1Marketing Principles
Managing Profitable Customer Relationships
Chapter One
2Marketing Principles
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
3Marketing Principles
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.
4Marketing Principles
Understanding the marketplace & consumer needs
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
5Marketing Principles
Understanding the marketplace & consumer needs
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 .
6Marketing Principles
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?
7Marketing Principles
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.
8Marketing Principles
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)
9Marketing Principles
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.
10Marketing Principles
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.
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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.
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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.
13Marketing Principles
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
14Marketing Principles
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
15Marketing Principles
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,.
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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.
17Marketing Principles
Share of Customer
Share of customer’s purchase in a product category.
Achieved through offering greater variety, cross-sell and up-sell strategies.
18Marketing Principles
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.
19Marketing Principles
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
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Barnacles limited fit between companies
offerings and customer needs. Relationship strategy :
If they cant be made profitable they should be fired.
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
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
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.
High profitability
low profitability
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
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.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
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.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Barnacles limited fit between companies
offerings and customer needs. Relationship strategy :
If they cant be made profitable they should be fired.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Barnacles limited fit between companies
offerings and customer needs. Relationship strategy :
If they cant be made profitable they should be fired.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
Short term customers long term customers
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
Barnacles limited fit between companies
offerings and customer needs. Relationship strategy :
If they cant be made profitable they should be fired.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
Barnacles limited fit between companies
offerings and customer needs. Relationship strategy :
If they cant be made profitable they should be fired.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
Barnacles limited fit between companies
offerings and customer needs. Relationship strategy :
If they cant be made profitable they should be fired.
True Friends Good fit between companies
offerings and customer needs. Relationship strategy :
Invest heavily in them until they become “true believers”.
Strangers little fit between companies
offerings and customer needs. Relationship strategy :
Don’t invest anything in them
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.
20
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
Companywide Strategic Planning
Steps in Strategic Planning
Companywide 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
Companywide Strategic Planning
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)
Companywide Strategic Planning
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
Companywide Strategic Planning
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:
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
Companywide Strategic Planning
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
Companywide Strategic Planning
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
2 - 34
– 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
Goal 4: Describe elements of customer-driven strategy
1. Market Segmentation
2. Target marketing
3. Market Positioning
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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
Goal 4: Describe elements of customer-driven strategy
1. Market Segmentation
2. Target marketing
3. Market Positioning
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
Managing the Marketing Effort
Goal 5: List the marketing management functions
Marketing Functions
• Analysis• Planning• Implementation• Control
2 - 38
– Plans are turned into action with day-to-day activities
– Good implementation is a challenge
Managing the Marketing Effort
Goal 5: List the marketing management functions
Marketing Functions
• Analysis• Planning• Implementation• Control
2 - 39
– Evaluation of the results of marketing strategies
– Checks for differences between goals and performance
Managing the Marketing Effort
Goal 5: List the marketing management functions
Marketing Functions
• Analysis• Planning• Implementation• Control
40Marketing Principles
Segmentation, Targeting, positioning, 4Ps
4Ps: Product Price Place promotion
4Cs Customer solution. Customer cost. Convenience. Communication.
41Marketing Principles
The Marketing Environment
Chapter 3
42Marketing Principles
– 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
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– Marketers must watch supply availability and pricing
– Effective partnership relationship management with suppliers is essential
Microenvironment
Actors
1. The company2. Suppliers3. Marketing
intermediaries4. Customers5. Competitors6. Publics
Goal 1: Describe environmental factors
44Marketing Principles
– 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
1. The company2. Suppliers3. Marketing
intermediaries4. Customers5. Competitors6. Publics
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– The five types of customer markets• Consumer• Business• Reseller• Government• International
Microenvironment
Actors
1. The company2. Suppliers3. Marketing
intermediaries4. Customers5. Competitors6. Publics
46Marketing Principles
– Conducting competitor analysis is critical for success of the firm
– A marketer must monitor its competitors’ offerings to create strategic advantage
Microenvironment
Actors
1. The company2. Suppliers3. Marketing
intermediaries4. Customers5. Competitors6. Publics
47Marketing Principles
– 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
1. The company2. Suppliers3. Marketing
intermediaries4. Customers5. Competitors6. Publics
48Marketing Principles
Macroenvironmental Forces
The Macroenvironment
Demographic Economic Natural
Technological Political Cultural
49Marketing Principles
Demographic Environment
Demographic Environment:– The study of human populations in terms of size,
density, location, age, gender, race, occupation and other statistics
50Marketing Principles
Economic Environment
Factors that affect consumer buying power and spending patterns.
51Marketing Principles
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.
52Marketing Principles
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.
53Marketing Principles
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
54Marketing Principles
Cause-Related Marketing
Marketers create link between brand and charitable organization
Demonstrates social responsibility Helps build positive brand image
55Marketing Principles
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.
56Marketing Principles
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…
57Marketing Principles
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
58Marketing Principles
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.”
59Marketing Principles
Managing MarketingInformation
Chapter 4
60Marketing Principles
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.
61Marketing Principles
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
62Marketing Principles
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
63Marketing Principles
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
64Marketing Principles
Developing Marketing Information
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
65Marketing Principles
Company employeesInternetGarbagePublished information
Competitor’s employees
Trade showsBenchmarkingChannel members and
key customers
Sources of competitive Intelligence
66Marketing Principles
Developing Marketing Information
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
67Marketing Principles
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.
68Marketing Principles
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.
69Marketing Principles
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
70Marketing Principles
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)
71
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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74
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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75
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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79
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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81
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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83
Consumer buyer behavior: the buying behavior of final consumer who buy goods and services for personal consumption.
Stimulus-Response Model of Consumer Behavior
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Stimuli 4P’s Other characteristics• economic• technological• political• cultural
Buyer ResponseProduct choiceBrand choiceDealer choicePurchase timingPurchase amount
Buyer’s Black BoxBuyer characteristicsBuyer decision process
5 - 84
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
5 - 85
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.
CulturalSocialPersonalPsychological
Key Factors
5 - 86
Characteristics Affecting Consumer Behavior
– 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
CulturalSocialPersonalPsychological
Key Factors
5 - 87
Characteristics Affecting Consumer Behavior
– Motivation– Perception– Learning– Beliefs and attitudes
CulturalSocialPersonalPsychological
Key Factors
5 - 88
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)
89
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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91
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
Marketing Principles
5 - 92
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
5 - 93
The Buyer Decision Process
Need recognition Information search Evaluation of
alternatives Purchase decision Postpurchase
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
5 - 94
The Buyer Decision Process
Need recognition Information search Evaluation of
alternatives Purchase decision Postpurchase
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
5 - 95
The Buyer Decision Process
Need recognition Information search Evaluation of
alternatives Purchase decision Postpurchase
behavior
• Two factors intercede between purchase intentions and the actual decision:
– Attitudes of others.(someone important to you)
– Unexpected situational factors
Process Stages
5 - 96
The Buyer Decision Process
Need recognition Information search Evaluation of
alternatives Purchase decision Postpurchase
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
97
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.
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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
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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.
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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.
Marketing Principles
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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
6 - 110
Major Influences on Business Buyers
Environmental Organizational Interpersonal Individual
Objectives Policies Procedures Organizational
structure Systems
Key Factors
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Major Influences on Business Buyers
Influence of members in the buying center– Authority– Status– Empathy– Persuasiveness
Key Factors Environmental Organizational Interpersonal Individual
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Major Influences on Business Buyers
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
115
Segmentation, Targeting, and Positioning
Chapter 7
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116
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)
126
Product, Services and Branding Strategies
Chapter 8
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8 - 127
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
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What is a Product?
Convenience Shopping Specialty Unsought
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.
Types of Consumer Products
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What is a Product?
Convenience Shopping Specialty Unsought
Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity
High price Exclusive distribution Carefully targeted promotions
Types of Consumer Products
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What is a Product?
Convenience Shopping Specialty Unsought
Little product awareness and knowledge (or if aware, sometimes negative interest)
Pricing varies Distribution varies Aggressive advertising
and personal selling by producers and resellers
Types of Consumer Products
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Product and Service Classifications
Consumer products Industrial products
– Materials and parts– Capital items– Supplies and services
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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
Marketing Principles
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
Stages of 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
9 - 148Goal 2: Understand steps in the new-product development process
Stages of the New Product Development Process
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.
9 - 149Goal 2: Understand steps in the new-product development process
Stages of the New Product Development Process
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.
9 - 150Goal 2: Understand steps in the new-product development process
Stages of the New Product Development Process
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.
9 - 151Goal 2: Understand steps in the new-product development process
Stages of the New Product Development Process
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
9 - 152Goal 2: Understand steps in the new-product development process
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.
Marketing Principles
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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
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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
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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
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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
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Pricing Considerations and Approaches
Chapter 10
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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.
Marketing Principles
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
Factors to Consider When Setting Price
Marketing objectives Marketing mix strategies Costs Organizational
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
Factors to Consider When Setting Price
Marketing objectives Marketing mix strategies Costs Organizational
considerations
Types of costs:– Variable, Fixed, Total
costs Experience (learning) curve
affects price
Internal Factors
Factors to Consider When Setting Price
Marketing objectives Marketing mix strategies Costs Organizational
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
Factors to Consider When Setting Price
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.
Marketing Principles
Factors to Consider When Setting Price
Nature of market and demand
Competitors’ costs, prices, and offers
Other environmental elements
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
Factors to Consider When Setting Price
Nature of market and demand
Competitors’ costs, prices, and offers
Other environmental elements
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
Marketing Principles
- 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
Marketing Principles
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.
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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.
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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
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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.
Marketing Principles
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.
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Integrated Marketing Communications Strategy
Chapter 14
Marketing Principles
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.
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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
Marketing Principles
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:
Marketing Principles
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.
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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
Marketing Principles
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
Setting the Promotional Budget and Mix
Advertising Personal Selling Sales Promotion Public Relations Direct Marketing
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
Setting the Promotional Budget and Mix
Advertising Personal Selling Sales Promotion Public Relations Direct Marketing
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
Setting the Promotional Budget and Mix
Advertising Personal Selling Sales Promotion Public Relations Direct Marketing
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
Setting the Promotional Budget and Mix
Advertising Personal Selling Sales Promotion Public Relations Direct Marketing
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.
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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
Marketing Principles
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
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