Principles of Marketing PDF

Principles of Marketing Shahd Zidan  1- Principles of Marketing What Is Marketing? Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return. Marketing is all around you, in g...

Principles of Marketing Shahd Zidan  1- Principles of Marketing What Is Marketing? Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return. Marketing is all around you, in good old traditional forms and in a host of new forms, from websites and mobile apps to online videos and social media. The Marketing Process: Creating and Capturing Customer Value: Question: Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts. Understanding the Marketplace and Customer Needs: Needs are states of felt deprivation. Wants are the form human needs take as they are shaped by culture and individual personality. Demands are human wants that are backed by buying power. Staying close to customers: Airbnb’s CEO Brian Chesky and co-founder Joe Gebbia regularly stay at the company’s host locations, helping them shape new customer solutions based on real user experiences. Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Marketing myopias are paying more attention to the specific products than to the benefits and experiences produced. Customers form expectations about the value and satisfaction of market offerings. - Satisfied customers buy again. - Dissatisfied customers switch to competitors. Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing actions try to create, maintain, and grow desirable exchange relationships. A market is the set of actual and potential buyers, Consumers market when they: Search for products. Interact with companies to obtain information. Make purchases. Figure 1.2 A Modern Marketing System: Question: Identify the key elements of a customer value-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy. Designing a Customer Value-Driven Marketing Strategy: Marketing management is the art and science of choosing target markets and building profitable relationships with them. ▪ What customers will we serve (target market)? ▪ How can we best serve these customers (value proposition)? A brand’s value proposition is the set of benefits or values it promises to deliver to customers to satisfy their needs. (Value propositions: Sonos positions its Sonos One with Amazon Alexa as “The smart speaker for music lovers.” It gives you all the advantages of Alexa but with high-quality Sono’s sound). There are five alternative concepts under which organizations design and carry out their marketing strategies: 1. Production concept. 2. Product concept. 3. Selling concept. 4. Marketing concept. 5. Societal Marketing concept. Figure 1.3 Selling and Marketing Concepts Contrasted: Societal marketing: The company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests. Figure 1.4 Three Considerations Underlying the Societal Marketing Concept: The marketing mix is comprised of a set of tools known as the four Ps: o Product. o Price. o Promotion. o Place. Integrated marketing program a comprehensive plan that communicates and delivers intended value. Question: Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return. Managing Customer Relationships and Capturing Customer Value: Customer relationship management—the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Relationship Building Blocks: Customer-perceived value: - The difference between total customer perceived benefits and customer cost. Customer satisfaction: - The extent to which perceived performance matches a buyer’s expectations. Customer satisfaction: Customer service champion L.L.Bean was founded on a philosophy of complete customer satisfaction. “If you are not 100% satisfied with one of our products, you may return it within one year of purchase for a refund.” Customer-Engagement Marketing: Fosters direct and continuous customer involvement in shaping brand conversations, experiences, and community. Engaging customers: Rather than using intrusive, hard-sell product pitches, Innocent Drinks interacts with customers in humorous ways, inspiring conversations and fostering relationships. Consumer-Generated Marketing: Brand exchanges created by consumers themselves. Consumers are playing an increasing role in shaping brand experiences. Consumer-generated marketing: “Charmingly low-budget” fan made Tesla ads drew millions of online views and sparked interactions among dedicated Tesla fans. Partner relationship management: involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers. Customer lifetime value: Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. To keep customers coming back, Stew Leonard’s has created the “Disneyland of dairy stores.” Rule #1—The customer is always right. Rule #2—If the customer is ever wrong, reread Rule #1. Share of customer: Share of customer is the portion of the customer’s purchasing that a company gets in its product categories. Customer equity: Customer equity are the total combined customer lifetime values of all of the company’s customers. To increase customer equity, Cadillac is making the classic car cool again among younger buyers. For example, says GM, “Cadillac will lead the company to an all-electric future.” Figure 1.5 Customer Relationship Groups: Question: Describe the major trends and forces that are changing the marketing landscape in this age of relationships. The Changing Marketing Landscape: ▪ Digital Age. ▪ Changing Economic Environment. ▪ Growth of Not-for-Profit Marketing. ▪ Rapid Globalization. ▪ Sustainable Marketing. We live in the age of Internet of Things, where everything is connected to everything else. Digital and social media marketing involves using digital marketing tools such as websites, social media, mobile ads and apps, online videos, email, and blogs that engage consumers anywhere, at any time, via their digital devices. Social media provide exciting opportunities to extend customer engagement and get people talking about a brand. Mobile marketing: Using mobile channels to stimulate immediate buying, make shopping easier, and enrich the brand experience. Big Data and AI: Brands can use big data to gain deep customer insights, personalize marketing offers, and improve customer engagements and service. Not-for-profit marketing is growing, as sound marketing can help organizations attract membership, funds, and support. Rapid Globalization: Managers around the world are taking both local and global views of the company’s: o Industry. o Competitors. o Opportunities. Sustainable Marketing: Corporate ethics and social responsibility have become important for every business. So, What Is Marketing? Pulling It All Together: Figure 1.6 An Expanded Model of the Marketing Process:  2- Analyzing the Marketing Environment MICROSOFT: Adapting to the Fast-Changing Marketing Environment: Microsoft has undergone a dramatic transformation to better align itself with the new digital world. More than just making the software that makes PCs run, Microsoft now wants to empower every person and every organization on the planet to achieve more, regardless of what device or operating system they use. A Company’s Marketing Environment: The marketing environment includes the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. Question: Describe the environmental forces that affect the company’s ability to serve its customers. The Microenvironment and Macroenvironment: Microenvironment consists of the actors close to the company that affect its ability to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics. Macroenvironment consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces. The Microenvironment: Figure 3.1 Actors in the Microenvironment: Actors in the Microenvironment: The Company: In designing marketing plans, marketing management takes other company groups into account. Top management. Finance. Research and development (R&D). Information technology. Purchasing. Operations. Human resources. Accounting. Suppliers: – Provide the resources to produce goods and services. – Treat as partners to provide customer value. Suppliers: Giant furniture retailer IKEA doesn’t just buy from its suppliers. It involves them deeply in the process of delivering the trendy but simple and affordable home furnishings to create a better everyday life for its customers. Marketing Intermediaries: o Resellers. o Physical distribution firms. o Marketing services agencies. o Financial intermediaries. Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers. Partnering with intermediaries: Apple provides its retail partners with much more than phones and smartwatches. It also pledges technical support. Competitors: Firms must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. Publics: Publics: NatWest shows its commitment to its local community by giving generously to local charities, community groups, and social enterprises. Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. Financial publics. Media publics. Government publics. Citizen-action publics. Local publics. General public. Internal publics. Customers: ▪ Consumer markets. ▪ Business markets. ▪ Reseller markets. ▪ Government markets. ▪ International markets. The Macroenvironment: Figure 3.2 Major Forces in the Company’s Macroenvironment: Question: Explain how changes in the demographic and economic environments affect marketing decisions. Major Forces in the Company’s Macroenvironment: The Demographic Environment: Demography is the study of human populations—size, density, location, age, gender, race, occupation, and other statistics. Demographic environment involves people, and people make up markets. Demographic trends include changing age and family structures, geographic population shifts, educational characteristics, and population diversity. Generational marketing is important in segmenting people by lifestyle or life stage instead of age. o Baby Boomers – born 1946 to 1964. o Generation X – born between 1965 and 1980. o Millennials – born between 1981 and 1996. o Generation Z – born between 1997 and 2012. o Generation Alpha – born after 2012. Baby boomers and millennials are now moving over to make room for younger Generation Alpha. Working remotely: Apps like Slack let people working remotely collaborate anywhere and everywhere through the internet and mobile devices. The changing American family. Geographic shifts in population. A better-educated, more white-collar, more professional population. Increasing diversity. Targeting consumers with disabilities: Toyota’s “Start Your Impossible” campaign included ads highlighting inspirational real-life stories of athletes who overcame mobility challenges, such Paralympic gold medallist alpine skier Lauren Woolstencroft. The Economic Environment: Economic environment: Consumers adopted a new back-to-basics sensibility in their lifestyles and spending patterns. To serve the tastes of these more financially frugal buyers, companies like Target are emphasizing the “pay less” side of their value propositions.  Question: Identify the major trends in the firm’s natural and technological environments. The Natural Environment: The natural environment is the physical environment and the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Trends in the Natural Environment: – Growing shortages of raw materials. – Increased pollution. – Increased government intervention. – Developing strategies that support environmental sustainability. Environmental sustainability involves developing strategies and practices that create a world economy that the planet can support indefinitely. The natural environment: Walmart has emerged in recent years as the world’s super “eco-nanny” through its own sustainability practices and its impact on the actions of its huge network of suppliers. The Technological Environment: o Most dramatic force in changing the marketplace. o New products, opportunities. o Concern for the safety of new products. Marketing technology: Disney takes full advantage of digital technology in creating magical customer experiences at its Walt Disney World Resort. Question: Explain the key changes in the political and cultural environments. The Political and Social Environment: Legislation regulating business is intended to protect: ▪ Companies from each other ▪ Consumers from unfair business practices ▪ The interests of society against unrestrained business behaviour. The Political and Social Environment: Increased emphasis on ethics and socially responsible actions. Cause-related marketing. Cause-related marketing: Ben & Jerry’s three-part “linked prosperity” mission drives it to make fantastic ice cream (product mission), manage the company for sustainable financial growth (economic mission), and use the company “in innovative ways to make the world a better place” (social mission). Both Ben & Jerry’s and its products are “Made of Something Better.” The Cultural Environment: The cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors. Core beliefs and values are persistent and are passed on from parents to children and are reinforced by schools, churches, businesses, and government. Secondary beliefs and values are more open to change and include people’s views of themselves, others, organizations, society, nature, and the universe. Shifts in Secondary Cultural Values: People’s views of themselves. People’s views of others. People’s views of organizations. People’s views of society. People’s views of nature. People’s views of the universe. Catering to the natural, organic, and ethical products trend: Unilever’s Love Beauty and Planet brand has one goal: “To make you more beautiful and give a little love to our planet.” Cause-Related Marketing: Linking Brands, Consumers, and Causes: Aerie’s #AerieREAL campaign pledges that it will use only unretouched images and videos of real women in its ads and other marketing content. The cause of body positivity and inclusivity is an integral part of the brand’s identity. Question: Discuss how companies can react to the marketing environment. Responding to the Marketing Environment: Views on Responding: Uncontrollable: - React and adapt to forces in the environment. Proactive: - Take aggressive actions to affect forces in the environment. Reactive: - Watch and react to forces in the environment. Real Marketing 3.2: In the Social Media Age: When the Dialogue Gets Nasty: Today’s empowered consumers: Whole Foods Market’s decision to put single pre-peeled oranges in individual plastic containers caused a viral storm of #OrangeGate tweets. However, the retailer averted the potential PR disaster by responding within hours with its own humorous, self-critical social media posts admitting its mistake.  3- Managing Marketing Information to Gain Customer Insights Question: Explain the importance of information in gaining insights about the marketplace and customers. Ferrero: Managing Marketing Information and Customer Insights: Customer insights are fresh marketing information-based understandings of customers and the marketplace that become the basis for creating customer value, engagement, and relationships. Ferrero successfully analyzes and uses marketing information and customer insights to better tailor its offerings to the local market. Its ability to gain fresh understandings of customers and the marketplace from marketing information has become the basis for the company’s success. Marketing Information and Customer Insights: Customer insights: Fresh and deep insights into customer needs and wants Companies use customer insights to develop a competitive advantage Insights can be difficult to obtain; marketers must manage marketing information from a wide range of sources Marketing Information and Today’s “Big Data”: Big data is the huge and complex data sets generated by today’s sophisticated information generation, collection, storage, and analysis technologies Big data comes from marketing research, internal transaction data, and real-time data flowing from its social media monitoring, connected devices, and other digital sources Managing Marketing Information: Customer insights teams: – Include all company functional areas  – Collect information from a wide variety of sources – Use insights to create more value for their customers A marketing information system (MIS) refers to the people and procedures dedicated to assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights. Figure 4.1 The Marketing Information System: Question: Define the marketing information system and discuss its parts. Marketing information system: Assessing Marketing Information Needs: A marketing information system (MIS) provides information to the company’s marketing and other managers and external partners such as suppliers, resellers, and marketing service agencies. Characteristics of a Good MIS: Balancing the information users would like to have against what they need and what is feasible to offer: User’s Needs. MIS Offerings. Developing Marketing Information: Marketers obtain information from: Internal data. - Internal data: Through skilful customer database development and use, Stitch Fix has built high levels of customer satisfaction and loyalty. - Internal databases are collections of consumer and market information obtained from data sources within the company network. Competitive Marketing intelligence. - Competitive marketing intelligence is the systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketing environment. - Mastercard’s digital intelligence command centre called the Conversation Suite—monitors, analyses, and responds in real time to millions of brand-related conversations across 43 markets and 26 languages around the world. Question: Outline the role of marketing research and the steps in the marketing research process. Marketing research. - Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. Figure 4.2 The Marketing Research Process: The Marketing Research Process: 1. Defining the Problem and Research Objectives: - Exploratory research. - Descriptive research. - Causal research. Written proposal: Management problem. Research objectives. Information needed. How the results will help management decisions. Budget. 2. Developing the Research Plan: Outlines sources of existing data. Spells out the specific research approaches, contact methods, sampling plans, and instruments to gather data. A decision by Nordsee to add “vegan fish” would call for marketing research that provides specific information. Secondary data is information that already exists somewhere, having been collected for another purpose. Gathering Secondary Data: Advantages: – Lower cost. – Obtained quickly. – Cannot collect otherwise. Disadvantages: Data may not be: – Relevant. – Accurate.  – Current. – Impartial. Primary data is information collected for the specific purpose at hand. Primary Data Collection: Research Approaches. Contact Methods. Sampling Plan. Research Instruments. Table 4.1 Planning Primary Data Collection: Primary Data Collection: Research Approaches: Observational research involves gathering primary data by observing relevant people, actions, and situations. Ethnographic research involves sending trained observers to watch and interact with consumers in their “natural environments.” Ethnographic research: Under Intuit’s “follow me home” program, teams of Intuit employees visit customers in their homes or offices to watch them use the company’s products in real life. Survey research involves gathering primary data by asking people questions about their knowledge, attitudes, preferences, and buying behavior. Experimental research involves gathering primary data by selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking for differences in group responses.  Experimental Research: Online experiments can be simple and inexpensive. For example, an online “A/B test” for Microsoft’s Bing search engine formatting yielded performance-enhancing results in only hours. Contact Methods: Mail, telephone, and personal interviewing: – Mail questionnaires. – Telephone interviewing. – Personal interviewing: ▪ Individual interviewing. ▪ Group interviewing. Focus Group Interviewing. New focus group designs: The Mom Complex uses “Mom Immersion Sessions” to help brand marketers understand and connect directly with their “mom customers” on important brand issues. Online marketing research: – Internet and mobile surveys. – Online focus groups. – Consumer tracking. – Experiments. – Online panels and brand communities. Online focus groups: Focus Vision’s Interview service lets focus group participants at remote locations see, hear, and react to each other in real-time, face-to-face discussions. Online behavioural and social tracking and targeting: Behavioral targeting. Online listening. Social targeting. Table 4.2 Types of Samples: Probability Sample: Nonprobability Sample: Research Instruments: Questionnaires: – Open-ended questions. – Closed-ended questions. Mechanical instruments. Biological and neurological measures: Online travel giant Expedia’s “Usability Lab” uses biometrics and observation to learn about the deep- down tensions and delights customers experience during their trip- planning journeys. 3. Implementing the Research Plan: - Collecting the information. - Processing the information. - Analysing the information. 4. Interpreting and Reporting Findings: - Interpret findings. - Draw conclusions. - Report to management.  Question: Explain how companies analyze and use marketing information. Analysing and Using Marketing Information: Customer Relationship Management (CRM): CRM involves managing detailed information about individual customers and carefully managing customer touch points to maximize customer loyalty. Big Data, Marketing Analytics, and Artificial Intelligence: Marketing analytics involves analysis tools, technologies, and processes by which marketers dig out meaningful patterns in big data to gain customer insights and gauge marketing performance. Some analytics employ artificial intelligence (AI), technology by which machines think and learn in a way that looks and feels human but with a lot more analytic capacity. Question: Discuss the special issues some marketing researchers face, including public policy and ethics issues. Other Marketing Information Considerations: Marketing Research in Small Businesses and Nonprofit Organizations. International Market Research. Public Policy and Ethics: – Customer privacy. – Misuse of research findings.  4- Consumer Markets and Buyer Behaviour Lenovo: Understanding Customers and Building Profitable Relationships: “The global success of Lenovo is rooted in its deep and sound understanding of customers and its ability to build profitable relationships. The business model is thus built on customer satisfaction, innovation, and operational efficiency.” Question: Define the consumer market and construct a simple model of consumer buyer behavior. Consumer Markets and Buyer Behavior: Consumer buyer behavior is the buying behavior of final consumers— individuals and households that buy goods and services for personal consumption. Consumer markets are made up of all the individuals and households that buy or acquire goods and services for personal consumption. Question: Name the four major factors that influence consumer buyer behavior. Model of Consumer Behavior: Figure 5.1 The Model of Buyer Behavior: Characteristics Affecting Consumer Behavior: Figure 5.2 Factors Influencing Consumer Behaviour: Cultural Factors: Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. Subcultures are groups of people within a culture with shared value systems based on common life experiences and situations. Targeting Hispanic consumers: Nestle’s DiGiorno brand worked with Twitter’s U.S. Hispanics team and the NFL to create a football campaign with Spanish tweets. Social classes are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Measured as a combination of occupation, income, education, wealth, and other variables. Social Factors: Groups and Social Networks: - Reference groups. - Opinion leaders. - Word-of-mouth influence. - Influencer marketing. - Online social networks. Influencer marketing: CoverGirl’s “I Am What I Make Up” campaign uses a diverse team of influential brand ambassadors who explain authentically in their own words what the slogan means to them. Family is the most important consumer-buying organization in society. Role and status can be defined by a person’s position in a group. Harnessing the power of mom-to-mom influence: Each year, Disney invites 175 to 200 moms and their families to its Disney Social Media Moms Celebration in Florida, an affair that’s a mix of public relations event, educational conference, and family vacation with plenty of Disney magic for these important mom influencers. Personal Factors: Occupation affects the goods and services bought by consumers. Age and Life Stage affect tastes in food, clothes, furniture, ad recreation. Economic situations include trends in spending, personal income, savings, interest rates. Appealing to occupation segments: CAT makes rugged, durable phones for the construction and heavy industries. Lifestyle is a person’s pattern of living as expressed in his or her psychographics. Personality refers to the unique psychological characteristics that distinguish a person or group. Brand personality: MINI markets to personality segments of people who are “adventurous, individualistic, open-minded, creative, tech-savvy, and young at heart”— anything but normal—just like the car. Psychological Factors: Motivation: - A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction of the need. - Motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations. Figure 5.3 Maslow’s Hierarchy of Needs: Perception: - Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. - Perceptual Processes: – Selective distortion is the tendency for people to interpret information in a way that will support what they already believe. – Selective retention is the tendency to remember good points made about a brand they favor and forget good points made about competing brands. – Selective attention is the tendency for people to screen out most of the information to which they are exposed. Learning: - Learning is the change in an individual’s behavior arising from experience and occurs through the interplay of: – Drives. – Stimuli. – Cues. – Responses. – Reinforcement.  Beliefs and attitudes. - A belief is a descriptive thought that a person has about something based on: – Knowledge. – Opinion. – Faith. - An attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea. This classic ad from the American Association of Advertising Agencies pokes fun at subliminal advertising. “So-called ‘subliminal advertising’ simply doesn’t exist,” says the ad. “Overactive imaginations, however, most certainly do.” SPANX: Changing the Way Women Think about “Shapewear”: SPANX changed the way women–and even men–think about both clothing and their body types. Question: List and define the major types of buying decision behavior and the stages in the buyer decision process. Types of Buying Decision Behavior: Complex buying behavior. Dissonance-reducing buying behavior. Habitual buying behavior. Variety-seeking buying behavior. Figure 5.4 Four Types of Buying Behavior: Figure 5.5 The Buyer Decision Process: The Buyer Decision Process: Need Recognition: Need recognition is the first stage of the buyer decision process, in which the consumer recognizes a problem or need triggered by: - Internal stimuli. - External stimuli. Information Search: Information search is the stage of the buyer decision process in which the consumer is motivated to search for more information. Sources of information: – Personal sources. – Commercial sources. – Public sources. – Experiential sources. Evaluation of Alternatives: Alternative evaluation is the stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set. Purchase Decision: Purchase decision is the buyer’s decision about which brand to purchase. The purchase intention may not be the purchase decision due to: - Attitudes of others. - Unexpected situational factors. Post purchase Behaviour: Post purchase behaviour is the stage of the buyer decision process in which consumers take further action after purchase, based on their satisfaction or dissatisfaction. Cognitive dissonance is buyer discomfort caused by post purchase conflict. Post purchase cognitive dissonance: Post purchase customer satisfaction is a key to building profitable customer relationships. Most marketers go beyond merely meeting the customer expectations—they aim to delight customers. The Customer Journey: Customer journey: the sum of the ongoing experiences consumers have with a brand that affect their buying behavior, engagement, and brand advocacy over time. The customer journey: By understanding the customer journey, marketers can work to create brand experiences that will result in positive purchase behavior, engagement, and brand advocacy over time. Question: Describe the adoption and diffusion process for new products. The Buyer Decision Process for New Products: The adoption process is the mental process an individual goes through from first learning about an innovation to final regular use. Stages in the adoption process include: – Awareness. – Interest. – Evaluation. – Trial. – Adoption. The adoption process: To help get tentative consumers over the buying decision hump, Beyond Meat invited consumers to “try some free—zip, zero, zilch” at their local grocery store. Individual Differences in Innovativeness: Innovators. Early Adopters. Early Mainstream. Late Mainstream. Lagging Adopters. Figure 5.6 Adopter Categories Based on Relative Time of Adoption of Innovations: Analyzing and Using Marketing Information: Influence of Product Characteristics on Rate of Adoption: Relative advantage. Compatibility. Complexity. Divisibility. Communicability.  5- Business Markets and Business Buyer Behaviour Consumer Markets and Buyer Behavior: Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. The business buying process is the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands. Question: Define the business market and explain how business markets differ from consumer markets. Business Markets: Market Structure and Demand: Fewer but larger buyers. Derived demand. Inelastic demand. Fluctuating demand. Nature of the Buying Unit: Business buyers usually face more complex buying decisions than do consumer buyers. Compared with consumer purchases, a business purchase usually involves: More decision participants. More professional purchasing effort. More buyer and seller interaction. Types of Decisions and the Decision Process: Business buyers usually face more complex buying decisions than consumer buyers. Supplier development is the systematic development of networks of supplier- partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others. Question: Identify the major factors that influence business buyer behavior. Business Buyer Behavior: Figure 6.1 A Model of Business Buyer Behaviour: Major Types of Buying Situations: Straight rebuy is a buying situation in which the buyer routinely reorders something without any modifications. Modified rebuy is a buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. New task is a buying situation in which the buyer purchases a product or service for the first time. Systems selling is buying a complete solution to a problem from a single seller. Solutions selling: UPS not only delivers packages for online retailer Overstock.com, it also manages much of Overstock’s complex order and returns process in an efficient, customer-pleasing way. Participants in the Business Buying Process: Buying center consists of all the individuals and units that play a role in the business purchase decision-making process. Users: are those that will use the product or service. Influencers: help define specifications and provide information for evaluating alternatives. Buyers: have formal authority to select the supplier and arrange terms of purchase. Deciders: have formal or informal power to select and approve final suppliers. Gatekeepers: control the flow of information. The buying center concept presents a major marketing challenge given the varied groups involved in the decision. Who participates in the decision? Relative influence on decision by various participants. Evaluation criteria used by various participants. Are there Informal participants involved in decision. Figure 6.2 Major Influences on Business Buyer Behavior: Question: List and define the steps in the business buying decision process. The Business Buying Process: Figure 6.3 Stages of the Business Buyer Decision Process: Problem recognition occurs when someone in the company recognizes a problem or need. Internal stimuli - Need for new product or production equipment. External stimuli - Idea from a trade show or advertising. Problem recognition: Salesforce’s “Blaze your trail” ads show how it solves problems for some of its high-profile customers, such as Intuit, suggesting that it can do the same for new customers. General need description describes the characteristics and quantity of the needed item. Product specification describes the technical criteria. Value analysis is an approach to cost reduction where components are studied to determine if they can be redesigned, standardized, or made with less costly methods of production. Supplier search involves compiling a list of qualified suppliers to find the best vendors. Proposal solicitation is the process of requesting proposals from qualified suppliers. Supplier selection is when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditions. Order-routine specifications includes the final order with the chosen supplier and lists all the specifications and terms of the purchase. Performance review involves a critique of supplier performance to the order- routine specifications.  Question: Discuss how online, mobile, and social media have changed business-to- business marketing. E-Procurement and Online Purchasing: Online purchasing. Company-buying sites. Extranets. Online procurement is standard procedure for most companies today, letting business marketers connect with customers online to sell products and services, provide customer support services, and maintain ongoing customer relationships. Advantages: Access to new suppliers. Lowers costs. Speeds order processing and delivery. Enhances information sharing. Improves sales. Facilitates service and support. Disadvantages: Erodes relationships as buyers search for new suppliers. Business-to-Business Digital and Social Media Marketing: B-to-B digital and social media marketing is using digital and social media marketing approaches to engage business customers and manage customer relationships anywhere, any time. Container shipping giant Maersk Line engages business customers through a boatload of digital and social media. “The goal is... to get closer to our customers.” Question: Compare the institutional and government markets and explain how institutional and government buyers make their buying decisions. Institutional and Government Markets: Institutional markets consist of schools, hospitals, nursing homes, and prisons that provide goods and services to people in their care. Characteristics: – Low budgets. – Captive patrons. Government markets tend to favor domestic suppliers, require them to submit bids, and normally award the contract to the lowest bidder. Affected by environmental factors. Non-economic factors considered. – Minority firms. – Depressed firms. – Small businesses. IBM: Staying Nimble and Relevant with B-to-B Digital and Social Media Marketing: Although IBM is one of the oldest companies around, when it comes to grasping digital and social media, good old Big Blue is young, nimble, and relevant.  6- Products, Services, and Brands: Building Customer Value IKEA: Building a Cult Brand: IKEA’S success comes from a deep understanding that it’s selling much more than just home furnishing at low prices—it offers customers a lifestyle both affordable and comprehensive. IKEA stores are designed for the customer to experience the whole store and be drawn by a wide variety of items along the way. Question: Define product and describe the major classifications of products and services. What is a Product? Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want. Services are a form of product that consists of activities, benefits, or satisfactions and that is essentially intangible and does not result in the ownership of anything. Products, Services, and Experiences: Products and services are becoming more commoditized. Companies are now creating and managing customer experiences with their brands or company. Figure 8.1 Three Levels of Product: Creating customer experiences: Your local Buffalo Wild Wings restaurant doesn’t just serve up wings and beer; it gives customers the ultimate “Wings. Beer. Sports.” fan experience. Product and Service Classifications: Consumer products: are products and services bought by final consumers for personal consumption. Convenience products: are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort. - Newspapers. - Candy. - Fast food. Shopping products: are less frequently purchased consumer products and services that the customer compares carefully on suitability, quality, price, and style. - Furniture. - Cars. - Appliances. Specialty products: are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. - Medical services. - Designer clothes. - High-end electronics. Unsought products: are consumer products that the consumer does not know about or knows about but does not normally think of buying. - Life insurance. - Funeral services. - Blood donations. Industrial products: are those products purchased for further processing or for use in conducting a business. Materials and parts: include raw materials and manufactured materials and parts. Capital items: are industrial products that aid in the buyer’s production or operations. Supplies and services: include operating supplies, repair and maintenance items, and business services. Table 8.1 Marketing Considerations for Consumer Products: Type of Consumer Product: Organizations, Persons, Places, and Ideas: Organization marketing: consists of activities undertaken to create, maintain, or change the attitudes and behaviours of target consumers toward an organization. Person marketing: consists of activities undertaken to create, maintain, or change the attitudes or behaviour of target consumers toward particular people. Place marketing: consists of activities undertaken to create, maintain, or change attitudes and behavior toward particular places. Social marketing: uses commercial marketing concepts to influence individuals’ behavior to improve their well-being and that of society.  Question: Describe the decisions companies make regarding their individual products and services, product lines, and product mixes. Product and Service Decisions: Figure 8.2 Individual Product Decisions: Individual Product and Service Decisions: Communicate and deliver benefits by product and service attributes. Product Quality: refers to the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. - Total quality management. - Return-on-quality. - Quality level. - Performance quality. - Conformance quality. Nike collaborated with Arab athletes on the design and style of its first sports hijab. Product Features: - Competitive tool for differentiating a product from competitors’ products - Assessed based on the value to the customer versus its cost to the company Product Style: describes the appearance of the product. Product design: contribute to a products usefulness as well as to its look. Individual Product and Service Decisions: Brand is the name, term, sign, or design or a combination of these, that identifies the maker or seller of a product or service. - A classic stunt by former bargain footwear retailer Payless dramatically illustrated the power of brands in shaping perceptions. Fashion influencers paid as much as $645 for “Palessi” shoes that normally sell for less than $40. Packaging involves designing and producing the container or wrapper for a product. Labels identify the product or brand, describe attributes, and provide promotion. Product support services augment actual products. - Customer service: From the start, under the Lexus Covenant, Lexus’s high-quality support services create an unmatched car ownership experience and some of the world’s most satisfied car owners. Product Line Decisions: Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. Product line length is the number of items in the product line. Line stretching. Line filling. Product line stretching and filling: Through skilful line stretching and filling, B M W now has brands and lines that successfully appeal to the rich, the super-rich, and the hope-to-be-rich. Product Mix Decisions: Product mix consists of all the product lines and items that a particular seller offers for sale. Width.  Length. Depth. Consistency. The product mix: Colgate-Palmolive’s nicely consistent product mix contains many brands that constitute the “Colgate World of Care”— products that “every day, people like you trust to care for themselves and the ones they love.” Question: Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require. Services Marketing: Types of Service Industries: Government Private not-for-profit organizations Business organizations Figure 8.3 Four Service Characteristics: Marketing Strategies for Service Firms: In addition to traditional marketing strategies, service firms often require additional strategies. Service-profit chain: links service firm profits with employee and customer satisfaction.  - Internal service quality. - Satisfied and productive service employees. - Greater service value. - Satisfied and loyal customers. - Healthy service profits and growth. Internal marketing: means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction. Interactive marketing: means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. - Service differentiation. - Service quality. - Service productivity. Figure 8.4 Three Types of Services Marketing: Marketing Strategies for Service Firms: Managing service differentiation creates a competitive advantage. Offer. Delivery. Image. Service differentiation: Emirates offers first-class suites in its Boeing 777 airplanes featuring door-to-ceiling sliding doors, closets for hanging clothes, wireless tablets with 2,500 channels, 32-inch TV screens, personal minibars, and “inspiration kits” containing moisturizing pajamas and skin care kits. Managing service quality enables a service firm to differentiate itself by delivering consistently higher quality than its competitors provide. Managing service productivity refers to the cost side of marketing strategies for service firms. Employee hiring and training. Service quantity and quality. Question: Discuss branding strategy—the decisions companies make in building and managing their brands. Brand Strategy: Building Strong Brands: Brand Equity and Brand Value: Brand equity is the differential effect that knowing the brand name has on customer response to the product or its marketing. Brand value is the total financial value of a brand. Figure 8.5 Major Brand Strategy Decisions: Building Strong Brands: Brand Positioning: Marketers can position brands at any of three levels. Attributes Benefits Beliefs and values Brand positioning: Brands like Disney form strong emotional connections with customers. Says one Disney World Resort regular: ““I have a deep love and bond to all things Disney.” Brand Name Selection: 1. Suggests benefits and qualities. 2. Easy to pronounce, recognize, and remember. 3. Distinctive. 4. Extendable. 5. Translatable for the global economy. 6. Capable of registration and legal protection. Brand Sponsorship: Manufacturer’s brand. Private brand. Licensed brand. Co-brand. Protecting the brand name: This ad asks advertisers and others to always add the registered trademark symbol and the words “Brand Tissue” to the Kleenex name, helping to keep from “erasing our coveted brand name that we’ve worked so hard for all these years.” Figure 8.6 Brand Development Strategies:  7- Customer Value-Driven Marketing Strategy: Creating Value for Target Customers Question: Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning. Customer-Driven Marketing Strategy: Market Segmentation: Market segmentation requires dividing a market into smaller segments with distinct needs, characteristics, or behaviours that might require separate marketing strategies or mixes. Segmenting consumer markets. - Geographic segmentation: divides the market into different geographical units such as nations, regions, states, counties, cities, or even neighbourhoods. - Demographic segmentation: divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Age and life-cycle stage segmentation divides a market into different age and life-cycle groups. Gender segmentation divides a market into different segments based on gender. Income segmentation divides a market into different income segments.  - Psychographic segmentation: divides a market into different segments based on social class, lifestyle, or personality characteristics. Lifestyle segmentation: Panera caters to a healthy eating lifestyle segment of people who want more than just good-tasting food— they want food that’s good for them, too. - Behavioural segmentation: divides a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product. Occasions. Benefits sought. User status. Usage rate. Loyalty status. Benefit segmentation: Schwinn makes bikes for every benefit segment. For example, its e-bikes “help make the morning commute or ride around town a little bit easier.” - Multiple segmentation is used to identify smaller, better-defined target groups. Experian’s Mosaic U S A system classifies U.S. households into one of 71 lifestyle segments and 19 levels of affluence. Using Acxiom’s Personicx segmentation system, marketers paint a surprisingly precise picture of who you are and what you buy. Personicx clusters carry such colourful names as “Skyboxes and Suburbans,” “Shooting Stars,” “Hard Chargers,” “Soccer and SUVs,” “Raisin’ Grandkids,” “Truckin’ and Stylin’,” “Pennywise Mortgagees,” and “Cartoons and Carpools.” Segmenting business markets: Consumer and business marketers use many of the same variables to segment their markets. Additional variables include: - Customer operating characteristics.  - Purchasing approaches. - Situational factors. - Personal characteristics. Segmenting international markets involves forming segments of consumers who have similar needs and buying behaviours even though they are located in different countries. - Geographic location. - Economic factors. - Political and legal factors. - Cultural factors. Requirements for effective segmentation. - Measurable: The size, purchasing power, and profiles of the segments can be measured. - Accessible: The market segments can be effectively reached and served. - Substantial: The market segments are large or profitable enough to serve. - Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. - Actionable: Effective programs can be designed for attracting and serving the segments. Question: Explain how companies identify attractive market segments and choose a market-targeting strategy. Market Targeting: Evaluating Market Segments: Segment size and growth. Segment structural attractiveness. Company objectives and resources. Selecting Target Market Segments: A target market is a set of buyers who share common needs or characteristics that the company decides to serve. Figure 7.2 Market-Targeting Strategies: Undifferentiated marketing targets the whole market with one offer. Mass marketing. Focuses on common needs rather than what’s different. Differentiated marketing targets several different market segments and designs separate offers for each. Goal is to achieve higher sales and stronger position. More expensive than undifferentiated marketing. Differentiated marketing: With more than 30 differentiated hotel brands, Marriott International dominates the hotel industry, capturing a much larger share of the travel and hospitality market than it could with any single brand alone. Concentrated marketing targets a large share of a smaller market. Limited company resources. Knowledge of the market. More effective and efficient.  Concentrated marketing: Fila owes its resurgence not only to the retro wave but the brand’s ability to create a narrative about its products. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. 1. Local marketing: involves tailoring brands and promotion to the needs and wants of local customer segments. - Cities. - Neighbourhoods. - Stores. 2. Individual marketing: involves tailoring products and marketing programs to the needs and preferences of individual customers. - Also known as: One-to-one marketing. Mass customization. - Individual marketing: The Rolls-Royce Bespoke design team works closely with individual customers to help them create their own unique Rolls-Royces. Choosing a targeting strategy depends on: Company resources. Product variability. Product life-cycle stage. Market variability. Competitor’s marketing strategies. Question: Discuss how companies differentiate and position their products for maximum competitive advantage. Differentiation and Positioning: Product position is the way the product is defined by consumers on important attributes. Positioning: Sonos does more than just sell speakers; it unleashes “All the music on earth, in every room of your house, wirelessly.” Positioning maps show consumer perceptions of marketer’s brands versus competing products on important buying dimensions. Figure 7.3 Positioning map: large luxury SUVs: Choosing a Differentiation and Positioning Strategy: Identifying a set of possible competitive advantages to build a position. Choosing the right competitive advantages. Selecting an overall positioning strategy. Communicating and delivering the chosen position to the market. Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to differentiate along the lines of: Product. Services. Channels. People. Image. Services differentiation: Quicken Loans’ Rocket Mortgage doesn’t just ofer mortgage loans; its online-only interface lets users get a loan decision in only minutes. A competitive advantage should be: Important. Distinctive. Superior. Communicable. Pre-emptive. Affordable. Profitable. Value proposition is the full mix of benefits upon which a brand is positioned. Figure 7.4 Possible Value Propositions: Positioning statement summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference). Communicating and Delivering the Chosen Position: Choosing the positioning is often easier than implementing the position. Establishing a position or changing one usually takes a long time. Maintaining the position requires consistent performance and communication  8- Understanding and Capturing Customer Value Question: Answer the question “What is a price?” and discuss the importance of pricing in today’s fast-changing environment. What Is a Price? Price is the amount of money charged for a product or service, or the sum of all the values that customers exchange for the benefits of having or using the product or service. Question: Define price, identify the three major pricing strategies, and discuss the importance of understanding customer-value perceptions, company costs, and competitor strategies when setting prices. Major Pricing Strategies: Figure 10.1 Considerations in Setting Price: Customer Value-Based Pricing: Value-based pricing uses the buyers’ perceptions of value rather than the seller’s cost. Value-based pricing is customer driven. Cost-based pricing is product driven. Price is set to match perceived value. Figure 10.2 Value-Based Pricing versus Cost-Based Pricing: Good-value pricing is offering just the right combination of quality and good service at a fair price. Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts. High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. Value-added pricing attaches value-added features and services to differentiate a company’s offers and thus their higher prices. Cost-Based Pricing: Cost-based pricing sets prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. Fixed costs are the costs that do not vary with production or sales level. Rent. Heat. Interest. Executive salaries. Variable costs vary directly with the level of production. Raw materials. Packaging. Total costs are the sum of the fixed and variable costs for any given level of production. Figure 10.3 Cost per Unit at Different Levels of Production per Period: Figure 10.4 Cost per Unit as a Function of Accumulated Production: The Experience Curve: Cost-plus pricing adds a standard markup to the cost of the product. Benefits: – Sellers are certain about costs. – Price competition is minimized. – Buyers feel it is fair. Disadvantages: – Ignores demand and competitor prices. Break-even pricing (target return pricing) is setting price to break even on costs or to make a target return. Figure 10.5 Break-Even Chart for Determining Target Return Price and Break- Even Volume: Table 10.1 Break-Even Volume and Profits at Different Prices: Competition-Based Pricing: Competition-based pricing is setting prices based on competitors’ strategies, costs, prices, and market offerings. Pricing versus competitors: Caterpillar dominates the heavy equipment industry despite charging premium prices. Customers believe that Caterpillar gives them a lot more value for the price over the lifetime of its machines. Question: Identify and define the other important external and internal factors affecting a firm’s pricing decisions. Other Considerations Affecting Price Decisions: Overall Marketing Strategy, Objectives, and Mix: Target costing starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met. Organizational Considerations: Who should set prices? Who can influence prices? The Market and Demand: Before setting prices, the marketer must understand the relationship between price and demand for its products. Pricing In Different Types of Markets: Pure competition. Monopolistic competition. Oligopolistic competition. Pure monopoly. Analyzing the Price–Demand Relationship: The demand curve shows the number of units the market will buy in a given period at different prices. Demand and price are inversely related. Higher price = lower demand. Price Elasticity of Demand: Price elasticity is a measure of the sensitivity of demand to changes in price. Inelastic demand is when demand hardly changes with a small change in price. Elastic demand is when demand changes greatly with a small change in price. The Economy and Other External Factors: Economic conditions. Reseller’s response to price. Government. Social concerns.  9- Marketing Channels: Delivering Customer Value NETFLIX: Finding the Future by Abandoning the Past: Time and again, Netflix has innovated its way to the top in the distribution of video entertainment. But to stay atop its boiling, roiling industry, Netflix must keep the distribution innovation pedal to the metal. Netflix’s innovative distribution strategy: From DVDs by mail to Watch Instantly to streaming on almost any device and creating original content, Netflix has led the howling pack by doing what it does best— revolutionize distribution. What’s next? Question: Explain why companies use marketing channels and discuss the functions these channels perform. Supply Chains and Value Delivery Networks: Upstream partners are firms that supply raw materials, components, parts, information, finances, and expertise needed to create a product or service. Downstream partners include the marketing channels or distribution channels that look toward the customer, including retailers and wholesalers. Supply chain “make and sell” view includes the firm’s raw materials, productive inputs, and factory capacity. Demand chain “sense and respond” view suggests that planning starts with the needs of the target customer. Value delivery network is composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system. Value delivery network: In making and marketing its lines of cars, Toyota manages a huge network of people within the company plus thousands of outside suppliers, dealers, and marketing service firms that work together to deliver the brand’s “Let’s Go Places” and “Let’s Go Beyond” promises. The Nature and Importance of Marketing Channels: Marketing channel (distribution channel) is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. How Channel Members Add Value: Transform the assortment of products into assortments wanted by consumers. Bridge the major time, place, and possession gaps that separate goods and services from users. Figure 12.1 How a Distributor Reduces the Number of Channel Transactions: How Channel Members Add Value: Information. Promotion. Contact. Matching. Negotiation. Physical distribution. Financing. Risk taking. Number of Channel Levels: Channel level is a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. Direct marketing channel is a marketing channel that has no intermediary levels. Indirect marketing channel is a marketing channel containing one or more intermediary levels. Figure 12.2 Consumer and Business Marketing Channels: Number of Channel Levels: Channel members are connected by several types of flows: Physical flow of products. Flow of ownership. Payment flow. Information flow. Promotion flow. Question: Discuss how channel members interact and how they organize to perform the work of the channel. Channel Behavior and Organization: Channel Behaviour: Marketing channels consist of firms that have partnered for their common good with each member playing a specialized role. Channel conflict refers to disagreement among channel members over goals, roles, and rewards. Horizontal conflict. Vertical conflict. Figure 12.3 Comparison of Conventional Distribution Channel with Vertical Marketing System: Vertical Marketing Systems: Conventional distribution systems consist of one or more independent producers, wholesalers, and retailers, each separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole. Vertical marketing systems (VMSs) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system. Corporate marketing systems. Contractual marketing systems. Administered marketing systems. Corporate vertical marketing systems combine successive stages of production and distribution under single ownership. Contractual vertical marketing systems consist of independent firms at different levels of production and distribution who join together through contracts. Franchise organization is a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production- distribution process. Franchising systems: Through franchising, Sports Clips—where you can “Get your hair in the game”—has rapidly grown to more than 1,700 locations. An administered vertical marketing system is a V M S that coordinates successive stages of production and distribution through the size and power of one of the parties. Horizontal Marketing Systems: Horizontal marketing system is a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Horizontal marketing systems: Target partners with CVS Health, who operates stores-within-stores to the benefit of all – Target, CVS, and their mutual customers. Figure 12.4 Multichannel Distribution System: Multichannel Distribution Systems: Multichannel distribution systems are systems in which a single firm sets up two or more marketing channels to reach one or more customer segments. Changing Channel Organization: Disintermediation is the cutting out of marketing channel intermediaries by producers or the displacement of traditional resellers by new intermediaries. Disintermediation: Toys“R”Us pioneered the superstore format that once made it the go-to place for buying toys. But after falling victim to shifts in toy market sales to big discounters like Walmart and online merchants like Amazon, the retail giant was forced to close down operations and shutter its stores. Question: Identify the major channel alternatives open to a company. Channel Design Decisions: Marketing channel design: Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives. Analyzing consumer needs. Setting channel objectives. Identifying channel alternatives. Evaluating channel alternatives. Analysing Consumer Needs: Find out what target consumers want from the channel. Identify market segments. Determine the best channels to use. Minimize the cost of meeting customer service requirements. Setting Channel Objectives: Determine targeted levels of customer service. Balance consumer needs against costs and customer price preferences. Identifying Major Alternatives: Types of intermediaries refers to channel members available to carry out channel work. Most companies face many channel member choices. Number of Marketing Intermediaries: Intensive distribution. Exclusive distribution. Selective distribution. Responsibilities of Channel Members A producer and the intermediaries need to agree on: Price policies. Conditions of sale. Territory rights. Specific services. Evaluating Major Alternatives: Economic criteria. Control issues. Adaptability criteria. Question: Explain how companies select, motivate, and evaluate channel members. Channel Management Decision: Selecting channel members. Managing channel members. Motivating channel members. Evaluating channel members. Public Policy and Distribution Decisions: Exclusive distribution is when the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Exclusive dealing is when the seller requires that the exclusive distribution sellers not handle competitor’s products. Exclusive territorial agreements are where producer or seller limit territory. Tying agreements are agreements where the dealer must take most or all of the line. Question: Discuss the nature and importance of marketing logistics and integrated supply chain management. Marketing Logistics and Supply Chain Management: Nature and Importance of Marketing Logistics: Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit. The importance or logistics: At any given time, GM has hundreds of millions of tons of finished vehicles and parts in transit, running up an annual logistics bill of about $8 billion. Even small savings can be substantial. Figure 12.5 Supply Chain Management: Supply chain management involves managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers. Goal of marketing logistics should be to provide a targeted level of customer service at the least cost. Major Logistics Functions: Warehousing. Inventory management. Transportation. Logistics information management. Integrated Logistics Management: Integrated logistics management is the recognition that providing customer service and trimming distribution costs requires teamwork internally and externally. Integrated logistics management: Oracle’s supply chain management software solutions help companies to “gain sustainable advantage and drive innovation by transforming their traditional supply chains into integrated value chains.”  10- Engaging Consumers and Communicating Customer Value: Integrated Marketing Communication Strategy BURGER KING: Anything but Traditional Integrated Marketing Communications: Burger King’s often wacky campaigns might strike some observers as impetuous or even reckless. But they unite around the long-held positioning that Burger King is “Home of the Whopper,” the iconic “flame-grilled, 100% beef” creation that keeps loyal customers coming back. Question: Define the five promotion mix tools for communicating customer value. The Promotional Mix: The promotion mix is the specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships. Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Broadcast. Print. Online. Mobile. Outdoor. Sales promotion is a short-term incentive to encourage the purchase or sale of a product or service. Discounts. Coupons. Displays.  Demonstrations. Personal selling is the personal interaction by the firm’s sales force for the purpose of engaging customers, making sales, and building customer relationships. Public relations involve building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events. Direct and digital marketing involves engaging directly with carefully targeted individual consumers and customer communities to both obtain an immediate response and build lasting customer relationships. Question: Discuss the changing communications landscape and the need for integrated marketing communications. Integrated Marketing Communications: The New Marketing Communications Model: Consumers are changing. Marketing strategies are changing. Advances in digital technology. The new marketing communications model: Marketers are shifting ever-larger portions of their marketing budgets away from old-media mainstays to online, social, and mobile media. Adidas now uses only digital channels to engage its younger consumers. Content marketing: As the lines are rapidly blurring between traditional advertising and new digital content, many marketers now view themselves more broadly as content marketing managers who create, inspire, share, and curate marketing content—both their own and that created by consumers and others. Integrated marketing communications (IMC) involves carefully integrating and coordinating the company’s many communications channels to deliver a clear, consistent, and compelling message about the organization and its products. Figure 14.1 Integrated Marketing Communications: Question: Outline the communication process and the steps in developing effective marketing communications. A View of the Communication Process: Figure 14.2 Elements in the Communication Process: Steps in Developing Effective Marketing Communication: 1. Identify the target audience. What will be said How it will be said When it will be said Where it will be said Who will say it 2. Determine the communication objectives. 3. Design the message. (AIDA Model). Get Attention. Hold Interest. Arouse Desire. Obtain Action. Message Content – “What to Say”: Rational appeal relates to the audience’s self-interest. Emotional appeal is an attempt to stir up positive or negative emotions to motivate a purchase. Moral appeal is directed to an audience’s sense of what is right and proper. Message content is “what to say.” Message structure and format is “how to say it.” Message format: To attract attention, advertisers can use novelty and contrast, eye-catching images and headlines, and distinctive formats, as shown in this Reese’s ad. 4. Choose the media to send the message. Personal communication involves two or more people communicating directly with each other. Face-to-face.  Phone. Mail or email. Texting or internet chat. Opinion leaders are people whose opinions are sought by others. Buzz marketing involves cultivating opinion leaders and getting them to spread information about a product or service to others in their communities. Nonpersonal communication channels are media that carry messages without personal contact or feedback, including major media, atmospheres, and events. 5. Select message source and collect feedback. The message’s impact depends on how the target audience views the communicator. Celebrities: – Athletes. – Entertainers. Professionals: – Health-care providers. Collecting feedback involves the communicator understanding the effect on the target audience by measuring behaviour resulting from the content. Question: Explain the methods for setting the promotion budget and factors that affect the design of the promotion mix. Setting the Total Promotion Budget and Mix: Setting the Promotional Budget: The affordable method sets the promotion budget at the level management thinks the company can afford.  The percentage-of-sales method sets the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price. The competitive-parity method sets the promotion budget to match competitors’ outlays. The objective-and-task method develops the promotion budget by specific promotion objectives and the costs of tasks needed to achieve these objectives. Shaping the Overall Promotional Mix: The concept of integrated marketing communications suggests that the company must blend the promotion tools carefully into a coordinated promotion mix. The Nature of Each Promotional Tool: Advertising can reach masses of geographically dispersed buyers at a low cost per exposure, and it enables the seller to repeat a message many times. Personal selling is the most effective method at certain stages of the buying process, particularly in building buyers’ preferences, convictions, actions, and developing customer relationships. Sales promotion includes coupons, contests, cents-off deals, and premiums that attract consumer attention and offer strong incentives to purchase. Public relations are a very believable form of promotion that includes news stories, features, sponsorships, and events. Direct and digital marketing is an immediate, customized, and interactive promotional tool that includes direct mail, catalogs, telephone marketing, online, mobile, and social media. Figure 14.3 Push versus Pull Promotion Strategy: Integrating The Promotional Mix: The company must take steps to see that each promotion mix element is smoothly integrated. The various promotion elements should work together to carry the firm’s unique brand messages and selling points. Socially Responsible Marketing Communication: Advertising and Sales Promotion: Communicate openly and honestly with consumers and resellers. Avoid deceptive or false advertising. Avoid bait-and-switch advertising. Conform to all federal, state, and local regulations. Personal Selling: Follow rules of “fair competition”. Do not offer bribes. Do not attempt to obtain competitors’ trade secrets. Do not disparage competitors or their products. 11- Advertising and Public Relations SNICKERS: “You’re Not You When You’re Hungry”: The Snickers “You’re not you when you’re hungry” mantra taps into a powerful and universal emotional appeal – hunger. Everyone can relate to how being hungry changes who you are. Question: Define the role of advertising in the promotion mix. Advertising: Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Figure 15.1 Major Advertising Decisions: Question: Describe the major decisions involved in developing an advertising program. Setting Advertising Objectives: An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific time. Comparative advertising: Wendy’s recent advertising has taken direct aim at McDonald’s frozen-beef burgers, giving a fresh, new voice to its heritage “fresh, never frozen” positioning. Informative advertising is used when introducing a new product category to build primary demand. Persuasive advertising is important with increased competition to build selective demand. Reminder advertising is important with mature products to help maintain customer relationships and keep customers thinking about the product. Table 15.1 Possible Advertising Objectives: Setting the Advertising Budget: Factors to Consider: Stage in product life cycle. Market share. Competition. Developing Advertising Strategy: Advertising strategy is the strategy by which the company accomplishes its advertising objectives and consists of: Creating advertising messages. Selecting advertising media. Creating the Advertising Message and Brand Content: Advertising clutter: Today’s consumers can easily skip, mute, or block TV and digital content they don’t want to watch. And, increasingly, they are choosing not to watch ads. Merging advertising and entertainment: Brand integrations—also known as branded entertainment, involve making the brand an inseparable part of some form of entertainment or content.  Native advertising—advertising or other brand-produced online content that looks in form and function like the other natural content surrounding it on a web or social media platform. Message and content strategy: The first step in creating effective advertising content is to plan a message strategy—the general message that will be communicated to consumers. Identifies consumer benefits. Follows from company’s broader positioning and customer value creation strategies. The creative concept is the compelling “big idea” that will bring an advertising message strategy to life in a distinctive and memorable way. Characteristics of the appeals should be: Meaningful. Believable. Distinctive. Message execution is when the advertiser turns the big idea into an actual ad execution that will capture the target market’s attention and interest. The creative team must find the best approach, style, tone, words, and format for executing the message. Message Execution Styles: Slice of life. Lifestyle. Fantasy. Mood or image. Musical. Personality symbol. Technical expertise. Scientific evidence. Testimonial or endorsement. Message execution also includes: Tone: – Positive or negative. Attention-getting words: Format: – Illustration. – Headline. – Copy. Novel formats can make an advertisement stand out. This Quicken Loans Rocket Mortgage ad compels readers to flip the ad, where they get the brand’s “Go Waitless” message. Selecting Advertising Media. Engaging the right consumers with the right media: The “Here to Create Legend” Boston Marathon campaign create ultra-personalized highlight videos for each of 30,000 marathon participants. Such ultra-personalization and engagement could be achieved only with digital and social media. The major steps in advertising media selection are: Determining reach, frequency, impact, and engagement. – Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time. – Frequency is a measure of how many times the average person in the target market is exposed to the message. – Impact is the qualitative value of a message exposure through a given medium. – Engagement is a measure of things such as ratings, readership, listenership, and click-through rates. Choosing among major media types. Table 15.2 Profiles of Major Media Types:  Selecting specific media vehicles. involves decisions presenting the message effectively and efficiently to the target customer and must consider the message’s: – Impact. – Effectiveness. – Cost. Choosing media timing. When deciding on media timing, the planner must consider: – Seasonality. – Real time responses. Peeps’ “Every Day Is a Holiday” campaign promotes the favourite marshmallow chicks and bunnies’ candies at holiday seasons other than just Easter, here Christmas. Evaluating Advertising Effectiveness and Return on Advertising Investment: Return on advertising investment is the net return on advertising investment divided by the costs of the advertising investment. Communication effects indicate whether the ad and media are communicating the ad message well and can be tested before or after the ad runs. Sales and profit effects compare past sales and profits with past expenditures or through experiments. Real-Time Marketing: Marketers want to engage consumers in the moment Oreo’s now famous “You can still dunk in the dark” tweet triggered a surge in real-time marketing. Other Advertising Considerations: Organizing for advertising: Agency vs. in-house. International advertising decisions: Standardization or Adaptation. International advertising: Chevrolet unifies its global advertising under a “Find New Roads” theme that has meaning in all markets, here Russia. Question: Define the role of public relations in the promotion mix. Public Relations: Public relations involve building good relations with the company’s various publics by obtaining favourable publicity, building up a good corporate image, and handling or heading off unfavourable rumours, stories, and events. Press relations or press agency involves the creation and placing of newsworthy information to attract attention to a person, product, or service. Product publicity involves publicizing specific products. Public affairs involve building and maintaining national or local community relations. Lobbying involves building and maintaining relations with legislators and government officials to influence legislation and regulation. Investor relations involves maintaining relationships with shareholders and others in the financial community. Development involves public relations with donors or members of non-profit organizations to gain financial or volunteer support. The Role and Impact of PR: Lower cost than advertising. Stronger impact on public awareness than advertising. Has power to engage consumers and make them part of the brand story. Question: Explain how companies use P R to communicate with their publics. Major Public Relations Tools News. Speeches. Special events. Written materials. Corporate identity materials. Public service activities. Buzz marketing. Social networking. Internet. The power of public relations: A simple statue with a big message, backed by an imaginative PR campaign, has had a larger and more lasting impact than even the most memorable Super Bowl ad, probably at a lower cost.  12- Personal Selling and Sales Promotion SALESFORCE: You Need a Great Sales Force to Sell Salesforce: Salesforce’s cloud-based “Customer Success Platform” provides a wide array of customer relationship management tools that help its customers “supercharge their sales.” Question: Discuss the role of a company’s salespeople in engaging customers, creating customer value, and building customer relationships. Personal Selling: Personal selling is the interpersonal part of the promotion mix and can include: Face-to-face communication. Telephone communication. Video or web conferencing. Professional selling: It takes more than fast talk and a warm smile to sell expensive airplanes. Boeing’s real challenge is to win business by building partnerships—day in, day out, year in, year out—with its customers. The Nature of Personal Selling: Salespeople are an effective link between the company and its customers to produce customer value and company profit by: Representing the company to customers. Representing customers to the company. Working closely with marketing. Salespeople link the company with its customers. To many customers, the salesperson is the company.  Question: Identify and explain the six major sales force management steps. Managing the Sales Force: Sales force management is the analysis, planning, implementation, and control of sales force activities. Figure 16.1 Major Steps in Sales Force Management: Designing Sales Force Strategy and Structure: Territorial sales force structure: each salesperson is assigned an exclusive geographic area and sells the company’s full line of products and services to all customers in that territory. – Fixes accountability. – Lowers sales expenses. – Improves relationship building and selling effectiveness. Product sales force structure: each salesperson sells along product lines. – Improves product knowledge. – Can lead to territorial conflicts. Customer sales force structure: each salesperson sells along customer or industry lines. – Improves customer relationships. Sales Force Size: Salespeople are one of the company’s most productive and expensive assets.  Workload approach to sales force size refers to grouping accounts into different classes to determine the number of salespeople needed. Outside sales force (field sales force) are salespeople who travel to call on customers in the field. Inside sales force are salespeople who conduct business from their offices via telephone, online and social media interactions, or visits from prospective buyers. Team selling involves using teams of people from sales, marketing, engineering, finance, technical support, and even upper management to service large, complex accounts. Recruiting and Selecting Salespeople: Careful selection and training increases sales performance. Poor selection increases recruiting and training costs, leads to lost sales, and disrupts customer relationships. Training Salespeople: Goals of training: – Customer knowledge. – Selling process. – Knowledge of products, company, competitors. Compensating Salespeople: Fixed amounts. Variable amounts. Expenses. Fringe benefits. Sales force compensation: A good compensation plan both motivates salespeople and directs their activities. Supervising Salespeople: The goal of supervision is to help salespeople work smart by doing the right things in the right ways.  Sales force automation systems are computerized, digitized sales force operations that let salespeople work more effectively anytime, anywhere. Sales force automation: To help salespeople work more efficiently and effectively anytime, anywhere, companies routinely equip their salespeople with laptops or tablets, smartphones, wireless connections, videoconferencing technologies, and customer relationship management software. Motivating Salespeople: Sales morale and performance can be increased through: – Organizational climate. – Sales quotas. – Positive incentives. Sales quotas are standards stating the amount salespeople should sell and how sales should be divided among the company’s products. Evaluating Salespeople and Sales Force Performance: Sales reports. Call reports. Expense reports. Social Selling: Online, Mobile, and social media Tools: Social selling is the use of online, mobile, and social media to engage customers, build stronger customer relationships, and augment sales performance. Digital technologies can make salespeople more productive and effective. Social selling: Machine tool manufacturer Makino engages customers through extensive digital content and social media, which complement sales force efforts to engage customers and build product–customer relationships.  Question: Discuss the personal selling process, distinguishing between transaction- oriented marketing and relationship marketing. The Personal Selling Process: Figure 16.2 Steps in the Selling Process: Steps in the Personal Selling Process: Prospecting identifies qualified potential customers through referrals from: Customers. Suppliers. Dealers. Internet. Reapproach is the process of learning as much as possible about a prospect, including needs, who is involved in the buying, and the characteristics and styles of the buyers. Objectives: – Qualify the prospect. – Gather information. – Make an immediate sale. Approaches: – Personal visit.  – Phone call. – Letter/email. Approach is the process where the salesperson meets and greets the buyer and gets the relationship off to a good start and involves the salesperson’s: Appearance. Opening lines. Follow-up remarks. Presentation is when the salesperson tells the product story to the buyer, presenting customer benefits, and showing how the product solves the customer’s problems. Great salespeople know how to sell, but more important, they know how to listen and build strong customer relationships. Handling objections is the process where salespeople resolve problems that are logical, psychological, or unspoken. Closing is the process where salespeople should recognize signals from the buyer—including physical actions, comments, and questions—to ask for a order and finalize the sale. Follow-up is the last step in which the salesperson follows up after the sale to ensure customer satisfaction and repeat business. Personal Selling and Managing Customer Relationships: Personal selling is transaction-oriented to close a specific sale with a specific customer. The long-term goal of personal selling is to develop a mutually profitable relationship. Value selling: Sales management’s challenge is to transform salespeople from customer advocates for price cuts into company advocates for value. Question: Explain how sales promotion campaigns are developed and implemented. Sales Promotion: Sales promotion refers to the short-term incentives to encourage purchases or sales of a product or service now. Consumer samples can be a powerful tool. 7-Eleven’s Free Slurpee Day celebration pulls new customers into the stores but also rewards loyal customers and encourages them to “maybe try something they haven’t.” Rapid Growth of Sales Promotion: Product managers are under pressure to increase current sales. Companies face more competition. Competing brands offer less differentiation. Advertising efficiency has declined due to rising costs, clutter, and legal constraints. Consumers have become more deal oriented. Sales Promotion Objectives: Setting sales promotion objectives includes using: Consumer promotions. Trade promotions. Business promotions. Sales force promotions. Major Sales Promotion Tools: Samples offer a trial amount of a product. Coupons are certificates that give buyers a saving when they purchase specified products. Rebates are similar to coupons except that the price reduction occurs after the purchase. Price packs offer consumers savings off the regular price of a product. Premiums are goods offered either for free or at a low price. Advertising specialties are useful articles imprinted with the advertiser’s name, logo, or message that are given as gifts to consumers. Point-of-purchase promotions include displays and demonstrations that take place at the point of sale. Contests, sweepstakes, and games give consumers the chance to win something—such as cash, trips, or goods—by luck or through extra effort. Contests require an entry by a consumer. Sweepstakes require consumers to submit their names for a drawing. Games present consumers with something that may or may not help them win a prize. Event marketing or event sponsorship is creating a brand-marketing event or serving as a sole or participating sponsor of events created by others. Major Tools for Trade Promotions: Discount. Allowance. Free goods. Specialty advertising. Major Sales Promotion Tools for Business Customers: Conventions and trade shows are effective to reach many customers not reached with the regular sales force. Sales contests are effective in motivating salespeople or dealers to increase performance over a given period. Developing the Sales Promotion Program: Size of the incentive. Conditions for participation. Promotion and distribution of the program. Length of the program. Evaluation of the program.