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Principles of Marketing Seventeenth Edition Chapter 1 Marketing: Creating Customer Value and Engagement Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights...

Principles of Marketing Seventeenth Edition Chapter 1 Marketing: Creating Customer Value and Engagement Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 1-1 Define marketing and outline the steps in the marketing process. 1-2 Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts. 1-3 Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy. 1-4 Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return. 1-5 Describe the major trends and forces that are changing the marketing landscape in this age of relationships. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Define marketing and outline the steps in the marketing process. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What is Marketing? Marketing is a process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What is Marketing? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Understanding the Marketplace and Customer Needs Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Understanding the Marketplace and Customer Needs 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Understanding the Marketplace and Customer Needs A market is set of actual and potential buyers. Consumers market when they: search for products interact with companies to obtain information make purchases Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Understanding the Marketplace and Customer Needs Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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)? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy A brand’s value proposition is the set of benefits or values it promises to deliver to customers to satisfy their needs. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy Societal Production Product Selling Marketing Marketing concept concept concept concept concept Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy The marketing mix is comprised of a set of tools known a the four Ps: product price promotion place Integrated marketing program—a comprehensive plan that communicates and delivers intended value Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Relationship Building Blocks Customer- Customer perceived value satisfaction The difference The extent to between total which perceived customer performance perceived matches a benefits and buyer’s customer cost expectations Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Customer-Engagement Marketing fosters direct and continuous customer involvement in shaping brand conversations, experiences, and community. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Consumer-Generated Marketing Brand exchanges created by consumers themselves. Consumers are playing an increasing role in shaping brand experiences. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Partner relationship management involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Share of customer is the portion of the customer’s purchasing that a company gets in its product categories. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Customer equity is the total combined customer lifetime values of all of the company’s customers. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 5 Describe the major trends and forces that are changing the marketing landscape in this age of relationships. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Changing Marketing Landscape Digital and social media marketing involves using digital marketing tools such as web sites, social media, mobile ads and apps, online videos, e-mail, and blogs that engage consumers anywhere, at any time, via their digital devices. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Changing Marketing Landscape Not-for-profit marketing growth Rapid globalization Sustainable marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. So, What Is Marketing? Pulling It All Together Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 2 Partnering to Build Customer Engagement, Value, and Relationships Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 2-1 Explain company-wide strategic planning and its four steps. 2-2 Discuss how to design business portfolios and develop growth strategies. 2-3 Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value. 2-4 Describe the elements of a customer value-driven marketing strategy and mix, and the forces that influence it. 2-5 List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Explain company-wide strategic planning and its four steps. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Company-Wide Strategic Planning (1 of 3) Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities, and its changing marketing opportunities. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Company-Wide Strategic Planning Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Company-Wide Strategic Planning The mission statement is the organization’s purpose; what it wants to accomplish in the larger environment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Company-Wide Strategic Planning Setting Company Objectives and Goals Business Marketing objectives objectives Build profitable Increase customer market share relationships Create local Invest in partnerships research Increase Improve profits promotion Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Discuss how to design business portfolios and develop growth strategies. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio The business portfolio is the collection of businesses and products that make up the company. Portfolio analysis is a major activity in strategic planning whereby management evaluates the products and businesses that make up the company. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Strategic business units can be a Company division Product line within a division Single product or brand Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Analyzing The Current Business Portfolio Identify strategic business units (SBUs) Assess the attractiveness of its various SBUs Decide how much support each SBU deserves Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Problems with Matrix Approaches Difficulty in defining SBUs and measuring market share and growth Time consuming Expensive Focus on current businesses, not future planning Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Developing Strategies for Growth and Downsizing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing The Business Portfolio Developing Strategies for Growth and Downsizing Downsizing is when a company must prune, harvest, or divest businesses that are unprofitable or that no longer fit the strategy. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Planning Marketing: Partnering to Build Customer Relationships (1 of 3) Partnering with Other Company Departments Value chain is a series of departments that carry out value creating activities to design, produce, market, deliver, and support a firm’s products. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Planning Marketing: Partnering to Build Customer Relationships (2 of 3) Partnering with Other Company Departments Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Planning Marketing: Partnering to Build Customer Relationships (3 of 3) Partnering with Others in the Marketing System Value delivery network is made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve performance of the entire system. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Describe the elements of a customer value-driven marketing strategy and mix, and the forces that influence it. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Marketing strategy is the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Market segmentation is the division of a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing mixes. Market segment is a group of consumers who respond in a similar way to a given set of marketing efforts. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Market positioning is the arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Differentiation begins the positioning process. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Positioning: Southwest’s positioning as “The LUV Airline” is reinforced by the colorful heart in its new logo and plane redesign. Southwest has “always put Heart in everything it does.” Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Developing an Integrated Marketing Mix Marketing mix is the set of controllable, tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it wants in the target market. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Marketing Strategy and the Marketing Mix Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 5 List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing the Marketing Effort Figure 2.6 Analysis, Planning, Implementation, and Control Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing the Marketing Effort Figure 2.7 Marketing Analysis: SWOT Analysis Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Managing the Marketing Effort Market Planning—Parts of a Marketing Plan Executive Marketing Threats and summary situation opportunities Objectives and Marketing Action issues strategy programs Budgets Controls Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing the Marketing Effort Marketing Implementation Turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives Addresses who, where, when, and how Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Measuring and Managing Return on Marketing Investment Return on Marketing Investment (Marketing ROI) Net return from a marketing investment divided by the costs of the marketing investment Measurement of the profits generated by investments in marketing activities Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Measuring and Managing Return on Marketing Investment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 3 Analyzing the Marketing Environment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 3-1 Describe the environmental forces that affect the company’s ability to serve its customers. 3-2 Explain how changes in the demographic and economic environments affect marketing decisions. 3-3 Identify the major trends in the firm’s natural and technological environments. 3-4 Explain the key changes in the political and cultural environments. 3-5 Discuss how companies can react to the marketing environment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Describe the environmental forces that affect the company’s ability to serve its customers. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A Company’s Marketing Environment 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A Company’s Marketing Environment Macroenvironment consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment The Company In designing marketing plans, marketing management takes other company groups into account. Top management Finance R&D Purchasing Operations Accounting Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment Suppliers Provide the resources to produce goods and services Treat as partners to provide customer value Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment Marketing Intermediaries Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment Marketing Intermediaries Physical Resellers distribution firms Marketing Financial services intermediaries agencies Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  The Microenvironment Competitors Firms must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment Publics 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Microenvironment Customers Consumer markets Business markets Reseller markets Government markets International markets Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Explain how changes in the demographic and economic environments affect marketing decisions. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macro environment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Demographic Environment Baby Boomers – born 1946 to 1964 Generation X – born between 1965 and 1976 Millennials – born between 1977 and 2000 Generation Z – born after 2000 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  The Macroenvironment Demographic Environment Generational marketing is important in segmenting people by lifestyle or life stage instead of age. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Demographic Environment Changing American family Changes in the workforce Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Demographic Environment Geographic Shifts in Population Growth in U.S. West and South and decline in Midwest and Northeast Change in where people work  Telecommuting  Home office Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Demographic Environment Markets are becoming more diverse. International National Ethnicity Gay and lesbian Disabled Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Economic Environment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Economic Environment Changes in Consumer Spending Value marketing involves offering financially cautious buyers greater value—the right combination of quality and service at a fair price. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Economic Environment Income Distribution Over the past several decades, the rich have grown richer, the middle class has shrunk, and the poor have remained poor. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 Identify the major trends in the firm’s natural and technological environments. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment The Natural Environment Trends in the Natural Environment Growing shortages of raw materials Increased pollution Increased government intervention Developing strategies that support environmental sustainability Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Natural Environment Environmental sustainability involves developing strategies and practices that create a world economy that the planet can support indefinitely. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Technological Environment Most dramatic force in changing the marketplace New products, opportunities Concern for the safety of new products Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Explain the key changes in the political and cultural environments. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment 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 behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Macroenvironment Political and Social Environment Increased emphasis on ethics Socially responsible behavior Cause-related marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  The Macroenvironment Cultural Environment The cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  The Macroenvironment Cultural Environment 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 5 Discuss how companies can react to the marketing environment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Responding to the Marketing Environment Views on Responding Uncontrollable Proactive Reactive React and Take Watch and adapt to aggressive react to forces in the actions to forces in the environment affect forces environment in the environment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 5 Consumer Markets and Buyer Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 5-1 Define the consumer market and construct a simple model of consumer buyer behavior. 5-2 Name the four major factors that influence consumer buyer behavior. 5-3 List and define the major types of buying decision behavior and the stages in the buyer decision process. 5-4 Describe the adoption and diffusion process for new products. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Define the consumer market and construct a simple model of consumer buyer behavior. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Consumer Markets and Buyer Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Name the four major factors that influence consumer buyer behavior. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Cultural Factors Subcultures are groups of people within a culture with shared value systems based on common life experiences and situations. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Cultural Factors 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Cultural Factors Major American Social Classes Upper Class Middle Class Working Class Lower Class Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Social Factors Groups and Social Networks Membership Aspirational Reference Groups Groups Groups Groups with Groups an Groups that direct individual form a influence wishes to comparison and to belong to or reference which a in forming person attitudes or belongs behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Groups and Social Networks Online social networks Buzz marketing Social media sites Virtual worlds Word of mouth Opinion leaders Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Social Factors Family is the most important consumer-buying organization in society. Role and status can be defined by a person’s position in a group. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Age and life-cycle stage PRIZM Lifestage Groups system  66 segments  11 life-stage groups Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Occupation affects the goods and services bought by consumers. Economic situations include trends in: Personal Interest Spending Savings income rates Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Lifestyle is a person’s pattern of living as expressed in his or her psychographics. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Personality refers to the unique psychological characteristics that distinguish a person or group. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Brand Personality Traits Sincerity Excitement Competence Sophistication Ruggedness Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Developing Marketing Information Psychological Factors Motivation Perception Learning Beliefs and attitudes Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Characteristics Affecting Consumer Behavior Psychological Factors 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Developing Marketing Information Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Perceptual Processes Selective Selective Selective attention distortion retention Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors Selective attention is the tendency for people to screen out most of the information to which they are exposed. 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors Learning is the change in an individual’s behavior arising from experience and occurs through the interplay of: Drives Stimuli Cues Responses Reinforcement Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 List and define the major types of buying decision behavior and the stages in the buyer decision process. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Types of Buying Decision Behavior Complex buying behavior Dissonance-reducing buying behavior Habitual buying behavior Variety-seeking buying behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Types of Buying Decision Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 5.5 The Buyer Decision Process Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process Postpurchase Behavior Postpurchase behavior is the stage of the buyer decision process in which consumers take further action after purchase, based on their satisfaction or dissatisfaction. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process Postpurchase Behavior Cognitive dissonance is buyer discomfort caused by postpurchase conflict. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Describe the adoption and diffusion process for new products. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process for New Products Individual Differences in Innovativeness Innovators Early Adopters Early Mainstream Late Mainstream Lagging Adopters Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Buyer Decision Process for New Products Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Analyzing and Using Marketing Information Influence of Product Characteristics on Rate of Adoption Relative Compatibility Complexity advantage Divisibility Communicability Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 6 Business Markets and Business Buyer Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 6-1 Define the business market and explain how business markets differ from consumer markets. 6-2 Identify the major factors that influence business buyer behavior. 6-3 List and define the steps in the business buying decision process. 6-4 Discuss how new information technologies and online, mobile, and social media have changed business-to-business marketing. 6-5 Compare the institutional and government markets and explain how institutional and government buyers make their buying decisions. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Define the business market and explain how business markets differ from consumer markets. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Business Markets Market Structure and Demand Fewer but larger buyers Derived demand Inelastic demand Fluctuating demand Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Markets 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Markets Decision Process 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Identify the major factors that influence business buyer behavior. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior Major Types of Buying Situations Systems selling is buying a complete solution to a problem from a single seller. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior 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 Influencers Deciders Purchasers Gatekeepers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior Participants in the Business Buying 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior Participants in the Business Buying Process 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Buyer Behavior Figure 6.2 Major Influences on Business Buying Behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Business Buyer Behavior Major Influences on Business Buying Behavior Economic Personal Factors Factors Price Emotion Service Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Business Buyer Behavior Major Influences on Business Buyers Environmental Factors Demand for Economic Cost of product outlook money Supply of Technology Culture Materials Politics Competition Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Business Buyer Behavior Major Influences on Business Buyers Organizational Factors Objectives Strategies Structure Systems Procedures Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Business Buyer Behavior Major Influences on Business Buyers Interpersonal Factors Influence Expertise Authority Dynamics Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Business Buyer Behavior Major Influences on Business Buyers Individual Factors Motives Perceptions Preferences Age Attitude Income Education toward risk Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 List and define the steps in the business buying decision process. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Business Buying Process Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Business Buying 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Business Buying Process 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Business Buying Process 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Business Buying Process Order-routine specifications includes the final order with the chosen supplier and lists all of the specifications and terms of the purchase. Performance review involves a critique of supplier performance to the order- routine specifications. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Discuss how new information technologies and online, mobile, and social media have changed business-to-business marketing. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. E-Procurement and Online Purchasing Online purchasing Company-buying sites Extranets Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. E-Procurement and Online Purchasing 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 5 Compare the institutional and government markets and explain how institutional and government buyers make their buying decisions. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Institutional and Government Markets 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 7 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 7-1 Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning. 7-2 List and discuss the major bases for segmenting consumer and business markets. 7-3 Explain how companies identify attractive market segments and choose a market-targeting strategy. 7-4 Discuss how companies differentiate and position their products for maximum competitive advantage. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Customer-Driven Marketing Strategy Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 List and discuss the major bases for segmenting consumer and business markets. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Market segmentation requires dividing a market into smaller segments with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting consumer markets Segmenting business markets Segmenting international markets Requirements for effective segmentation Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Market Segmentation Segmenting Consumer Markets Geographi Demograp c hic segmentati segmentati on on Psychograp Behavioral hic segmentati segmentatio on n Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Demographic segmentation divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Psychographic segmentation divides a market into different segments based on social class, lifestyle, or personality characteristics. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Behavioral segmentation divides a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Behavioral Segmentation Occasions Benefits sought User status Usage rate Loyalty status Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Multiple segmentation is used to identify smaller, better-defined target groups. Experian’s Mosaic USA system classifies U.S. households into one of 71 lifestyle segments and 19 levels of affluence. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Market Segmentation Segmenting International Markets Geographic Economic location factors Political and Cultural legal factors factors Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Segmentation Segmenting International Markets Intermarket segmentation involves forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Market Segmentation Requirements for Effective Segmentation Measurable Accessible Substantial Differentiable Actionable Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 Explain how companies identify attractive market segments and choose a market-targeting strategy. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Market Segments A target market is a set of buyers who share common needs or characteristics that the company decides to serve. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Figure 7.2 Market-Targeting Strategies. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Market Segments Undifferentiated marketing targets the whole market with one offer. Mass marketing Focuses on common needs rather than what’s different Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Market Segments 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Markets Concentrated marketing targets a large of a smaller market. Limited company resources Knowledge of the market More effective and efficient Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Market Segments Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local marketing Individual marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Market Segments Local marketing involves tailoring brands and promotion to the needs and wants of local customer segments. Cities Neighborhoods Stores Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Markets 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Market Targeting Selecting Target Market Segments Choosing a targeting strategy depends on Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Discuss how companies differentiate and position their products for maximum competitive advantage. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Product position is the way the product is defined by consumers on important attributes. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Positioning maps show consumer perceptions of marketer’s brands versus competing products on important buying dimensions. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to differentiate along the lines of: Product Services Channels People Image Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy A competitive advantage should be: Important Distinctive Superior Communicable Preemptive Affordable Profitable Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Value proposition is the full mix of benefits upon which a brand is positioned. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Positioning statement summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Positioning Statement Example for Evernote: “To busy multitaskers who need help remembering things, Evernote is a digital content management application that makes it easy to capture and remember moments and ideas from your everyday life using your computer, phone, tablet, and the Web.” Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Differentiation and Positioning 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 8 Products, Services, and Brands: Building Customer Value Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 8-1 Define product and describe the major classifications of products and services. 8-2 Describe the decisions companies make regarding their individual products and services, product lines, and product mixes. 8-3 Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require. 8-4 Discuss branding strategy—the decisions companies make in building and managing their brands. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Define product and describe the major classifications of products and services. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Service is a product that consists of activities, benefits, or satisfactions and that is essentially intangible and does not result in the ownership of anything. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Products, Services, and Experiences Products and services are becoming more commoditized. Companies are now creating and managing customer experiences with their brands or company. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  What Is a Product? Product and Service Classifications Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  What Is a Product? Product and Service Classifications Consumer products Industrial products Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What is a Product? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What is a Product? Product and Service Classifications Consumer products are products and services bought by final consumers for personal consumption. Convenience products Shopping products Specialty products Unsought products Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications Shopping products are less frequently purchased consumer products and services that the customer compares carefully on suitability, quality, price, and style. Furniture Cars Appliances Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications Industrial products are those products purchased for further processing or for use in conducting a business. Materials and parts Capital items Supplies and services Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications Organizations, Persons, Places, and Ideas Organization marketing Person marketing Place marketing Social marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications Person marketing consists of activities undertaken to create, maintain, or change the attitudes or behavior of target consumers toward particular people. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What Is a Product? Product and Service Classifications 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Describe the decisions companies make regarding their individual products and services, product lines, and product mixes. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Figure 8.2 Individual Product Decisions Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Communicate and deliver benefits by product and service attributes. Quality Features Style and design Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Style describes the appearance of the product. Design contributes to a product’s usefulness as well as to its looks. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Packaging involves designing and producing the container or wrapper for a product. Labels identify the product or brand, describe attributes, and provide promotion. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Product support services augment actual products. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Product Line Decisions Product line length is the number of items in the product line. Line stretching Line filling Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product and Service Decisions Product Mix Decisions Product mix consists of all the product lines and items that a particular seller offers for sale. Width Length Depth Consistency Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.  Services Marketing Types of Service Industries Government Private not-for-profit organizations Business organizations Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Figure 8.3 Four Service Characteristics Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms In addition to traditional marketing strategies, service firms often require additional strategies. Service-profit chain Internal marketing Interactive marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Managing service differentiation creates a competitive advantage. Offer Delivery Image Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Managing service quality enables a service firm to differentiate itself by delivering consistently higher quality than its competitors provide. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Managing service productivity refers to the cost side of marketing strategies for service firms. Employee hiring and training Service quantity and quality Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Discuss branding strategy—the decisions companies make in building and managing their brands. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Brand Strategy: Building Strong Brands Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Brand Strategy: Building Strong Brands Building Strong Brands Brand Positioning Marketers can position brands at any of three levels. Attributes Benefits Beliefs and values Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Brand Strategy: Building Strong Brands Building Strong Brands 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 Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Brand Strategy: Building Strong Brands Brand Sponsorship Manufacturer’s brand Private brand Licensed brand Co-brand Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Brand Strategy: Building Strong Brands Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 9 Developing New Products and Managing the Product Life Cycle Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 9-1 Explain how companies find and develop new product ideas. 9-2 List and define the steps in the new product development process and the major considerations in managing this process. 9-3 Describe the stages of the product life cycle and how marketing strategies change during a product’s life cycle. 9-4 Discuss two additional product issues: socially responsible product decisions and international product and services marketing. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Explain how companies find and develop new product ideas. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Strategy Ways to Obtain New Products Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product. New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 List and define the steps in the new product development process and the major considerations in managing this process. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Idea Generation Idea generation is the systematic search for new product ideas. Sources of new product ideas Internal External Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Idea Generation Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs. External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Idea Generation Crowdsourcing involves inviting broad communities of people— customers, employees, independent scientists and researchers, and even the public at large—into the new product innovation process. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Idea Screening Identify good ideas and drop poor ideas R-W-W screening framework: Is it real? Can we win? Is it worth doing? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Concept Development and Testing Product idea is an idea for a possible product that the company can see itself offering to the market. Product concept is a detailed version of the idea stated in meaningful consumer terms. Product image is the way consumers perceive an actual or potential product. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Concept Development and Testing Concept testing refers to testing new product concepts with groups of target consumers. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Marketing Strategy Development Marketing strategy development is designing an initial marketing strategy for a new product based on the product concept. Marketing strategy statement consists of: Target market description Value proposition planned Sales, market-share, and marketing mix Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Business Analysis Business analysis is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Product Development Product development is developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Test Marketing Test marketing is the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Test Marketing Marketing Strategy Development When test When test marketing is marketing is likely unlikely New product with Simple line large investment extension Uncertainty about Copy of product or competitor marketing product program Low costs Management confidence Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. New Product Development Process Commercialization Commercialization involves introducing a new product into the market. When to launch? Where to launch? Planned market rollout? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing New Product Development Successful new product development should be: Customer centered Team based Systematic Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing New Product Development Customer-Centered New Product Development Customer-centered new product development focuses on finding new ways to solve customer problems and creating more customer-satisfying experiences. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing New Product Development Team-Based New Product Development Team-based new product development involves various company departments working closely together, overlapping the steps in the product development process to save time and increase effectiveness. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managing New Product Development Systematic New Product Development Innovation management system  Creates an innovation-oriented company culture  Yields a large number of new product ideas New Product Development in Turbulent Times Tempted to reduce spending May become less competitive Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 3 Describe the stages of the product life cycle and how marketing strategies change during a product’s life cycle. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Product development Zero sales and increasing investment costs Introduction Slow sales and nonexistent profits Growth Rapid market acceptance and increasing profits Maturity Slow sales growth and profits level off or decline Decline Sales fall off and profits drop Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Introduction Stage Slow sales growth Little or no profit High distribution and promotion expenses Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Growth Stage Sales increase New competitors enter the market Profits increase Economies of scale Consumer education Lowering prices to attract more buyers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Maturity Stage Slowdown in sales Many suppliers Substitute products Overcapacity leads to competition Increased promotion and R&D to support sales and profits Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Maturity Stage Modification Strategies Modify the market Modify the product Modify the marketing mix Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Decline Stage Maintain the product Harvest the product Drop the product Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Table 9.2 Part I Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product Life-Cycle Strategies Table 9.2 Part II Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 4 Discuss two additional product issues: socially responsible product decisions and international product and services marketing. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Additional Product and Service Considerations Product Decisions and Social Responsibility Public policy and regulations regarding developing and dropping products, patents, quality, safety, and product warranties should be considered carefully. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Additional Product and Service Considerations International Product and Service Marketing Determining what products and services to introduce in which countries Standardization versus customization Packaging and labeling Customs, values, laws Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 10 Pricing: Understanding and Capturing Customer Value Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives 10-1 Answer the question “What is a price?” and discuss the importance of pricing in today’s fast-changing environment. 10-2 Identify the three major pricing strategies and discuss the importance of understanding customer-value perceptions, company costs, and competitor strategies when setting prices. 10-3 Identify and define the other important external and internal factors affecting a firm’s pricing decisions. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 1 Answer the question “What is a price?” and discuss the importance of pricing in today’s fast-changing environment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objective 2 Identify the three major pricing strategies and discuss the importance of understanding customer-value perceptions, company costs, and competitor strategies when setting prices. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Good-value pricing is offering just the right combination of quality and good service at a fair price. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Value-added pricing attaches value-added features and services to differentiate the companies offers and thus their higher prices. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies 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. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Fixed costs are the costs that do not vary with production or sales level. Rent Heat Interest Executive salaries Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Variable costs vary directly with the level of production. Raw materials Packaging Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Total costs are the sum of the fixed and variable costs for any given level of production. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Re