MKTG-80B Lecture 1-8 PDF

Lecture 1 MARKETING PROCESS Marketing Management Introduction Basic functions of an enterprise: Marketing and Innovation. Marketing: Provide products/services meeting the needs and wants of customers, focusing on basi...

Lecture 1 MARKETING PROCESS Marketing Management Introduction Basic functions of an enterprise: Marketing and Innovation. Marketing: Provide products/services meeting the needs and wants of customers, focusing on basic marketing concepts and applications Innovation: Strengthen the firm’s competitive marketing position and sustain profitability by technology, supply chains, product design, etc. Marketing Function Levels of Marketing Strategy Corporate Level: Set future direction of what businesses to pursue (product, service, total solution, etc.) and what value to be emphasized Business Level: Bring products/services to the marketplace and achieve/maintain competitive advantages Operational Level: Plan marketing program and implement/control marketing efforts Marketing Effectiveness Diagram Marketing Effectiveness Total Success: High profitability at maximum possible rate Partial Success: New customers replace lost customers Marketing Orientation Partial Failure: Sales slow or fall due to a lack of new Customer Focus - Understand needs, create value, and serve customers to assure customer satisfaction, with inter-functional Total Failure: Sales fall as customers leave teamwork Competitor Focus - Seek advantages relative to competitors, Key Elements in Marketing monitor behavior and respond to strategic moves (foes or Market (size, growth rate, location) friends) Environment (competition, entry barriers, constraints) Profit Focus - Manage to assure short- and long-term Customers (who, why, when, where profitability how, what) Marketing Mix  Market Forecast Who Makes What Decisions for Whom? Demand forecast is critically important Four-step process by Barnett (Source: F. William Barnett, “Four Steps to Forecast total Market Demand,”Harvard Business Review, July/August 1988) (1) Define the market - Total Sales revenue per year of all products delivering similar benefits to customers regardless of physical and functional features. (2) Segment the market - Subdivide total market into homogeneous customer subgroups with similar buying behavior and preferences (3) Determine segment drivers and predict their changes - key factors affecting the segment growths (4) Conduct sensitivity analyses - assess risks and check Market Segmentation assumptions Purpose Application examples: (a) Industrial product - Segments Segmentation Steps based on industries with individual segment growth rates as Criteria for Creating an Effective Segmentation Strategy drivers, assuming product demand is proportional to growth Pitfalls of Market Segmentation and business levels involved (b) Electricity - segments of industrial, commercial and Purpose residential; drivers are: business climate and industrial growth Divide consumers into groups having similar product/service rate for industrial; Internet sales increase, consumer preferences (divide/conquer) confidence, stock market performance for commercial; new Value to Company: (1) Match products/ service better to the home sales, change in home size and energy efficiency of groups, (2) Create suitable channels of distribution to reach appliances for residential. them, (3) Uncover new consumer groups, not being served sufficiently in the past, (4) Focus on niches being neglected by Environment competition Market study is needed to assess: Competition (market share distribution, technology, brand Additional Segmentation strength, marketing position, customer loyalty, etc.) Benefits to Company Barriers of entry (capital, technology, supply chains, Develop suitable marketing strategies distribution channels, governmental regulations, etc.) Formulate better-fitting marketing programs Track changes of buying behavior over time Customer Orientation Evaluate company’s competitive position in these segments Define needs through research (real value of a product to Achieve improved effectiveness in utilizing marketing customer - prestige, convenience) resources Define market segments (groups with similar needs to facilitate product customization) Pitfalls Differentiate products and communications (e.g., “Dude” Over-Segmentation (small sizes, fragmented segments selling Dell computers) difficult for company to serve -scale of economy) - Newer Create differentiated advantages for customers supply chains allows “build-to-order” strategies to serve smaller segments (Dell, Custom beer, Chinese foods, etc.) Customers Over-concentration (lack of balance between segments) Who (Profile, who buy from competitors, who does the buying, for whom is the buying done) Marketing Mix Why (Reasons for product preference: price, product performance, convenience, product styling, service, packaging) What (What for, what value benefit, what they really want? what needed in the future?) Where (where to get product information, where is buying decision made, where to buy from: Retail store, mail order, via internet, department store, discount store ) How (How to decide, how to compare) When (When to buy, weekly, monthly, special occasions, etc.) Marketing Mix Impact of Product Innovation Product Strategy: Functional attributes, compatibility to customer needs, distinguishable features over competition, product-line strategy, product/market fit Promotion/Communication Strategy: How to promote, adopt pull/push, which media to use, fit promotion to market segment selected. Pricing Strategy: Skimming or penetration based pricing, value-added pricing, target pricing, pricing fit to market segment Placement (Distribution) Strategy: Intensive, exclusive or selective distribution, relationship with intermediaries (retailers, wholesalers), changes in distribution logistics and technologies. Product Strategy Nature of Products Life Cycle of Products New Product Development Process Product Failure (Rate, Reasons) Summary Product Positioning What product features to include and emphasize - critically important Selection of product features to place new (or existing) products in a favorable position with respect to competition customer preferences and gap created by existing products in marketplace Example: Automobiles Products/Brands Product Life Cycle Brand - A Distinct identity that differentiates a relevant, Every Product goes through a number of phases: (1) enduring and creditable promise of value associated with a Initiation (product development, testing, market product, service or organization that indicates the source of development, advertising), (2) Growth (product promotion, that promise. It represents all images and experience market acceptance, profit growth), (3) Stagnation (price customers have of and with the organization. competition, substitution, new technologies), (4) Decline (cash cow strategy, product withdrawal) Promise of Value - Brand Examples IBM - Superior Service and support Apple - Simple and easy to use BDO – Finding ways for you SM Malls – Providing almost everything you need Brand Pyramid Product Supply Curve Product supply curve describes the market behavior of companies -- supplying larger quantity of products in the product price is raising to higher levels in search of higher profits Product innovations -- better products or lower product price, causing demand to increase and downward shift of supply curve. Pricing Strategy Customer Loyalty Pricing Options Five determinants of Customer Loyalty: (1) Quality customer Factors affecting Price support, (2) on-time delivery, (3) compelling product Pricing Methods performance, (4) convenient and reasonable priced shipping and handling, and (5) clear and trustworthy privacy policies. Pricing Options Dell - Customer Experience Council: Order fulfillment, Skimming Strategy - Set premium price initially to capture product performance, post- sale service and support. high profitability from affordable customers and then reduce price in time to reach additional customers in the marketplace Best Practice Examples (e.g., new books, ginger) Amazon.com - Tailor product offerings to individual Penetration Strategy - Set price low to penetrate the market preference, one-click convenience, error-free delivery; 59% rapidly for setting barrier of entry to late-coming competitors business from repeat customers (e.g., Microsoft Office 2000, Japanese motor cycles) EBay - Assure satisfaction of auction, buyer and seller rate each other, insurance of firs $200, Money in escrow account Pricing Methods until buyers are satisfied, 50% of customers are referrals Cost: Price = Cost + Markup (e.g., 30% of cost) Profit: Price = Cost + Profits (e.g., ROI) Market: Set price to what the buyers are willing to pay (imperfect information distribution, the next best alternative available to buyer) Value: Set price in proportion to product’s value added to buyer (application know-how) Competition: Set price at level charged by competition (Target Pricing) Target Pricing Set the selling price based on customer inputs and market survey and determine pertinent product features Add a gross margin that company must have Obtain the Cost of Goods Sold (CGS) that must not be exceed Define material/parts, design, product development, and production method to meet CGS target Internet-Enabled Communications Options Business to Business: Manufacturer’s Intranet for intermediaries Business to Consumer: Web portals of distributors for selling to consumers Direct: Manufacturer’ web sites (Dell, Gateway), buyer’s portals (Covisint, ChemConnect) Virtual Market: Third party search portals (Yahoo), auction site (e-Bay), e-marketplace Distribution Strategy Channels of Distribution Functions of Distribution Channels Type of Distribution Organizational Structures Impact of E-Commerce on Distributions Other Factors Affecting Marketing Success Alliances & partnerships Customer Interactions and Loyalty Organizational effectiveness Lecture 2 Four Support Activities How to Develop Marketing Strategies and Plans Procurement Technology development Marketing and Customer Value Human resource management Marketing is about satisfying consumer’s needs and wants. Firm in structure The task of any business is to deliver customer value as a profit. ❖The firm’s success depends not only on how well each The Value Delivery Process department its work, but also on how well the various The traditional view of the business process, however, will departmental activities are coordinated to conduct core not work in economies were people face abundant choices. business processes. There, the “mass market” is actually splintering into numerous These core business processes include: micro markets, each with its own wants, perceptions, The market sensing process preferences, and buying criteria. The new offering realization process The customer acquisition process The customer relationship management process The fulfillment management process A holistic marketing orientation can also provide insight into the process of capturing customer value. One conception of holistic marketing views it as “integrating the value exploration, value creation and value delivery activities with the purpose of building long term, mutually satisfying relationships and co-prosperity among key stakeholders. (a) Traditional Physical Process Sequence Corporate and Division Strategic Planning Defining the Corporate Mission The value creation and delivery sequence the process consist Establishing Strategic Business Units (SBU’s) of three parts. The first phase, choosing the value, represents Assigning Resources to each SBU’s the “homework” marketing staff must do before any product Assessing Growth Opportunities exists. Second phase providing the value and the third phase is communicating the value. Defining the Corporate Mission They focus on a limited no. of Goals Mission statement stress the company’s major policies and values They define the major competitive spheres within which company will operate: -Industry -Products and Application -Competence -Market Segment -Vertical -Geographical Establishing Strategic Business Units (SBU’s) (b)Value Creation and Delivering Sequence A Business can be defined in terms of three dimension: Value Chain -Customer Groups Michael Porter has proposed the value chain as a tool for -Customer needs identifying ways to create more customer value. According to -Technology this model, very firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. SBU’s Characteristics It has single business or collection of related business that Five Primary Activities can be planned separately from the rest of the company. Inbound logistics It has its own set of competitors. Operations It has a manager who is responsible for strategic planning and Outbound logistics profit performance and who controls most of the factors Marketing and sales affecting profit Service Assigning Resources to each SBU’s Organization and Organizational Culture The GE/Mc Kinsey Matrix classifier each SBU’s according to A company’s organization consist of its structures, policies, the extent of it’s competitive advantage and the attractiveness and corporate culture, all of which can become dysfunctional of it’s industry. in a rapidly changing business environment. BCG’s Growth Share Matrix uses relative market share and annual rate of market growth as criteria to make investment Corporate culture decisions Is an elusive concept, which some define as “the shared experiences, stories, beliefs, and norms tat characterize an Assessing Growth Opportunities organization” Planning new businesses The way are people dressed, how they talk to one another, Downsizing and the way they greet customers. Terminating old businesses It develops organically and its transmitted directly from the CEO’s personality and habits to the company’s employees Strategic Planning Gap It varies markedly among Asian companies Intensive growth Integrative growth Marketing Innovation Diversification growth Innovation in marketing is critical. Senior management should identify and encourage fresh ideas from three groups Intensive Growth that tend to be underrepresented in strategy making: -employees with youthful perspectives Product-market expansion grid -employees who are far removed from company headquarters Market penetration and -it consider whether it could gain more market share with its -employees who are new to the industry current products in their markets. Market-development strategy An innovative strategy firm, offers five key strategies for -it considers whether it can find or develop new markets for its managing change in an organization. current products. 1. Avoid the innovation title -pick a name for the innovation Product-development strategy team that won’t alienate co-workers -It considers whether it can develop new products of potential 2. Use the buddy system –find a like- minded collaborator interest to its current market. within the organization Diversification strategy 3. Set the metrics in advance –establish different sets of - it will review opportunities to develop new products for new funding testing and performance criteria for incremental, markets. experimental and potentially disruptive innovations 4. Aim for quick hits first –start with easily implemented ideas Integrative Growth that will work to demonstrate that things can get done, before A business can increase sales and profits through backward, quickly switching to bigger initiatives. forward, or horizontal integration within its industry. 5. Get data to back up your gut –use testing to get feedback Diversification Growth and improve and idea Diversification growth makes sense when good opportunities can be found outside the present businesses. SWOT Analysis The overall evaluation of a company’s strengths, weaknesses, Several types of Diversification opportunities, and threats is called SWOT Analysis. Concentric strategy -the company could seek new products that have technological External Environment (Opportunity and or marketing synergies with existing product lines. Threats) Analysis Horizontal strategy Good marketing is the art of finding, developing, and -the company might search for new products that could appeal profiting from opportunities. A marketing Opportunity is an to current customers even though the new product are area of buyer need and interest in which there is a high technologically unrelated to its current product line. probability that a company can profitability satisfy that need. Conglomerate strategy -the company might seek new businesses that have no Three main source of marketing opportunities relationship to its current technology, products, or markets. 1. Is to supply something that is in short supply 2. Is to supply an existing product or service in a new or Downsizing and Divesting older Businesses superior way Companies must not only develop new businesses, they must 3. Source after leads to a totally new product or services also carefully prune, harvest or divest tired old businesses to release needed resources and reduce cost.  An Environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit. Threats should be classified according to seriousness and probability of occurrence. Internal Environment (strengths/ weaknesses) Analysis It is one thing to find attractive opportunities and another to be able to take advantage of them. Each business needs to evaluate its internal strengths and weaknesses. Goal Formulation Once the company has performed a SWOT Analysis, it can proceed to develop specific goals for planning period. Managers use the term goals to describe objectives that are specific with respect to magnitude and time. For an Manages by Objective (MBO) system to work, the units objectiveness must meet four criteria: 1. They must be arranged hierarchically , from the most to the least important. 2. Objectives should be stated quantitatively whenever possible. 3. Goals should be realistic 4. Objectives must be consistent Strategic Formulation Porter’s Generic Strategy Overall cost leadership -the business works hard to achieve the lowest production and distribution costs so that it can price lower than its competitors and win a large market share Differentiation -the business concentrates on achieving superior performance in an important customer benefits area valued by a large part of the market Focus -the business focuses on one or more narrow market segments. The firm gets for know these segments intimately and pursues either cost leadership or differentiation within the target segment. Lecture 3 DATA SOURCES The researcher can gather secondary data, primary data, or MARKETING RESEARCH AND DEMAND FORECASTS both. Secondary data are data that were collected for another THE MARKETING RESEARCH SYSTEM purpose and already exist somewhere. Primary data are data freshly gathered for a specific purpose MARKETING RESEARCH or for a specific research project. - the systematic design,collection, analysis, and reporting of data and findings relevant to a specific marketing situation RESEARCH APPROACHES facing the company. ◼ Primary data can be collected in five main ways: through observation, focus groups, surveys, behavioral data, and Marketing research firms fall into three categories: experiments. 1. Syndicated-service research firms – these firms gather consumer and trade information, which they sell for a fee. Ex: 1. Observational Research – fresh data can be gathered by A.C. Nielsen Media Research. observing the relevant actors and settings. Consumers can be 2. Custom marketing research firms – these firms are hired to unobtrusively observed as they shop or as they consume carry out specific projects. They design the study and rteport products. the findings. 2. Ethnographic Research – this is a particular observational 3. Specialty-line marketing research firms – these firms research that uses concepts and tools from anthropology and provide specialized research services. The best example is the other social science disciplines to provide deep understanding field service firm, which sells field interviewing services to of how people live and work. The goal is to immerse the other firms. researcher into consumers’ lives to uncover unarticulated desires that might not surface in any other form of research. Small companies can hire the services of a marketing 3. Focus group Research – A focus group is a gathering of 6-10 research firm or conduct research in creative and people who are carefully selected based on certain affordable ways such as: demographic, psychographic or other considerations and brought together to discuss various topics of interest at length. 1. Engaging students or professors to design and carry out 4. Survey Research – Companies undertake surveys to learn projects. about people’s knowledge, beliefs, preferences, and 2. Using the internet. satisfaction, and to measure these magnitudes in the general 3. Checking out rivals. population. 5. Behavioral Data Research – Customer leave traces of their THE MARKETING RESEARCH PROCESS purchasing behavior in store scanning data, catalog purchases, and customer databases. Much can be learned by analyzing these data. Customers’ actual purchases reflect preferences and often are more reliable than statements they offer to market researchers. 6. Experimental Research – the most scientifically valid research. The purpose is to capture cause-and-effect relationships by eliminating competing explanations of the observed findings. RESEARCH INSTRUMENTS Step 1: Define the Problem, the Decision Alternatives, and the ◼Marketing researchers have a choice of three main research Research Objectives instruments in collecting primary data: questionnares, qualitative measures, and mechanical devices. Marketing manager must be careful not to define the problem too broadly or too narrowly for the marketing 1. Questionnaires – consists of questions presented to research. respondents. Because of its flexibility, the questionnareis by far the most common instrument used to collect primary data. Step 2: Develop the Research Plan Questionnaires need to be carefully developed, tested and The second stage of marketing research calls for developing debugged before they are administered on a large scale. the most efficient plan for gathering the needed information. Close-end question The marketing manager needs to know the cost of the research Open-end question plan before approving it. Designing a research plan calls for a decisions on data sources, research approaches, research instruments, sampling plan, and contact methods. 2. Qualitative Measures Step 6: Make the Decision Qualitative Research Techniques are relatively unstructured The managers who commissioned the research need to measurement approaches that permit a range of possible weigh the evidence. responses. Qualitative research techniques are a creative means of ascertaining consumer perceptions that may The Seven Characteristics of Good Marketing Research otherwise difficult to uncover. Scientific method Research creativity Here are seven techniques employed by design firm IDEO for Multiple methods understanding the customer experience: Interdependence of the type of information sought Shadowing Value and cost of information Behavior mapping Healthy skepticism Consumer journey Ethical marketing Camera journals Extreme user interviews Overcoming the Barriers to the Use of Marketing Research A narrow conception of the research Storytelling Uneven caliber of researchers Unfocused groups Poor framing of the problem Late and occassionally erroneous findings “ Marketing Insight: Getting into Consumer Heads with Personality and presentational differences Qualitative Research” describes some popular approaches. Word associations Projective techniques MEASURING MARKETING PRODUCTIVITY Visualization Brand personification An important task of marketing research is to assess the Laddering efficiency and effectiveness of marketing activities. Marketers increasingly are being held accountable for their investments TECHNOLOGICAL DEVICES – are occasionally useful in and must be able to justify marketing expenditures to senior marketing research. Technology has now advanced to such a management. degree that marketers can use devices such as skin sensors, brain wave scanners, and full body scanners to get consumer Two complementary approaches to measure marketing responses. productivity are: (1)Marketing metrics – to assess marketing effects, and (2) SAMPLING PLAN Marketing mix modeling – to estimate causal relationships and After deciding on the research approach and how marketing activity affects outcomes. A third, marketing instruments, the marketing researcher must design a dashboards – is a structured way to disseminate the insights sampling plan. This calls for three decisions: gleaned from these two approaches within the organization. Sampling unit – Who is to be surveyed? Sample size – How many people should be surveyed? Marketing Metrics – is the set of measures that help firms to Sampling procedure – How should the respondents be quantify, compare, and interpret their marketing performance. chosen? Marketing Mix Modeling – analyze data from a variety of CONTACT METHODS sources, such as retailer scanner data, company shipment data, Mail questionnaire pricing, media and promotion spending data, to understand Telephone interview more precisely the effects of specific marketing activities. Personal interview Online interview Marketing Dashboards Two key market based scorecards that reflect performance Step 3: Collect the Information – the data collection phase of and provide possible early warning signals. marketing research is generally the most expensive and the A customer-performance scorecard most prone to error. A stakeholder-performance scorecard Step 4: Analyze the Information – extract findings from the Productive ways to break down market collected data. Potential market Available market Step 5: Present the Findings – should present findings that are Target market relevant to the major marketing decisions facing management. Penetrated market VOCABULARY FOR DEMAND MEASUREMENT MARKET DEMAND – the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. It is not a fixed number but rather a function of the stated conditions. It can be called the market demand function. MARKET FORECAST – shows expected market demand, not maximum market demand. MARKET POTENTIAL – the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. COMPANY DEMAND – the company’s estimated share of market demand at alternative levels of company marketing effort in a given period of time. COMPANY SALES FORECAST – the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. COMPANY SALES POTENTIAL – is the sales limit approached by company demand as company marketing effort increases relative to that of competitors. The absolute limit of company demand is the market potential. ESTIMATING CURRENT DEMAND TOTAL MARKET POTENTIAL – the maximum amount of sales that might be available to all the firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. Chain-ratio method – involves multiplying a base number by several adjusting percentages. AREA MARKET POTENTIAL Market-buildup method – calls for identifying all the potential buyers in each market and estimating their potential purchases. Multiple-factor Index method INDUSTRY SALES AND MARKET SHARES ESTIMATING FUTURE DEMAND Survey of Buyer’s Intentions Composite of Sales force Opinions Expert opinion Past-sales Analysis Market test method Lecture 4 Personal Factors: Examining Consumer Markets Consumer Behavior Defined ❖is the study of how individuals, groups, and organizations select, buy, use and dispose of goods, services, ideas or experiences to satisfy their needs and wants. A consumer’s buying behavior is influenced by cultural, social, and personal factors. What Influences Consumer Behavior? Key Psychological Processes Cultural Factors: Motivation: Freud, Maslow, Herzberg Maslow Theory: Social Factors Reference Groups Freud’s Theory Assumed that the psychological forces shaping people’s behavior are largely unconscious, and that person cannot fully understand his or her own motivations. Social Factors Con’t: Shape, size, weight, material, color, and the brand name can Family call trigger certain associations and emotions. Laddering- can be used to trace a person’s motivators from the stated instrumental ones to more terminal ones. Herzberg’s Theory: Roles and Statuses A role consists of the activities a person is expected to perform. Each role carries a status.  (3) information may be “available” in memory (i.e. potentially Definition of terms: recallable) but may not be “accessible” i.e. unable to be Perception- is the process by which an individual selects, recalled) without the proper retrieval cues or reminders. organizes, and interprets information inputs to create a The Buying Decision Process meaningful picture of the world. The Five-Stage Model Selective Attention- means that marketers have to work hard to attract consumers’ notice. Selective Distortion- is the tendency to interpret information in a way that it will fit our perception. Selective Retention- we are to likely we to remember good points about a product we like and forget good points about competing products. It works to the advantage of strong brands. Subliminal Perception- require active engagement and thought by consumer. Con’t Beliefs and Attitudes Learning- involves changes in an individual’s behavior arising Belief from experience. is a descriptive thought that a person holds about something. Cues- are minor stimuli that determine when, where, People’s beliefs about the attributes and beliefs of a product and how the person responds. or a brand influence their buying decisions. Hedonic bias- people have general tendency to Attitudes attribute success themselves and failure to external Is a person’s favorable or unfavorable evaluation, emotional causes. feeling, and action tendencies toward some object or idea. Memory- all the information and experiences of individuals put people into frame of mind liking or disliking an object encounter as they go through life can and up in their long-term moving toward or away from it. memory. Attitudes lead people to behave in fairly consistent toward Short term memory- a temporary repository of similar objects. information. Attitude economize on energy and thought, they can bevery Long-term memory- a more permanent repository. difficult to change. Exam. Associative network memory model which consists of nodes and links. Expectancy Value Model Nodes- are stored information connected by links that vary in strength. Memory Processes Con’t Memory Retrieval- refers to how information gets out of Purchase Decisions memory. The consumer forms preferences among brands in the choice (1) the presence of other product information in memory can set. produce interference effects. The consumer may also form an intention to buy the most (2) the time since exposures to information at encoding affects preferred brand. the strength of a new association- the longer the time delay, the weaker the association. In executing a purchase intention, the consumer may make up to five sub- Decisions: Different Types of Risks 1. Brand 1. Functional risk- the product does not perform up to 2. Dealer expectation. 3. Quantity 2. Physical risk- the product poses a threat to the 4. Timing physical well-being or health of the users or others. 5. Payment method 3. Financial risk- the product is not worth the price pad. 4. Social risk- the product results in embarrassments Noncompensatory Models of Consumer Choice from others. The expectancy value model is a compensatory model in that 5. Psychological risk- the product affects the mental perceived good things for a product can help to overcome well-being of the User.t perceived bad things. 6. Time risk- the failure of the product results in an They often take “mental shortcuts” that involve simplifying opportunity cost of finding another satisfactory choice heuristics. product. With noncompensatory model of consumer choice, positive, and negative attribute considerations do not necessarily net Postpurchase Behavior out. The consumer might experience dissonance that stems from noticing certain disquieting features or hearing favorable 3 Choice Heuristics: things about other brands. 1. Conjunctive heuristic- the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first Postpurchase Satisfaction alternative that meets the minimum standard for all attributes. Satisfaction is a function of the closeness between 2. Lexicographic heuristic- the consumer chooses the best expectations and product’s perceived performance. brand on the basis of its perceived most important attribute. Consumers from their expectations on the basis of messages 3. Elimination-by-aspects heuristic- the consumer compares received from sellers, friends, and other information sources. brands on an attribute selected probabilistically-where the The importance of postpurchase satisfaction suggests that probability of choosing an attribute is positively related to its product claims must truthfully represent the product’s likely importance-and brands are eliminated if they do not meet performance. minimum acceptable cutoff levels. Postpurchase Actions Intervening Factors If the consumer is satisfied, the consumer will exhibit a higher Two general factors can intervene between the purchase probability of purchasing the product again. intention and the purchase decision: Dissatisfied consumers may abandon or return the product. 1. Attitudes of others a. the intensity of the other person’s negative attitude Postpurchase Use and Disposal toward the consumer’s preferred alternatives. b. the consumer's motivation to comply with the other person’s wishes. 2. Unanticipated Situation Factors- that may erupt to change the purchase intention. Steps Between Evaluation of Alternatives and a Purchase Decision Other Theories of Consumer Decision Making Formally, it has been defined in terms of “the tendency to The consumer decision process may not always develop in a categorize funds of items of value even though there is no carefully planned fashion. It is important to understand other logical basis for the categorization. theories and approaches to how consumers make decisions and when they might apply. According to Thaler: Mental Accounting is based on set of key core principles: Elaboration Likelihood Model 1. Consumer tend to segregate gains. An influential model of attitude formation and change, how 2. Consumers tend to integrate losses. consumers make evaluations in both low-and high involvement 3. Consumers tend to integrate smaller losses with circumstances. larger gains. There are two means of persuasion with their model: 4. Consumers tend to segregate small gains from larger a. central route- where the attitude formation or change losses. involves much thought and is based on a diligent, rational consideration of the most important product Profiling the Customer Buying Decision Process or service information Retrospective method- they can interview a small number of b. peripheral route- where attitude formation or change recent purchasers, asking them to recall events leading to their involves comparatively much less thought and is a purchase. consequence of the association of a brand with either Prospective method- they can locate consumers who plan to positive or negative peripheral cues. buy the product and ask them to think out loud about going through the buying Low-Involvement Marketing Strategies process. Absence of significant brand differences. Prescriptive method- they can ask consumers to describe the Four techniques to try to convert a low-involvement product ideal way to buy the product. into one of higher involvement: 1. They can link the product to some involving issue. 2. They can link the product to some involving personal situation. 3. They might design advertising to trigger strong emotional related to personal values or ego defense. 4. They might add an important feature. Variety Seeking Buying Behavior The market leader and the minor brands in this product category have different marketing strategies. The market leader try will try to encourage habitual buying behavior by dominating the shelf space with a variety of related but different product versions, avoiding cuts-of-stock conditions, and sponsoring frequent reminder advertising. Challenger firms will encourage variety seeking by offering lower prices, deals, coupons, free samples, and advertising that tries to break the consumer’s purchase and consumption cycle and presents reasons for trying something new. Decision Heuristics and Biases 1. The availability heuristic- consumers based their prediction on the quickness and ease of with which a particular example of an outcome comes to mind. 2. The representativeness heuristic- consumers based their predictions on how representative or similar the outcome is to other examples. 3. The anchoring and adjustment heuristic- consumers arrived at an initial judgment and then make adjustments of that first impression based on additional information. Mental Accounting Refers to the manner by which consumers code, categorize, and evaluate financial outcomes of choices. Lecture 5 Individual Marketing The ultimate level of segmentation leads to “segments of one” “customized marketing” or “one to Market Segment and Targets one” marketing. Customerization Combines operationally driven mass customization with Levels of Market Segmentation customized marketing in a way that empowers consumers to The starting point for discussing segmentation is design product and service offering of their choice. Mass Marketing. In Mass Marketing the seller engages in the Mass Bases for Segmenting Consumer Market Production, Mass Distribution, and Mass Promotion o one Two broad groups of variable are used to segment consumer product to all buyers. market. Some researchers try to form segment by looking by descriptive characteristics: Geographic, demographic, and Segment Marketing psychographic. consist of a group of customers who share a different set of Other researchers try to form segments by looking at needs and wants. behavioral consideration such as consumer responses to The Market does not create the segments, the marketer’s benefits use, use occasions, or brands. task is to identify the segments and decide which one(s) to target. Geographic Segmentation Calls or dividing the market into different geographical units Flexible Market Offering such as nations, states, regions, countries, cities or Naked Solution Containing the product and service elements neighborhoods. that all members segment value. Demographic Segmentation Discretionary Option Some members segment value. The market divided into groups on the basis of variables such as age, family size, family lie cycle, gender, income, occupation, Preference Patterns education, religion, race, generation, nationality, and social Homogeneous preferences class. Shows a market where all the consumers have roughly the same preference. The market shows no natural segment. Age and Life-cycle stage Diffused preferences Consumer wants and abilities change with age. Such as It may be scattered throughout the space, indicating that toothpaste that offer three main lines of product to target kids, consumers vary greatly in their preference. adults, and older consumers. And also pampers that offer their Clustered preference product for newborn, infant, cruiser, toddler, explorer, and The market might reveal distinct preference cluster, called preschooler. Natural Market Segment. Life stage Defines a person a major concern, such as going through a Niche Marketing divorce, going into a second, is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify Niches by Marriage, taking care of an older parent, deciding to bye a new dividing a segment into sub-segments. home, and so on. Gender Men and women tend to have different attitudinal Local Marketing and behavioral orientations, based partly on generic make up target marketing is leading to marketing programs tailored and partly on socialization. Gender differentiation has long to the needs and wants of local customers groups. (trading been applied in clothing, hairstyling, cosmetics, and areas, neighborhoods, even individual stores) magazines. Local marketing is particularly important in countries with strong regional differences. Income Income segmentation is a long standing practice in such product and service categories as automobiles, clothing Local marketing reflects a growing trend called grassroots cosmetics, financial services and travels. marketing. GRASSROOTS MARKETING Generation Each generation is profoundly influence by the Sometimes known as Guerilla marketing, starts from the times in which it grows up- the music, movies, politics, and ground up. Instead of launching a message you hope will defining events in this period. appeal to many people you target your efforts to a small group and hope the group will spread your message to a much larger Psychographic Segmentation audience. Psychographics is the science of using psychology and demographics to better understand consumers. The four groups with higher resources are: The AMERICAN MARKETING ASSOCIATION defines a brand as 1. Innovators - Successful, sophisticated, active, and “take a “name, term, symbol, or design, or combination of them. charge” people with high self-esteem. Purchases often reflect In fine arts, branding began with artistic signing their works. cultivated tastes for relatively upscale, niche-oriented products and services. ROLE OF BRANDS 2. Thinkers - Mature, satisfied, and reflective people who are Brands identify the source or maker of a product and allow motivated by ideas and value order, knowledge, and consumers – either individuals or organizations – to assign responsibility. Favor durability, functionality, and value in responsibility to a particular manufacturer or distributor. products. Consumers may evaluate the identical product differently 3. Achievers - Successful career-and work-oriented people who depending on how it is branded. value consensus and stability. Favor established and prestige Brands also perform valuable functions for firms. They products that demonstrate success to their peers. simplify product handling or tracing. 4. Experiencers - Young enthusiastic, and impulsive people Brands help to organize inventory and accounting records. who seek variety and excitement. Spend a comparatively high A brand also offers the firm legal protection for unique proportion and income on fashion, entertainment, and features or aspects of the product. socializing. Branding can also be seen as a powerful means to secure a competitive advantage. The major tendencies of the four groups with lower resources are: DEFINING BRAND EQUITY 1. Believers - conservative, conventional, and traditional Brand equity is the added value endowed to products and people with concrete beliefs. Favor and familiar and services. established products are loyal to established brands. Brand equity is an important intangible asset to the firm that 2. Strivers - Trendy and fun-loving people who seek approval has psychological and financial value. of others but are resource-constrained. Favor stylish products Consumer-based brand equity can be defined as the that emulate the purchase of those who greater material differential effect that brand knowledge has on consumer wealth. response to the marketing of that brand. 3. Makers - Practical, self-sufficient, traditional, family-oriented people who focus on their work and home context. Favor basic Brand promise the marketers vision of what the brand must products with a practical or functional purpose. be and do for consumers. 4. Strugglers - elderly, resigned, and passive people who are concerned about change. Loyal to their favorite brands. FOUR TYPES OF EAST ASIAN BRANDS 1. Golden assets - these refer to natural commodities such as Behavioral Segmentation In behavioral segmentation, buyers rice, wheat, fruit, tea, fish, cotton, timber, rubber, and minerals are divided into groups on the basis of their knowledge of which are abundant in the region and usually exported. attitude toward, use of, or response to a product. 2. Acquired assets - these refer to a branding opportunity on the back of an identity that enjoys strong credibility. DECISION ROLES 3. Potential assets - These refer to a building a global Asian People play five roles in buying decision: brand from scratch. initiator 4. Combining acquired assets with potential assets - This influencer hybrid approach may be achievable in the arts and decider entertainment industry by leveraging Asia’s extraordinary Buyer history. user. BEHAVIORAL VARIABLES Many marketers believe that BRAND IDENTITY The unique set of brand associations that behavioral variables – Occasion, benefits, user status, usage represents what the brand stands for and promises to rate, loyalty status, buyer-readiness stage, and attitude – are customers the best starting points for constructing market segments. Brand Audit a consumer-focused series of THE CONVERSION MODEL The conversion model has been procedures to assess the health of the brand, uncover its developed to measure the strength of the psychological sources of brand equity, and suggest ways to improve and commitment between brands and consumers and their leverage its equity. openness to change. BRAND PORTFOLIOS the set of all brand lines a particular Understanding and Developing Brand Equity firm offers for sale to buyers in a particular category. WHAT IS BRAND EQUITY? A category of products that are all made by a particular company and all have a particular name. Lecture 6 * Raw materials – Falls into two major groups : farm products and natural products. Developing Product Strategy Farm products ( eg. Wheat, Livestock, fruits and vegetables) – they are supplied by many producers Product Characteristics and Classifications who turn over to the market intermediaries. Product Natural products – they are limited in supply. They will - Is anything that that can be offered to a market to satisfy a usually bulk and low unit value and must be moved want or need. It includes physical goods, services, experiences, from producer to user. events, persons, places, properties, organizations, information, and ideas. Materials and parts * Manufactured materials and parts – fall into two categories: component materials and component parts. Component materials – are usually fabricated further ;means that the price and supplier reliability are key purchase factors. Component parts – enter the finished product with no further change in form. Capital Items - Are long-lasting goods that facilitate developing or managing the finished product. - They include two groups : installations and equipment. Installation – consists of buildings and heavy equipment. They are both directly from the producer Product Classifications: with a long negotiation needed. According durability and tangibility Equipment – comprises portable factory equipment Non-durable goods - These are tangible goods normally and tools and office equipment. It do not become consumed in one or a few uses. part of a finished product.. Durable goods - Tangible goods that normally survive many uses. Supplies and business services Services - These are intangible, inseparable, variable and - Are short-term goods and services that facilitate developing perishable products. or managing the finished products. - Supplies are of two kinds: maintenance and repair items According to consumer goods (includes paint , nails, and brooms); and operating supplies Convenience goods - Frequently, immediately and with a (includes coal , writing paper , pencils). minimum effort. - Business services include maintenance and repair services ( * Staples – consumer purchase on a regular basis. like window cleaning , watch repair, etc.) and business advisory * Emergency goods – purchased when a need is urgent. services (legal, management consulting , advertising, etc). Shopping goods - Are goods that the customer will go process Differentiation of selection and purchase , characteristically compares on such - Product must be differentiated to be branded. Physical bases such as suitability, quality, price and style. products vary in their potential for differentiation. * Homogeneous Shopping goods – are similar in quality but different enough in price to justify shopping PRODUCT DIFFRENTIATION comparisons. Form - It includes the size, shape, or physical structure of a * Heterogeneous Shopping goods – differ in product product features and services that may be more important than price. Features - It will supplement the basic or the main function of the certain product. Specialty goods - Have a unique characteristics or brand Customization - Ability of the company to meet each other identification for which a sufficient number of buyers are customer`s requirements. willing to make a special purchasing effort. Performance Quality - Is the level at which the product Unsought goods - The consumer does not know about or primary characteristics operate. does not normally think of buying. Conformance quality - The degree to which all the produced units are identical and meet the According to Industrial goods promised specifications. Materials and parts Durability - Is a measure of the product`s expected operating - Goods that are enter the manufacturer`s product completely life under natural or stressful conditions, is a valued attribute - Falls into two classes: the raw materials and the for certain products. manufactured materials and parts.  Reliability - Is a measure of the profitability that a product Product Systems will not malfunction or fail within a specified time period. - Is a group of diverse but related items that function in a Reparability - Is a measure of thee ease of fixing a product compatible manner. when it malfunctions or fails. Style - Describe the product`s look and feel to the buyer. It Product-Line Analysis has the advantage of creating distinctiveness that is difficult to - In offering a product line , companies normally develop a copy. basic platform and modules that can be added to meet Design - Is the totality of the features that effects how a different customer requirements. products looks and functions in terms of customer requirements. Line Stretching - Occurs when a company lengthens its product line beyond its SERVICES DIFFERENTIATION current range. Ordering Ease - Refers to how easy it is for the customer to Down-Market Stretch place a order with the company. - A company may want to introduce a lower-priced line for an Delivery - Refers to how well the product or service is of three reasons: delivered to the customer. 1. The company may notice strong growth opportunities as Installation - Refers to the work done to make a product mass objectives. operational in its planned location. 2. The company may wish to tie up lower end competitors who Customer Training - Refers to training the customer`s might otherwise try to move-up market. employees to use the vendor`s equipment properly and 3. The company may find that its market is stagnating or efficiency. declining up-market stretch. Customer Consulting - Refers to the data, information systems, and advice services Two- way Stretch that the seller offers to buyers. - Companies serving the middle market might decide to stretch Maintenance and Repair - Describe the service program for their line in both directions. helping customers keep purchased products in good working Line Filling order. - Is overdone if its results in self-cannibalization and strong Returns - Having two ways of returns : Controllable and customer confusion Uncontrollable Returns Controllable Returns – these from problems , Product – Mix Pricing difficulties or errors of the seller or customer and can - Price setting logic must be modified when the product is part mostly be eliminated with the proper strategies and of a product mix. programs by the company or it`s supply chain Product – Line Pricing partners. - Companies normally develop product lines rather than single Uncontrollable Returns - these cannot be eliminated products and introduce price steps. by the company in the short run though any of these means. Optional- feature pricing - Many companies offer optional products, features, and Product and Brand Relationships services along with their main product. The Product Hierarchy Captive- product pricing 1. Need Family - The core need that underlies the existence of - Some products require the use of ancillary or captive a product, family. products. 2. Product Family - All the product classes that can satisfy a core Two – Part Pricing need with reasonable effectiveness. - Service firms often engage in two part pricing , consisting a 3. Product class - A group of products within a product family fixed fee plus a variable usage fee. recognized as a certain functional coherence. Also known as By product Pricing Product Category. - The product of certain goods such as meats , petroleum 4. Product Line - A group of products within a product class that products, and other results in by0 products. are closely related. Product – Binding Pricing 5. Product Type - A group of items within a product line that - Seller often bundle products and features. share one of several possible forms of the product. 6. Item - Also called stock keeping unit or product variant. A distinct unit within a brand or product line. Product Systems and Mixes Product Mix - Also called a product assortment. The set of all products and items , a particular seller offers for sale.  Co- branding and Ingredient Branding Warranties - Are formal statements of expected product performance by Co- Branding the manufacturer. - Products that are often combined with products from other Guarantees companies in various ways - Reduce the buyers buying risk. Ingredient Branding - Is a special case of co- branding. It involves creating brand equity for materials, components, or parts that are necessary contained within other branded products. Packaging, Labeling, Warranties and Guarantees Packaging - Activity of designing and producing the container for a product. Packages might include the three levels of material : Primary Package ; Secondary Package ; Shipping Package. - We must include packaging as a styling weapon. Various factors have contributed to the growing use of packaging as a marketing tool: Self Service – more products are being sold to the self- service basis. The effective package must perform many of the sales tasks; attract attention , describe the product`s feature , create consumer confidence , and make overall reaction. Consumer Affluence – means consumers are willing to pay a little more for the convenience , appearance , dependability, and prestige of better packages. Company and brand image – packages contribute to instant recognition of the company or brand. Innovation opportunity – innovative packaging can bring large benefits to consumers and profits to producers. Protecting Intellectual property rights – wanted that the packaging is hard to copy by the competitor in order to protect the image. Structural design is crucial; it must be harmonized. After packaging is designed it must undergo to the following test: Engineering test – ensure the package under normal condition Visual test – ensure that script is legible and color harmonious Dealer test – ensure that dealers find the package attractive and east to handle Consumer test – ensure favorable consumer response. Labeling - A simple tag attached to the product or an elaborately designed graphic that is part of the package. Labeling performs several functions: * Identifies the product or brand – label might also grade the product. * Describe the product –Who made it ; Where it made ; When it was made ; What contains ; How it is to be used and How it be used safety. * Promote the product – the product was promoted through the attractive graphics. Lecture 7 Return an online-ordered product to a nearby store of the retailer DESIGNING AND MANAGING INTEGRATED MARKETING Receive discounts and promotional offers based on total CHANNELS online and offline purchases MARKETING CHANNELS AND VALUE NETWORKS VALUE NETWORKS ❖Most producers do not sell their goods directly to the final a system of partnerships and alliances that a firm creates to users; between them stands a set of intermediaries performing source, augment, and deliver its offerings. a variety of functions. ❖ These intermediaries constitute a marketing channel (also Demand chain planning called a trade channel or distribution channel). - The company should first think of the target market, however, and then design the supply chain backward from that point. MARKETING CHANNELS - sets of interdependent organizations participating in the Demand chain planning yields several insights. process of making a product or service available for use or First, the company can estimate whether more money is made consumption. upstream or downstream, in case it can integrate backward or - set of pathways a product or service follows after production, forward. culminating in purchase and consumption by the final end user. Second, the company is more aware of disturbances anywhere in the supply chain that might change costs, prices, or supplies. SOME CHANNELS Third, companies can go online with their business partners to ❖ Wholesalers and retailers—buy, take title to products. speed communications, transactions, and payments; reduce ❖ Merchants - resell the merchandise. costs; and increase accuracy. ❖ Agents (such as brokers, manufacturers’ representatives, sales agents) - search for customers and may negotiate on the THE ROLE OF MARKETING CHANNELS producer’s behalf but do not take title to the goods Through producers’ contacts, experience, specialization, and ❖ Facilitators (such as transportation companies, independent scale of operation, intermediaries make goods widely available warehouses, banks, advertising agencies) – assist in the and accessible to target markets, usually offering the firm more distribution process but neither take title to goods nor effectiveness and efficiency than it can achieve on its own. negotiate purchases or sales. CHANNEL LEVELS THE IMPORTANCE OF CHANNELS A marketing channel performs the work of moving goods from - the channels chosen affect all other marketing decisions. producers to consumers. Marketing channel system Zero-level channel - is the particular set of marketing channels a firm employs, and - also called a direct marketing channel, consists of a decisions about it are among the most critical ones manufacturer selling directly to the final customer. management faces. One-level channel - contains one selling intermediary, such as a retailer. Push strategy Two-level channel - uses the manufacturer’s sales force, trade promotion money, - contains two intermediaries typically a wholesaler and a or other means to induce intermediaries to carry, promote, retailer. and sell the product to end users. Three-level channel Pull strategy - contains three intermediaries wholesalers sell to jobbers, - the manufacturer uses advertising, essentially small-scale wholesalers, who sell to small retailers. promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus REVERSE-FLOW CHANNELS inducing the intermediaries to order it. are also important (1) to reuse products or containers (such as refillable chemical- HYBRID CHANNELS AND MULTICHANNEL MARKETING carrying drums), ❖ Hybrid channels or multichannel marketing occurs when a (2) to refurbish products for resale (such as circuit boards or single firm uses two or more marketing channels to reach computers), customer segments. (3) to recycle products (such as paper), and (4) to dispose of products and packaging. ❖ Customers expect channel integration, which allows them to: Order a product online and pick it up at a convenient retail location SERVICE SECTOR CHANNELS IDENTIFYING MAJOR CHANNEL ALTERNATIVES Nonprofit service organizations such as schools develop “educational-dissemination systems” and hospitals develop Channel alternatives differ in three ways: the types of “health-delivery systems.” These institutions must figure out intermediaries, the number needed, and the terms and agencies and locations for reaching a far-flung population. responsibilities of each. CHANNEL-DESIGN DECISIONS TYPES OF INTERMEDIARIES - To design a marketing channel system, marketers analyze Expand the company's direct sales force. customer needs and wants, establish channel objectives and Hire manufacturers' agents. constraints, and identify and evaluate major channel Find distributors. alternatives. NUMBER OF INTERMEDIARIES ANALYZING CUSTOMER NEEDS AND WANTS Exclusive distribution - means severely limiting the number of Consumers may choose the channels they prefer based on intermediaries. price, product assortment, and convenience, as well as their Selective distribution - relies on only some of the own shopping goals (economic, social, or experiential). intermediaries willing to carry a particular product. Intensive distribution - places the goods or services in as many Three types of shoppers: outlets as possible. 1. Service/quality customers - who cared most about the variety and performance of products and service. TERMS AND RESPONSIBILITIES OF CHANNEL MEMBER 2. Price/value customers - who were most concerned about - Price policy calls for the producer to establish a price list and spending wisely, and schedule of discounts and allowances that intermediaries see 3. Affinity customers - who primarily sought stores that suited as equitable and sufficient. people like themselves or groups they aspired to join. - Conditions of sale refers to payment terms and producer guarantees. CHANNELS PRODUCE FIVE SERVICE OUTPUTS: - Distributors’ territorial rights define the distributors’ Lot size territories and the terms under which the producer will Waiting and delivery time enfranchise other distributors Spatial convenience - Mutual services and responsibilities must be carefully Product variety spelled out, especially in franchised and exclusive-agency Service backup channels. LOT SIZE CHANNEL-MANAGEMENT DECISIONS The number of units the channel permits a typical customer to CHANNEL POWER - is the ability to alter channel members’ purchase on one occasion. behavior so they take actions they would not have taken otherwise. WAITING AND DELIVERY TIME The average time customers wait for receipt of goods. Types of power Customers increasingly prefer faster delivery channels. ❑Coercive power - a manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to SPATIAL CONVENIENCE cooperate. The degree to which the marketing channel makes it easy for ❑Reward power - the manufacturer offs intermediaries an customers to purchase the product. extra benefit for performing specific acts or functions. ❑Legitimate power - the manufacturer requests a behavior PRODUCT VARIETY that is warranted under the contract. The assortment breadth provided by the marketing channel. ❑Expert power - the manufacturer has special knowledge that Normally, customers prefer a greater assortment because the intermediaries value. more choices increase the chance of finding what they need. ❑Referent power - the manufacturer is so highly respected that intermediaries are proud to be associated with it. SERVICE BACKUP The add-on services (credit, delivery, installation, repairs) provided by the channel. The greater the service backup, the greater the work provided by the channel.  THREE TYPES OF VERTICAL MARKETING SYSTEM (VMS) Joint Memberships Marketers can encourage joint memberships in trade Three types of Contractual Relationship associations. A. Wholesaler-sponsored voluntary chains - wholesaler Co-option organize voluntary chains of independent retailers to help Is an effort by one organization to win the support of the them compete with large chain organizations. leaders of another by including them in advisory councils, B. Retailer Cooperatives - retailers take the initiative and boards of directors, and the like. organize a new business entity to carry on wholesaling and possibly some production. Diplomacy, Mediation, and Arbitration C. Franchise Organization - most common type of contractual Diplomacy takes place when each side sends a person or group relationship. to meet with its counterpart to resolve the conflict. Mediation relies on a neutral third party skilled in conciliating the two CONFLICT, COOPERATION , AND COMPETITION parties’ interests. In arbitration two par ties agree to present their arguments to one or more arbitrators and accept their Channel conflict - is generated when one channel member’s decision. actions prevent another channel from achieving its goal. Channel coordination - occurs when channel members are Legal Recourse brought together to advance the goals of the channel, as If nothing else proves effective, a channel partner may choose opposed to their own potentially incompatible goals to file a lawsuit. TYPES OF CONFLICT AND COMPETITION E-COMMERCE MARKETING PRACTICES ❖Horizontal channel conflict occurs between channel E-business members at the same level. Describes the use of electronic means and platforms to ❖Vertical channel conflict occurs between different levels of conduct a company’s business the channel. E-commerce ❖Multichannel conflict exists when the manufacturer has Means that the company or site offers to transact or facilitate established two or more channels that sell to the same market. the selling of products or services online. E-commerce has given in turn to e-purchasing and e- CAUSES OF CHANNEL CONFLICT marketing. Goal incompatibility. The manufacturer may want to achieve E-purchasing rapid market penetration through a low-price policy. Means companies decide to purchase goods, services, and Unclear roles and rights. Territory boundaries and credit for information from various online suppliers. Smart e-purchasing sales often produce conflict. has already saved companies millions of dollars. Differences in perception. The manufacturer may be optimistic about the short-term economic outlook and want dealers to carry higher inventory. Intermediaries’ dependence on the manufacturer. The fortunes of exclusive dealers, such as auto dealers, are profoundly affected by the manufacturer’s product and pricing decisions. MANAGING CHANNEL CONFLICT Strategic Justification a convincing strategic justification that they serve distinctive segments and do not compete as much as they might think can reduce potential for conflict among channel members. Dual Compensation pays existing channels for sales made through new channels. Superordinate Goals Channel members can come to an agreement on the fundamental or superordinate goal they are jointly seeking, whether it is survival, market share, high quality, or customer satisfaction. Employee Exchange A useful step is to exchange persons between two or more channel levels. Lecture 8 Low and Morh found that managers allocated less to Managing Mass Communication : Advertising, Sales advertising as brands move to the more mare phase of PLC. Promotion, Events and Public Relations Advertising Frequency →The number of repetitions needed to put across the brand’s ADVERTISING message to consumers has an important impact on the ►Is any paid form of non-personal presentation and advertising budget promotion of ideas, goods, or services by an identified sponsor. 3. Message ✓What Message Should be Sent? Communication Companies ►companies that assists clients to improve their overall Developing the Advertising Campaign communications effectively by offering strategic and practical In designing & developing an ad campaign, it is important to advice on many forms of communication. distinguish the message strategy or positioning of an ad--- what the ad attempts to convey about the brand –and its creative strategy how the ad expresses the brand claims so designing effective advertising campaign is both an art & a science Creative Development and Execution →The ad’s impact depends not only on what is said, but often more important, on how it is said. → Execution can be decisive. →Every advertising medium has a specific advantages and disadvantages. THE 5 M’S OF ADVERTISING Advertising Media 1. Mission TELEVISION ADS ✓What are the advertising objectives? →Is generally acknowledge as the most powerful advertising medium and reach a broad spectrum of consumers ADVERTISING GOAL (OR OBJECTIVE) → wide reach translates to low cost per exposure. ► A specific communications task and achievement level to be PRINT ADS accomplished with a specific audience in a specific period of →Offers a stark contrast to broadcast media. time. → It can be fairly passive medium. → There are two main print media: Advertising objectives can be classified to: a) Magazine a. INFORMATIVE ADVERTISING b) Newspaper → aims to create brand awareness and knowledge of new RADIO ADS products or new features of existing products →Pervasive medium b. PERSUASIVE ADVERTISING → flexible → aims to create liking, preference, conviction and purchase of → relatively inexpensive a product or service Legal and Social Issues c. REMINDER ADVERTISING →Advertisers should not make false claims, such as stating that →aims to stimulate repeat purchase of products and services a product cures something when it doesn’t d. REINFORCEMENT ADVERTISING →Must avoid false demonstrations →aims to convince current purchases that they made the right choice 4. Media ✓What Media Should used? 2. Money ✓How much can be spent? There are steps in deciding on Media and Measuring Effectiveness Factors Affecting Budget Deci