Marketing Principles (1)

1Marketing Principles

Managing Profitable Customer Relationships

Chapter One


What is marketing?!

The goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction.

Value = benefits – costs. Marketing : is the process by which companies

create value for customers and build strong customer relationships in order to capture value from customers in return.

The marketing process: P.5


Understanding the marketplace & consumer needs

Customer needs, wants, and demands:– Needs: states of felt deprivation.

– Physical needs.– Social needs.– Individual needs. (self expression and self esteem).– Do marketers create needs?? no

– Wants :the form human needs take as shaped by culture and individual personality. (objects that will satisfy needs)

– demands: human wants that are backed by buying power.



Marketing offers : a combination of products, services, information, or experiences offered to a market to satisfy a need or want.

Marketers should bay more attention to the experiences (benefits) produced by products rather than the products it self.

Value versus expectation versus satisfaction



Exchange: the act of obtaining a desired object from someone by offering something in return.

Markets: the set of actual and potential buyers of a product or service. Whose actually share a particular need or wants .


Designing a customer-driven marketing strategy

Marketing Management: the art and science of choosing target markets and building profitable relationships with them.

Marketing managers must answer tow important question :

1. What is our target market?1. Segmentation targeting (just a few target)2. Demarketing: marketing to reduce demand temporarily to reduce

or shift it

2. What is our value proposition (the sets of benefits it promises to deliver to consumers to satisfy their needs)? 1. How will we serve our customers?


Marketing management Orientation

There are five concept under which organizations designs and carry out there marketing strategies:– The production concept.– The product concept.– The selling concept.– The marketing concept.– The societal marketing concept.


The Production Concept

The production concept: consumers will favor products that are available and highly affordable.

Management should focus on improving production and distribution efficiency.

Its useful when: – demand exceeds supply.– Improved productivity will decrease the product cost

May lead to marketing myopia: focusing on operation and losing sight of the real objective (satisfying customer needs)


The Product Concept

Consumers will favor products that offer the most in quality, performance, and features .

organization should focus on continuous product improvement.

Market myopia: focusing on the product and not on the need satisfaction.


The Selling Concept

Consumers will not buy enough of the firms products unless it undertakes a large-scale selling and promotion efforts.

Sell what they make. Used with unsought products : insurance. Used when the organization face overcapacity. Focuses on creating sales transactions rather than

on building long-term customer relationships.


The Marketing Concept

Achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors do.

The marketing concept is customer centered. Fig 1.3 P.11.


The Societal Marketing Concept

Marketing strategy should deliver value to customers in a way that maintains or improves the consumer’s and the society’s will being.

Organizations should balance between : – Company profits.– Consumers satisfaction.– Society interests.


The Marketing Plan

Transforms the marketing strategy (which customers to serve and what value to present) into action.

Includes the marketing mix and the 4P’s of marketing– Product– Price– Place– Promotion


Building customer relationships

The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.

Satisfied customers are more likely to become loyal customers.

Satisfaction = perceived performance – expected performance


Customer Relationships Levels and Tools Basic Relationships

– Low-margin customers Full Partnerships

– Key customers Selective relationship management

– Weeding out unprofitable customers Long term relationship

– Frequency marketing program.• Reward customers who by frequently.

Direct Marketing Partner relationship marketing:

– Partners inside the company.• Every employee must be customer focus. (cooperation)

– Partners outside the company.• Suppliers, channel members,.


Creating customer loyalty and retention

Delight customers remain loyal and talk favorably to others about the company.

Customer value: the value of the entire stream of purchases that customers would make.


Share of Customer

Share of customer’s purchase in a product category.

Achieved through offering greater variety, cross-sell and up-sell strategies.


Customer Equity

The combined customer lifetime values of all current and potential customers.

Measures a firm’s performance, but in a manner that looks to the future.

The more loyal the customers, the more higher customer equity will be. But not always.

Choosing the “best” customers is a key.


Butterflies Good fit between companies

offerings and customer needs. Relationship strategy :

Its hard to convert them into loyal customers.

Invest in them until the next time around.

Strangers little fit between companies


Don’t invest anything in them

True Friends Good fit between companies


Invest heavily in them until they become “true believers”.

Barnacles limited fit between companies


If they cant be made profitable they should be fired.
















High profitability

low profitability



















































Short term customers long term customers

























































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Company and Marketing Strategy: Partnering to Build Customer

Relationships

Chapter 2

Marketing Principles

Companywide Strategic Planning

Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities


Steps in Strategic Planning


The mission statement is the organization’s purpose, what it wants to accomplish in the larger environment

Market-oriented mission statement defines the business in terms of satisfying basic customer needs.

Table 2.1 Pag.64


Company Product-Oriented Definition

Market-Oriented Definition

Amazon.com We sell books, videos, CDs, toys, consumer electronics and other products online

We make the Internet buying experience fast, easy, and enjoyable— we’re the place where you can find and discover anything you want to buy online

Disney We run theme parks We create fantasies—a place where dreams come true and America still works the way it’s supposed to

Nike We sell athletic shoes and apparel

We bring inspiration and innovation to every athlete* in the world (* if you have a body, you are an athlete)


The business portfolio is the collection of businesses and products that make up the company

Portfolio analysis is a major activity in strategic planning whereby management evaluates the products and businesses that make up the company

Designing the Business Portfolio


Strategic business unit (SBU) is a unit of the company that has a separate mission and objectives that can be planned separately from other company businesses

Companywide Strategic Planning:


Difficulty in defining SBUs and measuring market share and growth

Time consuming Expensive Focus on current businesses, not future planning

Problems with Matrix Approaches


Product/market expansion grid is a tool for identifying company growth opportunities through market penetration, market development, product development, or diversification

Developing Strategies for Growth and Downsizing


Developing Strategies for Growth and Downsizing Product/market expansion grid strategies

Developing Strategies for Growth and Downsizing

Market penetration– is a growth strategy increasing sales to current market segments without

changing the product Market development

– is a growth strategy that identifies and develops new market segments for current products

Product development – is a growth strategy that offers new or modified products to existing market

segments Diversification

– is a growth strategy through starting up or acquiring businesses outside the company’s current products and markets

Downsizing – is the reduction of the business portfolio by eliminating products or business

units that are not profitable or that no longer fit the company’s overall strategy

Value chain – is a series of departments that carry out value-

creating activities to design, produce, market, deliver, and support a firm’s products

Value delivery network– is made up of the company, suppliers, distributors,

and ultimately customers who partner with each other to improve performance of the entire system

Partnering to Build Customer Relationships

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– Customers grouped by:• Geographic• Demographic• Psychographic• Behavioral

– Market segment is a groups of consumers who respond in similar ways to marketing efforts.

1. Market Segmentation

2. Target marketing

3. Market Positioning

Marketing Strategy

Strategy

Goal 4: Describe elements of customer-driven strategy

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– Evaluation of each segment’s attractiveness

– Selection of segments with greatest long-term profitability

– A company can choose one or several segments to target

Marketing Strategy

Strategy



2. Target marketing


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– The place the product occupies in the consumer’s mind

– Products are positioned relative to competing products

– Marketers look for clear, distinctive and desirable place in positioning

Marketing Strategy

Strategy



2. Target marketing


Managing the Marketing Effort

– Finding opportunities– Avoiding threats– Understanding

strengths– Analyzing

weaknesses

2 - 36Goal 5: List the marketing management functions

• Analysis• Planning• Implementation• Control

Marketing Functions

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– Marketing plans include: • Executive summary• Analysis of current

situation• Objectives• Targets and positioning• Marketing mix• Budget• Controls


Goal 5: List the marketing management functions

Marketing Functions


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– Plans are turned into action with day-to-day activities

– Good implementation is a challenge



Marketing Functions


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– Evaluation of the results of marketing strategies

– Checks for differences between goals and performance



Marketing Functions



Segmentation, Targeting, positioning, 4Ps

4Ps: Product Price Place promotion

4Cs Customer solution. Customer cost. Convenience. Communication.


The Marketing Environment

Chapter 3


– Marketing must consider other parts of the organization including finance, R&D, purchasing, operations and accounting

– Marketing decisions must relate to broader company goals and strategies

Microenvironment

Actors

1. The company2. Suppliers3. Marketing

intermediaries4. Customers5. Competitors6. Publics

Goal 1: Describe environmental factors


– Marketers must watch supply availability and pricing

– Effective partnership relationship management with suppliers is essential

Microenvironment

Actors



Goal 1: Describe environmental factors


– Help to promote, sell and distribute goods to final buyers

– Include resellers, physical distribution firms, marketing services agencies and financial intermediaries (banks, insurance)

– Effective partner relationship management is essential

Microenvironment

Actors




– The five types of customer markets• Consumer• Business• Reseller• Government• International

Microenvironment

Actors




– Conducting competitor analysis is critical for success of the firm

– A marketer must monitor its competitors’ offerings to create strategic advantage

Microenvironment

Actors




– A group that has an actual or potential interest in or impact on an organization

– Seven publics include:• Financial (banks,

stockholders)• Media (give editorial

opinion)• Government (regulations)• Citizen-action• Local• General• Internal (employees,

managers)

Microenvironment

Actors




Macroenvironmental Forces

The Macroenvironment

Demographic Economic Natural

Technological Political Cultural


Demographic Environment

Demographic Environment:– The study of human populations in terms of size,

density, location, age, gender, race, occupation and other statistics


Economic Environment

Factors that affect consumer buying power and spending patterns.


Natural Environment

Natural Environment:– Involves the natural resources that are needed as

inputs by marketers or that are affected by marketing activities

– Trends• Shortages of raw materials• Increased pollution• Increased government intervention in natural resource

management.


Technological Environment

Rapidly changing force which creates many new marketing opportunities and products .

Technology must enable us to make practical and affordable versions of these products.


Political Environment

Consists of laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society

Laws protect companies, consumers and the interests of society

Increased emphasis on socially responsible actions


Cause-Related Marketing

Marketers create link between brand and charitable organization

Demonstrates social responsibility Helps build positive brand image


Cultural Environment

Made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviors.

Core Beliefs and Values: – Hard to change.– Believing in marriage.

Secondary Beliefs and Values:– Easier to change.– People should get married early.


Themselves:Identify with brands for self-expression

others Recent shift from “me” to “we”

society. People want to serve others and be

with them. Organizations

People see work as a source of money, not as a source of satisfaction.

Trend of decline in trust and loyalty to companies

Cultural Environment Includes people’s views of…


Cultural Environment Includes people’s views of

Society Patriots: want to defend it. Reformers : want to change it. Malcontents: want to leave it.(ساخط)

Nature (environment) lifestyles of health and sustainability”

(LOHAS) Universe

Includes religion and spirituality


Responding to the Marketing Environment

“There are three kinds of companies: – those who make things happen, – those who watch things happen, – and those who wonder what’s happened.”


Managing MarketingInformation

Chapter 4


Marketing Information System

Consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.

Give managers the right information in the right form at the right time.


MIS

How does it work?!

Interacts with information users to assess information Develops needed information from internal and external

sources. Helps users analyze information for marketing decisions Distributes the marketing information and helps

managers use it for decision making


MIS

The MIS serves company managers as well as external partners

The MIS must balance needs against feasibility:– Not all information can be obtained.– Obtaining, processing, sorting, and delivering

information is costly


Developing Marketing Information

Internal data is gathered via customer databases, financial records, and operations reports.

Advantages include quick/easy access to information.

Disadvantages stem from the incompleteness or inappropriateness of data to a particular situation because it was collected for other purposes.

Internal data Marketing Intelligence Marketing Research

Sources of Info



Marketing intelligence is the systematic collection and analysis of publicly available information about competitors and trends in the marketing environment.

Competitive intelligence gathering activities have grown dramatically.

Many sources of competitive information exist.(s45)

Internal data Marketing Intelligence Marketing Research

Sources of Info


Company employeesInternetGarbagePublished information

Competitor’s employees

Trade showsBenchmarkingChannel members and

key customers

Sources of competitive Intelligence



Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization.

It can be internal or external. Internal data Marketing

intelligence Marketing research

Sources of Info


Steps in the Marketing Research Process

1. Defining the problem and research objectives.2. Developing the research plan for collecting

information.3. Implementing the research plan – collecting and

analyzing the data.4. Interpreting and reporting the findings.


Defining the problem and research objectives

Defining the problem is the hardest step in the research process.

The manager and the researcher must work together to put the research objectives.

These objectives guide the entire process. Marketing research may have different objectives:

– Exploratory research: used to gather preliminary information that will help define the problem.

– Descriptive research: used to describe marketing situations or markets attributes.

– Causal research: used to identify cause-effect relationships.


Step 2: Developing the Research Plan

– The research plan (proposal) is a written document that outlines the type of problem, objectives, data needed, and the usefulness of the results. Includes:• Secondary data: Information collected for another purpose

that already exists.• Primary data: Information collected for the specific

purpose at hand


Secondary Data

Secondary data sources:– Government information– Internal, commercial, and online databases– Publications

Advantages:– Obtained quickly– Less expensive than primary data

Disadvantages:– Information may not exist or may not be usable

Evaluate the following when judging data quality: Relevance (fit research needs) Accuracy

Current (updated) Impartiality (objectivity)

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Primary data

Primary research decisions:– Research approaches– Contact methods– Sampling plan– Research instruments


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Research approaches

Observation Research:– Help to obtain information that people are unwilling

or unable to provide.– Discovers behavior but not motivations.– Long term or infrequent behaviors is difficult to

observe.


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Research approaches

Survey research:– Effective for descriptive information.– Ask customers questions about their knowledge,

attitudes, preferences, and buying behavior.– Major advantage is its flexibility– Disadvantages:

• Privacy.• People can't remember the product


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Research approaches

Experimental research – Investigates cause and effect relationships.– Experiments involve selecting matched groups, give

treatment, controlling unrelated factors, and checking for differences in behavior.


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Contact Methods

Key Contact Methods Include:– Mail surveys– Telephone Surveys– Personal Interviewing:

• Individual or focus group– Online Research– advantages and disadvantages : table 4.3 (P.113)


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Sampling Plan

Sample: subgroup of population from whom information will be collected.

Sampling Plan Decisions:– Sampling unit (whose to be surveyed) (who has the

information )– Sample size– Sampling procedure:

• Probability samples• Non-probability samples


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Research Instrument

Questionnaires – Include open-ended (exploratory) and closed-ended

questions– Phrasing and question order are key

Mechanical instruments– Nielsen’s people meters– Checkout scanners– Eye cameras


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Step 3: Implementing the Research Plan

This step involves collecting, processing, and analyzing the information.

Data is collected by the company or an outside firm

The data is then processed and checked for accuracy and completeness and coded for analysis

Finally, the data is analyzed by a variety of statistical methods


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Step 4: Interpreting and Reporting the Findings

– The research interprets the findings, draws conclusions and reports to management

– Managers and researchers must work together to interpret results for useful decision making

– The report must be simple


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Analyzing Marketing Information

Statistical analysis and analytical models are often used to help managers to understand relationships. And help to answer: what if? Which is best?

Customer relationship management (CRM) software helps manage information by integrating customer data from all sources within a company (touch point)

CRM software offers many benefits and can help a firm gain a competitive advantage when used as part of a total CRM strategy

CRM analysts develop data warehousing and use data mining techniques .


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Distributing and Using Marketing Information

Intranets and extranets help distribute information to company employees and value-network members.


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consumer buying behavior

Chapter 5


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Consumer buyer behavior: the buying behavior of final consumer who buy goods and services for personal consumption.

Stimulus-Response Model of Consumer Behavior


Stimuli 4P’s Other characteristics• economic• technological• political• cultural

Buyer ResponseProduct choiceBrand choiceDealer choicePurchase timingPurchase amount

Buyer’s Black BoxBuyer characteristicsBuyer decision process

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Characteristics Affecting Consumer Behavior

– Culture• Basic values, perceptions,

wants and behaviors learned from family and institutions.

• Marketers must spot cultural shifts

– Subculture• Groups with shared value

systems– Social Class

• Society’s divisions who share values, interests and behaviors

• Social class is not determined by a single factor like just income. Fig.5.3 P.141

CulturalSocialPersonalPsychological

Key Factors

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Characteristics Affecting Consumer Behavior Groups

– Membership: a group where someone belongs and have a direct influence on his behavior

– Reference: indirect point of comparison in forming a person attitudes or behaviors. • Aspirational: is a reference group which a person

wishes to belong• Opinion Leaders: people within a reference group

who exert influence on others• Peoples often are influenced by reference group to

which they do not belong• The effect of the reference group is stronger when the

product is visible to others. Family

– Many influencers (who take the buying decisions) Roles and Status

– Roles: the activities people are expected to perform according to the persons around them.

– Status : the general esteem given to a person by society.


Key Factors

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– Age and life cycle– Occupation– Economic Situation– Lifestyle

•Activities, interests and opinions– Personality and self-concept

(self image)• Personality :

– the unique psychological characteristics that lead to relatively consistent and lasting response to ones own environment


Key Factors

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– Motivation– Perception– Learning– Beliefs and attitudes


Key Factors

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Psychological Factors : Motivation

• A motive is a need that is sufficiently pressing to direct the person to seek satisfaction.

• Motivation could be :• Biological : arise from state of tension such as hunger or discomfort.• Psychological: arising from the need for recognition or belonging

• Motivation research based on Freud: buying decisions are affected by subconscious motives that even the buyer may not fully understand.

• Maslow ordered needs based on how pressing they are to the consumer.(p151)

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Psychological Factors: Perception

• Perception is the process by which people select, organize, and interpret information, and then behave according to it.

• Perception Includes:– Selective attention

• Consumers screen out information– Selective distortion

• People interpret to support beliefs– Selective retention

• People retain points to support attitudes

Subliminal advertising.


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Psychological Factors: Learning

Learning describes changes in an individual’s behavior arising from experience.


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Psychological Factors: Beliefs and Attitudes

Belief – A descriptive thought about a brand or service– May be based on real knowledge, opinion, or faith.– Beliefs make up brand image.– They are difficult to change.

Attitude – describes a person’s evaluations, feelings and tendencies

toward an object or idea


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The Buyer Decision Process

Need recognition Information search Evaluation of

alternatives Purchase decision Postpurchase

behavior

Needs can be triggered by:– Internal stimuli

• Normal needs become strong enough to drive behavior

– External stimuli• Advertisements• Friends of friends

Process Stages

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behavior

• The amount of information you search is depend on:

• Amount of information you already have.• Cost of obtaining information.

• Sources of information:– Personal (evaluate

product)– Commercial (inform

customers)– Public– Experiential– Word-of-mouth

Process Stages

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behavior

• Evaluation procedure depends on the consumer and the buying situation.

• Most buyers evaluate multiple attributes, each of which is weighted differently.

• At the end of the evaluation stage, purchase intentions are formed.

Process Stages

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behavior

• Two factors intercede between purchase intentions and the actual decision:

– Attitudes of others.(someone important to you)

– Unexpected situational factors

Process Stages

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behavior

• Satisfaction is important:– Perceived performance -

expected– Delighted consumers

engage in positive word-of-mouth.

– Unhappy customers tell on average 11 other people.

– It costs more to attract a new customer than it does to retain an existing customer.

• Cognitive dissonance: الناتج القلقاخر منتج شراء خسارة و الشراء .عن

Process Stages

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Types of Buying Decision Behavior Complex

– Highly involved, significant brand differences – Example – computer

Dissonance-reducing– Highly involved, little brand differences – Example – carpeting

Habitual– Low involvement, little brand differences – Example – salt– Select the brand because its familiar.

Variety-seeking – Low involvement, significant perceived brand differences – Example – cookies– Brand switching occurs for the sake of variety rather than because of

dissatisfaction.


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The Buyer Decision Process for new products

New Products– Good, service or idea that is perceived by customers

as new. Stages in the adoption process:

– Awareness: customers still lack information.– Interest: customers start seeks information– Evaluation.– Trial.– Adoption.


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Adopter categorization

Innovators : risk takers. Early adopters : leaders. Early majority. Late majority. Laggards.


100

Influence of product characteristics on rate of adoption

Relative advantage : perceived value. Compatibility: with customers needs, values, and

experience. Complexity: of using the product. Divisibility: could it be tried before being

purchased. Communicability: is it easy to describe the

product for others.


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Business Markets and Business Buyer Behavior

Chapter 6


102

Business Buyer Behavior

The buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.

Also included are retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.


103

Characteristics of Business Markets

Sales in the business market far exceed sales in consumer markets.

Business markets differ from consumer markets in many ways.– Marketing structure and demand– Nature of the buying unit– Types of decisions and the decision process


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Business Markets

Compared to consumer markets:– Business markets

• have fewer but larger customers

– Business customers • are more geographically

concentrated– Demand is different

• Demand is derived (e.g. computer ships, PC)

• Demand is price inelastic• Demand fluctuates more

according to customer demands.

Characteristics Marketing Structure and

Demand Nature of the

Buying Unit Types of Decisions and

the Decision Process

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Business Markets

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

Compared to consumer purchases:

– Involve more buyers in the decision process

– More professional purchasing effort

Characteristics

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Business Markets

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

Compared to consumer purchases–More complex buying decisions–The buying process is more

formalized–Buyers and sellers work more

closely together and build long-term relationships

Characteristics

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Business Buyer Behavior

Straight rebuy– Reordering without modification. Routine.

Modified rebuy– Requires modification to prior purchase– Current suppliers will try to keep the current account.– New suppliers will try to attract those customers.

New task– First-time purchase– Marketer must provide help and information

System selling: – Buying a packaged solution to a problem from a single seller, thus a

voiding all the separate decisions involved in a complex buying situation.


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Members of the Buying Center Users: initiate the buying proposal, define

product specifications, Influencers: define product specifications,

provide information. Buyers: have formal authority to purchase. Deciders: have formal or informal power to select

the final supplier. Gatekeepers: control the flow of information.


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Major Influences on Business Buyers

Environmental Organizational Interpersonal Individual

Economic trends:– Cost of money.– Uncertainty.

Supply conditions.– Shortage of raw materials.

Technological, political and competitive changes

Culture and customs

Key Factors

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Environmental Organizational Interpersonal Individual

Objectives Policies Procedures Organizational

structure Systems

Key Factors

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Influence of members in the buying center– Authority– Status– Empathy– Persuasiveness

Key Factors Environmental Organizational Interpersonal Individual

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Personal characteristics of members in the buying center– Age and income– Education– Job position– Personality– Risk attitudes– Buying styles

Key Factors Environmental Organizational Interpersonal Individual

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Stages in the Business Buying Process

Stage 1: Problem Recognition:– Internally: producing new product, shortage in raw materials.– Externally: see an ad, trade show.

Stage 2: General Need Description– Characteristics and quantity of the needed items.

Stage 3: Product Specification – Value analysis helps to reduce costs ( بمواصفات االنتاح الممكن من هل

(ارخص Stage 4: Supplier Search

– Supplier list development

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Stage 5: Proposal Solicitation Stage 6: Supplier Selection

– According to supplier attributes and their importance. Stage 7: Order-Routine Specification

– Blanket contract: long term relationship in which the supplier promises to resupply the buyer as needed at agreed price for a set time period.

– Blanket contracts are often used for maintenance, repair and operating items.

– Save negotiation time and inventory. Stage 8: Performance Review

Stages in the Business Buying Process

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Segmentation, Targeting, and Positioning

Chapter 7


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Segmenting consumer markets Geographic segmentation. Demographic segmentation.

– Age, gender, income Psychographic segmentation

– Social class, lifestyle, personality characteristics. Behavioral segmentation.

– Occasions.– Benefit sought: according to the different benefits that

consumers seek from the product. cars, laundry detergent.– User status: nonusers, ex-users, potential users, first time users.– Usage rate.– Loyalty status.


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Segmenting Business Markets

Demographic segmentation– Industry, company size, location

Operating variables– Technology, usage status, customer capabilities

Purchasing approaches Situational factors

– Urgency, specific application, size of order Personal characteristics

– Buyer-seller similarity, attitudes toward risk, loyalty

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Requirements for Effective Segmentation

Measurable– Size, purchasing power, and profile of segment

Accessible– Can be reached and served

Substantial– Large and profitable enough to serve

Differentiable– Respond differently

Actionable– Effective programs can be developed

Target Marketing

Evaluating Market Segments according to– Segment size and growth– Segment structural attractiveness

• Level of competition• Substitute products, (complementary)• Power of buyers• Power of suppliers

– Company objectives and resources (gain competitive advantage)

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Selecting Target Market Segments

Undifferentiated (mass) marketing– Focuses on what is in common in the needs of consumers.

Differentiated (segmented) marketing– Offering product and market variations to segments.

Concentrated (niche) marketing– Appropriate when the company resources are limited.

Micromarketing (local or individual)

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Choosing a Target Marketing Strategy

Considerations include:– Company resources– The degree of product variability– Product’s life-cycle stage– Market variability– Competitors’ marketing strategies

Positioning

Positioning:– The place the product occupies in consumers’ minds relative

to competing products.– Typically defined by consumers on the basis of important

attributes.– Involves implanting the brand’s unique benefits and

differentiation in the customer’s mind.– Positioning maps that plot perceptions of brands are

commonly used.

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Identifying possible competitive advantages

Choosing the right competitive advantage

Choosing a positioning strategy

Differentiation can be based on – Products– Services– Channels– People – Image

Topics

Choosing a Positioning Strategy

Goal 4: Realize how companies position their products

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Choosing a Positioning Strategy• How many differences to promote?

– Unique selling proposition:• promote just a one benefit or attribute

for the product.– Several benefits :

• used when more than one company claiming to be best on the same attribute.

• Which differences are meaningful or worthwhile? Criteria include:– Important: value to target market.– Distinctive: المنافس عن بتميز تقديمه– Superior: الخدمة اشباع بكيفية– Communicable:visible to buyers.– Preemptive: can’t be copied.– Affordable: buyers can bay for the

difference.– Profitable

Topics Identifying possible

competitive advantages Choosing the right

competitive advantage Choosing a positioning

strategy

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Choosing a Positioning Strategy

• Value propositions represent the full positioning of the brand

• Possible value propositions:– More for More – More for the Same – More for Less– The Same for Less – Less for Much Less

Topics Identifying possible

competitive advantages Choosing the right

competitive advantage Choosing a positioning

strategy (P.221)

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Product, Services and Branding Strategies

Chapter 8


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Definitions

Product– Anything offered to a market for attention, acquisition, use, or

consumption that might satisfy a need or want. Service

– A form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

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What is a Product?

Products, Services, and Experiences– Market offerings may consist of :

• A pure good.• A pure service.• A combination of goods and services

– Experiences are used to differentiate offerings Levels of Product and Services

– Core benefit, actual product, and augmented product Product and Service Classifications

– Consumer products and industrial products

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What is a Product?

Convenience Shopping Specialty Unsought

Frequent purchases bought with minimal buying effort and little comparison shopping

Low price Marketers must use:

– Widespread distribution– Mass promotion by producer

Types of Consumer Products

8 - 130

What is a Product?


Less frequent purchases More shopping effort for

comparisons. Higher than convenience good

pricing. Selective distribution in fewer

outlets. Advertising and personal selling Provide deeper sales support to

help customers in their comparison.


8 - 131

What is a Product?


Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity

High price Exclusive distribution Carefully targeted promotions


8 - 132

What is a Product?


Little product awareness and knowledge (or if aware, sometimes negative interest)

Pricing varies Distribution varies Aggressive advertising

and personal selling by producers and resellers


8 - 133

Product and Service Classifications

Consumer products Industrial products

– Materials and parts– Capital items– Supplies and services

8 - 134

Product and Service Classifications

Organizations, persons, places, and ideas– Organizational marketing makes use of corporate

image advertising– Person marketing applies to political candidates,

entertainment sports figures, and professionals– Place marketing relates to tourism– Social marketing promotes ideas

135

Individual Product decision (1\2)

Developing a product involves defining the benefits that it will offer through its attributes.

Product attributes:– Quality:

• quality is creating customer value and satisfaction.• Quality dimensions:

– performance quality : its ability to perform its functions.– Consistency quality: freedom from defect.

– Features: • Differentiate the product from competitors.• Features cost and value.

– Style and design.


136

Individual Product decision (1\2)

Brand : is a combination of name, sign, symbol, or design.

Packaging. labeling:

– Identify the product: brand name.– Describe the product.– Promote the product.

Product support services:Which is services after selling & keep customer happy.


137

Product line (cancelled)

Product line – A group of products that are closely related because they may:

• function in a similar manner• be sold to the same customer groups, • be marketed through the same types of outlets • fall within given price ranges

Product line length– Line stretching: adding products that are higher or lower

priced than the existing line– Line filling: adding more items within the present price range:

• It's used to :– Using excess capacity, plugging holes to keep out competitors .

• Line filling is overdone if it results in cannibalization and customer confusion.


138

Product Mix (cancelled)

Also known as product assortment, Consists of all the product lines and items that a particular seller offers for sale.

Product mix width:– Number of different product lines carried by company

Product mix depth:– Number of different versions of each product in the line

Product mix consistency– How closely related the various product lines are in end

use, production requirements, distribution channels, or other some ways.


139

Branding Strategy Brand equity is the positive differential effect that

knowing the brand name has on customer response to the product or service

One measure of equity is the extent to which customers are willing to pay more for the brand

Brand valuation is the process of estimating the total financial value of a brand


8 - 140

Branding Strategy (

Brands with strong equity have many competitive advantages:– High consumer awareness – Strong brand loyalty– Helps when introducing new products– Less susceptible to price competition

141

Brand Positioning (cancelled)

Three levels of positioning:– Product attributes: (functional)

• Least effective because:– Customers are more interested in what the attribute will do for

them.– Competitors can copy it easily.

– Benefits– Beliefs and values

• Taps into emotions


142

Brand Name Selection

Good Brand Names:–Suggest something about the product or its

benefits–Are easy to say, recognize and remember–Are distinctive–Are extendable–Translate well into other languages–Can be registered and legally protected


8 - 143

Characteristics of Services

Intangibility– Consumers look for service quality signals

Inseparability– Services can’t be separated from providers

Variability– Employees and other factors result in variability

Perishability– Services can’t be inventoried for later sale

8 - 144

Service Firm Marketing Strategies (cancelled)

The Service-Profit Chain– The chain that links service firm profits with employee and

customer satisfaction. – Internal Marketing– Interactive Marketing: service quality depends on the quality

of the buyer- seller interaction during the service encounter Managing Service Differentiation

– Offer, Delivery, Image. Managing Service Quality

– Measured by customer retention rates. Managing Service Productivity

145

Product Life Cycle

Chapter 9


Definition

New Product Development– Development of original products, product

improvements, product modifications, and new brands through the firm’s own R & D efforts.

New products can be obtained via acquisition or development.

New products suffer from high failure rates. Several reasons account for failure.

9 - 146Goal 1: Learn how companies find & develop new-product ideas

Stages of the New Product Development Process

Stage 1: Idea Generation– Internal idea sources:

• R & D– External idea sources:

• Customers, competitors, distributors, suppliers– To create successful idea generation system:

• Create an innovative culture.• Assign a company idea manager.• Create cross functional activities. (marketing, finance,

operation, R&D)• Create methods to encourage people to give new ideas.

9 - 147Goal 2: Understand steps in the new-product development process


Stage 2: Idea Screening– it aims to spot good ideas and drop poor one as soon

as possible because Product development costs increase substantially in later stages so poor ideas must be dropped

– Ideas are evaluated against criteria; most are eliminated



Stage 3: Concept Development and Testing– Concept development creates a detailed version of

the idea stated in meaningful consumer terms.– Concept testing asks target consumers to evaluate

product concepts.



Stage 4: Marketing Strategy Development– Consist of three parts

• The target market, product positioning, and sales, share, and profit goals for the first few years.

• Product price, distribution, and marketing budget for the first year.

• Long-run sales and profit goals and the marketing mix strategy.



Stage 5: Business Analysis– A review of the Sales, cost, and profit projections for

a new product to find out whether these factors satisfy the companies objectives

Stage 6: Product Development– Prototype development and testing– Test if the idea can be a physical product.



Stage 7: Test Marketing– Test the positioning strategy, advertising, distribution,

pricing, branding, packaging, budget level.– When the cost of introducing new product is low,

there is no need for testing.– Test marketing approaches

• Next slide. Stage 8: Commercialization


153

Test Marketing Approaches

Standard test markets– Apply the marketing strategy in small country.– Very costly and need long time.– Competitor interference.

Controlled test markets– Keep controlled panel of stores and a panel of shoppers.

(computer and TV). Simulated test markets

– Laboratory experiment: stimulate a shop and put product with competitor products and give consumers money to purchase , after period of time cal customer and collect feedback.


9 - 154

Marketing Strategies: Introduction Stage

Product – Offer a basic product Price – Use cost-plus basis to set Distribution – Build selective distribution Advertising – Build awareness among early adopters and

dealers/resellers Sales Promotion – Heavy expenditures to create trial

9 - 155

Marketing Strategies: Growth Stage

Product – Offer product extensions, service, warranty Price – Penetration pricing Distribution – Build intensive distribution Advertising – Build awareness and interest in the mass

market Sales Promotion – Reduce expenditures to take

advantage of consumer demand

9 - 156

Marketing Strategies: Maturity Stage

Product – Diversify brand and models Price – Set to match or beat competition Distribution – Build more intensive distribution Advertising – Stress brand differences and benefits Sales Promotion – Increase to encourage brand switching

9 - 157

Marketing Strategies: Decline Stage

Product – Phase out weak items Price – Cut price Distribution – Use selective distribution: phase out

unprofitable outlets Advertising – Reduce to level needed to retain hard-core

loyalists Sales Promotion – Reduce to minimal level

158

Pricing Considerations and Approaches

Chapter 10


159

Price definition

The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

Fixed price: same price for all customers. Dynamic price: pricing strategy that give different prices

according to the situation.


Factors to Consider When Setting Price

Marketing objectives Marketing mix strategies Costs Organizational

considerations

Market positioning influences pricing strategy

Other pricing objectives:– Survival– Current profit

maximization– Market share leadership– Product quality

leadership– competition

Internal Factors



considerations

Pricing must be carefully coordinated with the other marketing mix elements

Target costing: – C= P- profit.– Used in low price positioning

strategies. Nonprice positioning : depend

on differentiating the product.

Internal Factors



considerations

Types of costs:– Variable, Fixed, Total

costs Experience (learning) curve

affects price

Internal Factors



considerations

Who sets the price?– Small companies:

CEO or top management

– Large companies: Divisional or product line managers

Price negotiation is common in industrial settings where pricing departments may be created

Internal Factors


Nature of market and demand

Competitors’ costs, prices, and offers

Other environmental elements

Types of markets– Pure competition

• Prices are fixed because:– Buyers can't buy all of what they want at higher prices.– Sellers can't sell all of they want at higher prices.

– Monopolistic competition:• A range of prices occurs because sellers can

differentiate their offers.– Oligopolistic competition:

• Competitors are sensitive to each other prices.– Pure monopoly

Consumer perceptions of price and value– Price must fit benefit that customer get from the product

Price-demand relationship– Demand curve– Price elasticity of demand

External Factors

165

Price elasticity

Buyers are less price sensitive when:– The product is unique or high in quality.– They can't easily compare the quality of substitute

product.– Product price is low relative to their income.– Cost is shared with other parties.






Consider competitors’ costs, prices, and possible reactions

Pricing strategy influences the nature of competition– Low-price low-margin

strategies inhibit competition

– High-price high-margin strategies attract competition

External Factors





Economic conditions– Affect production costs – Affect buyer perceptions of

price and value Price must encourage resellers,

and give them a profit. Government may restrict or limit

pricing options Social considerations may be

taken into account

External Factors

168

Cost based pricing

Markup price= unit cost\ (1-desired return on sales) It can be used only if the expected demand can be

matched with the actual one. Ignores demand and competition Popular pricing technique because:

– It simplifies the pricing process– Price competition may be minimized– It is perceived as more fair to both buyers and sellers


- Variable costs: $20 - Fixed costs: $ 500,000- Expected sales: 100,000 units - Desired Sales Markup: 20%

Variable Cost + Fixed Costs/Unit Sales = Unit Cost$20 + $500,000/100,000 = $25 per unit

Unit Cost/(1 – Desired Return on Sales) = Markup Price$25 / (1 - .20) = $31.25

Cost-Based Pricing Example

Cost-Based Pricing

Break-Even Analysis and Target Profit Pricing– Break-even charts show total cost and total revenues at

different levels of unit volume.– The intersection of the total revenue and total cost curves is

the break-even point.– Companies wishing to make a profit must exceed the break-

even unit volume.– Depends on price elasticity’+– Breakeven volume= FC\(price-VC)– P.322

Value-Based Pricing:

Uses buyers’ perceptions of value rather than seller’s costs to set price.

Measuring perceived value can be difficult. Used with differentiated products. Value pricing at the retail level

– Everyday low pricing (EDLP) vs. high-low pricing

Competition-Based Pricing:

Also called going-rate pricing May price at the same level, above, or below the

competition Bidding for jobs is another variation of

competition-based pricing– Sealed bid pricing

173

Marketing Channels and Supply Chain Management

Chapter 12


174

Value Delivery Network A strong distribution system can be a competitive

advantage. Number of channels levels. Channel members are connected via a variety of flows:

– Physical Flow.– Payment Flow.– Information Flow.– Promotion Flow.– Flow of Ownership.


175

How Channel Members Add Value

Intermediaries require fewer contacts to move the product to the final purchaser.

Intermediaries help match product assortment demand with supply by buying in large quantities and sell in small quantities.


176

Channel Members Functions

Information Promotion Contact: with prospect buyers. Matching: fitting the offer to the buyers needs. Negotiation Physical Distribution Financing: cover cost of channel work. Risk taking


177

Channel Conflict

Occurs when channel members disagree on roles, activities, or rewards.

Types of Conflict:– Horizontal conflict: occurs among firms at the same

channel level (retailer with retailer in other area)

– Vertical conflict: occurs among firms at different channel levels. (retailer with wholesaler)

Some conflict is healthy.


Channel Design Decisions

Step 1: Analyzing Consumer Needs:– Delivery time and location.– High service higher cost higher prices.

Step 2: Setting Channel Objectives:– Set channel objectives in terms of targeted level of

customer service.– Many factors influence channel objectives:

• Nature of the company and its products.• Marketing intermediaries.• Competitors.• Environment.(economic and legal)

Channel Design Decisions

Step 3: Identifying Major Alternatives– Types of intermediaries

• sales force, manufacturer’s agency, industrial distributors– Number of marketing intermediaries

• Intensive, selective, and exclusive distribution– Responsibilities of channel members

Step 4: Evaluating Major Alternatives– Economic criteria (sales, costs of different alternatives)– Control issues– Adaptive criteria (to the environment)

Channel Management Decisions

Selecting Channel Members– Identify characteristics that distinguish the best channel

members. Managing and Motivating Channel Members

– Partner relationship management (PRM) is key Evaluating Channel Members

– Performance should be checked against standards– Channel members should be rewarded or replaced as dictated

by performance.

181

Integrated Marketing Communications Strategy

Chapter 14


182

Marketing Communications Mix– The specific mix of advertising, personal selling,

sales promotion, and public relations a company uses to pursue its advertising and marketing objectives.


183

Integrated Marketing Communications

The Need for Integrated Marketing Communications– Conflicting messages from different sources or promotional

approaches can confuse company or brand images• The problem is particularly prevalent when

functional specialists handle individual forms of marketing communications independently


Elements in the Communication Process

The Communication Process

Sender Message Media Receiver

Encoding Decoding Response Feedback

• Noise

185

Developing Effective Communication Steps Step 1: Identifying the Target Audience

– Affects decisions related to what, how, when, and where message will be said, as well as who will say it

Step 2: Determining Communication Objectives– Six buyer readiness stages:


PurchaseConvictionPreferenceLikingKnowledgeAwareness

186

Developing Effective Communication Steps Step 3: Designing a Message

– AIDA framework guides message design– Message content contains appeals or themes designed to produce

desired results• Rational appeals: the product will produce the desired benefit.• Emotional appeals: Love, pride, joy, humor, fear, guilt, shame• Moral appeals: what is right and proper.

– Message Structure: message structure issues:• Whether or not to draw a conclusion:

– The better is to ask questions and let the buyers come to their own conclusions.• Present the strongest argument first or last• One-sided (just strength) vs. two-sided argument (strength and weakness)

– Message Format: Design, layout, copy, color, shape, movement, words, sounds, voice, body language, dress, etc.


187

Developing Effective Communication

Step 4: Choosing Media– Personal communication channels

• Includes face-to-face, phone, mail, and Internet chat communications• Word-of-mouth , Buzz marketing cultivates opinion leaders

– Nonpersonal communication channels• Carry message without feedback• Includes media, atmosphere (physical evidence), and events.

Step 5: Selecting the Message Source– Highly credible sources are more persuasive– A poor spokesperson can tarnish a brand

Step 6: Collecting Feedback– Recognition, recall, and behavioral measures are assessed– May suggest changes in product/promotion


Setting the Promotional Budget

Affordability Method– Budget is set at a level that a company can afford

Percentage-of-Sales Method– Past or forecasted sales may be used

Competitive-Parity Method– Budget matches competitors’ outlays

Objective-and-Task Method– Specific objectives are defined– Tasks required to achieve objectives are determined– Costs of performing tasks are estimated, then summed to

create the promotional budget.

Setting the Promotional Budget and Mix

Advertising Personal Selling Sales Promotion Public Relations Direct Marketing

Reaches large, geographically dispersed audiences, often with high frequency

Low cost per exposure, Consumers perceive advertised

goods as more legitimate Dramatizes company/brand,

through sounds, colors, movement. Builds brand image; may stimulate

short-term sales Impersonal; one-way

communication

Promotion Tools



Most effective tool for building buyers’ preferences, convictions, and actions

Personal interaction allows for feedback and adjustments

Relationship oriented Buyers are more attentive Sales force represents a long-term

commitment Most expensive of the promotional

tools

Promotion Tools



Makes use of a variety of formats: premiums, coupons, contests, etc.

Attracts attention, offers strong purchase incentives, dramatizes offers,

Stimulates quick response Short lived Not effective at building long-term

brand preferences

Promotion Tools



Highly credible Many forms: news stories, events

and sponsorships, etc. Reaches many prospects missed

via other forms of promotion Dramatizes company or benefits Often the most underused element

in the promotional mix

Promotion Tools



Many forms: Telephone marketing, direct mail, online marketing, etc.

Four distinctive characteristics:– Nonpublic– Immediate– Customized– Interactive

Well-suited to highly targeted marketing efforts

Promotion Tools

194

Promotion Mix Strategies

Push strategy: trade promotions and personal selling efforts push the product through the distribution channels.

Pull strategy: producers use advertising and consumer sales promotions to generate strong consumer demand for products.


195

Checklist: Integrating the Promotion Mix

Analyze trends (internal and external):– Develop a combination of promotional tools based on

their strength and weakness. Audit communications spending: Identify all points of contact Team up in communications planning including

customers and suppliers Make all communication elements compatible Create performance measures Appoint an IMC manager


Chapter Eighteen

Creating Competitive Advantage

Creating Competitive Advantage

Competitive advantages – require delivering more value and satisfaction to

target consumers than competitors do Competitive marketing strategies are

– how companies analyze their competitors and develop value-based strategies for profitable customer relationships

Competitor Analysis

Competitor analysis is the process of identifying, assessing, and selecting key competitors

Competitor Analysis

Competitors can include:– All firms making the same product or class of

products– All firms making products that supply the same

service– All firms competing for the same consumer dollars

Identifying Competitors

Competitor AnalysisAssessing Competitors

Competitor’s objectives

•Profitability•Market share growth•Cash flow•Technological leadership•Service leadership

Competitor’s strategies

•Strategic group offers the strongest competition

Competitor AnalysisAssessing Competitors

Competitor’s strengths and weaknesses

•What can our competitors do? •Companies learn about their S,W through secondary data, personal experience, word of mouth, and benchmarking

Estimating competitor’s

reactions

•What will our competitors do?

Competitor Analysis

use of Customer value analysis :– Identification of major attributes that customers value

and the importance of these values– Assessment of the company’s and competitors’

performance on the valued attributes

Selecting Competitors to Attack and Avoid

http://www.decisioninsight.com/

Competitor Analysis

Strong or weak competitors– Weaker competitor : avoid high resources– Strong competitors : to sharpen its abilities.

Close or distant competitors: Good or bad competitors

– Good competitors:• Competitors may share the cost of market development• Help to increase demand.

– Bad competitors:• Take large risks, play by their own rules, break the industry

rules.

Selecting Competitors to Attack and Avoid

Finding uncontested market spaces

Blue ocean strategy:– Rather than head to head competition, companies

search for unoccupied positions.

Designing a Competitive Intelligence System

Identifies competitive information and the best sources of this information

Continually collects information Checks information for validity and reliability Interprets information Organizes information Sends key information to relevant decision

makers Responds to inquiries about competitors

Approaches to Marketing Strategy

Approaches to marketing strategy pass through three stages:– Entrepreneurial marketing

• Involves visualizing an opportunity and constructing and implementing flexible strategies

– Formulated marketing • Involves developing formal marketing strategies and

following them closely– Intrepreneurial marketing

• Involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches

Basic Competitive Strategies Michael Porter’s four basic competitive positioning

strategies

Overall cost leadership

Differentiation

Focus Middle of the road Do the

worst

Basic competitive strategies

Overall cost leadership strategy :– is when a company achieves the lowest production and

distribution costs and allows it to lower its prices and gain market share

Differentiation strategy– is when a company concentrates on creating a highly

differentiated product line and marketing program so it comes across as an industry class leader

Focus strategy– is when a company focuses its effort on serving few market

segments well rather than going after the whole market Porter considered no clear strategy to be “middle of the

road”

Basic Competitive Strategies

Michael Treacy and Fred Wiersema suggest companies can gain leadership positions by delivering superior value to their customers in three strategies or “value disciplines:”– Operational excellence– Customer intimacy– Product leadership

Basic Competitive Strategies

Operational excellence– refers to a company providing value by leading its industry in

price and convenience by reducing costs and creating a lean and efficient value delivery system

Customer intimacy – refers to a company providing superior value by segmenting

markets and tailoring products or services to match the needs of the targeted customers

Product leadership– refers to a company providing superior value by offering a

continuous stream of leading-edge products or services. Product leaders are open to new ideas and solutions and bring them quickly to the market.

Competitive Positions Market leader

– firm with the largest market share and leads the market price changes, product innovations, distribution coverage, and promotion spending

Market challengers – firms fighting to increase market share

Market followers – firms that want to hold on to their market share

Market nichers – firms that serve small market segments not being

pursued by other firms

Market Leader Strategies Expand total demand: by developing:

– New users, New uses, More usage of its products Protect their current market: by:

– Fixing or preventing weaknesses that provide opportunities to competitors

– Maintain consistent prices that provide value– Keep strong customer relationships– Continuous innovation

Expand market share: by:– increasing market share in current markets– Producing high-quality products– Creating good service experiences– Building close relationships

Market Challenger Strategies

Challenge the leader with an aggressive bid for more market share

Play along with competitors and not rock the boat Has the second mover advantage. Strategies:

– Frontal attack: • Attack the competitor strength rather than weakness.

– Indirect attack to the competitor weakness.

Market Follower Strategies

Second mover advantage Challenges firms its own size or smaller It must have a higher quality or lower prices or

more convenience.

Market Nicher Strategies

Ideal market niche is big enough to be profitable with high growth potential and has little interest from competitors

Key to market niching is specialization in :– Market– Customer– Product– Marketing mix

Balancing Customer and Competitor Orientations

Companies need to continuously adapt strategies to changes in the competitive environment

Competitor-centered company Customer-centered company Market-centered company

Competitor-centered company

spends most of its time tracking competitor’s moves and market shares and trying to find ways to counter them

Advantage is that the company is a fighter Disadvantage is that the company is reactive

Customer-centered company

spends most of its time focusing on customer developments in designing strategies

Provides a better position than competitor-centered company to identify opportunities and build customer relationships

Market-centered company

spends most of its time focusing on both competitor and customer developments in designing strategies

Companies have moved through four orientations over the years

Companies have moved throught

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