together Private trading networks Links sellers with their own trading partners
E-Commerce Domains
Major Domains
B2C B2B C2C C2B
C2C web sites help consumers exchange goods or information
eBay is one example
Auction sites facilitate the exchange process

Allow access to a much larger audience
Newsgroups / forums
Help consumers to find and share information
E-Commerce Domains
Major Domains
B2C B2B C2C C2B
Allow consumers to search out sellers, learn about offers, initiate purchase, or dictate purchase terms
Ex: Priceline.com
Some sites facilitate the feedback process between customers and companies
Ex: Planetfeed.com
Conducting E-Commerce
E-Marketing
Creating web sites Placing online ads and promotions Creating or using web communities Using E-mail and webcasting
Corporate web sites
Build goodwill and relationships; generate excitement
Marketing web sites

Engage consumers and attempt to influence purchase
Web site design

7 Cs of effective web site design
Seven Cs of Web Site Design
Context Content Community Communication Connection Commerce
Customization
E-Marketing
Creating web sites Placing online ads and promotions Creating or using web communities Using E-mail and webcasting
Online forms of ads and promotions
Banner ads/tickers Skyscrapers Interstitials Browser ads Content sponsorships Microsites Viral marketing
Future of online ads
E-Marketing
Creating web sites Placing on-line ads and promotions Creating or using web communities Using E-mail and webcasting
Web communities allow members with special interests to exchange views
Social communities Work-related communities
Marketers find well-defined demographics and shared interests useful when marketing
E-Marketing
Creating web sites Placing on-line ads and promotions Creating or using web communities Using E-mail and webcasting
E-mail marketing
Key tool for B2B and B2C marketing Clutter is a problem Enriched forms of e-mail attempt to break through clutter
Webcasting
Auto downloading of customized content to recipients PCs
Promise and Challenges of ECommerce

The Promise of E-Commerce
The future of B2B E-commerce is bright A few click-only companies may succeed Most companies will integrate online marketing into the marketing mix
Session #2: The Marketing Environment and Managing Marketing Information
The Marketing Environment

59
Objectives
Know the environmental forces that affect the companys ability to serve its customers. Realize how changes in the demographic and economic environments affect marketing decisions.
Objectives
Identify the major trends in the firms natural and technological environments. Know the key changes in the political and cultural environments. Understand how companies can react to the marketing environment.
Example
Volkswagen
Millennial fever set the stage to bring back the Beetle VWs investment: $ 560 million Demand quickly outstripped supply The new VW beetle enjoyed cross-generational appeal Earned many awards Beetle now accounts for over 25% of company sales
Discussion: Will the flower-power Microbus succeed flowernext?
Key Environments
Marketing Environment
The actors and forces that affect a firms ability to build and maintain successful relationships with customers. Aspects of the marketing environment: Microenvironment Macroenvironment
The Microenvironment
Actors Affecting a Firms Ability to Serve Customers
Company Suppliers Customer Markets Competitors Publics Marketing Intermediaries
The Microenvironment
Departments within the company impact marketing planning. Suppliers help create and deliver customer value.
Treat suppliers as partners.
Marketing intermediaries help sell, promote, and distribute goods.

Intermediaries take many forms.
The Macroenvironment
Customer markets must be studied.
Consumer, business, government, reseller and international markets exist.
Successful companies provide better customer value than the competition.

Size and industry position help to determine the appropriate competitive strategy.
Various publics must also be considered.
The Microenvironment Types of Publics

Financial Media Government Local General Internal
Citizen Action
Macroenvironmental Forces
Demographic Economic Natural Technological Political Cultural
Key Demographic Trends
World population growth Changing age structure
The U.S. population consists of seven generational groups.
Baby boomers, Generation X, and Generation Y are key groups.
Distinct segments typically exist within these generational groups.
Key Generations
Baby Boomers Generation X Generation Y
Born between 1946 and 1964 Represent 28% of the population; earn 50% of personal income Many mini-segments exist within the boomer group Entering peak earning years as they mature Lucrative market for travel, entertainment, housing, and more
Key Generations
Born between 1965 and 1976 First latchkey children Maintain a cautious economic outlook Share new cultural concerns Represent $125 billion in annual purchasing power Will be primary buyers of most goods by 2010
Key Generations
Born between 1977 and 1994 72 million strong; almost as large a group as their baby boomer parents New products, services, and media cater to GenY Computer, Internet and digitally saavy Challenging target for marketers
Key Demographic Trends
Changing American household Geographic population shifts Better-educated, more white-collar workforce Increasing Diversity
The Economic Environment
Affects consumer purchasing power and spending patterns. Two types of national economies: subsistence vs. industrial. U.S. consumers now spend carefully and desire greater value.
Key Economic Trends
U.S. income distribution is skewed. Upper class, middle class, working class and the underclass. Rich are getting richer, the middle class is shrinking, and the underclass remains poor. Consumer spending patterns are changing.
The Natural Environment
Concern for the natural environment has grown steadily, increasing the importance of these trends:
Shortage of raw materials Increased pollution Increased governmental intervention
Key Technological Trends
The technological environment is characterized by rapid change. New technologies create new opportunities and markets but make old technologies obsolete. The U.S. leads the world in research and development spending.
The Political Environment
Includes laws, governmental agencies, and pressure groups that impact organizations and individuals. Key trends include:
Increased legislation to protect businesses as well as consumers. Changes in governmental agency enforcement. Increased emphasis on ethical behavior and social responsibility.
The Cultural Environment
Is composed of institutions and other forces that affect a societys basic values, perceptions, preferences, and behaviors. Culture can influence decision making. Core beliefs are persistent; secondary cultural values change and shift more easily. The cultural values of a society are expressed through peoples views.
Cultural values are expressed via how people view:
Themselves Others Organizations Society Nature The Universe
Responding to the Marketing Environment

Reactive: Passive Acceptance and Adaptation
Companies design strategies that avoid threats and capitalize upon opportunities.
Proactive: Environmental Management

Use of lobbyists, PR, advertorials, lawsuits, complaints, and contractual agreements to influence environmental forces.
Managing Marketing Information

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Objectives
Understand the importance of information to the company. Know the definition of a marketing information system and be able to discuss its subparts. Learn the steps in the marketing research process.
Objectives
Learn how companies analyze and distribute marketing information. Realize the special issues some marketing researchers face, including public policy and ethical issues.
Example
Coke
New Coke was a fiasco; consumer complaints resulted in the return of Coke Classic after only 3 months. $4 million was spent researching New Coke. Key issue: the research problem was too narrowly defined, and consumer feelings were ignored. Poor judgment in result interpretation was also a problem.
Marketing Info. System

Marketing Information System (MIS)
Consists of people, equipment, and procedures that gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.

Assessing Marketing Information Needs
The MIS serves company managers as well as external partners. The MIS must balance needs against feasibility:
Not all information can be obtained. Obtaining, processing, sorting, and delivering information is costly.

Developing Information
Internal data Marketing intelligence Marketing research
Internal data is gathered via customer databases, financial records, and operations reports. Advantages of internal data include quick/easy access to information. Disadvantages stem from the incompleteness or inappropriateness of data to a particular situation.

Marketing intelligence is the systematic collection and analysis of publicly available information about competitors and trends in the marketing environment. Competitive intelligence gathering activities have grown dramatically. Many sources of competitive information exist.

Sources of Competitive Intelligence
Company employees Internet Garbage Published information Competitors employees Trade shows Benchmarking Channel members and key customers

Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. Steps in the marketing research process.

Steps in the Marketing Research Process:
Defining the problem and research objectives. Developing the research plan for collecting information. Implementing the research plan collecting and analyzing the data. Interpreting and reporting the findings.

Step 1: Defining the problem and research objectives
Dont confuse the symptoms of the problem with its cause when defining the problem. Exploratory, descriptive, and causal research each fulfill different objectives.

Step 2: Developing the Research Plan
Research objectives guide the determination of specific information needs. Research proposals outline the type of data needed and the research plan.
Secondary data: Information collected for another purpose which already exists. Primary data: Information collected for the specific purpose at hand

Types of Data
Secondary data Primary data
Secondary data sources:
Government information Internal, commercial, and online databases Publications
Advantages:
Obtained quickly Less expensive than primary data
Disadvantages:
Information may not exist or may not be usable.

Evaluate the Following When Judging Data Quality
Relevance Accuracy Currency Impartiality

Types of Data
Secondary data Primary data
Planning primary research:
Research approaches:
Observation, survey, experiment
Contact methods:
Mail, telephone, online, personal
Sampling plan:
Sampling unit, sample size, sampling procedure
Research instruments:
Questionnaire, mechanical instruments

Observation research using people or machines
Mystery shoppers, traffic counters, web site cookies are some examples. Discovers behavior but not motivations. Ethnographic research expands observation research to include consumer interviews.

Survey research is widely used to gather descriptive information.
Single source data systems gather information from consumer panels Survey research faces many problems
Experimental research investigates cause and effect relationships.

Key Contact Methods Include:
Mail surveys Telephone surveys Personal interviewing:
Individual or focus group
Online (Internet) research
Each contact method has strengths and weaknesses

Strengths and Weaknesses of Contact Methods Relate to:
Flexibility Sample control Data quantity Cost Interviewer effects Speed of data collection Response rate

Sample: subgroup of population from whom information will be collected Sampling Plan Decisions:
Sampling unit Sample size Sampling procedure:
Probability samples Non-probability samples

Research Instruments:
Questionnaires
Include open-ended and closed-ended questions Phrasing and question order are key
Mechanical instruments

Step 3 of the Research Process: Implementing the Research Plan
Involves collecting, processing, and analyzing information.
Step 4 of the Research Process: Interpreting and Reporting the Findings

Analyzing Marketing Information
Customer relationship management (CRM) helps manage information. CRM offers many benefits and can help a firm gain a competitive advantage. Technology alone cannot build profitable customer relationships.

Distributing and Using Marketing Information
Routine reporting makes information available in a timely manner. User friendly databases allow for special queries. Intranets and extranets help distribute information to company employees and value-network members.
Other Considerations
Marketing research in small businesses and not-for-profit organizations International marketing research Public policy and ethics
Consumer privacy issues
Misuse of research findings
Session 3: Markets & Buyer Behavior

Consumer Markets and Consumer Buyer Behavior Business Markets and Business Buyer Behavior
Consumer Markets and Consumer Buyer Behavior

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Objectives
Be able to define the consumer market and construct a simple model of consumer buyer behavior. Know the four major factors that influence consumer buyer behavior.
Objectives
Understand the major types of buying decision behavior and the stages in the buyer decision process. Be able to describe the adoption and diffusion process for new products.
Example
HarleyHarley-Davidson
Harley Hogs account for Fiercely loyal clientele revolves around 7 core 1/5 of U.S. cycle sales customer types Sales have exceeded Harley owners use their bikes supply for years to express their lifestyle and 1986-2000: Four stock attitudes splits, increase of 7,100% Advertising reflects the Harley mystique
Definitions
Consumer Buying Behavior
Buying behavior of individuals and households that buy products for personal consumption.
Consumer Market
All individuals/households who buy products for personal consumption.
Model of Consumer Behavior

Stimulus Response Model
Marketing and other stimuli enter the buyers black box and produce certain choice/purchase responses. Marketers must figure out what is inside of the buyers black box and how stimuli are changed to responses.
Characteristics Affecting Consumer Behavior

Key Factors
Cultural Social Personal Psychological Culture Subculture
Hispanic consumers African Americans Asian Americans Mature consumers
Social Class

Hispanics
35 million consumers purchase $425 billion worth of goods and services. Expected to grow 64% in 20 years. Spanish media makes group easy to reach. Brand loyal group.

African Americans
35 million consumers purchase $527 billion worth of goods and services. Growing more affluent / sophisticated. Price and brand name conscious; quality and selection are important. Certain media target this group.

Asian Americans
10 million consumers purchase $229 billion worth of goods and services. Fastest growing, most affluent subculture. Many nationalities comprise this group. Consumer packaged goods companies now target this group more heavily.

Mature Consumers
75 million consumers aged 50+ will grow to 115 million within 25 years. Mature consumers control 50% of all discretionary income. Attractive market for travel, restaurant, and cosmetics products, among others.

Key Factors
Cultural Social Personal Psychological
Groups
Membership Reference
Aspirational groups
Opinion leaders
Buzz marketing
Family
Children can influence
Roles and Status

Key Factors
Age and life cycle Occupation Economic situation Lifestyle
Activities, interests, and opinions Lifestyle segmentation
Personality and self-concept

Brand personality

Brand Personality Dimensions
Sincerity Ruggedness Excitement Competence
Sophistication

Key Factors
Motivation
Needs provide motives for consumer behavior Motivation research Maslows hierarchy of needs
Perception
Selective attention, selective distortion, selective retention
Learning
Drives, stimuli, cues, responses and reinforcement
Beliefs and attitudes

Maslows Hierarchy of Needs
Self-actualization Esteem Needs Social Needs Safety Needs Physiological Needs
Types of Buying-Decision Behavior

Difference between brands Significant Differences Involvement Level High Low
Few Differences
Complex buying behavior DissonanceDissonancereducing buying behavior
VarietyVariety-seeking buying behavior Habitual buying behavior
The Buyer Decision Process

Five Stages:
Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior

Process Stages
Needs can be triggered by:

Internal stimuli
Normal needs become strong enough to drive behavior
External stimuli
Advertisements Friends of friends

Process Stages
Consumers exhibit heightened attention or actively search for information. Sources of information:
Personal Commercial Public Experiential
Word-of-mouth

Process Stages
Evaluation procedure depends on the consumer and the buying situation. Most buyers evaluate multiple attributes, each of which is weighted differently. At the end of the evaluation stage, purchase intentions are formed.

Process Stages
Two factors intercede between purchase intentions and the actual decision:
Attitudes of others Unexpected situational factors

Process Stages
Satisfaction is important:
Delighted consumers engage in positive word-of-mouth. Unhappy customers tell on average 11 other people. It costs more to attract a new customer than it does to retain an existing customer.
Cognitive dissonance is common
Buyer Decision Process for New Products

New Products
Good, service or idea that is perceived by customers as new.
Stages in the Adoption Process

Marketers should help consumers move through these stages.

Stages in the Adoption Process
Awareness Evaluation Adoption Interest Trial

Individual Differences in Innovativeness
Consumers can be classified into five adopter categories, each of which behaves differently toward new products.
Product Characteristics and Adoption

Five product characteristics influence the adoption rate.

Adopter Categories
Innovators Early Majority Early Adopters Late Majority
Laggards

Product Characteristics
Relative Advantage Compatibility Complexity Divisibility
Communicability

International Consumer Behavior
Values, attitudes and behaviors differ greatly in other countries. Physical differences exist which require changes in the marketing mix. Customs vary from country to country. Marketers must decide the degree to which they will adapt their marketing efforts.
Business Markets and Business Buyer Behavior

138
Objectives
Be able to define the business market and explain how business markets differ from consumer markets. Know the major factors that influence business buyer behavior.
Objectives
Understand the steps in the business buying decision process. Understand institutional and government markets and how buyers in these markets make their buying decisions.
Example
Gulfstream Aerospace
Sells jets exclusively for corporate use 300 500 customers worldwide Rational, objective, and human factors influence business buyers decisions Multiple people are involved in the decision Buying influences include the CEO, pilot, board members, even spouses Company has been highly successful
Definition
Business Buyer Behavior:
The buying behavior of organizations 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.
Business Markets
Characteristics of Business Markets
Sales in the business market far exceed sales in consumer markets. Business markets differ from consumer markets in many ways.
Marketing structure and demand Nature of the buying unit Types of decisions and the decision process
Business Markets
Characteristic s
Compared to consumer markets:
Business markets
have fewer but larger customers
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process
Business customers
are more geographically concentrated
Demand is different
Demand is derived Demand is price inelastic
Demand fluctuates more, and changes more quickly
Business Markets
Characteristic s
Compared to consumer purchases:
Business purchases involve more buyers in the decision process. Purchasing efforts are undertaken by professional buyers.
Business Markets
Characteristic s
Compared to consumer purchases:
Business buyers face more complex buying decisions. The buying process is more formalized. Buyers and sellers work more closely together and build long-term relationships.
Business Buyer Behavior

Major Types of Buying Situations
Straight rebuy
Reordering without modification
Modified rebuy
Requires modification to prior purchase
New task
First-time purchase

Systems Selling:
Buying a packaged solution to a problem from a single seller.
Convenience is a major benefit
Often a key marketing strategy for businesses seeking to win and hold accounts.

Participants in the Business Buying Process
Users Buyers Influencers Deciders Gatekeepers
Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual
Economic trends Supply conditions Technological change Regulatory and political environments Competitive developments Culture and customs

Key Factors
Environmental Organizational Interpersonal Individual Objectives Policies Procedures Organizational structure Systems

Key Factors
Environmental Organizational Interpersonal Individual Authority Status Empathy Persuasiveness

Key Factors
Environmental Organizational Interpersonal Individual Authority Age Education Job position Personality Risk attitudes
Business Buying Process

Eight Stages:
Stage 1: Problem Recognition Stage 2: General Need Description Stage 3: Product Specification
Value analysis helps to reduce costs
Stage 4: Supplier Search

Supplier development

Eight Stages:
Stage 5: Proposal Solicitation Stage 6: Supplier Selection Stage 7: Order-Routine Specification
Blanket contracts are often used for maintenance, repair and operating items.
Stage 8: Performance Review

Business Buying on the Internet
E-procurement is growing rapidly. Reverse auctions account for much of the online purchasing activity. E-procurement offers many benefits:
Access to new suppliers Lower purchasing costs Quicker order processing and delivery
Institutional and Government Markets

Institutional Markets
Consist of churches, schools, prisons, hospitals, nursing homes and other institutions that provide goods and services to people in their care.

Institutional Markets
Often characterized by low budgets and captive patrons. Marketers may develop separate divisions and marketing mixes to service institutional markets.

Government Markets
Governmental units federal, state, and local that purchase or rent goods and services for carrying out the main functions of government.

Government Markets
More than 82,000 buying units. Require suppliers to submit bids. Favor domestic suppliers. Extensive paperwork is required from suppliers.

Government Markets
Government buyers often favor:
Depressed business firms and areas Small businesses Minority-owned businesses Firms which practice non-discriminatory practices

Government Markets
Most firms that sell to government buyers are not marketing oriented. Some companies have separate government marketing departments. Much of government buying has migrated online.
Session 4: Customer Driven Marketing Strategy Creating Value for Target Customers
Segmentation, Targeting, and Positioning Building the Right Relationships with the Right Customers
Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers
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Objectives
Be able to define the three steps of target marketing: market segmentation, target marketing, and market positioning. Understand the major bases for segmenting consumer and business markets.
Objectives
Know how companies identify attractive market segments and how they choose a target marketing strategy. Comprehend how companies position their products for maximum competitive advantage.
Example
Procter & Gamble
Sells multiple brands within the same product category for a variety of products Brands feature a different mix of benefits and appeal to different segments Has also identified different niches within certain segments Product modifications are useful: Tide offers seven different product formulations to serve different niches needs
Definition
Market Segmentation:
Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.
Market Segmentation
Topics
Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation
Geographical segmentation
Marketing mixes are customized geographically
Demographic segmentation
Most popular segmentation Demographics are closely related to needs, wants and usage rates
Psychographic segmentation
Lifestyle, social class, and personality-based segmentation
Behavioral segmentation
Typically done first
Market Segmentation
Geographic Segmentation Variables
World Region or Country U.S. region State City Neighborhood City or Metro Size Density Climate
Market Segmentation
Demographic Segmentation Variables
Age Gender Family size Family life cycle Income Nationality Occupation Education Religion Race Generation
Market Segmentation
Behavioral Segmentation Variables
Occasions Benefits User Status User Rates Loyalty Status Readiness Stage
Attitude Toward the Product
Market Segmentation
Topics
Demographic segmentation
Industry, company size, location
Operating variables
Technology, usage status, customer capabilities
Purchasing approaches Situational factors

Urgency, specific application, size of order
Personal characteristics
Buyer-seller similarity, attitudes toward risk, loyalty
Market Segmentation
Topics
Geographic segmentation
Location or region
Economic factors
Population income or level of economic development
Political and legal factors

Type / stability of government, monetary regulations, amount of bureaucracy, etc.
Cultural factors
Language, religion, values, attitudes, customs, behavioral patterns
Market Segmentation
Topics
Measurable
Size, purchasing power, and profile of segment
Accessible
Can be reached and served
Substantial
Large and profitable enough to serve
Differentiable
Respond differently
Actionable
Effective programs can be developed
Target Marketing
Evaluating Market Segments
Segment size and growth Segment structural attractiveness
Level of competition Substitute products Power of buyers Powerful suppliers
Company objectives and resources
Target Marketing
Target Marketing Strategies
Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Micromarketing (local or individual) marketing
Target Marketing
Choosing a Target-Marketing Strategy Requires Consideration of:
Company resources The degree of product variability Products life-cycle stage Market variability Competitors marketing strategies
Target Marketing
Socially Responsible Targeting
Some segments are at special risk:
Children Inner-city minority consumers Internet shoppers
Controversy occurs when the methods used are questionable.
Positioning
Positioning:
The place the product occupies in consumers minds relative to competing products. Typically defined by consumers on the basis of important attributes.
Positioning
Choosing a Positioning Strategy:
Identifying possible competitive advantages
Products, services, channels, people or image can be sources of differentiation.
Choosing the right competitive advantage

How many differences to promote?
Unique selling proposition Positioning errors to avoid
Which differences to promote?
Positioning
Criteria for Meaningful Differences
Important Superior Preemptive Distinctive Communicable Affordable
Profitable
Positioning
Selecting an overall positioning strategy
More for More Value Proposition More for the Same Value Proposition The Same for Less Value Proposition Less for Much Less Value Proposition More for Less Value Proposition
Positioning
Developing a positioning statement
Positioning statements summarize the company or brand positioning EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference).
Communicating the chosen position
Session 5: Marketing Decisions I: Product, Services, and Branding Strategies
Product, Services, and Branding Strategies

186
Objectives
Be able to define product and know the major classifications of products and services. Understand the decisions companies make regarding their individual products and services, product lines, and product mixes.
Objectives
Understand how firms build and manage their brands. Know the four characteristics of services and the additional marketing considerations that services require. Review additional product issues related to social responsibility and international marketing.
Example
The Cosmetics Industry
Cosmetics The promise, companies sell image, company, billions of dollars name, package, and worth of products ingredients are all part of the product, Consumers buy as are the stores more than just a where it is sold. particular smell
Definitions
Product
Anything offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.
Service
Any activity or benefit that one party can offer to another that is essentially intangible and does not result in ownership of anything.
What is a Product?
Products, Services, and Experiences
Market offerings, pure tangible goods, pure services, experiences
Levels of Product and Services

Core benefit, actual product, and augmented product
Product and Service Classifications
What is a Product?
Types of Consumer Products
Convenience Shopping Specialty Unsought
Frequent purchases bought with minimal buying effort and little comparison shopping Low price Widespread distribution Mass promotion by producer
What is a Product?
Less frequent purchases requiring more shopping effort and price, quality, and style comparisons. Higher than convenience good pricing Selective distribution in fewer outlets Advertising and personal selling by producer and reseller
What is a Product?
Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity High price Exclusive distribution Carefully targeted promotion by producers and resellers
What is a Product?
Little product awareness and knowledge (or if aware, sometimes negative interest) Pricing varies Distribution varies Aggressive advertising and personal selling by producers and resellers
What is a Product?
Consumer products Industrial products
Materials and parts Capital items Supplies and services
What is a Product?
Organizations, persons, places, and ideas
Organizational marketing makes use of corporate image advertising Person marketing applies to political candidates, entertainment sports figures, and professionals Place marketing relates to tourism Social marketing campaigns promote ideas
Product and Service Decisions

Key Decisions
Individual Product Product Line Product Mix
Product attributes
Quality, features, style and design
Branding Packaging Labeling Product support services

Key Decisions
Product line length

Line stretching: adding products that are higher or lower priced than the existing line Line filling: adding more items within the present price range

Key Decisions
Product line width:

number of different product lines carried by company
Product line depth:

Number of different versions of each product in the line
Product line consistency
Branding Strategy
Brands are powerful assets that must be carefully developed / managed. Brands with strong equity have many competitive advantages:
High consumer awareness Strong brand loyalty Helps when introducing new products Less susceptible to price competition
Brand Strategy
Key Decisions
Brand Positioning Brand Name Selection Brand Sponsorship Brand Development
Three levels of positioning:

Product attributes
Least effective
Benefits Beliefs and values

Taps into emotions
Brand Strategy
Key Decisions
Good Brand Names:
Suggest something about the product or its benefits Are easy to say, recognize and remember Are distinctive Are extendable Translate well into other languages Can be registered and legally protected
Brand Strategy
Key Decisions
Manufacturer brands Private (store) brands
Costly to establish and promote Higher profit margins
Licensed brands
Name and character licensing has grown
Co-branding
Advantages / disadvantages
Brand Strategy
Key Decisions
Line extensions
Minor changes to existing products
Brand extensions
Successful brand names help introduce new products
Multibrands
Multiple product entries in a product category
New brands
New product category
Brand Strategy
Line Extensions May Feature Different:
Flavors Colors Forms Ingredients
Package Sizes
Services Marketing
Services
Account for 74% of U.S. gross domestic product. Service industries include business organizations, government, and private not-for-profit organizations.
Services Marketing
Characteristics of Services
Intangibility
Consumers look for service quality signals
Inseparability
Services cant be separated from providers
Variability
Employees and other factors result in variability
Perishability
Services cant be inventoried for later sale
Services Marketing
Service Firm Marketing Strategies
The Service-Profit Chain
Internal Marketing Interactive Marketing
Managing Service Differentiation Managing Service Quality Managing Service Productivity
Additional Product Considerations

Product Decisions and Social Responsibility
Acquisitions and mergers Legal compliance Product liability issues Warranties
Additional Product Considerations

International Product and Services Marketing
Special challenges:
Which products should be marketed internationally? Should the products be standardized or adapted for world markets? How should packaging be adapted? How can other barriers be overcome?
NewNew-Product Development and Product Life-Cycle Strategies Life-
212
Objectives
Understand how companies find and develop new-product ideas. Learn the steps in the new-product development process. Know the stages of the product life cycle. Understand how marketing strategies change during the products life cycle.
Example
Microsoft
$50 billion in profits over 27 years Early new-product development relied heavily on copying the competition $4.2 billion annually invested in R & D Innovation is critical to Microsofts future success Much of R & D efforts are Internet related Many new products and services are in development
Definition
New Product Development
Development of original products, product improvements, product modifications, and new brands through the firms own R & D efforts.
New Product Development Strategy

New products can be obtained via acquisition or development. New products suffer from high failure rates. Several reasons account for failure.

New Product Development Process:
Stage 1: Idea Generation
Internal idea sources:
R&D
External idea sources:

Customers, competitors, distributors, suppliers

Stage 2: Idea Screening
Product development costs increase substantially in later stages. Ideas are evaluated against criteria; most are eliminated.

Stage 3: Concept Development and Testing
Product concepts provide detailed versions of new product ideas. Concept tests ask target consumers to evaluate product concepts.

Stage 4: Marketing Strategy Development
Strategy statements describe:
The target market, product positioning, and sales, share, and profit goals for the first few years. Product price, distribution, and marketing budget for the first year. Long-run sales and profit goals and the marketing mix strategy.

Stage 5: Business Analysis
Sales, cost, and profit projections
Stage 6: Product Development

Prototype development and testing

Stage 7: Test Marketing
Standard test markets Controlled test markets Simulated test markets
Stage 8: Commercialization
Product Life-Cycle Strategies

The Typical Product Life Cycle (PLC) Has Five Stages
Product Development, Introduction, Growth, Maturity, Decline Not all products follow this cycle:
Fads Styles Fashions

The product life cycle concept can be applied to a:
Product class (soft drinks) Product form (diet colas) Brand (Diet Dr. Pepper)
Using the PLC to forecast brand performance or to develop marketing strategies is problematic

PLC Stages
Product development Introduction Growth Maturity Decline
Begins when the company develops a new-product idea Sales are zero Investment costs are high Profits are negative

PLC Stages
Low sales High cost per customer acquired Negative profits Innovators are targeted Little competition
Marketing Strategies: Introduction Stage

Product Offer a basic product Price Use cost-plus basis to set Distribution Build selective distribution Advertising Build awareness among early adopters and dealers/resellers Sales Promotion Heavy expenditures to create trial

PLC Stages
Rapidly rising sales Average cost per customer Rising profits Early adopters are targeted Growing competition
Marketing Strategies: Growth Stage

Product Offer product extensions, service, warranty Price Penetration pricing Distribution Build intensive distribution Advertising Build awareness and interest in the mass market Sales Promotion Reduce expenditures to take advantage of consumer demand

PLC Stages
Sales peak Low cost per customer High profits Middle majority are targeted Competition begins to decline
Marketing Strategies: Maturity Stage

Product Diversify brand and models Price Set to match or beat competition Distribution Build more intensive distribution Advertising Stress brand differences and benefits Sales Promotion Increase to encourage brand switching

PLC Stages
Declining sales Low cost per customer Declining profits Laggards are targeted Declining competition
Marketing Strategies: Decline Stage

Product Phase out weak items Price Cut price Distribution Use selective distribution: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyalists Sales Promotion Reduce to minimal level
Session 6: Marketing Decisions II: Pricing Decisions Understanding and Capturing Customer Value
Pricing Considerations and Approaches
235
Objectives
Understand the internal factors affecting a firms pricing decisions. Understand the external factors affecting pricing decisions, including the impact of consumer perceptions of price and value. Be able to contrast the three general approaches to setting prices.
Example
Priceline.com
Buyer-driven commerce concept offers lower prices to consumers and the ability to sell excess inventory to sellers 13.5 million user customer base Tremendous growth Most deals relate to travel or time sensitive / perishable services Not all ventures have been profitable Some customers find it difficult to commit to purchase prior to learning details
What is Price?
Price Has Many Names
Rent Fee Rate Commission Assessment Tuition Fare Toll Premium Retainer Bribe Salary Wage Interest Tax
Definition
Price
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.
What is Price?
Dynamic Pricing on the Web allows SELLERS to:
Charge lower prices, reap higher margins. Monitor customer behavior and tailor offers. Change prices on the fly to adjust for changes in demand or costs. Negotiate prices in online auctions and exchanges.
What is Price?
Dynamic Pricing on the Web allows BUYERS to:
Get instant price comparisons from thousands of vendors. Find and negotiate lower prices. Negotiate prices in online auctions and exchanges.
What is Price?
Price and the Marketing Mix:
Only element to produce revenues Most flexible element Can be changed quickly
Price Competition Common Pricing Mistakes
Factors to Consider When Setting Price

Internal Factors
Marketing objectives Marketing mix strategies Costs Organizational considerations
Market positioning influences pricing strategy Other pricing objectives:
Survival Current profit maximization Market share leadership Product quality leadership
Not-for-profit objectives:
Partial or full cost recovery Social pricing

Internal Factors
Pricing must be carefully coordinated with the other marketing mix elements Target costing is often used to support product positioning strategies based on price Nonprice positioning can also be used

Internal Factors
Types of costs:
Variable Fixed Total costs
How costs vary at different production levels will influence price setting Experience (learning) curve effects on price

Internal Factors
Who sets the price?
Small companies: CEO or top management Large companies: Divisional or product line managers
Price negotiation is common in industrial settings Some industries have pricing departments

External Factors
Nature of market and demand Competitors costs, prices, and offers Other environmental elements
Types of markets
Pure competition Monopolistic competition Oligopolistic competition Pure monopoly
Consumer perceptions of price and value Price-demand relationship

Demand curve Price elasticity of demand

External Factors
Consider competitors costs, prices, and possible reactions when developing a pricing strategy Pricing strategy influences the nature of competition
Low-price low-margin strategies inhibit competition High-price high-margin strategies attract competition
Benchmarking costs against the competition is recommended

External Factors
Economic conditions
Affect production costs Affect buyer perceptions of price and value
Reseller reactions to prices must be considered Government may restrict or limit pricing options Social considerations may be taken into account
General Pricing Approaches

Cost-Based Pricing: Cost-Plus Pricing
Adding a standard markup to cost Ignores demand and competition Popular pricing technique because:
It simplifies the pricing process Price competition may be minimized It is perceived as more fair to both buyers and sellers

Cost-Based Pricing Example
Variable costs: $20 Fixed costs: $ 500,000 Expected sales: 100,000 units Desired Sales Markup: 20% Variable Cost + Fixed Costs/Unit Sales = Unit Cost $20 + $500,000/100,000 = $25 per unit Unit Cost/(1 Desired Return on Sales) = Markup Price $25 / (1 - .20) = $31.25

Cost-Based Pricing: Break-Even Analysis and Target Profit Pricing
Break-even charts show total cost and total revenues at different levels of unit volume. The intersection of the total revenue and total cost curves is the break-even point. Companies wishing to make a profit must exceed the break-even unit volume.

Break-Even Analysis and Target Profit Pricing
Revenues 1000 Thousands of Dollars 800 600 400 Fixed Costs 200 0 10 20 30 40 Quantity To Be Sold To Meet Target Profit Break-even point Target Profit $200,000 Total Costs
Sales Volume in Thousands of Units

Value-Based Pricing:
Uses buyers perceptions of value rather than sellers costs to set price. Measuring perceived value can be difficult. Consumer attitudes toward price and quality have shifted during the last decade.
Introduction of less expensive versions of established brands has become common.

Value-Based Pricing:
Business-to-business firms seek to retain pricing power
Value-added strategies can help
Value pricing at the retail level

Everyday low pricing (EDLP) vs. high-low pricing

Competition-Based Pricing:
Also called going-rate pricing May price at the same level, above, or below the competition Bidding for jobs is another variation of competition-based pricing
Sealed bid pricing
Pricing Strategies
257
Objectives
Learn the major strategies for pricing imitative and new products. Understand how companies find a set of prices that maximizes the profits from the total product mix.
Objectives
Learn how companies adjust their prices to take into account different types of customers and situations. Know the key issues related to initiating and responding to price changes.
Example
mLife: AT&T Wireless
Price is #1 factor mLife ad campaign influencing choice of attempted to build the cellular companies AT&T wireless brand so consumers would Prices in wireless consider value rather industry dropped 25% than just price in three years Few companies were Campaign met with strong initial success profitable
Definitions
Market-Skimming Pricing
Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price.
Market-Penetration Pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
Product Mix Pricing Strategies

Product Line Pricing
Setting price steps between product line items.
Price points
Optional-Product Pricing
Pricing optional or accessory products sold with the main product

Captive-Product Pricing
Pricing products that must be used with the main product
High margins are often set for supplies
Services: two-part pricing strategy

Fixed fee plus a variable usage rate

By-Product Pricing
Pricing low-value by-products to get rid of them
Product Bundle Pricing

Pricing bundles of products sold together
Price Adjustment Strategies

Strategies
Discount / allowance Segmented Psychological Promotional Geographical International
Types of discounts
Cash discount Quantity discount Functional (trade) discount Seasonal discount
Allowances
Trade-in allowances Promotional allowances

Strategies
Types of segmented pricing strategies:

Customer-segment Product-form pricing Location pricing Time pricing
Also called revenue or yield management Certain conditions must exist for segmented pricing to be effective

Conditions Necessary for Segmented Pricing Effectiveness
Market is segmentable Lower priced segments are not able to resell Competitors can not undersell segments charging higher prices Pricing must be legal Costs of segmentation can not exceed revenues earned Segmented pricing must reflect real differences in customers perceived value

Strategies
The price is used to say something about the product.

Price-quality relationship Reference prices Differences as small as five cents can be important Numeric digits may have symbolic and visual qualities that psychologically influence the buyer

Strategies
Temporarily pricing products below the list price or even below cost Loss leaders
Special-event pricing Cash rebates Low-interest financing, longer warranties, free maintenance
Promotional pricing can have adverse effects
Promotional Pricing Problems

Easily copied by competitors Creates deal-prone consumers May erode brands value Not a legitimate substitute for effective strategic planning Frequent use leads to industry price wars which benefit few firms

Strategies
Types of geographic pricing strategies:

FOB-origin pricing Uniform-delivered pricing Zone pricing Basing-point pricing Freight-absorption pricing

Strategies
Prices charged in a specific country depend on many factors

Economic conditions Competitive situation Laws / regulations Distribution system Consumer perceptions Cost considerations
Price Changes
Initiating Price Cuts is Desirable When a Firm:
Has excess capacity Faces falling market share due to price competition Desires to be a market share leader
Price Changes
Price Increases are Desirable:
If a firm can increase profit, faces cost inflation, or faces greater demand than can be supplied.
Methods of Increasing Price Alternatives to Increasing Price

Reducing product size, using less expensive materials, unbundling the product.
Price Changes
Buyer reactions to price changes must be considered. Competitors are more likely to react to price changes under certain conditions.
Number of firms is small Product is uniform Buyers are well informed
Price Changes
Respond To Price Changes Only If:
Market share / profits will be negatively affected if nothing is changed. Effective action can be taken:
Reducing price Raising perceived quality Improving quality and increasing price Launching low-price fighting brand
Public Policy and Pricing

Pricing within Channel Levels
Price-fixing
Competitors can not work with each other to set prices
Predatory pricing
Firms may not sell below cost with the intention of punishing a competitor or gaining higher long-run profits or running a competitor out of business.
Public Policy and Pricing

Pricing across Channel Levels
Price discrimination Retail price maintenance Deceptive pricing
Bogus reference / comparison pricing Scanner fraud Price confusion
Session 7: Marketing Decisions III: Marketing Channels and Supply Chain Management
Marketing Channels and Supply Chain Management

280
Objectives
Know why companies use distribution channels and understand the functions that these channels perform. Learn how channel members interact and how they organize to perform the work of the channel. Know the major channel alternatives that are open to a company.
Objectives
Comprehend how companies select, motivate, and evaluate channel members. Understand the nature and importance of marketing logistics and integrated supply chain management.
Example
Caterpillar
Dominates worlds markets for heavy construction and mining equipment. Independent dealers are key to success Dealer network is linked via computers Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications
Definition
Value Delivery Network
The network made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system.
Nature & Importance of Marketing Channels

Channel choices affect other decisions in the marketing mix
Pricing, Marketing communications
A strong distribution system can be a competitive advantage Channel decisions involve long-term commitments to other firms

How Channel Members Add Value
Intermediaries require fewer contacts to move the product to the final purchaser. Intermediaries help match product assortment demand with supply. Intermediaries help bridge major time, place, and possession gaps that separate products from those who would use them.

Key Functions Performed by Channel Members
Information Promotion Contact Matching Negotiation Physical Distribution Financing Risk taking

Number of Channel Levels
The number of intermediary levels indicates the length of a marketing channel.
Direct Channels Indirect Channels
Producers lose more control and face greater channel complexity as additional channel levels are added.

Channel Members Are Connected Via A Variety of Flows
Physical Flow Payment Flow Information Flow Promotion Flow
Flow of Ownership
Channel Behavior and Organization

Channel Conflict
Occurs when channel members disagree on roles, activities, or rewards. Types of Conflict:
Horizontal conflict: occurs among firms at the same channel level Vertical conflict: occurs among firms at different channel levels

Vertical Marketing Systems
Corporate VMS Contractual VMS Manufacturer-sponsored retailer franchise system Manufacturer-sponsored wholesaler franchise system Service-firm-sponsored retailer franchise system Administered VMS

Multichannel Distribution Systems
Also called hybrid marketing channels Occurs when a firm uses two or more marketing channels Hybrid marketing has many advantages
Changing Channel Organization

Disintermediation
Channel Design Decisions

Step 1: Analyzing Consumer Needs
Cost and feasibility of meeting needs must be considered
Step 2: Setting Channel Objectives

Set channel objectives in terms of targeted level of customer service Many factors influence channel objectives

Step 3: Identifying Major Alternatives
Types of intermediaries
Company sales force, manufacturers agency, industrial distributors
Number of marketing intermediaries

Intensive, selective, and exclusive distribution
Responsibilities of channel members

Step 4: Evaluating Major Alternatives
Economic criteria Control issues Adaptive criteria

Designing International Distribution Channels
Global marketers usually adapt their channel strategies to structures that exist within foreign countries Key challenges:
May be complex or hard to penetrate May be scattered, inefficient, or totally lacking
Channel Management Decisions

Selecting Channel Members
Identify characteristics that distinguish the best channel members
Managing and Motivating Channel Members

Partner relationship management (PRM) is key
Evaluating Channel Members

Performance should be checked against standards Channel members should be rewarded or replaced as dictated by performance
Public Policy and Distribution Decisions

Exclusive distribution
Only certain outlets are allowed to carry a firms products
Exclusive dealing
Exclusive territorial agreements Tying agreements
Marketing Logistics and Supply Chain Management

Marketing Logistics
Outbound distribution Inbound distribution Reverse distribution Involves the entire supply chain management system

Why Greater Emphasis is Being Placed on Logistics:
Offers firms a competitive advantage Can yield cost savings Greater product variety requires improved logistics Improvements in distribution efficiency are possible due to information technology

Goals of the Logistics System
No system can both maximize customer service and minimize costs. Firms must first weigh the benefits of higher service against the costs. State goals in terms of a targeted level of customer service at the least cost.

Major Logistics Functions
Warehousing Inventory Management Transportation Logistics Information Management

Transportation Carrier Options
Truck Rail Water Pipeline Air Internet
Intermodal transportation is becoming more common

Integrated Logistics Management
Cross-functional teamwork inside the company is critical Logistics partnerships are also built through shared projects Outsourcing of logistics firms to third-party firms is becoming more common
Retailing and Wholesaling
305
Objectives
Understand the roles of retailers and wholesalers in the marketing channel. Know the major types of retailers. Know the major types of wholesalers. Understand the marketing decisions facing retailers and wholesalers.
Case Study
Home Depot
Huge product assortment Prices are 20% 30% below hardware stores Obsessed with offering high quality customer service Lifetime value of customers: $25,000 Well-trained, highly motivated salespeople earn above average salaries Customer problem solving is encouraged Internet site offers many home improvement tips One of todays most successful retailers
Definitions
Retailing
All activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.
Retailer
Business whose sales come primarily from retailing.
Retailing
Types of Retailers
Specialty Stores Department Stores Supermarkets Discount Stores Convenience Stores Off-Price Retailers
Superstores
Retailing
Retailers Are Classified By:
Amount of service Product lines Relative prices Organizational approach
Self-service retailers
Customers are willing to selfserve to save money Discount stores
Limited-service retailers
Most department stores
Full-service retailers
Salespeople assist customers in every aspect of shopping experience High-end department stores Specialty stores
Retailing
Specialty stores
Narrow product lines with deep assortments
Department stores
Wide variety of product lines
Supermarkets Convenience stores

Limited line
Superstores
Food, nonfood, and services
Category killers
Giant specialty stores
Retailing
Discount stores
Low margins are offset by high volume
Off-price retailers
Independent off-price retailers
TJ Maxx, Marshalls
Factory outlets
Levi Strauss, Reebok
Warehouse clubs
Sams Club, Costco
Retailing
Corporate chain stores
Commonly owned / controlled
Voluntary chains
Wholesaler-sponsored groups of independent retailers
Retailer cooperatives
Groups of independent retailers who buy in bulk
Franchise organizations
Based on something unique
Merchandising conglomerates
Diversified retailing lines and forms under central ownership
Retailing
Retailer Marketing Decisions
Target marketing and positioning Product assortment, service mix, stores atmosphere Price Promotion Place (location)
Retailing
The Future of Retailing
New retail forms and shortening retail life cycles
Wheel-of-retailing concept
Growth of nonstore retailing

Mail-order, television, phone, online shopping
Retail convergence
Retailing
The Future of Retailing
Rise of megaretailers Growing importance of retail technology Global expansion of major retailers Retail stores as Communities or Hangouts
Definitions
Wholesaling
All activities involved in selling goods and services to those buying for resale or business use.
Wholesaling
A firm engaged primarily in wholesaling activity.
Wholesaling
Wholesalers add value by performing the following functions:
Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation
Wholesaling
Wholesalers add value by performing the following functions:
Financing Risk bearing Marketing information Management services and advice
Wholesaling
Types of Wholesalers
Merchant Wholesalers Brokers and Agents Manufacturers and retailers branches and offices
Full-service wholesalers
Wholesale merchants Industrial distributors
Limited-service wholesalers
Cash-and-carry wholesalers Truck wholesalers (jobbers) Drop shippers Rack jobbers Producers cooperatives Mail-order wholesalers
Wholesaling
Brokers
Bring buyers and sellers together and assist in negotiation
Agents
Manufacturers agents Selling agents Purchasing agents Commission merchants
Wholesaling
Sales branches and offices
Branches carry inventory: lumber, auto equipment, parts Offices do not carry inventory: dry goods
Purchasing officers
Perform roles similar to brokers and agents, however these individuals are employees of the organization
Wholesaling
Wholesaler Marketing Decisions
Target market and positioning
Targeting may be made on the basis of size of customer, type of retailer, need for service.
Marketing mix decisions

Product and service assortment: inventory, line Pricing: usual markup on COG is 20% Promotion: largely disorganized and unplanned Place: location, facilities
Wholesaling
Trends in Wholesaling
Price competition is still intense Successful wholesalers must add value by increasing efficiency and effectiveness The distinction between large retailers and wholesalers continues to blur More services will be provided to retailers Many wholesalers are going global
Session 8: Marketing Decisions IV:
Integrated Marketing Communication
Integrated Marketing Communication Strategy

Chapter 15 Kotler and Armstrong (2008)
326
Objectives
Know the tools of the marketing communications mix. Understand the process and advantages of integrated marketing communications. Learn the steps in developing effective marketing communications. Understand methods for setting promotional budgets and the factors that affect the design of the promotion mix.
Example
UPS
UPS is a $31 billion Implemented, What corporate giant Can Brown Do for You? UPS wanted to campaign reposition itself as Realigned its sales and a supply chain marketing organization solutions provider Developed new theme Ads, web sites, and salespeople deliver based on customer message daily input
Definition
Marketing Communications Mix
The specific mix of advertising, personal selling, sales promotion, and public relations a company uses to pursue its advertising and marketing objectives.
Integrated Marketing Communications

The Marketing Communications Environment is Changing:
Mass markets have fragmented, causing marketers to shift away from mass marketing
Media fragmentation is increasing as well
Improvements in information technology are facilitating segmentation

The Need for Integrated Marketing Communications
Conflicting messages from different sources or promotional approaches can confuse company or brand images
The problem is particularly prevalent when functional specialists handle individual forms of marketing communications independently

The Need for Integrated Marketing Communications
The Web alone cannot be used to build brands; brand awareness potential is limited Best bet is to wed traditional branding efforts with the interactivity and service capabilities of online communications Web efforts can enhance relationships

The concept under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about the organization and its products. IMC implementation often requires the hiring of a MarCom manager.
The Communication Process

Communications efforts should be viewed from the perspective of managing customer relationships over time. The communication process begins with an audit of all potential contacts. Effective communication requires knowledge of how communication works.
The Communication Process

Elements in the Communication Process
Sender Message Media Receiver Encoding Decoding Response Feedback
Noise
Developing Effective Communication

Step 1: Identifying the Target Audience
Affects decisions related to what, how, when, and where message will be said, as well as who will say it
Step 2: Determining Communication Objectives

Six buyer readiness stages

BuyerBuyer-Readiness Stages
Awareness Knowledge Liking Preference Conviction Purchase

Step 3: Designing a Message
AIDA framework guides message design Message content contains appeals or themes designed to produce desired results
Rational appeals Emotional appeals
Love, pride, joy, humor, fear, guilt, shame
Moral appeals

Step 3: Designing a Message
Message Structure: Key decisions are required with respect to three message structure issues:
Whether or not to draw a conclusion One-sided vs. two-sided argument Order of argument presentation
Message Format: Design, layout, copy, color, shape, movement, words, sounds, voice, body language, dress, etc.

Step 4: Choosing Media
Personal communication channels
Includes face-to-face, phone, mail, and Internet chat communications Word-of-mouth influence is often critical Buzz marketing cultivates opinion leaders
Nonpersonal communication channels

Includes media, atmosphere, and events

Step 5: Selecting the Message Source
Highly credible sources are more persuasive A poor spokesperson can tarnish a brand
Step 6: Collecting Feedback

Recognition, recall, and behavioral measures are assessed May suggest changes in product/promotion
Setting the Promotional Budget and Mix

Setting the Total Promotional Budget
Affordability Method
Budget is set at a level that a company can afford
Percentage-of-Sales Method
Past or forecasted sales may be used
Competitive-Parity Method
Budget matches competitors outlays

Setting the Total Promotional Budget
Objective-and-Task Method
Specific objectives are defined Tasks required to achieve objectives are determined Costs of performing tasks are estimated, then summed to create the promotional budget

Setting the Overall Promotion Mix
Determined by the nature of each promotion tool and the selected promotion mix strategy

Promotion Tools
Advertising Personal Selling Sales Promotion Public Relations Direct Marketing
Reaches large, geographically dispersed audiences, often with high frequency Low cost per exposure, though overall costs are high Consumers perceive advertised goods as more legitimate Dramatizes company/brand Builds brand image; may stimulate short-term sales Impersonal; one-way communication

Promotion Tools
Most effective tool for building buyers preferences, convictions, and actions Personal interaction allows for feedback and adjustments Relationship-oriented Buyers are more attentive Sales force represents a longterm commitment Most expensive of the promotional tools

Promotion Tools
May be targeted at the trade or ultimate consumer Makes use of a variety of formats: premiums, coupons, contests, etc. Attracts attention, offers strong purchase incentives, dramatizes offers, boosts sagging sales Stimulates quick response Short-lived Not effective at building longterm brand preferences

Promotion Tools
Highly credible Many forms: news stories, news features, events and sponsorships, etc. Reaches many prospects missed via other forms of promotion Dramatizes company or benefits Often the most underused element in the promotional mix

Promotion Tools
Many forms: Telephone marketing, direct mail, online marketing, etc. Four distinctive characteristics:
Nonpublic Immediate Customized Interactive
Well-suited to highly targeted marketing efforts

Promotion Mix Strategies
Push strategy: trade promotions and personal selling efforts push the product through the distribution channels. Pull strategy: producers use advertising and consumer sales promotions to generate strong consumer demand for products.

Checklist: Integrating the Promotion Mix
Analyze trends (internal and external) Audit communications spending Identify all points of contact Team up in communications planning Make all communication elements compatible Create performance measures Appoint an IMC manager
Socially Responsible Communications

Advertising and Sales Promotion
Avoid false and deceptive advertising
Bait and switch advertising
Trade promotions can not favor certain customers over others Use advertising to promote socially responsible programs and actions
Socially Responsible Communications

Personal Selling
Salespeople must follow the rules of fair competition Three day cooling-off rule protects ultimate consumers from high pressure tactics Business-to-business selling
Bribery, industrial espionage, and making false and disparaging statements about a competitor are forbidden
Advertising, Sales Promotion, and Public Relations

Chapter 16
354
Objectives
Understand the roles of advertising, sales promotion, and public relations in the promotion mix. Know the major decisions involved in developing an advertising program.
Objectives
Learn how sales promotion campaigns are developed and implemented. Learn how companies use public relations to communicate with their publics.
Example
AFLAC
A few years ago, only 1999: AFLAC developed the duck campaign to 13% of U.S. enhance brand recognized AFLAC awareness Old ads: warm and Incredibly successful: fuzzy similar to other name recognition is now insurance ads 91%; sales growth of Goal: break through 30% each year campaign has run advertising clutter
Definition
Advertising
Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.
Advertising
Signage in ancient times offers evidence of early advertising. Modern ad spending tops $231 billion in U.S. annually, $500 billion worldwide. Business firms, not-for-profit, social agencies, and professionals all advertise.
Advertising
Key Decisions
Setting objectives Setting the budget Developing the advertising strategy Evaluating advertising campaigns
Advertising objectives can be classified by primary purpose:

Inform
Introducing new products
Persuade
Becomes more important as competition increases Comparative advertising
Remind
Most important for mature products
Advertising
Key Decisions
Methods of budget setting were listed in chapter 15 Several factors should be considered when setting the ad budget:
Stage in the PLC Market share Level of competition Ad clutter Degree of brand differentiation
Advertising
Key Decisions
Creative challenges
Media fragmentation Soaring media costs Advertising clutter
Creating ad messages
Message strategy
Creative concept Advertising appeal
Message execution
Many execution styles Tone, format, illustration, headline, copy
Advertising
Creative Execution Styles
Slice of Life Lifestyle Fantasy Mood or Image Musical Personality Symbol Technical Expertise Scientific Evidence
Testimonial Evidence or Endorsement
Advertising
Key Decisions
Select advertising media
Decide on level of reach, frequency and impact Choose among the major media types by considering:
Consumer media habits, nature of the product, types of messages, and costs
Select specific media vehicles Decide on media timing
Advertising
Major Media Types
Newspapers Television Direct Mail Internet Radio Magazines Outdoor
Advertising
Key Decisions
Measuring communications effects

Copy testing Consumer recall Product awareness Product knowledge Product preference
Measuring sales effect

Past vs. current sales comparison Experimentation
Advertising
Organizing the Advertising Function
Small vs. large companies Nature of advertising agencies
Advantages of advertising agencies Departments Compensation Changes in agency services
Advertising
Advertising to International Markets
Standardizing worldwide advertising
Advantages include lower advertising costs, greater global advertising coordination, and consistent global image Drawbacks include ignoring differences in culture, demographics, and economic conditions.
Most marketers think globally but act locally
Definition
Sales Promotion
Sales Promotions are short-term incentives to encourage the purchase or sale of a product or service.
Sales Promotion
Sales Promotions
Can be targeted at final buyers, retailers and wholesalers, business customers, and members of the sales force. The use of sales promotions has been growing rapidly.
Sales Promotion
Objectives -- Consumer Promotions:
Increase short-term sales Generate product trial
Objectives -- Trade Promotions:

Obtaining distribution and shelf space Encouraging retailers to advertise the brand
Objectives -- Sales Force Promotions:

Signing up new accounts
Sales Promotion
Consumer Promotion Tools
Samples Cash Refunds (Rebates) Price packs (cents-off deals) Advertising Specialties
Premiums Patronage Rewards Point-of-Purchase Communications Contests, Games, and Sweepstakes
Sales Promotion
Trade Promotion Tools
Discounts ( also called price-off, off-list, and offinvoice) Allowances
Advertising allowances Display allowances
Free goods Push money Specialty advertising items
Sales Promotion
Business Promotion Tools
Includes many of the same tools used in consumer and trade promotions Two additional tools:
Conventions and trade shows Sales contests
Sales Promotion
Key Decisions When Developing the Sales Promotion Program:
Size of the incentive Conditions for participation Promotion and distribution of the actual sales promotion program Length of the promotional program Evaluation
Surveys and experiments can be used
Definition
Public Relations:
Building good relations with the companys various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.
Public Relations
Public Relations Functions
Press Relations Product Publicity Public Affairs Lobbying Investor Relations Development
Public Relations
Role and Impact of Public Relations
Advantages:
Strong impact on public awareness at lower cost than advertising Greater credibility than advertising
Publicity is often underused Good public relations can be a powerful brand-building tool
Public Relations
Public Relations Tools
News Speeches Corporate Identity Materials Mobile Marketing Special Events Written Materials Audiovisual Materials Public Service Activities
Session 9: Marketing Decisions IV: Direct Marketing & Sales Force Management
Personal Selling and Direct Marketing

Koltler and Armstong (2008) Chapter 17
381
Objectives
Understand the role of a companys salespeople in creating value for customers and building customers relationships. Know the six major sales force management steps.
Objectives
Understand the personal selling process, and how to distinguish between transaction-oriented marketing and relationship marketing. Learn about direct marketing and its benefits to customers and companies. Know the major forms of direct marketing.
Example
Lear Corporation
Sales force is organized Record-breaking into separate divisions earnings and sales dedicated to specific growth customers Outstanding sales force; rated as one of Division platform teams work with customers Americas best. and are linked to Sales force focuses customer operations at on customer success all levels
Definition
Salesperson
An individual acting for a company by performing one or more of the following activities: prospecting, communicating, servicing, and information gathering.
Personal Selling
Salespeople Have Many Names
Agents Sales consultants Sales Representatives Account Executives Sales Engineers District Managers Marketing Representatives Account Development Representatives
Personal Selling
The Role of the Sales Force
Two-way personal communication More effective than advertising in complex selling situations The sales force plays a major role in most companies The sales force works to product customer satisfaction and company profit.
Definition
Sales Force Management
The analysis, planning, implementation, and control of sales force activities. It includes setting and designing sales force strategy; and recruiting, selecting, training, supervising, compensating, and evaluating the firms salespeople.
Managing the Sales Force

Sales Force Strategy and Structure
Sales Force Structure
Territorial sales force structure Product sales force structure Customer sales force structure Complex sales force structure

Sales Force Strategy and Structure
Sales Force Size
Many companies use the workload approach to set sales force size
Other Issues
Outside and inside sales forces Team selling

Recruiting and Selecting Salespeople
Careful recruiting can:
Increase overall sales force performance Reduce turnover Reduce recruiting and training costs

Traits of Successful Salespeople
Enthusiasm Patience Initiative Self-Confidence Job Commitment Customer Orientation Independent Self-Motivated Excellent Listeners Friendly Persistent Attentive Honest Internally Motivated Relationship Oriented Disciplined Hardworking Team Players

Recruiting and Selecting Salespeople
Recruiting involves:
Soliciting applications Screening candidates
Interviews Sales aptitude, personality, analytical and/or organizational tests References, work history, etc.

Training Salespeople
Average training period is 4 months Training is expensive, but yields strong returns Training programs have many goals Many companies are adding Web-based sales training programs

Compensating Salespeople
Compensation elements: salary, bonuses, commissions, expenses, and fringe benefits Basic compensation plans:
Straight salary Straight commission Salary plus bonus Salary plus commission

Compensating Salespeople
Compensation plans should direct the sales force toward activities that are consistent with overall marketing objectives.
Gain market share Solidify market leadership Maximize profitability

Supervising Salespeople
Effective supervisors provide direction to the sales force
Annual call plans and time-and-duty analysis can help provide direction Sales force automation systems assist in creating more efficient sales force operations The Internet is the fastest-growing sales technology tool

Supervising Salespeople
Effective supervisors also motivate the sales force
Organizational climate Sales quotas Positive incentives
Sales meetings, sales contests, honors, etc.

Evaluating Salespeople
Several tools can be used
Sales reports Call reports Expense reports
The Personal Selling Process

Steps in the Selling Process
Prospecting and Qualifying Preapproach Approach Follow-up Presentation and Demonstration Handling Objections Closing

Prospecting and Qualifying
Prospecting: identifying potential customers Qualifying: Screening leads
Preapproach
Learning as much as possible about a prospective customer prior to making a sales call
Approach
Stage where the salesperson meets the customer for the first time

Presentation and Demonstration
Benefits of the product are presented/demonstrated Understanding prospect needs is key
Handling Objections Closing

Asking for the order
Follow-up
Helps ensure customer satisfaction
Direct Marketing
Benefits of Direct Marketing to Buyers
Convenient Easy to use Private Access to a wealth of information Immediate Interactive
Direct Marketing
Benefits of Direct Marketing to Sellers
Powerful tool for building relationships Allows for targeting of small groups or individuals with customized offers in a personalized fashion Offers access to buyers that couldnt be reached via other channels Low-cost, effective alternative for reaching specific markets
Direct Marketing
Customer Databases & Direct Marketing
Databases include customer profile, purchase history, and other detailed information Databases can be used to identify prospects, profile customers, and select customers to receive offers, and to build relationships Database marketing requires substantial investment in hardware, software, personnel
Direct Marketing
Forms of Direct Marketing
Face-to-Face Selling Telemarketing Direct-Mail Marketing Catalog Marketing Kiosk Marketing Online Marketing Direct-Response TV Marketing
Direct Marketing
Telephone Marketing
New legislation and technological advances threaten the future of telemarketing
Direct-Mail Marketing
New trends include fax mail, e-mail, and voice mail
Catalog Marketing
Many cataloguers have migrated to the web
Direct Marketing
Direct-Response Television Marketing
Direct-response advertising Infomercials Home shopping channels
Kiosk Marketing
Direct Marketing
Integrated Direct Marketing Public Policy and Ethical Issues
Irritation, Unfairness, Deception, and Fraud Invasion of Privacy
END
Good luck for the final exam!

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Principles of Marketing

KHAN Muhammad Asif QADER Muhammad Zeeshan

Marketing in the 21th century

Session #1: Defining Marketing and the Marketing Process

Marketing: Managing Profitable Customer Relationships

Discussion: Will Amazon.com Survive?

Marketing is NOT synonymous with sales or advertising

Marketing Management Marketing Management

Societal marketing concept

Loyalty and retention

Growing share of customer

Customer loyalty and retention programs

Growing share of customer

Direct sales to buyers are growing.

Company and Marketing Strategy: Partnering to Build Customer Relationships

Discussion: How Can Disney Recover?

The Marketing Process

The Marketing Process

The Marketing Process

The Marketing Process

Marketing in the Digital Age: Making New Customer Connections

Major Forces Shaping the Digital Age

The Internet Explosion

Major Forces Shaping the Digital Age

Customization and Customerization

Marketing Strategy in the Digital Age

Marketing Strategy in the Digital Age

E-commerce benefits both buyers and sellers

Marketing Strategy in the Digital Age

Marketing Strategy in the Digital Age

Online consumers differ from traditional off-line consumers

Auction sites facilitate the exchange process

Marketing web sites

Web site design

Future of online ads

Promise and Challenges of ECommerce

Session #2: The Marketing Environment and Managing Marketing Information

The Marketing Environment

Discussion: Will the flower-power Microbus succeed flowernext?

Marketing intermediaries help sell, promote, and distribute goods.

Successful companies provide better customer value than the competition.

Various publics must also be considered.

The Microenvironment Types of Publics

Distinct segments typically exist within these generational groups.

Responding to the Marketing Environment

Proactive: Environmental Management

Managing Marketing Information

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Marketing Info. System

Experimental research investigates cause and effect relationships.

Marketing Info. System