Marketing Management by Philip Kotler (11th Edition)

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Chapter 1 Defining Marketing for the 21st Century by:

1- 2 Chapter 1 Defining Marketing for the 21 st Century by

Kotler on Marketing:

1- 3 The future is not ahead of us. It has already happened. Unfortunately, it is unequally distributed among companies, industries and nations. Kotler on Marketing

Chapter Objectives:

1- 4 Chapter Objectives In this chapter we will address the following questions: What is the new economy like? What are the tasks of marketing? What are the major concepts and tools of marketing? What orientations do companies exhibit in the marketplace? How are companies and marketers responding to the new challenges?

The New Economy:

1- 5 The New Economy Substantial increase in buying power A greater variety of goods and services A greater amount of information about practically anything A greater ease in interacting and placing and receiving orders An ability to compare notes on products and services

The New Economy:

1- 6 The New Economy Websites can provide companies with powerful new information and sales channels. Companies can collect fuller and richer information about markets, customers, prospects and competitors. Companies can facilitate and speed up communications among employees. Companies can have 2-way communication with customers and prospects

The New Economy:

1- 7 The New Economy Companies can send ads, coupons, samples, information to targeted customers. Companies can customize offerings and services to individual customers. The Internet can be used as a communication channel for purchasing, training, and recruiting. Companies can improve logistics and operations for cost savings while improving accuracy and service quality.

PowerPoint Presentation:

1- 8 The three major challenges faced by businesses today are globalization, advances in technology, and deregulation. Which of these affords the greatest opportunity for established businesses? Which affords the greatest opportunities for new businesses? Why? Discussion Question

Marketing Task:

1- 9 Marketing Task Ten rules of radical marketing The CEO must own the marketing function. Make sure the marketing department starts small and flat and stays small and flat. Get face to face with the people who matter most – the customers. Use market research cautiously. Hire only passionate missionaries.

Marketing Task:

1- 10 Marketing Task Love and respect your customers. Create a community of consumers. Rethink the marketing mix. Celebrate common sense. Be true to the brand. Three stages of marketing practice Entrepreneurial Marketing Formulated Marketing Intrepreneurial Marketing

The Scope of Marketing:

1- 11 The Scope of Marketing Marketing: typically seen as the task of creating, promoting, and delivering goods and services to consumers and businesses.

PowerPoint Presentation:

1- 12 Table 1.1 Demand States and Marketing Tasks 1. Negative demand A major part of the market dislikes the product and may even pay a price to avoid it—vaccinations, dental work, vasectomies, and gallbladder operations, for instance. Employers have a negative demand for ex-convicts and alcoholics as employees. The marketing task is to analyze why the market dislikes the product and whether a marketing program consisting of product redesign, lower prices, and more positive promotion can change beliefs and attitudes. 2. No demand Target consumers may be unaware of or uninterested in the product. Farmers may not be interested in a new farming method, and college students may not be interested in foreign-language courses. The marketing task is to find ways to connect the benefits of the product with people’s natural needs and interests. See text for complete table

PowerPoint Presentation:

1- 13 Can you name a category of products for which your negative feelings have softened? What precipitated this change? Discussion Question

The Scope of Marketing:

1- 14 The Scope of Marketing Places Properties Organizations Information Ideas Goods Services Experiences Events Persons

The Decisions Marketers Make:

1- 15 The Decisions Marketers Make Consumer Markets Business Markets Global Markets Nonprofit and Governmental Markets

Marketing Concepts and Tools:

1- 16 Marketing Concepts and Tools Defining Marketing Marketing Marketing management Core Marketing Concepts Target Markets and Segmentation

Figure 1-1: A Simple Marketing System:

1- 17 Figure 1-1: A Simple Marketing System

Marketing Concepts and Tools:

1- 18 Marketing Concepts and Tools Marketplace, Marketspace, and Metamarket

Marketing Concepts and Tools:

1- 19 Marketing Concepts and Tools Marketers and Prospects Needs, Wants, and Demands Product, Offering, and Brand Value and Satisfaction Customer value triad Value Value = Benefits / Costs = (Functional benefits + Emotional benefits) / (Monetary costs + Time costs + Energy costs + Psychic costs)

Marketing Concepts and Tools:

1- 20 Marketing Concepts and Tools Exchange and Transactions Exchange Transaction Barter Transfer Behavioral response

Marketing Concepts and Tools:

1- 21 Marketing Concepts and Tools Relationships and Networks Relationship marketing Marketing network Marketing Channels Supply Chain Competition

Marketing Concepts and Tools:

1- 22 Marketing Concepts and Tools Brand competition Industry competition Form competition Generic competition Marketing environment Task environment Broad environment Marketing Program Marketing program Marketing mix

Company Orientations Toward the Marketplace:

1- 23 Company Orientations Toward the Marketplace Production Concept Product concept Selling Concept Marketing Concept

Company Orientations Toward the Marketplace:

1- 24 Company Orientations Toward the Marketplace Target Market Customer Needs Stated needs Real needs Unstated needs Delight needs Secret needs

Company Orientations Toward the Marketplace:

1- 25 Company Orientations Toward the Marketplace Integrated Marketing External marketing Internal marketing

Company Orientations Toward the Marketplace:

1- 26 Company Orientations Toward the Marketplace Profitability Sales decline Slow growth Changing buying patterns Increasing competition Increasing marketing expenditures

Company Orientations Toward the Marketplace:

1- 27 Company Orientations Toward the Marketplace Societal Marketing Concept Cause-related marketing

PowerPoint Presentation:

1- 28 Can you identify the trends that have made the marketing concept, the customer concept, and the societal marketing concept more attractive models for contemporary marketing managers? Discussion Question

How Business and Marketing are Changing:

1- 29 How Business and Marketing are Changing Customers Brand manufacturers Store-based retailers

How Business and Marketing are Changing:

1- 30 How Business and Marketing are Changing Company responses and adjustments Reengineering Outsourcing E-commerce Benchmarking Alliances Partner-suppliers Market-centered Global and local Decentralized

How Business and Marketing are Changing:

1- 31 How Business and Marketing are Changing Marketer Responses and Adjustments Customer relationship marketing Customer lifetime value Customer share Target marketing Customization Customer database Integrated marketing communications Channels as partners Every employee a marketer Model-based decision making

Chapter 2 Adapting Marketing To The New Economy by:

1- 32 Chapter 2 Adapting Marketing To The New Economy by

Kotler on Marketing:

1- 33 The Internet will create new winners and bury the laggards. Kotler on Marketing

Chapter Objectives:

1- 34 Chapter Objectives In this chapter, we will address the following questions: What are the major forces driving the New Economy? How are business and marketing practices changing as a result of the New Economy? How are marketers using the Internet, customer databases, and customer relationship management in the New Economy?

Adapting Marketing to the New Economy:

1- 35 Adapting Marketing to the New Economy Major Drivers of the New Economy Digitization and Connectivity Disintermediation and Reintermediation Customization and Customerization

PowerPoint Presentation:

1- 36 Procter & Gamble’s Reflect.com site allows customers to design their own beauty products

PowerPoint Presentation:

1- 37 Adapting Marketing to the New Economy Industry Convergence How Business Practices are Changing Organize by product units to organize by customer segments Shift focus from profitable transactions to customer lifetime value Shift focus from financial scorecard to also focusing on the marketing scorecard Shift focus from shareholders to stakeholders

Table 2-1: Old Economy vs. New Economy :

1- 38 Table 2-1: Old Economy vs. New Economy Old Economy New Economy Organize by product units Focus on profitable transactions Look primarily at financial scorecard Focus on shareholders Marketing does the marketing Build brands through advertising Focus on customer acquisition No customer satisfaction measurement Overpromise, underdeliver Organize by customer segments Focus on customer lifetime value Look also at marketing scorecard Focus on stakeholders Everyone does the marketing Build brands through behavior Focus on customer retention and growth Measure customer satisfaction and retention rate Underpromise , overdeliver

Adapting Marketing to the New Economy:

1- 39 Adapting Marketing to the New Economy Everyone does the marketing Build brands through performance, not just advertising Customer retention rather than customer acquisition From none to in-depth customer satisfaction measurement From over-promise, under-deliver to under-promise, over-deliver The New Hybrid

Adapting Marketing to the New Economy:

1- 40 How Marketing Practices are Changing: E-Business E-business E-commerce E-purchasing E-marketing Internet Domains: B2C (Business to Customer) Adapting Marketing to the New Economy

PowerPoint Presentation:

1- 41 Customers can shop online at Calyx and Corolla or ask for a catalog and shop by phone

Adapting Marketing to the New Economy:

1- 42 Adapting Marketing to the New Economy Internet Domains: B2B (Business to Business)

Figure 2-1: The Supplier-Customer Relationship: Traditional and New Economy Structures:

1- 43 Figure 2-1: The Supplier-Customer Relationship: Traditional and New Economy Structures

PowerPoint Presentation:

1- 44 www.transora.com: global online marketplace for the consumer packaged goods industry

Adapting Marketing to the New Economy:

1- 45 Adapting Marketing to the New Economy Internet Domains: C2C (Consumer to Consumer) Internet Domains: C2B (Customer to Business) Pure Click vs. Brick and Click Companies Pure-click companies

PowerPoint Presentation:

1- 46 CarPoint, leading metamediary for car buying, is a pure click company: It exists only on the Web.

Adapting Marketing to the New Economy:

1- 47 Adapting Marketing to the New Economy Brick and Click companies

PowerPoint Presentation:

1- 48 Which is more important for developing an e-presence: the agility of a pure click company, or the well defined and readily identifiable resources of a traditional brick and mortar company? Discussion Question

Adapting Marketing to the New Economy:

1- 49 Adapting Marketing to the New Economy How Marketing Practices are Changing: Setting Up Web Sites Designing an Attractive Website Seven elements of effective sites Context Content Community Customization Communication Connection Commerce

PowerPoint Presentation:

1- 50 Would you be willing to give up one or more of the seven elements of an effective web site in order to speed the deployment of a new company e-commerce site? What would the expected trade-offs be between an effective site and an early web presence? Discussion Question

PowerPoint Presentation:

1- 51 Attracting and Keeping Visitors How can we get more prospects to know and visit our site? How can we use marketing to spread word-of-mouth? How can we convert visitors into repeaters? How do we make our site more experiential and real? How can we build a strong relationship with our customers? How can we build a customer community? How can we capture and exploit customer data for up-selling and cross-selling? How much should we spend on building and marketing our site? Advertising on the Internet What are the various ways that we can advertise on the Internet? How do we choose the right sites for placing our ads or sponsorship? Table 2-2: Setting Up a Dot-com Presence See text for complete table

Adapting Marketing to the New Economy:

1- 52 Adapting Marketing to the New Economy Context factors Content factors Getting feedback

Adapting Marketing to the New Economy:

1- 53 Adapting Marketing to the New Economy Placing Ads and Promotions Online Banner ads Sponsorships Microsite Interstitials Browser ads Alliances and affiliate programs Push

PowerPoint Presentation:

1- 54 Infogate.com “pushes” targeted content and ads to those who are interested in a product or product category

Adapting Marketing to the New Economy:

1- 55 Adapting Marketing to the New Economy Building a Revenue and Profit Model Advertising income Sponsorship income Membership and subscriptions Profile income Product and service sales Transaction commission and fees Market research/information Referral income

Adapting Marketing to the New Economy:

1- 56 Adapting Marketing to the New Economy How Marketing Practices are Changing: Customer Relationship Marketing Reduce rate of customer defection Increase longevity of customer relationship Enhance growth potential through cross-selling and up-selling Make low profit customers more profitable or terminate them

Adapting Marketing to the New Economy:

1- 57 Adapting Marketing to the New Economy Focus disproportionate effort on high value customers

Table 2-3: Mass Marketing vs. One-to-One Marketing:

1- 58 Table 2-3: Mass Marketing vs. One-to-One Marketing Mass Marketing One-to-One Marketing Average customer Customer anonymity Standard product Mass production Mass distribution Mass advertising Mass promotion One-way message Economies of scale Share of market All customers Customer attraction Individual customer Customer profile Customized market offering Customized production Individualized distribution Individualized message Individualized incentives Two-way messages Economies of scope Share of customer Profitable customers Customer retention

Adapting Marketing to the New Economy:

1- 59 Adapting Marketing to the New Economy Four steps for One-to-One Marketing Don’t go after everyone, identify prospects. Define customers by their needs and their value to the company. Individual interaction with customers builds stronger relationships. Customize messages, services, and products for each customer.

Adapting Marketing to the New Economy:

1- 60 Adapting Marketing to the New Economy Customer Databases and Database Marketing Customer mailing list Business database

Adapting Marketing to the New Economy:

1- 61 Data Warehouses and Data Mining Using the database To identify prospects To determine target market To deepen customer loyalty To reactivate customer purchases To avoid serious customer mistakes The Downside of Database Marketing Adapting Marketing to the New Economy

Chapter 3 Building Customer Satisfaction, Value, and Retention by:

1- 62 Chapter 3 Building Customer Satisfaction, Value, and Retention by

Kotler on Marketing:

1- 63 It is no longer enough to satisfy customers. You must delight them. Kotler on Marketing

Chapter Objectives:

1- 64 Chapter Objectives In this chapter, we will address the following questions: What are customer value and satisfaction, and how can companies deliver them? What makes a high-performance business? How can companies both attract and retain customers? How can companies improve both customer and company profitability? How can companies deliver total quality?

Defining Customer Value and Satisfaction:

1- 65 Defining Customer Value and Satisfaction Customer Perceived Value (CPV) Total customer value Total customer cost

Figure 3-1: Determinants of Customer Delivered Value:

1- 66 Figure 3-1: Determinants of Customer Delivered Value

Defining Customer Value and Satisfaction:

1- 67 Total Customer Satisfaction Satisfaction Customer Expectations Delivering High Customer Value Value proposition Value-delivery system Measuring Satisfaction Defining Customer Value and Satisfaction

Table 3-1: Tools for Tracking and Measuring Customer Satisfaction:

1- 68 Table 3-1: Tools for Tracking and Measuring Customer Satisfaction Complaint and suggestion systems: Customer satisfaction surveys: A customer-centered organization makes it easy for customers to register suggestions and complaints. Some customer-centered companies-P&G, General Electric, Whirlpool—establish hot lines with toll-free numbers. Companies are also using Web sites and e-mail for quick, two-way communication. Studies show that although customers are dissatisfied with one out of every four purchases, less than 5 percent will complain. Most customers will buy less or switch suppliers. Responsive companies measure customer satisfaction directly by conducting periodic surveys. While collecting customer satisfaction data, it is also useful to ask additional questions to measure repurchase intention and to measure the likelihood or willingness to recommend the company and brand to others. See text for complete table

PowerPoint Presentation:

1- 69 Would you feel more brand loyalty for a company that tried to immediately resolve a complaint via E-mail, or a company that had a customer service representative call within two business days to resolve the problem over the phone? Discussion Question

PowerPoint Presentation:

1- 70 Premier Dell.com is a special business-oriented part of the Dell Web site that allows customers to interact with Dell and customize all phases of doing business with Dell.

The Nature of High Performance Business:

1- 71 The Nature of High Performance Business High-performance business

Figure 3-2: The High Performance Business:

1- 72 Figure 3-2: The High Performance Business

The Nature of High Performance Business:

1- 73 The Nature of High Performance Business Stakeholders Processes Resources Core competency Distinctive capabilities Organization and Organizational Culture Organization Corporate culture Scenario analysis

PowerPoint Presentation:

1- 74 Can you name a company that has changed the public’s perception of their corporate culture? Has this effectively rehabilitated that company’s image? Discussion Question

Delivering Customer Value and Satisfaction:

1- 75 Delivering Customer Value and Satisfaction Value Chain Value chain

Figure 3-3: The Generic Value Chain:

1- 76 Figure 3-3: The Generic Value Chain

Delivering Customer Value and Satisfaction:

1- 77 Delivering Customer Value and Satisfaction Benchmarks Core Business Processes The market sensing process The new offering realization process The customer acquisition process The customer relationship management process The fulfillment management process

Delivering Customer Value and Satisfaction:

1- 78 The Value Delivery Network (Supply Chain) Delivering Customer Value and Satisfaction

Figure 3-4: Levi Strauss’s Value-Delivery Network:

1- 79 Figure 3-4: Levi Strauss’s Value-Delivery Network

Attracting and Retaining Customers:

1- 80 Attracting and Retaining Customers Partner relationship management (PRM) Customer relationship management (CRM)

PowerPoint Presentation:

1- 81 Saturn has gained a customer loyalty rate of more than 60% by fundamentally changing the buyer-seller relationship. Can you think of another company that has made a change of similar magnitude? Have they had similar results? Discussion Question

Attracting and Retaining Customers:

1- 82 Attracting and Retaining Customers Attracting Customers Computing the Cost of Lost Customers Customer churn Lifetime value

PowerPoint Presentation:

1- 83 On the Lands’ End Web site, customers can click a button to talk with a customer service representative

Attracting and Retaining Customers:

1- 84 Attracting and Retaining Customers The Need for Customer Retention Measuring Customer Lifetime Value (CLV) Customer Relationship Management (CRM): The Key Customer equity Three drivers of customer equity Value equity Brand equity Relationship equity

Figure 3-5: The Customer-Development Process:

1- 85 Figure 3-5: The Customer-Development Process

Attracting and Retaining Customers:

1- 86 Attracting and Retaining Customers Five levels of investment in customer relationship building Basic marketing Reactive marketing Accountable marketing Proactive marketing Partnership marketing

Figure 3-6: Levels of Relationship Marketing:

1- 87 Figure 3-6: Levels of Relationship Marketing

Attracting and Retaining Customers:

1- 88 Attracting and Retaining Customers Forming Strong Customer Bonds: The Basics Cross-departmental participation Integrate the Voice of the Customer into all business decisions Create superior offering for the target market

Attracting and Retaining Customers:

1- 89 Organize and make accessible a database of customer information Make it easy for customers to reach the appropriate personnel Reward outstanding employees Adding Financial Benefits Frequency programs (FPs) Attracting and Retaining Customers

PowerPoint Presentation:

1- 90 The H.O.G. Web site presents the benefits of joining.

Attracting and Retaining Customers:

1- 91 Attracting and Retaining Customers Adding Social Benefits

Table 3-2: Social Actions Affecting Buyer-Seller Relationships:

1- 92 Table 3-2: Social Actions Affecting Buyer-Seller Relationships Good Things Bad Things Initiate positive phone calls Make recommendations Candor in language Use phone Show appreciation Make service suggestions Use “we” problem-solving language Get to problems Use jargon or shorthand Personality problems aired Talk of “our future together” Routinize responses Accept responsibility Plan the future Make only callbacks Make justifications Accommodative language Use correspondence Wait for misunderstandings Wait for service requests Use “owe-us” legal language Only respond to problems Use long-winded communications Personality problems hidden Talk about making good on the past Fire drill and emergency responsiveness Shift blame Rehash the past

Attracting and Retaining Customers:

1- 93 Attracting and Retaining Customers Adding Structural Ties Create long-term contracts Charge lower price to high volume customers Turn product into long-term service

Customer Profitability, Company Profitability, and Total Quality Management:

1- 94 Customer Profitability, Company Profitability, and Total Quality Management Measuring Profitability Profitable customer

Figure 3-7: Customer-Product Profitability Analysis:

1- 95 Figure 3-7: Customer-Product Profitability Analysis

Figure 3-8: Allocating marketing investment according to customer value:

1- 96 Figure 3-8: Allocating marketing investment according to customer value

Customer Profitability, Company Profitability, and Total Quality Management:

1- 97 Customer Profitability, Company Profitability, and Total Quality Management Increasing Company Profitability Competitive advantage Implementing TQM Total Quality Management Quality

Chapter 4 Winning Markets Through Market-Oriented Strategic Planning by:

1- 98 Chapter 4 Winning Markets Through Market-Oriented Strategic Planning by

Kotler on Marketing:

1- 99 Kotler on Marketing It is more important to do what is strategically right than what is immediately profitable.

Chapter Objectives:

1- 100 Chapter Objectives In this chapter, we examine the following questions: How is strategic planning carried out at the corporate and division levels? How is planning carried out at the business unit level? What are the major steps in the marketing process? How is planning carried out at the product level? What does a marketing plan include?

Strategic Planning: Three Key Areas and Four Organization Levels:

1- 101 Strategic Planning: Three Key Areas and Four Organization Levels Strategic marketing plan Tactical marketing plan Marketing plan

Corporate and Division Strategic Planning:

1- 102 Corporate and Division Strategic Planning All corporate headquarters undertake four planning activities Defining the Corporate Mission Establishing Strategic Business Units (SBUs) Assigning resources to each SBU Planning new businesses, downsizing, or terminating older businesses

Corporate and Division Strategic Planning:

1- 103 Corporate and Division Strategic Planning Defining the Corporate Mission Mission statements define which competitive scopes the company will operate in Industry scope Products and applications scope Competence scope Market-segment scope Vertical scope Geographical scope

PowerPoint Presentation:

1- 104 Can you name a company that has recently changed its product scope or market segment scope in a very public way? Was this an expansion or contraction of scope? Discussion Question

Corporate and Division Strategic Planning:

1- 105 Corporate and Division Strategic Planning Establishing Strategic Business Units (SBUs)

Table 4.1: Product-Oriented versus Market-Oriented Definitions of a Business:

1- 106 Table 4.1: Product-Oriented versus Market-Oriented Definitions of a Business Company Product Definition Market Definition Missouri-Pacific Railroad We run a railroad We are a people-and-goods mover Xerox We make copying equipment We help improve office productivity Standard Oil We sell gasoline We supply energy Columbia Pictures We make movies We market entertainment Encyclopaedia We sell encyclopedias We distribute Information Carrier We make air conditioners and furnaces We provide climate control in the home

Corporate and Division Strategic Planning:

1- 107 Corporate and Division Strategic Planning Three characteristics of SBUs Single business or collection of related businesses that can be planned for separately Has its own set of competitors Has a manager who is responsible for strategic planning and profit

PowerPoint Presentation:

1- 108 The Growth-Share Matrix Relative market share Four Cells Question Marks Stars Cash Cows Dogs SBU Strategies SBU Lifecycle

PowerPoint Presentation:

1- 109 Can you give an example of a “Star” that skipped “Cash Cow”, and went straight to “Dog” status? Discussion Question

Corporate and Division Strategic Planning:

1- 110 Corporate and Division Strategic Planning The General Electric Model

Table 4-2: Factors underlying Market Attractiveness and Competitive Position in GE Multifactor Portfolio Model: Hydraulic-Pumps Market:

1- 111 Table 4-2: Factors underlying Market Attractiveness and Competitive Position in GE Multifactor Portfolio Model: Hydraulic-Pumps Market Market Attractiveness Overall market size Annual market growth rate Historical profit margin Competitive intensity Technological requirements Inflationary vulnerability Energy requirements Environmental impact Social-political-legal Weight 0.20 0.20 0.15 0.15 0.15 0.05 0.05 0.05 Must be acceptable 1.0 Rating = (1-5) 4 5 4 2 4 3 2 3 Value 0.80 1. 0.60 0.30 0.60 0.15 0.10 0.15 3.70 Business Strength Market share Share growth Product quality Brand reputation Distribution network 0.10 0.15 0.10 0.10 0.05 4 2 4 5 4 0.40 0.30 0.40 0.50 0.20 See text for complete table

Corporate and Division Strategic Planning:

1- 112 Corporate and Division Strategic Planning Critique of Portfolio Models Planning New Businesses, Downsizing Older Businesses

Corporate and Division Strategic Planning:

1- 113 Corporate and Division Strategic Planning Intensive Growth

PowerPoint Presentation:

1- 114 Starbucks’ home page: Customers can request a catalog of Starbucks products, subscribe to a newsletter, and shop online

Corporate and Division Strategic Planning:

1- 115 Corporate and Division Strategic Planning Integrative Growth Diversification Growth Downsizing Older Businesses

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1- 116 Give an example of a market segment where integrative growth would be preferable to growth through diversification. Explain why one approach is better than the other. Discussion Question

Business Unit Strategic Planning :

1- 117 Business Unit Strategic Planning Business Mission SWOT Analysis External Environment Analysis (Opportunity and Threat Analysis) Marketing Opportunity Buying opportunity more convenient or efficient Meet the need for more information and advice Customize an offering that was previously only available in standard form

PowerPoint Presentation:

1- 118 Give some examples of companies that have grown to dominate their market segment by using technology to make buying opportunities more convenient and efficient. Discussion Question

Business Unit Strategic Planning :

1- 119 Business Unit Strategic Planning Marketing Opportunity Analysis (MOA) Can the benefits be articulated to a target market? Can the target market be reached with cost-effective media and trade channels? Does the company have the critical capabilities to deliver the customer benefits? Can the company deliver these benefits better than any actual or potential competitors? Will the rate of return meet the required threshold of investment?

Figure 4-7: Opportunity and Threat Matrices:

1- 120 Figure 4-7: Opportunity and Threat Matrices

Business Unit Strategic Planning :

1- 121 Business Unit Strategic Planning Internal Environmental Analysis (Strength/Weakness Analysis) Goal Formation Strategic Formulation Strategy

Business Unit Strategic Planning :

1- 122 Business Unit Strategic Planning Porter’s Generic Strategies Overall cost leadership Differentiation Focus

PowerPoint Presentation:

1- 123 Travelocity’s Web site helps the consumer plan the whole vacation – flights, lodging, and car rental.com

Business Unit Strategic Planning :

1- 124 Operational Effectiveness and Strategy Strategic group Strategic alliances Business Unit Strategic Planning

Business Unit Strategic Planning :

1- 125 Business Unit Strategic Planning Marketing Alliances Product or service alliances Promotional alliances Logistical alliances Pricing collaborations Partner Relationship Management, PRM Program Formulation and Implementation

Business Unit Strategic Planning :

1- 126 Business Unit Strategic Planning Feedback and Control

The Marketing Process:

1- 127 The Marketing Process Steps in the Planning Process The marketing process Analyzing Market Opportunities Developing Marketing Strategies Planning Marketing Programs Managing the Marketing Effort Annual-plan control Profitability control Strategic control

Figure 4-10: Factors Influencing Company Marketing Strategy:

1- 128 Figure 4-10: Factors Influencing Company Marketing Strategy

Product Planning: The Nature and Contents of a Marketing Plan:

1- 129 Product Planning: The Nature and Contents of a Marketing Plan Contents of the Marketing Plan Executive Summary Current Marketing Situation Opportunity and issue analysis Objectives Marketing strategy Action programs Financial projections Implementation controls

Product Planning: The Nature and Contents of a Marketing Plan:

1- 130 Sample Marketing Plan: Sonic Personal Digital Assistant Current Marketing Situation Opportunity and Issue Analysis Objectives Action Programs Financial Projections Product Planning: The Nature and Contents of a Marketing Plan

Product Planning: The Nature and Contents of a Marketing Plan:

1- 131 Implementation Controls Marketing Strategy Positioning Product Management Pricing Distribution Marketing Communications Marketing Research Product Planning: The Nature and Contents of a Marketing Plan

Chapter 5 Gathering Information and Measuring Market Demand by:

1- 132 Chapter 5 Gathering Information and Measuring Market Demand by

Kotler on Marketing:

1- 133 Kotler on Marketing Marketing is becoming a battle based more on information than on sales power.

Chapter Objectives:

1- 134 Chapter Objectives In this chapter, we focus on the following questions: What are the components of a modern marketing information system? What constitutes good marketing research? How can marketing decision support systems help marketing managers make better decisions? How can demand be more accurately measured and forecasted?

The Components of a Modern Marketing Information System:

1- 135 Marketing Information System (MIS) 10 useful questions for determining the information needs of marketing managers. What decisions do you regularly make? What information do you need to make these decisions? What information do you regularly get? What special studies do you periodically request? The Components of a Modern Marketing Information System

The Components of a Modern Marketing Information System:

1- 136 The Components of a Modern Marketing Information System What information would you want that you are not getting now? What information would you want daily? Weekly? Monthly? Yearly? What magazines and trade reports would you like to see on a regular basis? What topics would you like to be kept informed of? What data analysis programs would you want? What are the four most helpful improvements that could be made in the present marketing information system?

Internal Record Systems:

1- 137 Internal Record Systems The Order-to-Payment Cycle Sales Information Systems Databases, Data Warehouses And Data-Mining

PowerPoint Presentation:

1- 138 Can you name a company that uses targeted mailings to promote new products, or regional offerings? Discussion Question

The Marketing Intelligence System:

1- 139 The Marketing Intelligence System A Marketing Intelligence System is a set of procedures and sources used by managers to obtain everyday information about developments in the marketing environment.

PowerPoint Presentation:

1- 140 What are some of the potential hazards a company might face by relying too heavily on distributors, retailers, or other intermediaries for market intelligence? Discussion Question

PowerPoint Presentation:

1- 141 The Marriott Vacation Club International Web site gives interested customers the opportunity to sell themselves on the Marriott offerings

PowerPoint Presentation:

1- 142 CEOExpress.com is a portal to information–a user clicks on a listing and is then connected to that site

Table 5-1: Secondary-Data Sources:

1- 143 Table 5-1: Secondary-Data Sources Secondary-Data Sources Internal Sources Company profit-loss statements, balance sheets, sales figures, sales-call reports, invoices, inventory records, and prior research reports. Government Publications Statistical Abstract of the United States County and City Data Book Industrial Outlook Marketing Information Guide Periodicals and Books Business Periodicals Index Standard and Poor’s Industry See text for complete table

Marketing Research System:

1- 144 Marketing Research System Marketing Research Suppliers of Marketing Research Engaging students or professors to design and carry out projects Using the Internet Checking out rivals Syndicated-service research firms Custom marketing research firms Specialty-line marketing research firms

Figure 5-1: The Marketing Research Process:

1- 145 Figure 5-1: The Marketing Research Process

Marketing Research System:

1- 146 Marketing Research System The Marketing Research Process Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives Step 2: Develop the Research Plan Data Sources Research Approaches Observational research Focus group research

Marketing Research System:

1- 147 Marketing Research System Survey research Behavioral data Experimental research Research Instruments Questionnaires Psychological tools Mechanical devices Quantitative measures

Table 5-2: Types of Questions:

1- 148 Table 5-2: Types of Questions See text for complete table 1_____ 2 _____ 3_____ 4_____ 5_____ Small airlines generally give better service than large ones. Strongly Disagree Neither agree Agree Strongly disagree nor disagree agree A statement with which the respondent shows the amount of agreement/ disagreement. Likert scale An organized tour group Spouse and children Business associates/friends/relatives Spouse Children only No one With whom are you traveling on this flight? A question with three or more answers. Multiple Choice In arranging this trip, did you personally phone American? Yes No A question with two possible answers. Dichotomous Example Description Name A. Closed-end Questions

Marketing Research System:

1- 149 Marketing Research System Sampling Plan Sampling unit Sample size Sampling procedure

PowerPoint Presentation:

1- 150 www.wansink.com is a consumer psychology Web site set up by Dr. Brian Wansink of the University of Illinois

Table 5-3: Probability and Nonprobability Samples:

1- 151 Probability Sample Simple random sample Every member of the population has an equal chance of selection Stratified random sample The population is divided into mutually exclusive groups (such as age groups), and random samples are drawn from each group Cluster (area) sample The population is divided into mutually exclusive groups (such as city blocks), and the researcher draws a sample of the groups to interview Table 5-3: Probability and Nonprobability Samples Continued on next slide . . .

Table 5-3: Probability and Nonprobability Samples (Continued):

1- 152 Nonprobability Sample Convenience sample The researcher selects the most accessible population members Judgment sample The researcher selects population members who are good prospects for accurate information Quota sample The researcher finds and interviews a prescribed number of people in each of several categories Table 5-3: Probability and Nonprobability Samples (Continued)

Marketing Research System:

1- 153 Marketing Research System Contact Methods Mail questionnaire Personal interviewing Arranged interviews Intercept interviews Online methods Click-stream Cookies Automated telephone surveys

Marketing Research System:

1- 154 Marketing Research System Step 3: Collect the Information Step 4: Analyze the Information Step 5: Present the Findings Step 6: Make the Decision

Table 5-4: The Seven Characteristics of Good Marketing Research :

1- 155 Table 5-4: The Seven Characteristics of Good Marketing Research 1. Scientific method Effective marketing research uses the principles of the scientific method: careful observation, formulation of hypotheses, prediction, and testing. 2. Research creativity At its best, marketing research develops innovative ways to solve a problem: a clothing company catering to teenagers gave several young men video cameras, then used the videos for focus groups held in restaurants and other places teens frequent. 3. Multiple methods Marketing researchers shy away from overreliance on any one method. They also recognize the value of using two or three methods to increase confidence in the results. See text for complete table

Marketing Research System:

1- 156 Marketing Research System Overcoming Barriers to the Use of Marketing Research A narrow conception of the research Uneven caliber of researchers Poor framing of the problem Late and occasionally erroneous findings Personality and presentational differences

Marketing Decision Support System:

1- 157 Marketing Decision Support System Marketing Decision Support System (MDSS) Marketing and sales software programs BRANDAID CALLPLAN DETAILER GEOLINE MEDIAC PROMOTER ADCAD CONVERSTORY

Table 5-5: Quantitative Tools Used in Marketing Decision Support Systems:

1- 158 Table 5-5: Quantitative Tools Used in Marketing Decision Support Systems Statistical Tools 1. Multiple regression: A statistical technique for estimating a “best fitting” equation showing how the value of a dependent variable varies with changing values in a number of independent variables. Example : A company can estimate how unit sales are influenced by changes in the level of company advertising expenditures, sales force size, and price. 2. Discriminant analysis: A statistical technique for classifying an object or persons into two or more categories. Example : A large retail chain store can determine the variables that discriminate between successful and unsuccessful store locations. 3. Factor analysis: A statistical technique used to determine the few underlying dimensions of a larger set of intercorrelated variables. Example : A broadcast network can reduce a large set of TV programs down to a small set of basic program types. See text for complete table

Forecasting and Demand Measurement:

1- 159 Forecasting and Demand Measurement The Measures of Market Demand Figure 5-3: Ninety Types of Demand Measurement (6X5X3)

Forecasting and Demand Measurement:

1- 160 Which Market to Measure? Market Potential market Available market Target market (severed market) Penetrated market A Vocabulary for Demand Measurement Market Demand Market share Market penetration index Share penetration index Forecasting and Demand Measurement

Figure 5-4: Market Demand Functions:

1- 161 Figure 5-4: Market Demand Functions Forecasting and Demand Measurement

PowerPoint Presentation:

1- 162 Can you name a market segment with a low penetration index? A high penetration index? Can you think of a market where the high penetration index might be a misleading indicator? Discussion Question

Forecasting and Demand Measurement:

1- 163 Forecasting and Demand Measurement Market Forecast Market Potential Product penetration percentage Company Demand Company Sales Forecast Sales quota Sales budget Company Sales Potential

Forecasting and Demand Measurement:

1- 164 Estimating Current demand Total Market Potential Area Market Potential Market-Buildup Method Forecasting and Demand Measurement

Table 5-6: Market-Buildup Method Using SIC Codes:

1- 165 Table 5-6: Market-Buildup Method Using SIC Codes SIC (a) Annual Sales in Millions of $ (b) Number of Establishments (c) Potential Number of Lathe Sales Per $1 Million Customer Sales Market Potential (a x b x c) 2511 1 6 10 60 5 2 10 100 2521 1 3 5 15 5 1 5 25 30 200

Forecasting and Demand Measurement:

1- 166 Forecasting and Demand Measurement Multiple-Factor Index Method Brand development index (BDI)

Table 5-7: Calculating the Brand Development Index (BDI):

1- 167 Table 5-7: Calculating the Brand Development Index (BDI) (a) Percent of U.S. Brand (b) Percent of U.S. Category BDI Territory Sales Sales (a  b) x 100 Seattle 3.09 2.71 114 Portland 6.74 10.41 65 Boston 3.49 3.85 91 Toledo .97 .81 120 Chicago 1.13 .81 140 Baltimore 3.12 3.00 104

Forecasting and Demand Measurement:

1- 168 Forecasting and Demand Measurement Industry Sales and Market Shares Estimating Future Demand Survey of Buyers’ Intentions Forecasting Purchase probability scale

Forecasting and Demand Measurement:

1- 169 Forecasting and Demand Measurement Composite of Sales Force Opinions Expert Opinion Group discussion method Pooling of individual estimates Past-Sales Analysis Time-series analysis Exponential smoothing Statistical demand analysis Econometric analysis Market-Test Method

Chapter 6 Scanning the Marketing Environment by:

1- 170 Chapter 6 Scanning the Marketing Environment by

Kotler on Marketing:

1- 171 Kotler on Marketing Today you have to run faster to stay in place.

Chapter Objectives:

1- 172 Chapter Objectives In this chapter, we focus on two questions: What are the key methods for tracking and identifying opportunities in the macroenvironment? What are the key demographic, economic, natural, technological, political, and cultural developments?

Analyzing Needs and Trends in the Macroenvironment:

1- 173 Analyzing Needs and Trends in the Macroenvironment Trend Fad Megatrends

PowerPoint Presentation:

1- 174 Given the definitions for fads, trends, and megatrends presented in the text, how would you define your online activities? Can you identify an online trend that is likely to grow into a megatrend? Discussion Question

Identifying and Responding to the Major Macroenvironment Forces:

1- 175 The substantial speedup of international transportation, communication, and financial transactions, leading to the rapid growth of world trade and investment, especially tripolar trade (North America, Western Europe, Far East) The movement of manufacturing capacity and skills to lower cost countries. The rising economic power of several Asian countries in world markets. The rise of trade blocks such as the European Union and NAFTA signatories. Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 176 The severe debt problems of a number of countries, along with the increasing fragility of the international financial system. The increasing use of barter and countertrade to support international transactions. The move toward market economies in formerly socialist countries along with rapid privatization of publicly owned companies. The rapid dissemination of global lifestyles. The gradual opening of major new markets, namely China, India, eastern Europe, the Arab countries, and Latin America. Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 177 The increasing tendency of multinationals to transcend their locational and national characteristics and become transnational firms. The increasing number of cross-border corporate strategic alliances–for example, MCI and British Telecom, and Texas Instruments and Hitachi. The increasing ethnic and religious conflicts in certain countries and regions. The growth of global brands in autos, food, clothing, electronics. Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 178 Demographic Environment Worldwide Population Growth Population Age Mix Ethnic and Other Markets Identifying and Responding to the Major Macroenvironment Forces

PowerPoint Presentation:

1- 179 Can you identify one or more nations whose populations hold the promise of huge potential markets for consumer goods? How have pressures from potential marketers to these untapped consumer groups driven the political discussion on a national and international level? Discussion Question

Identifying and Responding to the Major Macroenvironment Forces:

1- 180 Educational Groups Household Patterns Geographical Shifts in Population From a Mass Market to Micromarkets Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 181 Economic Environment Income Distribution Savings, Debt, and Credit Availability Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 182 Natural Environment Shortage of Raw Materials Increased Energy Cost Anti-Pollution Pressures Changing Role of Governments Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 183 Technological Environment Accelerating Pace of Change Unlimited Opportunities for Innovation Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 184 Varying R&D Budgets Increased Regulation of Technological Change Political-Legal Environment Legislation Regulating Business Growth of Special-Interest Groups Consumerist movement Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 185 Social-Cultural Environment Views of themselves Views of others Views of organizations Views of society Views of nature Views of universe Identifying and Responding to the Major Macroenvironment Forces

Identifying and Responding to the Major Macroenvironment Forces:

1- 186 High Persistence of Core Cultural Values Existence of subcultures Subcultures Shifts of Secondary Cultural Values Through Time Identifying and Responding to the Major Macroenvironment Forces

Chapter 7 Analyzing Consumer Markets and Buyer Behavior by:

1- 187 Chapter 7 Analyzing Consumer Markets and Buyer Behavior by

Kotler on Marketing:

1- 188 Kotler on Marketing The most important thing is to forecast where customers are moving, and be in front of them.

Chapter Objectives:

1- 189 In this chapter, we focus on two questions: How do the buyers’ characteristics – cultural, social, personal, and psychological – influence buying behavior? How does the buyer make purchasing decisions? Chapter Objectives

Influencing Buyer Behavior:

1- 190 Consumer Behavior Cultural Factors Culture Subcultures Diversity marketing Social class Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 191 Social Factors Reference Groups Reference groups Membership groups Primary groups Secondary groups Aspirational groups Dissociative groups Opinion leader Influencing Buyer Behavior

Table 7.1: Characteristics of Major U.S. Social Classes:

1- 192 Table 7.1: Characteristics of Major U.S. Social Classes See text for complete table Upper Uppers (less than 1%) The social elite who live on inherited wealth. They give large sums to charity, run the debutante balls, maintain more than one home, and send their children to the finest schools. They are a market for jewelry, antiques, homes, and vacations. They often buy and dress conservatively. Although small as a group, they serve as a reference group to the extent that their consumption decisions are imitated by the other social classes. Lower Uppers (about 2%) Persons, usually from the middle class, who have earned high income or wealth through exceptional ability in the professions or business. They tend to be active in social and civic affairs and to buy the symbols of status for themselves and their children. They include the nouveau riche, whose pattern of conspicuous consumption is designed to impress those below them.

Influencing Buyer Behavior:

1- 193 Secondary groups Aspirational groups Dissociative groups Opinion leader Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 194 Family Family of orientation Family of procreation Roles and Statuses Role Status Influencing Buyer Behavior

PowerPoint Presentation:

1- 195 With the “graying” of the American populace, marketers have begun to shift images and cultural references in advertising from things that are relevant to the twenty-somethings to images of active seniors, and soundtracks from the sixties and seventies. Can you identify any particular ad campaigns that fit this pattern? Discussion Question

Influencing Buyer Behavior:

1- 196 Personal Factors Age and Stage in the Life Cycle Family life cycle Occupation and Economic Circumstances Influencing Buyer Behavior

PowerPoint Presentation:

1- 197 In recent years, many organizations have “provided” televisions with limited programming access for use in K-12 classrooms. Do these entities have a moral obligation to avoid overt marketing to their captive audiences, or is this a valid tool for introducing offerings to future consumers? What should the responsibilities of the educators be in these situations? Discussion Question

Table 7.2: Stages in the Family Life Cycle:

1- 198 Table 7.2: Stages in the Family Life Cycle See text for complete table 1. Bachelor stage: Young, single, not living at home Few financial burdens. Fashion opinion leaders. Recreation oriented. Buy: basic home equipment, furniture, cars, equipment for the mating game; vacations. 2. Newly married couples: Young, no children Highest purchase rate and highest average purchase of durables: cars, appliances, furniture, vacations. 3. Full nest I: Youngest child under six Home purchasing at peak. Liquid assets low. Interested in new products, advertised products. Buy: washers, dryers, TV, baby food, chest rubs and cough medicines, vitamins, dolls, wagons, sleds, skates. 4. Full nest II: Youngest child six or over Financial position better. Less influenced by advertising. Buy larger-size packages, multiple-unit deals. Buy: many foods, cleaning materials, bicycles, music lessons, pianos.

Figure 7.2: The VALS segmentation system: An 8-part typology :

1- 199 Figure 7.2: The VALS segmentation system: An 8-part typology Groups with High Resources Actualizers Fulfilleds Achievers Experiencers Groups with Lower Resources Believers Strivers Makers Strugglers

PowerPoint Presentation:

1- 200 SRI Consulting Business Intelligence’s Web site

Influencing Buyer Behavior:

1- 201 Personality and Self-Concept Personality Brand personality Sincerity Excitement Competence Sophistication Ruggedness Self-concept Person’s actual self-concept Ideal self-concept Others’ self-concept Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 202 Psychological Factors Motivation Motive Freud’s Theory Laddering Projective techniques Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 203 Ernest Dichter’s research found: Consumers resist prunes because prunes are wrinkled looking and remind people of old age. Men smoke cigars as an adult version of thumb sucking. Women prefer vegetable shortening to animal fats because the latter arouse a sense of guilt over killing animals. Women don’t trust cake mixes unless they require adding an egg, because this helps them feel they are giving “birth.” Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 204 Maslow’s Theory Influencing Buyer Behavior Figure 7.3: Maslow’s Hierarchy of Needs

Influencing Buyer Behavior:

1- 205 Herzberg’s Theory Dissatisfiers Satisfiers Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 206 Perception Selective attention People are more likely to notice stimuli than relate to a current need People are more likely to notice stimuli than they anticipate People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli Selective distortion Selective retention Influencing Buyer Behavior

Influencing Buyer Behavior:

1- 207 Learning Drive Cues Discrimination Beliefs and Attitudes Belief Spreading activation Attitude Influencing Buyer Behavior

PowerPoint Presentation:

1- 208 The purchase of a product from a Company A turns out to be a positive experience. You are looking for a loosely related product, which is also offered by Company A. Do you assume that you will again have a positive experience with Company A’s offering, or do you look for the “best of breed,” regardless of which company offers it? Discussion Question

The Buying Decision Process:

1- 209 Buying Roles Initiator Influencer Decider Buyer User Buying behavior The Buying Decision Process

Table 7.3: Four Types of Buying Behavior :

1- 210 Table 7.3: Four Types of Buying Behavior High Involvement Low Involvement Significant Differences between Brands Complex buying behavior Variety-seeking buying behavior Few Differences between Brands Dissonance-reducing buying behavior Habitual buying behavior

The Buying Decision Process:

1- 211 Complex Buying Behavior Dissonance-Reducing Buyer Behavior Habitual Buying Behavior Variety-Seeking Buying Behavior The Buying Decision Process

Stages in the Buying Decision Process:

1- 212 How marketers learn about the stages: Introspective method Retrospective method Prospective method Prescriptive method Understanding by mapping the customer’s Consumption system Customer activity cycle Customer scenario Metamarket Metamediaries Stages in the Buying Decision Process

PowerPoint Presentation:

1- 213 The Edmunds.com home page shows the variety of services this Web company offers those shopping for a car.

Stages of the Buying Decision Process:

1- 214 Problem recognition Information search Personal sources Commercial sources Public sources Experiential sources Stages of the Buying Decision Process Figure 7.4: Five-Stage Model of the Consumer Buying Process

Figure 7.5: Successive Sets Involved in Customer Decision Making :

1- 215 Figure 7.5: Successive Sets Involved in Customer Decision Making

The Buying Decision Process:

1- 216 Evaluation of Alternatives Potential Attributes of interest Cameras Hotels Mouthwash Tires Brand beliefs Brand image The Buying Decision Process

Table 7.4: A Consumer’s Brand Beliefs about Computers :

1- 217 Table 7.4: A Consumer’s Brand Beliefs about Computers Computer Attribute Memory Capacity Graphics Capability Size and Weight Price A 10 8 6 4 B 8 9 8 3 C 6 8 10 5 D 4 3 7 8

The Buying Decision Process:

1- 218 Strategies designed to stimulate interest in a computer Redesign the computer Alter beliefs about the brand Alter beliefs about competitors’ brands Alter the importance weights Call attention to neglected attributes Shift the buyer’s ideas The Buying Decision Process

The Buying Decision Process:

1- 219 Purchase Decision Figure 7.6: Steps Between Evaluation of Alternatives and a purchase decision The Buying Decision Process

The Buying Decision Process:

1- 220 Informediaries Consumer Reports Zagats Unanticipated situational factors Perceived risk Brand decision Vendor decision Quantity decision Timing decision Payment-method decision The Buying Decision Process

The Buying Decision Process:

1- 221 Postpurchase Behavior Postpurchase Satisfaction Disappointed Satisfied Delighted Postpurchase Actions Postpurchase Use and Disposal The Buying Decision Process

Figure 7.7: How Customers Dispose of Products :

1- 222 Figure 7.7: How Customers Dispose of Products

The Buying Decision Process:

1- 223 Other Models of the Buying Decision Process Health Model Stages of Change Model Precontemplation Contemplation Preparation Action Maintenance Customer Activity Cycle Model Pre, during and post phases The Buying Decision Process

Figure 7.8: Activity cycle for IBM customers in the global electronic networking capability market space :

1- 224 Figure 7.8: Activity cycle for IBM customers in the global electronic networking capability market space

Figure 7.9: Value adds for IBM customers in the global electronic networking capability market space :

1- 225 Figure 7.9: Value adds for IBM customers in the global electronic networking capability market space

Chapter 8 Analyzing Business Markets and Business Buying Behavior by:

1- 226 Chapter 8 Analyzing Business Markets and Business Buying Behavior by

Kotler on Marketing:

1- 227 Kotler on Marketing Many businesses are wisely turning their suppliers and distributors into valued partners.

Chapter Objectives:

1- 228 Chapter Objectives In this chapter, we focus on six questions: What is the business market, and how does it differ from the consumer market? What buying situations do organizational buyers face? Who participates in the business buying process? What are the major influences on organizational buyers? How do business buyers make their decisions? How do institutions and government agencies do their buying?

What is Organizational Buying?:

1- 229 What is Organizational Buying? Organizational buying The business market versus the consumer market Business market Fewer buyers Larger buyers Close supplier-customer relationship Geographically concentrated buyers

What is Organizational Buying?:

1- 230 What is Organizational Buying? Derived demand Inelastic demand Fluctuating demand Professional purchasing

PowerPoint Presentation:

1- 231 Blue Shield of California’s mylifepath

What is Organizational Buying?:

1- 232 What is Organizational Buying? Several buying influences Multiple sales calls Directed purchasing Reciprocity Leasing

PowerPoint Presentation:

1- 233 If you were tasked with marketing a product or service to an organization, would you attempt to initially contact the purchasing department , or potential users of your company’s offerings? Why? Would the product you were selling make a difference? Why? Discussion Question

What is Organizational Buying?:

1- 234 What is Organizational Buying? Buying Situations Straight rebuy Modified rebuy New Task Systems Buying and Selling Systems buying Turnkey solution Systems selling

PowerPoint Presentation:

1- 235 What are some of the benefits to an organization that can be derived from a single source solution , or a systems buying arrangement with a prime contractor? What are some of the potential pitfalls? What can the company do to protect itself from these hazards? Discussion Question

Participants in the Business Buying Process:

1- 236 Participants in the Business Buying Process The Buying Center Initiators Users Influencers Deciders Approvers Buyers Gatekeepers Key buying influencers Multilevel in-depth selling

Figure 8-1: Major Influences on Industrial Buying Behavior:

1- 237 Figure 8-1: Major Influences on Industrial Buying Behavior

Major Influences on Buying Decisions:

1- 238 Major Influences on Buying Decisions Environmental Factors Organizational Factors Purchasing-Department Upgrading Cross-Functional Roles Centralized Purchasing Decentralized Purchasing of Small-Ticket Items Internet Purchasing

PowerPoint Presentation:

1- 239 The e-hub Plastics.com home page offers buyers and sellers of plastics a marketplace plus news and information

PowerPoint Presentation:

1- 240 Covisint’s Web site offers both services and information

Major Influences on Buying Decisions:

1- 241 Major Influences on Buying Decisions Other Organizational Factors Long-Term Contracts Vendor-managed inventory Continuous replenishment programs Purchasing-Performance Evaluation and Buyers’ Professional Development Improved Supply Chain Management Lean Production Just-in-time

Major Influences on Buying Decisions:

1- 242 Major Influences on Buying Decisions Interpersonal and Individual Factors Cultural Factors France Germany Japan Korea Latin America

The Purchasing/ Procurement Process:

1- 243 The Purchasing/ Procurement Process Incentive to purchase Three Company Purchasing Orientations Buying Orientation Commoditization Multisourcing Procurement Orientation Materials requirement planning (MRP) Supply Chain Management Orientation

The Purchasing/ Procurement Process:

1- 244 The Purchasing/ Procurement Process Types of Purchasing Processes Routine products Leverage products Strategic products Bottleneck products

The Purchasing/ Procurement Process:

1- 245 The Purchasing/ Procurement Process Stages in the Buying Process Problem Recognition General Need Description and Product Specification Product value analysis Supplier Search Vertical hubs Functional hubs Direct external links to major suppliers Buying alliances Company buying sites Request for proposals (RFPs)

Table 8.1: Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses):

1- 246 Table 8.1: Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses) Buyclasses New Modified Straight Task Rebuy Rebuy 1. Problem recognition Yes Maybe No 2. General need description Yes Maybe No 3. Product specification Yes Yes Yes Buyphases 4. Supplier search Yes Maybe No 5. Proposal solicitation Yes Maybe No 6. Supplier selection Yes Maybe No 7. Order-routine specification Yes Maybe No 8. Performance review Yes Yes Yes

The Purchasing/ Procurement Process:

1- 247 The Purchasing/ Procurement Process General Need Description and Product Specification Product value analysis Supplier Search Vertical hubs Functional hubs Direct extranet links to major suppliers Buying alliances Company buying sites Request for proposals (RFPs)

The Purchasing/ Procurement Process:

1- 248 The Purchasing/ Procurement Process Proposal Solicitation Supplier Selection

Table 8-2: An Example of Vendor Analysis:

1- 249 Table 8-2: An Example of Vendor Analysis Attributes Rating Scale Importance Weights Poor (1) Fair (2) Good (3) Excellent (4) Price .30 x Supplier reputation .20 x Product reliability .30 x Service reliability .10 x Supplier Flexibility .10 x Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5

The Purchasing/ Procurement Process:

1- 250 The Purchasing/ Procurement Process Customer value assessment Routine-order products Procedural-problem products Political-problem products Order-Routine Specification Blanket contract Stockless purchase plans Performance Review Buyflow map

Figure 8-2: Major Influences on Industrial Buying Behavior:

1- 251 Figure 8-2: Major Influences on Industrial Buying Behavior

Institutional and Government Markets:

1- 252 Institutional and Government Markets Institutional market

Chapter 9 Dealing with the Competition by:

1- 253 Chapter 9 Dealing with the Competition by

Kotler on Marketing:

1- 254 Kotler on Marketing Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors.

Chapter Objectives:

1- 255 In this chapter, we focus on five things companies need to know about their competition: Who the primary competitors are How to ascertain their strategies, objectives, strengths and weaknesses, and reaction patterns How to design a competitive intelligence system Whether to position as market leader, challenger, follower, or nicher How to balance a customer versus competitor orientation Chapter Objectives

Figure 9-1: Five Forces Determining Segment Structural Attractiveness:

1- 256 Figure 9-1: Five Forces Determining Segment Structural Attractiveness Competitive Forces Threat of: intense segment rivalry new entrants substitute products buyers’ growing bargaining power suppliers’ growing bargaining power

Figure 9-2: Barriers and Profitability:

1- 257 Figure 9-2: Barriers and Profitability

PowerPoint Presentation:

1- 258 GetThere.com, launched as the Internet Travel Network in 1995, was the first company to book trips over the Web

Identifying Competitors:

1- 259 Identifying Competitors Industry Concept of Competition Industry Number of Sellers and Degree of Differentiation Pure monopoly Oligopoly Pure oligopoly Differentiated oligopoly Monopolistic competition Pure competition

Identifying Competitors:

1- 260 Identifying Competitors Entry, Mobility, Exit Barriers Entry barriers Mobility barriers Exit barriers Cost Structure Degree of Vertical Integration Vertical integration Degree of Globalization Market Concept of Competition

Analyzing Competitors :

1- 261 Objectives Figure 9-5: A Competitor’s Expansion Plans Analyzing Competitors

Analyzing Competitors:

1- 262 Analyzing Competitors Strengths and Weaknesses Dominant Strong Favorable Tenable Weak Nonviable

Table 9-1: Customer’s Ratings of Competitors on Key Success Factors:

1- 263 Table 9-1: Customer’s Ratings of Competitors on Key Success Factors Customer Awareness Product Quality Product Availability Technical Assistance Selling Staff Competitor A E E P P G Competitor B G G E G E Competitor C F P G F F Note: E = excellent, G = good, F = fair, P = poor.

Analyzing Competitors:

1- 264 Analyzing Competitors Three Variables to Monitor When Analyzing Competitors: Share of market Share of mind Share of heart

Table 9-2: Market Share, Mind Share, and Heart Share:

1- 265 Table 9-2: Market Share, Mind Share, and Heart Share Market Share Mind Share Heart Share 2000 2001 2002 2000 2001 2002 2000 2001 2002 Competitor A 50% 47% 44% 60% 58% 54% 45% 42% 39% Competitor B 30 34 37 30 31 35 44 47 53 Competitor C 20 19 19 10 11 11 11 11 8

Analyzing Competitors:

1- 266 Reaction Patterns 1. If competitors are nearly identical and make their living the same way, then their competitive equilibrium is unstable. 2. If a single major factor is the critical factor, then the competitive equilibrium is unstable. 3. If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer. 4. The fewer the number of critical competitive variables, the fewer the number of competitors. 5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to increase or decrease share. Analyzing Competitors

PowerPoint Presentation:

1- 267 For many years, the major national broadcast television networks shared 100% of the market, and traded market share back and forth periodically. During the last two decades, the emergence of nationally available cable programming, and the rise of rival broadcast networks like Fox, UPN, and WB have increasingly cut into the market share of the “big three.” What steps would you recommend that the “big three” networks take to stop or slow this loss of market share? Discussion Question

Designing The Competitive Intelligence System:

1- 268 Designing The Competitive Intelligence System Four Main Steps Setting Up the System Collecting the Data Evaluating and Analyzing the Data Disseminating Information and Responding

Designing The Competitive Intelligence System:

1- 269 Designing The Competitive Intelligence System Selecting Competitors Customer Value Analysis (CVA) Customer Value = Customer Benefits – Customer Costs Customer Benefits = product benefits, service benefits, personnel benefits, image benefits Customer Costs = purchase price, acquisition costs, usage costs, maintenance costs, ownership costs, disposal costs

PowerPoint Presentation:

1- 270 What do you see as the potential impact of the availability of information via the Internet on the design of competitive intelligence systems? What problems could be caused by the inability of the average computer user to verify the accuracy of data from the web? What impact will emerging database technologies like text-based data mining have in competitive intelligence systems? Discussion Question

Table 9-3: Customer Cost of Three Brands:

1- 271 Table 9-3: Customer Cost of Three Brands A B C Price $100 $ 90 $ 80 Acquisition costs 15 25 30 Usage costs 4 7 10 Maintenance costs 2 3 7 Ownership costs 3 3 5 Disposal costs 6 5 8 Total costs $130 $135 $140

Designing The Competitive Intelligence System:

1- 272 Designing The Competitive Intelligence System Major Steps in Customer Value Analysis: 1. Identify the major attributes customers value. 2. Assess the quantitative importance of the different attributes. 3. Assess the companies’ and competitors’ performances on the different customer values against their rated importance. 4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an attribute-by-attribute basis. 5. Monitor customer values over time.

Designing The Competitive Intelligence System:

1- 273 Classes of Competitors Strong versus Weak Close versus Distant “Good” versus “Bad” Designing The Competitive Intelligence System

Figure 9-6: Hypothetical Market Structure:

1- 274 Figure 9-6: Hypothetical Market Structure Designing Competitive Strategies

Designing Competitive Strategies:

1- 275 Designing Competitive Strategies Market-Leader Strategies Expanding the Total Market New Users Market-penetration strategy New-market segment strategy Geographical-expansion strategy New Uses More Usage Defending Market Share

PowerPoint Presentation:

1- 276 IGT’s home page focuses on customer service

PowerPoint Presentation:

1- 277 Defense Strategies Position Defense Flank Defense Preemptive Defense Counteroffensive Defense Mobile Defense Market broadening Principle of the objective Principle of mass Market diversification Contraction Defense Planned contraction (Strategic withdrawal) Designing Competitive Strategies

Designing Competitive Strategies:

1- 278 Designing Competitive Strategies Two Case Studies: Procter & Gamble and Caterpillar Proctor & Gamble Customer knowledge Long-term outlook Product innovation Quality strategy Line-extension strategy

Designing Competitive Strategies:

1- 279 Designing Competitive Strategies Brand-extension strategy Multibrand strategy Heavy advertising and media pioneer Aggressive sales force Effective sales promotion Competitive toughness Manufacturing efficiency and cost cutting Brand-management system

Designing Competitive Strategies:

1- 280 Designing Competitive Strategies Market-Challenger Strategies Defining the Strategic Objective and Opponent(s) It can attack the market leader It can attack firms of its own size that are not doing the job and are underfinanced It can attack small local and regional firms Choosing a General Attack Strategy

Figure 9-10: Attack Strategies:

1- 281 Figure 9-10: Attack Strategies

PowerPoint Presentation:

1- 282 Swedish firm SCA’s www.libero.se site creates a dialogue with expectant and new parents and even allows users to send pictures, brief stories, and child wish list to family all over the world.

Designing Competitive Strategies:

1- 283 Designing Competitive Strategies Choosing a Specific Attack Strategy Price-discount Lower price goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion

Designing Competitive Strategies:

1- 284 Designing Competitive Strategies Market-Follower Strategies Innovative imitation (Product imitation) Product innovation Four Broad Strategies: Counterfeiter Cloner Imitator Adapter

Designing Competitive Strategies:

1- 285 Designing Competitive Strategies Market-Nicher Strategies High margin versus high volume Nicher Specialist Roles End-user specialist Value-added reseller Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist

Balancing Customer and Competitor Orientations:

1- 286 Balancing Customer and Competitor Orientations Competitor-centered company Customer-centered company

Chapter 10 Identifying Market Segments and Selecting Target Markets by:

1- 287 Chapter 10 Identifying Market Segments and Selecting Target Markets by

Kotler on Marketing:

1- 288 Kotler on Marketing “Don’t buy market share. Figure out how to earn it.”

Chapter Objectives:

1- 289 Chapter Objectives We focus on the following questions: How can a company identify the segments that make up a market? What criteria can a company use to choose the most attractive target markets?

Target Marketing:

1- 290 Target Marketing Target marketing requires marketers to take three major steps: Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). Select one or more market segments to enter (market targeting). For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).

Levels and Patterns of Market Segmentation:

1- 291 Levels and Patterns of Market Segmentation Levels of Market Segmentation Mass marketing Micromarketing Segment marketing Market segment Sector Flexible market offering Naked solution Discretionary options

Levels and Patterns of Market Segmentation:

1- 292 Levels and Patterns of Market Segmentation Niche Marketing Niche Local Marketing Individual Customer Marketing Mass-customization Choiceboard Customerization Segments Individuals

Levels and Patterns of Market Segmentation:

1- 293 Levels and Patterns of Market Segmentation Patterns for Market Segmentation Preference segments Homogeneous preferences Diffused preferences Clustered preferences Natural market segments Concentrated marketing

Levels and Patterns of Market Segmentation:

1- 294 Levels and Patterns of Market Segmentation Market Segmentation Procedure Needs-based market segmentation approach Market partitioning Brand-dominant hierarchy Nation-dominant hierarchy

PowerPoint Presentation:

1- 295 ChemStation’s Web site offers customers solutions to their problems, not just products.

Table 10-1: Steps in Segmentation Process:

1- 296 Table 10-1: Steps in Segmentation Process Description 1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem. 2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable). 3. Segment Attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment. 4. Segment Profitability Determine segment profitability. 5. Segment Positioning For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics. See text for complete table

Levels and Patterns of Market Segmentation:

1- 297 Levels and Patterns of Market Segmentation Effective Segmentation Measurable Substantial Accessible Differentiable Actionable

Segmenting Consumer and Business Markets:

1- 298 Segmenting Consumer and Business Markets Bases for Segmenting Consumer Markets

Table 10-2: Major Segmentation Variables for Consumer Markets:

1- 299 Table 10-2: Major Segmentation Variables for Consumer Markets Geographic Region Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England City or metro size Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000; 1,000,000-4,000,000; 4,000,000 or over Density Urban, suburban, rural Climate Northern southern Demographic Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+ Family size 1-2, 3-4, 5+ See text for complete table

Segmenting Consumer and Business Markets:

1- 300 Segmenting Consumer and Business Markets Bases for Segmenting Consumer Markets Geographic Segmentation Demographic Segmentation Age and Life-Cycle Stage

PowerPoint Presentation:

1- 301 An easily identifiable demographic group which is often targeted by marketers is college students. Do you think this is influenced more by a common economic status of the target group, geographic concentration of a specific age group, or some other factor(s)? Discussion Question

PowerPoint Presentation:

1- 302 Sega’s homepage: Not just games

Segmenting Consumer and Business Markets:

1- 303 Segmenting Consumer and Business Markets Life Stage Gender Income Generation The Depression Cohort The World War II Cohort The Post-War Cohort Leading-Edge Baby Boomer Cohort Trailing-Edge Baby Boomer Cohort Generation X Cohort The Generation Y Cohort

Segmenting Consumer and Business Markets:

1- 304 Segmenting Consumer and Business Markets Lifestage Analytic Matrix Lifestages Physiographics Emotional effects Socioeconomics Social Class Psychographic Segmentation Lifestyle Time-constrained multitasking Money-constrained

PowerPoint Presentation:

1- 305 Improvements in both the average standard of living and in health care have had profound effects in the industrialized world during the last two generations. Other than an increase in the average life expectancy for both men and women, what effects has this trend toward longer and healthier lives in general had on the traditional life stage assumptions that marketers make? Discussion Question

Segmenting Consumer and Business Markets:

1- 306 Segmenting Consumer and Business Markets Personality “Brand personality” examples: Sincere Exciting Competent Sophisticated Rugged Values Core values

Segmenting Consumer and Business Markets:

1- 307 Segmenting Consumer and Business Markets Behavioral Segmentation Occasions Critical life events or transitions Benefits Mobil has identified five segments and their sizes Road Warriors 16% Generation F 27% True Blues 16% Home Bodies 21% Price Shoppers 20%

Segmenting Consumer and Business Markets:

1- 308 Segmenting Consumer and Business Markets User Status Usage Rate Loyalty Status Hard-core loyals Split loyals Shifting loyals Switchers Buyer-Readiness Stage Attitude

Segmenting Consumer and Business Markets:

1- 309 Segmenting Consumer and Business Markets Multi-Attribute Segmentation (Geoclustering) Four PRIZM clusters American Dreams Rural Industria Gray Power Country Squires Targeting Multiple Segments

Segmenting Consumer and Business Markets:

1- 310 Segmenting Consumer and Business Markets Bases For Segmenting Business Markets

Table 10-3: Major Segmentation Variables for Business Markets:

1- 311 Table 10-3: Major Segmentation Variables for Business Markets Demographic Industry: Which industries should we serve? Company size: What size companies should we serve? Location: What geographical areas should we serve? Operating Variables Technology: What customer technologies should we focus on? User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers? Customer capabilities: Should we serve customers needing many or few services? Purchasing Approaches Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations? Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on? See text for complete table

Segmenting Consumer and Business Markets:

1- 312 Segmenting Consumer and Business Markets Business buyers seek different benefit bundles based on their stage in the purchase decision process. First-time prospects Novices Sophisticates

Segmenting Consumer and Business Markets:

1- 313 Segmenting Consumer and Business Markets Rangan, Moriarty, and Swartz studied a mature commodity market, steel stamping, and found four business segments Program buyers Relationship buyers Transaction buyers Bargain hunters

Segmenting Consumer and Business Markets:

1- 314 Segmenting Consumer and Business Markets Rackman and Vincentis proposed a segmentation scheme that classifies business buyers into three groups Price-oriented customers (transactional selling) Solution-oriented customers (consultative selling) Strategic-value customers (enterprise selling)

Market Targeting:

1- 315 Market Targeting Evaluating and Selecting the Market Segments Single-Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage Undifferentiated marketing Differentiated marketing

Market Targeting:

1- 316 Market Targeting Higher costs using differentiated marketing include: Product modification cost Manufacturing cost Administrative cost Inventory cost Promotion cost

Market Targeting:

1- 317 Market Targeting Additional Considerations Ethical Choice of Market Targets Supersegment Segment-By-Segment Invasion Plans

Figure 10-3: Segment-by-Segment Invasion Plan:

1- 318 Figure 10-3: Segment-by-Segment Invasion Plan

Market Targeting:

1- 319 Intersegment Cooperation Market Targeting

Chapter 11 Positioning and Differentiating the Market Offering Through the Product Life Cycle by:

1- 320 Chapter 11 Positioning and Differentiating the Market Offering Through the Product Life Cycle by

Kotler on Marketing:

1- 321 Watch the product life cycle; but more important, watch the market life cycle. Kotler on Marketing

Chapter Objectives :

1- 322 Chapter Objectives In this chapter, we focus on the following questions: How can the firm choose and communicate an effective positioning in the market? What are the major differentiating attributes available to firms? What marketing strategies are appropriate at each stage of the product life cycle? What marketing strategies are appropriate at each stage of the market’s evolution?

Developing and Communicating a Positioning Strategy :

1- 323 Developing and Communicating a Positioning Strategy Positioning Value position

Table 11.1: Examples of Value Propositions Demand States and Marketing Tasks:

1- 324 Table 11.1: Examples of Value Propositions Demand States and Marketing Tasks Company and Product Target Customers Benefits Price Value Proposition Perdue (chicken) Quality-conscious consumers of chicken Tenderness 10% premium More tender golden chicken at a moderate premium price Volvo (station wagon) Safety-conscious “upscale” families Durability and safety 20% premium The safest, most durable wagon in which your family can ride Domino’s (pizza) Convenience-minded pizza lovers Delivery speed and good quality 15% premium A good hot pizza, delivered to your door door within 30 minutes of ordering, at a moderate price

Developing and Communicating a Positioning Strategy:

1- 325 Developing and Communicating a Positioning Strategy Positioning According to Ries and Trout Strengthen own current position Grab an unoccupied position De-position Re-position Product ladders Positioning According to Treacy and Wiersema Value disciplines Product leader Operationally excellent firm Customer intimate firm

Developing and Communicating a Positioning Strategy:

1- 326 Treacy and Wiersema propose that a business should follow four rules for success Become best at one of the three value disciplines. Achieve an adequate performance level in the other two disciplines. Keep improving one’s superior position in the chosen discipline so as not to lose out to a competitor. Keep becoming more adequate in the other two disciplines, because competitors keep raising customers’ expectations. Developing and Communicating a Positioning Strategy

Developing and Communicating a Positioning Strategy:

1- 327 Positioning: How many ideas to promote? Unique selling proposition Four major positioning errors Underpositioning Overpositioning Confused positioning Doubtful positioning Developing and Communicating a Positioning Strategy

PowerPoint Presentation:

1- 328 Can you think of any companies that market the same product or service offering to multiple segments using different strategies? Are the different segments being offered different value propositions? Discussion Question

Figure 11.1: Perceptual Map:

1- 329 Figure 11.1: Perceptual Map

Developing and Communicating a Positioning Strategy:

1- 330 Developing and Communicating a Positioning Strategy Theme park’s positioning possibilities: Attribute positioning Benefit positioning Use or application positioning User positioning Competitor positioning Product category positioning Quality or price positioning Which Positioning to Promote?

Table 11.2: Method for Competitive-Advantage Selection:

1- 331 Table 11.2: Method for Competitive-Advantage Selection (1) (2) (3) (4) (5) Competitive Advantage Company Standing Competitor Standing Importance of Improving Standing (H-M-L)* Affordability and Speed (H-M-L) Technology 8 8 L L Cost 6 8 H M Quality 8 6 L L Service 4 3 H H H=high, M=medium, L=low See text for complete table

Adding Further Differentiation :

1- 332 Adding Further Differentiation Differentiation Differentiation criteria: Important Distinctive Superior Preemptive Affordable Profitable

Adding Further Differentiation:

1- 333 Adding Further Differentiation Exceed customer expectations with a three-step process Defining the customer value model Building the customer value hierarchy Basic Expected Desired Unanticipated Deciding on the customer value package

Figure 11.2: The BCG Competitive Advantage Matrix:

1- 334 Figure 11.2: The BCG Competitive Advantage Matrix Differentiation Tools

Table 11.3: Differentiation Variables:

1- 335 Table 11.3: Differentiation Variables Product Services Personnel Channel Image Form Ordering ease Competence Coverage Symbols Features Delivery Courtesy Expertise Media Performance Installation Credibility Performance Atmosphere Conformance Customer training Reliability Events Durability Customer consulting Responsiveness See text for complete table

Differentiation Tools:

1- 336 Differentiation Tools Product Differentiation Form Features

Table 11.4: Measuring Customer Effectiveness Value:

1- 337 Table 11.4: Measuring Customer Effectiveness Value Company Cost Customer Value Customer Value/Customer Cost Feature (a) (b) (c=b/a) Rear-window defrosting $100 $200 2 Cruise control 600 600 1 Automatic transmission 800 2,400 3

Differentiation Tools:

1- 338 Differentiation Tools Performance Quality Conformance Quality Durability Reliability Reparability Style Design: The Integrating Force Services Differentiation Ordering Ease

PowerPoint Presentation:

1- 339 The home page for Peapod, the nation’s largest online grocer

Differentiation Tools:

1- 340 Differentiation Tools Delivery Quick response system Installation Customer Training Customer Consulting Maintenance and Repair HP’s online support page

PowerPoint Presentation:

1- 341 Many e-commerce ventures fail because of distribution problems in the so-called “last mile” (the local distribution portion of shipping of online purchases). Can a marketing plan help offset some of these potential pitfalls? Discussion Question

Differentiation Tools:

1- 342 Differentiation Tools Miscellaneous Services Personnel Differentiation Competence Courtesy Creditability Reliability Responsiveness Communication

Differentiation Tools:

1- 343 Differentiation Tools Channel Differentiation Image Differentiation Identity Image Symbols, Colors, Slogans, Special Attributes Physical plant Events and Sponsorship Using Multiple Image-Building Techniques

PowerPoint Presentation:

1- 344 Which differentiation tool would be most useful for a dot.com startup? Why? Discussion Question

Product Life-Cycle Marketing Strategies :

1- 345 Product Life-Cycle Marketing Strategies To say that a product has a life cycle asserts four things Products have a limited life. Product sales pass through distance stages, each posing different challenges, opportunities, and problems to the seller. Profits rise and fall at different stages of the product life cycle. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.

Figure 11.4: Cost Product Life-Cycle Patterns:

1- 346 Figure 11.4: Cost Product Life-Cycle Patterns Product Life-Cycle Marketing Strategies

Figure 11.5: Style, Fashion, and Fad Life Cycles:

1- 347 Figure 11.5: Style, Fashion, and Fad Life Cycles Product Life-Cycle Marketing Strategies

Figure 11.6: Long-Range Product Market Expansion Strategy (P = Product; M = Market):

1- 348 Marketing Strategies: Introduction Stage The Pioneer Advantage Inventor Product pioneer Market pioneer Product Life-Cycle Marketing Strategies Figure 11.6: Long-Range Product Market Expansion Strategy (P = Product; M = Market)

PowerPoint Presentation:

1- 349 Marketing Strategies: Growth Stage Improve product quality and add new product features and improved styling Add new models and flanker products Enter new market segments Increase distribution coverage and enter new distribution channels Shift from product-awareness advertising to product-preference advertising Lower prices to attract next layer of price-sensitive buyers Product Life-Cycle Marketing Strategies

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1- 350 Marketing Strategies: Maturity Stage Market Modification Expand number of brand users by: Converting nonusers Entering new market segments Winning competitors’ customers Convince current users to increase usage by: Using the product on more occasions Using more of the product on each occasion Using the product in new ways Product Life-Cycle Marketing Strategies

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1- 351 Product modification Quality improvement Feature improvement Marketing-Mix Modification Prices Distribution Advertising Sales promotion Personal selling Services Product Life-Cycle Marketing Strategies

PowerPoint Presentation:

1- 352 Marketing Strategies: Decline Stage Increase firm’s investment (to dominate the market and strengthen its competitive position) Maintain the firm’s investment level until the uncertainties about the industry are resolved. Decrease the firm’s investment level selectively by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches Harvesting (“milking”) the firm’s investment to recover cash quickly Divesting the business quickly by disposing of its assets as advantageously as possible. Product Life-Cycle Marketing Strategies

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1- 353 Product Life-Cycle Concept: Critique Market evolution Product Life-Cycle Marketing Strategies

Table 11.5: Summary of Product Life-Cycle Characteristics, Objectives, and Strategies:

1- 354 Table 11.5: Summary of Product Life-Cycle Characteristics, Objectives, and Strategies Introduction Growth Maturity Characteristics Sales Low sales Rapidly rising sales Peak sales Costs High cost per customer Average cost per customer Low cost per customer Profits Negative Rising profits High profits Customers Few Growing Number Stable number beginning to decline See text for complete table

Market Evolution:

1- 355 Market Evolution Diffused-preference market options A single-niche strategy A multiple-niche strategy A mass-market strategy Growth Market-growth stage options Single-niche strategy Mass-market strategy Multiple-niche strategy Maturity

Market Evolution:

1- 356 Decline An Example: The Paper-Towel Market Dynamics of Attribute Competition Customer expectations are progressive Approaches to discover new attributes: Customer-survey processes Intuitive processes Dialectical processes Needs-hierarchy process Market Evolution

Chapter 12 Developing New Market Offerings by:

1- 357 Chapter 12 Developing New Market Offerings by

Kotler on Marketing:

1- 358 Who should ultimately design the product? The customer, of course. Kotler on Marketing

Chapter Objectives :

1- 359 Chapter Objectives In this chapter, we focus on the following questions: What challenges does a company face in developing new products? What organizational structures are used to manage new-product development? What are the main stages in developing new products, and how can they be managed better? What factors affect the rate of diffusion and consumer adoption of newly launched products?

Developing New Market Offerings :

1- 360 Developing New Market Offerings Six categories of new products New-to-the-world products New product lines Additions to existing product lines Improvements and revisions of existing products Repositioning Cost reductions

Challenges in New-Product Development :

1- 361 Challenges in New-Product Development Incremental innovation Disruptive technologies Why do new products fail? A high-level executive pushes a favorite idea through in spite of negative research findings. The idea is good, but the market size is overestimated. The product is not well designed.

Challenges in New-Product Development :

1- 362 Challenges in New-Product Development The product is incorrectly positioned in the market, not advertised effectively, or overpriced. The product fails to gain sufficient distribution coverage or support. Development costs are higher than expected. Competitors fight back harder than expected.

Challenges in New-Product Development :

1- 363 Challenges in New-Product Development Factors that tend to hinder new-product development Shortage of important ideas in certain areas Fragmented markets Social and governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles

Organizational Arrangements :

1- 364 Organizational Arrangements New-product deployment requires specific criteria – one company established the following acceptance criteria The product can be introduced within five years The product has a market potential of at least $50 million and a 15 percent growth rate. The product would provide at least 30 percent return on sales and 40 percent on investment. The product would achieve technical or market leadership.

Organizational Arrangements :

1- 365 Budgeting For New Product Development 3M’s approach: 15% rule Each promising idea gets an “executive champion” Expect some failures Golden Step awards handed out each year Organizational Arrangements

PowerPoint Presentation:

1- 366 3M online: The 3M Innovation Network

Table 12.1 Finding One Successful New Product (Starting with 64 New Ideas):

1- 367 Table 12.1 Finding One Successful New Product (Starting with 64 New Ideas) Stage Number of Ideas Pass Ratio Cost per Product Idea Total Cost 1. Idea screening 64 1:4 $ 1,000 $ 64,000 2. Concept testing 16 1:2 20,000 320,000 3. Product development 8 1:2 200,000 1,600,000 4. Test marketing 4 1:2 500,000 2,000,000 5. National launch 2 1:2 5,000,000 10,000,000 $5,721,000 $13,984,000

Organizational Arrangements:

1- 368 Organizational Arrangements Organizing New-Product Development Product managers New-product managers High-level management committee New product department Venture teams

Organizational Arrangements:

1- 369 Stage-gate system Gatekeepers make one of four decisions: Go Kill Hold Recycle Organizational Arrangements

Managing the Development Process: Ideas:

1- 370 Idea Generation Interacting with Others Sales representatives Intermediaries Product champion Managing the Development Process: Ideas

Managing the Development Process: Ideas:

1- 371 Techniques for stimulating creativity in individuals and groups Attribute listing Forced relationships Morphological analysis Reverse assumption analysis New contexts Mind-mapping Managing the Development Process: Ideas

PowerPoint Presentation:

1- 372 Idea Screening Idea manager Idea committee Two types of errors in screening ideas DROP-error GO-error Managing the Development Process: Ideas

PowerPoint Presentation:

1- 373 Some of the most notable “drop-errors” have come from the most recognizable names in American business. Xerox saw the potential of the copy machine, IBM and Eastman Kodak did not. IBM thought the personal computer market would be miniscule. Can you think of any “drop-errors” that the company didn’t survive? Discussion Question

Table 12.2 Product-Idea Rating Device:

1- 374 Table 12.2 Product-Idea Rating Device Relative Weight Product Score Product Rating Product Success Requirements (a) (b) (c = a x b) Unique or superior product .40 .8 .32 High performance to cost ratio .30 .6 .18 High marketing dollar support .20 .7 .14 Lack of strong competition .10 .5 .05 Total 1.00 .69   Rating scale: .00-.30 poor; .31-.60 fair; .61-.80 good. Minimum acceptance rate: .61

Managing the Development Process: Concept to Strategy:

1- 375 Managing the Development Process: Concept to Strategy Concept Development and Testing Product idea Product concept Concept development Category concept Product–positioning map Brand concept

Figure 12.3: Product and Brand Positioning:

1- 376 Figure 12.3: Product and Brand Positioning

PowerPoint Presentation:

1- 377 Sometimes a new product is developed, like the felt-tip pen and the “walkman” style personal music device. Consumers weren’t clamoring for either of these products before they came to market. Most people hadn’t even conceived of such an item. Careful planning developed markets for these new lines. Can you think of more recent examples? Discussion Question

Managing the Development Process: Concept to Strategy:

1- 378 Managing the Development Process: Concept to Strategy Concept Testing Rapid prototyping Virtual reality Customer-driven engineering Questions to measure product dimensions Communicability and believability Need level Gap level Need-gap score

Managing the Development Process: Concept to Strategy:

1- 379 Managing the Development Process: Concept to Strategy Perceived value Purchase intention User targets, purchase occasions, purchasing frequency Conjoint Analysis Example: five design elements Three package designs Three brand names Three prices Possible Good Housekeeping seal Possible money-back guarantee

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1- 380 Managing the Development Process: Concept to Strategy Marketing Strategy Business Analysis Estimating Total Sales

Managing the Development Process: Concept to Strategy:

1- 381 Managing the Development Process: Concept to Strategy Survival-age distribution Estimating Cost and Profits

Table 12.3 Projected Five-Year-Cash-Flow Statement (in thousands of dollars):

1- 382 Table 12.3 Projected Five-Year-Cash-Flow Statement (in thousands of dollars) Year 0 Year 1 Year 2 Year 3 1. Sales revenue $ 0 $11,889 $15,381 $19,654 2. Cost of goods sold 0 3,981 5,150 6,581 3. Gross margin 0 7,908 10,231 13,073 4. Development costs -3,500 0 0 0 5. Marketing costs 0 8,000 6,460 8,255 6. Allocated overhead 0 1,189 1,538 1,965 See text for complete table

Managing the Development Process: Concept to Strategy:

1- 383 Managing the Development Process: Concept to Strategy Break-even analysis Risk analysis

Managing The Development Process: Development to Commercialization :

1- 384 Managing The Development Process: Development to Commercialization Product Development Quality Function Deployment (QFD) Customer attributes (CAs) Engineering attributes (EAs) Lands’ End Japan Web site

Managing The Development Process: Development to Commercialization:

1- 385 Managing The Development Process: Development to Commercialization Customer tests Alpha testing Beta testing Consumer preference measures Rank-order Paired-comparison Monadic-rating

Managing The Development Process: Development to Commercialization:

1- 386 Managing The Development Process: Development to Commercialization Market Testing Consumer-Goods Market Testing Seeks to estimate four variables Trial First repeat Adoption Purchase frequency Sales wave research

Managing The Development Process: Development to Commercialization:

1- 387 Managing The Development Process: Development to Commercialization Simulated Test Marketing Controlled Test Marketing Test Markets How many test cities? Which cities? Length of test? What information? What action to take? Business-Goods Market Testing

PowerPoint Presentation:

1- 388 Managing The Development Process: Development to Commercialization Philips’ Pronto Web site Commercialization When (Timing) First entry Parallel entry Late entry Where (Geographic Strategy)

PowerPoint Presentation:

1- 389 To Whom (Target-Market Prospects) How (Introductory Market Strategy) Critical path scheduling (CPS) Managing The Development Process: Development to Commercialization The iMac, launched with a dramatic countdown campaign

The Consumer-Adoption Process:

1- 390 The Consumer-Adoption Process Adoption Consumer-adoption process Consumer-loyalty process Mass-market approach Heavy-usage target marketing Stages in the Adoption Process Innovation Innovation diffusion process

The Consumer-Adoption Process:

1- 391 The Consumer-Adoption Process Adopters of new products move through five stages Awareness Interest Evaluation Trial Adoption Factors Influencing the Adoption Process Readiness to Try New Products and Personal Influence

Figure 12.7: Adopter Categorization on the Basis of Relative Time of Adoption of Innovation:

1- 392 Figure 12.7: Adopter Categorization on the Basis of Relative Time of Adoption of Innovation

The Consumer-Adoption Process:

1- 393 The Consumer-Adoption Process Personal influence Characteristics of the Innovation Relative advantage Compatibility Complexity Divisibility Communicability Organizations’ Readiness to Adopt Innovations

Chapter 13 Designing Global Market Offerings by:

1- 394 Chapter 13 Designing Global Market Offerings by

Kotler on Marketing:

1- 395 Your company does not belong in markets where it cannot be the best. Kotler on Marketing

Chapter Objectives :

1- 396 Chapter Objectives In this chapter, we focus on the following questions: What factors should a company review before deciding to go abroad? How can companies evaluate and select foreign markets to enter? What are the major ways of entering a foreign market? To what extent must the company adapt its products and marketing program to each foreign country? How should the company manage and organize its international activities?

Figure 13.1: Major Decisions in International Marketing:

1- 397 Figure 13.1: Major Decisions in International Marketing Competing on a Global Basis Global industry Global firm

Deciding Whether To Go Abroad:

1- 398 Factors drawing companies into the international arena: Global firms offering better products or lower prices can attack the company’s domestic market. The company discovers that some foreign markets present higher profit opportunities than the domestic market. The company needs a larger customer base to achieve economies of scale. The company wants to reduce its dependence on any one market. The company’s customers are going abroad and need servicing. Deciding Whether To Go Abroad

Deciding Whether To Go Abroad:

1- 399 Deciding Whether To Go Abroad Before going abroad, the company must weigh several risk: The company might not understand foreign customer preferences and fail to offer a competitively attractive product. The company might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals. The company might underestimate foreign regulations and incur unexpected costs. The company might realize that it lacks managers with international experience. The foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate property.

Table 13.1: Blunders in International Marketing:

1- 400 Table 13.1: Blunders in International Marketing Hallmark cards failed when they were introduced in France. The French dislike syrupy sentiment and prefer writing their own cards. Philips began to earn a profit in Japan only after it had reduced the size of its coffeemakers to fit into smaller Japanese kitchens and its shavers to fit smaller Japanese hands. Coca-Cola had to withdraw its two-liter bottle in Spain after discovering that few Spaniards owned refrigerators with large enough compartments to accommodate it. General Foods’ Tang initially failed in France because it was positioned as a substitute for orange juice at breakfast. The French drink little orange juice and almost none at breakfast. Kellogg’s Pop-Tarts failed in Britain because the percentage of British homes with toasters was significantly lower than in the United States and the product was too sweet for British tastes. See text for complete table

PowerPoint Presentation:

1- 401 In the early 20 th century, the Trans-Atlantic cable allowed for the transmission of photographs in near real time. Still images went to press soon after news of events in Europe arrived here in the States. Are there any emerging communication technologies today that show similar potential? How can these be harnessed to improve a company’s global offerings? Discussion Question

Deciding Which Markets to Enter :

1- 402 Deciding Which Markets to Enter How many markets to enter Ayal and Zif contend that a company should enter fewer countries when: Market entry and market costs are high Product and communication costs are high Population and income size and growth are high in the initial countries chosen Dominant foreign firms can establish high barriers to entry

Deciding Which Markets to Enter:

1- 403 Deciding Which Markets to Enter Regional free trade zones The European Union NAFTA MERCOSUL APEC Evaluating potential markets Psychic proximity

PowerPoint Presentation:

1- 404 Regional free trade zones offer many potential benefits to companies expanding their offerings abroad. Clearly defined national import/export policies are just one potential benefit. Can you think of any others? What marketing challenges will not be eased by such agreements? Discussion Question

Deciding How to Enter the Market :

1- 405 Deciding How to Enter the Market Figure 13.2: Five Modes of Entry into Foreign Markets

Deciding How to Enter the Market:

1- 406 Indirect and direct export Occasional exporting Active exporting Indirect exporting Domestic-based export merchants Domestic-based export agents Cooperative organizations Export-management companies Deciding How to Enter the Market

Deciding How to Enter the Market:

1- 407 Companies can carry on direct exporting in several ways Domestic-based export department or division Overseas sales branch or subsidiary Traveling export sales representatives Foreign-based distributors or agents Deciding How to Enter the Market

Deciding How to Enter the Market:

1- 408 Licensing Management contracts Contract manufacturing Franchising Deciding How to Enter the Market

Deciding How to Enter the Market:

1- 409 Deciding How to Enter the Market Joint ventures Direct investment The Internationalization Process Johanson and Wiedersheim-Paul identified four stages in the internationalization process: No regular export activities Export via independent representatives (agents) Establishment of one or more sales subsidiaries Establishment of production facilities abroad

Deciding on the Marketing Program :

1- 410 Deciding on the Marketing Program Standardized marketing mix Adapted marketing mix

PowerPoint Presentation:

1- 411 McDonald’s around the world: Hungary

Deciding on the Marketing Program:

1- 412 Deciding on the Marketing Program Product Straight extension

Figure 13.3: Five International Product and Promotion Strategies:

1- 413 Figure 13.3: Five International Product and Promotion Strategies

Deciding on the Marketing Program:

1- 414 Deciding on the Marketing Program Product adaptation Product invention Backward invention Forward invention Promotion Communication adaptation Dual adaptation

PowerPoint Presentation:

1- 415 Carlsberg’s global Web site

Deciding on the Marketing Program:

1- 416 Deciding on the Marketing Program Price Price escalation Companies have three choices Set a uniform price everywhere Set a market-based price in each country Set a cost-based price in each country Transfer price Dumping Arm’s-length price Gray market

Figure 13.4: Whole-Channel Concept for International Marketing:

1- 417 Figure 13.4: Whole-Channel Concept for International Marketing Deciding on the Marketing Program Place (distribution channels) Seller’s international marketing headquarters Channels between nations Channels within foreign nations

PowerPoint Presentation:

1- 418 One of the most profound political changes in the late 20 th century was the fall of the “iron curtain” and the subsequent opening of markets in Eastern Europe. Has this potential marketplace been fully exploited by American companies? European companies? Why or why not? Discussion Question

Deciding on the Marketing Organization :

1- 419 Deciding on the Marketing Organization Export department International division Geographical organizations World product groups International subsidiaries

Deciding on the Marketing Organization :

1- 420 Deciding on the Marketing Organization Global organization Bartlett and Ghoshal distinguish three organizational strategies: A global strategy treats the world as a single market. A multinational strategy treats the world as a portfolio of national opportunities. A “glocal” strategy standardizes certain core elements and localizes other elements.

Chapter 14 Setting the Product and Branding Strategy by:

1- 421 Chapter 14 Setting the Product and Branding Strategy by

Kotler on Marketing:

1- 422 The best way to hold customers is to constantly figure out how to give them more for less. Kotler on Marketing

Chapter Objectives :

1- 423 Chapter Objectives In this chapter, we focus on the following questions: What are the characteristics of products? How can a company build and manage its product mix and product lines? How can a company make better brand decisions? How can packaging and labeling be used as marketing tools?

The Product and the Product Mix:

1- 424 The Product and the Product Mix Product Physical goods Services Experiences Events Persons Places Properties Organizations Information Ideas Figure 14.1: Components of the Market Offering

The Product and the Product Mix:

1- 425 The Product and the Product Mix Product levels Customer value hierarchy Core benefit Basic product Expected product Augmented product Figure 14.2: Five Product Levels

PowerPoint Presentation:

1- 426 BabyCenter is not just an online merchant, it’s a metamediary

The Product and the Product Mix:

1- 427 The Product and the Product Mix Consumption system Potential product Product hierarchy Need family Product family Product class Product line Product type Item General Mills’ Mycereal.com Web site

The Product and the Product Mix:

1- 428 The Product and the Product Mix Product system Product mix Product classifications Durability and Tangibility Classification: Nondurable goods Durable goods Services

The Product and the Product Mix:

1- 429 The Product and the Product Mix Consumer-Goods Classification: Convenience goods Staples Impulse goods Emergency goods Shopping goods Homogeneous shopping goods Heterogeneous shopping goods Specialty goods Unsought goods

The Product and the Product Mix:

1- 430 The Product and the Product Mix Industrial-Goods Classification Materials and parts Farm products Natural products Manufactured materials and parts Component materials Component parts Capital items Installations Equipment

The Product and the Product Mix:

1- 431 The Product and the Product Mix Supplies and business services Maintenance and repair items Operating supplies Maintenance and repair services Business advisory services

The Product and the Product Mix:

1- 432 The Product and the Product Mix Product mix (Product assortment) Product mix has a certain: Width Length Depth Consistency

Table 14.1: Product-Mix Width and Product-Line Length for Proctor& Gamble Products:

1- 433 Table 14.1: Product-Mix Width and Product-Line Length for Proctor& Gamble Products PRODUCT-LINE LENGTH Product-Mix Width Detergents Toothpaste Disposable Bar Soap Diapers Paper Tissue Ivory Snow (1930) Dreft (1933) Tide (1946) Cheer (1950) Gleem (1952) Crest (1955) Ivory (1879) Kirk’s (1885) Lava (1893) Camay (1926) Pampers (1961) Luvs (1976) Charmin (1928) Puffs (1960) Banner (1982) Summit (1992) See text for complete table

The Product and the Product Mix:

1- 434 The Product and the Product Mix Product-line decisions Product-line analysis Sales and Profits Four types of product classes: Core product Staples Specialties Convenience items

The Product and the Product Mix:

1- 435 The Product and the Product Mix Market profile Figure 14.4: Product Map for a Paper-Product Line

The Product and the Product Mix:

1- 436 The Product and the Product Mix Product-line length Line Stretching Downmarket Stretch The company may notice strong growth opportunities as mass retailers attract a growing number of shoppers The company may wish to tie up lower-end competitors who might otherwise try to move upmarket The company may find that the middle market is stagnating or declining Upmarket Stretch Two-Way Stretch

PowerPoint Presentation:

1- 437 Kmart has entered into branding and distribution agreements with celebrities like Kate Smith for women’s apparel and Martha Stewart in house wares, gardening supplies, etc. Is this an upmarket stretch, a downmarket stretch or a two-way stretch for Kmart? Discussion Question

The Product and the Product Mix:

1- 438 The Product and the Product Mix Line Filling Just-noticeable difference Line Modernization, featuring, and pruning Brand decisions What is brand? Attributes Benefits Values Culture Personality User

The Product and the Product Mix:

1- 439 The Product and the Product Mix Commonly used research approaches to determine brand meaning: Word associations Personifying the brand Laddering up the brand essence Brand essence Laddering up

The Product and the Product Mix:

1- 440 The Product and the Product Mix Building Brand Identity Brand bonding Brands are not built by advertising but by the brand experience Everyone in the company lives the brand Three ways to carry on internal branding – Employees must Understand Desire, and Deliver on the brand promise

The Product and the Product Mix:

1- 441 Building Brands in the new economy Heidi and Don Schultz urge companies to: Clarify the corporation’s basic values and build the corporate brand. Use brand managers to carry out the tactical work. Develop a more comprehensive brand-building plan. Define the brand’s basic essence to be delivered wherever it is sold. Use the brand-value proposition as the key driver of the company’s strategy, operations, services, and product development. Measure their brand-building effectiveness, not by the old measures of awareness, recognition, and recall, but by a more comprehensive set of measures including customer-perceived value, customer satisfaction, customer share of wallet, customer retention, and customer advocacy. The Product and the Product Mix

The Product and the Product Mix:

1- 442 The Product and the Product Mix Brand Equity Brand awareness Brand acceptability Brand preference Aaker’s five levels of customer attitude: The customer will change brands, especially for price reasons. No brand loyalty. Customer is satisfied. No reason to change brands. Customer is satisfied and would incur cost by changing brand. Customer values the brand and sees it as a friend. Customer is devoted to the brand.

The Product and the Product Mix:

1- 443 The Product and the Product Mix Value of Brand Equity Brand valuation Competitive advantages of high brand equity: The company will have more leverage in bargaining with distributors and retailers because customers expect them to carry the brand. The company can charge a higher price than its competitors because the brand has higher perceived quality. The company can more easily launch extensions because the brand name carries high credibility. The brand offers some defense against price competition.

PowerPoint Presentation:

1- 444 Managing Brand Equity Branding Challenges Branding Decision: To Brand or Not to Brand? The Product and the Product Mix

PowerPoint Presentation:

1- 445 When is a brand more than just a brand? Have you ever based a purchasing decision primarily on the brand? Was it because of some perceived quality difference, or was it based on the expectation of how others would see or treat you? Have you ever seen someone buying a given brand of an item in an attempt to be seen as “cool”? Discussion Question

The Product and the Product Mix:

1- 446 The Product and the Product Mix Branding gives the seller several advantages: Brand name makes it easier for the seller to process orders and track down problems Seller’s brand name and trademark provide legal protection of unique product features Branding gives the seller the opportunity to attract a loyal and profitable set of customers. Branding helps the seller segment markets. Strong brands help build corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers.

The Product and the Product Mix:

1- 447 The Product and the Product Mix Brand-Sponsor Decisions Manufacturer brand Distributor brand Licensed brand name Slotting fee Brand ladder Brand parity

The Product and the Product Mix:

1- 448 The Product and the Product Mix Brand-Name Decision Four available strategies: Individual names Blanket family names Separate family names for all products Corporate name combined with individual product names

The Product and the Product Mix:

1- 449 The Product and the Product Mix Desirable qualities for a brand name It should suggest something about the product’s benefits It should suggest the product or service category It should suggest concrete, “high imagery” qualities It should be easy to spell, pronounce, recognize, and remember It should be distinctive It should not carry poor meanings in other countries and languages

The Product and the Product Mix:

1- 450 The Product and the Product Mix Brand building tools Public relations and press releases Sponsorships Clubs and consumer communities Factory visits Trade shows Event marketing Public facilities Social cause marketing High value for the money Founder’s or a celebrity personality Mobile phone marketing

PowerPoint Presentation:

1- 451 Nike’s arrangement with Michael Jordan has provided an excellent example of a celebrity endorsement. Can you think of an endorsement campaign that backfired? What did it cost the company in the short term? What, if any, have been the lasting effects? Discussion Question

The Product and the Product Mix:

1- 452 The Product and the Product Mix Brand Strategy Decision Functional brand Image brand Experimental brands Line Extensions Branded variants Brand extensions Brand dilution

The Product and the Product Mix:

1- 453 The Product and the Product Mix Multibrands, New Brands, and Co-Brands Multibrand Flanker Bands Co-branding (Dual branding) Ingredient co-branding Same-company co-branding Joint venture co-branding Multisponsor co-branding

The Product and the Product Mix:

1- 454 The Product and the Product Mix Brand Asset Management Brand Auditing and Repositioning Brand report card

The Product and the Product Mix:

1- 455 The Product and the Product Mix Packaging and Labeling Packaging Package Primary Package Secondary Package Shipping Package Factors which have contributed to the growing use of packaging as a marketing tool Self-Service Consumer affluence Company and brand image Innovation opportunity

The Product and the Product Mix:

1- 456 The Product and the Product Mix Labeling Functions Identification Grading Description Consumerists have lobbied for: Open dating Unit pricing Grade labeling Percentage labeling

Chapter 15 Designing and Managing Services by:

1- 457 Chapter 15 Designing and Managing Services by

Kotler on Marketing:

1- 458 Every business is a service business. Does your service put a smile on the customer’s face? Kotler on Marketing

Chapter Objectives :

1- 459 Chapter Objectives In this chapter, we focus on the following questions: How are services defined and classified? How do services differ from goods? How can service firms improve their differentiation, quality, and productivity? How can goods-producing companies improve their customer support services?

The Nature of Services:

1- 460 Keen.com is a virtual advice marketplace The Nature of Services Government sector Private non-profit sector Business sector Manufacturing sector Service

The Nature of Services:

1- 461 Categories of Service Mix Pure tangible good Tangible good with accompanying services Hybrid Major service with accompanying minor goods and services Pure service The Nature of Services

The Nature of Services:

1- 462 Characteristics of Services and Their Marketing Implications Intangibility Service positioning strategy can be made tangible through: Place People Equipment Communication material Symbols Price The Nature of Services

PowerPoint Presentation:

1- 463 Online companies that provide services are often directly impacted by the quality of a customer’s computer or the customer’s Internet connection. Can you think of another service sector that has so little control over the environment in which their services are provided? Discussion Question

The Nature of Services:

1- 464 The Nature of Services Carbone and Haeckel purpose the following for customer experience engineering Performance and context clues Humanics Mechanics Experience blueprint

The Nature of Services:

1- 465 The Nature of Services Inseparability Variability Quality control by: Good hiring and training procedures Service blueprint Monitoring customer satisfaction

The Nature of Services:

1- 466 Perishability Strategies for better matching between demand and supply in a service business Differential pricing Nonpeak demand Complementary services Reservation systems Part-time employees Peak-time efficiency Increased consumer participation Shared services Facilities for future expansion The Nature of Services

PowerPoint Presentation:

1- 467 Marketing Strategies for Service Firms Three Additional Ps People Physical evidence presentation Process

Figure 15.3: Three Types of Marketing in Service Industries:

1- 468 Figure 15.3: Three Types of Marketing in Service Industries

Marketing Strategies for Service Firms:

1- 469 Marketing Strategies for Service Firms Service Companies face three tasks: Competitive differentiation Service quality Productivity Managing differentiation Offering Primary service package Secondary service features

PowerPoint Presentation:

1- 470 Kaiser Permanente Online has over 30,000 registered users

Marketing Strategies for Service Firms:

1- 471 Marketing Strategies for Service Firms Faster and Better Delivery Reliability Resilience Innovativeness Image Managing Service Quality Perceived service Expected service

PowerPoint Presentation:

1- 472 FedEx and UPS have taken over much of the US Postal Service’s business, mostly through flexibility and innovation that the USPS can’t match. Can you think of another governmental service (anywhere in the world) where a private company has been able to take the profitable segment of a service, and leave the less profitable or more risky segment for a government agency? Discussion Question

Marketing Strategies for Service Firms:

1- 473 Marketing Strategies for Service Firms Five gaps that cause unsuccessful delivery Gap between consumer expectation and management perception Gap between management perception and service-quality specification Gap between service-quality specification and service delivery Gap between service delivery and external communications Gap between perceived service and expected service

Marketing Strategies for Service Firms:

1- 474 Five determinants of service quality Reliability Responsiveness Assurance Empathy Tangibles Strategic Concept Top-Management Commitment High Standards Self-Service Technologies (SSTS) Marketing Strategies for Service Firms

PowerPoint Presentation:

1- 475 Myalert.com provides access to services that users can perform themselves

Table 15.1 Customer Importance and Performance Ratings for an Auto Dealership:

1- 476 Table 15.1 Customer Importance and Performance Ratings for an Auto Dealership Mean Mean Attribute Importance Performance Number Attribute Description Rating Rating 1 Job done right the first time 3.83 2.63 2 Fast action on complaints 3.63 2.73 3 Prompt warranty work 3.60 3.15 4 Able to do any job needed 3.56 3.00 See text for complete table

Marketing Strategies for Service Firms:

1- 477 Marketing Strategies for Service Firms Satisfying Customer Complaints Satisfying Employees As Well As Customers Managing Productivity Seven approaches to improving service productivity: Have service providers work more skillfully Increase the quantity of service by surrendering some quality “Industrialize the service” by adding equipment and standardizing production Reduce or make obsolete the need for a service by inventing a product solution Design a more effective service Present customers with incentives to substitute their own labor for company labor Harness the power of technology to give customers access to better service and make service workers more productive

Managing Product Support Services:

1- 478 Managing Product Support Services Customers have three worries Reliability and failure frequency Downtime duration Out-of-pocket costs of maintenance and repair Life-cycle cost

Managing Product Support Services:

1- 479 Managing Product Support Services To provide the best support for expensive equipment, firms offer: Facilitating services Value-augmenting services Herman Miller Office Furniture Company offers: Five-year product warranties Quality audits after installation Guaranteed move-in dates Trade-in allowances on systems products

Managing Product Support Services:

1- 480 Managing Product Support Services Postsale Service Strategy Major trends in product support service Lele has noted the following: Equipment manufacturers are building more reliable and more easily fixable equipment Customers are becoming more sophisticated about buying product support services “Service unbundling”

Managing Product Support Services:

1- 481 Managing Product Support Services Customers dislike dealing with multiple service providers handling different types of equipment Third-party service organizations Service contracts (extended warranties) may diminish in importance Customer service choices are increasing rapidly–this is holding down prices and profits Companies are increasing the quality of their call centers and their customer service representatives (CSRs)

Chapter 16 Developing Price Strategies and Programs by:

1- 482 Chapter 16 Developing Price Strategies and Programs by

Kotler on Marketing:

1- 483 Sell value, not price. Kotler on Marketing

Chapter Objectives :

1- 484 Chapter Objectives In this chapter, we focus on three questions: How should a price be set on a product or service for the first time? How should the price be adapted to meet varying circumstances and opportunities? When should the company initiate a price change, and how should it respond to a competitor’s price change?

Figure 16.1: Nine Price-Quality Strategies:

1- 485 Figure 16.1: Nine Price-Quality Strategies

Figure 16.2: Price Should Align with Value:

1- 486 Figure 16.2: Price Should Align with Value

Setting the Price :

1- 487 Setting the Price Step 1: Selecting the pricing objective Survival Maximize current profits Maximize their market share Market-penetration pricing Best when: Market is highly price-sensitive, and a low price stimulates market growth, Production and distribution costs fall within accumulated production experience, and Low price discourages actual and potential competition

PowerPoint Presentation:

1- 488 Many companies engage in “market skimming,” offering new products at whatever price the market will bear, then over time decreasing the price in order to gain the maximum profit from each market segment. Can you think of any products that wouldn’t fit this pricing model? Why not? Discussion Question

PowerPoint Presentation:

1- 489 Maytag’s homepage presents its “corporate family of brands”

PowerPoint Presentation:

1- 490 Setting the Price Step 2: Determining Demand Price sensitivity Total Cost of Ownership (TCO)

Setting the Price :

1- 491 Setting the Price Tom Nagle offers this list of factors associated with lower price sensitivity The product is more distinctive Buyers are less aware of substitutes Buyers cannot easily compare the quality of substitutes The expenditure is a smaller part of the buyer’s total income The expenditure is small compared to the total cost of the end product Part of the cost is borne by another party The product is used in conjunction with assets previously bought The product is assumed to have more quality, prestige, or exclusiveness Buyers cannot store the product

PowerPoint Presentation:

1- 492 Setting the Price Estimating Demand Curves Price Elasticity of Demand Inelastic Elastic Price indifference band

Setting the Price :

1- 493 Setting the Price Step 3: Estimating Cost Types of Cost and Levels of Production Fixed costs (overhead) Variable cost Total cost Average cost Accumulated Production Experience curve (Learning curve)

PowerPoint Presentation:

1- 494 Setting the Price Differentiated Marketing Offers Activity-based cost (ABC) accounting Target costing Step 4: Analyzing Competitors’ Cost, Prices, and Offers

Setting the Price :

1- 495 Setting the Price Step 5: Selecting a Pricing Method Markup Pricing Unit Cost = variable cost + (fixed cost/unit sales) Markup price Markup price= unit cost/ (1 – desired return on sales) Target-Return Pricing Target-return price = unit cost + (desired return X investment capital)/unit sales

Figure 16.8: Break-Even Chart for Determining Target-Return Price and Break-Even Volume:

1- 496 Break-even volume Break-even volume = fixed cost / (price – variable cost) Perceived-Value Pricing Perceived value Price buyers Value buyers Loyal buyers Value-in-use price Figure 16.8: Break-Even Chart for Determining Target-Return Price and Break-Even Volume Setting the Price

Setting the Price :

1- 497 Setting the Price Value Pricing Everyday low pricing (EDLP) High-low pricing Going-Rate Pricing Auction-Type Pricing English auctions (ascending bids) Dutch auctions (descending bids) Sealed-bid auctions Group Pricing

Table 16.1: Effect of Different Bids on Expected Profit:

1- 498 Table 16.1: Effect of Different Bids on Expected Profit Company’s Bid Company’s Profit Probability of Getting Award with This Bid (Assumed) Expected Profit $ 9,500 $ 100 0.81 $ 81 10,000 600 0.36 216 10,500 1,100 0.09 99 11,000 1,600 0.01 16

PowerPoint Presentation:

1- 499 volumebuy.com: group or pool pricing

PowerPoint Presentation:

1- 500 Some large entities, both public and private, currently bid online for many products and services. Do you think there will be a market for consumers to bid on electrical power, like major corporate electricity users do? What about oil for heating? Can you think of any other products or services with a potential online auction market for home users? Discussion Question

Setting the Price :

1- 501 Setting the Price Step 6: Selecting the Final Price Psychological Pricing Reference price Gain-and-Risk-Sharing Pricing Influence of the Other Marketing Elements Brands with average relative quality but high relative advertising budgets charged premium prices Brands with high relative quality and high relative advertising budgets obtained the highest prices The positive relationship between high advertising budgets and high prices held most strongly in the later stages of the product life cycle for market leaders

Setting the Price :

1- 502 Setting the Price Brands with average relative quality but high relative advertising budgets charged premium prices Brands with high relative quality and high relative advertising budgets obtained the highest prices The positive relationship between high advertising budgets and high prices held most strongly in the later stages of the product life cycle for market leaders Company Pricing Policies Impact of Price on Other Parties

Adapting the Price :

1- 503 Adapting the Price Geographical Pricing (Cash, Countertrade, Barter) Countertrade Barter Compensation deal Buyback arrangement Offset Price Discounts and Allowances

Table 16.2: Price Discounts and Allowances:

1- 504 Table 16.2: Price Discounts and Allowances Cash Discount: A price reduction to buyers who pay bills promptly. A typical example is “2/10, net 30,” which means that payment is due within 30 days and that the buyer can deduct 2 percent by paying the bill within 10 days. Quantity Discount: A price reduction to those who buy large volumes. A typical example is “$10 per unit for less than 100 units; $9 per unit for 100 or more units.” Quantity discounts must be offered equally to all customers and must not exceed the cost savings to the seller. They can be offered on each order placed or on the number of units ordered over a given period. See text for complete table

Adapting the Price :

1- 505 Adapting the Price Promotional Pricing Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting

Adapting the Price :

1- 506 Adapting the Price Discriminatory Pricing Customer segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing

Adapting the Price :

1- 507 Adapting the Price Product-mix pricing Product-Line Pricing Optional-Feature Pricing Captive-Product Pricing Captive products Two-Part Pricing By-Product Pricing Product-Bundling Pricing Pure bundling Mixed bundling

PowerPoint Presentation:

1- 508 personify.com provides software that helps Web merchants find target customers

Initiating and Responding to Price Changes :

1- 509 Initiating and Responding to Price Changes Initiating Price Cuts Drive to dominate the market through lower costs Low quality trap Fragile-market-share trap Shallow-pockets trap

Table 16.3: Marketing-Mix Alternatives:

1- 510 Table 16.3: Marketing-Mix Alternatives Strategic Options Reasoning Consequences 1. Maintain price and perceived quality. Engage in selective customer pruning. Firm has higher customer loyalty. It is willing to lose poorer customers to competitors. Smaller market share. Lowered profitability. 2. Raise price and perceived quality. 3. Maintain price and raise perceived quality. Raise price to cover rising costs. Improve quality to justify higher prices. It is cheaper to maintain price and raise perceived quality. Smaller market share. Maintained profitability. Smaller market share. Short-term decline in profitability. Long-term increase in profitability. See text for complete table

Table 16.4: Profits Before and After a Price Increase:

1- 511 Table 16.4: Profits Before and After a Price Increase Before After Price $ 10 $10.10 (a 1 percent price increase) Units sold 100 100 Revenue $1000 $1010 Costs -970 -970 Profit $ 30 $ 40 (a 33 1/3 percent profit increase) Initiating and Responding to Price Changes

Initiating and Responding to Price Changes :

1- 512 Initiating and Responding to Price Changes Initiating Price Increases Cost inflation Anticipatory pricing Overdemand Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts

Initiating and Responding to Price Changes :

1- 513 Initiating and Responding to Price Changes Possible responses to higher costs or overhead without raising prices include: Shrinking the amount of product instead of raising the price Substituting less expensive materials or ingredients Reducing or removing product features Removing or reducing product services, such as installation or free delivery Using less expensive packaging material or larger package sizes Reducing the number of sizes and models offered Creating new economy brands

Initiating and Responding to Price Changes :

1- 514 Initiating and Responding to Price Changes Reactions to Price Changes Customer Reactions Competitor Reactions Responding to Competitors’ Price Changes Maintain price Maintain price and add value Reduce price Increase price and improve quality Launch a low-price fighter line

Chapter 17 Designing and Managing Value Networks and Marketing Channels by:

1- 515 Chapter 17 Designing and Managing Value Networks and Marketing Channels by

Kotler on Marketing:

1- 516 Establish channels for different target markets and aim for efficiency, control, and adaptability. Kotler on Marketing

Chapter Objectives:

1- 517 In this chapter, we focus on the following channel questions from the viewpoint of the manufacturers: What is the value network and marketing channel system? What work is performed by marketing channels? What decisions do companies face in designing, managing, evaluating, and modifying their channels? What trends are taking place in channel dynamics? How can channel conflict be managed? Chapter Objectives

What is a Value Network and Marketing-Channel System?:

1- 518 What is a Value Network and Marketing-Channel System? Value Network Marketing channel

PowerPoint Presentation:

1- 519 Oracle’s home page

What is a Value Network and Marketing-Channel System?:

1- 520 What is a Value Network and Marketing-Channel System? “Go-to-market” or hybrid channels IBM’s sales force sells to large accounts, outbound telemarketing sells to medium-sized accounts, direct mail sells to small accounts, retailers sell to still smaller accounts, and the Internet to sell specialty items Charles Schwab enables its customers to do transactions in branch offices, over the phone, or via the Internet Staples markets through traditional retail, direct-response Internet site, virtual malls, and 30,000 linked affiliated sites

What is a Value Network and Marketing-Channel System?:

1- 521 What is a Value Network and Marketing-Channel System? Channel integration characteristics: Ability to order a product online, and pick it up at a convenient retail location Ability to return an online-ordered product to a nearby store Right to receive discounts based on total of online and off-line purchases

What Work is Performed by Marketing Channels?:

1- 522 What Work is Performed by Marketing Channels? Many producers lack the financial resources to carry out direct marketing In some cases direct marketing simply is not feasible Producers who do establish their own channels can often earn a greater return by increasing their investment in their main business.

Figure 17.1: How a Distributor Effects an Economy of Effort:

1- 523 Figure 17.1: How a Distributor Effects an Economy of Effort

PowerPoint Presentation:

1- 524 As more retailers develop a web presence, they often move from a “brick-and-mortar” to a “click-and-mortar” business model where customers expect channel integration. Can you identify any potential problems for these companies? Can you identify any unique marketing opportunities that such a change would offer these companies? Discussion Question

What Work is Performed by Marketing Channels?:

1- 525 What Work is Performed by Marketing Channels? Channel Functions and Flows Key functions include: Gather information about potential and current customers, competitors, and others Develop and disseminate persuasive communications to stimulate purchasing Reach agreements on price and other terms so that transfer of ownership or possession can be effected Place orders with manufacturers

What Work is Performed by Marketing Channels?:

1- 526 What Work is Performed by Marketing Channels? Acquire funds to finance inventories at different levels in the marketing channel Assume risk connected with carrying out channel work Provide for the successive storage and movement of physical products Provide for buyers’ payment of their bills through banks and other financial institutions Oversee actual transfer of ownership from one organization or person to another

Figure 17.2: Five Marketing Flows in the Marketing Channel for Forklift Trucks:

1- 527 Figure 17.2: Five Marketing Flows in the Marketing Channel for Forklift Trucks

What Work is Performed by Marketing Channels?:

1- 528 What Work is Performed by Marketing Channels? Forward flow Backward flow

What Work is Performed by Marketing Channels?:

1- 529 What Work is Performed by Marketing Channels? Channel levels Zero-level channel (a.k.a. direct-marketing channel) One-level channel Two-level channel Three-level channel Reverse-flow channel Service Sector Channels Information Highway Channels

PowerPoint Presentation:

1- 530 The advent of print media, the telephone, radio, television, and the Internet have all provided new ways for marketers to get their message to their intended audience. As various technologies advance, these information channels offer more precise delivery of a message. Can you identify an emerging information distribution channel? Discussion Question

PowerPoint Presentation:

1- 531 The People’s Bank Internet site

Channel-Design Decisions:

1- 532 Channel-Design Decisions Push strategy Pull strategy Designing a channel system involves four steps: Analyzing customer needs Establishing channel objectives Identifying major channel alternatives Evaluating major channel alternatives

Channel-Design Decisions:

1- 533 Channel-Design Decisions Analyze Customers’ Desired Service Output Levels Lot size Waiting time Spatial convenience Product variety Service backup

Channel-Design Decisions:

1- 534 Channel-Design Decisions Establish Objectives and Constraints Identify Major Channel Alternatives Types of Intermediaries Number of Intermediaries Exclusive distribution Exclusive dealing Selective distribution Intensive distribution

Channel-Design Decisions:

1- 535 Channel-Design Decisions Terms and Responsibilities of Channel Members Price policy Conditions of sale Distributors’ territorial rights Evaluate the Major Alternatives Economic Criteria

Figure 17.4: The Value-Adds versus Costs of Different Channels:

1- 536 Figure 17.4: The Value-Adds versus Costs of Different Channels

Figure 17.5: Break-even Cost Chart:

1- 537 Figure 17.5: Break-even Cost Chart Channel-Design Decisions Channel advantage Control and Adaptive Criteria

Channel-Management Decisions:

1- 538 Channel-Management Decisions Selecting Channel Members Training Channel Members Motivating Channel Members Producers can use: Coercive power Reward power Legitimate power Expert power Referent power

Channel-Management Decisions:

1- 539 Channel-Management Decisions Distribution programming Distributor-relations planning Evaluating Channel Members Modifying Channel Arrangements

Channel Dynamics:

1- 540 Channel Dynamics Vertical Marketing Systems Conventional marketing channel Vertical marketing systems (VMS) Corporate and Administered VMS Corporate VMS Administered VMS

Channel Dynamics:

1- 541 Channel Dynamics Contractual VMS Wholesaler-sponsored voluntary chains Retailer cooperatives Franchise organizations Manufacturer-sponsored retailer franchise Manufacturer-sponsored wholesaler franchise Service-firm-sponsored retailer franchise

Channel Dynamics:

1- 542 Channel Dynamics The New Competition in Retailing Horizontal Marketing Systems Multichannel Marketing Systems

Channel Dynamics:

1- 543 Channel Dynamics Roles of Individual Firms Insiders Strivers Complementers Transients Outside innovators

Channel Dynamics:

1- 544 Channel Dynamics Conflict, Cooperation, and Competition Types of Conflict and Competition Vertical channel conflict Horizontal channel conflict Multichannel conflict Causes of Channel Conflict Goal incompatibility Unclear roles and rights Differences in perception

Channel Dynamics:

1- 545 Channel Dynamics By adding new channels, a company faces the possibility of channel conflict which may include: Conflict between the national account managers and field sales force Conflict between the field sales force and the telemarketers Conflict between the field sales force and the dealers

Channel Dynamics:

1- 546 Channel Dynamics Managing Channel Conflict Diplomacy Mediation Arbitration Legal and Ethical Issues in Channel Distribution Exclusive distribution Exclusive dealing Tying agreements

Chapter 18 Managing Retailing, Wholesaling, and Market Logistics by:

1- 547 Chapter 18 Managing Retailing, Wholesaling, and Market Logistics by

Kotler on Marketing:

1- 548 Successful “go-to-market” strategies require integrating retailers, wholesalers, and logistical organizations. Kotler on Marketing

Chapter Objectives:

1- 549 Chapter Objectives In this chapter, we focus on the following questions about each marketing intermediary: What major types of organizations occupy this sector? What marketing decisions do organizations in this sector make? What are the major trends in this sector?

Retailing:

1- 550 Retailing Types of Retailers Retail life cycle

Table 18.1: Major Retailer Types:

1- 551 Table 18.1: Major Retailer Types Specialty Store: Narrow product line with a deep assortment. A clothing store would be a single-line store; a men’s clothing store would be a limited-line store; and a men’s custom-shirt store would be a superspecialty store. Examples: Athlete’s Foot, Tall Men, The Limited, The Body Shop. Department Store: Several product lines—typically clothing, home furnishings, and household goods—with each line operated as a separate department managed by specialist buyers or merchandisers. Examples : Sears, JCPenney , Nordstrom, Bloomingdale’s. Supermarket: Relatively large, low-cost, low-margin, high volume, self-service operation designed to serve total needs for food, laundry, and household products. Examples : Kroger, Food Emporium, Jewel. Convenience Store: Relatively small store located near residential area, open long hours, seven days a week, and carrying a limited line of high-turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee, soft drinks. Examples : 7-Eleven, Circle K. See text for complete table

Retailing:

1- 552 Retailing Levels of Service Wheel-of-retailing Four levels of service: Self-service Self-selection Limited service Full service

Figure 18.1: Retail Positioning Map:

1- 553 Figure 18.1: Retail Positioning Map

Retailing:

1- 554 Retailing Nonstore retailing Categories of nonstore retailing Direct selling Direct marketing Telemarketing Television direct-response marketing Electronic shopping Automatic vending Buying service Corporate Retailing

Table 18.2: Major Types of Retail Organizations:

1- 555 Table 18.2: Major Types of Retail Organizations Corporate Chain Store: Two or more outlets commonly owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise. Their size allows them to buy in large quantities at lower prices, and they can afford to hire corporate specialists to deal with pricing, promotion, merchandising, inventory control, and sales forecasting. Examples : Tower Records, GAP, Pottery Barn. Voluntary Chain: A wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. Examples : Independent Grovers Alliance (IGA), True Value Hardware. Retailer Cooperative: Independent retailers who set up a central buying organization and conduct joint promotion efforts. Examples : Associated Grocers, ACE Hardware. Consumer Cooperative : A retail firm owned by its customers. In consumer coops residents contribute money to open their own store, vote on its policies, elect a group to manage it, and receive patronage dividends. See text for complete table

Retailing:

1- 556 Retailing Marketing Decisions Target Market Product Assortment and Procurement Breadth Depth

Retailing:

1- 557 Retailing Product-differentiation Strategy Possibilities Feature exclusive national brands that are not available at competing retailers Feature mostly private branded merchandise Feature blockbuster distinctive merchandise events Feature surprise or ever-changing merchandise Feature the latest or newest merchandise first Offer merchandise customizing services Offer a highly targeted assortment

PowerPoint Presentation:

1- 558 Wal-Mart has for the first time moved into the number one position on Fortune magazine’s “Fortune 500” list, passing up such companies as GM and Exxon. How has their target market identification helped put them into this position? What can Wal-Mart’s chief rivals, K-Mart and Target, do to try to close the gap? Discussion Question

Retailing:

1- 559 Retailing Merchandise managers Direct product profitability (DPP) Services and Store Atmosphere Prepurchase services include accepting telephone and mail orders, etc. Postpurchase services include shipping and delivery, etc. Ancillary services include general information, check cashing, parking, etc. Price Decision High-markup, lower volume Low-markup, high volume

Retailing:

1- 560 Retailing Promotion Decision Place Decision General business districts Regional shopping centers Community centers Strip malls (a.k.a. shopping strips) A location within a larger store

Retailing:

1- 561 Retailing Trends in Retailing New retail forms and combinations Growth of intertype competition Growth of giant retailers Growing investment in technology Global presence of major retailers Selling an experience, not just goods Competition between store-based and non-store-based retailing

PowerPoint Presentation:

1- 562 How have the “television age,” the “information age,” and the emergence of a world consumer culture affected market targeting decisions of retailers? What effect do you think trade entities like NAFTA and the European Union have had on retailing? Discussion Question

Wholesaling:

1- 563 Wholesaling Wholesalers’ functions: Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling The Growth and Types of Wholesaling

Table 18.3: Major Wholesaler Types:

1- 564 Table 18.3: Major Wholesaler Types Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. They are called jobbers, distributors , or mill supply houses and fall into two categories: full service and limited service. Full-Service Wholesalers : Carry stock, maintain a sales force, offer credit, make deliveries, and provide management assistance. There are two types of full-service wholesalers: (1) Wholesale merchants sell primarily to retailers and provide a full range of services. General-merchandise wholesalers carry several merchandise lines. General-line wholesalers carry one or two lines. Specialty wholesalers carry only part of a line. (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock, offering credit, and providing delivery. See text for complete table

Wholesaling:

1- 565 Wholesaling Wholesaler Marketing Decisions Target Market Product Assortment and Services Price Decision Promotion Decision Place Decision

PowerPoint Presentation:

1- 566 McKesson offers online supply management

Wholesaling:

1- 567 Wholesaling Trends in Wholesaling Narus and Anderson identified four ways to strengthen relationships with manufacturers Sought clear agreement about their expected function in the marketing channel Gained insight into the manufacturers’ requirements by visiting their plants Fulfilled commitments by meeting volume targets Identified and offered value-added services to help their suppliers

Market Logistics:

1- 568 Market Logistics Supply chain management (SCM) Value network Demand chain planning Market logistics Market logistics planning has four steps: Deciding on the company’s value proposition to its customers Deciding on the best channel design and network strategy for reaching the customers Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management Implementing the solution with the best information systems, equipment, policies, and procedures Integrated logistics systems (ILS)

PowerPoint Presentation:

1- 569 The IKEA-USA home page

Market Logistics:

1- 570 Market Logistics Market-logistics Objectives Market-logistics Decisions Order Processing Order-to-payment cycle Warehousing Storage warehouses Distribution warehouses Automated warehouses

Market Logistics:

1- 571 Inventory Inventory cost increases at an accelerating rate as the customer service level approaches 100% Order (reorder) point Order-processing costs Inventory-carrying costs Market Logistics

Figure 18.2: Determining Optimal Order Quantity:

1- 572 Figure 18.2: Determining Optimal Order Quantity

Market Logistics:

1- 573 Market Logistics Just-In-Time production (JIT) Transportation Containerization Piggyback Fishyback Trainship Airtruck Private carrier Contract carrier Common carrier

PowerPoint Presentation:

1- 574 The 1-800-Flowers.com site makes online ordering easy

Market Logistics:

1- 575 Market Logistics Organizational Lessons Companies should appoint a senior vice president of logistics to be the single point of contact for all logistical elements The senior vice president of logistics should hold periodic meetings with sales and operations people to review inventory, etc. New software and systems are the key to achieving competitively superior logistics performance in the future

Chapter 19 Managing Integrated Marketing Communications by:

1- 576 Chapter 19 Managing Integrated Marketing Communications by

Kotler on Marketing:

1- 577 Integrated marketing communications is a way of looking at the whole marketing process from the viewpoint of the customer. Kotler on Marketing

Chapter Objectives:

1- 578 Chapter Objectives In this chapter, we focus on three major questions: How does communication work? What are the major steps in developing an integrated marketing communications program? Who should be responsible for marketing communication planning?

Marketing Communications Mix:

1- 579 Marketing Communications Mix Advertising Sales Promotion Public Relations and Publicity Personal Selling Direct and Interactive Marketing

Table 19.1: Common Communication Platforms:

1- 580 Table 19.1: Common Communication Platforms Advertising Sales Promotion Public Relations Personal Selling Direct Marketing Print and broadcast ads Contests, games, sweepstakes, lotteries Press kits Sales presentation Catalogs Packaging-outer Premiums and gifts Speeches Sales meetings Mailings Packaging inserts Sampling Seminars Incentive programs Telemarketing Motion pictures Fairs and trade shows Annual reports Samples Electronic shopping See text for complete table The Communication Process

Figure 19.1: Elements in the Communication Process:

1- 581 Figure 19.1: Elements in the Communication Process

The Communication Process:

1- 582 The Communication Process Target audience may not receive the intended message for any of three reasons: Selective attention Selective distortion Selective retention

The Communication Process:

1- 583 The Communication Process Fiske and Hartley have outlined factors that influence communication: The greater the influence of the communication source, the greater the effect on the recipient Communication effects are greatest when they are in line with existing opinions, beliefs, and dispositions

The Communication Process:

1- 584 The Communication Process Communication can produce the most effective shifts on unfamiliar, lightly felt, peripheral issues that do not lie at the core of the recipient’s value system. Communication is more likely to be effective if the source is believed to have expertise, high status, objectivity, or likeability, but particularly if the source has power and can be identified with. The social context, group, or reflective group will mediate the communication and influence whether or not the communication is accepted.

Figure 19.2: Steps in Developing Effective Communication:

1- 585 Figure 19.2: Steps in Developing Effective Communication

Developing Effective Communications:

1- 586 Developing Effective Communications Identify the Target Audience Image analysis Familiarity scale Favorability scale Never Heard of Heard of Only Know a Little Bit Know a Fair Amount Know Very Well Very Unfavorable Somewhat Unfavorable Indifferent Somewhat Favorable Very favorable

PowerPoint Presentation:

1- 587 Some companies spend a significant portion of their advertising budget on a single high profile event. In recent years, commercial time during the Superbowl broadcast has become such an occasion. While some companies have used such events to launch successful, long-running campaigns, others have seen little benefit from these ads. Can you remember the name of the firm whose critically acclaimed Superbowl ad featured cowboys herding cats? Discussion Question

Figure 19.3: Familiarity-Favorability Analysis:

1- 588 Figure 19.3: Familiarity-Favorability Analysis

PowerPoint Presentation:

1- 589 Developing Effective Communications Semantic differential Developing a set of relevant dimensions Reducing the set of relevant dimensions Administering the instrument to a sample of respondents Averaging the results Checking on the image variance

Developing Effective Communications:

1- 590 Developing Effective Communications Determine the Communication Objective Cognitive Affective Behavioral Response-hierarchy models

Figure 19.5: Response Hierarchy Models:

1- 591 Figure 19.5: Response Hierarchy Models

Developing Effective Communications:

1- 592 Developing Effective Communications Hierarchy-of effects model Awareness Knowledge Liking Preference Conviction Purchase

Developing Effective Communications:

1- 593 Developing Effective Communications Design the Message AIDA model Gain attention Hold interest Arouse desire Elicit action Message Content Rational appeals Emotional appeals Moral appeals

Developing Effective Communications:

1- 594 Developing Effective Communications Message Structure Message Format Message Source Factors underlying source credibility Expertise Trustworthiness Principle of congruity

PowerPoint Presentation:

1- 595 bmwfilms .com

Developing Effective Communications:

1- 596 Developing Effective Communications Select the Communication Channels Personal Communication Channels Advocate channels Expert channels Social channels

Developing Effective Communications:

1- 597 Developing Effective Communications Steps to stimulate personal influence channels to work on the companies’ behalf Devote extra effort to influential individuals and companies Create opinion leaders by providing the product at attractive terms to certain people Work through community influentials such as local disk jockeys, class presidents, and presidents of women’s organizations Use influential or believable people in testimonial advertising Develop advertising with high “conversation value”

Developing Effective Communications:

1- 598 Developing Effective Communications Develop word-of-mouth referral channels to build business Establish an electronic forum Use viral marketing Nonpersonal Communication Channels Media Atmospheres Events Social-structure view of interpersonal communication Liaison Bridge

Developing Effective Communications:

1- 599 Developing Effective Communications Establish the Total Marketing Communications budget Affordable Method Percentage-of-Sales Method Competitive-Parity Method

Developing Effective Communications:

1- 600 Developing Effective Communications Objective-and-Task Method Establish the market-share goal Determine the percentage of the market that should be reached by advertising Determine the percentage of aware prospects that should be persuaded to try the brand Determine the number of advertising impressions per 1 percent trial rate Determine the number of gross rating points that would have to be purchased Determine the necessary advertising budget on the basis of the average cost of buying a gross rating point

Deciding on the Marketing Communications Mix:

1- 601 Deciding on the Marketing Communications Mix The Promotional tools Advertising General Qualities: Public presentation Pervasiveness Amplified expressiveness Impersonality Sales Promotion Benefits: Communication Incentive Invitation

Deciding on the Marketing Communications Mix:

1- 602 Deciding on the Marketing Communications Mix Public Relations and Publicity Distinctive qualities: High credibility Ability to catch buyers off guard Dramatization Personal Selling Distinctive qualities: Personal confrontation Cultivation Response

Deciding on the Marketing Communications Mix:

1- 603 Deciding on the Marketing Communications Mix Direct Marketing Distinctive qualities: Nonpublic Customized Up-to-date Interactive

Deciding on the Marketing Communications Mix:

1- 604 Deciding on the Marketing Communications Mix Factors in setting the Marketing Communications Mix Type of Product Market Advertising’s role in business markets: Advertising can provide an introduction to the company and its products If the product embodies new features, advertising can explain them Reminder advertising is more economical than sales calls

Deciding on the Marketing Communications Mix:

1- 605 Deciding on the Marketing Communications Mix Advertisements offering brochures and carrying the company’s phone number are an effective way to generate leads for sales representatives. Sales representatives can use tear sheets of the company’s ads to legitimize their company and products. Advertising can remind customers of how to use the product and reassure them about their purchase.

Deciding on the Marketing Communications Mix:

1- 606 Deciding on the Marketing Communications Mix Levitt found that: Corporate advertising that can build up the company’s reputation will help the sales representatives Sales representatives from well-known firms have an edge, but a highly effective presentation from a lesser known company’s rep can overcome that edge Company reputation helps most when the product is complex

Deciding on the Marketing Communications Mix:

1- 607 Deciding on the Marketing Communications Mix Gary Lilien found that: The average industrial company sets its marketing budget at 7 percent of sales Industrial companies spent a higher-than-average amount on advertising if their products had higher quality, uniqueness, or purchase frequency, or if there was customer growth Industrial companies set a higher-than-average marketing budget when their customers were more dispersed or the customer growth rate was higher

Deciding on the Marketing Communications Mix:

1- 608 Deciding on the Marketing Communications Mix Effectively trained consumer sales force can make four important contributions: Increased stock position Enthusiasm building Missionary selling Key account management Buyer-Readiness Stage

Figure 19.6: Cost-Effectiveness of Different Promotional Tools:

1- 609 Figure 19.6: Cost-Effectiveness of Different Promotional Tools

PowerPoint Presentation:

1- 610 Deciding on the Marketing Communications Mix Product Life-Cycle Stage Measure the Communications’ Result

PowerPoint Presentation:

1- 611 While traditional communication methods make measurement of results difficult, Internet communications offer different, more immediate measures. How can analysis of web site visitors’ behavior be used to evaluate the effectiveness of a company’s marketing communications strategy? Discussion Question

Managing the Integrated Marketing Communications Process:

1- 612 Managing the Integrated Marketing Communications Process Integrated Marketing Communications (IMC)

Chapter 20 Managing Advertising, Sales Promotion, Public Relations, and Direct Marketing by:

1- 613 Chapter 20 Managing Advertising, Sales Promotion, Public Relations, and Direct Marketing by

Kotler on Marketing:

1- 614 The best advertising is done by satisfied customers. Kotler on Marketing

Chapter Objectives :

1- 615 Chapter Objectives In this chapter, we focus on the following questions: What steps are involved in developing an advertising program? What explains the growing use of sales promotion, and how are sales-promotion decisions made? How can companies exploit the potential of public relations and publicity? How can companies use integrated direct marketing for competitive advantage? How can companies do effective e-marketing?

Figure 20.1: The Five Ms of Advertising:

1- 616 Figure 20.1: The Five Ms of Advertising Developing and Managing an Advertising Program Setting the Advertising Objectives Advertising goal (Objective)

Developing and Managing an Advertising Program:

1- 617 Developing and Managing an Advertising Program Advertising objectives at different stages in Hierarchy of Effects Informative advertising Persuasive advertising Reminder advertising Reinforcement advertising Brand equity

Developing and Managing an Advertising Program:

1- 618 Developing and Managing an Advertising Program Deciding on the Advertising Budget Five factors to consider when setting the advertising budget: Stage in the product life cycle Market share and consumer base Competition and clutter Advertising frequency Product substitutability

Developing and Managing an Advertising Program:

1- 619 Developing and Managing an Advertising Program Choosing the Advertising Message Message generation Message evaluation and selection Twedt rates messages on: Desirability Exclusiveness Believability Creative brief Positioning statement Message execution Rational positioning Emotional positioning Social responsibility review

PowerPoint Presentation:

1- 620 Ethical Funds’ homepage

Deciding on Media and Measuring Effectiveness:

1- 621 Deciding on Media and Measuring Effectiveness Deciding on Reach, Frequency, and Impact Media selection How many exposures, E*, will produce audience awareness A* depends on the exposures’: Reach (R) Frequency (F) Impact (I)

Figure 20.2: Relationship Among Trial, Awareness, and the Exposure Function:

1- 622 Figure 20.2: Relationship Among Trial, Awareness, and the Exposure Function

Deciding on Media and Measuring Effectiveness:

1- 623 Deciding on Media and Measuring Effectiveness Total Number of Exposures (E) E = R x F where R = reach, F = frequency Known as Gross Rating Points (GRP) Weighted Number of Exposures (WE) WE = R x F x I where R = reach, F = frequency, I = average impact

Table 20.1: Profiles of Media Types:

1- 624 Deciding on Media and Measuring Effectiveness Choosing Among Major Media Types Table 20.1: Profiles of Media Types Medium Advantages Limitations Newspapers Flexibility; timeliness; good local market coverage; broad acceptance; high believability Short life; poor reproduction quality; small “passalong” audience Television Combines sight, sound, and motion; appealing to the senses; high attention; high reach High absolute cost; high clutter; fleeting exposure; less audience selectivity Direct mail Audience selectivity; flexibility; no ad competition within the same medium; personalization Relatively high cost; “junk mail” image See text for complete table

Deciding on Media and Measuring Effectiveness:

1- 625 Deciding on Media and Measuring Effectiveness Media planners consider: Target-audience media habits Product characteristics Message characteristics Cost New Media Advertorials Infomercials

PowerPoint Presentation:

1- 626 More manufacturers are using new technologies to move toward “mass customization” in their product offerings. Have you seen a similar move among marketers? Discussion Question

PowerPoint Presentation:

1- 627 Earthlink: High-speed Internet Service Provider

Deciding on Media and Measuring Effectiveness:

1- 628 Deciding on Media and Measuring Effectiveness Allocating the Budget Audience size measures: Circulation Audience Effective audience Effective ad-exposed audience

Figure 20.3: Classification of Advertising Timing Patterns:

1- 629 Figure 20.3: Classification of Advertising Timing Patterns Deciding on Media and Measuring Effectiveness Deciding on Media Timing Carryover Habitual behavior

Deciding on Media and Measuring Effectiveness:

1- 630 Deciding on Media and Measuring Effectiveness Buyer turnover Purchase frequency Forgetting rate Continuity Concentration Flighting Pulsing Deciding on Geographical Allocation Areas of dominant influence (ADIs) or designated marketing areas (DMAs)

Deciding on Media and Measuring Effectiveness:

1- 631 Deciding on Media and Measuring Effectiveness Evaluating Advertising Effectiveness Communication-Effect Research Copy testing Consumer feedback method Example questions: What is the main message you get from this ad? What do you think they want you to know, believe, or do? How likely is it that this ad will influence you to undertake the implied action? What works well in the ad and what works poorly? How does the ad make you feel? Where is the best place to reach you with this message?

Table 20.2: Advertising Research Techniques:

1- 632 Table 20.2: Advertising Research Techniques For Print Ads. Starch and Gallup & Robinson, Inc. are two widely used print pretesting services. Test ads are placed in magazines, which are then circulated to consumers. These consumers are contacted later and interviewed. Recall and recognition tests are used to determine advertising effectiveness. For Broadcast Ads. In-home tests : A videotape is taken into the homes of target consumers, who then view the commercials. Trailer test : In a trailer in a shopping center, shoppers are shown the products and given an opportunity to select a series of brands. They then view commercials and are given coupons to be used in the shopping center. Redemption rates indicate commercials’ influence on purchase behavior. See text for complete table Deciding on Media and Measuring Effectiveness Portfolio test Laboratory test

Figure 20.4: Formula for Measuring Sales Impact of Advertising:

1- 633 Figure 20.4: Formula for Measuring Sales Impact of Advertising Deciding on Media and Measuring Effectiveness Sales-Effect Research Share of advertising expenditures Share of voice Share of consumers’ minds and hearts Share of market Historical approach Experimental design

Sales Promotion:

1- 634 Sales Promotion Promotion offers incentive to buy Consumer promotion Trade promotion Sales-force promotion Purpose of Sales Promotion

PowerPoint Presentation:

1- 635 Many companies offer free samples as part of a promotional campaign. This approach extends beyond the grocery store or retail outlet into large organizations like universities. Can you identify any products or services that are provided to students or faculty at your school as part of a promotional campaign? Discussion Question

Sales Promotion:

1- 636 Sales Promotion Major Decisions in Sales Promotion Establishing Objectives Selecting Consumer-Promotion Tools Manufacturer promotions Retailer promotions

Table 20.3: Major Consumer-Promotion Tools:

1- 637 Table 20.3: Major Consumer-Promotion Tools Samples: Offer of a free amount of a product or service delivered door to door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer. Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific product: mailed, enclosed in other products or attached to them, or inserted in magazines and newspaper ads. Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at the retail shop: consumer sends a specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by mail. Price Packs (cents-off deals): Offers to consumers of savings off the regular price of a product, flagged on the label or package. A reduced-price pack is a single package sold at a reduced price (such as two for the price of one). A banded pack is two related products banded together (such as a toothbrush and toothpaste). See text for complete table

PowerPoint Presentation:

1- 638 Coolsavings.com’s home page

Table 20.4: Major Trade-Promotion Tools:

1- 639 Table 20.4: Major Trade-Promotion Tools Price-Off(off-invoice or off-list): A straight discount off the list price on each case purchased during a stated time period. Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. An advertising allowance compensates retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special product display. Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size. Source: For more information, see Betsy Spethman , “Trade Promotion Redefined,” Brandweek , March 13, 1995, pp. 25-32. Sales Promotion Selecting Trade-Promotion Tools

Table 20.5: Major Business-and Sales-Force-Promotion Tools:

1- 640 Table 20.5: Major Business-and Sales-Force-Promotion Tools Trade Shows and Conventions: Industry associations organize annual trade shows and conventions. Business marketers may spend as much as 35 percent of their annual promotion budget on trade shows. Over 5,600 trade shows take place every year, drawing approximately 80 million attendees. Trade show attendance can range from a few thousand people to over 70,000 for large shows held by the restaurant or hotel-motel industries. Participating vendors expect several benefits, including generating new sales leads, maintaining customer contacts, introducing new products, meeting new customers, selling more to present customers, and educating customers with publications, videos, and other audiovisual materials. Sales Contests: A sales contest aims at inducing the sales force or dealers to increase their sales results over a stated period, with prizes (money, trips, gifts, or points) going to those who succeed. See text for complete table Sales Promotion Selecting Business-and Sales-Force-Promotion Tools

Sales Promotion:

1- 641 Sales Promotion Developing the Program Incentive Considerations Size of incentive Conditions for participation Duration of promotion Distribution vehicle Presenting, Implementing, Controlling, and Evaluating the Program Lead time Sell-in time

Public Relations:

1- 642 Public Relations Public Public Relations Public Relations Department Functions Include: Press relations Product publicity Corporate communication Lobbying Counseling

Public Relations:

1- 643 Public Relations Marketing Public Relations (MPR) Publicity vs. MPR MPR assists in the following tasks: Assisting in the launch of new products Assisting in repositioning a mature product Building interest in a product category Influencing specific target groups Defending products that have encountered public problems Building the corporate image in a way that reflects favorably on its products

Table 20.6: Major Tools in Marketing PR:

1- 644 Table 20.6: Major Tools in Marketing PR Publications: Companies rely extensively on published materials to reach and influence their target markets. These include annual reports, brochures, articles, company newsletters and magazines, and audiovisual materials. Events: Companies can draw attention to new products or other company activities by arranging special events like news conferences, seminars, outings, trade shows, exhibits, contests and competitions, and anniversaries that will reach the target publics. Sponsorships: Companies can promote their brands and corporate name by sponsoring sport and cultural events and highly regarded causes. News: One of the major tasks of PR professionals is to find or create favorable news about the company, its products, and its people, and get the media to accept press releases and attend press conferences. See text for complete table Public Relations Major Decisions in Marketing PR

Public Relations:

1- 645 Public Relations Establishing the Marketing Objectives MPR can: Build awareness Build creditability Hold down promotional cost

Public Relations:

1- 646 Public Relations Thomas L. Harris offers the following suggestions: Build marketplace excitement before media advertising breaks Build a core customer base Build a one-to-one relationship with consumers Turn satisfied customers into advocates Influence the influentials Choosing Messages and Vehicles Event Creation Implementing the Plan and Evaluating Results

Direct Marketing:

1- 647 Direct Marketing Direct-Order Marketing Customer Relationship Marketing The Growth of Direct Marketing Market Demassification The Benefits of Direct Marketing Integrated Direct Marketing

Direct Marketing:

1- 648 Direct Marketing Major Channels for Direct Marketing Face-To-Face Selling Direct Mail New Forms of Mail Delivery Fax mail E-mail Voice mail

Direct Marketing:

1- 649 Direct Marketing Direct marketing has passed through a number of stages: Carpet bombing Database marketing Interactive marketing Real-time personalized marketing Lifetime value marketing Constructing a Direct-Mail Campaign Objectives Target Markets and Prospects Offer Elements Testing Elements Measuring Campaign Success: Lifetime Value

Direct Marketing:

1- 650 Direct Marketing Catalog Marketing Telemarketing and M-Commerce Inbound telemarketing Outbound telemarketing Four types of telemarketing: Telesales Telecoverage Teleprospecting Customer service and technical support

Direct Marketing:

1- 651 Direct Marketing Other Media for Direct-Response Marketing Direct-response advertising At-home shopping channels Videotext and interactive TV Kiosk Marketing

Direct Marketing:

1- 652 Direct Marketing E-Marketing Permission Marketing Levels of Permission Marketing: No permission level Low permission level Medium permission level High permission level Transaction level E-Marketing Guidelines Give the customer a reason to respond Personalize the content of your e-mails Offer something the customer could not get via direct mail Make it easy for the customer to “unsubscribe”

Chapter 21 Managing The Sales Force by:

1- 653 Chapter 21 Managing The Sales Force by

Kotler on Marketing:

1- 654 The successful salesperson cares first for the customer, second for the products. Kotler on Marketing

Chapter Objectives:

1- 655 Chapter Objectives In this chapter, we answer the following questions: What decisions do companies face in designing a sales force? How do companies recruit, select, train, supervise, motivate, and evaluate a sales force? How can salespeople improve their skills in selling, negotiation, and carrying on relationship marketing?

Sales Representative:

1- 656 Sales Representative Robert McMurry’s sales representative types: Deliverer Order taker Missionary Technician Demand creator Solution vendor

PowerPoint Presentation:

1- 657 Designing the Sales Force Sales-Force Objectives and Strategy Common tasks for salespeople Prospecting Targeting Communicating Selling Information gathering Allocating

Designing the Sales Force:

1- 658 Designing the Sales Force Leveraged sales force Direct (company) sales force Contractual sales force Sales-Force Structure

Table 21.1: Sales-Force Structures:

1- 659 Table 21.1: Sales-Force Structures Territorial: Each sales representative is assigned an exclusive territory. This sales structure results in a clear definition of responsibilities. It increases the rep’s incentive to cultivate local business and personal ties. Travel expenses are relatively low because each rep travels within a small area. Territory size: Territories can be designed to provide equal sales potential or equal workload. Territories of equal potential provide each rep with the same income opportunities and provide the company with a means to evaluate performance. Territories can also be designed to equalize the sales workload so that each rep can cover the territory adequately. Territory shape: Territories are formed by combining smaller units, such as counties or states, until they add up to a territory of a given potential or workload. Companies can use computer programs to design territories that optimize such criteria as compactness, equalization of workload or sales potential, and minimal travel time. See text for complete table

Designing the Sales Force:

1- 660 Designing the Sales Force Sales-Force Size Workload approach: Customers are grouped into size classes Desirable call frequencies are established for each class The number of accounts in each size class is multiplied by the corresponding call frequency The average number of calls a sales representative can make per year is determined The total number of sales representatives needed is determined

PowerPoint Presentation:

1- 661 Discussion Question The Internet has allowed many companies to shift sales support for small accounts to e-commerce sites and away from sales personnel. Additionally, many regularly occurring functions have become automated, allowing customers with any size organization to use web-based systems to place orders and submit warranty requests. Can you think of any other areas where Internet-based technologies could change the way a sales force interacts with their customers?

Designing the Sales Force:

1- 662 Designing the Sales Force Sales-Force Compensation Four Components: Fixed amount Variable amount Expense allowances Benefits

PowerPoint Presentation:

1- 663 Managing the Sales Force Recruiting and Selecting Reps Training Sales Reps

Managing the Sales Force:

1- 664 Managing the Sales Force Training Programs Have Several Goals Sales representatives need to: Know and identify with the company Know the company’s products Know customers’ and competitors’ characteristics Know how to make effective sales presentations Understand field procedures and responsibilities

Managing the Sales Force:

1- 665 Managing the Sales Force Supervising Sales Reps Norms for Customer Calls Norms for Prospect Calls Using Sales Time Efficiently

PowerPoint Presentation:

1- 666 DAA Solutions’ home page describes its Design-to-Order® Software application

Managing the Sales Force:

1- 667 Managing the Sales Force Time-and-duty analysis Preparation Travel Food and breaks Waiting Selling Administration

PowerPoint Presentation:

1- 668 Company Web site as a prospecting tool

Managing the Sales Force:

1- 669 Managing the Sales Force Motivating Sales Reps Churchill, Ford, & Walker Motivation Model: Sales managers must be able to convince salespeople that they can sell more by working harder or being trained to work smarter Sales managers must be able to convince salespeople that the rewards for better performance are worth the extra effort

Managing the Sales Force:

1- 670 Managing the Sales Force Sales Quotas Supplementary Motivators Sales meetings Sales contests Evaluating Sales Representatives Sources of Information Formal Evaluation

Table 21.2: Form for Evaluating Sales Representative’s Performance:

1- 671 Table 21.2: Form for Evaluating Sales Representative’s Performance See text for complete table Territory: Midland Sales Representative: John Smith 1999 2000 2001 2002 1. Net sales product A $251,300 $253,200 $270,000 $263,100 2. Net sales product B 423,200 439,200 553,900 561,900 3. Net sales total 674,500 692,400 823,900 825,000 4. Percent of quota product A 95.6 92.0 88.0 84.7 5. Percent of quota product B 120.4 122.3 134.9 130.8 6. Gross profits product A $50,260 $50,640 $54,000 $52,620 7. Gross profits product B 42,320 43,920 55,390 56,190 8. Gross profits total 92,580 94,560 109,390 108,810

Figure 21.3: Managing the Sales Force: Improving Effectiveness:

1- 672 Figure 21.3: Managing the Sales Force: Improving Effectiveness Principles of Personal Selling

PowerPoint Presentation:

1- 673 Principles of Personal Selling Professionalism Sales-oriented approach Customer-oriented approach Rackham’s questions for prospects Situation questions Problem questions Implication questions Need-payoff questions

Figure 21.4: Major Steps in Effective Selling:

1- 674 Figure 21.4: Major Steps in Effective Selling

Principles of Personal Selling:

1- 675 Principles of Personal Selling Major Steps in an Effective Sales Process: Prospecting and Qualifying Preapproach Approach Presentation and Demonstration Overcoming Objections Closing Follow-up and Maintenance

PowerPoint Presentation:

1- 676 iPhysicianNet’s home page shows a video detailing session

Principles of Personal Selling:

1- 677 Principles of Personal Selling Negotiation When to negotiate When factors bear not only on price, but also on quality of service When business risk cannot be accurately predetermined When a long period of time is required to produce the items purchased When production is interrupted frequently because of numerous change orders

Figure 21.5: The Zone Agreement:

1- 678 Figure 21.5: The Zone Agreement

Principles of Personal Selling:

1- 679 Principles of Personal Selling Formulating a Negotiation Strategy

Table 21.3: Classic Bargaining Tactics:

1- 680 Table 21.3: Classic Bargaining Tactics See text for complete table Acting Crazy Put on a good show by visibly demonstrating your emotional commitment to your position. This increases your credibility and may give the opponent a justification to settle on your terms. Big Pot Leave yourself a lot of room to negotiate. Make high demands at the beginning. After making concessions, you will still end up with a larger payoff than if you started too low. Get a Prestigious Ally The ally can be a person or a project that is prestigious. You try to get the opponent to accept less because the person/object he or she will be involved with is prestigious. The Well Is Dry Take a stand and tell the opponent you have no more concessions to make.

Principles of Personal Selling:

1- 681 Principles of Personal Selling Relationship Marketing

PowerPoint Presentation:

1- 682 For many organizations, relationship marketing is more important than any individual transaction, because these long-term relationships can yield greater overall profitability. Would it be easier to convince a company to enter into a long term supplier-customer relationship if you offered them savings through vertical integration of product offerings , or ease of use derived from a broad range of product offerings ? Discussion Question

Chapter 22 Managing the Total Marketing Effort by:

1- 683 Chapter 22 Managing the Total Marketing Effort by

Kotler on Marketing:

1- 684 The marketing organization will have to redefine its role from managing customer interactions to integrating and managing all the company’s customer-facing processes. Kotler on Marketing

Chapter Objectives:

1- 685 Chapter Objectives In this chapter, we focus on the following questions: What are the trends in company organization? How are marketing and sales organized in companies? What steps can a company take to build a stronger customer focused culture? How can a company improve its marketing-implementation skills? What tools are available to help companies monitor and improve their marketing activities?

Trends in Company Organization:

1- 686 Trends in Company Organization Main responses of companies to a changing environment Reengineering Outsourcing Benchmarking Supplier partnering Customer partnering Merging Globalizing Flattening Focusing Empowering

PowerPoint Presentation:

1- 687 Outsourcing can save companies money by passing on to another firm the overhead involved with maintaining specialized staff positions, or eliminating the need to maintain specialized equipment that does not directly support their core business. What are the potential risks associated with outsourcing? Discussion Question

Figure 22.1: Stages in the Evolution of the Marketing Department:

1- 688 Figure 22.1: Stages in the Evolution of the Marketing Department The Evolution of the Marketing Department Marketing Organization

PowerPoint Presentation:

1- 689 Marketing Organization S imple Sales Department Sales Department With Ancillary Marketing Functions Separate Marketing Department Modern Marketing Department / Effective Marketing Company Process-And Outcome-Based Company

PowerPoint Presentation:

1- 690 Marketing Organization Organizing the Marketing Department Functional Organization Field sales Customer service Product management Geographic Organization Area market specialist

PowerPoint Presentation:

1- 691 Organizing a marketing organization geographically can allow marketing managers to focus on regional and cultural differences in their market segments. What are the reasons why geographical segmentation might be a bad idea? What could be done to minimize these problems in geographically organized marketing departments? Discussion Question

PowerPoint Presentation:

1- 692 Krispy Kreme’s Web site promotes new store openings

Marketing Organization:

1- 693 Marketing Organization Product- or Brand-Management Organization Product and brand managers have these tasks: Develop a long-range and competitive strategy for the product Preparing an annual marketing plan and sales forecast Working with advertising and merchandising agencies to develop copy, programs, and campaigns Stimulating support of the product among the sales force and distributors Gathering continuous intelligence on the product’s performance, customer and dealer attitudes, and new problems and opportunities Initiating product improvements to meet changing market needs

Figure 22.3: The Product Manager’s Interactions:

1- 694 Figure 22.3: The Product Manager’s Interactions

Marketing Organization:

1- 695 Marketing Organization Pearson and Wilson’s five steps to make the product-management system work better Clearly delineate the limits of manager’s role Build a strategy-development-and-review process Take into account areas of potential conflict Set up a formal process that forces to the top all conflict-of-interest situations Establish a system for measuring results

PowerPoint Presentation:

1- 696 Marketing Organization A Second Alternative is to switch from product managers to product teams Vertical product team Triangular product team Horizontal product team Third Alternative: Brand Asset Management Team (BAMT)

Figure 22.5: Managing Through Teams at Kraft:

1- 697 Figure 22.5: Managing Through Teams at Kraft

Marketing Organization:

1- 698 Marketing Organization Market-Management/Customer Management Organization Market-management Organization Markets manager Customer-management Organization Product-Management/ Market-Management Organization

Marketing Organization:

1- 699 Marketing Organization Corporate-Divisional Organization No corporate marketing Moderate marketing Strong corporate marketing Marketing Relations With Other Departments R&D Engineering and Purchasing Manufacturing and Operations Finance Accounting and Credit

Marketing Organization:

1- 700 Marketing Organization Building a Companywide Marketing Orientation Transforming into a true market-driven firm requires: Developing a companywide passion for customers Organizing around customer segments instead of around products Developing a deep understanding of customers through qualitative and quantitative research

Marketing Organization:

1- 701 Marketing Organization What steps can a CEO take to create a market and customer focused company? Convince senior management of the need Appoint a senior marketing officer and a marketing task force Get outside help and guidance Change the company’s reward measurement and system Hire strong marketing talent Develop strong in-house marketing training programs Install a modern marketing planning system Establish an annual marketing excellence recognition program Shift from a department focus to a process-outcome focus Empower the employees

Marketing Organization:

1- 702 Strategic innovation resource: Brighthouse Injecting More Creativity Into the Organization Marketing Organization

Marketing Implementation:

1- 703 Marketing Implementation Thomas Bonoma’s four sets of skills for implementing marketing programs Diagnostic skills Identification of company level Implementation skills Evaluation skills Aprimo helps companies “manage the business of marketing”

Table 22.1: Types of Marketing Control:

1- 704 Evaluation and Control Table 22.1: Types of Marketing Control Type of Control Prime Responsibility Purpose Of Control Approaches I. Annual-plan control Top management Middle management To examine whether the planned results are being achieved Sales analysis Market-share analysis Sales-to-expense ratios Financial analysis Market-based scorecard analysis See text for complete table

Figure 22.7: The Control Process:

1- 705 Figure 22.7: The Control Process Evaluation and Control Annual-Plan Control Sales Analysis Sales variance analysis Microsales analysis

Evaluation and Control:

1- 706 Evaluation and Control Market-Share Analysis Overall market share Served market share Relative market share Marketing Expense-To-Sales Analysis

Evaluation and Control:

1- 707 Evaluation and Control Financial Analysis

Evaluation and Control:

1- 708 Evaluation and Control Market-Based Scorecard Analysis Customer-performance scorecard Stakeholder-performance scorecard Profitability Control Marketing-Profitability Analysis

Table 22.2: A Simplified Profit-and-Loss Statement:

1- 709 Table 22.2: A Simplified Profit-and-Loss Statement Sales $60,000 Cost of goods sold 39,000 Gross margin $21,000 Expenses Salaries $9,300 Rent 3,000 Supplies 3,500 15,800 Net profit $5,200

Table 22.3: Mapping Natural Expenses into Functional Expenses:

1- 710 Table 22.3: Mapping Natural Expenses into Functional Expenses Natural Accounts Total Selling Advertising Packing and Delivery Billing and Collecting Salaries $9,300 $5,100 $1,200 $1,400 $1,600 Rent 3,000 — 400 2,000 600 Supplies 3,500 400 1,500 1,400 200 $15,800 $5,500 $3,100 $4,800 $2,400 Step 1: Identifying Functional Expenses Evaluation and Control

Table 22.4: Bases for Allocating Functional Expenses to Channels:

1- 711 Table 22.4: Bases for Allocating Functional Expenses to Channels Channel Type Selling Advertising Packing and Delivery Billing and Collecting Hardware 200 50 50 50 Garden Supply 65 20 21 21 Department stores 10 30 9 9 275 100 80 80 Functional expense $5,500 $3,100 $4,800 $2,400 % No. of Units 275 100 80 80 Equals $ 20 $ 31 $ 60 $ 30 Step 2: Assigning Functional Expenses to Marketing Entities Evaluation and Control

Table 22.5: Profit-and-Loss Statements for Channels:

1- 712 Table 22.5: Profit-and-Loss Statements for Channels Hardware Garden Supply Dept. Stores Whole Company Sales $30,000 $10,000 $20,000 $60,000 Cost of goods sold 19,500 6,500 13,000 39,000 Gross margin $10,500 $ 3,500 $ 7,000 $21,000 Expenses Selling ($20 per call) $ 4,000 $ 1,300 $ 200 $ 5,500 Advertising ($31 per advertisement) 1,550 620 930 3,100 See text for complete table Evaluation and Control Step 3: Preparing a Profit-and-Loss Statement for Each Marketing Entity

Evaluation and Control:

1- 713 Evaluation and Control Determine Corrective Action Direct Versus Full Costing Direct costs Traceable common costs Nontraceable common cost Activity-based Cost Accounting (ABC) Efficiency control Marketing Controller Sales-Force Efficiency Advertising Efficiency Sales-Promotion Efficiency Distribution Efficiency

Evaluation and Control:

1- 714 Evaluation and Control Strategic control The Marketing Effectiveness Review The Marketing Audit Marketing audit’s four characteristics: Comprehensive Systematic Independent Periodic

Table 22.6: Components of a Marketing Audit:

1- 715 Table 22.6: Components of a Marketing Audit Part I. Marketing Environment Audit Macroenvironment A. Demographic What major demographic developments and trends pose opportunities or threats to this company? What actions has the company taken in response to these developments and trends? B. Economic What major developments in income, prices, savings, and credit will affect the company? What actions has the company been taking in response to these developments and trends? C. Environmental What is the outlook for the cost and availability of natural resources and energy needed by the company? What concerns have been expressed about the company’s role in pollution and conservation, and what steps has the company taken? See text for complete table

Evaluation and Control:

1- 716 Evaluation and Control The Marketing Excellence Review

Table 22.7: The Marketing Excellence Review: Best Practices:

1- 717 Table 22.7: The Marketing Excellence Review: Best Practices Poor Good Excellent Product-Driven Market-Driven Market-Driven Mass-Market Oriented Segment Oriented Niche Oriented and Customer Oriented Product Offer Augmented Product Offer Oriented Average Product Quality Better Than Average Customer Solutions Offer Average Service Quality Better Than Average Legendary End-Product Oriented Core-Product Oriented Legendary See text for complete table

Evaluation and Control:

1- 718 Evaluation and Control The Ethical and Social Responsibility Review

PowerPoint Presentation:

1- 719

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