Marketing Principles PDF

Chapter 1 - What is Marketing? 1.1 - Defining Marketing ​ Marketing - the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. ​ Four activities, o...

Chapter 1 - What is Marketing? 1.1 - Defining Marketing ​ Marketing - the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. ​ Four activities, or components, of marketing: ○​ Creating - the process of collaborating with suppliers and customers to create offerings that have value ○​ Communicating - broadly, describing those offerings, as well as learning from customers ○​ Delivering - getting those offerings to the consumer in a way that optimizes value ○​ Exchanging - trading value for those offerings ​ Four P’s (from 1950s) - called the Marketing Mix - marketing plan is a mix of these four components ○​ Product. Goods and services (creating offerings). ○​ Promotion. Communication. ○​ Place. Getting the product to a point at which the customer can purchase it (delivering). ○​ Price. The monetary amount charged for the product (exchanging) ​ Product, price, place, and promotion are nouns. As such, these words fail to capture all the activities of marketing. For example, exchanging requires mechanisms for a transaction, which consist of more than simply a price or place. Exchanging requires, among other things, the transfer of ownership. For example, when you buy a car, you sign documents that transfer the car’s title from the seller to you. That’s part of the exchange process but not clear in the four Ps. Value ​ Value lies at the centre of everything marketing does ​ Value - the benefits buyers receive that meet their needs. In other words, value is what the customer gets by purchasing and consuming a company’s offering. So, although the offering is created by the company, the value is determined by the customer. ​ Personal value equation - the net benefit a consumer receives from a product less the price paid for it and the hassle or effort expensed to acquire it ​ Hassle - the time and effort the consumer puts into the shopping process  ​ Marketing concept - a philosophy underlying all that marketers do, driven by satisfying customer wants and needs ​ Market oriented - the degree to which a company follows the marketing concept ​ Beginning with the Industrial Revolution in the late 1800s - companies were production oriented ​ Production oriented - a belief that the way to compete is a function of product innovation and reducing production costs, as good products appropriately priced sell themselves ​ Production era - a period beginning with the Industrial Revolution and concluding in the 1920s in which production-orientation thinking dominated the way in which firms competed ​ From the 1920s until after WW2 - companies tended to be selling oriented - necessary to push their products by heavily emphasizing advertising and selling (selling era) ​ Product orientation - a philosophy that focuses on competing through product innovation ​ Marketing era - from 1950 to at least 1990 (see service-dominant logic era, value era, and one-to-one era), the dominant philosophy among businesses is the marketing concept ​ NOW - we are in the: ○​ Value era - a time when companies emphasize creating value for customers ○​ One-to-one era - the way to compete is to build relationships with customers one at a time and seek to service each customer’s needs individually ○​ Transformative era - a time when marketing is transforming complete companies into new forms and core products because of the drive to serve customers more completely. ​ Not all companies adapt to the eras Creating Offerings That Have Value ​ Offering - That entire bundle, consisting of the tangible good, the intangible service, and the price; Together, the three make up a single firm’s offer. Communicating Offers ​ Communicating - describing the offering and its value to your potential and current customers, as well as learning from customers what it is they want and like. ○​ Most marketers separate communicating into promotion and research, promotion (including selling) being communicating to customers and research involving listening to customers. ​ More interactive dialogue with buyers is needed today Delivering Offerings ​ Delivering - in marketing, as in delivering value, a broad term that means getting the product to the consumer and making sure that the user gets the most out of the product and service  ​ Value is delivered through: ○​ Supply chain - includes a number of organizations and functions that mine or farm, make, assemble, or deliver materials and products from a manufacturer to consumers. ​ Logistics - or transportation and storage of materials and products, is the primary component of supply chain management, but there are other aspects of supply chain management that we will discuss later. Exchanging Offerings ​ Exchange - the transaction of value, usually economic, between a buyer and seller ​ Other exchanges, such as information about your preferences gathered through surveys, might not involve cash. ​ When consumers acquire, consume (use), and dispose of products and services, exchange occurs, including during the consumption phase. 1.2 - Who Does Marketing? ​ Everybody ​ For-Profit Companies ○​ For example, McDonald’s creates a new spicy chicken sandwich for $1.99 (the offering), launches a social media campaign (communicating), makes the sandwiches available on certain dates (delivering), and then sells them in its stores (exchanging). ○​ For-profit companies can be defined by the nature of their customers. A B2C (business-to-consumer) company like Chris Pantoya’s Fan Controlled Football or P&G sells products and services to be used by consumers like you, while a B2B (business-to-business) company sells products to be used within another company’s operations, as well as by government agencies and entities. ​ Nonprofit Organizations ○​ Nonprofit marketing - marketing activities conducted to meet the goals of nonprofit organizations ​ Government entities ○​ For example, when the U.S. Army advertises to parents of prospective recruits, sends brochures to high schools, or brings a Bradley Fighting Vehicle to a state fair, the army is engaging in marketing. ​ Environmental Protection Agency (EPA) ○​ Runs a number of advertising campaigns designed to promote environmentally friendly activities. One such campaign promoted the responsible disposal of motor oil instead of simply pouring it on the ground or into a storm sewer. ​ Social marketing - Marketing conducted in an effort to achieve certain social objectives can be done by government agencies, nonprofit institutions, religious organizations, and others  ​ Individuals ○​ Self-promotion is a form of marketing. 1.3 - Why Study Marketing? ​ Marketing Enables Profitable Transactions to Occur ○​ In this way, marketing helps facilitate exchanges between buyers and sellers for the mutual benefit of both parties. Likewise, good social marketing provides people with information and helps them make healthier decisions for themselves and for others. ​ Marketing Delivers Value ○​ Not only does marketing deliver value to customers, but also that value translates into the value of the firm as it develops a reliable customer base and increases its sales and profitability. ​ Marketing Benefits Society ○​ Marketing benefits society in general by improving people’s lives in two ways. ​ Facilitates trade and jobs are created - better marketing means more successful companies ​ Value delivery function of marketing - when you add all the marketers together who are trying to deliver offerings of greater value to consumers and are effectively communicating that value, consumers are able to make more informed decisions about a wider array of choices ​ More choices and smarter consumers - higher quality of life ​ Marketing Costs Money ○​ Marketing can sometimes be the largest expense associated with producing a product. In the flavored water business, marketing expenses account for about one-third of a product’s price—about the same as the ingredients used to make the soft drink itself. ​ Marketing Offers People Career Opportunities ○​ Marketing research. Personnel in marketing research are responsible for studying markets and customers in order to understand what strategies or tactics might work best for firms. ○​ Merchandising. In retailing, merchandisers are responsible for developing strategies regarding what products wholesalers should carry to sell to retailers such as Target and Walmart. ○​ Sales. Salespeople meet with customers, determine their needs, propose offerings, and make sure that the customer is satisfied. Sales departments can also include sales support teams who work on creating the offering.  ○​ Advertising. Whether it’s for an advertising agency or inside a company, some marketing personnel work on advertising. Television commercials and print ads are only part of the advertising mix. Many people who work in advertising spend all their time creating advertising for electronic media, such as websites and their pop-up ads, podcasts, and the like. ○​ Product development. People in product development are responsible for identifying and creating features that meet the needs of a firm’s customers. They often work with engineers or other technical personnel to ensure that value is created. ○​ Customer insights or marketing analytics. In today’s information technology and social media world, a great deal of data exists about consumers and markets. Marketing analysts or customer insights analysts are the professionals who analyze the data and provide insights to other members of the marketing team, from product development to merchandising, to sales and advertising. ○​ Direct marketing. Professionals in direct marketing communicate directly with customers about a company’s product offerings via channels such as email, chat lines, telephone, or direct mail. ○​ Digital marketing. Digital marketing professionals combine advertising, direct marketing, and other areas of marketing to communicate directly with customers via social media, the web, and mobile media (including texts). They also work with statisticians to determine which consumers receive which message and with IT professionals to create the right look and feel of digital media. ○​ Event marketing. Some marketing personnel plan special events, orchestrating face-to-face conversations with potential and current customers in a special setting. ○​ Nonprofit marketing. Nonprofit marketers often don’t get to do everything listed previously, as nonprofits typically have smaller budgets. But their work is always very important as they try to change behaviors without having a product to sell. ​ Criticisms of Marketing ○​ False advertising ○​ Deceptive marketing practices ○​ Volkswagen was sued in 2016 for false claims regarding its cars’ emissions record; even Red Bull was sued because, in spite of advertising saying “Red Bull gives you wings,” one plaintiff said he had not sprouted wings! ○​ Fuels consumerism - the tendency of consumers to want more and more products and services they don’t really need. ○​ Concerns are persuading more companies to take a societal marketing orientation  ○​ Societal marketing orientation - a company’s marketing efforts should not be aimed only at delivering products to customers and profits to shareholders but ultimately improve the well-being of society and the world in general. 1.4 - Themes and Organization of This Book ​ Everything Starts with Customers ○​ Most organizations start with an idea of how to serve customers better. ○​ Many companies think about potential markets and customers when they first launch their businesses. ​ Not all companies create mission statements that reflect a marketing orientation. Steve Jobs, the legendary co-founder of Apple, believed that meeting customers’ needs wasn’t enough because, he contended, they often don’t know what products they want or need until they are made available to them. Instead, Apple’s mission statement initially was product oriented. It was based on the premise that a company’s success is due to great products and that simply supplying them will lead to demand for them. The Marketing Plan ​ Marketing plan - the strategy for implementing the components of marketing: creating, communicating, delivering, and exchanging value. ○​ Once a company has decided what business it is in and expressed that in a mission statement, the firm then develops a corporate strategy. ○​ Marketing strategists subsequently use the corporate strategy and mission and combine that with an understanding of the market to develop the company’s marketing plan. The Changing Marketing Environment ​ Digital information and big data  ​ Ethics and social responsibility ​ Sustainability ​ Service-dominant logic ​ Metrics and analytics ​ A global environment Lecture 1 - Introduction ​ Midterm Exam - 3 questions only from him ​ Final Exam - 6 questions only from him What is Marketing? ​ 7 Ps ○​ Value Proposition ○​ Positioning - how you are perceived versus your competitors in the market ○​ People - target ○​ Promotion ○​ Product - energy in drink ○​ Place ○​ Price Ways to Go to Market ​ Production orientation - companies competed by reducing production costs  ​ Selling orientation - companies pushed their products by heavily emphasizing advertising and selling ​ Product orientation - companies focused on product innovation Positioning Map - Cell Phones ​ Iphone - top left ​ LG phone - bottom left 3 Types of Media ​ Social media ​ Earned media - get coverage of something you do that costs you nothing Product (or Service) ​ Branded ​ Unbranded STP - Segmentation, Targeting, Position ​ Segmentation - dividing a company’s target market into groups of potential customers with similar needs and behaviours ​ Targeting - Target a specific group of people which you have already segmented ​ Position - Creating a unique value for your targeted group of people - a brand or product’s ability to influence how consumers perceive it relative to competitors Chapter 2 - Strategic Planning 2.1 - The Value Proposition ​ Value proposition comes before developing a strategy or creating a strategic plan ​ Value proposition - a thirty-second “elevator speech” stating the specific benefits a product or service offering provides a buyer ○​ It shows why the product or service is superior to competing offers ​ Answers the questions: ○​ Why should I buy from you, do business with you, or hire you? ​ Note that although a value proposition will hopefully lead to profits for a firm, when the firm presents its value proposition to its customers, it doesn’t mention its own profits. ​ That’s because the goal is to focus on the external market or what customers want. ​ Target markets - groups of customers, they want to reach when they are developing their value propositions ​ Once the benefits of a product or service are clear, the firm must develop strategies that support the value proposition. The value proposition serves as a guide for this process. In the case of a sales consulting firm whose value  proposition states, “Our clients grow their business, large or small, typically by a minimum of 30–50 percent over the previous year,” their strategies must help clients improve their sales by 30–50 percent. 2.2 - Components of the Strategic Planning Process ​ Strategic planning process - A process that helps an organization allocate its resources under different conditions to accomplish its objectives, deliver value, and be competitive in a market-driven economy ○​ Helps an organization allocate its resources to capitalize on opportunities in the marketplace ○​ Long-term process ​ Strategic planning process includes: ○​ Conducting a situation analysis ○​ Developing the organization’s mission statement, objectives, value proposition, and strategies Conducting a Situation Analysis ​ Situation Analysis - an assessment of an organization’s internal and external environments ○​ External - macro and micro factors outside the organization ○​ Internal - (company) environments Conducting a SWOT Analysis ​ Based on the situation analysis, organizations analyze their Strengths, Weaknesses, Opportunities, and Threats, or conduct what’s called a SWOT analysis ○​ SWOT - a tool that frames the situational analysis ​ Strengths and weaknesses - internal factors - somewhat controllable ​ Opportunities and threats - external factors - largely uncontrollable  ​ If you are doing a situation analysis on PepsiCo (or any company) and are looking at the weak economy, take PepsiCo (company) out of the picture and see what factors remain. If the factor—the weak economy—is still there, it is an external factor and affects many companies. Assessing the Internal Environment ​ Once companies determine their strengths, they can use those strengths to capitalize on opportunities and develop their competitive advantage. ​ When organizations assess their internal environments, they must look at factors such as performance and costs as well as brand awareness and location. Managers need to examine both the past and current strategies of their firms and determine what strategies succeeded and which ones failed. Assessing the External Environment ​ The macro environment includes economic factors, demographic trends, cultural and social trends, political and legal regulations, technological changes, and the price and availability of natural resources. ​ The micro environment includes competition, suppliers, marketing intermediaries (retailers, wholesalers), the public, the company, and customers. The Competitive Environment ​ Coke and Pepsi are direct competitors in the soft drink industry, Hilton and Marriott are competitors in the hospitality industry, and organizations such as United Way and the American Cancer Society compete for resources in the nonprofit sector. However, hotels must also consider other options (substitutes) that people have when selecting a place to stay, such as hostels, dorms, bed and breakfasts, or rental homes. ​ Five forces model - the framework helps organizations understand their current competitors and substitutes as well as organizations that could become competitors (potential entrants) in the future. Competitive Analysis ​ Firms tend to focus on direct competitors when conducting a competitive analysis ○​ Tries to determine a firm’s strengths and weaknesses, its image, and its resources ​ Competitive analysis involves looking at any information (annual reports, financial statements, news stories, observation details obtained on visits, etc.) available on competitors. ​ Mystery shoppers - A person who is paid to shop at a firm’s establishment or one of its competitors’ to observe the level of service, cleanliness of the facility, and so forth, and report his or her findings to the firm ○​ Learn about customer service and products According to Porter, in addition to their direct competitors (competitive rivals), organizations must consider the strength and impact the following could have: ​ substitute products ​ potential entrants (new competitors) in the marketplace ​ the bargaining power of suppliers ​ the bargaining power of buyers The Political and Legal Environment ​ All organizations must comply with government regulations and understand the political and legal environments in which they do business. Different government agencies enforce the numerous regulations that have been established to protect both consumers and businesses. ​ For example, the Sherman Act (1890) prohibits U.S. firms from restraining trade by creating monopolies and cartels. The regulations related to the act are enforced by the Federal Trade Commission (FTC), which also regulates deceptive advertising. The U.S. Food and Drug Administration (FDA) regulates the labeling of consumable products, such as food and medicine. ​ Consumer Product Safety Commission - the group that sets safety standards for consumer products. The Economic Environment ​ The economy has a major impact on spending by both consumers and businesses, which, in turn, affects the goals and strategies of organizations. Economic factors include variables such as inflation, unemployment, interest rates, and whether the economy is in a growth period or a recession. The Demographic and Social and Cultural Environments ​ The demographic and social and cultural environments—including social trends, such as people’s attitudes toward fitness and nutrition; demographic characteristics, such as people’s age, income, marital status, education, and occupation; and culture, which relates to people’s beliefs and values—are constantly changing in the global marketplace. ​ Fitness, nutrition, and health trends affect the product offerings of many firms. Technology ​ The technology available in the world is changing the way people communicate and the way firms do business. Everyone is affected by technological changes. Artificial intelligence (AI), digital technology, more self-scanners in stores, and mobile phones are a few examples of how technology continues to affect businesses and consumers.  ​ Marketers have begun allocating more of their promotion budgets to digital technologies including social media platforms, online ads, and mobile marketing rather than focusing on traditional print media such as newspapers and magazines. Natural Resources ​ Natural resources are scarce commodities, and consumers are becoming increasingly aware of this fact. Today, many firms are doing more to engage in “sustainable” practices that help protect the environment and conserve natural resources. ​ Green marketing - involves marketing environmentally safe products and services in a way that is good for the environment. The Mission Statement ​ Mission statement - defines the purpose of the organization and answers the question of how a company defines its business ○​ States the purpose of the organization and why it exists ​ Sometimes companies have multiple strategic business units (SBUs) ​ Strategic business units (SBUs) - businesses or product lines within an organization that have their own competitors, customers, and profit centers ○​ Have their own mission statement, competitors, objectives, and strategies 2.3 - Developing Organizational Objectives and Formulating Strategies Developing Objectives ​ Objectives - What organizations want to accomplish (the end results) in a given time frame ○​ Objectives should be realistic (achievable) and measurable, if possible ​ Objectives help guide and motivate a company’s employees and give its managers reference points for evaluating the firm’s marketing actions. ​ Although many organizations publish their mission statements, most for-profit companies typically do not publish their objectives Formulating Strategies ​ Strategies - the means to an end, or what the firm will do to achieve its objectives ○​ The game plan ​ Tactics - include specific actions, such as coupons, television commercials, banner ads, buy one–get one free, and so on, taken to execute the strategy. ​ Marketing Plan - a strategic plan at the functional level that provides a firm’s marketing group with direction. ○​ A road map that improves the firm’s understanding of its competitive situation ○​ Helps the firm allocate resources and divvy up the tasks that employees need to do for the company to meet its objectives ​ Market penetration strategies - focus on increasing a firm’s sales of its existing products to its existing customers. Companies often offer consumers special promotions or low prices to increase their usage and encourage them to buy products. ​ Product development strategies - involve creating new products for existing customers. A new product can be a totally new innovation, a product line extension, or a product with enhanced value, such as one with an improved feature. ​ Market development strategies - focus on entering new markets with existing products. For example, when most business travel was halted, hotel occupancy was extremely low, and people worked remotely during the COVID-19 pandemic, some hotels around the world including Marriott, Hilton, and Hyatt, decided to go after a different market. Hotel rooms and public spaces provided workspace for remote workers as a way to generate revenue. People could purchase day passes as an option to working from home. Hotels also offered deals for longer stays where families could be in a separate room. ○​ New markets can include any new groups of customers, such as different age groups, new geographic areas, or international markets. ○​ Export - sell products to buyers in foreign markets ○​ License - sell the right to use some aspect of their production processes, trademarks, or patents to individuals or firms in foreign markets. Licensing is  a popular strategy, but firms must figure out how to protect their interests if the licensee decides to open its own business and void the license agreement. ​ Franchising - granting an independent operator the right to use your company’s business model, techniques, and trademarks for a fee ○​ Longer-term (and thus riskier) form of licensing that is extremely popular with service firms ○​ Franchisees pay a fee for the franchise and must adhere to certain standards ​ Contract manufacturing - when companies hire manufacturers to produce their products in another country ○​ The manufacturers are provided specifications for the products, which are then manufactured and sold on behalf of the company that contracted the manufacturing. Contract manufacturing may provide tax incentives and may be more profitable than manufacturing the products in the home country. Examples of products in which contract manufacturing is often used include cell phones, computers, and printers. ​ Joint ventures - an entity that is created when two parties agree to share their profits, losses, and control with one another in an economic activity they jointly undertake ○​ Combine the expertise and investments of two companies and help companies enter foreign markets. The firms in each country share the risks ○​ Some countries such as China often require companies to form a joint venture with a domestic firm in order to enter the market. After entering the market in a partnership with a domestic firm and becoming established in the market, some firms may decide to separate from their partner and become their own business. investments. ​ Direct investment - owning a company or facility overseas ○​ Another way to enter a foreign market, providing the most control but also having the most risk ​ Diversification strategies - offering products that are unrelated to other existing products produced by the organization ○​ Involve entering new markets with new products or doing something outside a firm’s current businesses ○​ Firms that have little experience with different markets or different products often diversify their product lines by acquiring other companies. Diversification can be profitable, but it can also be risky if a company does not  have the expertise or resources it needs to successfully implement the strategy. 2.4 - Where Strategic Planning Occurs within Firms ​ Strategic planning may occur at different levels within an organization ​ For example, in large organizations top executives will develop strategic plans for the corporation as a whole. These are corporate-level plans ​ Corporate - level plans - plans developed for the corporation as a whole take place at the corporate level ​ In addition, many large firms have different divisions, or businesses, called strategic business units. - develop their own strategic plans ​ Business-level plans - plans developed for each strategic business unit typically have their own mission statement ​ The different departments, or functions (accounting, finance, marketing, and so forth) within a company or SBU, might also develop strategic plans. For example, a company may develop a marketing plan or a financial plan, which are functional-level plans. ​ If a company wants to increase its profits or return on investment (ROI) at the corporate level and owns multiple business units, each unit might develop strategic plans to increase its own profits and thereby the firm’s profits as a whole. At the functional level, a firm’s marketing department might develop strategic plans to increase sales and market share of the firm’s most profitable products, which will increase profits at the business level and help the corporation’s profitability and ROI. Both business-level and functional plans should help the firm increase its profits, so the company’s corporate-level strategic objectives can be met. 2.5 - Strategic Portfolio Planning Approaches ​ Portfolio - a group of business units owned by a single firm ​ In order to evaluate each business, companies sometimes utilize what’s called a portfolio planning approach. ​ Portfolio planning approach - an approach to analyzing various businesses relative to one another ○​ Two of the most widely used portfolio planning approaches include the Boston Consulting Group (BCG) matrix and the General Electric (GE) approach. ​ Boston Consulting Group (BCG) matrix - a portfolio-planning approach that examines strategic business units based on their relative market shares and growth rates. Businesses are classified as stars, cash cows, questions marks (problem children), or dogs ○​ Helps companies evaluate each of its strategic business units based on two factors: (1) the SBU’s market growth rate (i.e., how fast the unit is growing compared to the industry in which it competes), and (2) the SBU’s relative market share (i.e., how the unit’s share of the market compares to the market share of its competitors). ○​ Useful to make business and investment decisions ​ The Four Categories ○​ Stars - business or offering with high growth and a high market share ​ Everyone wants to be a star  ​ Company must have to invest money to improve star products and distribute them as well as promote them ​ Ex. Aquafina ○​ Cash Cows - business or offering with a large share of a shrinking market ​ Generate a lot of cash, they do not have a long-term future ​ Need to manage products so they continue to generate revenue to fund star products or help grow question marks into stars ​ Ex. Apple iPhone ○​ Question Marks or Problem Children - businesses or offerings with a low share of a high-growth market ​ Must decide whether to invest in the and hope they become stars or gradually eliminate or sell them ​ For example, when sales of Mattel’s Barbie doll fell, Mattel had to decide whether to continue to invest in the Barbie brand, since she was their “problem child.” Mattel decided to invest in Barbie, but unfortunately did not pay attention and lost their Princess dolls to Hasbro. ○​ Dogs - business or offering with low growth and a low market share ​ Many companies invest in question marks because market share is available for them to capture. ​ The success sequence is often used as a means to help question marks become stars. With the success sequence, money is taken from cash cows (if available) and invested into question marks in hopes of them becoming stars. ​ Harvest - when a firm lowers investment in a product or business; The goal is to try to generate short-term profits from the product regardless of the long-term impact on its survival. ​ Divest - when a firm drops or sells a product or business The General Electric Approach ​ General Electric Approach - a portfolio-planning approach that examines a business’ strengths and the attractiveness of industries (the industry in which it competes) ​ Companies evaluate their strengths and the attractiveness of industries as high, medium, and low. The firms then determine their investment strategies based on how well the two correlate with one another. ​ Yellow - means caution  Chapter 16 - The Marketing Plan ​ Creating a great customer experience may be a focal point for an organization’s marketing plan. ​ A well-designed marketing plan should communicate realistic expectations to a firm’s CEO and other stakeholders. ​ Marketing plan - a document that is designed to communicate the marketing strategy for an offering. The purpose of the plan is to influence executives, suppliers, distributors, and other important stakeholders of the firm so they will invest money, time, and effort to ensure the plan is a success. ○​ To communicate to everyone in the organization who has what marketing-related responsibilities and how they should execute those responsibilities. 16.1 - Marketing Planning Roles ​ Team of marketing specialists are involved in creating an organization’s marketing plans ○​ Sometimes multiple teams are involved. ○​ Many companies create marketing plans at the divisional level. ○​ Each division has its own Chief Marketing Officer (CMO) ​ Some of the team members specialize in certain areas. For example, the copier company Xerox has a team that specializes in competitive analysis. 16.2 - Functions of the Marketing Plan Recall that a marketing plan should do the following: A.​ Identify customers’ needs and wants. B.​ Evaluate whether the organization can meet those needs and deliver value in some way that allows for profitable exchanges with customers to occur. C.​ Develop a mission statement, objectives, value proposition, strategy, and organization centered on those needs. 1.​ Create offerings that are the result of meticulous market research. 2.​ Form operations and supply chains that advance the successful delivery of those offerings.  D.​ Pursue advertising, promotional, and public relations campaigns that lead to continued successful exchanges between the company and its customers. E.​ Engage in meaningful communications with customers on a regular basis. The Marketing Plan: An Outline ​ Written primarily for executives, who will use the forecasts in your plan to make budgeting decisions ​ Many people will use the plan: ○​ Your firm’s sales force will use the marketing plan to determine its sales strategies and how many salespeople are needed. ○​ The entire marketing staff will rely on the plan to determine the direction and nature of their activities. ○​ The advertising agency you hire to create your promotional campaigns will use the plan to guide its creative team.  1.​ The Executive Summary ○​ Should provide all the information your company’s executives need to make a decision without reading the rest of the plan ​ Brief description of the market ​ The product to be offered ​ The value proposition ​ The strategy behind the plan ​ Key budget items ○​ Any other important information, such as how your competitors and channel partners will respond to the actions your firm takes, should also be summarized and included as justification for strategy recommendations. ○​ One to two pages long ○​ Most find it easier to write this last 2.​ The Business Challenge ○​ Planner describes the offering and provides a brief rationale for why the company should invest in it ​ Why is the offering needed? ​ What is the value proposition? ​ How does it fit in with what the company is already doing and further its overall business goals? ​ Reference the company’s mission statement - how does the offering and marketing plan further the company’s mission? ○​ Answer the question - why should I invest in this plan? 3.​ The Market ○​ Describe your customers and competitors, any other organizations with which you will collaborate, and the state of the market ○​ Start with the customers who currently purchase or will purchase the offering ○​ Discuss the factor you believe is most convincing first, followed by the second-most convincing factor, and so on. ​ Customers ​ Target market - current and potential customers ​ For example, Progresso Soups’ primary market segments might include the following: ​ Families in colder regions ​ People who need a good lunch but have to eat at their desks ​ Busy young singles ​ Older, perhaps retired, empty-nesters ​ Company Analysis ​ Include the results of your analysis of your company’s strengths and weaknesses in this section.  ​ You will also need to identify any functional areas in which your company might need to invest for the plan to succeed. For example, money might be needed for new production or distribution facilities and to hire new marketing or sales employees and train existing ones. ​ Use SWOT analysis ​ Factors that make for better SWOT analysis ○​ Honest ○​ Broad ○​ Long-term ○​ Multiple perspectives ​ ​ Collaborators ​ Along with company strengths and weaknesses, identify any actual or potential partners needed for the plan to work. Note that collaborators are more than just a list of suppliers and distributors. Collaborators are those organizations, either upstream or downstream in the value chain, you need to partner with to co-create value. ​ Competitors ​ Identify your competitors and be honest about both their strengths and weaknesses in your marketing. Remember that other people, and perhaps other organizations, will be using your plan to create their own plans. If they are to be successful, they have to know what competition they face. ○​ Include how quickly you expect your competitors to retaliate and what the nature of that retaliation will be. Will they lower their prices, create similar offerings, add services to drive up the value of their products, spend more on advertising, or a combination of these tactics? ​ Include analysis of competition’s financial resources ​ Business Climate ​ A complete coverage of the climate would include the following (the PEST analysis): ○​ Political climate ​ Any new government regulations as well as legislation ○​ Economic climate ​ Inflation and unemployment rates, as well as exchange rate, may affect your business ○​ Social and cultural environment ​ Marketers, for example, may note the rise in the Hispanic population as a market segment, but it is also important to recognize the influence of the Hispanic culture. ○​ Technological environment  ​ Technology is the application of science to solve problems. It encompasses more than just information (computer) technology. The Value Proposition and Strategy ​ This section is your opportunity to create a compelling argument as to what you intend to do and why others should invest in the strategy. Your reader will be asking, “Why should we adopt this strategy?” The Offering ​ Provide detail on the features and benefits of the offering, including pricing options, in this section. ​ Part of an offering is the service support consumers need to extract the offering’s full value. The support might include presales support as well as postsales support. The Communication Plan ​ How will the offering be launched? Will it be like Dow Corning’s launch of silicone acrylate copolymer, a product used to add color to cosmetics? That product was announced at the In-Cosmetics trade show in Barcelona. Or will you invite customers, media, and analysts from around the globe to your company’s offices for the launch, as SAS did with its SAS 9 software product? ○​ How ongoing customer communications will be conducted ○​ Mechanisms used to gather customer feedback and insights ​ The discussion of the communication plan can be fairly broad. You can put additional details in a separate planning document that outlines the product’s advertising strategies, event strategies (such as trade shows and special events like  customer golf tournaments that will be used to promote the product), sponsorships, and sales strategies. Distribution ​ This section should answer questions about delivering value, where and how the offering will be sold. Who will sell it? Who will ship it? Who pays for shipping? How will it be shipped? Who will service and support it with services such as research, credit, and handling? In addition, the distribution section should specify the inventories that need to be maintained in order to meet customer expectations for fast delivery and where those inventories should be kept. Pricing ​ Pricing strategies must cover both fixed and variable costs. Information regarding pricing approaches, adjustments, and transportation charges need to be included. If all other information is missing, price indicates quality. What image does the price convey? May customers bundle offerings to save money? What services are included in the price? Remember, price is the only component of the marketing mix that generates revenue. It is the easiest to change and the easiest to copy. Budget ​ Covers: ○​ Resources ○​ New personnel ○​ New equipment ○​ New locations ​ Of course, these resources have costs associated with them. In some instances, the budget might require that existing resources be redeployed and a case made for doing so. ○​ First portion will likely cover the investment required for the launch ○​ Additional funds need to be allocated to the offering to make it ready for the market ​ Include costs associated with maintaining the amount of inventory of the product to meet customers’ needs ​ Forecast the product’s sales and profits Conclusion ​ Repeat the highlights ​ Summarize: ○​ The target market ○​ The value proposition(s) ○​ The offer ○​ The communication plan ○​ Distribution plan ○​ Pricing plan ​ Use active not passive voice ​ Use visuals and bullet points 16.3 - Forecasting ​ Sales forecast - the estimate of how much the company will actually sell ○​ Accuracy is important ○​ Understand the demand ​ Determine market potential - total industry-wide sales expected in a particular product category for the time period of interest. ○​ (The time period of interest might be the coming year, quarter, month, or some other time period.) ​ Next, estimate the company’s sales potential - the maximum total revenue it hopes to generate from a product or the number of units of it the company can hope to sell. Forecasting Methods - Judgment and Survey Techniques ​ Judgment techniques - forecasting methods that rely on someone’s estimate(s) ​ Judgment techniques can include customer (or channel member or supplier) surveys, executive or expert opinions, surveys of customers’ (or channel members’) intentions or estimates, and estimates by salespeople. ​ Customer and Channel Surveys ○​ In some markets, particularly in business-to-business markets, research companies ask customers how much they plan to spend in the coming year on certain products. ○​ Companies then buy the surveys from the research companies or do their own surveys to use as a starting point for their forecasting. Surveys are better at estimating market potential than sales potential, however, because potential buyers are far more likely to know they will buy something—they just don’t know which brand or model. Surveys can also be relatively costly, particularly when they are commissioned for only one company. ​ Sales Force Composite ○​ Sales force composite - a forecast based on estimates of sales in a given time period gathered from all of a firm’s salespeople. ​ Executive Opinion ○​ Executive opinion - a forecasting method in which an executive or group of executives provides a best estimate of what will be sold or what will happen ○​ Each executive submits an estimate of the company’s sales, which are then averaged to form the overall sales forecast. The advantages of executive opinions are that they are low cost and fast and have the effect of making executives committed to achieving them. ​ Expert Opinion ○​ Expert opinion - a forecasting method in which the forecast is based on an objective third-party expert’s best estimate of what will happen in the market and how that will influence sales ○​ Expert is usually someone outside the company ​ Time Series Techniques ○​ Time series techniques examine sales patterns in the past in order to predict sales in the future ○​ Trend analysis - a group of forecasting methods that base the future period of sales (or another variable) on the rate of change for previous periods of time ​ For example, if sales have grown 3 percent per year over the past five years, trend analysis would assume a similar 3 percent growth rate next year. ○​ Adjustments to be made to account for swings in rates of change: ​ Moving average - a trend analysis type of forecasting method that estimates sales (or other variable) based on an average rate of change over a group of previous periods of time; the rate changes (moves) as the oldest period is dropped off and the most recent period added in ​ Rate change for the past few periods is averaged ​ Exponential smoothing - a method of trend analysis forecasting that weighs more recent periods of time more heavily than more distant periods of time ​ A type of moving average that puts more emphasis on the most recent period ​ Correlates and Other Models ○​ Correlation analysis - a form of trend analysis that estimates sales based on the trends of other variables ​ For example, furniture-company executives know that new housing starts (the number of new houses that are begun to be built in a period) predict furniture sales in the near future because new houses tend to get filled up with new furniture. Such a correlate is considered a leading indicator, because it leads, or precedes, sales. ○​ Leading indicator - a correlate that occurs before the variable being forecasted (eg., permits to build new houses is a leading indicator of building material sales because permits are issued before the materials are purchased). ​ Response models - sophisticated statistical models used in forecasting that are based on how customers have responded in the past to marketing strategies ○​ For example, companies take previous sales data and combine it with customer data gathered from the retailer’s website to learn about customers’ behaviors. ​ Market tests - an experiment in which the company launches a new offering in a  limited market or for a limited time in order to gain real-world knowledge of how the market will react to the product. ​ Pick the right method(s) for your business and your decision ○​ Some products have very short selling cycles; others take a long time to produce and sell. What is appropriate for a fast-moving consumer good like toothpaste is not appropriate for a durable good like a refrigerator. A response model might work for Crest toothpaste in the short term, but longer-term forecasts might require a sophisticated time-series technique. By contrast, Whirlpool might find, for example, that channel surveys are better predictors of refrigerator sales over the long term. ​ Use multiple methods ○​ Since forecasts are estimates, the more estimates generated from various methods, the better. For example, combining expert opinions with a trend analysis could help you understand not only what is happening but also why. Every forecast results in decisions, such as the decision to hire more people, add manufacturing capacity, order supplies, and so forth. The more forecasts you have to make and resulting decisions you have to live with, the better you will get at forecasting. ​ Use many variables ○​ Forecasting for smaller business units first can result in greater accuracy. For example, JCPenney may estimate sales by region first, and then roll that information up into a national sales forecast. By forecasting locally, more variables can be considered, and with more variables comes more information, which should help the accuracy of the company’s overall sales forecast. Similarly, JCPenney may estimate sales by market segment, such as women over age fifty. Again, forecasting in a smaller segment or business unit can then enable the company to compare such forecasts to forecasts by product line and gain greater accuracy overall. ​ Use scenario-based forecasts ○​ One forecast is not enough. Consider what will happen if conditions change. For example, how might your forecast change if your competitors react strongly to your strategy? How might it change if they don’t react at all? Or if the government changes a policy that makes your product tax-free? All of these factors will influence sales, so the smart executive considers multiple scenarios. While the executive may not expect the government to make something tax-free, scenarios can be created that consider favorable government regulation, stable regulation, and negative regulation, just as one can consider light competitive reaction, moderate reaction, or strong reaction. ​ Track actual results and adjust ○​ As time goes on, forecasts that have been made should be adjusted to reflect reality. For example, Katie Scallan-Sarantakes may have to do an annual forecast for Scion sales, but as each month goes by, she has hard sales data with which to adjust future forecasts. Further, she knows how strongly  competition has reacted and can adjust her estimates accordingly. So even though she may have an annual forecast, the forecast changes regularly based on how well the company is doing. 16.4 - Ongoing Marketing Planning and Evaluation ​ In reality, marketing plans may be created or revised frequently—sometimes on an annual basis, or when a new CMO is hired, when market dynamics change drastically and quickly, or a company’s CEO wants one. ○​ Marketing plan is a “living” document ○​ Strategies are typically reviewed on a quarterly basis and adjustments are made as necessary ​ Casualty - the relationship between two variables whereby one variable is a direct consequence of the other. ○​ For a scientist in a lab, identifying causality is fairly easy because the causal variable can be controlled and the consequences observed. For marketers, such control is a dream, not a reality. Identifying causality, then, can be a real challenge. ​ Control - (a) the degree to which you can manipulate an outcome; (b) the degree to which you can separate the effects of a variable on a consequence ○​ For example, you have complete control over what the customer pays for the offering. You are able to manipulate that outcome. However, you have no control over seasonal effects. Nonetheless, you can identify what those effects are and account for their influence. ​ Managerial control - you have control over how variables in a marketing plan are implemented. ○​ You decide, for example, how many stores will carry your product. You can vary that number and have an effect on sales. ​ Statistical control - you can remove the influence of the variable on the outcome mathematically. ○​ For example, you have no control over seasonality. If you are selling a product for babies and more babies are born in August than any other month, then your sales will go up in September. The Marketing Audit ​ Marketing audit - an examination or snapshot of the state of a company’s marketing strategies as they are actually implemented. ​ Fidelity - the degree to which the plan is being implemented as it is supposed to be.  Chapter 5 - Market Segmenting, Targeting, and Positioning ​ Market segmentation - the process of breaking down all consumers into groups of potential buyers with similar characteristics ○​ Divide or segment people and organizations into different groups of potential buyers with similar characteristics ○​ Companies try to group their customers together based on how they are alike 5.1 - Targeted Marketing Versus Mass Marketing ​ Targeted marketing (or differentiated marketing) - differentiating some aspect of your marketing (the product, promotion, and/or price or place), based on different groups of customers ○​ This is a newer phenomenon ​ Mass marketing ( or undifferentiated marketing) - selling the same product to all consumers ○​ Came first ○​ Evolved along with mass production ○​ Attempts to appeal to the largest possible portion of a market with a specific product Benefits of Segmenting Targeting Markets ​ Breaking a market into segments can help you enlarge your customer base by giving you information with which to successfully adjust some component of your offering—the offering itself, its price, or the way you service and market the product. ​ The process can help you: ○​ Avoid head-on competition with other firms trying to capture the same customers ○​ Develop new offerings and expand profitable brands and products lines ○​ Remarket older, less-profitable products and brands ○​ Identify early adopters, who are people who are inclined to adopt new products as soon as they hit the market ○​ Redistribute money and sales efforts to focus on your most profitable customers ○​ Retain “at-risk” customers in danger of defecting to your competitors  ​ The trend today is toward more precise, targeted marketing. One reason why is because most firms don’t have the resources to market their products to everyone using all different mediums. Nor would such an effort be efficient, because no single product is right for each and every consumer. Instead, firms have to figure which groups of people are most likely to buy their products and focus their efforts on those customers. ​ Need to conduct market research ​ Tools include: ○​ Government agencies collect and report vast amounts of population information and economic data that can reveal changing consumption trends ○​ Technology ○​ Social media - get information about consumers’ search behvaiour ○​ Loyalty cards - provide information about consumers’ buying behaviours ​ Tracking people’s web browsing patterns ​ Ask buyers questions about what they do during the day, what they talk about, the products and services you see them using, the quality of experiences they have using those products or services Segmenting and Targeting a Firm’s Current Customers ​ Finding and attracting new customers is generally far more difficult than retaining your current customers. ​ It’s so important to get to know, form close relationships with, and focus your selling efforts on current customers. ​ Create personalized marketing campaigns for people who have done business with the company in the past - Backroads company did this ​ Firms survey their customers - they hire market research firms to do so, utilizing loyalty programs, or using analytical tools to determine where they go online and what they buy ​ Twitter - companies keep in touch with customers and boost their revenues - tweets about special offerings ​ Consequently, you will want to interact with some customers more than others. Believe it or not, some firms deliberately “untarget” unprofitable customers. ​ One-to-one marketing - forming close, personal relationships with customers and giving them exactly what they want ○​ An idea proposed by Don Peppers and Martha Rogers in their 1944 book The One to One Future 5.2 - How Markets Are Segmented ​ Segment markets based on two types of groups: ○​ Consumer markets ○​ Business-to-business (B2B) markets ​ Segmentation bases - criteria used to classify and divide buyers into different groups Types of Segmentation Bases ​ Four segmentation categories: ○​ Behavioral segmentation. What benefits do customers want, and how do they use our product? ○​ Demographic segmentation. How do the ages, races, genders, and ethnic backgrounds of our customers affect what they buy?  ○​ Geographic segmentation. Where are our customers located, and how can we reach them? What products do they buy based on their locations? ○​ Psychographic segmentation. What do our customers think about and value? How do they live their lives? Segmenting by Behaviour ​ Behavioural segmentation - divides people and organizations into groups according to how they behave or act toward products ​ Benefits segmentation - segmenting buyers by the benefits they want from products - is very common ​ Usage rates - how often, if ever, customers use certain products ​ Value-based segmentation - based on a customer’s lifetime value - or CLV ​ Customer’s lifetime value - the total monetary value of a customer over the customer’s lifetime ○​ For example, if a student spends an average of $50 per month on clothing over five years while in college, that student is worth $600 per year or $3000 over their lifetime as a college student. Many firms will segment on CLV in  some fashion, either on the basis of dollars spent with the firm or total dollars spent on the category. Back to the student example, if your store gets half of that student’s spending, the CLV for you is $1500 but with a potential CLV of $3000. ​ The sum of revenue over the lifetime of the customer Segmenting by Demographics ​ Demographic segmentation - segmenting buyers by personal characteristics such as their ages, income, ethnicity, and family sizes ​ Family life cycle - the stages families go through over time and how it affects people’s buying behavior. For example, if you have no children, your demand for pediatric services (medical care for children) is likely to be slim to none, but if you have children, your demand might be very high because children frequently get sick. Segmenting by Geography ​ Geographic segmentation - divides the market into areas based on location and explains why the check-out clerks at stores sometimes ask for your zip code, and why you get ads for restaurants and stores in your area and not in other towns and cities ​ Geocoding - a process that takes data such as this and plots it on a map. Geocoding can help businesses see where prospective customers might be clustered and target them with various ad campaigns, including direct mail. ​ Geodemographics - combining both demographic and geographic information for marketing purposes ​ Customer profiles - a description of a type of customer based on market segmentation criteria ​ Population density - the number of people per square mile ○​ Have you ever noticed that in rural towns, McDonald’s restaurants are hard to find, but Dairy Queens (DQ) are usually easy to locate? McDonald’s generally won’t put a store in a town of fewer than five thousand people. However, this is prime turf for the “DQ”— because it doesn’t have to compete with bigger franchises like McDonald’s. Segmenting by Psychographics ​ Psychographic segmentation - segmenting people by their activities, interests, opinion, attitudes, values, and lifestyles  ○​ Gathered via surveys ​ Based on their responses to different statements, consumers were divided up into the following categories, each characterized by certain buying behaviors. ○​ Innovators. Innovators are successful, sophisticated, take-charge people with high self-esteem. Because they have such abundant resources, they exhibit all three primary motivations in varying degrees. They are change leaders and are the most receptive to new ideas and technologies. Innovators are very active consumers, and their purchases reflect cultivated tastes for upscale, niche products and services. Image is important to Innovators, not as evidence of status or power but as an expression of their taste, independence, and personality. Innovators are among the established and emerging leaders in business and government, yet they continue to seek challenges. Their lives are characterized by variety. Their possessions and recreation reflect a cultivated taste for the finer things in life. ○​ Thinkers. Thinkers are motivated by ideals. They are mature, satisfied, comfortable, and reflective people who value order, knowledge, and responsibility. They tend to be well educated and actively seek out information in the decision-making process. They are well informed about world and national events and are alert to opportunities to broaden their knowledge. Thinkers have a moderate respect for the status quo institutions of authority and social decorum but are open to consider new ideas. Although their incomes allow them many choices, Thinkers are conservative, practical consumers; they look for durability, functionality, and value in the products they buy. ○​ Achievers. Motivated by the desire for achievement, Achievers have goal-oriented lifestyles and a deep commitment to career and family. Their social lives reflect this focus and are structured around family, their place of worship, and work. Achievers live conventional lives, are politically conservative, and respect authority and the status quo. They value consensus, predictability, and stability over risk, intimacy, and self-discovery. With many wants and needs, Achievers are active in the consumer marketplace. Image is important to Achievers; they favor established, prestige products and services that demonstrate success to their peers. Because of their busy lives, they are often interested in a variety of time-saving devices. ○​ Experiencers. Experiencers are motivated by self-expression. As young, enthusiastic, and impulsive consumers, Experiencers quickly become enthusiastic about new possibilities but are equally quick to cool. They seek  variety and excitement, savoring the new, the offbeat, and the risky. Their energy finds an outlet in exercise, sports, outdoor recreation, and social activities. Experiencers are avid consumers and spend a comparatively high proportion of their income on fashion, entertainment, and socializing. Their purchases reflect the emphasis they place on looking good and having “cool” stuff. ○​ Believers. Like Thinkers, Believers are motivated by ideals. They are conservative, conventional people with concrete beliefs based on traditional, established codes: family, religion, community, and the nation. Many Believers express moral codes that are deeply rooted and literally interpreted. They follow established routines, organized in large part around home, family, community, and social or religious organizations to which they belong. As consumers, Believers are predictable; they choose familiar products and established brands. They favor American products and are generally loyal customers. ○​ Strivers. Strivers are trendy and fun loving. Because they are motivated by achievement, Strivers are concerned about the opinions and approval of others. Money defines success for Strivers, who don’t have enough of it to meet their desires. They favor stylish products that emulate the purchases of people with greater material wealth. Many see themselves as having a job rather than a career, and a lack of skills and focus often prevents them from moving ahead. Strivers are active consumers because shopping is both a social activity and an opportunity to demonstrate to peers their ability to buy. As consumers, they are as impulsive as their financial circumstance will allow. ○​ Makers. Like Experiencers, Makers are motivated by self-expression. They express themselves and experience the world by working on it—building a house, raising children, fixing a car, or canning vegetables—and have enough skill and energy to carry out their projects successfully. Makers are practical people who have constructive skills and value self-sufficiency. They live within a traditional context of family, practical work, and physical recreation and have little interest in what lies outside that context. Makers are suspicious of new ideas and large institutions such as big business. They are respectful of government authority and organized labor but resentful of government intrusion on individual rights. They are unimpressed by material possessions other than those with a practical or functional purpose. Because they prefer value to luxury, they buy basic products. ○​ Survivors. Survivors live narrowly focused lives. With few resources with which to cope, they often believe that the world is changing too quickly. They  are comfortable with the familiar and are primarily concerned with safety and security. Because they must focus on meeting needs rather than fulfilling desires, Survivors do not show a strong primary motivation. Survivors are cautious consumers. They represent a very modest market for most products and services. They are loyal to favorite brands, especially if they can purchase them at a discount. ​ Consumer insight - an understanding of consumers that results when both quantitative and qualitative information are gathered about them (INSIGHT) Segmentation in B2B Markets ​ According to Harrison, Hague, and Hague, the behavioral, or needs-based, segments in B2B markets include the following: ○​ A price-focused segment, which is composed of small companies that have low profit margins and regard the good or service being sold as not being strategically important to their operations. ○​ A quality and brand-focused segment, which is composed of firms that want the best possible products and are prepared to pay for them. ○​ A service-focused segment, which is composed of firms that demand high-quality products and have top-notch delivery and service requirements. ○​ A partnership-focused segment, which is composed of firms that seek trust and reliability on the part of their suppliers and see them as strategic partners. ​ Vertical market segments - In B2B marketing, a portion of an overall market that is engaged in the same business or profession ○​ The two businesses the company serves are commercial real estate companies and multi-family (apartment and condo) real estate companies. The company then breaks the market down by size of the company, both in terms of what they spend currently and what they could spend. 5.3 - Selecting Target Markets and Target-Market Strategies ​ An attractive market has the following characteristics: ○​ It is sizeable (large) enough to be profitable given your operating cost. India and China have about the same population but the market for cars in China is six times bigger because China has more people with enough money to buy cars. ○​ It is growing. The size of the middle class in countries other than the U.S. tripled over the past twenty years (the U.S. middle class declined), and that growth will continue. That’s why Netflix, Starbucks, and others are focusing their growth efforts in other countries.  ○​ It is not already swamped by competitors, or you have found a way to stand out in a crowd. IBM used to make PCs. However, after the marketplace became crowded with competitors, IBM sold the product line to a Chinese company called Lenovo. ○​ Either it is accessible or you can find a way to reach it. Accessibility, or the lack of it, could include geographic accessibility, political and legal barriers, technological barriers, or social barriers. For example, to overcome geographic barriers, the consumer products company Unilever has hired over 70,000 women in India and Pakistan to sell the company’s products to rural consumers in 165,000 villages without stores. In Pakistan alone, this strategy reaches 4.5 million who were otherwise inaccessible. ○​ The company has the resources to compete in it. Elon Musk had the idea of building electric cars but to do so, he had to raise the money and he had to be wary of traditional car companies like GM and Mercedes. He also had to convince engineers that it was a good idea to join his company—and he did. ○​ It “fits in” with your firm’s mission and objectives. Unilever produces all of its products in plants powered by renewable energy sources, as part of its commitment to sustainability. Its customers can count on ingredients that were also sourced sustainably. Target-Market Strategies: Choosing the Number of Markets to Target ​ Kraft Mac and Cheese proved that mass marketing can work—at least for a while. Mass marketing is also efficient because you don’t have to tailor any part of the offering for different groups of consumers, which is more work and costs more money. The problem is that buyers are not all alike. If a competitor comes along and offers these groups a product (or products) that better meet their needs, you will lose business. Multisegment Marketing ​ Most firms tailor their offerings in one way or another to meet the needs of different segments of customers. Because these organizations don’t have all their eggs in one basket, they are less vulnerable to competition. Marriott International is an example of a company that operates in multiple market segments. The company has different types of hotels and motels and permanent living facilities designed to meet the needs of different market segments. Marriott has invested in over thirty unique brands so consumers don’t confuse the brand and the brand is not diluted. ​ Some of the Marriott brands and their target markets are as follows: ○​ Marriott Courtyard. Targeted at over-the-road travelers. ○​ Ritz-Carlton Hotels. Targeted at luxury travelers.  ○​ Marriott Conference Centers. Targeted at businesses hosting small- and midsized meetings. ○​ Marriott ExecuStay. Targeted at executives needing month-long accommodations. ○​ Marriott Vacation Clubs. Targeted at travelers seeking to buy timeshares. ​ Multisegment marketing - targeting multiple groups of consumers ○​ Strategy can allow firms to respond to demographic changes and other trends in markets. Concentrated Marketing ​ Concentrated marketing - involves targeting a very select group of customers. ○​ Concentrated marketing can be a risky strategy because companies really do have all their eggs in one basket. ​ Niche marketing - involves targeting an even more select group of consumers. ○​ When engaging in niche marketing, a company’s goal is often to be a big fish in a small pond instead of a small fish in a big pond. ​ Microtargeting - also called narrowcasting, involves gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive and using that information to create highly personalized communications. Targeting Global Markets 5.4 - Positioning and Repositioning Offerings ​ Positioning - is how consumers perceive a product relative to the competition. Companies want to have a distinctive image and offering that stands out from the competition in the minds of consumers. ​ One way to position your product is to plot customer survey data on a perceptual map. ​ Perceptual map - a two-dimensional graph that visually shows where your product stands, or should stand, relative to your competitors, based on criteria important to buyers. ○​ The criteria can involve any number of characteristics—price, quality, level of customer service associated with the product, and so on. ​ Tagline - a catchphrase designed to sum up the essence of a product. ​ Repositioning - an effort to “move” a product to a different place in the market and a different place in the minds of consumers.  Marketing Lecture 2 ​ J.D. On the Road ​ 1979 Sugar Hill gang - first rap song ever written ​ 1965 Bob Dillon - but he thinks this first rap song ever written ​ Marketing Plan - comprehensive, detail oriented document designed to sell your plan to an audience ​ Your brand: ○​ Exec summary ○​ Objectives, Strategy and Preliminary Recommendation ○​ Research Findings and Methodology ○​ 7 Ps of Brand Architecture ​ Value Proposition - please handle separately from all other 6 Ps ○​ Communication Plan ​ What are the key promotional tools to use in the business ​ Experiential marketing tool - test drive; Costco sampling food What is a Strategy? ​ How you get what you want ​ Starts with objective setting - what you are trying to achieve Value Proposition ​ Why people buy you Segmentation ​ Marketing segments ​ Targeting segments ​ Positioning ​ Facts tell you what ​ Insights tell you why Types of Segmentation Basis ​ Behavioural ○​ Benefits ○​ Usage ○​ Application ​ Geographic ​ Demographics ○​ Median for income - doesn’t identify family size  ​ Psychographic ​ ​ VALS - Value and Lifestyles ○​ Thinkiners ○​ Achievers ​ Do what you are good at - to maximize income ​ Not do what you love ○​ Experiencers ​ Segmentation in B2B Markets ○​ Price-focused segment ​ McDonald’s ○​ Quality and brand-focused segment ○​ Service-focused segment ○​ Partnership-focused segment ​ Targeted products - winter boots ​ Light users, heavy users, non users (People) Targeting ​ Having the right inputs and efficiency manufacture process decreases your production cost What Makes A Good Target? ​ It is sizeable (large) enough to be profitable given your operating cost ​ It is growing ​ It is not already swamped by competitors ​ Either it is accessible, or you can find a way to reach it ​ It “fits with” what you are trying to achieve How to get people to buy your own products? ​ Take business from competitors ​ Take business from your own products (cannibalization) ​ New people coming into the market Let’s Name Some Brands and Speculate About Their Targets ​ Nike - targets athletic individuals; “just do it” ​ Tesla - target people that are eco-friendly and want to save money on gas ​ McDonald’s - target families because it is affordable, teenagers who don’t have a lot of money, convenience ​ Apple - targets high-end consumers, students Who is your best prospect to sell products too? ​ Existing customers or new customers? ​ Existing customers - target them because of product performance ​ New customers - more difficult and expensive Positioning - How consumers perceive a product relative to the competition ​ Is about “the what counts factors”  Chapter 3 - Consumer Behaviour: How People Make Buying Decisions 3.1 - Factors That Influence Consumers’ Buying Behaviour ​ As we mentioned earlier in the chapter, consumer behavior is influenced by many things, including environmental and marketing factors, the situation, personal and psychological factors, family, and culture. ​ Businesses also often try to influence a consumer’s behavior with things they can control, such as the way in which they design their websites, apps, the layout of their stores, music, lighting, grouping of products, pricing, and advertising. Situational Factors ​ Marketing professionals take physical factors such as a store’s design and layout into account when they are designing their facilities. Presumably, the longer you wander around a facility, the more you will spend. ​ Store locations also influence behavior. Starbucks does a good job in terms of locating its stores. It has the process down to a science: you can scarcely drive a few miles down the road without passing a Starbucks. You can also buy cups of Starbucks coffee at many grocery stores, airports, cruise ships, and even in the Tower of London—virtually any place where there is foot traffic. ​ Physical factors firms can control, such as the layout of a store, music played at stores, the lighting, temperature, and even the smells you experience are called atmospherics ​ Atmospherics - the physical aspects of the selling environment retailers try to control ​ Mirrors near hotel elevators are another example. Hotel operators have found that when people are busy looking at themselves in the mirrors, they don’t feel like they are waiting as long for their elevators. ​ Not all physical factors are under a company’s control, however. Take weather, for example. Rainy weather can be a boon to some companies, like umbrella makers such as Totes, but a problem for others. ​ Some studies have shown that consumers feel better about retailers that attempt to prevent overcrowding in their stores. However, other studies have shown that to a certain extent, crowding can have a positive impact on a person’s buying experience. Crowding can make people clamor to buy a product before others do and it is sold out. The phenomenon is often referred to as “herd behavior.” Social Situation ​ The social situation you’re in can significantly affect your purchase behavior. Perhaps you have seen Girl Scouts selling cookies outside grocery stores and other retail establishments and purchased nothing from them. But what if your neighbor’s daughter is selling the cookies? Are you going to turn her down or be a friendly neighbor and buy a box (or two)?  ​ Certain social situations can also make you less willing to buy products. You might spend quite a bit of money each month eating at fast food restaurants like McDonald’s and Subway, but would you take someone to one of those restaurants for your first date? Some people might. Other people would choose a more upscale restaurant. ​ Likewise, if you have turned down a drink or dessert on a date because you were worried about what the person you were with might have thought, your consumption was affected by your social situation. Time ​ The time of day, time of year, and how much time consumers feel they have to shop affect what they buy. ​ Researchers have even discovered that whether someone is a “morning person” or “evening person” affects the person’s shopping patterns. ​ Have you ever gone to the grocery store when you were hungry or after payday, when you had cash in your pocket? When you are hungry or have cash, you may purchase more than you would at other times. Reasons for the Purchase ​ The reason you are shopping also affects the amount of time you will spend shopping. Are you making an emergency purchase? What if you need some items for an important dinner or a project and only have an hour to get everything? ​ In recent years, emergency clinics have sprung up in strip malls all over the country. Convenience is one reason. The other is sheer necessity. If you cut yourself and you are bleeding badly, you’re probably not going to shop around much to find the best clinic. You will go to the one that’s closest to you. ​ Purchasing a gift might not be an emergency situation, but you might not want to spend much time shopping for it either. Gift certificates and cards you can buy online or easily pick up at a grocery or drugstore while you’re shopping for something else are popular for this reason. That’s why the cards are generally placed near checkout stands: grab and go. Mood ​ People’s moods temporarily affect their spending patterns. People in a good moods are likely to linger longer in a store, buy more, and even pay more. One study found that relaxed shoppers are willing to pay up to 15 percent more for goods than less-relaxed shoppers. The clothing brand and retailer Tommy Bahama found that offering free appetizers and mimosas at its stores during the holidays was a major sales booster. Economic Situation ​ People’s economic situations definitely affect what they will buy and how much of it. For example, during economic downturns, many people reduce their spending.  Stores with lower-priced merchandise like Costco and Walmart tend to fare better during these periods than higher-end stores such as Saks Fifth Avenue and Nordstrom. ​ To get buyers in the shopping mood during an economic downturn, companies resort to different measures, such as introducing more lower-priced brands. Personal Factors Personality and Self-Concept ​ Personality - an individual’s disposition as other people see it ○​ Helps explain why people are different, and encompasses a person’s unique traits ​ The “Big Five” personality traits psychologists discuss frequently include openness or how open you are to new experiences, conscientiousness or how diligent you are, extraversion or how outgoing or shy you are, agreeableness or how easy you are to get along with, and neuroticism or how prone you are to negative mental states. ​ The link between people’s personalities and their buying behavior is somewhat unclear. Some research studies have shown that “sensation seekers,” or people who seek out thrilling, dangerous, or unusual experiences, are more likely to respond well to advertising that’s violent and graphic. The problem for firms is figuring out “who’s who” in terms of their personalities. ​ Marketers have had better luck linking people’s self-concepts to their buying behavior. ○​ Self-concept - how a person sees himself or herself; positive or negative ○​ Ideal self - how you would like to see yourself - whether it’s prettier, more popular, or more eco-conscious Gender, Age, and Stage of Life ​ Men and women need and buy different products. They also shop differently and in general, have different attitudes about shopping. You know the old stereotypes. Men see what they want and buy it, but women “try on everything and shop ’til they drop.” ​ Women are also twice as likely as men to use viewing tools such as the zoom and rotate buttons and links that allow them to change the colors of products. ​ You have probably noticed that the things you buy have changed as you age. Think about what you wanted and how you spent your money when you were a child versus a teenager and an adult. ​ If you’re single and working after graduation, you probably spend your money differently than a newly married couple does. ​ Chronological age - a person’s age in years ​ Cognitive age - the age a buyer perceives himself or herself to be ○​ A person’s cognitive age affects his or her activities and sparks interests consistent with his or her perceived age. Cognitive age is a significant predictor of consumer behaviors, including dining out, watching television, going to bars and dance clubs, playing online games, and shopping. ​ Companies have found that many consumers feel younger than their chronological ages and are not receptive to products that feature “old folks” in ads because they can’t identify with these people. Lifestyle ​ To better understand and connect with consumers based on their lifestyles, companies interview or ask people to complete questionnaires about factors that relate to their lifestyles, such as their activities, interests, and opinions (which are often referred to as AIO statements). ​ A number of research organizations examine lifestyle and psychographic characteristics of consumers. ​ Psychographics - Measuring the attitudes, values, lifestyles, and opinions of consumers using demographics ○​ combines the lifestyle traits of consumers and their personality styles with an analysis of their attitudes, activities, and values to identify groups of consumers with similar characteristics. ​ One of the most widely used systems to classify people based on psychographics is the VALS (Values, Attitudes, and Lifestyles) framework. Using VALS to combine psychographics with demographic information, such as people’s marital statuses, education levels, and incomes provides a better understanding of consumers. Psychological Factors ​ Motivation - is the inward drive we have to get what we need In the mid-1900s, Abraham Maslow, an American psychologist, developed the hierarchy of needs shown in Figure 3.1. ​ The need for food is recurring. Other needs, such as shelter, clothing, and safety, tend to be enduring. ​ Perception - how people interpret the world around them and make sense of it ○​ You do so via stimuli that affect your different senses—sight, hearing, touch, smell, and taste. ○​ Selective attention - the process whereby a person filters information based on how relevant it is to them ​ It’s been described as a “suit of armor” that helps you filter out information you don’t need. ○​ Selective retention - the process whereby a person retains information based on how well it matches their values and beliefs ​ At other times, people forget information, even if it’s quite relevant to them, which is called selective retention. ​ Often the information contradicts the person’s belief. An example is a longtime chain smoker who forgets much of the information communicated during a commercial for an anti-smoking medication. ○​ Subliminal advertising - advertising that is not apparent to consumers but is thought to be perceived subconsciously by them  ​ is the opposite of shock advertising and involves exposing consumers to marketing stimuli such as photos, ads, and messages by stealthily embedding them in movies, ads, and other media. ​ Although there is no evidence that subliminal advertising works, years ago the words Drink Coca-Cola were flashed for a millisecond on a movie screen. Consumers were thought to perceive the information subconsciously and to be influenced to buy the products shown. Many people considered the practice to be subversive, and in 1974, the Federal Communications Commission banned it. However, much of the original research on subliminal advertising, conducted by a researcher trying to drum up business for his market research firm, was fabricated. ○​ Another offbeat technique marketers are using today to get your attention is ASMR (autonomous sensory meridian response). ASMR is the tingling feeling you get down your scalp and spine when you hear certain certain sounds, such as a whisper. Often used for meditative techniques, companies are now using it in their ads. During a Super Bowl, Anheuser-Busch ran a commercial that featured actress Zoe Kravitz whispering and tapping her nails on a glass of beer. People took notice. Learning ​ Learning - refers to the process by which consumers change their behaviour after they gain information or experience ​ Operant or instrumental conditioning - a type of behaviour that’s repeated when it’s rewarded ○​ What occurs when researchers are able to get a mouse to run through a maze for a piece of cheese or a dog to salivate just by ringing a bell. ○​ In other words, operative conditioning occurs as a result of a repetitive behavior that has positive or negative consequences. ○​ Companies engage in operant conditioning by rewarding consumers, which causes them to repeat their purchasing behaviors. Prizes and toys that come in Cracker Jacks boxes and McDonald’s Happy Meals, a free sandwich after a certain number of purchases, and free car washes when you fill up your car with a tank of gas are examples. ​ Gamification - a strategy of building a game component into a product to encourage consumers to use it or use it more ○​ Peleton’s exercise bike is an example. It features a digital leader board that lets you compete against your friends to see who is winning the exercise war. Attitude ​ Attitudes - “mental positions” or emotional feelings, favourable or unfavorable evaluations, and action tendencies people have about products, services, companies, ideas, issues, or institutions  ​ Attitudes tend to be enduring and hard to change because they are based on people’s values and beliefs. Societal Factors Culture ​ Culture - the shared beliefs, customs, behaviours, and attitudes that characterize a society used by people to cope with their world and with one another ​ Culture is a handed-down way of life and is often considered the broadest influence on a consumer’s behavior. Subcultures ​ Subculture - a group of people within a culture who are different from the dominant culture but have something in comm