www.bookfiesta4u.com1-1PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyCreative Assistance byCreative Assistance byD. Carter and S. KogerD. Carter and S. Koger
Chapter 1Chapter 1Defining Marketing for theDefining Marketing for the2121stst CenturyCenturybybywww.bookfiesta4u.com1-2PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
The future is not aheadThe future is not aheadof us. It has alreadyof us. It has alreadyhappened.happened.Kotler onMarketingwww.bookfiesta4u.com1-3happened.happened.Unfortunately, it isUnfortunately, it isunequally distributedunequally distributedamong companies,among companies,industries and nations.industries and nations.
Chapter ObjectivesIn this chapter we will address the followingIn this chapter we will address the followingquestions:questions:What is the new economy like?What is the new economy like?What are the tasks of marketing?What are the tasks of marketing?www.bookfiesta4u.com1-4What are the tasks of marketing?What are the tasks of marketing?What are the major concepts and tools ofWhat are the major concepts and tools ofmarketing?marketing?What orientations do companies exhibit in theWhat orientations do companies exhibit in themarketplace?marketplace?How are companies and marketers responding toHow are companies and marketers responding tothe new challenges?the new challenges?
The New EconomySubstantial increase in buying powerSubstantial increase in buying powerA greater variety of goods and servicesA greater variety of goods and servicesA greater amount of information aboutA greater amount of information aboutpractically anythingpractically anythingwww.bookfiesta4u.com1-5practically anythingpractically anythingA greater ease in interacting and placingA greater ease in interacting and placingand receiving ordersand receiving ordersAn ability to compare notes on productsAn ability to compare notes on productsand servicesand services
The New EconomyWebsites can provide companies withWebsites can provide companies withpowerful new information and salespowerful new information and saleschannels.channels.Companies can collect fuller and richerCompanies can collect fuller and richerinformation about markets, customers,information about markets, customers,www.bookfiesta4u.com1-6information about markets, customers,information about markets, customers,prospects and competitors.prospects and competitors.Companies can facilitate and speed upCompanies can facilitate and speed upcommunications among employees.communications among employees.Companies can have 2Companies can have 2--waywaycommunication with customers andcommunication with customers andprospectsprospects
The New EconomyCompanies can send ads, coupons,Companies can send ads, coupons,samples, information to targetedsamples, information to targetedcustomers.customers.Companies can customize offerings andCompanies can customize offerings andservices to individual customers.services to individual customers.www.bookfiesta4u.com1-7services to individual customers.services to individual customers.The Internet can be used as aThe Internet can be used as acommunication channel for purchasing,communication channel for purchasing,training, and recruiting.training, and recruiting.Companies can improve logistics andCompanies can improve logistics andoperations for cost savings whileoperations for cost savings whileimproving accuracy and service quality.improving accuracy and service quality.
The three major challenges faced byThe three major challenges faced bybusinesses today are globalization,businesses today are globalization,advances in technology, and deregulation.advances in technology, and deregulation.www.bookfiesta4u.com1-8advances in technology, and deregulation.advances in technology, and deregulation.Which of these affords the greatestWhich of these affords the greatestopportunity foropportunity for establishedestablished businesses?businesses?Which affords the greatestWhich affords the greatestopportunities foropportunities for newnewbusinesses? Why?businesses? Why?
Marketing TaskTen rules of radical marketingTen rules of radical marketingThe CEO must own the marketing function.The CEO must own the marketing function.Make sure the marketing department startsMake sure the marketing department startssmall and flat and stays small and flat.small and flat and stays small and flat.www.bookfiesta4u.com1-9Get face to face with the people who matterGet face to face with the people who mattermostmost –– the customers.the customers.Use market research cautiously.Use market research cautiously.Hire only passionate missionaries.Hire only passionate missionaries.
Marketing TaskLove and respect your customers.Love and respect your customers.Create a community of consumers.Create a community of consumers.Rethink the marketing mix.Rethink the marketing mix.Celebrate common sense.Celebrate common sense.www.bookfiesta4u.com1-10Be true to the brand.Be true to the brand.Three stages of marketing practiceThree stages of marketing practiceEntrepreneurial MarketingEntrepreneurial MarketingFormulated MarketingFormulated MarketingIntrepreneurial MarketingIntrepreneurial Marketing
The Scope of MarketingMarketing: typically seen as theMarketing: typically seen as thetask of creating, promoting, andtask of creating, promoting, anddelivering goods and services todelivering goods and services toconsumers and businesses.consumers and businesses.www.bookfiesta4u.com1-11consumers and businesses.consumers and businesses.
Table 1.1DemandStates andMarketingTasks1. Negative1. NegativedemanddemandA major part of the market dislikes theA major part of the market dislikes theproduct and may even pay a price toproduct and may even pay a price toavoid itavoid it——vaccinations, dental work,vaccinations, dental work,vasectomies, and gallbladdervasectomies, and gallbladderoperations, for instance. Employers haveoperations, for instance. Employers havea negative demand for exa negative demand for ex--convicts andconvicts andalcoholics as employees. The marketingalcoholics as employees. The marketingtask is to analyze why the markettask is to analyze why the marketdislikes the product and whether adislikes the product and whether amarketing program consisting ofmarketing program consisting ofproduct redesign, lower prices, andproduct redesign, lower prices, andmore positive promotion can changemore positive promotion can changewww.bookfiesta4u.com1-12more positive promotion can changemore positive promotion can changebeliefs and attitudes.beliefs and attitudes.2. No demand2. No demand Target consumers may be unaware of orTarget consumers may be unaware of oruninterested in the product. Farmersuninterested in the product. Farmersmay not be interested in a new farmingmay not be interested in a new farmingmethod, and college students may notmethod, and college students may notbe interested in foreignbe interested in foreign--languagelanguagecourses. The marketing task is to findcourses. The marketing task is to findways to connect the benefits of theways to connect the benefits of theproduct with people’s natural needs andproduct with people’s natural needs andinterests.interests.See text for complete table
Can you name a category ofCan you name a category ofproducts for which your negativeproducts for which your negativefeelings have softened?feelings have softened?www.bookfiesta4u.com1-13feelings have softened?feelings have softened?What precipitatedWhat precipitatedthis change?this change?
The Scope of MarketingPlacesPlacesPropertiesPropertiesOrganizationsOrganizationsGoodsGoodsServicesServicesExperiencesExperienceswww.bookfiesta4u.com1-14OrganizationsOrganizationsInformationInformationIdeasIdeasExperiencesExperiencesEventsEventsPersonsPersons
Marketing Conceptsand ToolsMarketers and ProspectsMarketers and ProspectsNeeds, Wants, and DemandsNeeds, Wants, and DemandsProduct, Offering, and BrandProduct, Offering, and BrandValue and SatisfactionValue and Satisfactionwww.bookfiesta4u.com1-19Value and SatisfactionValue and SatisfactionCustomer value triadCustomer value triadValueValueValue = Benefits / Costs =Value = Benefits / Costs =(Functional benefits + Emotional benefits) /(Functional benefits + Emotional benefits) /(Monetary costs + Time costs + Energy costs +(Monetary costs + Time costs + Energy costs +Psychic costs)Psychic costs)
Marketing Conceptsand ToolsExchange and TransactionsExchange and TransactionsExchangeExchangeTransactionTransactionwww.bookfiesta4u.com1-20TransactionTransactionBarterBarterTransferTransferBehavioral responseBehavioral response
Marketing Conceptsand ToolsRelationships and NetworksRelationships and NetworksRelationship marketingRelationship marketingMarketing networkMarketing networkwww.bookfiesta4u.com1-21Marketing networkMarketing networkMarketing ChannelsMarketing ChannelsSupply ChainSupply ChainCompetitionCompetition
Company OrientationsToward the MarketplaceProduction ConceptProduction ConceptProduct conceptProduct conceptwww.bookfiesta4u.com1-23Selling ConceptSelling ConceptMarketing ConceptMarketing Concept
Company OrientationsToward the MarketplaceTarget MarketTarget MarketCustomer NeedsCustomer Needswww.bookfiesta4u.com1-24Stated needsStated needsReal needsReal needsUnstated needsUnstated needsDelight needsDelight needsSecret needsSecret needs
Company OrientationsToward the MarketplaceIntegrated MarketingIntegrated MarketingExternal marketingExternal marketingwww.bookfiesta4u.com1-25Internal marketingInternal marketing
Company OrientationsToward the MarketplaceProfitabilityProfitabilitySales declineSales declineSlow growthSlow growthwww.bookfiesta4u.com1-26Slow growthSlow growthChanging buying patternsChanging buying patternsIncreasing competitionIncreasing competitionIncreasing marketingIncreasing marketingexpendituresexpenditures
Company OrientationsToward the MarketplaceSocietal Marketing ConceptSocietal Marketing ConceptCauseCause--related marketingrelated marketingwww.bookfiesta4u.com1-27
Can you identify the trends that haveCan you identify the trends that havemade the marketing concept, themade the marketing concept, thecustomer concept, and the societalcustomer concept, and the societalwww.bookfiesta4u.com1-28customer concept, and the societalcustomer concept, and the societalmarketing concept more attractivemarketing concept more attractivemodels for contemporarymodels for contemporarymarketing managers?marketing managers?
How Business andMarketing are ChangingCustomersCustomersBrand manufacturersBrand manufacturerswww.bookfiesta4u.com1-29StoreStore--based retailersbased retailers
How Business andMarketing are ChangingCompany responses and adjustmentsCompany responses and adjustmentsReengineeringReengineeringOutsourcingOutsourcingPartnerPartner--supplierssuppliersMarketMarket--centeredcenteredwww.bookfiesta4u.com1-30OutsourcingOutsourcingEE--commercecommerceBenchmarkingBenchmarkingAlliancesAlliancesMarketMarket--centeredcenteredGlobal and localGlobal and localDecentralizedDecentralized
How Business andMarketing are ChangingMarketer ResponsesMarketer Responsesand Adjustmentsand AdjustmentsCustomer relationshipCustomer relationshipmarketingmarketingIntegrated marketingIntegrated marketingcommunicationscommunicationswww.bookfiesta4u.com1-31marketingmarketingCustomer lifetime valueCustomer lifetime valueCustomer shareCustomer shareTarget marketingTarget marketingCustomizationCustomizationCustomer databaseCustomer databasecommunicationscommunicationsChannels as partnersChannels as partnersEvery employee aEvery employee amarketermarketerModelModel--based decisionbased decisionmakingmaking
Chapter 2Chapter 2Adapting Marketing To TheAdapting Marketing To TheNew EconomyNew Economybybywww.bookfiesta4u.com1-32PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
The Internet willThe Internet willcreate new winnerscreate new winnersand bury theand bury theKotler onMarketingwww.bookfiesta4u.com1-33and bury theand bury thelaggards.laggards.
Chapter ObjectivesIn this chapter, we will address theIn this chapter, we will address thefollowing questions:following questions:What are the major forces driving the NewWhat are the major forces driving the NewEconomy?Economy?www.bookfiesta4u.com1-34Economy?Economy?How are business and marketing practicesHow are business and marketing practiceschanging as a result of the New Economy?changing as a result of the New Economy?How are marketers using the Internet,How are marketers using the Internet,customer databases, and customercustomer databases, and customerrelationship management in the Newrelationship management in the NewEconomy?Economy?
Adapting Marketing to theNew EconomyMajor Drivers of the New EconomyMajor Drivers of the New EconomyDigitization and ConnectivityDigitization and ConnectivityDisintermediation andDisintermediation andwww.bookfiesta4u.com1-35Disintermediation andDisintermediation andReintermediationReintermediationCustomization andCustomization andCustomerizationCustomerization
Procter & Gamble’s Reflect.com site allows customersProcter & Gamble’s Reflect.com site allows customersto design their own beauty productsto design their own beauty productswww.bookfiesta4u.com1-36
Adapting Marketing to theNew EconomyIndustry ConvergenceIndustry ConvergenceHow Business Practices are ChangingHow Business Practices are ChangingOrganize by product units to organize byOrganize by product units to organize bycustomer segmentscustomer segmentswww.bookfiesta4u.com1-37customer segmentscustomer segmentsShift focus from profitable transactions toShift focus from profitable transactions tocustomer lifetime valuecustomer lifetime valueShift focus from financial scorecard to alsoShift focus from financial scorecard to alsofocusing on the marketing scorecardfocusing on the marketing scorecardShift focus from shareholders to stakeholdersShift focus from shareholders to stakeholders
Table 2-1: Old Economy vs. New EconomyOld EconomyOld Economy New EconomyNew EconomyOrganize by product unitsOrganize by product unitsFocus on profitable transactionsFocus on profitable transactionsLook primarily at financialLook primarily at financialscorecardscorecardFocus on shareholdersFocus on shareholdersOrganize by customer segmentsOrganize by customer segmentsFocus on customer lifetime valueFocus on customer lifetime valueLook also at marketing scorecardLook also at marketing scorecardFocus on stakeholdersFocus on stakeholdersEveryone does the marketingEveryone does the marketingwww.bookfiesta4u.com1-38Marketing does the marketingMarketing does the marketingBuild brands through advertisingBuild brands through advertisingFocus on customer acquisitionFocus on customer acquisitionNo customer satisfactionNo customer satisfactionmeasurementmeasurementOverpromise, underdeliverOverpromise, underdeliverEveryone does the marketingEveryone does the marketingBuild brands through behaviorBuild brands through behaviorFocus on customer retention andFocus on customer retention andgrowthgrowthMeasure customer satisfaction andMeasure customer satisfaction andretention rateretention rateUnderpromise, overdeliverUnderpromise, overdeliver
Adapting Marketing to theNew EconomyEveryone does the marketingEveryone does the marketingBuild brands through performance,Build brands through performance,not just advertisingnot just advertisingCustomer retention ratherCustomer retention ratherwww.bookfiesta4u.com1-39Customer retention ratherCustomer retention ratherthan customer acquisitionthan customer acquisitionFrom none to inFrom none to in--depth customerdepth customersatisfaction measurementsatisfaction measurementFrom overFrom over--promise, underpromise, under--deliver todeliver tounderunder--promise, overpromise, over--deliverdeliverThe New HybridThe New Hybrid
How Marketing PracticesHow Marketing Practicesare Changing: Eare Changing: E--BusinessBusinessEE--businessbusinessAdapting Marketing to theNew Economywww.bookfiesta4u.com1-40EE--businessbusinessEE--commercecommerceEE--purchasingpurchasingEE--marketingmarketingInternet Domains: B2CInternet Domains: B2C(Business to Customer)(Business to Customer)
Customers can shop online at Calyx and Corolla orCustomers can shop online at Calyx and Corolla orask for a catalog and shop by phoneask for a catalog and shop by phonewww.bookfiesta4u.com1-41
Adapting Marketing to theNew EconomyInternet Domains: B2BInternet Domains: B2B(Business to Business)(Business to Business)www.bookfiesta4u.com1-42
www.transora.com: global online marketplace forwww.transora.com: global online marketplace forthe consumer packaged goods industrythe consumer packaged goods industrywww.bookfiesta4u.com1-44
Adapting Marketing to theNew EconomyInternet Domains: C2CInternet Domains: C2C(Consumer to Consumer)(Consumer to Consumer)Internet Domains: C2BInternet Domains: C2Bwww.bookfiesta4u.com1-45Internet Domains: C2BInternet Domains: C2B(Customer to Business)(Customer to Business)Pure Click vs. Brick andPure Click vs. Brick andClick CompaniesClick CompaniesPurePure--click companiesclick companies
CarPoint, leading metamediary for car buying, is a pureCarPoint, leading metamediary for car buying, is a pureclick company: It exists only on the Web.click company: It exists only on the Web.www.bookfiesta4u.com1-46
Adapting Marketing to theNew EconomyBrick and Click companiesBrick and Click companieswww.bookfiesta4u.com1-47
Which is more important forWhich is more important fordeveloping an edeveloping an e--presence: the agilitypresence: the agilityof a pure click company, or the wellof a pure click company, or the wellwww.bookfiesta4u.com1-48of a pure click company, or the wellof a pure click company, or the welldefined and readily identifiabledefined and readily identifiableresources of a traditionalresources of a traditionalbrick and mortarbrick and mortarcompany?company?
Adapting Marketing to theNew EconomyHow Marketing Practices are Changing:How Marketing Practices are Changing:Setting Up Web SitesSetting Up Web SitesDesigning an Attractive WebsiteDesigning an Attractive WebsiteSeven elements of effective sitesSeven elements of effective siteswww.bookfiesta4u.com1-49Seven elements of effective sitesSeven elements of effective sitesContextContextContentContentCommunityCommunityCustomizationCustomizationCommunicationCommunicationConnectionConnectionCommerceCommerce
Would you be willing to give up one orWould you be willing to give up one ormore of the seven elements of an effectivemore of the seven elements of an effectiveweb site in order to speed the deploymentweb site in order to speed the deploymentwww.bookfiesta4u.com1-50of a new company eof a new company e--commerce site?commerce site?What would the expected tradeWhat would the expected trade--offs beoffs bebetween an effective sitebetween an effective siteand an early weband an early webpresence?presence?
Attracting and Keeping VisitorsAttracting and Keeping VisitorsHow can we get more prospects to know and visit our site?How can we get more prospects to know and visit our site?How can we use marketing to spread wordHow can we use marketing to spread word--ofof--mouth?mouth?How can we convert visitors into repeaters?How can we convert visitors into repeaters?How do we make our site more experiential and real?How do we make our site more experiential and real?How can we build a strong relationship with our customers?How can we build a strong relationship with our customers?How can we build a customer community?How can we build a customer community?How can we capture and exploit customer data for upHow can we capture and exploit customer data for up--sellingsellingTable 2Table 2--2:2:SettingSettingUp aUp aDotDot--comcomPresencePresencewww.bookfiesta4u.com1-51How can we capture and exploit customer data for upHow can we capture and exploit customer data for up--sellingsellingand crossand cross--selling?selling?How much should we spend on building and marketing ourHow much should we spend on building and marketing oursite?site?Advertising on the InternetAdvertising on the InternetWhat are the various ways that we can advertise on theWhat are the various ways that we can advertise on theInternet?Internet?How do we choose the right sites for placing our ads orHow do we choose the right sites for placing our ads orsponsorship?sponsorship?See text for complete table
Adapting Marketing to theNew EconomyPlacing Ads and Promotions OnlinePlacing Ads and Promotions OnlineBanner adsBanner adsSponsorshipsSponsorshipsMicrositeMicrositewww.bookfiesta4u.com1-53MicrositeMicrositeInterstitialsInterstitialsBrowser adsBrowser adsAlliances and affiliateAlliances and affiliateprogramsprogramsPushPush
Infogate.com “pushes” targeted content and ads to thoseInfogate.com “pushes” targeted content and ads to thosewho are interested in a product or product categorywho are interested in a product or product categorywww.bookfiesta4u.com1-54
Adapting Marketing to theNew EconomyBuilding a Revenue and Profit ModelBuilding a Revenue and Profit ModelAdvertising incomeAdvertising incomeSponsorship incomeSponsorship incomeMembership andMembership andsubscriptionssubscriptionswww.bookfiesta4u.com1-55Membership andMembership andsubscriptionssubscriptionsProfile incomeProfile incomeProduct and serviceProduct and servicesalessalesTransaction commissionTransaction commissionand feesand feesMarket research/informationMarket research/informationReferral incomeReferral income
Adapting Marketing to theNew EconomyHow Marketing Practices are Changing:How Marketing Practices are Changing:Customer Relationship MarketingCustomer Relationship MarketingReduce rate of customer defectionReduce rate of customer defectionIncrease longevity ofIncrease longevity ofwww.bookfiesta4u.com1-56Increase longevity ofIncrease longevity ofcustomer relationshipcustomer relationshipEnhance growth potentialEnhance growth potentialthrough crossthrough cross--selling and upselling and up--sellingsellingMake low profit customers more profitableMake low profit customers more profitableor terminate themor terminate them
Adapting Marketing to theNew EconomyFocus disproportionate effortFocus disproportionate efforton high value customerson high value customerswww.bookfiesta4u.com1-57
Table 2-3: Mass Marketing vs.One-to-One MarketingMass MarketingMass Marketing OneOne--toto--One MarketingOne MarketingAverage customerAverage customerCustomer anonymityCustomer anonymityStandard productStandard productMass productionMass productionMass distributionMass distributionIndividual customerIndividual customerCustomer profileCustomer profileCustomized marketCustomized marketofferingofferingCustomized productionCustomized productionwww.bookfiesta4u.com1-58Mass distributionMass distributionMass advertisingMass advertisingMass promotionMass promotionOneOne--way messageway messageEconomies of scaleEconomies of scaleShare of marketShare of marketAll customersAll customersCustomer attractionCustomer attractionIndividualized distributionIndividualized distributionIndividualized messageIndividualized messageIndividualized incentivesIndividualized incentivesTwoTwo--way messagesway messagesEconomies of scopeEconomies of scopeShare of customerShare of customerProfitable customersProfitable customersCustomer retentionCustomer retention
Adapting Marketing to theNew EconomyFour steps for OneFour steps for One--toto--One MarketingOne MarketingDon’t go after everyone,Don’t go after everyone,identify prospects.identify prospects.Define customers by their needsDefine customers by their needswww.bookfiesta4u.com1-59Define customers by their needsDefine customers by their needsand their value to the company.and their value to the company.Individual interaction with customersIndividual interaction with customersbuilds stronger relationships.builds stronger relationships.Customize messages, services, andCustomize messages, services, andproducts for each customer.products for each customer.
Data Warehouses and Data MiningData Warehouses and Data MiningUsing the databaseUsing the databaseTo identify prospectsTo identify prospectsTo determine target marketTo determine target marketAdapting Marketing to theNew Economywww.bookfiesta4u.com1-61To determine target marketTo determine target marketTo deepen customer loyaltyTo deepen customer loyaltyTo reactivate customerTo reactivate customerpurchasespurchasesTo avoid serious customerTo avoid serious customermistakesmistakesThe Downside of DatabaseThe Downside of DatabaseMarketingMarketing
Chapter 3Chapter 3Building CustomerBuilding CustomerSatisfaction, Value, andSatisfaction, Value, andRetentionRetentionbybywww.bookfiesta4u.com1-62bybyPowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
It is no longerIt is no longerenough to satisfyenough to satisfycustomers. You mustcustomers. You mustKotler onMarketingwww.bookfiesta4u.com1-63customers. You mustcustomers. You mustdelight them.delight them.
Chapter ObjectivesIn this chapter, we will address theIn this chapter, we will address thefollowing questions:following questions:What are customer value and satisfaction,What are customer value and satisfaction,and how can companies deliver them?and how can companies deliver them?What makes a highWhat makes a high--performance business?performance business?www.bookfiesta4u.com1-64What makes a highWhat makes a high--performance business?performance business?How can companies both attractHow can companies both attractand retain customers?and retain customers?How can companies improve both customerHow can companies improve both customerand company profitability?and company profitability?How can companies deliver total quality?How can companies deliver total quality?
Defining Customer Valueand SatisfactionCustomer Perceived Value (CPV)Customer Perceived Value (CPV)Total customer valueTotal customer valuewww.bookfiesta4u.com1-65Total customer costTotal customer cost
Total Customer SatisfactionTotal Customer SatisfactionSatisfactionSatisfactionCustomer ExpectationsCustomer ExpectationsDefining Customer Valueand Satisfactionwww.bookfiesta4u.com1-67Customer ExpectationsCustomer ExpectationsDelivering High Customer ValueDelivering High Customer ValueValue propositionValue propositionValueValue--delivery systemdelivery systemMeasuring SatisfactionMeasuring Satisfaction
Table 3-1: Tools for Tracking and MeasuringCustomer SatisfactionComplaintComplaintandandsuggestionsuggestionsystems:systems:A customerA customer--centered organization makes it easy forcentered organization makes it easy forcustomers to register suggestions and complaints.customers to register suggestions and complaints.Some customerSome customer--centered companiescentered companies--P&G, GeneralP&G, GeneralElectric, WhirlpoolElectric, Whirlpool——establish hot lines with tollestablish hot lines with toll--freefreenumbers. Companies are also using Web sites andnumbers. Companies are also using Web sites andee--mail for quick, twomail for quick, two--way communication.way communication.Studies show that although customers are dissatisfiedStudies show that although customers are dissatisfiedwww.bookfiesta4u.com1-68CustomerCustomersatisfactionsatisfactionsurveys:surveys:Studies show that although customers are dissatisfiedStudies show that although customers are dissatisfiedwith one out of every four purchases, less than 5with one out of every four purchases, less than 5percent will complain. Most customers will buy less orpercent will complain. Most customers will buy less orswitch suppliers. Responsive companies measureswitch suppliers. Responsive companies measurecustomer satisfaction directly by conducting periodiccustomer satisfaction directly by conducting periodicsurveys. While collecting customer satisfaction data, itsurveys. While collecting customer satisfaction data, itis also useful to ask additional questions to measureis also useful to ask additional questions to measurerepurchase intention and to measure the likelihood orrepurchase intention and to measure the likelihood orwillingness to recommend the company and brand towillingness to recommend the company and brand toothers.others.See text for complete table
Would you feel more brand loyalty for aWould you feel more brand loyalty for acompany that tried to immediately resolvecompany that tried to immediately resolvea complaint via Ea complaint via E--mail, or a company thatmail, or a company thatwww.bookfiesta4u.com1-69a complaint via Ea complaint via E--mail, or a company thatmail, or a company thathad a customer service representative callhad a customer service representative callwithin two business days towithin two business days toresolve the problem overresolve the problem overthe phone?the phone?
Premier Dell.com is a special businessPremier Dell.com is a special business--oriented part of theoriented part of theDell Web site that allows customers to interact with Dell andDell Web site that allows customers to interact with Dell andcustomize all phases of doing business with Dell.customize all phases of doing business with Dell.www.bookfiesta4u.com1-70
The Nature of HighPerformance BusinessHighHigh--performance businessperformance businesswww.bookfiesta4u.com1-71
Figure 3-2: The High Performance Businesswww.bookfiesta4u.com1-72
The Nature of HighPerformance BusinessStakeholdersStakeholdersProcessesProcessesResourcesResourceswww.bookfiesta4u.com1-73Core competencyCore competencyDistinctive capabilitiesDistinctive capabilitiesOrganization and Organizational CultureOrganization and Organizational CultureOrganizationOrganizationCorporate cultureCorporate cultureScenario analysisScenario analysis
Can you name a company that hasCan you name a company that haschanged the public’s perception ofchanged the public’s perception oftheir corporate culture? Has thistheir corporate culture? Has thiswww.bookfiesta4u.com1-74their corporate culture? Has thistheir corporate culture? Has thiseffectively rehabilitated thateffectively rehabilitated thatcompany’s image?company’s image?
Saturn has gained a customer loyalty rateSaturn has gained a customer loyalty rateof more than 60% by fundamentallyof more than 60% by fundamentallychanging the buyerchanging the buyer--seller relationship.seller relationship.www.bookfiesta4u.com1-81changing the buyerchanging the buyer--seller relationship.seller relationship.Can you think of another company thatCan you think of another company thathas made a change of similarhas made a change of similarmagnitude? Have theymagnitude? Have theyhad similar results?had similar results?
Attracting and RetainingCustomersAttracting CustomersAttracting CustomersComputing the Cost ofComputing the Cost ofLost CustomersLost Customerswww.bookfiesta4u.com1-82Lost CustomersLost CustomersCustomer churnCustomer churnLifetime valueLifetime value
On the Lands’ End Web site, customers can click aOn the Lands’ End Web site, customers can click abutton to talk with a customer service representativebutton to talk with a customer service representativewww.bookfiesta4u.com1-83
Attracting and RetainingCustomersThe Need for Customer RetentionThe Need for Customer RetentionMeasuring CustomerMeasuring CustomerLifetime Value (CLV)Lifetime Value (CLV)Customer Relationship ManagementCustomer Relationship Managementwww.bookfiesta4u.com1-84Customer Relationship ManagementCustomer Relationship Management(CRM): The Key(CRM): The KeyCustomer equityCustomer equityThree drivers of customer equityThree drivers of customer equityValue equityValue equityBrand equityBrand equityRelationship equityRelationship equity
Attracting and RetainingCustomersFive levels of investment inFive levels of investment incustomer relationship buildingcustomer relationship buildingBasic marketingBasic marketingwww.bookfiesta4u.com1-86Basic marketingBasic marketingReactive marketingReactive marketingAccountable marketingAccountable marketingProactive marketingProactive marketingPartnership marketingPartnership marketing
Figure 3-6: Levels of Relationship Marketingwww.bookfiesta4u.com1-87
Attracting and RetainingCustomersForming Strong Customer Bonds:Forming Strong Customer Bonds:The BasicsThe BasicsCrossCross--departmental participationdepartmental participationwww.bookfiesta4u.com1-88CrossCross--departmental participationdepartmental participationIntegrate the Voice of the CustomerIntegrate the Voice of the Customerinto all business decisionsinto all business decisionsCreate superior offering for theCreate superior offering for thetarget markettarget market
Organize and make accessible aOrganize and make accessible adatabase of customer informationdatabase of customer informationMake it easy for customers toMake it easy for customers toAttracting and RetainingCustomerswww.bookfiesta4u.com1-89Make it easy for customers toMake it easy for customers toreach the appropriate personnelreach the appropriate personnelReward outstanding employeesReward outstanding employeesAdding Financial BenefitsAdding Financial BenefitsFrequency programs (FPs)Frequency programs (FPs)
The H.O.G. Web site presents the benefits of joining.The H.O.G. Web site presents the benefits of joining.www.bookfiesta4u.com1-90
Attracting and RetainingCustomersAdding Social BenefitsAdding Social Benefitswww.bookfiesta4u.com1-91
Table 3-2:Social ActionsAffectingBuyer-SellerRelationshipsGood ThingsGood Things Bad ThingsBad ThingsInitiate positive phone callsInitiate positive phone callsMake recommendationsMake recommendationsCandor in languageCandor in languageUse phoneUse phoneShow appreciationShow appreciationMake service suggestionsMake service suggestionsUse “we” problemUse “we” problem--solvingsolvinglanguagelanguageMake only callbacksMake only callbacksMake justificationsMake justificationsAccommodative languageAccommodative languageUse correspondenceUse correspondenceWait for misunderstandingsWait for misunderstandingsWait for service requestsWait for service requestsUse “oweUse “owe--us” legal languageus” legal languageOnly respond to problemsOnly respond to problemswww.bookfiesta4u.com1-92languagelanguageGet to problemsGet to problemsUse jargon or shorthandUse jargon or shorthandPersonality problems airedPersonality problems airedTalk of “our future together”Talk of “our future together”Routinize responsesRoutinize responsesAccept responsibilityAccept responsibilityPlan the futurePlan the futureOnly respond to problemsOnly respond to problemsUse longUse long--windedwindedcommunicationscommunicationsPersonality problems hiddenPersonality problems hiddenTalk about making good onTalk about making good onthe pastthe pastFire drill and emergencyFire drill and emergencyresponsivenessresponsivenessShift blameShift blameRehash the pastRehash the past
Attracting and RetainingCustomersAdding Structural TiesAdding Structural TiesCreate longCreate long--term contractsterm contractsCharge lower price to highCharge lower price to highwww.bookfiesta4u.com1-93Charge lower price to highCharge lower price to highvolume customersvolume customersTurn product intoTurn product intolonglong--term serviceterm service
Chapter 4Chapter 4Winning Markets ThroughWinning Markets ThroughMarketMarket--Oriented StrategicOriented StrategicPlanningPlanningbybywww.bookfiesta4u.com1-98bybyPowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Kotler onMarketingIt is more importantIt is more importantto do what isto do what isstrategically rightstrategically rightwww.bookfiesta4u.com1-99strategically rightstrategically rightthan what isthan what isimmediatelyimmediatelyprofitable.profitable.
Chapter ObjectivesIn this chapter, we examine theIn this chapter, we examine thefollowing questions:following questions:How is strategic planning carried out atHow is strategic planning carried out atthe corporate and division levels?the corporate and division levels?How is planning carried out at theHow is planning carried out at thewww.bookfiesta4u.com1-100How is planning carried out at theHow is planning carried out at thebusiness unit level?business unit level?What are the major steps in theWhat are the major steps in themarketing process?marketing process?How is planning carried out at theHow is planning carried out at theproduct level?product level?What does a marketing plan include?What does a marketing plan include?
Strategic Planning: Three Key Areasand Four Organization LevelsStrategic marketing planStrategic marketing planTacticalTactical marketing planmarketing planMarketing planMarketing planwww.bookfiesta4u.com1-101
Corporate and DivisionStrategic PlanningAll corporate headquarters undertakeAll corporate headquarters undertakefour planning activitiesfour planning activitiesDefining the Corporate MissionDefining the Corporate Missionwww.bookfiesta4u.com1-102Defining the Corporate MissionDefining the Corporate MissionEstablishing Strategic Business Units (SBUs)Establishing Strategic Business Units (SBUs)Assigning resources to each SBUAssigning resources to each SBUPlanning new businesses, downsizing, orPlanning new businesses, downsizing, orterminating older businessesterminating older businesses
Corporate and DivisionStrategic PlanningDefining the Corporate MissionDefining the Corporate MissionMission statements define which competitiveMission statements define which competitivescopes the company will operate inscopes the company will operate inwww.bookfiesta4u.com1-103Industry scopeIndustry scopeProducts and applications scopeProducts and applications scopeCompetence scopeCompetence scopeMarketMarket--segment scopesegment scopeVertical scopeVertical scopeGeographical scopeGeographical scope
Can you name a company that hasCan you name a company that hasrecently changed its product scoperecently changed its product scopeor market segment scope in a veryor market segment scope in a verywww.bookfiesta4u.com1-104or market segment scope in a veryor market segment scope in a verypublic way? Was this an expansionpublic way? Was this an expansionor contraction of scope?or contraction of scope?
Corporate and DivisionStrategic PlanningEstablishing Strategic Business UnitsEstablishing Strategic Business Units(SBUs)(SBUs)www.bookfiesta4u.com1-105
Table 4.1: Product-Oriented versus Market-OrientedDefinitions of a BusinessCompanyCompany Product DefinitionProduct Definition Market DefinitionMarket DefinitionMissouriMissouri--PacificPacificRailroadRailroadWe run a railroadWe run a railroad We are a peopleWe are a people--andand--goods movergoods moverXeroxXerox We make copyingWe make copyingequipmentequipmentWe help improve officeWe help improve officeproductivityproductivityStandard OilStandard Oil We sell gasolineWe sell gasoline We supply energyWe supply energywww.bookfiesta4u.com1-106Columbia PicturesColumbia Pictures We make moviesWe make movies We market entertainmentWe market entertainmentEncyclopaediaEncyclopaedia We sell encyclopediasWe sell encyclopedias We distribute InformationWe distribute InformationCarrierCarrier We make airWe make airconditioners andconditioners andfurnacesfurnacesWe provide climateWe provide climatecontrol in the homecontrol in the home
Corporate and DivisionStrategic PlanningThree characteristics of SBUsThree characteristics of SBUsSingle business or collection of relatedSingle business or collection of relatedbusinesses that can be planned for separatelybusinesses that can be planned for separatelywww.bookfiesta4u.com1-107businesses that can be planned for separatelybusinesses that can be planned for separatelyHas its own set of competitorsHas its own set of competitorsHas a manager who is responsible forHas a manager who is responsible forstrategic planning and profitstrategic planning and profit
Can you give an example of a “Star”Can you give an example of a “Star”that skipped “Cash Cow”, and wentthat skipped “Cash Cow”, and wentstraight to “Dog” status?straight to “Dog” status?www.bookfiesta4u.com1-109straight to “Dog” status?straight to “Dog” status?
Corporate and DivisionStrategic PlanningThe General Electric ModelThe General Electric Modelwww.bookfiesta4u.com1-110
Corporate and DivisionStrategic PlanningCritique of Portfolio ModelsCritique of Portfolio ModelsPlanning New Businesses,Planning New Businesses,www.bookfiesta4u.com1-112Downsizing Older BusinessesDownsizing Older Businesses
Corporate and DivisionStrategic PlanningIntensive GrowthIntensive Growthwww.bookfiesta4u.com1-113
Starbucks’ home page: Customers can request aStarbucks’ home page: Customers can request acatalog of Starbucks products, subscribe to acatalog of Starbucks products, subscribe to anewsletter, and shop onlinenewsletter, and shop onlinewww.bookfiesta4u.com1-114
Give an example of a marketGive an example of a marketsegment where integrative growthsegment where integrative growthwould be preferable to growthwould be preferable to growthwww.bookfiesta4u.com1-116would be preferable to growthwould be preferable to growththrough diversification. Explainthrough diversification. Explainwhy one approach is betterwhy one approach is betterthan the other.than the other.
Business UnitStrategic PlanningBusiness MissionBusiness MissionSWOT AnalysisSWOT AnalysisExternal Environment AnalysisExternal Environment Analysiswww.bookfiesta4u.com1-117External Environment AnalysisExternal Environment Analysis(Opportunity and Threat Analysis)(Opportunity and Threat Analysis)Marketing OpportunityMarketing OpportunityBuying opportunity more convenient orBuying opportunity more convenient orefficientefficientMeet the need for more information and adviceMeet the need for more information and adviceCustomize an offering that was previously onlyCustomize an offering that was previously onlyavailable in standard formavailable in standard form
Give some examples of companiesGive some examples of companiesthat have grown to dominate theirthat have grown to dominate theirmarket segment by using technologymarket segment by using technologywww.bookfiesta4u.com1-118market segment by using technologymarket segment by using technologyto make buying opportunities moreto make buying opportunities moreconvenient and efficient.convenient and efficient.
Business UnitStrategic PlanningMarketing Opportunity Analysis (MOA)Marketing Opportunity Analysis (MOA)Can the benefits be articulated to a targetCan the benefits be articulated to a targetmarket?market?Can the target market be reached with costCan the target market be reached with cost--www.bookfiesta4u.com1-119Can the target market be reached with costCan the target market be reached with cost--effective media and trade channels?effective media and trade channels?Does the company have the critical capabilitiesDoes the company have the critical capabilitiesto deliver the customer benefits?to deliver the customer benefits?Can the company deliver these benefits betterCan the company deliver these benefits betterthan any actual or potential competitors?than any actual or potential competitors?Will the rate of return meet the requiredWill the rate of return meet the requiredthreshold of investment?threshold of investment?
Figure 4-7: Opportunity and Threat Matriceswww.bookfiesta4u.com1-120
Travelocity’s Web site helps the consumer plan theTravelocity’s Web site helps the consumer plan thewhole vacationwhole vacation –– flights, lodging, and car rental.comflights, lodging, and car rental.comwww.bookfiesta4u.com1-123
Operational Effectiveness and StrategyOperational Effectiveness and StrategyStrategic groupStrategic groupBusiness UnitStrategic Planningwww.bookfiesta4u.com1-124Strategic alliancesStrategic alliances
Business UnitStrategic PlanningMarketing AlliancesMarketing AlliancesProduct or service alliancesProduct or service alliancesPromotional alliancesPromotional alliancesLogistical alliancesLogistical allianceswww.bookfiesta4u.com1-125Logistical alliancesLogistical alliancesPricing collaborationsPricing collaborationsPartner RelationshipPartner RelationshipManagement, PRMManagement, PRMProgram Formulation andProgram Formulation andImplementationImplementation
Business UnitStrategic PlanningFeedback and ControlFeedback and Controlwww.bookfiesta4u.com1-126
The Marketing ProcessSteps in the Planning ProcessSteps in the Planning ProcessThe marketing processThe marketing processAnalyzing Market OpportunitiesAnalyzing Market OpportunitiesDeveloping Marketing StrategiesDeveloping Marketing Strategieswww.bookfiesta4u.com1-127Planning Marketing ProgramsPlanning Marketing ProgramsManaging the Marketing EffortManaging the Marketing EffortAnnualAnnual--plan controlplan controlProfitability controlProfitability controlStrategic controlStrategic control
Product Planning: The Nature andContents of a Marketing PlanContents of the Marketing PlanContents of the Marketing PlanExecutive SummaryExecutive SummaryCurrent Marketing SituationCurrent Marketing SituationOpportunity and issue analysisOpportunity and issue analysiswww.bookfiesta4u.com1-129Opportunity and issue analysisOpportunity and issue analysisObjectivesObjectivesMarketing strategyMarketing strategyAction programsAction programsFinancial projectionsFinancial projectionsImplementation controlsImplementation controls
Sample Marketing Plan: Sonic PersonalSample Marketing Plan: Sonic PersonalDigital AssistantDigital AssistantCurrent Marketing SituationCurrent Marketing SituationProduct Planning: The Nature andContents of a Marketing Planwww.bookfiesta4u.com1-130Current Marketing SituationCurrent Marketing SituationOpportunity and Issue AnalysisOpportunity and Issue AnalysisObjectivesObjectivesAction ProgramsAction ProgramsFinancial ProjectionsFinancial Projections
Implementation ControlsImplementation ControlsMarketing StrategyMarketing StrategyPositioningPositioningProduct Planning: The Nature andContents of a Marketing Planwww.bookfiesta4u.com1-131PositioningPositioningProduct ManagementProduct ManagementPricingPricingDistributionDistributionMarketing CommunicationsMarketing CommunicationsMarketing ResearchMarketing Research
Chapter 5Chapter 5Gathering Information andGathering Information andMeasuring Market DemandMeasuring Market Demandbybywww.bookfiesta4u.com1-132PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Kotler onMarketingMarketing isMarketing isbecoming a battlebecoming a battlewww.bookfiesta4u.com1-133becoming a battlebecoming a battlebased more onbased more oninformation thaninformation thanon sales power.on sales power.
Chapter ObjectivesIn this chapter, we focus on the followingIn this chapter, we focus on the followingquestions:questions:What are the components of a modernWhat are the components of a modernmarketing information system?marketing information system?What constitutes good marketing research?What constitutes good marketing research?www.bookfiesta4u.com1-134What constitutes good marketing research?What constitutes good marketing research?How can marketing decision support systemsHow can marketing decision support systemshelp marketing managers make betterhelp marketing managers make betterdecisions?decisions?How can demand be more accuratelyHow can demand be more accuratelymeasured and forecasted?measured and forecasted?
Marketing Information System (MIS)Marketing Information System (MIS)10 useful questions for determining the10 useful questions for determining theinformation needs of marketinginformation needs of marketingThe Components of a ModernMarketing Information Systemwww.bookfiesta4u.com1-135information needs of marketinginformation needs of marketingmanagers.managers.What decisions do you regularly make?What decisions do you regularly make?What information do you need to make theseWhat information do you need to make thesedecisions?decisions?What information do you regularly get?What information do you regularly get?What special studies do you periodically request?What special studies do you periodically request?
The Components of a ModernMarketing Information SystemWhat information would you want that you are notWhat information would you want that you are notgetting now?getting now?What information would you want daily? Weekly?What information would you want daily? Weekly?Monthly? Yearly?Monthly? Yearly?www.bookfiesta4u.com1-136Monthly? Yearly?Monthly? Yearly?What magazines and trade reports would you like toWhat magazines and trade reports would you like tosee on a regular basis?see on a regular basis?What topics would you like to be kept informed of?What topics would you like to be kept informed of?What data analysis programs would you want?What data analysis programs would you want?What are the four most helpful improvements thatWhat are the four most helpful improvements thatcould be made in the present marketing informationcould be made in the present marketing informationsystem?system?
Internal Record SystemsThe OrderThe Order--toto--Payment CyclePayment CycleSales Information SystemsSales Information Systemswww.bookfiesta4u.com1-137Sales Information SystemsSales Information SystemsDatabases, Data WarehousesDatabases, Data WarehousesAnd DataAnd Data--MiningMining
Can you name a company that usesCan you name a company that usestargeted mailings to promote newtargeted mailings to promote newproducts, or regional offerings?products, or regional offerings?www.bookfiesta4u.com1-138products, or regional offerings?products, or regional offerings?
The MarketingIntelligence SystemA Marketing Intelligence SystemA Marketing Intelligence Systemis a set of procedures and sourcesis a set of procedures and sourcesused by managers to obtainused by managers to obtainwww.bookfiesta4u.com1-139used by managers to obtainused by managers to obtaineveryday information abouteveryday information aboutdevelopments in the marketingdevelopments in the marketingenvironment.environment.
What are some of the potentialWhat are some of the potentialhazards a company might face byhazards a company might face byrelying too heavily on distributors,relying too heavily on distributors,www.bookfiesta4u.com1-140relying too heavily on distributors,relying too heavily on distributors,retailers, or otherretailers, or otherintermediaries forintermediaries formarket intelligence?market intelligence?
The Marriott Vacation Club International Web siteThe Marriott Vacation Club International Web sitegives interested customers the opportunity to sellgives interested customers the opportunity to sellthemselves on the Marriott offeringsthemselves on the Marriott offeringswww.bookfiesta4u.com1-141
CEOExpress.com is a portal to informationCEOExpress.com is a portal to information––a usera userclicks on a listing and is then connected to that siteclicks on a listing and is then connected to that sitewww.bookfiesta4u.com1-142
Table 5-1: Secondary-Data SourcesSecondarySecondary--Data SourcesData SourcesA.A. Internal SourcesInternal SourcesCompany profitCompany profit--loss statements, balanceloss statements, balancesheets, sales figures, salessheets, sales figures, sales--call reports,call reports,invoices, inventory records, and priorinvoices, inventory records, and priorresearch reports.research reports.B.B. Government PublicationsGovernment Publications•• Statistical Abstract of the United StatesStatistical Abstract of the United Stateswww.bookfiesta4u.com1-143•• Statistical Abstract of the United StatesStatistical Abstract of the United States•• County and City Data BookCounty and City Data Book•• Industrial OutlookIndustrial Outlook•• Marketing Information GuideMarketing Information GuideC.C. Periodicals and BooksPeriodicals and Books•• Business Periodicals IndexBusiness Periodicals Index•• Standard and Poor’s IndustryStandard and Poor’s IndustrySee text for complete table
Marketing Research SystemMarketing ResearchMarketing ResearchSuppliers of Marketing ResearchSuppliers of Marketing ResearchEngaging students or professors toEngaging students or professors todesign and carry out projectsdesign and carry out projectsUsing the InternetUsing the Internetwww.bookfiesta4u.com1-144Using the InternetUsing the InternetChecking out rivalsChecking out rivalsSyndicatedSyndicated--service research firmsservice research firmsCustom marketing research firmsCustom marketing research firmsSpecialtySpecialty--line marketing researchline marketing researchfirmsfirms
Marketing Research SystemThe Marketing Research ProcessThe Marketing Research ProcessStep 1: Define the Problem, theStep 1: Define the Problem, theDecision Alternatives, and theDecision Alternatives, and theResearch ObjectivesResearch Objectiveswww.bookfiesta4u.com1-146Research ObjectivesResearch ObjectivesStep 2: Develop theStep 2: Develop theResearch PlanResearch PlanData SourcesData SourcesResearch ApproachesResearch ApproachesObservational researchObservational researchFocus group researchFocus group research
Table 5-2: Types of QuestionsChildren onlyChildren onlyNo oneNo oneWith whom are you traveling on this flight?With whom are you traveling on this flight?A question with three or more answers.A question with three or more answers.MultipleMultipleChoiceChoiceIn arranging this trip, did you personally phone American?In arranging this trip, did you personally phone American?Yes NoYes NoA question with two possible answers.A question with two possible answers.DichotomousDichotomousExampleExampleDescriptionDescriptionNameNameA. ClosedA. Closed--end Questionsend Questionswww.bookfiesta4u.com1-148See text for complete table1_____ 2 _____ 3_____ 4_____ 5_____1_____ 2 _____ 3_____ 4_____ 5_____Small airlines generally give better service than large ones.Small airlines generally give better service than large ones.Strongly Disagree Neither agree Agree StronglyStrongly Disagree Neither agree Agree Stronglydisagree nor disagree agreedisagree nor disagree agreeA statement with which the respondentA statement with which the respondentshows the amount of agreement/shows the amount of agreement/disagreement.disagreement.Likert scaleLikert scaleAn organized tour groupAn organized tour groupSpouse andSpouse andchildrenchildrenBusiness associates/friends/relativesBusiness associates/friends/relativesSpouseSpouse
Marketing Research SystemSampling PlanSampling unitSample sizewww.bookfiesta4u.com1-149Sampling procedure
www.wansink.com is a consumer psychologyWeb site set up by Dr. Brian Wansink of theUniversity of Illinoiswww.bookfiesta4u.com1-150
A.A.Probability SampleProbability SampleSimple random sampleSimple random sample Every member of the population has anEvery member of the population has anequal chance of selectionequal chance of selectionStratified randomStratified randomsamplesampleThe population is divided into mutuallyThe population is divided into mutuallyexclusive groups (such as age groups),exclusive groups (such as age groups),and random samples are drawn fromand random samples are drawn fromTable 5-3: Probability and Nonprobability Sampleswww.bookfiesta4u.com1-151and random samples are drawn fromand random samples are drawn fromeach groupeach groupCluster (area) sampleCluster (area) sample The population is divided into mutuallyThe population is divided into mutuallyexclusive groups (such as city blocks),exclusive groups (such as city blocks),and the researcher draws a sample ofand the researcher draws a sample ofthe groups to interviewthe groups to interviewContinued on next slide . . .
B.B.NonprobabilityNonprobabilitySampleSampleConvenience sampleConvenience sample The researcher selects the mostThe researcher selects the mostaccessible population membersaccessible population membersJudgment sampleJudgment sample The researcher selects populationThe researcher selects populationmembers who are good prospects formembers who are good prospects forTable 5-3: Probability and Nonprobability Samples(Continued)www.bookfiesta4u.com1-152members who are good prospects formembers who are good prospects foraccurate informationaccurate informationQuota sampleQuota sample The researcher finds and interviews aThe researcher finds and interviews aprescribed number of people in each ofprescribed number of people in each ofseveral categoriesseveral categories
Marketing Research SystemStep 3: Collect theInformationStep 4: Analyze theInformationwww.bookfiesta4u.com1-154InformationStep 5: Present theFindingsStep 6: Make theDecision
Table 5-4: The Seven Characteristics of GoodMarketing Research1. Scientific1. ScientificmethodmethodEffective marketing research uses the principlesEffective marketing research uses the principlesof the scientific method: careful observation,of the scientific method: careful observation,formulation of hypotheses, prediction, and testing.formulation of hypotheses, prediction, and testing.2. Research2. ResearchcreativitycreativityAt its best, marketing research developsAt its best, marketing research developsinnovative ways to solve a problem: a clothinginnovative ways to solve a problem: a clothingcompany catering to teenagers gave severalcompany catering to teenagers gave severalwww.bookfiesta4u.com1-155company catering to teenagers gave severalcompany catering to teenagers gave severalyoung men video cameras, then used the videosyoung men video cameras, then used the videosfor focus groups held in restaurants and otherfor focus groups held in restaurants and otherplaces teens frequent.places teens frequent.3. Multiple3. MultiplemethodsmethodsMarketing researchers shy away from overrelianceMarketing researchers shy away from overrelianceon any one method. They also recognize the valueon any one method. They also recognize the valueof using two or three methods to increaseof using two or three methods to increaseconfidence in the results.confidence in the results.See text for complete table
Marketing Research SystemOvercoming Barriers to the Use ofOvercoming Barriers to the Use ofMarketing ResearchMarketing ResearchA narrow conception of the researchA narrow conception of the researchwww.bookfiesta4u.com1-156Uneven caliber of researchersUneven caliber of researchersPoor framing of the problemPoor framing of the problemLate and occasionally erroneous findingsLate and occasionally erroneous findingsPersonality and presentational differencesPersonality and presentational differences
Table 5-5: Quantitative Tools Used in Marketing DecisionSupport SystemsStatistical ToolsStatistical Tools1. Multiple1. Multipleregression:regression:A statistical technique for estimating a “best fitting”A statistical technique for estimating a “best fitting”equation showing how the value of a dependent variableequation showing how the value of a dependent variablevaries with changing values in a number of independentvaries with changing values in a number of independentvariables.variables. ExampleExample: A company can estimate how unit: A company can estimate how unitsales are influenced by changes in the level of companysales are influenced by changes in the level of companyadvertising expenditures, sales force size, and price.advertising expenditures, sales force size, and price.2. Discriminant2. Discriminantanalysis:analysis:A statistical technique for classifying an object orA statistical technique for classifying an object orpersons into two or more categories.persons into two or more categories. ExampleExample: A large: A largewww.bookfiesta4u.com1-158analysis:analysis: persons into two or more categories.persons into two or more categories. ExampleExample: A large: A largeretail chain store can determine the variables thatretail chain store can determine the variables thatdiscriminate between successful and unsuccessful storediscriminate between successful and unsuccessful storelocations.locations.3. Factor3. Factoranalysis:analysis:A statistical technique used to determine the fewA statistical technique used to determine the fewunderlying dimensions of a larger set of intercorrelatedunderlying dimensions of a larger set of intercorrelatedvariables.variables. ExampleExample: A broadcast network can reduce a: A broadcast network can reduce alarge set of TV programs down to a small set of basiclarge set of TV programs down to a small set of basicprogram types.program types.See text for complete table
Forecasting andDemand MeasurementThe Measures of Market DemandThe Measures of Market DemandFigure 5-3: Ninetywww.bookfiesta4u.com1-159Figure 5-3: NinetyTypes of DemandMeasurement(6X5X3)
Which Market toMeasure?MarketPotential marketAvailable marketForecasting andDemand Measurementwww.bookfiesta4u.com1-160Available marketTarget market(severed market)Penetrated marketA Vocabulary for Demand MeasurementMarket DemandMarket shareMarket penetration indexShare penetration index
Can you name a market segmentCan you name a market segmentwith a low penetration index? Awith a low penetration index? Ahigh penetration index? Can youhigh penetration index? Can youwww.bookfiesta4u.com1-162high penetration index? Can youhigh penetration index? Can youthink of a market where the highthink of a market where the highpenetration index might be apenetration index might be amisleading indicator?misleading indicator?
Estimating Current demandEstimating Current demandTotal Market PotentialTotal Market PotentialArea Market PotentialArea Market PotentialForecasting and DemandMeasurementwww.bookfiesta4u.com1-164Area Market PotentialArea Market PotentialMarketMarket--Buildup MethodBuildup Method
Table 5-6: Market-Buildup Method Using SIC CodesSICSIC(a)(a)AnnualAnnualSales inSales inMillionsMillionsof $of $(b)(b)Number ofNumber ofEstablishmentsEstablishments(c)(c)PotentialPotentialNumberNumberof Lathe Salesof Lathe SalesPer $1 MillionPer $1 MillionCustomer SalesCustomer SalesMarketMarketPotentialPotential(a x b x c)(a x b x c)www.bookfiesta4u.com1-165SICSIC of $of $ EstablishmentsEstablishments Customer SalesCustomer Sales (a x b x c)(a x b x c)2511251111 66 1010 606055 22 1010 10010025212521 11 33 55 151555 11 55 25253030 200200
Forecasting and DemandMeasurementMultiple-Factor IndexMethodwww.bookfiesta4u.com1-166Brand developmentBrand developmentindex (BDI)index (BDI)
Table 5-7: Calculating the BrandDevelopment Index (BDI)(a)(a)Percent ofPercent ofU.S. BrandU.S. Brand(b)(b)Percent ofPercent ofU.S. CategoryU.S. Category BDIBDITerritoryTerritory SalesSales SalesSales (a(a ÷÷÷÷÷÷÷÷ b) x 100b) x 100SeattleSeattle 3.093.09 2.712.71 114114www.bookfiesta4u.com1-167PortlandPortland 6.746.74 10.4110.41 6565BostonBoston 3.493.49 3.853.85 9191ToledoToledo .97.97 .81.81 120120ChicagoChicago 1.131.13 .81.81 140140BaltimoreBaltimore 3.123.12 3.003.00 104104
Forecasting and DemandMeasurementIndustry Sales and Market SharesEstimating Future DemandSurvey of Buyers’ Intentionswww.bookfiesta4u.com1-168Survey of Buyers’ IntentionsForecastingPurchase probability scale
Forecasting and DemandMeasurementComposite of Sales Force OpinionsExpert OpinionGroup discussion methodPooling of individual estimateswww.bookfiesta4u.com1-169Pooling of individual estimatesPast-Sales AnalysisTime-series analysisExponential smoothingStatistical demand analysisEconometric analysisMarket-Test Method
Chapter 6Chapter 6Scanning the MarketingScanning the MarketingEnvironmentEnvironmentbybywww.bookfiesta4u.com1-170PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Kotler onMarketingToday youToday youhave to runhave to runfaster to stayfaster to staywww.bookfiesta4u.com1-171faster to stayfaster to stayin place.in place.
Chapter ObjectivesIn this chapter, we focus on twoIn this chapter, we focus on twoquestions:questions:What are the key methods for tracking andWhat are the key methods for tracking andwww.bookfiesta4u.com1-172What are the key methods for tracking andWhat are the key methods for tracking andidentifying opportunities in theidentifying opportunities in themacroenvironment?macroenvironment?What are the key demographic, economic,What are the key demographic, economic,natural, technological, political, and culturalnatural, technological, political, and culturaldevelopments?developments?
Analyzing Needs and Trends inthe MacroenvironmentTrendTrendFadFadMegatrendsMegatrendswww.bookfiesta4u.com1-173MegatrendsMegatrends
Given the definitions for fads,Given the definitions for fads,trends, and megatrends presented intrends, and megatrends presented inthe text, how would you definethe text, how would you define youryourwww.bookfiesta4u.com1-174the text, how would you definethe text, how would you define youryouronline activities? Can you identifyonline activities? Can you identifyan online trend that is likelyan online trend that is likelyto grow into a megatrend?to grow into a megatrend?
The substantial speedup of internationalThe substantial speedup of internationaltransportation, communication, and financialtransportation, communication, and financialtransactions, leading to the rapid growth of world tradetransactions, leading to the rapid growth of world tradeand investment, especially tripolar trade (Northand investment, especially tripolar trade (NorthAmerica, Western Europe, Far East)America, Western Europe, Far East)Identifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-175America, Western Europe, Far East)America, Western Europe, Far East)The movement of manufacturing capacity and skills toThe movement of manufacturing capacity and skills tolower cost countries.lower cost countries.The rising economic power of several Asian countriesThe rising economic power of several Asian countriesin world markets.in world markets.The rise of trade blocks such as the European UnionThe rise of trade blocks such as the European Unionand NAFTA signatories.and NAFTA signatories.
The severe debt problems of a number of countries,The severe debt problems of a number of countries,along with the increasing fragility of the internationalalong with the increasing fragility of the internationalfinancial system.financial system.The increasing use of barter and countertrade toThe increasing use of barter and countertrade tosupport international transactions.support international transactions.Identifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-176support international transactions.support international transactions.The move toward market economies in formerlyThe move toward market economies in formerlysocialist countries along with rapid privatization ofsocialist countries along with rapid privatization ofpublicly owned companies.publicly owned companies.The rapid dissemination of global lifestyles.The rapid dissemination of global lifestyles.The gradual opening of major new markets, namelyThe gradual opening of major new markets, namelyChina, India, eastern Europe, the Arab countries, andChina, India, eastern Europe, the Arab countries, andLatin America.Latin America.
The increasing tendency of multinationals to transcendThe increasing tendency of multinationals to transcendtheir locational and national characteristics andtheir locational and national characteristics andbecome transnational firms.become transnational firms.The increasing number of crossThe increasing number of cross--border corporateborder corporatestrategic alliancesstrategic alliances––for example, MCI and Britishfor example, MCI and BritishIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-177strategic alliancesstrategic alliances––for example, MCI and Britishfor example, MCI and BritishTelecom, and Texas Instruments and Hitachi.Telecom, and Texas Instruments and Hitachi.The increasing ethnic and religious conflicts in certainThe increasing ethnic and religious conflicts in certaincountries and regions.countries and regions.The growth of global brands in autos, food, clothing,The growth of global brands in autos, food, clothing,electronics.electronics.
Demographic EnvironmentDemographic EnvironmentWorldwide PopulationWorldwide PopulationGrowthGrowthIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-178GrowthGrowthPopulation Age MixPopulation Age MixEthnic and OtherEthnic and OtherMarketsMarkets
Can you identify one or moreCan you identify one or morenations whose populations hold thenations whose populations hold thepromise of huge potential marketspromise of huge potential marketsfor consumer goods? How havefor consumer goods? How havewww.bookfiesta4u.com1-179for consumer goods? How havefor consumer goods? How havepressures from potential marketerspressures from potential marketersto these untapped consumerto these untapped consumergroups driven the politicalgroups driven the politicaldiscussion on a nationaldiscussion on a nationaland international level?and international level?
Educational GroupsEducational GroupsHousehold PatternsHousehold PatternsGeographical Shifts inGeographical Shifts inIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-180Geographical Shifts inGeographical Shifts inPopulationPopulationFrom a Mass MarketFrom a Mass Marketto Micromarketsto Micromarkets
Economic EnvironmentEconomic EnvironmentIncome DistributionIncome DistributionIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-181Savings, Debt, andSavings, Debt, andCredit AvailabilityCredit Availability
Natural EnvironmentNatural EnvironmentShortage of Raw MaterialsShortage of Raw MaterialsIncreased Energy CostIncreased Energy CostIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-182Increased Energy CostIncreased Energy CostAntiAnti--Pollution PressuresPollution PressuresChanging Role of GovernmentsChanging Role of Governments
Technological EnvironmentTechnological EnvironmentAccelerating Pace of ChangeAccelerating Pace of ChangeIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-183Unlimited OpportunitiesUnlimited Opportunitiesfor Innovationfor Innovation
Varying R&D BudgetsVarying R&D BudgetsIncreased Regulation ofIncreased Regulation ofTechnological ChangeTechnological ChangeIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-184PoliticalPolitical--Legal EnvironmentLegal EnvironmentLegislation RegulatingLegislation RegulatingBusinessBusinessGrowth of SpecialGrowth of Special--InterestInterestGroupsGroupsConsumerist movementConsumerist movement
SocialSocial--CulturalCulturalEnvironmentEnvironmentViews of themselvesViews of themselvesIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-185Views of themselvesViews of themselvesViews of othersViews of othersViews of organizationsViews of organizationsViews of societyViews of societyViews of natureViews of natureViews of universeViews of universe
High Persistence of CoreHigh Persistence of CoreCultural ValuesCultural ValuesExistence of subculturesExistence of subculturesIdentifying and Responding to theMajor Macroenvironment Forceswww.bookfiesta4u.com1-186Existence of subculturesExistence of subculturesSubculturesSubculturesShifts of Secondary CulturalShifts of Secondary CulturalValues Through TimeValues Through Time
Chapter 7Chapter 7Analyzing ConsumerAnalyzing ConsumerMarkets and Buyer BehaviorMarkets and Buyer Behaviorbybywww.bookfiesta4u.com1-187PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Kotler onMarketingThe mostThe mostimportantimportantthing is tothing is towww.bookfiesta4u.com1-188forecast whereforecast wherecustomers arecustomers aremoving, andmoving, andbe in front ofbe in front ofthem.them.
In this chapter, we focus on two questions:In this chapter, we focus on two questions:How do the buyers’ characteristicsHow do the buyers’ characteristics –– cultural,cultural,social, personal, and psychologicalsocial, personal, and psychological –– influenceinfluenceChapter Objectiveswww.bookfiesta4u.com1-189social, personal, and psychologicalsocial, personal, and psychological –– influenceinfluencebuying behavior?buying behavior?How does the buyer make purchasingHow does the buyer make purchasingdecisions?decisions?
Table 7.1: Characteristics of Major U.S. Social Classes1.1. Upper UppersUpper Uppers(less than 1%)(less than 1%)The social elite who live on inherited wealth. TheyThe social elite who live on inherited wealth. Theygive large sums to charity, run the debutante balls,give large sums to charity, run the debutante balls,maintain more than one home, and send theirmaintain more than one home, and send theirchildren to the finest schools. They are a market forchildren to the finest schools. They are a market forjewelry, antiques, homes, and vacations. They oftenjewelry, antiques, homes, and vacations. They oftenbuy and dress conservatively. Although small as abuy and dress conservatively. Although small as agroup, they serve as a reference group to the extentgroup, they serve as a reference group to the extentthat their consumption decisions are imitated by thethat their consumption decisions are imitated by theother social classes.other social classes.www.bookfiesta4u.com1-192See text for complete tableother social classes.other social classes.2.2. Lower UppersLower Uppers(about 2%)(about 2%)Persons, usually from the middle class, who havePersons, usually from the middle class, who haveearned high income or wealth through exceptionalearned high income or wealth through exceptionalability in the professions or business. They tend toability in the professions or business. They tend tobe active in social and civic affairs and to buy thebe active in social and civic affairs and to buy thesymbols of status for themselves and their children.symbols of status for themselves and their children.They include the nouveau riche, whose pattern ofThey include the nouveau riche, whose pattern ofconspicuous consumption is designed to impressconspicuous consumption is designed to impressthose below them.those below them.
FamilyFamilyFamily of orientationFamily of orientationFamily of procreationFamily of procreationRoles and StatusesRoles and StatusesInfluencing Buyer Behaviorwww.bookfiesta4u.com1-194Roles and StatusesRoles and StatusesRoleRoleStatusStatus
With the “graying” of the American populace,With the “graying” of the American populace,marketers have begun to shift images andmarketers have begun to shift images andcultural references in advertising from thingscultural references in advertising from thingsthat are relevant to the twentythat are relevant to the twenty--somethings tosomethings towww.bookfiesta4u.com1-195that are relevant to the twentythat are relevant to the twenty--somethings tosomethings toimages of active seniors, and soundtracksimages of active seniors, and soundtracksfrom the sixties and seventies. Can youfrom the sixties and seventies. Can youidentify any particularidentify any particularad campaigns that fitad campaigns that fitthis pattern?this pattern?
Personal FactorsPersonal FactorsAge and Stage in the Life CycleAge and Stage in the Life CycleFamily life cycleFamily life cycleInfluencing Buyer Behaviorwww.bookfiesta4u.com1-196Family life cycleFamily life cycleOccupation and EconomicOccupation and EconomicCircumstancesCircumstances
In recent years, many organizations haveIn recent years, many organizations have“provided” televisions with limited programming“provided” televisions with limited programmingaccess for use in Kaccess for use in K--12 classrooms. Do these12 classrooms. Do theseentities have a moral obligation to avoid overtentities have a moral obligation to avoid overtwww.bookfiesta4u.com1-197entities have a moral obligation to avoid overtentities have a moral obligation to avoid overtmarketing to their captive audiences, or is this amarketing to their captive audiences, or is this avalid tool for introducing offerings to futurevalid tool for introducing offerings to futureconsumers? What should theconsumers? What should theresponsibilities of the educatorsresponsibilities of the educatorsbe in these situations?be in these situations?
Table 7.2: Stages in the Family Life Cycle1. Bachelor stage:1. Bachelor stage:Young, single, not livingYoung, single, not livingat homeat homeFew financial burdens. Fashion opinionFew financial burdens. Fashion opinionleaders. Recreation oriented. Buy: basic homeleaders. Recreation oriented. Buy: basic homeequipment, furniture, cars, equipment for theequipment, furniture, cars, equipment for themating game; vacations.mating game; vacations.2. Newly married2. Newly marriedcouples:couples:Young, no childrenYoung, no childrenHighest purchase rate and highest averageHighest purchase rate and highest averagepurchase of durables: cars, appliances,purchase of durables: cars, appliances,furniture, vacations.furniture, vacations.3. Full nest I:3. Full nest I: Home purchasing at peak. Liquid assets low.Home purchasing at peak. Liquid assets low.www.bookfiesta4u.com1-198See text for complete table3. Full nest I:3. Full nest I:Youngest child underYoungest child undersixsixHome purchasing at peak. Liquid assets low.Home purchasing at peak. Liquid assets low.Interested in new products, advertisedInterested in new products, advertisedproducts. Buy: washers, dryers, TV, baby food,products. Buy: washers, dryers, TV, baby food,chest rubs and cough medicines, vitamins,chest rubs and cough medicines, vitamins,dolls, wagons, sleds, skates.dolls, wagons, sleds, skates.4. Full nest II:4. Full nest II:Youngest child six orYoungest child six oroveroverFinancial position better. Less influenced byFinancial position better. Less influenced byadvertising. Buy largeradvertising. Buy larger--size packages,size packages,multiplemultiple--unit deals. Buy: many foods, cleaningunit deals. Buy: many foods, cleaningmaterials, bicycles, music lessons, pianos.materials, bicycles, music lessons, pianos.
Figure 7.2: The VALS segmentation system:An 8-part typologyGroups with HighGroups with HighResourcesResources1.1. ActualizersActualizers2.2. FulfilledsFulfilleds3.3. AchieversAchieverswww.bookfiesta4u.com1-1993.3. AchieversAchievers4.4. ExperiencersExperiencersGroups with LowerGroups with LowerResourcesResources1.1. BelieversBelievers2.2. StriversStrivers3.3. MakersMakers4.4. StrugglersStrugglers
SRI Consulting Business Intelligence’s Web siteSRI Consulting Business Intelligence’s Web sitewww.bookfiesta4u.com1-200
Personality and SelfPersonality and Self--ConceptConceptPersonalityPersonalityBrand personalityBrand personalitySinceritySincerityExcitementExcitementInfluencing Buyer Behaviorwww.bookfiesta4u.com1-201ExcitementExcitementCompetenceCompetenceSophisticationSophisticationRuggednessRuggednessSelfSelf--conceptconceptPerson’s actual selfPerson’s actual self--conceptconceptIdeal selfIdeal self--conceptconceptOthers’ selfOthers’ self--conceptconcept
Ernest Dichter’s research found:Ernest Dichter’s research found:Consumers resist prunes because prunes areConsumers resist prunes because prunes arewrinkled looking and remind people of old age.wrinkled looking and remind people of old age.Men smoke cigars as an adult version of thumbMen smoke cigars as an adult version of thumbsucking.sucking.Influencing Buyer Behaviorwww.bookfiesta4u.com1-203sucking.sucking.Women prefer vegetable shortening to animalWomen prefer vegetable shortening to animalfats because the latter arouse a sense of guiltfats because the latter arouse a sense of guiltover killing animals.over killing animals.Women don’t trust cake mixes unless theyWomen don’t trust cake mixes unless theyrequire adding an egg, because this helps themrequire adding an egg, because this helps themfeel they are giving “birth.”feel they are giving “birth.”
PerceptionPerceptionSelective attentionSelective attentionPeople are more likely to notice stimuli thanPeople are more likely to notice stimuli thanrelate to a current needrelate to a current needPeople are more likely to notice stimuli thanPeople are more likely to notice stimuli thanInfluencing Buyer Behaviorwww.bookfiesta4u.com1-206People are more likely to notice stimuli thanPeople are more likely to notice stimuli thanthey anticipatethey anticipatePeople are more likely to notice stimuliPeople are more likely to notice stimuliwhose deviations are large in relation to thewhose deviations are large in relation to thenormal size of the stimulinormal size of the stimuliSelective distortionSelective distortionSelective retentionSelective retention
LearningLearningDriveDriveCuesCuesDiscriminationDiscriminationInfluencing Buyer Behaviorwww.bookfiesta4u.com1-207DiscriminationDiscriminationBeliefs and AttitudesBeliefs and AttitudesBeliefBeliefSpreading activationSpreading activationAttitudeAttitude
The purchase of a product from a Company AThe purchase of a product from a Company Aturns out to be a positive experience. You areturns out to be a positive experience. You arelooking for a loosely related product, which is alsolooking for a loosely related product, which is alsowww.bookfiesta4u.com1-208looking for a loosely related product, which is alsolooking for a loosely related product, which is alsooffered by Company A. Do you assume that youoffered by Company A. Do you assume that youwill again have a positive experience withwill again have a positive experience withCompany A’s offering, or do youCompany A’s offering, or do youlook for the “best of breed,”look for the “best of breed,”regardless of whichregardless of whichcompany offers it?company offers it?
How marketers learn about the stages:How marketers learn about the stages:Introspective methodIntrospective methodRetrospective methodRetrospective methodProspective methodProspective methodStages in the BuyingDecision Processwww.bookfiesta4u.com1-212Prescriptive methodPrescriptive methodUnderstanding by mapping the customer’sUnderstanding by mapping the customer’sConsumption systemConsumption systemCustomer activity cycleCustomer activity cycleCustomer scenarioCustomer scenarioMetamarketMetamarketMetamediariesMetamediaries
The Edmunds.com home page shows the variety ofThe Edmunds.com home page shows the variety ofservices this Web company offers those shoppingservices this Web company offers those shoppingfor a car.for a car.www.bookfiesta4u.com1-213
Problem recognitionProblem recognitionInformation searchInformation searchPersonal sourcesPersonal sourcesStages of the BuyingDecision ProcessFigure 7.4:www.bookfiesta4u.com1-214Personal sourcesPersonal sourcesCommercial sourcesCommercial sourcesPublic sourcesPublic sourcesExperiential sourcesExperiential sourcesFigure 7.4:Five-StageModel of theConsumerBuyingProcess
Figure 7.5: Successive Sets Involved in CustomerDecision Makingwww.bookfiesta4u.com1-215
Evaluation of AlternativesEvaluation of AlternativesPotential Attributes of interestPotential Attributes of interestCamerasCamerasHotelsHotelsThe Buying Decision Processwww.bookfiesta4u.com1-216HotelsHotelsMouthwashMouthwashTiresTiresBrand beliefsBrand beliefsBrand imageBrand image
Strategies designed to stimulate interest in aStrategies designed to stimulate interest in acomputercomputerRedesign the computerRedesign the computerAlter beliefs about the brandAlter beliefs about the brandThe Buying Decision Processwww.bookfiesta4u.com1-218Alter beliefs about the brandAlter beliefs about the brandAlter beliefs about competitors’ brandsAlter beliefs about competitors’ brandsAlter the importance weightsAlter the importance weightsCall attention to neglected attributesCall attention to neglected attributesShift the buyer’s ideasShift the buyer’s ideas
Purchase DecisionPurchase DecisionFigure 7.6: Steps Between Evaluation ofAlternatives and a purchase decisionThe Buying Decision Processwww.bookfiesta4u.com1-219
Postpurchase BehaviorPostpurchase BehaviorPostpurchase SatisfactionPostpurchase SatisfactionDisappointedDisappointedSatisfiedSatisfiedThe Buying Decision Processwww.bookfiesta4u.com1-221SatisfiedSatisfiedDelightedDelightedPostpurchase ActionsPostpurchase ActionsPostpurchase Use and DisposalPostpurchase Use and Disposal
Figure 7.7: How Customers Dispose of Productswww.bookfiesta4u.com1-222
Other Models of the Buying DecisionOther Models of the Buying DecisionProcessProcessHealth ModelHealth ModelStages of Change ModelStages of Change ModelThe Buying Decision Processwww.bookfiesta4u.com1-223Stages of Change ModelStages of Change ModelPrecontemplationPrecontemplationContemplationContemplationPreparationPreparationActionActionMaintenanceMaintenanceCustomer Activity Cycle ModelCustomer Activity Cycle ModelPre, during and post phasesPre, during and post phases
Figure 7.8:Activity cyclefor IBMcustomers inthe globalelectronicnetworkingcapabilitywww.bookfiesta4u.com1-224capabilitymarket space
Figure 7.9:Value addsfor IBMcustomers inthe globalelectronicnetworkingcapabilitywww.bookfiesta4u.com1-225capabilitymarket space
Chapter 8Chapter 8Analyzing Business MarketsAnalyzing Business Marketsand Business Buyingand Business BuyingBehaviorBehaviorbybywww.bookfiesta4u.com1-226bybyPowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Chapter ObjectivesIn this chapter, we focus on six questions:In this chapter, we focus on six questions:What is the business market, and how does itWhat is the business market, and how does itdiffer from the consumer market?differ from the consumer market?What buying situations do organizational buyersWhat buying situations do organizational buyersface?face?www.bookfiesta4u.com1-228face?face?Who participates in the business buying process?Who participates in the business buying process?What are the major influences on organizationalWhat are the major influences on organizationalbuyers?buyers?How do business buyers make their decisions?How do business buyers make their decisions?How do institutions and government agencies doHow do institutions and government agencies dotheir buying?their buying?
What is OrganizationalBuying?Organizational buyingOrganizational buyingThe business market versus the consumerThe business market versus the consumermarketmarketwww.bookfiesta4u.com1-229marketmarketBusiness marketBusiness marketFewer buyersFewer buyersLarger buyersLarger buyersClose supplierClose supplier--customer relationshipcustomer relationshipGeographically concentrated buyersGeographically concentrated buyers
What is OrganizationalBuying?Derived demandDerived demandInelastic demandInelastic demandwww.bookfiesta4u.com1-230Fluctuating demandFluctuating demandProfessional purchasingProfessional purchasing
Blue Shield of California’s mylifepathBlue Shield of California’s mylifepathwww.bookfiesta4u.com1-231
What is OrganizationalBuying?Several buying influencesSeveral buying influencesMultiple sales callsMultiple sales callsDirected purchasingDirected purchasingwww.bookfiesta4u.com1-232Directed purchasingDirected purchasingReciprocityReciprocityLeasingLeasing
If you were tasked with marketing aIf you were tasked with marketing aproduct or service to an organization,product or service to an organization,would you attempt to initially contact thewould you attempt to initially contact thewww.bookfiesta4u.com1-233would you attempt to initially contact thewould you attempt to initially contact thepurchasing departmentpurchasing department, or, or potentialpotentialusersusers of your company’s offerings? Why?of your company’s offerings? Why?Would the product youWould the product youwere selling make awere selling make adifference? Why?difference? Why?
What is OrganizationalBuying?Buying SituationsBuying SituationsStraight rebuyStraight rebuyModified rebuyModified rebuywww.bookfiesta4u.com1-234New TaskNew TaskSystems Buying and SellingSystems Buying and SellingSystems buyingSystems buyingTurnkey solutionTurnkey solutionSystems sellingSystems selling
What are some of the benefits to anWhat are some of the benefits to anorganization that can be derivedorganization that can be derivedfrom afrom a single source solutionsingle source solution, or a, or asystems buyingsystems buying arrangement with aarrangement with awww.bookfiesta4u.com1-235systems buyingsystems buying arrangement with aarrangement with aprime contractor? What are some ofprime contractor? What are some ofthe potential pitfalls? Whatthe potential pitfalls? Whatcan the company do tocan the company do toprotect itself fromprotect itself fromthese hazards?these hazards?
Participants in the BusinessBuying ProcessThe Buying CenterThe Buying CenterInitiatorsInitiatorsUsersUsersInfluencersInfluencerswww.bookfiesta4u.com1-236InfluencersInfluencersDecidersDecidersApproversApproversBuyersBuyersGatekeepersGatekeepersKey buying influencersKey buying influencersMultilevel inMultilevel in--depth sellingdepth selling
Figure 8-1: Major Influences onIndustrial Buying Behaviorwww.bookfiesta4u.com1-237
Major Influences on BuyingDecisionsEnvironmental FactorsEnvironmental FactorsOrganizational FactorsOrganizational FactorsPurchasingPurchasing--Department UpgradingDepartment Upgradingwww.bookfiesta4u.com1-238PurchasingPurchasing--Department UpgradingDepartment UpgradingCrossCross--Functional RolesFunctional RolesCentralized PurchasingCentralized PurchasingDecentralized Purchasing of SmallDecentralized Purchasing of Small--TicketTicketItemsItemsInternet PurchasingInternet Purchasing
The eThe e--hub Plastics.com home page offers buyers andhub Plastics.com home page offers buyers andsellers of plastics a marketplace plus news andsellers of plastics a marketplace plus news andinformationinformationwww.bookfiesta4u.com1-239
Covisint’s Web site offers both services andCovisint’s Web site offers both services andinformationinformationwww.bookfiesta4u.com1-240
Major Influences on BuyingDecisionsOther Organizational FactorsOther Organizational FactorsLongLong--Term ContractsTerm ContractsVendorVendor--managed inventorymanaged inventoryContinuous replenishment programsContinuous replenishment programswww.bookfiesta4u.com1-241Continuous replenishment programsContinuous replenishment programsPurchasingPurchasing--Performance Evaluation and Buyers’Performance Evaluation and Buyers’Professional DevelopmentProfessional DevelopmentImproved Supply Chain ManagementImproved Supply Chain ManagementLean ProductionLean ProductionJustJust--inin--timetime
Major Influences on BuyingDecisionsInterpersonal and Individual FactorsInterpersonal and Individual FactorsCultural FactorsCultural FactorsFranceFrancewww.bookfiesta4u.com1-242FranceFranceGermanyGermanyJapanJapanKoreaKoreaLatin AmericaLatin America
The Purchasing/Procurement ProcessIncentive to purchaseIncentive to purchaseThree Company Purchasing OrientationsThree Company Purchasing OrientationsBuying OrientationBuying OrientationCommoditizationCommoditizationwww.bookfiesta4u.com1-243CommoditizationCommoditizationMultisourcingMultisourcingProcurement OrientationProcurement OrientationMaterials requirement planning (MRP)Materials requirement planning (MRP)Supply Chain Management OrientationSupply Chain Management Orientation
The Purchasing/Procurement ProcessTypes of Purchasing ProcessesTypes of Purchasing ProcessesRoutine productsRoutine productsLeverage productsLeverage productswww.bookfiesta4u.com1-244Leverage productsLeverage productsStrategic productsStrategic productsBottleneck productsBottleneck products
The Purchasing/Procurement ProcessStages in the Buying ProcessStages in the Buying ProcessProblem RecognitionProblem RecognitionGeneral Need Description andGeneral Need Description andProduct SpecificationProduct Specificationwww.bookfiesta4u.com1-245Product SpecificationProduct SpecificationProduct value analysisProduct value analysisSupplier SearchSupplier SearchVertical hubsVertical hubsFunctional hubsFunctional hubsDirect external links to major suppliersDirect external links to major suppliersBuying alliancesBuying alliancesCompany buying sitesCompany buying sitesRequest for proposals (RFPs)Request for proposals (RFPs)
Table 8.1: Buygrid Framework: Major Stages (Buyphases) of theIndustrial Buying Process in Relation to Major Buying Situations(Buyclasses)BuyclassesBuyclassesNewNew ModifiedModified StraightStraightTaskTask RebuyRebuy RebuyRebuy1. Problem recognition1. Problem recognition YesYes MaybeMaybe NoNo2. General need description2. General need description YesYes MaybeMaybe NoNowww.bookfiesta4u.com1-2462. General need description2. General need description YesYes MaybeMaybe NoNo3. Product specification3. Product specification YesYes YesYes YesYesBuyphasesBuyphases 4. Supplier search4. Supplier search YesYes MaybeMaybe NoNo5. Proposal solicitation5. Proposal solicitation YesYes MaybeMaybe NoNo6. Supplier selection6. Supplier selection YesYes MaybeMaybe NoNo7. Order7. Order--routine specificationroutine specification YesYes MaybeMaybe NoNo8. Performance review8. Performance review YesYes YesYes YesYes
The Purchasing/Procurement ProcessGeneral Need Description andGeneral Need Description andProduct SpecificationProduct SpecificationProduct value analysisProduct value analysisSupplier SearchSupplier Searchwww.bookfiesta4u.com1-247Supplier SearchSupplier SearchVertical hubsVertical hubsFunctional hubsFunctional hubsDirect extranet links toDirect extranet links tomajor suppliersmajor suppliersBuying alliancesBuying alliancesCompany buying sitesCompany buying sitesRequest for proposals (RFPs)Request for proposals (RFPs)
The Purchasing/Procurement ProcessProposal SolicitationProposal SolicitationSupplier SelectionSupplier Selectionwww.bookfiesta4u.com1-248
Chapter 9Chapter 9Dealing with theDealing with theCompetitionCompetitionbybywww.bookfiesta4u.com1-253PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
In this chapter, we focus on five thingsIn this chapter, we focus on five thingscompanies need to know about theircompanies need to know about theircompetition:competition:Who the primary competitors areWho the primary competitors areHow to ascertain their strategies, objectives,How to ascertain their strategies, objectives,strengths and weaknesses, and reactionstrengths and weaknesses, and reactionChapter Objectiveswww.bookfiesta4u.com1-255strengths and weaknesses, and reactionstrengths and weaknesses, and reactionpatternspatternsHow to design a competitive intelligence systemHow to design a competitive intelligence systemWhether to position as market leader,Whether to position as market leader,challenger, follower, or nicherchallenger, follower, or nicherHow to balance a customer versusHow to balance a customer versuscompetitor orientationcompetitor orientation
Figure 9-1: Five Forces DeterminingSegment Structural AttractivenessCompetitive ForcesThreat of:Threat of:1.1. intense segmentintense segmentrivalryrivalry2.2. new entrantsnew entrantswww.bookfiesta4u.com1-2562.2. new entrantsnew entrants3.3. substitute productssubstitute productsbuyers’ growingbuyers’ growingbargaining powerbargaining powersuppliers’ growingsuppliers’ growingbargainingbargainingpowerpower
Figure 9-2: Barriers and Profitabilitywww.bookfiesta4u.com1-257
GetThere.com, launched as the Internet Travel NetworkGetThere.com, launched as the Internet Travel Networkin 1995, was the first company to book trips over thein 1995, was the first company to book trips over theWebWebwww.bookfiesta4u.com1-258
Identifying CompetitorsIndustry Concept of CompetitionIndustry Concept of CompetitionIndustryIndustryNumber of Sellers andNumber of Sellers andDegree of DifferentiationDegree of DifferentiationPure monopolyPure monopolywww.bookfiesta4u.com1-259Pure monopolyPure monopolyOligopolyOligopolyPure oligopolyPure oligopolyDifferentiated oligopolyDifferentiated oligopolyMonopolistic competitionMonopolistic competitionPure competitionPure competition
Identifying CompetitorsEntry, Mobility, Exit BarriersEntry, Mobility, Exit BarriersEntry barriersEntry barriersMobility barriersMobility barriersExit barriersExit barriersCost StructureCost Structurewww.bookfiesta4u.com1-260Cost StructureCost StructureDegree of Vertical IntegrationDegree of Vertical IntegrationVertical integrationVertical integrationDegree of GlobalizationDegree of GlobalizationMarket Concept of CompetitionMarket Concept of Competition
ObjectivesObjectivesFigure 9-5: A Competitor’s Expansion PlansAnalyzing Competitorswww.bookfiesta4u.com1-261
Analyzing CompetitorsStrengths and WeaknessesStrengths and WeaknessesDominantDominantStrongStrongwww.bookfiesta4u.com1-262StrongStrongFavorableFavorableTenableTenableWeakWeakNonviableNonviable
Table 9-1: Customer’s Ratings of Competitors onKey Success FactorsCustomerCustomerAwarenessAwarenessProductProductQualityQualityProductProductAvailabilityAvailabilityTechnicalTechnicalAssistanceAssistanceSellingSellingStaffStaffCompetitor ACompetitor A EE EE PP PP GGCompetitor BCompetitor B GG GG EE GG EEwww.bookfiesta4u.com1-263Competitor BCompetitor B GG GG EE GG EECompetitor CCompetitor C FF PP GG FF FFNote: E = excellent, G = good, F = fair, P = poor.Note: E = excellent, G = good, F = fair, P = poor.
Analyzing CompetitorsThree Variables to MonitorThree Variables to MonitorWhen Analyzing Competitors:When Analyzing Competitors:Share of marketShare of marketShare of mindShare of mindwww.bookfiesta4u.com1-264Share of mindShare of mindShare of heartShare of heart
Table 9-2: Market Share, Mind Share, and Heart ShareMarket ShareMarket Share Mind ShareMind Share Heart ShareHeart Share20002000 20012001 20022002 20002000 20012001 20022002 20002000 20012001 20022002Competitor ACompetitor A 50%50% 47%47% 44%44% 60%60% 58%58% 54%54% 45%45% 42%42% 39%39%www.bookfiesta4u.com1-265Competitor ACompetitor A 50%50% 47%47% 44%44% 60%60% 58%58% 54%54% 45%45% 42%42% 39%39%Competitor BCompetitor B 3030 3434 3737 3030 3131 3535 4444 4747 5353Competitor CCompetitor C 2020 1919 1919 1010 1111 1111 1111 1111 88
Reaction PatternsReaction Patterns1. If competitors are nearly identical and make their living the1. If competitors are nearly identical and make their living thesame way, then their competitive equilibrium is unstable.same way, then their competitive equilibrium is unstable.2. If a single major factor is the critical factor, then the2. If a single major factor is the critical factor, then thecompetitive equilibrium is unstable.competitive equilibrium is unstable.3. If multiple factors may be critical factors, then it is possible3. If multiple factors may be critical factors, then it is possiblefor each competitor to have some advantage and befor each competitor to have some advantage and bedifferentially attractive to some customers. The moredifferentially attractive to some customers. The moreAnalyzing Competitorswww.bookfiesta4u.com1-266differentially attractive to some customers. The moredifferentially attractive to some customers. The morefactors that may provide an advantage, the morefactors that may provide an advantage, the morecompetitors who can coexist. Competitors all have theircompetitors who can coexist. Competitors all have theirsegment, defined by the preference for the factor tradesegment, defined by the preference for the factor trade--offsoffsthey offer.they offer.4. The fewer the number of critical competitive variables, the4. The fewer the number of critical competitive variables, thefewer the number of competitors.fewer the number of competitors.5. A ratio of 2 to 1 in market share between any two5. A ratio of 2 to 1 in market share between any twocompetitors seems to be the equilibrium point at which it iscompetitors seems to be the equilibrium point at which it isneither practical nor advantageous for either competitor toneither practical nor advantageous for either competitor toincrease or decrease share.increase or decrease share.
For many years, the major national broadcastFor many years, the major national broadcasttelevision networks shared 100% of the market, andtelevision networks shared 100% of the market, andtraded market share back and forth periodically.traded market share back and forth periodically.During the last two decades, the emergence ofDuring the last two decades, the emergence ofnationally available cable programming, and the risenationally available cable programming, and the risewww.bookfiesta4u.com1-267nationally available cable programming, and the risenationally available cable programming, and the riseof rival broadcast networks like Fox, UPN, and WBof rival broadcast networks like Fox, UPN, and WBhave increasingly cut into the market share of thehave increasingly cut into the market share of the“big three.” What steps would you“big three.” What steps would yourecommend that the “big three”recommend that the “big three”networks take to stop or slownetworks take to stop or slowthis loss of market share?this loss of market share?
Designing The CompetitiveIntelligence SystemFour Main StepsFour Main StepsSetting Up the SystemSetting Up the SystemCollecting the DataCollecting the Datawww.bookfiesta4u.com1-268Collecting the DataCollecting the DataEvaluating and Analyzing the DataEvaluating and Analyzing the DataDisseminating Information and RespondingDisseminating Information and Responding
What do you see as the potential impact of theWhat do you see as the potential impact of theavailability of information via the Internet on theavailability of information via the Internet on thedesign of competitive intelligence systems? Whatdesign of competitive intelligence systems? Whatproblems could be caused by the inability of theproblems could be caused by the inability of thewww.bookfiesta4u.com1-270problems could be caused by the inability of theproblems could be caused by the inability of theaverage computer user to verify the accuracy ofaverage computer user to verify the accuracy ofdata from the web? What impact will emergingdata from the web? What impact will emergingdatabase technologies likedatabase technologies liketexttext--based data mining havebased data mining havein competitive intelligencein competitive intelligencesystems?systems?
Designing The CompetitiveIntelligence SystemMajor Steps in Customer Value Analysis:Major Steps in Customer Value Analysis:1. Identify the major attributes customers value.1. Identify the major attributes customers value.2. Assess the quantitative importance2. Assess the quantitative importanceof the different attributes.of the different attributes.www.bookfiesta4u.com1-2723. Assess the companies’ and competitors’3. Assess the companies’ and competitors’performances on the different customerperformances on the different customervalues against their rated importance.values against their rated importance.4. Examine how customers in a specific4. Examine how customers in a specificsegment rate the company’s performancesegment rate the company’s performanceagainst a specific major competitor on anagainst a specific major competitor on anattributeattribute--byby--attribute basis.attribute basis.5. Monitor customer values over time.5. Monitor customer values over time.
Classes of CompetitorsClasses of CompetitorsStrong versus WeakStrong versus WeakDesigning The CompetitiveIntelligence Systemwww.bookfiesta4u.com1-273Close versus DistantClose versus Distant“Good” versus “Bad”“Good” versus “Bad”
Designing CompetitiveStrategiesMarketMarket--Challenger StrategiesChallenger StrategiesDefining the Strategic Objective andDefining the Strategic Objective andOpponent(s)Opponent(s)www.bookfiesta4u.com1-280Opponent(s)Opponent(s)It can attack the market leaderIt can attack the market leaderIt can attack firms of its own size that are notIt can attack firms of its own size that are notdoing the job and are underfinanceddoing the job and are underfinancedIt can attack small local and regional firmsIt can attack small local and regional firmsChoosing a General Attack StrategyChoosing a General Attack Strategy
Swedish firm SCA’s www.libero.se site creates a dialogue withSwedish firm SCA’s www.libero.se site creates a dialogue withexpectant and new parents and even allows users to sendexpectant and new parents and even allows users to sendpictures, brief stories, and child wish list to family all over thepictures, brief stories, and child wish list to family all over theworld.world.www.bookfiesta4u.com1-282
Designing CompetitiveStrategiesChoosing a Specific AttackChoosing a Specific AttackStrategyStrategyPricePrice--discountdiscountLower price goodsLower price goodsPrestige goodsPrestige goodswww.bookfiesta4u.com1-283Prestige goodsPrestige goodsProduct proliferationProduct proliferationProduct innovationProduct innovationImproved servicesImproved servicesDistribution innovationDistribution innovationManufacturing cost reductionManufacturing cost reductionIntensive advertising promotionIntensive advertising promotion
Chapter 10Chapter 10Identifying MarketIdentifying MarketSegments and SelectingSegments and SelectingTarget MarketsTarget Marketsbybywww.bookfiesta4u.com1-287bybyPowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Kotler onMarketing“Don’t buy“Don’t buymarket share.market share.Figure outFigure outwww.bookfiesta4u.com1-288Figure outFigure outhow to earnhow to earnit.”it.”
Chapter ObjectivesWe focus on the following questions:We focus on the following questions:How can a companyHow can a companyidentify the segmentsidentify the segmentsthat make up athat make up amarket?market?www.bookfiesta4u.com1-289market?market?What criteria canWhat criteria cana company use toa company use tochoose the mostchoose the mostattractive targetattractive targetmarkets?markets?
Target MarketingTarget marketing requires marketers toTarget marketing requires marketers totake three major steps:take three major steps:Identify and profile distinct groups of buyersIdentify and profile distinct groups of buyerswho differ in their needs and preferenceswho differ in their needs and preferences(market segmentation).(market segmentation).www.bookfiesta4u.com1-290(market segmentation).(market segmentation).Select one or more market segments to enterSelect one or more market segments to enter(market targeting).(market targeting).For each target segment, establish andFor each target segment, establish andcommunicate the key distinctive benefit(s) ofcommunicate the key distinctive benefit(s) ofthe company’s market offering (marketthe company’s market offering (marketpositioning).positioning).
Levels and Patterns ofMarket SegmentationLevels of Market SegmentationLevels of Market SegmentationMass marketingMass marketingMicromarketingMicromarketingSegment marketingSegment marketingwww.bookfiesta4u.com1-291Segment marketingSegment marketingMarket segmentMarket segmentSectorSectorFlexible market offeringFlexible market offeringNaked solutionNaked solutionDiscretionary optionsDiscretionary options
ChemStation’s Web site offers customers solutionsChemStation’s Web site offers customers solutionsto their problems, not just products.to their problems, not just products.www.bookfiesta4u.com1-295
Table 10-1: Steps in Segmentation ProcessDescriptionDescription1. Needs1. Needs--BasedBasedSegmentationSegmentationGroup customers into segments based on similarGroup customers into segments based on similarneeds and benefits sought by customer in solvingneeds and benefits sought by customer in solvinga particular consumption problem.a particular consumption problem.2. Segment2. SegmentIdentificationIdentificationFor each needsFor each needs--based segment, determine whichbased segment, determine whichdemographics, lifestyles, and usage behaviorsdemographics, lifestyles, and usage behaviorsmake the segment distinct and identifiablemake the segment distinct and identifiable(actionable).(actionable).3. Segment3. Segment Using predetermined segment attractivenessUsing predetermined segment attractivenesswww.bookfiesta4u.com1-2963. Segment3. SegmentAttractivenessAttractivenessUsing predetermined segment attractivenessUsing predetermined segment attractivenesscriteria (such as market growth, competitivecriteria (such as market growth, competitiveintensity, and market access), determine theintensity, and market access), determine theoverall attractiveness of each segment.overall attractiveness of each segment.4. Segment Profitability4. Segment Profitability Determine segment profitability.Determine segment profitability.5. Segment Positioning5. Segment Positioning For each segment, create a “value proposition”For each segment, create a “value proposition”and productand product--price positioning strategy based onprice positioning strategy based onthat segment’s unique customer needs andthat segment’s unique customer needs andcharacteristics.characteristics.See text for complete table
Levels and Patterns ofMarket SegmentationEffective SegmentationEffective SegmentationMeasurableMeasurableSubstantialSubstantialwww.bookfiesta4u.com1-297SubstantialSubstantialAccessibleAccessibleDifferentiableDifferentiableActionableActionable
Segmenting Consumer andBusiness MarketsBases for SegmentingBases for SegmentingConsumer MarketsConsumer Marketswww.bookfiesta4u.com1-298
Table 10-2: Major Segmentation Variablesfor Consumer MarketsGeographicGeographicRegionRegion Pacific, Mountain, West North Central, West SouthPacific, Mountain, West North Central, West SouthCentral, East North Central, East South Central,Central, East North Central, East South Central,South Atlantic, Middle Atlantic, New EnglandSouth Atlantic, Middle Atlantic, New EnglandCity or metro sizeCity or metro size Under 5,000; 5,000Under 5,000; 5,000--20,000; 20,00020,000; 20,000--50,000; 50,00050,000; 50,000--100,000; 100,000100,000; 100,000--250,000; 250,000250,000; 250,000--500,000;500,000;www.bookfiesta4u.com1-299500,000500,000--1,000,000; 1,000,0001,000,000; 1,000,000--4,000,000; 4,000,0004,000,000; 4,000,000or overor overDensityDensity Urban, suburban, ruralUrban, suburban, ruralClimateClimate Northern southernNorthern southernDemographicDemographicAgeAge Under 6, 6Under 6, 6--11, 1211, 12--19, 2019, 20--34, 3534, 35--49, 5049, 50--64, 65+64, 65+Family sizeFamily size 11--2, 32, 3--4, 5+4, 5+See text for complete table
Segmenting Consumer andBusiness MarketsBases for Segmenting Consumer MarketsBases for Segmenting Consumer MarketsGeographic SegmentationGeographic SegmentationDemographic SegmentationDemographic Segmentationwww.bookfiesta4u.com1-300Demographic SegmentationDemographic SegmentationAge and LifeAge and Life--CycleCycleStageStage
An easily identifiable demographic groupAn easily identifiable demographic groupwhich is often targeted by marketers iswhich is often targeted by marketers iscollege students. Do you think this iscollege students. Do you think this iswww.bookfiesta4u.com1-301college students. Do you think this iscollege students. Do you think this isinfluenced more by a common economicinfluenced more by a common economicstatus of the target group, geographicstatus of the target group, geographicconcentration of a specificconcentration of a specificage group, or someage group, or someother factor(s)?other factor(s)?
Sega’s homepage: Not just gamesSega’s homepage: Not just gameswww.bookfiesta4u.com1-302
Segmenting Consumer andBusiness MarketsLife StageLife StageGenderGenderIncomeIncomeGenerationGenerationwww.bookfiesta4u.com1-303The Depression CohortThe Depression CohortThe World War II CohortThe World War II CohortThe PostThe Post--War CohortWar CohortLeadingLeading--EdgeEdgeBaby Boomer CohortBaby Boomer CohortTrailingTrailing--EdgeEdgeBaby Boomer CohortBaby Boomer CohortGeneration X CohortGeneration X CohortThe Generation Y CohortThe Generation Y Cohort
Improvements in both the average standardImprovements in both the average standardof living and in health care have hadof living and in health care have hadprofound effects in the industrialized worldprofound effects in the industrialized worldduring the last two generations. Other thanduring the last two generations. Other thanan increase in the average life expectancy foran increase in the average life expectancy forwww.bookfiesta4u.com1-305an increase in the average life expectancy foran increase in the average life expectancy forboth men and women, what effects has thisboth men and women, what effects has thistrend toward longer andtrend toward longer andhealthier lives in general hadhealthier lives in general hadon the traditional life stageon the traditional life stageassumptions that marketersassumptions that marketersmake?make?
Segmenting Consumer andBusiness MarketsBehavioral SegmentationBehavioral SegmentationOccasionsOccasionsCritical life events or transitionsCritical life events or transitionsBenefitsBenefitswww.bookfiesta4u.com1-307BenefitsBenefitsMobil has identified fiveMobil has identified fivesegments and their sizessegments and their sizesRoad Warriors 16%Road Warriors 16%Generation F 27%Generation F 27%True Blues 16%True Blues 16%Home Bodies 21%Home Bodies 21%Price Shoppers 20%Price Shoppers 20%
Segmenting Consumer andBusiness MarketsBases For SegmentingBases For SegmentingBusiness MarketsBusiness Marketswww.bookfiesta4u.com1-310
Table 10-3: Major Segmentation Variablesfor Business MarketsDemographic1. Industry: Which industries should we serve?2. Company size: What size companies should we serve?3. Location: What geographical areas should we serve?Operating Variables4. Technology: What customer technologies should we focus on?5. User or nonuser status: Should we serve heavy users, medium users,www.bookfiesta4u.com1-3115. User or nonuser status: Should we serve heavy users, medium users,light users, or nonusers?6. Customer capabilities: Should we serve customers needing many or fewservices?Purchasing Approaches7. Purchasing-function organization: Should we serve companies withhighly centralized or decentralized purchasing organizations?8. Power structure: Should we serve companies that are engineeringdominated, financially dominated, and so on?See text for complete table
Segmenting Consumer andBusiness MarketsBusiness buyers seek different benefitBusiness buyers seek different benefitbundles based on their stage inbundles based on their stage inthe purchase decision process.the purchase decision process.www.bookfiesta4u.com1-312the purchase decision process.the purchase decision process.1.1. FirstFirst--time prospectstime prospects2.2. NovicesNovices3.3. SophisticatesSophisticates
Segmenting Consumer andBusiness MarketsRangan, Moriarty, and Swartz studied aRangan, Moriarty, and Swartz studied amature commodity market, steel stamping,mature commodity market, steel stamping,and found four business segmentsand found four business segments1.1. Program buyersProgram buyerswww.bookfiesta4u.com1-3131.1. Program buyersProgram buyers2.2. Relationship buyersRelationship buyers3.3. Transaction buyersTransaction buyers4.4. Bargain huntersBargain hunters
Segmenting Consumer andBusiness MarketsRackman and Vincentis proposed aRackman and Vincentis proposed asegmentation scheme that classifiessegmentation scheme that classifiesbusiness buyers into three groupsbusiness buyers into three groupsPricePrice--oriented customersoriented customerswww.bookfiesta4u.com1-314PricePrice--oriented customersoriented customers(transactional selling)(transactional selling)SolutionSolution--oriented customersoriented customers(consultative selling)(consultative selling)StrategicStrategic--value customersvalue customers(enterprise selling)(enterprise selling)
Market TargetingEvaluating and Selecting the Market SegmentsEvaluating and Selecting the Market SegmentsSingleSingle--Segment ConcentrationSegment ConcentrationSelective SpecializationSelective SpecializationProduct SpecializationProduct Specializationwww.bookfiesta4u.com1-315Product SpecializationProduct SpecializationMarket SpecializationMarket SpecializationFull Market CoverageFull Market CoverageUndifferentiated marketingUndifferentiated marketingDifferentiated marketingDifferentiated marketing
Chapter 11Chapter 11Positioning and DifferentiatingPositioning and Differentiatingthe Market Offering Throughthe Market Offering Throughthe Product Life Cyclethe Product Life Cyclebybywww.bookfiesta4u.blogspot.com 11-320bybyPowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Watch the productWatch the productlife cycle; but morelife cycle; but moreimportant, watch theimportant, watch theKotler onMarketingwww.bookfiesta4u.blogspot.com 11-321important, watch theimportant, watch themarket life cycle.market life cycle.
Chapter ObjectivesIn this chapter, we focus on the followingIn this chapter, we focus on the followingquestions:questions:How can the firm choose and communicate anHow can the firm choose and communicate aneffective positioning in the market?effective positioning in the market?What are the major differentiating attributesWhat are the major differentiating attributeswww.bookfiesta4u.blogspot.com 11-322What are the major differentiating attributesWhat are the major differentiating attributesavailable to firms?available to firms?What marketing strategies are appropriate atWhat marketing strategies are appropriate ateach stage of the product life cycle?each stage of the product life cycle?What marketing strategies are appropriate atWhat marketing strategies are appropriate ateach stage of the market’s evolution?each stage of the market’s evolution?
Developing and Communicatinga Positioning StrategyPositioningPositioningValue positionValue positionwww.bookfiesta4u.blogspot.com 11-323Value positionValue position
Table 11.1: Examples of Value PropositionsDemand States and Marketing TasksCompanyCompanyandandProductProductTargetTargetCustomersCustomers BenefitsBenefits PricePriceValueValuePropositionPropositionPerduePerdue(chicken)(chicken)QualityQuality--consciousconsciousconsumers ofconsumers ofchickenchickenTendernessTenderness 10%10%premiumpremiumMore tenderMore tendergolden chicken atgolden chicken ata moderatea moderatepremium pricepremium priceVolvoVolvo SafetySafety-- DurabilityDurability 20%20% The safest, mostThe safest, mostwww.bookfiesta4u.blogspot.com 11-324VolvoVolvo(station(stationwagon)wagon)SafetySafety--consciousconscious“upscale”“upscale”familiesfamiliesDurabilityDurabilityand safetyand safety20%20%premiumpremiumThe safest, mostThe safest, mostdurable wagon indurable wagon inwhich your familywhich your familycan ridecan rideDomino’sDomino’s(pizza)(pizza)ConvenienceConvenience--minded pizzaminded pizzaloversloversDeliveryDeliveryspeed andspeed andgood qualitygood quality15%15%premiumpremiumA good hot pizza,A good hot pizza,delivered to yourdelivered to yourdoor door withindoor door within30 minutes of30 minutes ofordering, at aordering, at amoderate pricemoderate price
Developing and Communicatinga Positioning StrategyPositioning According to Ries and TroutPositioning According to Ries and TroutStrengthen own current positionStrengthen own current positionGrab an unoccupied positionGrab an unoccupied positionDeDe--positionpositionReRe--positionpositionwww.bookfiesta4u.blogspot.com 11-325ReRe--positionpositionProduct laddersProduct laddersPositioning According to Treacy andPositioning According to Treacy andWiersemaWiersemaValue disciplinesValue disciplinesProduct leaderProduct leaderOperationally excellent firmOperationally excellent firmCustomer intimate firmCustomer intimate firm
Treacy and Wiersema propose that a businessTreacy and Wiersema propose that a businessshould follow four rules for successshould follow four rules for success1.1. Become best at one of the three value disciplines.Become best at one of the three value disciplines.2.2. Achieve an adequate performance levelAchieve an adequate performance levelDeveloping and Communicatinga Positioning Strategywww.bookfiesta4u.blogspot.com 11-3262.2. Achieve an adequate performance levelAchieve an adequate performance levelin the other two disciplines.in the other two disciplines.3.3. Keep improving one’s superior position in the chosenKeep improving one’s superior position in the chosendiscipline so as not to lose out to a competitor.discipline so as not to lose out to a competitor.4.4. Keep becoming more adequate in the other twoKeep becoming more adequate in the other twodisciplines, because competitors keepdisciplines, because competitors keepraising customers’ expectations.raising customers’ expectations.
Positioning: How many ideas toPositioning: How many ideas topromote?promote?Unique selling propositionUnique selling propositionFour major positioning errorsFour major positioning errorsDeveloping and Communicatinga Positioning Strategywww.bookfiesta4u.blogspot.com 11-327Four major positioning errorsFour major positioning errors1.1. UnderpositioningUnderpositioning2.2. OverpositioningOverpositioning3.3. Confused positioningConfused positioning4.4. Doubtful positioningDoubtful positioning
Can you think of any companiesCan you think of any companiesthat market the same product orthat market the same product orservice offering toservice offering to multiple segmentsmultiple segmentswww.bookfiesta4u.blogspot.com 11-328service offering toservice offering to multiple segmentsmultiple segmentsusing different strategies? Are theusing different strategies? Are thedifferent segments beingdifferent segments beingoffered different valueoffered different valuepropositions?propositions?
Adding Further DifferentiationDifferentiationDifferentiationDifferentiation criteria:Differentiation criteria:ImportantImportantDistinctiveDistinctivewww.bookfiesta4u.blogspot.com 11-332DistinctiveDistinctiveSuperiorSuperiorPreemptivePreemptiveAffordableAffordableProfitableProfitable
Adding Further DifferentiationExceed customer expectations with aExceed customer expectations with athreethree--step processstep process1.1. Defining the customer value modelDefining the customer value model2.2. Building the customer value hierarchyBuilding the customer value hierarchywww.bookfiesta4u.blogspot.com 11-3332.2. Building the customer value hierarchyBuilding the customer value hierarchyBasicBasicExpectedExpectedDesiredDesiredUnanticipatedUnanticipated3.3. Deciding on the customer value packageDeciding on the customer value package
Many eMany e--commerce ventures fail becausecommerce ventures fail becauseof distribution problems in the soof distribution problems in the so--calledcalled“last mile” (the local distribution portion“last mile” (the local distribution portionwww.bookfiesta4u.blogspot.com 11-341“last mile” (the local distribution portion“last mile” (the local distribution portionof shipping of online purchases).of shipping of online purchases). Can aCan amarketing plan help offsetmarketing plan help offsetsome of these potentialsome of these potentialpitfalls?pitfalls?
Differentiation ToolsChannel DifferentiationChannel DifferentiationImage DifferentiationImage DifferentiationIdentityIdentitywww.bookfiesta4u.blogspot.com 11-343ImageImageSymbols, Colors, Slogans, Special AttributesSymbols, Colors, Slogans, Special AttributesPhysical plantPhysical plantEvents and SponsorshipEvents and SponsorshipUsing Multiple ImageUsing Multiple Image--Building TechniquesBuilding Techniques
Which differentiation tool would beWhich differentiation tool would bemost useful for a dot.com startup?most useful for a dot.com startup?www.bookfiesta4u.blogspot.com 11-344most useful for a dot.com startup?most useful for a dot.com startup?Why?Why?
Product Life-Cycle MarketingStrategiesTo say that a product has a life cycle assertsTo say that a product has a life cycle assertsfour thingsfour things1.1. Products have a limited life.Products have a limited life.2.2. Product sales pass through distance stages, eachProduct sales pass through distance stages, eachwww.bookfiesta4u.blogspot.com 11-3452.2. Product sales pass through distance stages, eachProduct sales pass through distance stages, eachposing different challenges, opportunities, andposing different challenges, opportunities, andproblems to the seller.problems to the seller.3.3. Profits rise and fall at different stages of theProfits rise and fall at different stages of theproduct life cycle.product life cycle.4.4. Products require different marketing, financial,Products require different marketing, financial,manufacturing, purchasing, and human resourcemanufacturing, purchasing, and human resourcestrategies in each lifestrategies in each life--cycle stage.cycle stage.
Marketing Strategies: Growth StageMarketing Strategies: Growth StageImprove product quality and add newImprove product quality and add newproduct features and improved stylingproduct features and improved stylingAdd new models and flanker productsAdd new models and flanker productsEnter new market segmentsEnter new market segmentsProduct Life-Cycle MarketingStrategieswww.bookfiesta4u.blogspot.com 11-349Enter new market segmentsEnter new market segmentsIncrease distribution coverage and enter newIncrease distribution coverage and enter newdistribution channelsdistribution channelsShift from productShift from product--awareness advertising toawareness advertising toproductproduct--preference advertisingpreference advertisingLower prices to attract next layer of priceLower prices to attract next layer of price--sensitive buyerssensitive buyers
Marketing Strategies: Maturity StageMarketing Strategies: Maturity StageMarket ModificationMarket ModificationExpand number of brand users by:Expand number of brand users by:1.1. Converting nonusersConverting nonusersProduct Life-Cycle MarketingStrategieswww.bookfiesta4u.blogspot.com 11-3501.1. Converting nonusersConverting nonusers2.2. Entering new market segmentsEntering new market segments3.3. Winning competitors’ customersWinning competitors’ customersConvince current users to increase usage by:Convince current users to increase usage by:1.1. Using the product on more occasionsUsing the product on more occasions2.2. Using more of the product on each occasionUsing more of the product on each occasion3.3. Using the product in new waysUsing the product in new ways
Marketing Strategies: Decline StageMarketing Strategies: Decline Stage1.1. Increase firm’s investment (to dominate theIncrease firm’s investment (to dominate themarket and strengthen its competitive position)market and strengthen its competitive position)2.2. Maintain the firm’s investment level until theMaintain the firm’s investment level until theuncertainties about the industry are resolved.uncertainties about the industry are resolved.Product Life-Cycle MarketingStrategieswww.bookfiesta4u.blogspot.com 11-352uncertainties about the industry are resolved.uncertainties about the industry are resolved.3.3. Decrease the firm’s investment level selectively byDecrease the firm’s investment level selectively bydropping unprofitable customer groups, whiledropping unprofitable customer groups, whilesimultaneously strengthening the firm’ssimultaneously strengthening the firm’sinvestment in lucrative nichesinvestment in lucrative niches4.4. Harvesting (“milking”) the firm’s investment toHarvesting (“milking”) the firm’s investment torecover cash quicklyrecover cash quickly5.5. Divesting the business quickly by disposing of itsDivesting the business quickly by disposing of itsassets as advantageously as possible.assets as advantageously as possible.
DeclineDeclineAn Example: The PaperAn Example: The Paper--Towel MarketTowel MarketDynamics of Attribute CompetitionDynamics of Attribute CompetitionCustomer expectations are progressiveCustomer expectations are progressiveApproaches to discover new attributes:Approaches to discover new attributes:Market Evolutionwww.bookfiesta4u.blogspot.com 11-356Approaches to discover new attributes:Approaches to discover new attributes:CustomerCustomer--survey processessurvey processesIntuitive processesIntuitive processesDialectical processesDialectical processesNeedsNeeds--hierarchy processhierarchy process
Chapter 12Chapter 12Developing NewDeveloping NewMarket OfferingsMarket Offeringsbybywww.bookfiesta4u.blogspot.com 11-357PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Who shouldWho shouldultimately design theultimately design theproduct? Theproduct? TheKotler onMarketingwww.bookfiesta4u.blogspot.com 11-358product? Theproduct? Thecustomer, of course.customer, of course.
Chapter ObjectivesIn this chapter, we focus on the followingIn this chapter, we focus on the followingquestions:questions:What challenges does a company face inWhat challenges does a company face indeveloping new products?developing new products?What organizational structures are used toWhat organizational structures are used tomanage newmanage new--product development?product development?www.bookfiesta4u.blogspot.com 11-359manage newmanage new--product development?product development?What are the main stages in developing newWhat are the main stages in developing newproducts, and how can they be managedproducts, and how can they be managedbetter?better?What factors affect the rate of diffusion andWhat factors affect the rate of diffusion andconsumer adoption of newly launchedconsumer adoption of newly launchedproducts?products?
Developing New MarketOfferingsSix categories of new products1. New-to-the-world products2. New product lineswww.bookfiesta4u.blogspot.com 11-3602. New product lines3. Additions to existing product lines4. Improvements and revisions of existingproducts5. Repositioning6. Cost reductions
Challenges in New-ProductDevelopmentIncremental innovationIncremental innovationDisruptive technologiesDisruptive technologiesWhy do new products fail?Why do new products fail?www.bookfiesta4u.blogspot.com 11-361A highA high--level executive pushes a favorite idealevel executive pushes a favorite ideathrough in spite of negative researchthrough in spite of negative researchfindings.findings.The idea is good, but the market size isThe idea is good, but the market size isoverestimated.overestimated.The product is not well designed.The product is not well designed.
Challenges in New-ProductDevelopmentThe product is incorrectly positionedThe product is incorrectly positionedin the market, not advertisedin the market, not advertisedeffectively, or overpriced.effectively, or overpriced.The product fails to gain sufficientThe product fails to gain sufficientwww.bookfiesta4u.blogspot.com 11-362The product fails to gain sufficientThe product fails to gain sufficientdistribution coverage or support.distribution coverage or support.Development costs are higher thanDevelopment costs are higher thanexpected.expected.Competitors fight back harder thanCompetitors fight back harder thanexpected.expected.
Challenges in New-ProductDevelopmentFactors that tend to hinder newFactors that tend to hinder new--productproductdevelopmentdevelopmentShortage of important ideas in certain areasShortage of important ideas in certain areasFragmented marketsFragmented marketswww.bookfiesta4u.blogspot.com 11-363Fragmented marketsFragmented marketsSocial and governmental constraintsSocial and governmental constraintsCost of developmentCost of developmentCapital shortagesCapital shortagesFaster required development timeFaster required development timeShorter product life cyclesShorter product life cycles
Organizational ArrangementsNewNew--product deployment requires specificproduct deployment requires specificcriteriacriteria –– one company established theone company established thefollowing acceptance criteriafollowing acceptance criteriaThe product can be introduced within five yearsThe product can be introduced within five yearswww.bookfiesta4u.blogspot.com 11-364The product can be introduced within five yearsThe product can be introduced within five yearsThe product has a market potential of at leastThe product has a market potential of at least$50 million and a 15 percent growth rate.$50 million and a 15 percent growth rate.The product would provide at least 30 percentThe product would provide at least 30 percentreturn on sales and 40 percent on investment.return on sales and 40 percent on investment.The product would achieve technical or marketThe product would achieve technical or marketleadership.leadership.
Budgeting For New ProductBudgeting For New ProductDevelopmentDevelopment3M’s approach:3M’s approach:15% rule15% ruleOrganizational Arrangementswww.bookfiesta4u.blogspot.com 11-36515% rule15% ruleEach promising idea gets anEach promising idea gets an“executive champion”“executive champion”Expect some failuresExpect some failuresGolden Step awards handed outGolden Step awards handed outeach yeareach year
3M online: The 3M Innovation Network3M online: The 3M Innovation Networkwww.bookfiesta4u.blogspot.com 11-366
Table 12.1 Finding One Successful New Product(Starting with 64 New Ideas)StageStageNumberNumberof Ideasof IdeasPassPassRatioRatioCost perCost perProduct IdeaProduct Idea Total CostTotal Cost1. Idea screening1. Idea screening 6464 1:41:4 $ 1,000$ 1,000 $ 64,000$ 64,0002. Concept testing2. Concept testing 1616 1:21:2 20,00020,000 320,000320,000www.bookfiesta4u.blogspot.com 11-3673. Product3. Productdevelopmentdevelopment88 1:21:2 200,000200,000 1,600,0001,600,0004. Test marketing4. Test marketing 44 1:21:2 500,000500,000 2,000,0002,000,0005. National launch5. National launch 22 1:21:2 5,000,0005,000,000 10,000,00010,000,000$5,721,000$5,721,000 $13,984,000$13,984,000
StageStage--gate systemgate systemGatekeepers make one ofGatekeepers make one offour decisions:four decisions:Organizational Arrangementswww.bookfiesta4u.blogspot.com 11-369four decisions:four decisions:GoGoKillKillHoldHoldRecycleRecycle
Idea GenerationIdea GenerationInteracting with OthersInteracting with OthersManaging the DevelopmentProcess: Ideaswww.bookfiesta4u.blogspot.com 11-370Interacting with OthersInteracting with OthersSales representativesSales representativesIntermediariesIntermediariesProduct championProduct champion
Techniques for stimulating creativityTechniques for stimulating creativityin individuals and groupsin individuals and groupsAttribute listingAttribute listingManaging the DevelopmentProcess: Ideaswww.bookfiesta4u.blogspot.com 11-371Attribute listingAttribute listingForced relationshipsForced relationshipsMorphological analysisMorphological analysisReverse assumption analysisReverse assumption analysisNew contextsNew contextsMindMind--mappingmapping
Idea ScreeningIdea ScreeningIdea managerIdea managerIdea committeeIdea committeeManaging the DevelopmentProcess: Ideaswww.bookfiesta4u.blogspot.com 11-372Two types of errors inTwo types of errors inscreening ideasscreening ideasDROPDROP--errorerrorGOGO--errorerror
Some of the most notable “dropSome of the most notable “drop--errors” haveerrors” havecome from the most recognizable names income from the most recognizable names inAmerican business. Xerox saw the potentialAmerican business. Xerox saw the potentialof the copy machine, IBM and Eastmanof the copy machine, IBM and Eastmanwww.bookfiesta4u.blogspot.com 11-373of the copy machine, IBM and Eastmanof the copy machine, IBM and EastmanKodak did not. IBM thought the personalKodak did not. IBM thought the personalcomputer market would be miniscule.computer market would be miniscule.Can you think of anyCan you think of any“drop“drop--errors” that theerrors” that thecompany didn’t survive?company didn’t survive?
Table 12.2 Product-Idea Rating DeviceRelativeRelativeWeightWeightProductProductScoreScoreProductProductRatingRatingProduct Success RequirementsProduct Success Requirements (a)(a) (b)(b) (c = a x b)(c = a x b)Unique or superior productUnique or superior product .40.40 .8.8 .32.32High performance to cost ratioHigh performance to cost ratio .30.30 .6.6 .18.18www.bookfiesta4u.blogspot.com 11-374High performance to cost ratioHigh performance to cost ratio .30.30 .6.6 .18.18High marketing dollar supportHigh marketing dollar support .20.20 .7.7 .14.14Lack of strong competitionLack of strong competition .10.10 .5.5 .05.05TotalTotal 1.001.00 .69.69σσσσσσσσσσσσσσσσ Rating scale: .00Rating scale: .00--.30 poor; .31.30 poor; .31--.60 fair; .61.60 fair; .61--.80 good. Minimum acceptance rate: .61.80 good. Minimum acceptance rate: .61
Managing the DevelopmentProcess: Concept to StrategyConcept Development and TestingConcept Development and TestingProduct ideaProduct ideaProduct conceptProduct conceptwww.bookfiesta4u.blogspot.com 11-375Product conceptProduct conceptConcept developmentConcept developmentCategory conceptCategory conceptProductProduct––positioning mappositioning mapBrand conceptBrand concept
Sometimes a new product is developed, likeSometimes a new product is developed, likethe feltthe felt--tip pen and the “walkman” styletip pen and the “walkman” stylepersonal music device. Consumers weren’tpersonal music device. Consumers weren’tclamoring for either of these products beforeclamoring for either of these products beforewww.bookfiesta4u.blogspot.com 11-377clamoring for either of these products beforeclamoring for either of these products beforethey came to market. Most people hadn’tthey came to market. Most people hadn’teven conceived of such an item. Carefuleven conceived of such an item. Carefulplanning developed marketsplanning developed marketsfor these new lines. Can youfor these new lines. Can youthink of more recentthink of more recentexamples?examples?
Managing the DevelopmentProcess: Concept to StrategyConcept TestingConcept TestingRapid prototypingRapid prototypingVirtual realityVirtual realityCustomerCustomer--driven engineeringdriven engineeringwww.bookfiesta4u.blogspot.com 11-378CustomerCustomer--driven engineeringdriven engineeringQuestions to measure product dimensionsQuestions to measure product dimensionsCommunicability and believabilityCommunicability and believabilityNeed levelNeed levelGap levelGap levelNeedNeed--gap scoregap score
Managing the DevelopmentProcess: Concept to StrategyPerceived valuePerceived valuePurchase intentionPurchase intentionUser targets, purchase occasions, purchasingUser targets, purchase occasions, purchasingfrequencyfrequencywww.bookfiesta4u.blogspot.com 11-379Conjoint AnalysisConjoint AnalysisExample: five design elementsExample: five design elementsThree package designsThree package designsThree brand namesThree brand namesThree pricesThree pricesPossible Good Housekeeping sealPossible Good Housekeeping sealPossible moneyPossible money--back guaranteeback guarantee
Managing theDevelopment Process:Concept to StrategyMarketing StrategyMarketing StrategyBusiness AnalysisBusiness Analysiswww.bookfiesta4u.blogspot.com 11-380Business AnalysisBusiness AnalysisEstimating Total SalesEstimating Total Sales
Managing the DevelopmentProcess: Concept to StrategySurvivalSurvival--age distributionage distributionEstimating Cost and ProfitsEstimating Cost and Profitswww.bookfiesta4u.blogspot.com 11-381Estimating Cost and ProfitsEstimating Cost and Profits
Table 12.3 Projected Five-Year-Cash-FlowStatement (in thousands of dollars)Year 0Year 0 Year 1Year 1 Year 2Year 2 Year 3Year 31. Sales revenue1. Sales revenue $ 0$ 0 $11,889$11,889 $15,381$15,381 $19,654$19,6542. Cost of goods sold2. Cost of goods sold 00 3,9813,981 5,1505,150 6,5816,5813. Gross margin3. Gross margin 00 7,9087,908 10,23110,231 13,07313,073www.bookfiesta4u.blogspot.com 11-3823. Gross margin3. Gross margin 00 7,9087,908 10,23110,231 13,07313,0734. Development costs4. Development costs --3,5003,500 00 00 005. Marketing costs5. Marketing costs 00 8,0008,000 6,4606,460 8,2558,2556. Allocated overhead6. Allocated overhead 00 1,1891,189 1,5381,538 1,9651,965See text for complete table
Managing the DevelopmentProcess: Concept to StrategyBreakBreak--even analysiseven analysisRisk analysisRisk analysiswww.bookfiesta4u.blogspot.com 11-383Risk analysisRisk analysis
Managing The Development Process:Development to CommercializationProduct DevelopmentProduct DevelopmentQuality Function Deployment (QFD)Quality Function Deployment (QFD)Customer attributes (CAs)Customer attributes (CAs)EngineeringEngineeringwww.bookfiesta4u.blogspot.com 11-384EngineeringEngineeringattributes (EAs)attributes (EAs)Lands’ EndLands’ EndJapan Web siteJapan Web site
Managing The DevelopmentProcess: Development toCommercializationCustomer testsCustomer testsAlpha testingAlpha testingwww.bookfiesta4u.blogspot.com 11-385Alpha testingAlpha testingBeta testingBeta testingConsumer preference measuresConsumer preference measuresRankRank--orderorderPairedPaired--comparisoncomparisonMonadicMonadic--ratingrating
Managing The DevelopmentProcess: Development toCommercializationMarket TestingMarket TestingConsumerConsumer--Goods Market TestingGoods Market Testingwww.bookfiesta4u.blogspot.com 11-386ConsumerConsumer--Goods Market TestingGoods Market TestingSeeks to estimate four variablesSeeks to estimate four variablesTrialTrialFirst repeatFirst repeatAdoptionAdoptionPurchase frequencyPurchase frequencySales wave researchSales wave research
Managing The DevelopmentProcess: Development toCommercializationSimulated Test MarketingSimulated Test MarketingControlled Test MarketingControlled Test Marketingwww.bookfiesta4u.blogspot.com 11-387Test MarketsTest MarketsHow many test cities?How many test cities?Which cities?Which cities?Length of test?Length of test?What information?What information?What action to take?What action to take?BusinessBusiness--Goods Market TestingGoods Market Testing
Managing The Development Process:Development to CommercializationPhilips’ Pronto Web sitePhilips’ Pronto Web siteCommercializationCommercializationWhen (Timing)When (Timing)1.1. First entryFirst entry2.2. Parallel entryParallel entrywww.bookfiesta4u.blogspot.com 11-388Philips’ Pronto Web sitePhilips’ Pronto Web site2.2. Parallel entryParallel entry3.3. Late entryLate entryWhere (GeographicWhere (GeographicStrategy)Strategy)
To Whom (TargetTo Whom (Target--Market Prospects)Market Prospects)How (Introductory Market Strategy)How (Introductory Market Strategy)Critical path scheduling (CPS)Critical path scheduling (CPS)Managing The Development Process:Development to Commercializationwww.bookfiesta4u.blogspot.com 11-389The iMac, launched withThe iMac, launched witha dramatic countdowna dramatic countdowncampaigncampaign
The Consumer-AdoptionProcessAdoptionAdoptionConsumerConsumer--adoption processadoption processConsumerConsumer--loyalty processloyalty processwww.bookfiesta4u.blogspot.com 11-390MassMass--market approachmarket approachHeavyHeavy--usage target marketingusage target marketingStages in the Adoption ProcessStages in the Adoption ProcessInnovationInnovationInnovation diffusion processInnovation diffusion process
The Consumer-AdoptionProcessAdopters of new products moveAdopters of new products movethrough five stagesthrough five stagesAwarenessAwarenessInterestInterestwww.bookfiesta4u.blogspot.com 11-391InterestInterestEvaluationEvaluationTrialTrialAdoptionAdoptionFactors Influencing the Adoption ProcessFactors Influencing the Adoption ProcessReadiness to Try New Products andReadiness to Try New Products andPersonal InfluencePersonal Influence
Figure 12.7: Adopter Categorization on the Basis ofRelative Time of Adoption of Innovationwww.bookfiesta4u.blogspot.com 11-392
The Consumer-AdoptionProcessPersonal influencePersonal influenceCharacteristics of the InnovationCharacteristics of the InnovationRelative advantageRelative advantagewww.bookfiesta4u.blogspot.com 11-393CompatibilityCompatibilityComplexityComplexityDivisibilityDivisibilityCommunicabilityCommunicabilityOrganizations’ Readiness to AdoptOrganizations’ Readiness to AdoptInnovationsInnovations
Chapter 13Chapter 13Designing GlobalDesigning GlobalMarket OfferingsMarket Offeringsbybywww.bookfiesta4u.blogspot.com 11-394PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Your company doesnot belong inKotler onMarketingwww.bookfiesta4u.blogspot.com 11-395not belong inmarkets where itcannot be the best.
Chapter ObjectivesIn this chapter, we focus on the followingIn this chapter, we focus on the followingquestions:questions:What factors should a company review beforeWhat factors should a company review beforedeciding to go abroad?deciding to go abroad?How can companies evaluate and select foreignHow can companies evaluate and select foreignmarkets to enter?markets to enter?www.bookfiesta4u.blogspot.com 11-396markets to enter?markets to enter?What are the major ways of entering a foreignWhat are the major ways of entering a foreignmarket?market?To what extent must the company adapt itsTo what extent must the company adapt itsproducts and marketing program to each foreignproducts and marketing program to each foreigncountry?country?How should the company manage and organize itsHow should the company manage and organize itsinternational activities?international activities?
Factors drawing companies into theFactors drawing companies into theinternational arena:international arena:Global firms offering better products or lowerGlobal firms offering better products or lowerprices can attack the company’s domestic market.prices can attack the company’s domestic market.The company discovers that some foreign marketsThe company discovers that some foreign marketspresent higher profit opportunities than thepresent higher profit opportunities than thedomestic market.domestic market.Deciding Whether To Go Abroadwww.bookfiesta4u.blogspot.com 11-398domestic market.domestic market.The company needs a larger customer base toThe company needs a larger customer base toachieve economies of scale.achieve economies of scale.The company wants to reduce its dependenceThe company wants to reduce its dependenceon any one market.on any one market.The company’s customers are going abroadThe company’s customers are going abroadand need servicing.and need servicing.
Deciding Whether To Go AbroadBefore going abroad, the company must weighBefore going abroad, the company must weighseveral risk:several risk:The company might not understand foreignThe company might not understand foreigncustomer preferences and fail to offer acustomer preferences and fail to offer acompetitively attractive product.competitively attractive product.The company might not understand the foreignThe company might not understand the foreigncountry’s business culture or know how to dealcountry’s business culture or know how to dealwww.bookfiesta4u.blogspot.com 11-399country’s business culture or know how to dealcountry’s business culture or know how to dealeffectively with foreign nationals.effectively with foreign nationals.The company might underestimate foreignThe company might underestimate foreignregulations and incur unexpected costs.regulations and incur unexpected costs.The company might realize that it lacks managersThe company might realize that it lacks managerswith international experience.with international experience.The foreign country might change its commercialThe foreign country might change its commerciallaws, devalue its currency, or undergo a politicallaws, devalue its currency, or undergo a politicalrevolution and expropriate property.revolution and expropriate property.
Table 13.1: Blunders in International MarketingHallmark cards failed when they were introduced in France. The FrenchHallmark cards failed when they were introduced in France. The Frenchdislike syrupy sentiment and prefer writing their own cards.dislike syrupy sentiment and prefer writing their own cards.Philips began to earn a profit in Japan only after it had reduced the size ofPhilips began to earn a profit in Japan only after it had reduced the size ofits coffeemakers to fit into smaller Japanese kitchens and its shavers to fitits coffeemakers to fit into smaller Japanese kitchens and its shavers to fitsmaller Japanese hands.smaller Japanese hands.CocaCoca--Cola had to withdraw its twoCola had to withdraw its two--liter bottle in Spain after discoveringliter bottle in Spain after discoveringthat few Spaniards owned refrigerators with large enough compartments tothat few Spaniards owned refrigerators with large enough compartments towww.bookfiesta4u.blogspot.com 11-400that few Spaniards owned refrigerators with large enough compartments tothat few Spaniards owned refrigerators with large enough compartments toaccommodate it.accommodate it.General Foods’ Tang initially failed in France because it was positioned asGeneral Foods’ Tang initially failed in France because it was positioned asa substitute for orange juice at breakfast. The French drink little orangea substitute for orange juice at breakfast. The French drink little orangejuice and almost none at breakfast.juice and almost none at breakfast.Kellogg’s PopKellogg’s Pop--Tarts failed in Britain because the percentage of BritishTarts failed in Britain because the percentage of Britishhomes with toasters was significantly lower than in the United States andhomes with toasters was significantly lower than in the United States andthe product was too sweet for British tastes.the product was too sweet for British tastes.See text for complete table
In the early 20In the early 20thth century, the Transcentury, the Trans--AtlanticAtlanticcable allowed for the transmission ofcable allowed for the transmission ofphotographs in near real time. Still imagesphotographs in near real time. Still imageswent to press soon after news of events inwent to press soon after news of events inwww.bookfiesta4u.blogspot.com 11-401went to press soon after news of events inwent to press soon after news of events inEurope arrived here in the States. Are thereEurope arrived here in the States. Are thereany emerging communication technologiesany emerging communication technologiestoday that show similartoday that show similarpotential? How can these bepotential? How can these beharnessed to improve aharnessed to improve acompany’s global offerings?company’s global offerings?
Deciding Which Marketsto EnterHow many markets to enterHow many markets to enterAyal and Zif contend that a company shouldAyal and Zif contend that a company shouldenter fewer countries when:enter fewer countries when:www.bookfiesta4u.blogspot.com 11-402enter fewer countries when:enter fewer countries when:Market entry and market costs are highMarket entry and market costs are highProduct and communication costs are highProduct and communication costs are highPopulation and income size and growth are highPopulation and income size and growth are highin the initial countries chosenin the initial countries chosenDominant foreign firms can establish highDominant foreign firms can establish highbarriers to entrybarriers to entry
Deciding Which Marketsto EnterRegional free trade zonesRegional free trade zonesThe European UnionThe European UnionNAFTANAFTAwww.bookfiesta4u.blogspot.com 11-403NAFTANAFTAMERCOSULMERCOSULAPECAPECEvaluating potential marketsEvaluating potential marketsPsychic proximityPsychic proximity
Regional free trade zones offer manyRegional free trade zones offer manypotential benefits to companies expandingpotential benefits to companies expandingtheir offerings abroad. Clearly definedtheir offerings abroad. Clearly definedwww.bookfiesta4u.blogspot.com 11-404their offerings abroad. Clearly definedtheir offerings abroad. Clearly definednational import/export policies are just onenational import/export policies are just onepotential benefit. Can you think of anypotential benefit. Can you think of anyothers? What marketingothers? What marketingchallenges will not be easedchallenges will not be easedby such agreements?by such agreements?
Deciding How toEnter the Marketwww.bookfiesta4u.blogspot.com 11-405Figure 13.2:Five Modes ofEntry into ForeignMarkets
Indirect and direct exportIndirect and direct exportOccasional exportingOccasional exportingActive exportingActive exportingDeciding How to Enterthe Marketwww.bookfiesta4u.blogspot.com 11-406Indirect exportingIndirect exportingDomesticDomestic--based export merchantsbased export merchantsDomesticDomestic--based export agentsbased export agentsCooperative organizationsCooperative organizationsExportExport--management companiesmanagement companies
Companies can carry on directCompanies can carry on directexporting in several waysexporting in several waysDomesticDomestic--based exportbased exportdepartment or divisiondepartment or divisionDeciding How to Enterthe Marketwww.bookfiesta4u.blogspot.com 11-407department or divisiondepartment or divisionOverseas sales branch orOverseas sales branch orsubsidiarysubsidiaryTraveling export salesTraveling export salesrepresentativesrepresentativesForeignForeign--based distributorsbased distributorsor agentsor agents
LicensingLicensingManagement contractsManagement contractsContract manufacturingContract manufacturingDeciding How to Enterthe Marketwww.bookfiesta4u.blogspot.com 11-408Contract manufacturingContract manufacturingFranchisingFranchising
Deciding How to Enterthe MarketJoint venturesJoint venturesDirect investmentDirect investmentThe Internationalization ProcessThe Internationalization Processwww.bookfiesta4u.blogspot.com 11-409Johanson and WiedersheimJohanson and Wiedersheim--Paul identifiedPaul identifiedfour stages in the internationalizationfour stages in the internationalizationprocess:process:No regular export activitiesNo regular export activitiesExport via independent representatives (agents)Export via independent representatives (agents)Establishment of one or more sales subsidiariesEstablishment of one or more sales subsidiariesEstablishment of production facilities abroadEstablishment of production facilities abroad
Deciding on the MarketingProgramStandardized marketing mixStandardized marketing mixAdapted marketing mixAdapted marketing mixwww.bookfiesta4u.blogspot.com 11-410
McDonald’s around the world: HungaryMcDonald’s around the world: Hungarywww.bookfiesta4u.blogspot.com 11-411
Deciding on the MarketingProgramProductProductStraight extensionStraight extensionwww.bookfiesta4u.blogspot.com 11-412
Figure 13.3: Five International Product andPromotion Strategieswww.bookfiesta4u.blogspot.com 11-413
Deciding on the MarketingProgramProduct adaptationProduct adaptationProduct inventionProduct inventionBackward inventionBackward inventionwww.bookfiesta4u.blogspot.com 11-414Forward inventionForward inventionPromotionPromotionCommunication adaptationCommunication adaptationDual adaptationDual adaptation
Carlsberg’s global Web siteCarlsberg’s global Web sitewww.bookfiesta4u.blogspot.com 11-415
Deciding on the MarketingProgramPricePricePrice escalationPrice escalationCompanies have three choicesCompanies have three choicesSet a uniform price everywhereSet a uniform price everywherewww.bookfiesta4u.blogspot.com 11-416Set a uniform price everywhereSet a uniform price everywhereSet a marketSet a market--based price in each countrybased price in each countrySet a costSet a cost--based price in each countrybased price in each countryTransfer priceTransfer priceDumpingDumpingArm’sArm’s--length pricelength priceGray marketGray market
Deciding on theMarketing ProgramPlace (distribution channels)Place (distribution channels)Seller’s international marketingSeller’s international marketingheadquartersheadquartersChannels between nationsChannels between nationswww.bookfiesta4u.blogspot.com 11-417Figure 13.4:Whole-Channel Concept forInternational MarketingChannels between nationsChannels between nationsChannels within foreign nationsChannels within foreign nations
One of the most profound political changesOne of the most profound political changesin the late 20in the late 20thth century was the fall of thecentury was the fall of the“iron curtain” and the subsequent opening“iron curtain” and the subsequent openingof markets in Eastern Europe. Has thisof markets in Eastern Europe. Has thiswww.bookfiesta4u.blogspot.com 11-418of markets in Eastern Europe. Has thisof markets in Eastern Europe. Has thispotential marketplace been fullypotential marketplace been fullyexploited by Americanexploited by Americancompanies? Europeancompanies? Europeancompanies? Why orcompanies? Why orwhy not?why not?
Deciding on the MarketingOrganizationExport departmentExport departmentInternational divisionInternational divisionGeographical organizationsGeographical organizationswww.bookfiesta4u.blogspot.com 11-419Geographical organizationsGeographical organizationsWorld product groupsWorld product groupsInternational subsidiariesInternational subsidiaries
Deciding on the MarketingOrganizationGlobal organizationGlobal organizationBartlett and Ghoshal distinguish threeBartlett and Ghoshal distinguish threeorganizational strategies:organizational strategies:www.bookfiesta4u.blogspot.com 11-420organizational strategies:organizational strategies:A global strategy treats the world as a singleA global strategy treats the world as a singlemarket.market.A multinational strategy treats the world as aA multinational strategy treats the world as aportfolio of national opportunities.portfolio of national opportunities.A “glocal” strategy standardizes certain coreA “glocal” strategy standardizes certain coreelements and localizes other elements.elements and localizes other elements.
Chapter 14Chapter 14Setting the Product andSetting the Product andBranding StrategyBranding Strategybybywww.bookfiesta4u.blogspot.com 11-421PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
The best way to holdThe best way to holdcustomers is tocustomers is toconstantly figure outconstantly figure outKotler onMarketingwww.bookfiesta4u.blogspot.com 11-422constantly figure outconstantly figure outhow to give themhow to give themmore for less.more for less.
Chapter ObjectivesIn this chapter, we focus on the followingIn this chapter, we focus on the followingquestions:questions:What are the characteristics of products?What are the characteristics of products?How can a company build and manage itsHow can a company build and manage itswww.bookfiesta4u.blogspot.com 11-423How can a company build and manage itsHow can a company build and manage itsproduct mix and product lines?product mix and product lines?How can a company make better brandHow can a company make better branddecisions?decisions?How can packaging and labeling be used asHow can packaging and labeling be used asmarketing tools?marketing tools?
The Product and theProduct MixProductProductPhysical goodsPhysical goodsServicesServicesExperiencesExperiencesFigure 14.1: Componentsof the Market Offeringwww.bookfiesta4u.blogspot.com 11-424ExperiencesExperiencesEventsEventsPersonsPersonsPlacesPlacesPropertiesPropertiesOrganizationsOrganizationsInformationInformationIdeasIdeas
The Product and theProduct MixIndustrialIndustrial--Goods ClassificationGoods ClassificationMaterials and partsMaterials and partsFarm productsFarm productsNatural productsNatural productswww.bookfiesta4u.blogspot.com 11-430Natural productsNatural productsManufacturedManufacturedmaterials and partsmaterials and partsComponent materialsComponent materialsComponent partsComponent partsCapital itemsCapital itemsInstallationsInstallationsEquipmentEquipment
The Product and theProduct MixSupplies and business servicesSupplies and business servicesMaintenance andMaintenance andrepair itemsrepair itemswww.bookfiesta4u.blogspot.com 11-431Operating suppliesOperating suppliesMaintenance andMaintenance andrepair servicesrepair servicesBusiness advisoryBusiness advisoryservicesservices
The Product and theProduct MixProduct mix (ProductProduct mix (Productassortment)assortment)Product mix has a certain:Product mix has a certain:www.bookfiesta4u.blogspot.com 11-432Product mix has a certain:Product mix has a certain:WidthWidthLengthLengthDepthDepthConsistencyConsistency
Table 14.1: Product-Mix Width and Product-LineLength for Proctor& Gamble ProductsPRODUCTPRODUCT--ProductProduct--Mix WidthMix WidthDetergentsDetergents ToothpasteToothpasteDisposableDisposableBar SoapBar Soap DiapersDiapersPaperPaperTissueTissueIvory SnowIvory Snow(1930)(1930)DreftDreftGleem (1952)Gleem (1952)Crest (1955)Crest (1955)IvoryIvory(1879)(1879)Kirk’sKirk’sPampersPampers(1961)(1961)LuvsLuvsCharminCharmin(1928)(1928)PuffsPuffswww.bookfiesta4u.blogspot.com 11-433PRODUCTPRODUCT--LINELINELENGTHLENGTHDreftDreft(1933)(1933)TideTide(1946)(1946)CheerCheer(1950)(1950)Kirk’sKirk’s(1885)(1885)LavaLava(1893)(1893)CamayCamay(1926)(1926)LuvsLuvs(1976)(1976)PuffsPuffs(1960)(1960)BannerBanner(1982)(1982)SummitSummit(1992)(1992)See text for complete table
The Product and theProduct MixProductProduct--line decisionsline decisionsProductProduct--line analysisline analysisSales and ProfitsSales and ProfitsFour types ofFour types ofwww.bookfiesta4u.blogspot.com 11-434Four types ofFour types ofproduct classes:product classes:Core productCore productStaplesStaplesSpecialtiesSpecialtiesConvenience itemsConvenience items
The Product and theProduct MixMarket profileMarket profilewww.bookfiesta4u.blogspot.com 11-435Figure 14.4:Product Mapfor aPaper-ProductLine
The Product and theProduct MixProductProduct--line lengthline lengthLine StretchingLine StretchingDownmarket StretchDownmarket StretchThe company may notice strong growth opportunities asThe company may notice strong growth opportunities aswww.bookfiesta4u.blogspot.com 11-436The company may notice strong growth opportunities asThe company may notice strong growth opportunities asmass retailers attract a growing number of shoppersmass retailers attract a growing number of shoppersThe company may wish to tie up lowerThe company may wish to tie up lower--end competitorsend competitorswho might otherwise try to move upmarketwho might otherwise try to move upmarketThe company may find that the middle market isThe company may find that the middle market isstagnating or decliningstagnating or decliningUpmarket StretchUpmarket StretchTwoTwo--Way StretchWay Stretch
Kmart has entered into branding andKmart has entered into branding anddistribution agreements with celebrities likedistribution agreements with celebrities likeKate Smith for women’s apparel and MarthaKate Smith for women’s apparel and Marthawww.bookfiesta4u.blogspot.com 11-437Stewart in house wares, gardening supplies,Stewart in house wares, gardening supplies,etc. Is this an upmarket stretch, aetc. Is this an upmarket stretch, adownmarket stretch or a twodownmarket stretch or a two--way stretchway stretchfor Kmart?for Kmart?
The Product and theProduct MixLine FillingLine FillingJustJust--noticeablenoticeabledifferencedifferenceBrand decisionsBrand decisionsWhat is brand?What is brand?AttributesAttributeswww.bookfiesta4u.blogspot.com 11-438Line Modernization,Line Modernization,featuring, andfeaturing, andpruningpruningAttributesAttributesBenefitsBenefitsValuesValuesCultureCulturePersonalityPersonalityUserUser
The Product and theProduct MixCommonly used research approachesCommonly used research approachesto determine brand meaning:to determine brand meaning:Word associationsWord associationswww.bookfiesta4u.blogspot.com 11-439Personifying thePersonifying thebrandbrandLaddering up theLaddering up thebrand essencebrand essenceBrand essenceBrand essenceLaddering upLaddering up
The Product and theProduct MixBuilding Brand IdentityBuilding Brand IdentityBrand bondingBrand bondingBrands are not built by advertisingBrands are not built by advertisingbut by the brand experiencebut by the brand experiencewww.bookfiesta4u.blogspot.com 11-440but by the brand experiencebut by the brand experienceEveryone in the company lives the brandEveryone in the company lives the brandThree ways to carry on internal brandingThree ways to carry on internal branding ––Employees mustEmployees mustUnderstandUnderstandDesire, andDesire, andDeliver on the brand promiseDeliver on the brand promise
Building Brands in the new economyBuilding Brands in the new economyHeidi and Don Schultz urge companies to:Heidi and Don Schultz urge companies to:Clarify the corporation’s basic values and build the corporateClarify the corporation’s basic values and build the corporatebrand.brand.The Product and theProduct Mixwww.bookfiesta4u.blogspot.com 11-441Use brand managers to carry out the tactical work.Use brand managers to carry out the tactical work.Develop a more comprehensive brandDevelop a more comprehensive brand--building plan.building plan.Define the brand’s basic essence to be delivered wherever it is sold.Define the brand’s basic essence to be delivered wherever it is sold.Use the brandUse the brand--value proposition as the key driver of the company’svalue proposition as the key driver of the company’sstrategy, operations, services, and product development.strategy, operations, services, and product development.Measure their brandMeasure their brand--building effectiveness, not by the old measuresbuilding effectiveness, not by the old measuresof awareness, recognition, and recall, but by a more comprehensiveof awareness, recognition, and recall, but by a more comprehensiveset of measures including customerset of measures including customer--perceived value, customerperceived value, customersatisfaction, customer share of wallet, customer retention, andsatisfaction, customer share of wallet, customer retention, andcustomer advocacy.customer advocacy.
The Product and theProduct MixBrand EquityBrand EquityBrand awarenessBrand awarenessBrand acceptabilityBrand acceptabilityBrand preferenceBrand preferencewww.bookfiesta4u.blogspot.com 11-442Brand preferenceBrand preferenceAaker’s five levels of customer attitude:Aaker’s five levels of customer attitude:The customer will change brands, especially forThe customer will change brands, especially forprice reasons. No brand loyalty.price reasons. No brand loyalty.Customer is satisfied. No reason to change brands.Customer is satisfied. No reason to change brands.Customer is satisfied and would incur cost byCustomer is satisfied and would incur cost bychanging brand.changing brand.Customer values the brand and sees it as a friend.Customer values the brand and sees it as a friend.Customer is devoted to the brand.Customer is devoted to the brand.
The Product and theProduct MixValue of Brand EquityValue of Brand EquityBrand valuationBrand valuationCompetitive advantages of high brand equity:Competitive advantages of high brand equity:The company will have more leverage in bargaining withThe company will have more leverage in bargaining withwww.bookfiesta4u.blogspot.com 11-443The company will have more leverage in bargaining withThe company will have more leverage in bargaining withdistributors and retailers because customers expect themdistributors and retailers because customers expect themto carry the brand.to carry the brand.The company can charge a higher price than itsThe company can charge a higher price than itscompetitors because the brand has higher perceivedcompetitors because the brand has higher perceivedquality.quality.The company can more easily launch extensions becauseThe company can more easily launch extensions becausethe brand name carries high credibility.the brand name carries high credibility.The brand offers some defense against price competition.The brand offers some defense against price competition.
Managing Brand EquityManaging Brand EquityBranding ChallengesBranding ChallengesBranding Decision: To Brand or Not to Brand?Branding Decision: To Brand or Not to Brand?The Product and the Product Mixwww.bookfiesta4u.blogspot.com 11-444
When is a brand more than just a brand?When is a brand more than just a brand?Have you ever based a purchasing decisionHave you ever based a purchasing decisionprimarily on the brand? Was it because ofprimarily on the brand? Was it because ofsome perceived quality difference, or was itsome perceived quality difference, or was itwww.bookfiesta4u.blogspot.com 11-445some perceived quality difference, or was itsome perceived quality difference, or was itbased on the expectation of how othersbased on the expectation of how otherswould see or treat you? Have you ever seenwould see or treat you? Have you ever seensomeone buying a givensomeone buying a givenbrand of an item in anbrand of an item in anattempt to be seen as “cool”?attempt to be seen as “cool”?
The Product and theProduct MixBranding gives the seller several advantages:Branding gives the seller several advantages:Brand name makes it easier for the seller toBrand name makes it easier for the seller toprocess orders and track down problemsprocess orders and track down problemsSeller’s brand name and trademark provide legalSeller’s brand name and trademark provide legalwww.bookfiesta4u.blogspot.com 11-446Seller’s brand name and trademark provide legalSeller’s brand name and trademark provide legalprotection of unique product featuresprotection of unique product featuresBranding gives the seller the opportunity toBranding gives the seller the opportunity toattract a loyal and profitable set of customers.attract a loyal and profitable set of customers.Branding helps the seller segment markets.Branding helps the seller segment markets.Strong brands help build corporate image,Strong brands help build corporate image,making it easier to launch new brands and gainmaking it easier to launch new brands and gainacceptance by distributors and consumers.acceptance by distributors and consumers.
The Product and theProduct MixBrandBrand--Name DecisionName DecisionFour available strategies:Four available strategies:Individual namesIndividual nameswww.bookfiesta4u.blogspot.com 11-448Individual namesIndividual namesBlanket family namesBlanket family namesSeparate family names for all productsSeparate family names for all productsCorporate name combined withCorporate name combined withindividual product namesindividual product names
The Product and theProduct MixDesirable qualities for a brand nameDesirable qualities for a brand nameIt should suggest something about the product’sIt should suggest something about the product’sbenefitsbenefitsIt should suggest the product or service categoryIt should suggest the product or service categorywww.bookfiesta4u.blogspot.com 11-449It should suggest the product or service categoryIt should suggest the product or service categoryIt should suggest concrete, “high imagery”It should suggest concrete, “high imagery”qualitiesqualitiesIt should be easy to spell, pronounce, recognize,It should be easy to spell, pronounce, recognize,and rememberand rememberIt should be distinctiveIt should be distinctiveIt should not carry poor meanings in otherIt should not carry poor meanings in othercountries and languagescountries and languages
The Product and theProduct MixBrand building toolsBrand building toolsPublic relations andPublic relations andpress releasespress releasesSponsorshipsSponsorshipsPublic facilitiesPublic facilitiesSocial causeSocial causemarketingmarketingwww.bookfiesta4u.blogspot.com 11-450SponsorshipsSponsorshipsClubs and consumerClubs and consumercommunitiescommunitiesFactory visitsFactory visitsTrade showsTrade showsEvent marketingEvent marketingmarketingmarketingHigh value forHigh value forthe moneythe moneyFounder’s or aFounder’s or acelebrity personalitycelebrity personalityMobile phoneMobile phonemarketingmarketing
Nike’s arrangement with Michael JordanNike’s arrangement with Michael Jordanhas provided an excellent example of ahas provided an excellent example of acelebrity endorsement. Can you think ofcelebrity endorsement. Can you think ofwww.bookfiesta4u.blogspot.com 11-451celebrity endorsement. Can you think ofcelebrity endorsement. Can you think ofan endorsement campaign that backfired?an endorsement campaign that backfired?What did it cost the companyWhat did it cost the companyin the short term? What,in the short term? What,if any, have been theif any, have been thelasting effects?lasting effects?
The Product and theProduct MixMultibrands, New Brands, andMultibrands, New Brands, andCoCo--BrandsBrandsMultibrandMultibrandwww.bookfiesta4u.blogspot.com 11-453Flanker BandsFlanker BandsCoCo--branding (Dual branding)branding (Dual branding)Ingredient coIngredient co--brandingbrandingSameSame--company cocompany co--brandingbrandingJoint venture coJoint venture co--brandingbrandingMultisponsor coMultisponsor co--brandingbranding
The Product and theProduct MixBrand Asset ManagementBrand Asset ManagementBrand Auditing and RepositioningBrand Auditing and Repositioningwww.bookfiesta4u.blogspot.com 11-454Brand report cardBrand report card
The Product and theProduct MixPackaging and LabelingPackaging and LabelingPackagingPackagingPackagePackagePrimary PackagePrimary Packagewww.bookfiesta4u.blogspot.com 11-455Primary PackagePrimary PackageSecondary PackageSecondary PackageShipping PackageShipping PackageFactors which have contributed to the growing useFactors which have contributed to the growing useof packaging as a marketing toolof packaging as a marketing toolSelfSelf--ServiceServiceConsumer affluenceConsumer affluenceCompany and brand imageCompany and brand imageInnovation opportunityInnovation opportunity
The Product and theProduct MixLabelingLabelingFunctionsFunctionsIdentificationIdentificationGradingGradingwww.bookfiesta4u.blogspot.com 11-456GradingGradingDescriptionDescriptionConsumerists have lobbied for:Consumerists have lobbied for:Open datingOpen datingUnit pricingUnit pricingGrade labelingGrade labelingPercentage labelingPercentage labeling
Chapter 15Chapter 15Designing and ManagingDesigning and ManagingServicesServicesbybywww.bookfiesta4u.blogspot.com 11-457PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Every business is aservice business.Kotler onMarketingwww.bookfiesta4u.blogspot.com 11-458service business.Does your serviceput a smile on thecustomer’s face?
Chapter ObjectivesIn this chapter, we focus on the followingIn this chapter, we focus on the followingquestions:questions:How are services defined and classified?How are services defined and classified?How do services differ from goods?How do services differ from goods?www.bookfiesta4u.blogspot.com 11-459How do services differ from goods?How do services differ from goods?How can service firms improve theirHow can service firms improve theirdifferentiation, quality, and productivity?differentiation, quality, and productivity?How can goodsHow can goods--producing companiesproducing companiesimprove their customer support services?improve their customer support services?
Keen.com is a virtualKeen.com is a virtualadvice marketplaceadvice marketplaceThe Nature of ServicesGovernment sectorGovernment sectorPrivate nonPrivate non--profitprofitsectorsectorBusinessBusinesssectorsectorwww.bookfiesta4u.blogspot.com 11-460ManufacturingManufacturingsectorsectorServiceService
Categories of Service MixCategories of Service MixPure tangible goodPure tangible goodTangible good withTangible good withaccompanying servicesaccompanying servicesThe Nature of Serviceswww.bookfiesta4u.blogspot.com 11-461accompanying servicesaccompanying servicesHybridHybridMajor service with accompanyingMajor service with accompanyingminor goods and servicesminor goods and servicesPure servicePure service
Characteristics of Services and TheirCharacteristics of Services and TheirMarketing ImplicationsMarketing ImplicationsIntangibilityIntangibilityService positioning strategy can beService positioning strategy can beThe Nature of Serviceswww.bookfiesta4u.blogspot.com 11-462made tangible through:made tangible through:PlacePlacePeoplePeopleEquipmentEquipmentCommunication materialCommunication materialSymbolsSymbolsPricePrice
Online companies that provide services areOnline companies that provide services areoften directly impacted by the quality of aoften directly impacted by the quality of acustomer’s computer or the customer’scustomer’s computer or the customer’swww.bookfiesta4u.blogspot.com 11-463customer’s computer or the customer’scustomer’s computer or the customer’sInternet connection. Can you think ofInternet connection. Can you think ofanother service sector that has so littleanother service sector that has so littlecontrol over the environmentcontrol over the environmentin which their servicesin which their servicesare provided?are provided?
The Nature of ServicesCarbone and Haeckel purpose theCarbone and Haeckel purpose thefollowing forfollowing for customer experiencecustomer experienceengineeringengineeringwww.bookfiesta4u.blogspot.com 11-464engineeringengineeringPerformance and context cluesPerformance and context cluesHumanicsHumanicsMechanicsMechanicsExperience blueprintExperience blueprint
The Nature of ServicesInseparabilityInseparabilityVariabilityVariabilityQuality control by:Quality control by:Good hiring and training proceduresGood hiring and training proceduresService blueprintService blueprintMonitoringMonitoringwww.bookfiesta4u.blogspot.com 11-465MonitoringMonitoringcustomercustomersatisfactionsatisfaction
PerishabilityPerishabilityStrategies for better matching between demand andStrategies for better matching between demand andsupply in a service businesssupply in a service businessDifferential pricingDifferential pricingNonpeak demandNonpeak demandComplementary servicesComplementary servicesThe Nature of Serviceswww.bookfiesta4u.blogspot.com 11-466Complementary servicesComplementary servicesReservation systemsReservation systemsPartPart--time employeestime employeesPeakPeak--time efficiencytime efficiencyIncreased consumer participationIncreased consumer participationShared servicesShared servicesFacilities for future expansionFacilities for future expansion
Marketing Strategiesfor Service FirmsThree Additional PsThree Additional PsPeoplePeoplePhysicalPhysicalwww.bookfiesta4u.blogspot.com 11-467PhysicalPhysicalevidenceevidencepresentationpresentationProcessProcess
Figure 15.3: Three Types of Marketing in Service Industrieswww.bookfiesta4u.blogspot.com 11-468
Marketing Strategiesfor Service FirmsService Companies face three tasks:Service Companies face three tasks:Competitive differentiationCompetitive differentiationService qualityService qualityProductivityProductivitywww.bookfiesta4u.blogspot.com 11-469ProductivityProductivityManaging differentiationManaging differentiationOfferingOfferingPrimary service packagePrimary service packageSecondary service featuresSecondary service features
Marketing Strategiesfor Service FirmsFaster and Better DeliveryFaster and Better DeliveryReliabilityReliabilityResilienceResilienceInnovativenessInnovativenesswww.bookfiesta4u.blogspot.com 11-471InnovativenessInnovativenessImageImageManaging Service QualityManaging Service QualityPerceived servicePerceived serviceExpected serviceExpected service
FedEx and UPS have taken over much of theFedEx and UPS have taken over much of theUS Postal Service’s business, mostly throughUS Postal Service’s business, mostly throughflexibility and innovation that the USPS can’tflexibility and innovation that the USPS can’tmatch. Can you think of another governmentalmatch. Can you think of another governmentalwww.bookfiesta4u.blogspot.com 11-472match. Can you think of another governmentalmatch. Can you think of another governmentalservice (anywhere in the world) where a privateservice (anywhere in the world) where a privatecompany has been able to take the profitablecompany has been able to take the profitablesegment of a service, andsegment of a service, andleave the less profitable orleave the less profitable ormore risky segment for amore risky segment for agovernment agency?government agency?
Marketing Strategiesfor Service FirmsFive gaps that cause unsuccessfulFive gaps that cause unsuccessfuldeliverydeliveryGap between consumerGap between consumerexpectation and managementexpectation and managementperceptionperceptionGap between managementGap between managementwww.bookfiesta4u.blogspot.com 11-473Gap between managementGap between managementperception and serviceperception and service--qualityqualityspecificationspecificationGap between serviceGap between service--qualityqualityspecification and service deliveryspecification and service deliveryGap between service delivery andGap between service delivery andexternal communicationsexternal communicationsGap between perceived serviceGap between perceived serviceand expected serviceand expected service
Five determinants of service qualityFive determinants of service qualityReliabilityReliabilityResponsivenessResponsivenessAssuranceAssuranceMarketing Strategiesfor Service Firmswww.bookfiesta4u.blogspot.com 11-474AssuranceAssuranceEmpathyEmpathyTangiblesTangiblesStrategic ConceptStrategic ConceptTopTop--Management CommitmentManagement CommitmentHigh StandardsHigh StandardsSelfSelf--Service Technologies (SSTS)Service Technologies (SSTS)
Myalert.com provides access to servicesMyalert.com provides access to servicesthat users can perform themselvesthat users can perform themselveswww.bookfiesta4u.blogspot.com 11-475
Table 15.1 Customer Importance and PerformanceRatings for an Auto DealershipMeanMean MeanMeanAttributeAttribute ImportanceImportance PerformancePerformanceNumberNumber Attribute DescriptionAttribute Description RatingRating RatingRatingwww.bookfiesta4u.blogspot.com 11-47611 Job done right the first timeJob done right the first time 3.833.83 2.632.6322 Fast action on complaintsFast action on complaints 3.633.63 2.732.7333 Prompt warranty workPrompt warranty work 3.603.60 3.153.1544 Able to do any job neededAble to do any job needed 3.563.56 3.003.00See text for complete table
Marketing Strategies for Service FirmsSatisfying Customer ComplaintsSatisfying Customer ComplaintsSatisfying Employees As Well As CustomersSatisfying Employees As Well As CustomersManaging ProductivityManaging ProductivitySeven approaches to improving service productivity:Seven approaches to improving service productivity:Have service providers work more skillfullyHave service providers work more skillfullyIncrease the quantity of service by surrendering some qualityIncrease the quantity of service by surrendering some qualitywww.bookfiesta4u.blogspot.com 11-477Increase the quantity of service by surrendering some qualityIncrease the quantity of service by surrendering some quality“Industrialize the service” by adding equipment and standardizing“Industrialize the service” by adding equipment and standardizingproductionproductionReduce or make obsolete the need for a service by inventing aReduce or make obsolete the need for a service by inventing aproduct solutionproduct solutionDesign a more effective serviceDesign a more effective servicePresent customers with incentives to substitute their own labor forPresent customers with incentives to substitute their own labor forcompany laborcompany laborHarness the power of technology to give customers access to betterHarness the power of technology to give customers access to betterservice and make service workers more productiveservice and make service workers more productive
Managing ProductSupport ServicesCustomers have three worriesCustomers have three worriesReliability and failure frequencyReliability and failure frequencyDowntime durationDowntime durationwww.bookfiesta4u.blogspot.com 11-478Downtime durationDowntime durationOutOut--ofof--pocket costs ofpocket costs ofmaintenance and repairmaintenance and repairLifeLife--cycle costcycle cost
Managing ProductSupport ServicesTo provide the best support for expensiveTo provide the best support for expensiveequipment, firms offer:equipment, firms offer:Facilitating servicesFacilitating servicesValueValue--augmenting servicesaugmenting serviceswww.bookfiesta4u.blogspot.com 11-479ValueValue--augmenting servicesaugmenting servicesHerman Miller Office Furniture CompanyHerman Miller Office Furniture Companyoffers:offers:FiveFive--year product warrantiesyear product warrantiesQuality audits after installationQuality audits after installationGuaranteed moveGuaranteed move--in datesin datesTradeTrade--in allowances on systems productsin allowances on systems products
Managing ProductSupport ServicesPostsale Service StrategyPostsale Service StrategyMajor trends in product support serviceMajor trends in product support serviceLele has noted the following:Lele has noted the following:www.bookfiesta4u.blogspot.com 11-480Lele has noted the following:Lele has noted the following:Equipment manufacturers are building moreEquipment manufacturers are building morereliable and more easily fixable equipmentreliable and more easily fixable equipmentCustomers are becoming more sophisticatedCustomers are becoming more sophisticatedabout buying product support servicesabout buying product support services“Service unbundling”“Service unbundling”
Managing ProductSupport ServicesCustomers dislike dealing with multipleCustomers dislike dealing with multipleservice providers handling different typesservice providers handling different typesof equipmentof equipmentThirdThird--party service organizationsparty service organizationsService contracts (extended warranties)Service contracts (extended warranties)www.bookfiesta4u.blogspot.com 11-481Service contracts (extended warranties)Service contracts (extended warranties)may diminish in importancemay diminish in importanceCustomer service choices are increasingCustomer service choices are increasingrapidlyrapidly––this is holding down prices andthis is holding down prices andprofitsprofitsCompanies are increasing the quality ofCompanies are increasing the quality oftheir call centers and their customer servicetheir call centers and their customer servicerepresentatives (CSRs)representatives (CSRs)
Chapter 16Chapter 16Developing Price StrategiesDeveloping Price Strategiesand Programsand Programsbybywww.bookfiesta4u.blogspot.com 11-482PowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Chapter ObjectivesIn this chapter, we focus on threeIn this chapter, we focus on threequestions:questions:How should a price be set on a product orHow should a price be set on a product orservice for the first time?service for the first time?www.bookfiesta4u.blogspot.com 11-484service for the first time?service for the first time?How should the price be adapted to meetHow should the price be adapted to meetvarying circumstances and opportunities?varying circumstances and opportunities?When should the company initiate a priceWhen should the company initiate a pricechange, and how should it respond to achange, and how should it respond to acompetitor’s price change?competitor’s price change?
Figure 16.1: Nine Price-Quality Strategieswww.bookfiesta4u.blogspot.com 11-485
Figure 16.2: Price Should Align with Valuewww.bookfiesta4u.blogspot.com 11-486
Setting the PriceStep 1: Selecting the pricing objectiveStep 1: Selecting the pricing objectiveSurvivalSurvivalMaximize current profitsMaximize current profitsMaximize their market shareMaximize their market shareMarketMarket--penetration pricingpenetration pricingwww.bookfiesta4u.blogspot.com 11-487MarketMarket--penetration pricingpenetration pricingBest when:Best when:Market is highly priceMarket is highly price--sensitive, and a low pricesensitive, and a low pricestimulates market growth,stimulates market growth,Production and distribution costs fall withinProduction and distribution costs fall withinaccumulated production experience, andaccumulated production experience, andLow price discourages actual and potentialLow price discourages actual and potentialcompetitioncompetition
Many companies engage in “marketMany companies engage in “marketskimming,” offering new products atskimming,” offering new products atwhatever price the market will bear, thenwhatever price the market will bear, thenover time decreasing the price in order toover time decreasing the price in order towww.bookfiesta4u.blogspot.com 11-488over time decreasing the price in order toover time decreasing the price in order togain the maximum profit from eachgain the maximum profit from eachmarket segment. Can you think of anymarket segment. Can you think of anyproducts that wouldn’t fitproducts that wouldn’t fitthis pricing model?this pricing model?Why not?Why not?
Maytag’s homepage presents itsMaytag’s homepage presents its“corporate family of brands”“corporate family of brands”www.bookfiesta4u.blogspot.com 11-489
Setting the PriceStep 2: Determining DemandStep 2: Determining DemandPrice sensitivityPrice sensitivityTotal Cost of Ownership (TCO)Total Cost of Ownership (TCO)www.bookfiesta4u.blogspot.com 11-490
Setting the PriceTom Nagle offers this list of factors associatedTom Nagle offers this list of factors associatedwith lower price sensitivitywith lower price sensitivityThe product is more distinctiveThe product is more distinctiveBuyers are less aware of substitutesBuyers are less aware of substitutesBuyers cannot easily compare the quality of substitutesBuyers cannot easily compare the quality of substitutesThe expenditure is a smaller part of the buyer’s total incomeThe expenditure is a smaller part of the buyer’s total incomewww.bookfiesta4u.blogspot.com 11-491The expenditure is a smaller part of the buyer’s total incomeThe expenditure is a smaller part of the buyer’s total incomeThe expenditure is small compared to the total cost of the endThe expenditure is small compared to the total cost of the endproductproductPart of the cost is borne by another partyPart of the cost is borne by another partyThe product is used in conjunction with assets previously boughtThe product is used in conjunction with assets previously boughtThe product is assumed to have more quality, prestige, orThe product is assumed to have more quality, prestige, orexclusivenessexclusivenessBuyers cannot store the productBuyers cannot store the product
Setting the PriceEstimating Demand CurvesEstimating Demand CurvesPrice Elasticity of DemandPrice Elasticity of DemandInelasticInelasticElasticElasticwww.bookfiesta4u.blogspot.com 11-492ElasticElasticPrice indifference bandPrice indifference band
Setting the PriceStep 3: Estimating CostStep 3: Estimating CostTypes of Cost and Levels of ProductionTypes of Cost and Levels of ProductionFixed costs (overhead)Fixed costs (overhead)Variable costVariable costwww.bookfiesta4u.blogspot.com 11-493Variable costVariable costTotal costTotal costAverage costAverage costAccumulated ProductionAccumulated ProductionExperience curve (Learning curve)Experience curve (Learning curve)
volumebuy.com: group or pool pricingvolumebuy.com: group or pool pricingwww.bookfiesta4u.blogspot.com 11-499
Some large entities, both public and private,Some large entities, both public and private,currently bid online for many products and services.currently bid online for many products and services.Do you think there will be a market for consumers toDo you think there will be a market for consumers towww.bookfiesta4u.blogspot.com 11-500Do you think there will be a market for consumers toDo you think there will be a market for consumers tobid on electrical power, like major corporatebid on electrical power, like major corporateelectricity users do? What about oilelectricity users do? What about oilfor heating? Can you think of anyfor heating? Can you think of anyother products or services with aother products or services with apotential online auctionpotential online auctionmarket for home users?market for home users?
Setting the PriceStep 6: Selecting the Final PriceStep 6: Selecting the Final PricePsychological PricingPsychological PricingReference priceReference priceGainGain--andand--RiskRisk--Sharing PricingSharing PricingInfluence of the Other Marketing ElementsInfluence of the Other Marketing Elementswww.bookfiesta4u.blogspot.com 11-501Influence of the Other Marketing ElementsInfluence of the Other Marketing ElementsBrands with average relative quality but high relativeBrands with average relative quality but high relativeadvertising budgets charged premium pricesadvertising budgets charged premium pricesBrands with high relative quality and high relativeBrands with high relative quality and high relativeadvertising budgets obtained the highest pricesadvertising budgets obtained the highest pricesThe positive relationship between high advertisingThe positive relationship between high advertisingbudgets and high prices held most strongly in the laterbudgets and high prices held most strongly in the laterstages of the product life cycle for market leadersstages of the product life cycle for market leaders
Setting the PriceBrands with average relative quality but high relativeBrands with average relative quality but high relativeadvertising budgets charged premium pricesadvertising budgets charged premium pricesBrands with high relative quality and high relativeBrands with high relative quality and high relativeadvertising budgets obtained the highest pricesadvertising budgets obtained the highest pricesThe positive relationship between high advertisingThe positive relationship between high advertisingwww.bookfiesta4u.blogspot.com 11-502The positive relationship between high advertisingThe positive relationship between high advertisingbudgets and high prices held most strongly in the laterbudgets and high prices held most strongly in the laterstages of the product life cycle for market leadersstages of the product life cycle for market leadersCompany Pricing PoliciesCompany Pricing PoliciesImpact of Price on Other PartiesImpact of Price on Other Parties
Adapting the PriceGeographical Pricing (Cash,Geographical Pricing (Cash,Countertrade, Barter)Countertrade, Barter)CountertradeCountertradewww.bookfiesta4u.blogspot.com 11-503BarterBarterCompensation dealCompensation dealBuyback arrangementBuyback arrangementOffsetOffsetPrice Discounts and AllowancesPrice Discounts and Allowances
Table 16.2: Price Discounts and AllowancesCash Discount:Cash Discount: A price reduction to buyers who pay billsA price reduction to buyers who pay billspromptly. A typical example is “2/10, net 30,”promptly. A typical example is “2/10, net 30,”which means that payment is due within 30which means that payment is due within 30days and that the buyer can deduct 2days and that the buyer can deduct 2percent by paying the bill within 10 days.percent by paying the bill within 10 days.Quantity Discount:Quantity Discount: A price reduction to those who buy largeA price reduction to those who buy largevolumes. A typical example is “$10 per unitvolumes. A typical example is “$10 per unitfor less than 100 units; $9 per unit for 100 orfor less than 100 units; $9 per unit for 100 orwww.bookfiesta4u.blogspot.com 11-504for less than 100 units; $9 per unit for 100 orfor less than 100 units; $9 per unit for 100 ormore units.” Quantity discounts must bemore units.” Quantity discounts must beoffered equally to all customers and mustoffered equally to all customers and mustnot exceed the cost savings to the seller.not exceed the cost savings to the seller.They can be offered on each order placed orThey can be offered on each order placed oron the number of units ordered over a givenon the number of units ordered over a givenperiod.period.See text for complete table
Adapting the PricePromotional PricingPromotional PricingLossLoss--leader pricingleader pricingSpecialSpecial--event pricingevent pricingCash rebatesCash rebateswww.bookfiesta4u.blogspot.com 11-505Cash rebatesCash rebatesLowLow--interest financinginterest financingLonger payment termsLonger payment termsWarranties and service contractsWarranties and service contractsPsychological discountingPsychological discounting
personify.com provides software that helpspersonify.com provides software that helpsWeb merchants find target customersWeb merchants find target customerswww.bookfiesta4u.blogspot.com 11-508
Initiating and Responding toPrice ChangesInitiating Price CutsInitiating Price CutsDrive to dominate the marketDrive to dominate the marketwww.bookfiesta4u.blogspot.com 11-509Drive to dominate the marketDrive to dominate the marketthrough lower coststhrough lower costsLow quality trapLow quality trapFragileFragile--marketmarket--share trapshare trapShallowShallow--pockets trappockets trap
Table 16.3: Marketing-Mix AlternativesStrategic OptionsStrategic Options ReasoningReasoning ConsequencesConsequences1. Maintain price and1. Maintain price andperceived quality.perceived quality.Engage in selectiveEngage in selectivecustomer pruning.customer pruning.Firm has higherFirm has highercustomer loyalty. It iscustomer loyalty. It iswilling to lose poorerwilling to lose poorercustomers tocustomers tocompetitors.competitors.Smaller market share.Smaller market share.Lowered profitability.Lowered profitability.2. Raise price and2. Raise price and Raise price to coverRaise price to cover Smaller market share.Smaller market share.www.bookfiesta4u.blogspot.com 11-5102. Raise price and2. Raise price andperceived quality.perceived quality.3. Maintain price and3. Maintain price andraise perceivedraise perceivedquality.quality.Raise price to coverRaise price to coverrising costs. Improverising costs. Improvequality to justify higherquality to justify higherprices.prices.It is cheaper toIt is cheaper tomaintain price andmaintain price andraise perceived quality.raise perceived quality.Smaller market share.Smaller market share.MaintainedMaintainedprofitability.profitability.Smaller market share.Smaller market share.ShortShort--term decline interm decline inprofitability. Longprofitability. Long--termtermincrease inincrease inprofitability.profitability.See text for complete table
Table 16.4: Profits Before and After a Price IncreaseBeforeBefore AfterAfterPricePrice $ 10$ 10 $10.10$10.10 (a 1 percent price increase)(a 1 percent price increase)Units soldUnits sold 100100 100100Initiating and Responding to Price Changeswww.bookfiesta4u.blogspot.com 11-511Units soldUnits sold 100100 100100RevenueRevenue $1000$1000 $1010$1010CostsCosts --970970 --970970ProfitProfit $ 30$ 30 $ 40$ 40 (a 33 1/3 percent profit(a 33 1/3 percent profitincrease)increase)
Initiating and Responding toPrice ChangesInitiating Price IncreasesInitiating Price IncreasesCost inflationCost inflationAnticipatory pricingAnticipatory pricingwww.bookfiesta4u.blogspot.com 11-512Anticipatory pricingAnticipatory pricingOverdemandOverdemandDelayed quotation pricingDelayed quotation pricingEscalator clausesEscalator clausesUnbundlingUnbundlingReduction of discountsReduction of discounts
Initiating and Responding toPrice ChangesPossible responses to higher costs or overhead withoutPossible responses to higher costs or overhead withoutraising prices include:raising prices include:Shrinking the amount of product instead of raising the priceShrinking the amount of product instead of raising the priceSubstituting less expensive materials or ingredientsSubstituting less expensive materials or ingredientswww.bookfiesta4u.blogspot.com 11-513Substituting less expensive materials or ingredientsSubstituting less expensive materials or ingredientsReducing or removing product featuresReducing or removing product featuresRemoving or reducing product services, such as installationRemoving or reducing product services, such as installationor free deliveryor free deliveryUsing less expensive packaging material or larger packageUsing less expensive packaging material or larger packagesizessizesReducing the number of sizes and models offeredReducing the number of sizes and models offeredCreating new economy brandsCreating new economy brands
Initiating and Responding toPrice ChangesReactions to Price ChangesReactions to Price ChangesCustomer ReactionsCustomer ReactionsCompetitor ReactionsCompetitor Reactionswww.bookfiesta4u.blogspot.com 11-514Responding to Competitors’ PriceResponding to Competitors’ PriceChangesChangesMaintain priceMaintain priceMaintain price and add valueMaintain price and add valueReduce priceReduce priceIncrease price and improve qualityIncrease price and improve qualityLaunch a lowLaunch a low--price fighter lineprice fighter line
Chapter 17Chapter 17Designing and ManagingDesigning and ManagingValue Networks andValue Networks andMarketing ChannelsMarketing Channelsbybywww.bookfiesta4u.blogspot.com 11-515bybyPowerPoint byPowerPoint byMilton M. PressleyMilton M. PressleyUniversity of New OrleansUniversity of New Orleans
Establish channels fordifferent target marketsand aim for efficiency,Kotler onMarketingwww.bookfiesta4u.blogspot.com 11-516and aim for efficiency,control, andadaptability.
In this chapter, we focus on the followingIn this chapter, we focus on the followingchannel questions from the viewpoint of thechannel questions from the viewpoint of themanufacturers:manufacturers:What is the value network and marketingWhat is the value network and marketingchannel system?channel system?What work is performed by marketingWhat work is performed by marketingChapter Objectiveswww.bookfiesta4u.blogspot.com 11-517What work is performed by marketingWhat work is performed by marketingchannels?channels?What decisions do companies face inWhat decisions do companies face indesigning, managing, evaluating, anddesigning, managing, evaluating, andmodifying their channels?modifying their channels?What trends are taking place in channelWhat trends are taking place in channeldynamics?dynamics?How can channel conflict be managed?How can channel conflict be managed?
What is a Value Network andMarketing-Channel System?Value NetworkValue NetworkMarketing channelMarketing channelwww.bookfiesta4u.blogspot.com 11-518Marketing channelMarketing channel
Oracle’s home pageOracle’s home pagewww.bookfiesta4u.blogspot.com 11-519
What is a Value Network andMarketing-Channel System?“Go“Go--toto--market” ormarket” or hybridhybrid channelschannelsIBM’s sales force sells to large accounts, outboundIBM’s sales force sells to large accounts, outboundtelemarketing sells to mediumtelemarketing sells to medium--sized accounts, direct mailsized accounts, direct mailsells to small accounts, retailers sell to still smaller accounts,sells to small accounts, retailers sell to still smaller accounts,www.bookfiesta4u.blogspot.com 11-520sells to small accounts, retailers sell to still smaller accounts,sells to small accounts, retailers sell to still smaller accounts,and the Internet to sell specialty itemsand the Internet to sell specialty itemsCharles Schwab enables its customers to do transactions inCharles Schwab enables its customers to do transactions inbranch offices, over the phone, or via the Internetbranch offices, over the phone, or via the InternetStaples markets through traditional retail, directStaples markets through traditional retail, direct--responseresponseInternet site, virtual malls, and 30,000 linked affiliated sitesInternet site, virtual malls, and 30,000 linked affiliated sites
What is a Value Network andMarketing-Channel System?Channel integration characteristics:Channel integration characteristics:Ability to order a product online, andAbility to order a product online, andpick it up at a convenient retail locationpick it up at a convenient retail locationwww.bookfiesta4u.blogspot.com 11-521pick it up at a convenient retail locationpick it up at a convenient retail locationAbility to return an onlineAbility to return an online--orderedorderedproduct to a nearby storeproduct to a nearby storeRight to receive discounts based onRight to receive discounts based ontotal of online and offtotal of online and off--line purchasesline purchases
What Work is Performed byMarketing Channels?Many producers lack the financial resourcesMany producers lack the financial resourcesto carry out direct marketingto carry out direct marketingIn some cases direct marketingIn some cases direct marketingwww.bookfiesta4u.blogspot.com 11-522In some cases direct marketingIn some cases direct marketingsimply is not feasiblesimply is not feasibleProducers who do establish their ownProducers who do establish their ownchannels can often earn a greater return bychannels can often earn a greater return byincreasing their investment in their mainincreasing their investment in their mainbusiness.business.
As more retailers develop a web presence, theyAs more retailers develop a web presence, theyoften move from a “brickoften move from a “brick--andand--mortar” to amortar” to a“click“click--andand--mortar” business model wheremortar” business model wherecustomers expect channel integration. Can youcustomers expect channel integration. Can youwww.bookfiesta4u.blogspot.com 11-524customers expect channel integration. Can youcustomers expect channel integration. Can youidentify any potential problems for theseidentify any potential problems for thesecompanies? Can you identify any uniquecompanies? Can you identify any uniquemarketing opportunitiesmarketing opportunitiesthat such a change wouldthat such a change wouldoffer these companies?offer these companies?
What Work is Performed byMarketing Channels?Channel Functions and FlowsChannel Functions and FlowsKey functions include:Key functions include:Gather information about potential andGather information about potential andcurrent customers, competitors, and otherscurrent customers, competitors, and otherswww.bookfiesta4u.blogspot.com 11-525current customers, competitors, and otherscurrent customers, competitors, and othersDevelop and disseminate persuasiveDevelop and disseminate persuasivecommunications to stimulate purchasingcommunications to stimulate purchasingReach agreements on price and other terms soReach agreements on price and other terms sothat transfer of ownership or possession can bethat transfer of ownership or possession can beeffectedeffectedPlace orders with manufacturersPlace orders with manufacturers
What Work is Performed byMarketing Channels?Acquire funds to finance inventories at differentAcquire funds to finance inventories at differentlevels in the marketing channellevels in the marketing channelAssume risk connected withAssume risk connected withcarrying out channel workcarrying out channel workwww.bookfiesta4u.blogspot.com 11-526carrying out channel workcarrying out channel workProvide for the successive storageProvide for the successive storageand movement of physical productsand movement of physical productsProvide for buyers’ payment of their billsProvide for buyers’ payment of their billsthrough banks and other financial institutionsthrough banks and other financial institutionsOversee actual transfer of ownership from oneOversee actual transfer of ownership from oneorganization or person to anotherorganization or person to another
Figure 17.2: Five Marketing Flows in the Marketing Channelfor Forklift Truckswww.bookfiesta4u.blogspot.com 11-527
What Work is Performed byMarketing Channels?Forward flowForward flowBackward flowBackward flowwww.bookfiesta4u.blogspot.com 11-528Backward flowBackward flow
What Work is Performed byMarketing Channels?Channel levelsChannel levelsZeroZero--level channel (a.k.a. directlevel channel (a.k.a. direct--marketingmarketingchannel)channel)OneOne--level channellevel channelwww.bookfiesta4u.blogspot.com 11-529OneOne--level channellevel channelTwoTwo--level channellevel channelThreeThree--level channellevel channelReverseReverse--flow channelflow channelService Sector ChannelsService Sector ChannelsInformation Highway ChannelsInformation Highway Channels
The advent of print media, the telephone,The advent of print media, the telephone,radio, television, and the Internet have allradio, television, and the Internet have allprovided new ways for marketers to get theirprovided new ways for marketers to get theirmessage to their intended audience. Asmessage to their intended audience. Aswww.bookfiesta4u.blogspot.com 11-530message to their intended audience. Asmessage to their intended audience. Asvarious technologies advance, thesevarious technologies advance, theseinformation channels offer more preciseinformation channels offer more precisedelivery of a message. Candelivery of a message. Canyou identify an emergingyou identify an emerginginformation distributioninformation distributionchannel?channel?
The People’s Bank Internet siteThe People’s Bank Internet sitewww.bookfiesta4u.blogspot.com 11-531
Channel-Design DecisionsPush strategyPush strategyPull strategyPull strategyDesigning a channel systemDesigning a channel systeminvolves four steps:involves four steps:www.bookfiesta4u.blogspot.com 11-532involves four steps:involves four steps:Analyzing customer needsAnalyzing customer needsEstablishing channel objectivesEstablishing channel objectivesIdentifying major channel alternativesIdentifying major channel alternativesEvaluating major channel alternativesEvaluating major channel alternatives
Channel-Design DecisionsEstablish Objectives and ConstraintsEstablish Objectives and ConstraintsIdentify Major Channel AlternativesIdentify Major Channel AlternativesTypes of IntermediariesTypes of Intermediarieswww.bookfiesta4u.blogspot.com 11-534Types of IntermediariesTypes of IntermediariesNumber of IntermediariesNumber of IntermediariesExclusive distributionExclusive distributionExclusive dealingExclusive dealingSelective distributionSelective distributionIntensive distributionIntensive distribution
Channel-Design DecisionsTerms and Responsibilities ofTerms and Responsibilities ofChannel MembersChannel MembersPrice policyPrice policywww.bookfiesta4u.blogspot.com 11-535Conditions of saleConditions of saleDistributors’ territorial rightsDistributors’ territorial rightsEvaluate the Major AlternativesEvaluate the Major AlternativesEconomic CriteriaEconomic Criteria
Figure 17.4: The Value-Adds versus Costs of Different Channelswww.bookfiesta4u.blogspot.com 11-536
Channel-Design DecisionsChannel advantageChannel advantageControl and Adaptive CriteriaControl and Adaptive Criteriawww.bookfiesta4u.blogspot.com 11-537Figure 17.5:Break-evenCost Chart