NAU Marketing IM

Principles of Marketing Instructional Material
Version 2.1 Date: 10/27/08

INTRODUCTION
Welcome to Marketing! Principles of Marketing is an introductory

course in the field of marketing. You will learn the components of the
marketing system and the marketing decision making process which
revolves around the marketing mix (product, price, place and
promotion). Additional topics include consumerism, the legal
environment, consumer behavior, and the international market and
their effect on marketing.
This course will take you on a journey through understanding what

marketing is and how it’s used for the benefit of businesses and consumers alike. Marketing is a more
recent business field and one that has greatly impacted the way we do business. We’ll discuss the way
information helps us make decisions, examine our environments, create strategies, use socially
responsible decisions and understand global aspects of marketing. This information will help us
understand the way business is conducted and to better compete in today’s highly competitive market.
This course is designed around competencies, supported by learning objectives, which tell you what
major skills you will learn. The instructional materials support the competencies and learning objectives
and are designed to increase the efficiency and flexibility of your learning time and effort. Through your
involvement and participation in the course activities, you will learn these skills and demonstrate your
mastery of them by completing the required assignments and assessments.
National American University Page 2

GRADING
GRADED ITEMS
Item Point Value Weight
Quizzes 80 8%
Discussions 300 (12 discussions, 25 points each) 30%
Assignments 400 (8 assignments, 50 points each) 40%
Case Study 120 12%
Final Exam 100 10%
TOTAL 1000 100%
GRADING SCALE
Percentage Letter Grade
90 – 100% A
80 – 89% B
70 – 79% C
60 – 69% D
Below 60% F

PERFORMANCE EXPECTATIONS
Class members are expected to read the instructional materials and complete the activities for each
learning plan prior to class in preparation for the classroom sessions each week. Be prepared to discuss
the content in the instructional materials during class sessions. Time is limited and lack of preparation
for class will reflect in your participation points.
PRE-CLASS ACTIVITIES
Read the learning plan activities

Read the instructional materials
Read any web linked materials and complete related activities
Complete any web searches.
IN-CLASS ACTIVITIES
Show evidence of preparation for in-class activities through attendance and use of learning plan terminology
and concepts.
Actively participate in all classroom activities (discussions, quizzes, exams, exercises, etc.)
Make meaningful and substantive contributions to classroom activities.
POST-CLASS ACTIVITIES
Complete assignments as directed by the instructor.

TABLE OF CONTENTS
Learning Plan 1: The Basics of Marketing ......................................................................................................................6
Learning Plan 2: The Major Forces and Factors in Marketing and Buying Decisions ..................................................30
Learning Plan 3: Strategic Planning and Marketing Strategy.......................................................................................50
Learning Plan 4: Finding and Growing Products ..........................................................................................................72
Learning Plan 5: Factors Affecting Pricing and the Major Channel Intermediaries .....................................................90
Learning Plan 6: Retailing and Integrated Marketing Communication .....................................................................105
Learning Plan 7: Personal Selling, Direct Marketing and the Internet .......................................................................123
Learning Plan 8: Global Marketing, Social Responsiblilty and Ethics.........................................................................148

LEARNING PLAN 1: THE BASICS OF MARKETING
COMPETENCIES
APPLY BASIC MARKETING TERMS AND CONCEPTS.

APPLY BASIC MARKETING RESEARCH PRINCIPLES.
This learning plan addresses the following learning objectives to help you master the competency:
a) Distinguish between consumer needs, wants, and demands.

b) Distinguish between products and services.
c) Identify the key elements of the five marketing management philosophies.
d) Describe the major challenges facing marketers in the new “connected” millennium.
e) Discuss why accurate marketing information is important to a company.
f) Develop a marketing research plan for a product and/or company of your choosing.
g) Define marketing information system.
h) List steps in the market research process.
i) Examine the steps for developing a comprehensive market strategy.
j) Describe ways of distributing marketing information.
k) Discuss special issues facing marketing researchers in today’s environment.
OVERVIEW
Make a list of some things you need. Then, make a list of some things you want. If you had written the
same list five years ago, would it look different? How? Have you ever wondered why a business chose its
location? Its products? The needs or wants of customers? Its hours?
Before we begin discussing the many facets of marketing, we must first begin with a definition of the
term “marketing.” What do you think the term marketing means?
The American Marketing Association defines marketing as “an organizational function and a set of
processes for creating, communicating and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders.” This definition leads us to
understand the aspects of the role of marketing in the organization as it seeks to understand what
consumers need, want and demand.
This organizational function and set of processes must be understood as the
marketing managers’ task of satisfying customers and stakeholders by
assessing consumers’ needs, measuring their needs and wants for a product
or service, and determining the influences on their decision-making process
as they make choices among products and services in the market. Twenty
years ago, marketing was called “mass marketing.” Firms would blast a
message over the radio or television, hoping that those who were interested
would be listening. These firms never sought out customers—they only sent
out messages in hopes that the audience was in fact a market target. An
analogy would be hunting for Canada geese using a shotgun. The pellets
from the shell (or the message) would spread through the air, and so the chance of hitting one or more

birds (or having the firm’s message heard by numerous market targets) was attainable. Throughout this
course, you’ll be able to understand how marketing has evolved.
Every profit and not-for-profit business attempts to achieve customer value as a way of staying ahead of
the competition and making a profit. If customers don’t value your product or service, you cannot stay
in business. Since the concept of value is determined by the consumer, a system that assesses accurate
and reliable data about consumers is needed. This is the task for marketing research.
What makes this role more challenging is the increasing explosion of information, technologies and
systems. However, this challenge is also offset by a series of competencies that were not available
before 30 years ago, such as computers, fax machines, CD and DVDs, videoconferencing, the Internet,
marketing software, U.S. and global official information, electronic almanacs and research providers for
every field. This extensive information can become overwhelming, and marketers have to look for the
right pieces of information to more fully understand the market in which they operate or hope to enter.
You can learn more about how the whole cumulative body of marketing knowledge and research arose
in the 1950s with the Ford Foundation’s program, Harvard mathematical models and research journals
founded by psychologists in the article “Scholarly Research in Marketing: Exploring the ‘4 Eras’ of
Thought Development” by Wilkie, and Moore.
This learning plan will provide you with information related to the role of researching customers’
thoughts and values. You will see how market researchers have become an essential and valuable asset
for every organization, the important market information researchers provide for organizations to
provide better customer value, the methods by which such information is provided, and how a
marketing information system, whether manual or automatic, is developed.

REVENUE GENERATION AND THE MARKETER
Out of necessity, business organizations require revenue or income to

successfully compete in a market. But what is a market? A market can
mean many things, but most simply it refers to the place where
buyers and sellers come together to exchange goods or services.
Therefore, businesses must use the concepts of marketing to make
sure that their products or services meet with consumers to develop a
mutually beneficial relationship.
Locating and defining current and future revenue-generating opportunities are some of the primary
roles of the marketing function in an organization. It is a highly creative and non-routine business
activity that requires a pioneering and risk-taking orientation on the part of the marketing department
that accepts this role and responsibility for the organization. The people responsible for marketing in an
organization are called “marketers.
Over time, customers have been identified by organizations as having specific needs, wants and
demands.
NEEDS
“Needs” are states of felt deprivation. A customer “need” may be physical,

social or individual. In other words, there are different characteristics for the
definition of a customer need, and the marketing organization within a
company will categorize customer needs using these three broad categories.
A physical need is a particular requirement by the body to be able to achieve

homeostasis through the consumption of food, drink and air, getting
adequate sleep and maintaining a comfortable temperature. When a
customer expresses interest in the fulfillment of a physical need, those
needs are characterized by physical requirements for food, clothing, shelter,
medical services, etc. A human being requires these needs to be satisfied to live.
Social needs are those particular customer needs associated with affection and love. Family and friends
most often meet this social need. This need however can extend to participation in or support of social
organizations. For example, identification with the Girl Scouts of America and the purchase of Girl Scout
cookies demonstrate a support and affiliation with an organization that supports the growth and
development of young women.
Finally, there are individual needs for knowledge and self-expression. This may be a person’s desire for
self-improvement, status or reputation. It may also include personal preferences that make individuals
unique.

CUSTOMER VALUE AND THE PERCEPTION OF NEED
According to Kano’s Model of Customer Satisfaction (Kano, 1984),

need is defined as the primary value element that describes the
performance and physical characteristics of the product. Through
understanding the consumer or customer need, a marketer can
clearly define the product and service feature against the specific
needs of the customer. The closer the fit between the customer’s
need and the product or service meeting that need, the more likely it
is that demand for the product will be high. A high demand for a
product or service helps promote product sales.
Because of this demand relationship, the success of every product and service—and thus every
business—is contingent primarily on a clear identification of customers’ needs and the development of
products and services that specifically meet those needs. If needs are not met, the customer will be
dissatisfied. Dissatisfied customers will seek other products that may meet their needs.
Follow this link for a graphic and further explanation of Kano’s Model of Customer Satisfaction:
www.ucalgary.ca/~design/engg251/First Year Files/kano.pdf.
WANTS
Wants, simply put, are anything that we desire. However, in looking at this
from a marketing perspective, customer wants are defined as the way needs
are shaped through perceptions of social and individual cultures and
personality. In other words, based on the social position of an individual, the
individual culture of the consumer or the individual’s perception of value, a
need is turned into a want, and the customer is driven to purchase a
particular product or service based on this “need” that has now become a
want. For instance, a college student needs a pair of shoes to be able to walk
to school. However, it is the role of the marketer to create the conditions in
which the student wants a pair of shoes from the “Wear Yellow Collection”
offered by Nike. In this example, we begin to understand the highly creative and consumer focused
orientation of the marketing activities and their execution. We can see that one of the primary goals of a
marketer is to turn customer needs into customer wants, creating a more significant incentive for the
consumer to purchase the product or service.

DEMAND
We have now discussed customer needs and wants, and we must now
understand the concept of demand.
Once the customer’s want is satisfied by the product or service, which is

based on satisfying a need, the customer will act on the want by using
resources or buying power. A buying transaction is the evidence of consumer
demand. The consumer receives value and satisfaction for the money
offered in exchange for the good or service. The organization receives a
revenue stream in return for producing a product or service that fulfills the
need and want of the consumer. In marketing, the closer the fit between the
need and want, and the ultimate satisfaction and value for the consumer received from a particular
product or service, the higher the consumer’s demand for the product or service. This is a simple but
important marketing principle to remember.
There are many products and services in the market today. Products are those items made from raw
materials and transformed into a tangible or touchable item. Examples of products include computers,
shoes, dishwashers, desks, etc. Services on the other hand, are intangible and are performed by a
person for the convenience of another. Examples of services include income-tax preparation, massages,
hospitals, amusement parks, laundromats, etc. We will discuss products and services further when we
evaluate the components of the marketing mix.
MARKETING OPPORTUNITY ANALYSIS OR MARKETING MIX: THE “4PS”
Successful companies are able to watch customers very closely to design, produce or market products
and services that fit the needs and wants of the consumers. It is the job of marketers to continually
conduct customer research to provide businesses with the necessary information relating to customer
needs to promote the demand for their products and services.
Once the organization has conducted research to help decide on their overall marketing strategy
through understanding customers' needs, wants and demands, marketers then analyze their marketing
opportunity. The "marketing mix" is a set of controllable, tactical marketing tools that the marketer
blends to produce a response in their customers, or target market to maximize a marketing opportunity.
This is the way marketers turn "wants" into "demands."
These controllable variables or tools that marketers assess are: Product, Price, Place and Promotion,
commonly known as the "4 Ps" of marketing. Sometimes, we refer to these concepts as the "4 Cs",
which are Customer Solution, Cost, Convenience and Communication. The 4 P's are business-centered,
whereas the 4 C's are more consumer-centered. (http://www.teneric.co.uk/businessinfo/marketing-
mix.html)

Let's take each of these terms and examine them for their contribution to the success of the marketer,
the organization and the satisfaction of the customer.
MARKETING OPPORTUNITY ANALYSIS OR MARKETING MIX: THE "4PS"
PRODUCT
A product is a good-and-service combination offered to a target market. The

target market is made up of the group of potential customers with similar
needs and buying characteristics that we seek in our marketing efforts. A
product is defined as anything that can be offered to a market that might
satisfy a consumer want or need. Products are typified by a complete bundle
of benefits or satisfactions that buyers perceive they will obtain if they
purchase the product. As we stated earlier, the more closely a product or
service matches the need and want of the consumer, the more satisfaction
the consumer will have in the product and service.
As we said earlier, products can be thought of as tangible (concrete), but it can also include intangible
(the sum of all physical, psychological, symbolic and service attributes) characteristics, such as the
"feeling" a consumer gets when sitting in a fine leather chair. The chair will have utility by providing
seating to the consumer; but the leather surface creates an intangible contribution to the experience of
the customer, an experience that goes beyond concrete utility of offering a place to sit down.
For the purposes of the marketing mix, "Product" will refer to both products and/or services. Keep in
mind that products and services may be consumer or industrial. Under the consumer category, we have
convenience, shopping, specialty and unsought goods. On the other hand, industrial products may be
materials and parts, capital items, and supplies and services. Let's examine these types of products and
services separately:
PRODUCT - CONSUMER PRODUCTS AND SERVICES
Consumer products are those products and services related to the

personal needs and wants of the individual consumer. Consumer
products are related to the consumption activities of the individual in
the marketplace.
Consumer buying patterns are likely to be highly differentiated in

various cultures, differing from society to society. In other words,
British consumers may have different buying patterns than Brazilian
consumers.
There are four types of consumer products: convenience, shopping, specialty and unsought. These will
be discussed further in a later learning plan.

PRODUCT - INDUSTRIAL PRODUCTS AND SERVICES
These are products and services that are purchased for further
processing or for use in conducting a business. Examples include
machinery repair services, computing equipment and forklift trucks.
This one also has subcategories:
Materials and Parts: These include raw materials (farm products such
as wheat and natural products such as fish), manufactured materials
or component materials (iron, cement) and components parts (small
motors, tires).
Capital Items: These are industrial products that aid in the buyer's production or operations, such as gas
installation and accessory equipment. Installation equipment may be buildings (factories, and offices),
and fixed equipment (generators, drill presses). Accessory equipment may be portable factory
equipment and tools (hand tools, lift trucks) and office equipment (fax machines, computers, and
printers).
Supplies and Services: Supplies are items such as cleaning and maintenance materials or stationery.
Services can be maintenance and repair services (computer repair) and business advisory services (legal
and management consulting).
PRODUCT LIFE CYCLE
An important aspect of understanding products and markets is that products have what is referred to as
a life cycle. The product life cycle is characterized by four stages that include product development,
introduction, growth, maturity and decline. We will discuss the product life cycle in a later learning plan.
It is important to understand, however, that products will not exist forever and that their existence is
often marked by four distinct stages.
PRICE
"Price" is the amount of money a customer will pay for a product or service
or both. There are many factors that determine the price of the product.
Minimally, the price is determined by the cost it takes to make the product
or provide a service. This includes both fixed and variable costs. Fixed costs
include space rental, utilities, etc., while variable costs vary, such as the labor
used or cost of raw materials. A business will then add a percentage to the
cost of the product or service to make a profit.
In simple terms, the price is the amount of money that should cover both
production costs and should provide profit to a company. For example, it
costs $20 to produce a pair of shoes (materials, labor hours, manufacturing plant rental, supervision,

etc.). A price of $60 will cover such costs and will produce $40 in profit. These are basic concepts that
can be studied more deeply in accounting and financial courses.
PLACE
The "place" component of the 4P's includes all decisions and activities
related to what marketers do to make their product or service available to
target customers. This includes the path that products take from
manufacturer to buyer and is called the "distribution channel." For example:
DKNY, an upscale clothing producer, uses wholesalers and retailers in their
distribution channel. These include Burdines-Macy's, Bloomingdale's,
Dillard's, Saks Fifth Avenue and outlets. These retail stores keep an inventory
of DKNY merchandise and attract every type of customer. For big spenders,
DKNY makes its merchandise available in Bloomingdale's and Saks. For low
spenders, DKNY makes its merchandise available in outlets. The more places
a product is offered, the higher the chances to sell the product.
On the other hand, an industrial supplier that serves an industrial consumer may have a supply network
of distributors in an industry. The network of distributors and resellers is responsible for moving the
product through the sales "channel" to the end-user. The computer industry is characterized by groups
of distributors and resellers that supply organizations with computers. Cisco and IBM sell directly to
industrial users of computer supplies and products through such a distribution channel. The more
closely the distribution channel connects with the customer or end-user in the sales channel, the more
easily the products and services of the organization are sold to meet the customers' need for those
products and services.
The marketer in the organization is responsible for understanding the sales channel in any industry and
for connecting the organization's marketing strategies with the network of distributors and resellers,
which will then connect its products and services with consumers.
PROMOTION
Just as the word suggests, "promotion" in the 4P's attempts to promote a

company and/or its products and services to create awareness and
attraction to generate sales. This is done in numerous ways. Marketers are
constantly seeking new avenues for promotion unique to other sellers in
their market. As you study the marketing mix, you will understand that
having a good price, place and product is not enough if the promotion fails.
For example, TiVo may be a great product with appealing commercials, but a
large number of target customers do not know what TiVo means or what
kind of product it is. So this product, with a good price and convenient places

of purchase, fails in promotion. Promotion can be costly, and knowing just the right amount of
promotion can be difficult.
THE FIVE MARKETING PHILOSOPHIES
Now that we understand the key aspects of the marketing mix, we

need to understand some of the perspectives or philosophies of
marketing.
Marketing management is defined as the practical application of

marketing techniques. Therefore, it includes analysis, planning,
implementation and control of programs designed to create, build
and maintain mutually beneficial exchanges with consumers and the
organization that serves them.
Organizations conduct their marketing management through and with the aid of the following
philosophies: production, product, selling, marketing and societal marketing. These philosophies
represent discrete ways that firms can approach the marketplace. A firm will often choose one, but
some firms choose several of these philosophies to market their products and services.
PRODUCTION PHILOSOPHY
The production philosophy holds that consumers will favor products that are available and highly
affordable. This philosophy is more commonly recognized when organizations try to increase production
at lower costs. When a company favors operational cost reductions over other marketing philosophies,
it is a clear indication that they have a "production" marketing philosophy.
PRODUCT PHILOSOPHY
The product philosophy means that customers will favor products that offer the most in quality,
performance and innovative features. This is called customer value. These qualities, together with the
customer personality, are the biggest influences in the purchasing decision-making process of every
customer.
SELLING PHILOSOPHY
The selling philosophy means that customers will not buy enough of the organization's products unless it
undertakes a large-scale selling and promoting effort. This is where a need for advertising is highly
reflected, especially with unsought products.

MARKETING PHILOSOPHY
The marketing philosophy means that achieving organizational goals depends on determining the needs
and wants of market targets and delivering the desired satisfactions more effectively and efficiently than
competitors.
For example: Marriott Hotels uses the slogan "We Make it Happen for You." Celebrity Cruises uses "Let
us exceed your expectations." Visit these Web sites to see the practical approach for this philosophy.
http://marriott.com/default.mi
http://www.celebrity.com/home.do
SOCIETAL MARKETING PHILOSOPHY
Finally, the societal marketing philosophy applies when the organization determines the needs, wants
and interests of target markets and provides for society's and customers' well-being.
For example, The Body Shop. This organization strongly opposes the testing of cosmetics and ingredients
on animals. This is its strategy for the application of the societal marketing philosophy, which is a
differentiation from other competitors who might use animal testing.
NEW CHALLENGES
Understanding the marketing mix and marketing philosophies,

however, does not prevent challenges in the market. Increased
understanding of marketing by businesses as well as technological
innovation and increased globalization continues to create many
challenges.
Technology and globalization have been fostered by new and

innovative communication techniques, and along with changing social
trends and patterns, have led to the creation of the term "market connectedness."
As the marketplace globally becomes more connected, the implications are clear: New markets are
established at an alarming rate. In other words, the more connected we become, the more pressure
there is to produce new products and services to meet high levels of demand across the globe. New
technologies and techniques for communication, use of the Internet, as well as detailed customer
databases, telecommunications, videoconferencing, intranets and extranets all create possibilities for
connection and for resolving the tension between consumer needs and wants, and consumer demands.
It also creates a very competitive environment.

The major challenges marketers now face include decisions related to how to connect with customers,
partners and the rest of the world. Identification of the most profitable customers, keeping customers
for the lifetime of their purchasing activity and staying directly in touch with customers through "chat
rooms," live customer service, etc., are but a few of the challenges professional marketers face in high
velocity markets. For example, Godiva Chocolatier marketers are directly connected to the customers
through live chat rooms created for customer service (see http://www.godiva.com ) working directly
with customers can be considered a challenge and an additional marketing expense. However, having
direct information from customers produces a competitive advantage for this company by keeping it
ahead of the identification of future needs and wants expressed directly by its customers, before the
competition identifies those specific consumer needs and wants.
Being connected goes further than staying in touch with the customer.
Organizations must also stay in touch with marketers inside the company as
well as with external partners, such as suppliers. These relationships or
strategic alliances may result not only in new product and service ideas but
also in ways to reduce costs and improve processes for a more competitive
market position. This means that developing internal and external
relationships helps us compete more effectively.
Information is a key to a marketer's success. Therefore, marketers use a

series of tools, techniques, market theories and philosophies that help them
stay in touch with the daunting amount of information. These tools also help the organization maintain
its focus which is necessary to capture a significant percentage of the mind share of the market. The
term "mind share" refers to the degree to which a consumer (industrial or individual) thinks of one
specific organization when a product or service idea is discussed. In later learning plans, we'll discuss
ways marketers collect and understand information to help organizations market themselves effectively.
APPLY MARKETING RESEARCH PRINCIPLES
INTRODUCTION
Every profit and not-for-profit business attempts to achieve customer value as a way of staying ahead of
the competition and making a profit. If customers don’t value your product or service, then you cannot
stay in business. Since the concept of value is determined by the consumer, a system that assesses
accurate and reliable data about consumers is needed. This is the task for marketing research.
What makes this role more challenging is the increasing explosion of information, technologies and
systems. However, this challenge is also offset by a series of competencies that were not available
before 30 years ago, such as computers, fax machines, CDs and DVDs, videoconferencing, the Internet,
marketing software, U.S. and global official information, electronic almanacs and research providers for

every field. This extensive information can become overwhelming,
and marketers have to look for the right pieces of information to
more fully understand the market in which they operate or hope to
enter.
You can learn more about how the whole cumulative body of
marketing knowledge and research arose in the 1950s with the Ford
Foundation’s program, Harvard mathematical models and research
journals founded by psychologists in the article “Scholarly Research in Marketing: Exploring the ‘4 Eras’
of Thought Development”, by Wilkie, and Moore.
http://proquest.umi.com/pqdweb?did=498276221&sid=8&Fmt=2&clientId=9003&RQT=309&VName=P
QD
This part of the learning plan will provide you with information related to the
role of researching customers’ thoughts and values. You will see how market
researchers have become an essential and valuable asset for every
organization, the important market information researchers provide for
organizations to provide better customer value, the methods by which such
information is provided, and how a marketing information system, whether
manual or automatic, is developed.
LEARNING OBJECTIVE: DISCUSS WHY ACCURATE INFORMATION IS IMPORTANT TO A COMPANY

AND DEVELOP A MARKET RESEARCH PLAN FOR A PRODUCT AND/OR COMPANY OF YOUR
CHOOSING.
The goal of marketing is to identify and satisfy the customer’s needs and wants in a more effective and
efficient way than that of the competition. To achieve this goal, every marketer needs to understand the
consumers (industrial or individual) in their target market. This includes their attitudes, value systems,
buying behaviors and demographics. Therefore, the creation of superior customer value and satisfaction
for customers requires that companies collect and assess accurate consumer information. A formalized
approach to this task of building value in the eyes of the company’s target market is what we know as
"marketing research."
We will see how marketers view information, not just as an input for making better decisions but also as
an important strategic asset and marketing tool. Accurate and reliable information is a priceless asset
every company acquires. Competitors can copy each other’s equipment, products and sometimes
procedures, but it is more difficult to duplicate another company’s information.

To see a clear example as to why information is important to a
company, take a look at an interesting article published by the Wall
Street Journal: Home & Family: Wal-Mart Stores to Sell High-End
Sound System In Effort to Go Upscale Kortney Stringer. Wall Street
Journal. (Eastern edition). New York, N.Y.: Mar 31, 2005. pg. D.4
http://proquest.umi.com/pqdweb?did=814972801&sid=7&Fmt=3&cli
entId=9003&RQT=309&VName=PQD. You can see how even this low-
price retail giant is beginning to cater to more upscale clients. What
information helped Wal-Mart make this decision? How was the information obtained? What would
happen without this information?
Information is such an important variable that today’s marketing research suppliers are in demand.
Many organizations have outsourced their market research needs, and market research suppliers have
become a very valuable resource for every competitive organization.
To explore more about this topic, read “Selecting a Market Research Supplier” (Holly Edmunds, 2001
MarketingPower.com Inc.) http://www.marketingpower.com/ or “Global Sourcing: A Hallmark of the
21st Century Business.” (Patrick M Byrne. Logistics Management (2002). Highland Ranch: Nov
2004.Vol.43, Iss. 11; pg. 33, 2 pgs)
QD. In these articles, you will be able to determine how convenient and responsible outsourcing
decisions can be in meeting an organization’s information needs.
LEARNING OBJECTIVE: DEFINE MARKETING INFORMATION SYSTEM.
What is a marketing information system? As the name suggests, it is a system of organizing and
retrieving marketing information. Marketing information systems were created in response to every
organization’s need for marketing information, managed in a systematic way. This system consists of
people, equipment and procedures to gather, sort, analyze, evaluate and distribute needed, timely and
accurate information to marketing decision makers.
As we discover how the marketing information system works, the following model will help you
understand the components and relationships within this system.
Whether manual or automated, the Marketing Information System is composed of three parts:
assessing information needs, developing information and information analysis.

MARKETING INFORMATION SYSTEM
ASSESSING INFORMATION NEEDS
Assessing information helps balance the information that managers would like to have against what
they really need and what is feasible to obtain. The company begins by interviewing marketing
managers to find out what information the marketing manager would like to have. Some managers will
ask for whatever information they can get, without thinking carefully about what they really need. It is
important that we understand what information we really need, because obtaining information can be
time-consuming and costly.
For example, a manager might want to know how competitors are planning to change their advertising
budgets for the following year, which competitors are planning to develop a particular product or
aggregate sales for the last five years for a particular product.
DEVELOPING INFORMATION
The information we need can be obtained from internal data, marketing intelligence and marketing
research. Internal databases are computerized collections of information obtained from data sources
within the company. For example, the accounting department prepares financial statements and keeps
detailed records of sales, costs and cash flows. Manufacturing reports on production schedules,
shipments and inventories, and may keep track of the market demand. Internal data can be accessed
more quickly and cheaply than other information sources. However, it can also be incomplete or wrong
because data ages quickly and careful tracking may have only built an unnecessary surplus of unusable
or unnecessary information.
Marketing intelligence is the systematic collection and analysis of publicly available information about
competitors and developments in the marketing environment. This system gathers, analyzes and
distributes information about the company’s competitive, technological, customer, economic, social and
political and regulatory environments. This system determines what intelligence is needed, collects it
through a variety of means and delivers it to the marketing managers. For example, if marketers need to
know political, economic or social statistics, the Statistical Abstract of the U.S. would be beneficial.
Check out the abstract by visiting http://www.census.gov/compendia/statab/. Information already
gathered is known as secondary data.
Marketing research is the systematic design, collection, analysis and reporting of data relevant to a
specific marketing situation facing an organization. This data can be related to assessments of customer
satisfactions and purchase behavior, studies of pricing, demos, promotion activities, trade shows, etc.
New data, such as the information obtained through marketing research, is called, primary data. We will
discuss the steps in the market research process in the next section.

INFORMATION ANALYSIS
The third portion of the marketing information system is information analysis. When applying the
marketing information to problems and decisions, there may be a need for more statistical analysis. This
part of the marketing information system, applies statistical analysis to learn more about both the
relationship between a set of data and its statistical reliability, and means and standard deviations on
questions about markets and outcomes. Without this statistical analysis, marketers may not understand
the full picture and make poor decisions. For example, information gathered suggests that one out of
four households has a computer. We can assume that means for the U.S., but what if it were only for a
particular state or region? What if the actual number of computers was much higher or lower in the
market you are serving?
DISTRIBUTING INFORMATION
Once the information is gathered through marketing intelligence and marketing research, it must be
distributed to the right marketing managers at the right time. Most companies centralize marketing
information systems that provide managers with regular performance reports, intelligence updates and
reports on the results of studies. For example, a sales manager having trouble with a customer may
want a summary of the account’s sales and profitability over the past year. Or a retail store manager
who has run out of a best-selling product may want to know the current inventory levels in the chain of
other stores.
LEARNING OBJECTIVE: LIST STEPS IN THE MARKETING RESEARCH PROCESS AND ASSESS THE
IMPORTANCE OF EACH STEP FOR THE DEVELOPMENT OF A COMPREHENSIVE MARKET
STRATEGY.
Like any other process, the marketing research process is composed of several steps. These steps or
activities are described as follows:
STEPS IN THE MARKETING RESEARCH PROCESS
1. Defining the problem and research objectives
This is often the hardest step in the research process. Marketing managers may know that
something is wrong without knowing the specific causes. For example, they may know that sales
are going down, but they don’t know that they have poor advertising and promotions. Once the
problem has been identified, the manager and researcher must set the research objectives. The
objectives may be exploratory, descriptive and causal. The exploratory research objective is to
gather preliminary information that will help define the problem and suggest hypotheses. The
descriptive research objective is to describe things such as the market potential for a product or

the demographics and attitudes of consumers who buy the product. The causal research
objective is to test hypotheses about cause-and-effect relationships.
2. Developing the research plan
This step is to determine the information needed, develop a plan for gathering it efficiently and
present the plan to marketing management. The plan outlines sources of existing data and spells
out the specific research approaches (observation, surveys, experiments), contact methods
(mail, telephone, personal, online), sampling plans (sampling unit, sample size, sampling
procedure) and instruments that researchers will use to gather new data (questionnaire,
mechanical instruments).
The question many companies face is: Should we do the research ourselves or pay someone to
do it? Some information is readily available, while new information can be time-consuming and
costly. It is important to understand that it takes time to gather information. When the process
of data collection is over, much of the information may be outdated and thus unreliable. An
option many businesses use is to pay a firm to gather the information. Some market research
firms specialize in gathering market data and can provide that information more readily.
Understanding research tools is also important. Many research tools exist and different tools
gather different types of information. Let’s take a look at the basic types of data or information:
Qualitative and Quantitative. Qualitative concerns itself with the quality of the information,
whereas quantitative is concerned with the quantity or amount of the information. Both of
these types can be useful.
Among the types of qualitative research tools are focus groups. Focus groups are small meetings
held to discuss specific products or services for marketers to better understand customer needs.
For example, marketers may hold a focus group to unveil advertising. They first want to know
how the focus group will respond to the advertising before launching the advertising to the
entire market. The focus group may have suggestions or comments beneficial to the marketers.
One of the main types of quantitative tools is the questionnaire. Most people are familiar with
questionnaires because they are often conducted online or by telephone. This allows
researchers to gather specific data from many people in a systematic way. Questionnaires may
be needed to understand a specific market. For example, a questionnaire may be commissioned
to determine when and where people buy their electronics or what type of experience someone
had while shopping online.
3. Implementing the research plan
This step involves collecting, processing and analyzing the information. Data collection can be
carried out by the company’s marketing research staff or by outside firms. This stage is the most

expensive and the most subject to error. Researchers must watch the fieldwork closely and
make sure that respondents don’t give biased or dishonest answers. They must also be aware of
those respondents who tend to give “neutral” answers because they may be bored by either the
complexity or length of the question.
4. Interpreting and reporting the findings
Here, the researcher interprets the findings, draws conclusions and reports them to
management. The researcher should not try to overwhelm the marketing managers with
numbers and complicated statistical techniques. The researcher should present important
findings that are useful in the major decision-making processes faced by the management.
Experts on statistics are the major players in this step.
When these steps are designed and implemented well, the result is a flow of information to the
thought-leadership within the organization. The goal is better decisions that are data driven,
rather than intuitive or opinion-derived, resulting in a better connection between the needs and
wants of the consumer (industrial or individual), which in turn results in a higher consumer
demand.
LEARNING OBJECTIVE: DESCRIBE WAYS OF DISTRIBUTING MARKETING INFORMATION.
Marketing information can be invaluable, but only if it gets to the

right people at the right time. Managers are faced with knowing when
and how to distribute information. Some managers unfortunately like
to hoard information, but sharing key market data can successfully
impact the firm. Marketing directors and managers alike share
marketing research with each other. Decision-makers of all types need
portions of data to make decisions about keeping the company
competitive. Some companies have staff researchers who control the
data. Other companies compile data and make it available to top managers or on servers that can be
accessed company-wide. Because information is so valuable, it can be difficult to know when to keep
and when to share information and how.
LEARNING OBJECTIVE: DISCUSS SPECIAL ISSUES FACING MARKET RESEARCHERS IN TODAY’S

ENVIRONMENT.
Market research is an important, yet challenging task. There are special issues that face market
researchers today that make this process even more challenging.

INTRUSIONS ON CONSUMER PRIVACY
I’m sure we’ve all experienced unwanted calls by marketers. These

marketers call you because as marketing professionals, they have a
need to gather information and they likely have information that says
you don’t work weekends! This means they call during weekday
evenings or weekends. It is their job to gather all of the information
that, for marketing purposes, is valuable to their company.
Sometimes online companies gather information regarding your

surfing habits, your age, what credit card you use to make purchases, etc. How is this information used,
and is it tied to your name directly? Eighty-two percent of Americans worry that they lack control over
how businesses use their personal information, and 41 percent said that businesses had invaded their
privacy. For a marketer to call you without your consent, knowing that he or she did not obtain your
phone number voluntarily from you, may be viewed as an intrusion on your privacy and your living
space. As a response to this increasing concern and these bothersome phone calls, the Do Not Call
Registry has been enacted. For more interesting information regarding the National Do Not Call Registry,
visit https://www.donotcall.gov/default.aspx. This registry is just one legal issue that every marketer
faces when he or she tries to perform his or her research by telephone.
MISUSE OF RESEARCH FINDINGS
Suppose a fast-food company employs a market research firm to

research potential locations of a new drive-in franchise operation.
There are two potential sites for the new franchise, near the mall or
downtown. The market research findings suggest that the local mall,
which is just outside town, is a high-traffic area, but the downtown
area has three times the amount of traffic. The company chose to
relocate next to the mall. What factors may have influenced this
decision?

POOR RESEARCH
A study may show, for example, that the Latino population in the U.S. would like to see more citrus fruit
snack bars in grocery stores. However this study may have included only 100 people at random. It may
not have included Latinos, or Latinos who grew up in the United States who may be accustomed to
eating peanut butter snack food bars. Therefore, it’s important to understand research techniques and
ways to ensure that results are accurate. How could this “poor research” example be improved?
The main issue is recognizing that surveys can be abused, and to that effect, the American Marketing
Association, the Council of American Survey Research Associations and the Marketing Research
Association have developed codes of research ethics and standards of conduct.
SUMMARY
Marketing is the sum of activities, ideas and actions taken by an

organization to communicate its products and services to a market.
We began our understanding of the Principles of Marketing
throughout this learning plan. From the basic elements of needs,
wants and demands of consumers, together with the management
tools and techniques available to an organization, we begin to
understand how consumers and organizations come together in the
marketplace for the benefit of both.

ACTIVITIES
1. Make a list of some things you need. Then, make a list of some things you want. If you had
written the same list five years ago, would it look different? How? Have you ever wondered why
a business chose its location? Its products? The needs or wants of customers? Its hours?
2. Read the Learning Plan 1 instructional materials and the articles at the following links:
http://www.bls.gov/oco/ocos020.htm
http://www.census.gov/compendia/statab/
Participate in the following interactive activities and view a description of each:

Marketing Information System
Marketing Research Process
3. Please review the terminology in the glossary for this learning plan at: Learning Plan 1 Glossary
4. Throughout this course, you may want to visit the following Web sites, which contain glossaries
of the terms commonly used in Marketing:
http://marketing.about.com/cs/glossaryofterms/l/blglossary.htm
www.marketingpower.com/mg-dictionary.php
5. Conduct an Internet search to find an organization that specializes in conducting market

research. For example: http://www.powerdecisions.com/. Were there a lot of search results? In
what types of information does it specialize? Reflect on why accurate information is important
to a company, how marketing information is distributed and special issues facing marketing
researchers today. List the steps of how you would perform market research for a company.
6. For a review for this learning plan follow this link to a PowerPoint.
7. Discussion 1.1 Introductions:
Get to know your classmates. Describe your educational goals and share personal
information as directed by your instructor and to the extent that you are comfortable. Name
one thing you would like to learn in this class. Identify at least one person with whom you
have something in common and respond to that person.
8. Graded Discussion 1.2 Accurate Information:
Discuss with your class why accurate marketing information is important to a company and
how a marketing professional assures the research or information is correct.
9. Reflect again on pre-class activities. Would your answers change now after completed the
remaining pre-class and in-class activities? How so and why?
10. Terminology Quiz:
Take the terminology quiz for this learning plan. This quiz is worth 10 points.

SUGGESTED GRADED DISCUSSIONS SCORING GUIDE
This Scoring Guide will be used for all the graded discussions throughout the course.
Rating Scale
5 Work meets or exceeds criterion.

4 Work meets criterion with minor errors.
3 Work reflects an understanding of criterion with minor misunderstandings/misconceptions.
2 Criterion partially met, but one or more important concepts/skills are missing or flawed.
1 Work reflects an attempt to meet criterion, but significant
misunderstandings/misconceptions are apparent.
0 Criterion not met or work is absent.
Criteria
1. You show evidence of preparation for the in-class activities.

2. You actively participate in class discussions.
3. You make meaningful and substantive contributions to the discussions.
4. You are respectful of the opinions and ideas of other learners.
5. Your comments reflect topics or concepts from the instructional materials and other course
content.
GRADED ASSIGNMENTS
1. Case Study: Due in Learning Plan 8
You will be required to submit a case study assignment due with other required work in Learning Plan 8.
It is advised to start reviewing the case materials well ahead of time. Refer to Learning Plan 7 for details
of the case study assignment.
2. Graded Assignment: The 4 P’s

Do a web (http://www.mcdonalds.com/) or library search on McDonald’s Corporation.
Select and evaluate one of its products or services using each of the 4P's.
Describe some major challenges facing marketers for McDonald’s.
If McDonald’s wanted to sell a new product why would accurate marketing information be
important?
What steps would be used to develop a marketing plan and strategy for the new product?
How could McDonald’s distribute the marketing information?
Prepare this assignment using Times New Roman 12-point and double spacing in a one to two page
paper. Use proper spelling, grammar, and punctuation and submit as directed by your instructor.

LP1 SUGGESTED ASSIGNMENT SCORING GUIDE
Rating Scale
9-10 Work meets or exceeds criterion.

7-8 Work meets criterion with minor errors.
5-6 Work reflects an understanding of criterion with minor misunderstandings/misconceptions.
3-4 Criterion partially met, but one or more important concepts/skills are missing or flawed.
1-2 Work reflects an attempt to meet criterion, but significant
Criteria
1. Student selected and evaluated one of McDonald’s products or services using each of the 4P's.
2. Student described some major challenges facing marketers for McDonald’s.
3. Student explained if McDonald’s wanted to sell a new product why accurate marketing information
would be important.
4. Student described the steps that would be used to develop a marketing plan and strategy for the
new product.
5. Student described how McDonald’s could distribute the marketing information.

ADDITIONAL RESOURCES
WEB SITES:
http://www.census.gov/compendia/statab/
http://www.mra-net.org/
http://www.inc.com/guides/write_biz_plan/24018.html
http://www.bls.gov/oco/ocos020.htm
http://entrepreneur.com/businessplan/index.html
http://www.marketingpower.com/
http://www.netmba.com/marketing/concept/
REFERENCES, SUPPLEMENTAL READING
Kano's Model of Customer Satisfaction: www.ucalgary.ca/~design/engg251/First Year Files/kano.pdf.
http://www.teneric.co.uk/businessinfo/marketing-mix.html
Cohan, Peter. How the Demos Lost the Business. Retrieved on July 21, 2005 from Pragmatic Marketing
Web page http://www.pragmaticmarketing.com/productmarketing/topics/03/0308pc.asp
Cohan, Peter. Achieving Success with Remote Software Demonstrations. Retrieved on July 21, 2005,
from Pragmatic Marketing Web page
www.pragmaticmarketing.com/productmarketing/topics.03/0312pc.asp
Edmunds, Holly. Selecting a Market Research Supplier. Retrieved from American Marketing Association
Web page http://www.marketingpower.com/content995.php
Levey, Tim. The Next Wave in marketing Software. How to Improve Win Rate with SME. Retrieved on
July 21, 2005, from Pragmatic Marketing Web page
http://www.pragmaticmarketing.com/productmarketing/topics/03/0311tl.asp
McBride, Bill Measuring Print Advertising. Retrieved from American Marketing Association Web page
http://www.marketingpower.com/content1292C286S4.php
McManus, John (2004). Stumbling into Intelligence. American Demographics. April 1, 2004.

Meir, Dan. The Seven Stages of Effective Survey Research. Retrieved from American Marketing
Association Web page http://www.marketingpower.com/content14402.php
Murphy, Jacques. Trade Shows: Maximizing ROI. Retrieved on July 21, 2005, from Pragmatic Marketing
Web page www.pragmaticmarketing.com/productmarketing/topics/04/0402jm b.asp
Nelems, James. Qualitative Research Overview. Retrieved from American Marketing Association Web
page http://www.marketingpower.com/content1060.php
Nelson, Barbara. Listening to Potential Customers: Building Tomorrow’s Products Requires Listening to
the Market. Retrieved on July 21, 2005 from Pragmatic Marketing Web page
http://www.pragmaticmarketing.com/productmarketing/magazine/1/2/07bn.asp
Productmarketing.com. May/June 2005. Vol. 3, Issue 3, 1 – 28 pg.
Raisinghani, Mahesh (2005). Future Trends in Search Engines. Journal of electric Commerce in
Organizations. Vol. 3, Iss. 3, Pg. I, 7pgs.
Searls, Doc. Linux for Suits – Showtime. Retrieved on July 21, 2005, from Linux Journal Web page
http://www.pragmaticmarketing.com/productmarketing/topics/03/0308pc.asp
Shefer, Daniel (2002). Webcasts as a Lead Generation Tool. Retrieved on July 21, 2005, from Marketing
at Interwise Web page
download.interwise.com/media/pdf/whitepaper_WebcastsForLeadGeneration.pdf
Stegeman, Linda. Using Research in Defining New Products. Retrieved on July 21, 2005, from Pragmatic
Marketing Web page http://www.pragmaticmarketing.com/productmarketing/topics/03/0301ls.asp
Stringer, Kortney (2005) Family: Wal-Mart Stores to Sell High-End Sound System In Effort to Go Upscale.
Wall Street Journal. (Eastern edition). New York, N.Y.: Mar 31, 2005. pg. D.4 Retrieved on November 11,
2006,
QD
Trout, Joanne (2005). MasterCard Analysis of Mass-Affluent Consumers reveal Importance of

Customization; Emergence of Mass-Affluent Market Sparking New Wave of Financial Products. Business
Wire. June 16, 2005
Wilkie, William & Moore, Elizabeth. Scholarly Research in Marketing: Exploring the “4 Eras” of Thought
Development (2003). Journal of Public Policy & Marketing. Vol. 22, No. 2. Pg. 116 – 146.
QD

LEARNING PLAN 2: THE MAJOR FORCES AND FACTORS IN MARKETING AND BUYING
DECISIONS
COMPETENCIES
EXAMINE THE MAJOR FORCES IN THE ENVIRONMENT THAT AFFECT MARKETING.

EXPLORE THE FACTORS AFFECTING BUYING DECISIONS.
a) Describe ways environmental forces affect a company’s ability to serve its customers.
b) Describe ways today’s demographic and economic environments are changing.
c) Identify the major trends in a firm’s natural and technological environment using SWOT
analysis.
d) Identify the key changes in today’s political and cultural environments using SWOT analysis.
e) Identify factors influencing customer buying behavior.
f) Describe the stages in the buyer decision making process.
g) Identify the factors influencing business buying behavior.
h) Distinguish between the key elements in the business buying process.
OVERVIEW
Reflect on the last time you made a purchase of over $100. How did you decide when and where to
make the purchase? How did you decide on the brand? What about the last time you spent $10?
Without an understanding of the environment, companies would
make tragic mistakes leading to business failure. What if companies
still made cassette tapes, or 3.5-inch floppy disks? What if the
available work force in an area dropped by 15 percent? What would
happen if a law was passed that prevented the sale of your product or
service or that dictated safety features? What if we were in a
recession instead of an economic boom? These are all questions
business leaders must answer as they continue to do business. In this
learning plan, we will discuss the environmental forces affecting our
ability to serve customers as well as trends in demographics,
economics, technology, politics, and culture.
It’s important to understand how customers or potential customers make decisions about purchases.
This helps us meet their needs and get our products in the right place at the right time. This learning
plan will provide you with all of the characteristics affecting consumer behavior, which are cultural,
social, personal and psychological. You will explore the stages in purchasing decision-making: need
recognition, information search, evaluation of alternatives, purchase decision and post-purchase
behavior. You will also learn to identify the factors that influence business buying behaviors:
environmental, interpersonal and individual factors. Finally, you will be provided with the stages of the
business buying process: problem recognition, general need description, product specification, supplier
search, proposal solicitation, supplier selection, order-routine specification and performance review.

LEARNING OBJECTIVE: DESCRIBE WAYS ENVIRONMENTAL FORCES ARE AFFECTING A
COMPANY’S ABILITY TO SERVE ITS CUSTOMERS.
One of the main forces that affect meeting consumer needs and wants is the economy. Let’s discuss the
economic geography of business as well as related topics to the economy and our ability to meet
consumer demands.
ECONOMIC GEOGRAPHY
One of the primary roles of the marketing professional, as

mentioned in Learning Plan 1, is to identify revenue-generating
opportunities for an organization so that the organization remains a
viable or healthy entity, producing stakeholder value, revenue
streams, and social value in serving its customers and the
community.
Identification of the economic revenue-generating capacity of a

marketplace is among the most important of all of the marketing
activities in business. Any market is composed of MICRO (immediate
and industry-related) and MACRO (large and system-related)
features that the marketing professional must become intimately
aware of to connect with customer wants, needs, and demands.
Let’s examine the micro-economic geography.
MICRO-ECONOMIC GEOGRAPHY
Characteristics of a Micro or Industry Competitive Analysis are

identified by reviewing the specific industry or marketplace within
which the organization does business or within the industry of a
targeted product or service being reviewed for development and
sale by the company. The groups affected by the impact of micro-environmental forces on a company’s
ability to serve its customers are: THE COMPANY, SUPPLIERS, MARKETING INTERMEDIARIES,
COMPETITORS, and BUYERS. Let’s take a few minutes and identify these terms.
The company has a moral responsibility to act in a particular manner. It also has a duty to render an
account that will enable affected stakeholders to assess how well it has performed in relation to this
responsibility.
Suppliers provide the raw materials needed for the production of goods and services. An example of
suppliers for Coca Cola are sugar, water, carbon dioxide, flavorings, etc., so that companies like Coca
Cola can assemble them into a product or service for a consumer. Suppliers are critical to the
development of a market for any company, because not only do they produce inputs to a business in

terms of raw materials to build products or perform services, they also represent a major factor in the
cost of a product or service because of the price they charge for their own products and services as
factors to a business operation. Understanding the control that suppliers have over your business
through supplies or inputs to your business is of critical importance to the marketer. Marketing
managers must watch supply availability so that customer satisfaction is not negatively affected by
shortages, delays, labor strikes, etc.
The marketing intermediaries or DISTRIBUTION CHANNELS are the firms or individuals in a

marketplace who help the company in the promotion, sale, and distribution of its goods. Market
intermediaries include resellers, physical distribution firms, marketing service agencies, and financial
intermediaries. Their role and responsibility is to move the product from the manufacturer or producer
of a product to you as a consumer in the marketplace. Resellers are the distribution channels that help
the company find customers or make sales to them. Physical distribution firms help the company stock
and move goods from their points of origin to their destinations. Marketing services agencies are the
marketing research firms, advertising agencies, media firms, and marketing consulting firms that help
the company target and promote its products to the right markets. Finally, financial intermediaries
include banks, credit companies, insurance companies, and other businesses that help finance
transactions or insure against the risks associated with the buying and selling of goods.
Competitors are rivals that sell either similar products or services, or products or services that can be
perceived by the customer as an ALTERNATIVE to the product or service offered. It is important for
marketers to understand rivals for their size and aggressiveness in terms of the numbers and types of
products and services they bring to market. It is also important to know how competitive firms exhibit
characteristics of trends and patterns in the marketplace. This may offer immediate and important
information to the marketer about the likely introduction of products and services by the competitor.
One of the very best predictors of future performance is past performance. Understand your
competition, and you have a tremendous advantage in reducing risk, creating opportunities and leading
and managing your own company in its marketplace. With respect to competitors, a marketer’s task is
to help the company in providing greater customer value and satisfaction than its competitors. The
marketer’s role is to create a better relationship between the expectations of the customer and the
ultimate experience the customer has as they engage with the product or service offering.
If a market is highly competitive with large and well-established firms that have strong BRAND
AWARENESS, there may be barriers to entry into the market. In other words, it may not be possible for
a new product or service, i.e. a new competitor, to gain a foothold, given the amount of competitive
rivalry already existing in a marketplace.
Buyers have the ultimate control over the price they will pay for a product or service. The ability of a
buyer to purchase a similar product or service is referred to in marketing as the ability to purchase an
ALTERNATIVE or SUBSTITUTE product. Alternative products require the marketer to pay special
attention to goods and services that look and feel like the product they are offering, but can be
purchased more easily and less expensively by a customer who has a want or a need to fulfill. Deciding

on a substitute product may be something we experience each day at the grocery store, such as when
we evaluate the purchase of margarine or butter for our morning toast. Cost, product features for
health, and other factors go into our decision to purchase one or the other. The marketer needs to
evaluate the impact of alternative products on the marketing program for any product or service.
In summary, then, a Micro or Industry Competitive Analysis of a marketplace covers:
Company, or the business that is marketing and selling a product or service in the marketplace.
Suppliers of goods and services as inputs to a business and how much control they have over the prices
and offerings of various goods and services to a business.
Market Intermediaries who distribute the products and who are the resellers, marketing service
agencies, and financial intermediaries, etc., in the marketplace.
Competition, or rivals in the marketplace; how big they are and what market share they hold.
Buyers and the ultimate control they have over the price they will pay for a product or service.
Macro-environmental Analysis and Economic Geography
Remember that MACRO refers to large and system-related. Therefore, the macro-environment deals
with the BIG PICTURE—the larger influences on the business. The macro-environmental analysis is an
important principle of marketing because there are many systemic and highly influential trends and
events in the macro-environment, and thus any market that impacts customer activity. To understand
these marketplace trends, the marketer needs to step back and evaluate the larger trends of the
marketplace to design effective marketing campaigns to produce successful results for the organization.
Elements of the macro-environmental forces are characterized by the following domains or categories
of analysis:

Each of these will be discussed in greater detail in the following sections.
LEARNING OBJECTIVE: DESCRIBE WAYS TODAY’S DEMOGRAPHIC AND ECONOMIC

ENVIRONMENTS ARE CHANGING.
Let’s examine the demographic and economic environments in detail and discuss their impact on
marketing objectives.

DEMOGRAPHIC FACTORS
Demographic factors refer to the study of human populations. The

marketer is interested in understanding the population of the
marketplace: How many consumers/customers there are; how
educated they are; what they are eating; how they are living; how old
they are; and what their cultural orientations are, all of which will
impact their buying behaviors and decisions.
This is a highly specialized area of marketing intelligence and one that

requires the marketer to carefully think through the types of information that he or she needs to know
about the marketplace and its consumers. Firms specializing in consumer research are often engaged for
their deep databases and their understanding of how to elicit this necessary information for a thorough
connection to the market and its consumers.
ECONOMIC FACTORS
Economic factors refer to factors that affect the costs and political realities of doing business in markets.
Some industries are more prone to INFLATION. Inflation is the steady increase in prices. In other words,
as the cost of money rises, increased pressure on profits is a risk businesses assume when doing
business in that industry. There are also curious relationships in some industries between trends and
patterns of the market and the realities of doing business. Some industries are prone to RECESSION or
contraction, which has little to do with the way the marketer is managing the business but rather has to
do with the larger and systemic factors of the industry infrastructure and its competitiveness, or with
the nature of regular cycles of the marketplace that impact the revenue streams planned for by the
marketer. One such relationship is the relationship between the cost of money, or INTEREST RATES,
established in the U.S. by the Federal Reserve Bank and the housing industry. The higher the cost of
money or interest, the greater the negative impact on the number of new home starts in the housing
industry. Each marketplace has curious patterns like this that the marketer needs to know and
understand to avoid risk and to capture business opportunities.
LEARNING OBJECTIVE: IDENTIFY THE MAJOR TRENDS IN A FIRM'S NATURAL AND

TECHNOLOGICAL ENVIRONMENTS USING A SWOT ANALYSIS.
An important tool in identifying changes surrounding the market is a SWOT analysis. SWOT refers to
Strengths, Weaknesses, Opportunities, Threats. Taking the time to identify these items for your
company is crucial in remaining competitive. There are many factors that exist that can impact a
business both negatively and positively, but only if you know and understand these factors through a
SWOT analysis. SWOT will be discussed further in another learning plan; but we can better understand
the environmental, natural, and technological environments through SWOT.

ENVIRONMENTAL OR NATURAL RESOURCE FACTORS
Environmental or natural resource factors are becoming more and

more critical to the business practitioner with each passing year.
Many of our resources are nonrenewable or are under deep
ecological attack. Examples of nonrenewable resources are oil, coal,
and forests. Understanding the issues surrounding air pollution, noise
pollution, water pollution, degradation of the forests, nonrenewable
resource depletion must be understood to protect environmental and
natural resources because they cannot be replaced. This
understanding also helps with innovation. Innovation is the creative and technological thinking that
creates new ideas.
TECHNOLOGY
Rapid innovation exists in most industries today because of the

introduction of technological advances. It is important that the
marketer understands the trends of change and the driving force of
technological developments in his/her marketplace to plan for these
changes to lead product innovation in the market and capture the
imagination and interest of the consumer, resulting in sales.
Technological and innovative product decisions are very critical

decisions of position and image in a marketplace because the
marketer decides how he or she wants the organization and its products to be seen and remembered by
the customer. If a marketer wants the organization that he or she serves to be seen as an innovator,
then leading with new product innovation or service enhancements will be an important characteristic
of product planning and research. Or if the organization wants to be seen as a fast follower, then this is
yet another position and image the marketer can foster so the market knows what to expect from the
organization in serving needs, wants, and consumer demand.
LEARNING OBJECTIVE: IDENTIFY THE KEY CHANGES IN TODAY'S POLITICAL AND CULTURAL
ENVIRONMENTS USING A SWOT ANALYSIS.
As we have mentioned, the SWOT analysis is used to identify factors that impact business. SWOT can
also be used to identify political and cultural strengths, weaknesses, opportunities, and threats.

POLICITICAL, LEGAL, AND REGULATORY FACTORS
Political, legal, and regulatory factors are those government

influences that impact an industry in some way. For instance, the FAA
(Federal Aviation Administration) grants licenses to fly in certain
airspace. Airport commissions decide which and how many carriers
will have “gate” exposure at their airports. Pilots have certain rules
and regulations for the number of hours they can fly, and the
requirements of licensure for certain abilities and knowledge as
commercial pilots. Each industry has specific rules and regulations
that govern it and that change. Changes in government regulations, laws, and policies by governments
or professional governing bodies can impact any organization. Part of a good macro-analysis takes these
systemic and impact rules and regulations into account for business planning and implementation.
In summary, the macro-analysis includes demographics, economics, political, legal, and regulatory,
environment, or natural resource and technological factors that allow a marketer to use knowledge of
the marketplace and perform subsequent planning activities for their business.
Together, the micro-analysis of the industry and the macro-analysis of the systemic forces that impact
markets prepare the marketing professional with specific and general knowledge about trends and
patterns in the market. With such information, the marketing professional is armed with the knowledge
required to avoid risk and to capitalize on opportunities for existing and future revenue streams.
OVERVIEW
It’s important to understand how customers or potential customers

make decisions about purchases. This helps us meet their needs and
get our products in the right place at the right time. This part of the
learning plan will provide you with all of the characteristics affecting
consumer behavior, which are: CULTURAL, SOCIAL, PERSONAL, and
PSYCHOLOGICAL. You will explore the stages in purchasing decision-
making: need recognition, information search, evaluation of
alternatives, purchase decision, and post-purchase behavior. You will
also learn to identify the factors that influence business buying behaviors: environmental, interpersonal,
and individual factors. Finally, you will be provided with the stages of the business buying process:
problem recognition, general need description, product specification, supplier search, proposal
solicitation, supplier selection, order-routine specification, and performance review.

LEARNING OBJECTIVE: IDENTIFY FACTORS INFLUENCING CUSTOMER BUYING BEHAVIOR.
Understanding the factors that influence customer buying behaviors is a major activity of the
professional marketer. As the marketer becomes more aware of the characteristics of the consumers in
a particular marketplace, the consumers’ needs and wants, and ways to generate consumer demand,
marketing efforts become more successful. What exactly influences customer buying behavior?
CULTURE
The cultural factors have the deepest influence on consumer behavior. To more fully understand the
impact of culture; let’s define the following cultural terms:
Culture: The system of shared beliefs, values, customs, behaviors, and artifacts that is used by the
members of a society to cope with their world and with one another, and that is passed from generation
to generation.
Subculture: A social group within a larger culture that has distinctive patterns of behavior and beliefs.
Social Class: A social class refers to a large group of people who rank close to one another in wealth,
power, and prestige.
Cultural backgrounds are a decisive ingredient in the introduction of a product or service, as well as in
the profitability of a product line or service in an industry. Each culture and subculture has unique
characteristics, interests, ethical stances, etc., that impact the buying characteristics of the consumer
within those cultures and subcultures. We can see an example of this today in the growth of the Latino
population in Florida. A marketer must be sensitive to capturing an understanding of the social
differences and language connotations that define this unique culture. Even within the Latino
population itself, there can be subcultures. Subcultures can include diversities in nationalities, religions,
and racial groups.
SOCIETY
Social factors also have influences on consumer behavior. No matter what the group is, it is a social
entity and serves as a point of reference in forming a person’s attitudes and behaviors. Like groups, the
family is perhaps the most common and most important consumer-buying organization in American
society. You can see how groups, and thus families, influence a person’s buying behavior. Further
influence is often the result of role and status, which define the position a person holds within his or her
social group, and the esteem (status) given to that person’s role by society.

PERSONAL CHARACTERISTICS
Personal factors include a consumer’s age, life cycle stage, occupation, economic situation, lifestyle,
personality, and self-concept. All of these things can influence a person’s behaviors. For example, older
individuals are rarely as attracted to the fads that are so common to teenagers. Lawyers may have a
more important status and economic situation in society and will likely be influenced to wear name-
brand clothes and drive expensive cars. People who want a simple lifestyle are usually more interested
in the functionality of the clothes or vehicle and not the name brand.
PSYCHOLOGY
Finally, psychological factors include motivation, perception, learning, beliefs, and attitudes. For the
motivation factor, you can review the motivational theories proposed by Freud and Maslow, which are
offered in your reading list below.
Research on the purchasing decision-making process has been developing over the past 30 years. We
have a clear understanding of the thought processes used by an individual who is considering a purchase
decision. The thought frames discussed below offer the marketing professional a significant amount of
information about how to influence an individual to make a purchase decision.
To understand how consumers make purchasing decisions, we need to understand the five components
that make up the process. The following graphic may help you understand the process as we discover
each component.
STAGES IN THE BUYER PURCHASING DECISION-MAKING PROCESS
1. Need Recognition and Problem Awareness. The first stage, Need Recognition, comes when the
buyer recognizes the problem or need. This need may be triggered by internal or external
stimuli. Think about a time when you were reading a newspaper or walking through a shopping
mall and something caught your eye. What caused you to stop and look at an advertisement or
pick up a product and analyze it? More than likely, it was that you had been thinking about
something similar or that the view of a product or service caused you to remember a need you
had for something. Now, think about your activities at that point. Did you want to know more
about the product or service? Did you find yourself evaluating the product or service for a
function it would perform for you specifically?
2. Information Search. Once you determine you have a need for a product or service, the next step
is to gather information. Information searches are accomplished through personal, or word-of-
mouth, sources as well as commercial and public sources—any or all of which are designed by a
firm’s marketing professionals to capture your attention and to influence you to make a
purchase.

Let’s define what we mean by each of these terms:
PERSONAL SOURCES or WORD-OF-MOUTH SOURCES are very valuable to us as consumers,

and marketers work hard to gather TESTIMONIES of individuals who have experienced a
product or service. Marketers can then personalize the experience of the consumer to a
potential buyer. Think of a time you had a friend refer a product or service to you, and you had a
good experience. How many others did you tell of the product or service?
COMMERCIAL SOURCES are companies that possess specialized knowledge. Identifying these
commercial sources and understanding what special information they have, will help consumers
use their knowledge in a particular field. What commercial sources offer specialized electronics
information?
PUBLIC SOURCES include organizations such as research universities, government agencies and
regulatory bodies, which collect information of interest to most organizations. Understanding
the types of information that these various agencies and organizations hold can be of great
value in determining product improvements and safety initiatives to improve overall product
performance and customer satisfaction.
Once you begin the information-gathering phase, you will immediately move into the next of
the buying-decision activities: Evaluation.
3. Evaluation. Evaluation of alternatives occurs when the consumer is actually processing

information, ranking brands, and arriving at a brand choice. Once the information has been
gathered, a consumer will evaluate the information to determine what is most reliable, which
product may meet his/her needs best and rank them in order of preference. BRANDING may be
a key factor in determining which brand a consumer chooses. Branding refers to the
characteristics of a product or service that form in the mind of the consumer over time. Brand
characteristic is an important concept for the marketer, because the more aware we are of the
product and its capabilities, the more likely we are to choose that brand and less likely to switch
to another similar or alternative brand. We will discuss branding further in a later Learning Plan.
Now that the customer has evaluated the product or service, he or she is ready to engage in a
purchasing decision.
4. Purchase Decision. The needs and wants of the consumer have been identified and information
has been gathered and evaluated. Now the consumer is ready to engage in a purchase decision.
The consumer is ready to fulfill the DEMAND characteristic discussed previously.
The consumer will almost always make his or her purchase decision in favor of the most
preferred brand, that being the brand that most fulfills his or her needs and wants. The

experience of the consumer concerning the product or service will be paramount in the post-
purchase behavior of the consumer relative to the purchase.
5. Post-Purchase Behavior/Evaluation. Post-purchase behavior varies, depending on the

consumer’s satisfaction or dissatisfaction with the product or service. When the product or
service falls short of the customer’s fulfillment expectations, the consumer is disappointed. Here
the organization may experience negative feedback on customer satisfaction surveys. If negative
feedback is received, the marketing professional will begin an investigation into how customer
perceptions lead to a negative experience.
When the product or service meets a customer’s expectations of his or her needs and wants, the
consumer is satisfied. The marketing professional is likely to see a generous amount of positive
feedback with regard to the experience the customer had with the product.
Remember, however, that the actual experience of the customer is directly related to the
ANTICIPATED benefit the customer would experience in terms of the fulfillment of his or her
needs and wants. You can begin to understand how important it is for the marketing
professional to understand the needs and wants of a consumer group to be able to craft the
marketing in the development stages of the product or service toward those needs and wants of
the customer. Often, companies are not engaged enough in this deep understanding of the
market to produce products and services that are of interest to consumers. The work of the
marketing professional is to make DATA-DRIVEN DECISIONS based on facts gathered directly
from the customer.
When the product or service exceeds consumer needs and wants, the consumer is more than
satisfied. (REMEMBER OUR KANO’S MODEL FROM LEARNING PLAN 1.) The greater the linkage
between expectations and fulfillment of expectations, the more significant is the enthusiasm of
the consumer, and the greater the chance that the consumer will return for additional products
and services. In addition, this consumer is likely to send other consumers to the company for the
purchase of the product or service as a result of their extreme satisfaction.
SOURCE:HTTP://WWW.TUTOR2U.NET/BUSINESS/MARKETING/BUYING_DECISION_PROCESS
.ASP
The following graphic begins to discuss yet another principle of marketing:
THE RELATIONSHIP BETWEEN COST AND BENEFIT
As mentioned above, we have described that satisfied customers have had their needs and wants
fulfilled, resulting in a high degree of satisfaction. However, in this graphic, we are beginning to add yet
another dimension to the customer-satisfaction equation: cost of the product, or what we refer to as
PRICE IN MARKETING.

The implications of this graphic are clear. If the cost of the product is
out of balance relative to the benefit to the customer, the buying
decision or the consumer experience of the product may be affected
adversely or positively, depending on the circumstances.
The work of the marketing professional is to:
1. Find a balance between the benefit to the consumer and the price paid for the product or
service as part of the overall customer satisfaction equation.
2. Create a better relationship between the expectations of the customer and the ultimate
experience the customer has as he or she engages with the product or service offered.
3. Help the company provide greater customer value and satisfaction (including numbers 1 and 2)
than its competitors. This is a matter of strategic thinking. The greater the connection between
the customer’s needs and wants and the ultimate experience of the customer in the fulfillment
of those needs and wants, the greater the customer experience, and the greater the likelihood
the customer will return to purchase another product or service, or tell others about his or her
experience.
LEARNING OBJECTIVE: IDENTIFY THE FACTORS INFLUENCING BUSINESS BUYING BEHAVIOR.
As a marketer, we must not only think of individual consumers, but

we must also consider the needs of businesses because, like
individuals, businesses need to make purchases. The same factors
influencing individual consumers to buy are not the same as those
affecting businesses. The factors influencing business buying behavior
include environmental, organizational, interpersonal, and individual.
ENVIRONMENTAL FACTORS:
Economic
Technological
Political/Regulatory
Competitive
Cultural
As the environmental factors influence the buying-decision process, a number of institutions could be
considered to be of significance in understanding these environmental forces. These include
professional groups, government, suppliers, customers, etc. For international markets, deep knowledge

about a country’s environment is essential, because those factors could significantly vary among
different countries and could particularly affect those companies that are active in the global markets.
ORGANIZATIONAL FACTORS:
Objectives
Policies
Procedures
Organizational structure
Systems
The most important organizational factors influencing the buying decisions on an organizational level
can be recognized in organizational structure, organizational goals and tasks, a company’s objectives
and policies, and internal procedures and systems. For many companies, one person called the
purchasing agent makes purchasing decisions for the company. This is often done when experts or users
of the product make recommendations on the product to purchase. These people in the company that
make or influence purchases are called the Buying Center. The company’s objectives may dictate the
types of purchases they make, such as low-cost purchases in order to save money, or perhaps luxury
furnishings to convey a sense of quality among clients or customers. It’s important to understand these
factors when marketing to business consumers. If we don’t market to their needs, we’ll miss a big
opportunity of gaining a business from a customer.
INTERPERSONAL FACTORS:
Authority
Status
Empathy
Persuasiveness
The interactions among people in the buying center often influence one another until the purchase is
completed. If the buying center is informally organized, or if it is not clear who the key decision-maker is,
interpersonal relationships might be of decisive importance. That is why business strategists must take
into consideration personal factors when developing an appropriate approach toward the customer. The
most common interpersonal factors influencing buying decisions are authority and status within the
organization, empathy, and persuasiveness.

INDIVIDUAL FACTORS:
Age
Education
Job Position
Personality
Risk Attitudes
Individual factors differ for everyone involved in the buying-decision process. For example, an older
executive may make different buying decisions than a younger assistant. An outgoing person may make
riskier purchases or more trendy purchases than someone more reserved. Think about a purchase you
have made recently. How did those influences mentioned above impact your buying decision in favor of
or against the purchase? Would these factors influence you if you were to make a purchase for a
business?
LEARNING OBJECTIVE: DISTINGUISH AMONG THE KEY ELEMENTS IN THE BUSINESS BUYING
PROCESS.
Organizations exhibit the same kind of decision-making structure as mentioned above, with slightly
different orientations.
1. Problem Identification. During the first stage of the organization’s decision-making process, the
organization will identify a problem. Problem recognition occurs when the company identifies a
problem or need. Just as in the buyer purchasing decision-making process, problem recognition
results from internal or external stimuli.
2. Problem Definition. A general need description will occur when the company determines the
characteristics and quantity of the needed item or service. You can see much of the same
language being used for an organization’s needs and wants as it is for the consumer’s needs and
wants.

3. Solution Specification. This stage occurs when the company develops a specific definition for
the needs and wants of the organization. The need or want is delineated for specific technical
product specifications, or the organization conducts a cost/benefit value analysis, clarifying the
qualities of the product or service and the overall benefit to the organization. Organizations
often are a bit more specific about these data-driven qualities in the decision-making process,
because they usually have to justify cost expenditure for decisions made.
4. Supplier Search Assuming that the cost/benefit analysis suggests that the organization should
proceed with the buying decision (benefits outweigh the costs), a supplier search begins. The
organization then requests bids. This is when the company solicits qualified businesses, or
vendors, to make an offer for supplying a product or service to the company, usually with
specified costs and timeline. The request for bids will usually have a stated time period.
5. Assessment of Vendors. Once the time period for accepting bids is over, key decision-makers
will evaluate the bids. The company will assess which vendor best fulfills the cost/benefit
specifics identified for the fulfillment of the organization’s needs and wants.
6. Supplier Selection. After the vendors or suppliers have been assessed, supplier selection occurs
when the company chooses the best bidder and enters into a binding contract. This initiates the
formal relationship between the buyer and seller.
7. Agreement. During this phase, the company and the supplier establish the formal contract.
Usually, specifications as to product quality and delivery are identified within the formal
contract, as well as many other important clauses to protect both the buyer and supplier.
An important element in this phase is contract law. Contract law governs the relationship
between the supplier of a product or service and the company that seeks the product and
service. Rules of law for specific states require that business agents understand the regulations
in the country or state within which they are doing business. This is of increased importance in
international settings. Lawyers are an important resource in contracts and should be consulted
on legal matters such as these.
8. Monitoring and Review. This stage is marked by the overall performance evaluation of the
supplier. This is similar to the post-purchase behavior in the buyer purchasing decision-making
process, where there are discussions of the strengths and the development needs, and where
the customer and supplier identify deficiencies or satisfactions. Just like post-purchase behavior
for consumers, businesses may not make repeat purchases if they are not satisfied.
Depending on the product, business purchasing decisions can take an extensive period of time. Unlike
individual consumers, the number of people involved in business purchasing decisions may result in
decisions taking weeks, months, or even years.

ACTIVITIES
1. Reflect on the last time you made a purchase of over $100. How did you decide when and where
to make the purchase? How did you decide on the brand? What about the last time you spent
$10?
http://www.business.gov/
http://www.knowthis.com/tutorials/principles-of-marketing/business-buying-
behavior.htm
4. Participate in the following interactive activity to review the micro-economic geography Micro-
economic Geography and view a description of each.

Customer Buying Behavior
Buyer Purchasing Decision-Making Process
Business Buying Behavior
5. Visit http://quickfacts.census.gov/qfd/states/00000lk.html and

http://censtats.census.gov/usa/usa.shtml. Find data on the population and income levels of the
USA as a whole and for your state. How easy was the information to find? What other sites may
have this information? How will this data affect marketing activities?
6. Think about ways environmental forces such as cultural differences, government and the
economy can affect a company's ability to serve its customers. Describe things that you didn't
realize were necessary to consider when starting or operating a business. Why are these things
important? How might you gather this important information for your own business?
9. Graded Discussion 2.1 Buyer Decision-Making:
Discuss with the class how a company capitalizes on the buyer decision-making process with its
product or service. Give examples.
10. Terminology Quiz: Take the terminology quiz for this learning plan.

GRADED ASSIGNMENTS
Buying Situation/Scenario
Antonio Rodriguez is a single 49-year old living in New York City. For 17 years Antonio earned a good
living working on Wall Street. However, during those years, Antonio lived frugally so that he could save
enough money to pursue his dream of opening a restaurant. After reaching his financial goal, Antonio
spent sixteen months planning out the details of his restaurant, which will specialize in Aztec cuisine.
Antonio is finally ready to purchase a computer system which will serve the various needs of his new
business.
Directions
Describe how cultural, social, personal and psychological influences might shape Antonio’s
buying decision.
Describe how Antonio’s search for a computer system will be reflected in the elements of the
business buying behavior.
Describe how/if the environmental, organizational, interpersonal, and individual factors will
influence Antonio’s search for the restaurant’s computer system.
Guidelines
Your paper should be approximately two pages long.
Be sure to address each factor listed above
Analyze the scenario; it reflects a fair amount of information about the kind of person that
Antonio is.
Prepare this assignment using Times New Roman 12-point and double spacing in a two page paper.
Use proper spelling, grammar, and punctuation and submit as directed by your instructor.

Rating Scale
Criteria
1. The paper addressed the cultural, societal, personal and psychological influences.
2. The paper addressed the problem identification, problem definition, and solution specification
elements of the business buying process.
3. The paper addressed the search, assessment, selection and agreement elements of the business
buying process.
4. The paper addressed the environmental, organizational, interpersonal and individual factors.
5. Correct spelling, grammar and punctuation present; content is interesting and convincing.

WEB SITES
http://adage.com/americandemographics/
http://www.businessweek.com/technology/
http://www.economist.com/index.html
http://www.swlearning.com/marketing/marketing_news/marketing_channels.html
http://www.knowthis.com/tutorials/principles-of-marketing/business-buying-behavior.htm
http://www.learnmarketing.net/consumer.htm
http://sales-tips.industrialego.com/sales-articles/061201.htm
For a better understanding of the way macro-environments affect marketing, visit www.census.gov. By
navigating through this link, you will have access to the most accurate data provided by the U.S.
government regarding demographics and economy.
This article shows a very interesting technological approach in image-managing through public relations:
(http://www.knowthis.com/articles/marketing/public_relations.htm). In this article, you will see one of
the ways marketers use PR as a method to cut through excessive promotional clutter that can inundate
consumers. Another technological approach from marketers can be found at
http://www.accenture.com. Do a search for Technological approach. This article will introduce you to
how companies retain services to digitalize their visual contents on the Web to stay competitive.
A display of both macro- and micro-environments affecting the market can be assessed through a
special report on business issues and opportunities in China and Europe at
http://www.accenture.com/xd/xd.asp?it=enweb&xd=ideas\pca\china_european.xml. When reading this
report, pay special attention to the characteristics of each country to be able to easily identify each
variable on both macro- and micro-environments.
For more marketing research information go to

http://www.topsearch10.com/search.php?aid=31128&q=Direct+Mail. This source will provide you with
the best links to assess all of the data that marketers need to target their customers.

ENVIRONMENTAL SCANNING AS INFORMATION SEEKING AND ORGANIZATIONAL LEARNING. What
may be gleaned from the research that has been completed so far on environmental scanning? For a
summary of Principal Findings from Research on Environmental Scanning, visit
http://informationr.net/ir/7-1/paper112.html
NICHE MARKETING VS. MASS MARKETING. Understand the importance of defining a niche market.
http://marketing.about.com/od/careersinmarketing/l/aa060303a.htm
http://www.revision-notes.co.uk/revision/854.html
MARKETING POLLUTION CONTROL: The problem of pollution control is an illuminating example of how
governments in a market economy can harness the marketplace mechanisms of supply and demand to
address a critical issue confronting the entire society. Refer to the Governmental International
Information Program at: http://usinfo.state.gov/products/pubs/market/mktsb8a.htm
POLLUTION PREVENTION: This Web site hosts over a dozen pollution-prevention case studies, covering
a wide range of pollution-prevention topics.
http://www.cullbridge.com/Topic%20Pages/Pollution_Prevention.htm
Adebanjo, Dotun. (2003). Classifying and selecting e-CRM applications: An analysis-based proposal.
MANAGEMENT DECISION, 41 (6), 570 – 577.
Hancock, Mayanne, John, Roland & Wojcik, Philip. (2005). Better B2B Selling. THE MCKINSEY
QUARTERLY. Visit http://www.marketingpower.com/content25927.php
McWilliams, Gary (2004, November 8). Minding the store: Analyzing customers, Best Buy decides not all
are welcome; Retailer aims to outsmart dogged bargain-hunters, and coddle Big Spenders; Looking for
'Barrys' and 'Jills'. THE WALL STREET JOURNAL, page A1.
Nasir, Suphan, & Nasir, V. (2005, Sept.). Analyzing the role of customer-base differences in developing
Customer Relationship Management strategies. JOURNAL OF AMERICAN ACADEMY OF BUSINESS.
Cambridge. 7 (2), 32 – 38.
Principles of Marketing.
http://www.knowthis.com/tutorials/principles-of-marketing/business-buying-behavior.htm
Principles of Marketing 2.
http://www.knowthis.com/tutorials/marketing/consumer-buying-behavior.htm

LEARNING PLAN 3: STRATEGIC PLANNING AND MARKETING STRATEGY
COMPETENCIES
APPLY BASIC STRATEGIC PLANNING CONCEPTS TO THE MARKETING PROCESS.

APPLY THE MAJOR ELEMENTS OF A MARKETING STRATEGY.
a) Identify elements of companywide strategic planning.

b) Describe the relationship between marketing’s role and strategic planning.
c) Identify forces that influence the marketing process.
d) Describe ways marketing management functions are included in the marketing plan.
e) Discuss the three steps of target marketing.
f) Describe elements of market segmentation that can influence a firm’s target market.
g) List the key characteristics of an attractive market segment.
h) Discuss the key elements in a market-covered strategy.
OVERVIEW
Think of your favorite childhood restaurant. Is it still in business today? How do you perceive its strategy
changing since you were a child? How might it continue to change and why? Think about your favorite
store (clothing, furniture, supermarket, etc.). Why does it appeal to you? Does it also appeal to people
that are culturally or demographically different? Why?
Much of the information about understanding the key forces affecting

marketing and buying behaviors is the result of market research. During this
learning plan, we will be taking the compilation of data and applying it to the
strategic planning process and how a company uses techniques and planning
tools to assess its market opportunities. Through the assessment of
marketing macro- and micro-environments, an organization develops a
comprehensive knowledge of the industrial or individual consumer and
begins to plan and organize the company to meet these demands. The
macro- and micro-environments are composed of the trends and patterns
that impact the company within the industry in which it does business. Data
about these trends and patterns helps an organization understand how it can best serve customers.
In larger firms, the strategic planning concepts will be written down in what is commonly referred to as
a business plan. Not having a plan in writing is often blamed for over 80 percent of all small-business
failures.
We’ve discussed strategic planning and how marketing fits into the overall strategic plan. This learning
plan explores and applies the components of the marketing strategy, target marketing and market
segmentation. Without a specific marketing strategy, marketers would waste valuable resources trying

to “mass market” as companies did in the past. In today’s increasingly competitive environment, having
a clear strategy helps businesses compete more effectively and is an important element in reaching a
firm’s overall objectives.
LEARNING OBJECTIVE: IDENTIFY ELEMENTS OF A COMPANY-WIDE STRATEGIC PLANNING.
There are many elements that can be included in a company's strategic planning. However, there are
basic components that include organizational mission, objectives, and SWOT analysis. The strategic plan
of a company entails every aspect of the firm, including research and development (R&D), human
resources, manufacturing, legal, accounting, marketing, etc. The marketing plan becomes a piece of the
entire strategic plan of the firm.
ORGANIZATIONAL MISSION STATEMENT
What are we here for? Every organization exists to meet the needs of
the larger society. Therefore, each organization, whether profit or
nonprofit, exists as long as it can create a purpose, vision or mission
that meets the larger society's need through available resources.
Sometimes when a firm first begins, its mission is very simple.

However, as time progresses, the organization must continue to
expand to remain competitive. As the environment changes, the
managerial work force must change, too. As the company grows, so should a firm's mission statement. It
is a firm's mission statement that defines the company's direction. This mission statement must mature
so the company will succeed in reaching its desirable goal. Outdated mission statements do not provide
the necessary direction the company needs to progress. The questions that a business must ask
regarding its mission are:
What is the nature of our business?

Who are our customers?
What do our customers value?
What will our business be in the future?
These questions define how a business is to be run. If a long-run mission statement is established and if
the people within the organization are knowledgeable of its contents, this knowledge makes it easier for
everyone within the organization to do his or her job.
The three key elements in establishing a firm’s mission statement are:
The defining characteristics that make our firm successful in meeting society’s needs and how it
was accomplished.
The organization’s competencies and strengths; what we do better than the competition.

The organization’s environment.
Clarifying and defining the organization’s environment and related opportunities, constraints and
threats help the organization craft a relevant and timely mission statement. It is important to realize
that building a corporate mission statement doesn’t happen overnight. Mission statements are
developed and evolve over time.
Peter Drucker, a notable business writer, suggests that a firm’s mission statement must be:
Achievable
Motivational to employees
Specific
Evaluate the mission statement of a firm you are aware of, and determine whether these three
characteristics are in place. Ask yourself if having these three elements in the mission statement help
you remember the words and message of the organization as you think of its mission statement.
ORGANIZATIONAL GOALS AND OBJECTIVES
A vision and mission statement help the organization to not only develop a sense of where it can add
value in the marketplace but also to develop the kind of market intelligence and insight necessary for
survival in today’s competitive global marketplaces. One of the more significant problems in most
organizations is corporate myopia, or what is known in the medical field as nearsightedness. Some
businesses do not see the broad picture of their environment. An example? One industry that struggled
with this problem was the railroad industry.
During the railroad era, railroad executives were more concerned with
their product than marketing their products. These executives never
realized that they were not in the railroad business but the
transportation business. It took about 50 years for railroad executives
to be beaten out by trucking services. A firm putting its hopes on only
its product offerings and not its market is surely to lose its way.
Marketing is the only way for a firm to go so as not to suffer from
market myopia.
An organization’s objectives are realized only if it pays attention to its mission. The objectives are the
HOW we achieve our mission. The objectives must: be specific, provide direction, be oriented for the
long term, and allow management to evaluate and control them over time. Questions to consider when
developing objectives are:
What is the firm’s market share?

What is its allegiance toward innovation?
What physical and financial resources are available?

SWOT ANALYSIS
After evaluating the corporate mission statement and objectives, a SWOT

analysis is important. SWOT is an acronym for Strengths, Weaknesses,
Opportunities and Threats. A SWOT analysis helps us understand what we do
well, where we need to improve, what opportunities exist and what may
prevent our success. The strengths and weaknesses are internal to the
organization, and the opportunities and threats are external. Imagine the
value of conducting a SWOT analysis on your firm or your competition. How
is this information helpful? The term ENVIRONMENTAL SCANNING is also
helpful. Environmental scanning concerns itself with identifying anything in
the environment that affects, will affect or may affect business operations.
LEARNING OBJECTIVE: DESCRIBE THE RELATIONSHIP BETWEEN MARKETING'S ROLE AND

STRATEGIC PLANNING.
The company is composed of several groups, such as TOP MANAGEMENT, FINANCE, RESEARCH AND
DEVELOPMENT, PURCHASING, MANUFACTURING and ACCOUNTING. Top management sets the
company’s mission, objectives, broad strategies and policies. Marketing managers make decisions within
the plans made by top management, and top management must approve marketing plans before they
can be implemented. Finance is concerned with finding and using funds to carry out the marketing plan.
Research and development focuses on designing safe and attractive products. Purchasing is concerned
with getting supplies and materials. Manufacturing produces the desired quality and quantity of
products. Accounting has to measure revenues and costs to help the marketing group know how well it
is achieving its objectives. All these functions, of course, are coordinated under the marketing concept,
to provide superior customer value and satisfaction.
As mentioned earlier, the strategic plan of the organization concerns itself with the overall direction and
coordination of all of the business’s activities. Marketing is vital to achieving the strategic plan, because
the marketing function is often the interface between the organization and consumers.
A marketing plan will entail identifying consumers’ needs, wants, demands, market segmentation/target
marketing, and the marketing mix. All of the different aspects of marketing are coordinated into a
marketing plan. Again, this marketing plan is devised with the strategic plan in mind.
To better understand this process, consider the steps below:
1. Situational (SWOT) Analysis. This is part of the strategic planning process and helps us
understand where we are and where we need to be. The results of our SWOT analysis prepare
us for the next step.

2. Market Product Focus and Goal Setting. This is where the firm applies a process of market
segmentation. This is where the firm considers the type of customer or customer group that
usually purchases its products. Understanding your target market is important because each
target market will require a different marketing mix. After segmenting, however, you may
aggregate those segments or groups with similar needs to reduce advertising and other related
expenses.
3. Marketing Program. Once it has established Step 1 and Step 2, the firm is ready to find the best
marketing mix, which is the right combination of the four P's, as they are sometimes referred to
by marketers. The four P's are:
Product Strategy
Price Strategy
Promotional Strategy
Place (distribution) Strategy.
LEARNING OBJECTIVE: IDENTIFY FORCES THAT INFLUENCE THE MARKETING PROCESS.
There are mainly five environmental or external forces affecting every business. These include social,
economic, technological, competitive and regulatory. Understanding these forces gives us a better
opportunity to meet consumer needs.
1. Social Forces - These are sometimes referred to as demographics.

Demographics refer to age, gender, marital status, education, location or
occupation. What demographics, or social trends, are changing within the
United States? Changes in social forces develop new needs and wants.
Examine the following examples:
Do you have the same needs, wants and values as your parents? No, each
generation has its very own unique set of needs. The Depression Generation, Baby-boomers, Generation
X, Generation Y and Generation M, or our present day teenagers, have differing needs and aspirations.
Marketers are able to identify these needs and then build a marketing plan to satisfy those needs. This is
evident in the values of today's youth compared to their parents. Value studies have been assessed, and
demographers are finding that the older generations seem to value honesty and family values, while the
youth of today value self-esteem and fitness more. Demographers, those who study demographics, are
discovering that tradition plays less of a role than it used to as each new generation brings its own
unique set of values into play. How can marketers capitalize on this information?
Demographers have also discovered that many changes are occurring within the U.S. population. Some
northeasterners are leaving the northeast and slowly looking for newer cities to find work. Many of
them are moving to Nevada, Arizona, Colorado and Utah. Many people have already relocated to
California, Texas and Florida.

As for culture, many races have differing ethnic buying patterns. One segment that has created such a
growing market is the Hispanic community. Their eating, dining, entertainment and recreation habits
seem to differ greatly from the majority of Americans. Many Hispanics seem not to be melting into the
U.S. society as other ethnic groups. Some marketers have noticed this phenomenon and are offering
products unique to their liking.
Also, as more women enter the work force, changing values between men and women are becoming
more prevalent. It is not only that woman are demanding more of a say, but as more women enter the
labor force, even their household needs begin to change.
2. Economic Forces. These forces are macroeconomic forces such as those

economic shifts that occur during a recession or an inflationary period.
During a recession, most firms seem to place their purchasing goods and
services on hold until the economy takes off and borrowing money reduces
the cost of doing business. However, during inflationary periods, prices
seem to rise greatly, as does the cost of borrowing money. These inflationary trends place a tremendous
amount of pressure on the cost structures of an organization.
Another evaluation that economists perform in an economic analysis is of the disposable income of a
firm's customers or the disposable income of a population of people in a segment of the market, as an
example. A firm knowing the disposable-income patterns of its customers becomes effective in
segmenting a population of customers as a part of the overall marketing process. Understanding a
segment of a market and its disposable-income patterns allows a company to set a price relative to the
market for optimal results in marketing to the customer.
It is well-known that households with two wage earners rather than one usually have more discretionary
income, which means it is above subsistence level, and therefore, marketing to professional families is a
highly attractive market segment for some companies. It is also easy to see that one-wage-earner
families have a different disposable income, and the price point selected by a marketing organization for
a product will be greatly affected by this information.
3. Technological Forces - Technologies such as the cable, dish, HDTV and the
Internet, etc., keep firms searching for unique marketing opportunities and
trends. First, the costs of such technologies are continually decreasing as
new technologies become available. These technological products not only
have entered the consumer markets but must be applied to businesses that
wish to remain competitive. Imagine the future of a business that doesn't
use the capabilities of such widespread technology as the Internet.

4. Competitive Forces -We all know and understand that other businesses
that have the same product or service will create competition. This is
certainly a big force that influences the marketing process. Firms, or
businesses, operate in four different types of competitive situations: Perfect
Competition, Monopolistic Competition, Oligopoly and Monopoly. These are
discussed in greater detail in a later Learning Plan.
5. Regulatory Forces - Regulation consists of federal and state policies.

Consider the way patents are created and protected, consumers are
protected through the Food and Drug Administration (FDA) or employees
are protected through the Occupational Safety and Health Administration
(OSHA). An alternative to government intervention is self-regulation.
However, because too many companies were unwilling to regulate
themselves, government agencies have grown to administer regulatory policies.
LEARNING OBJECTIVE: DESCRIBE WAYS MARKETING MANAGEMENT FUNCTIONS ARE INCLUDED

IN THE MARKETING PLAN.
The role of marketing executives and planners is to bring vitally important information to the planning
process, to clearly develop the future goals and objectives of the firm, to allocate resources, and to
implement and modify the plans that are necessary for desired outcomes. We will examine three
marketing procedures of the marketing manager.
Step 1 – Develop the Plan for the Business – The Marketing Manager, with the business executives, will
develop the strategic plan for the business. Here, the marketing executive must develop a plan, or a
“marketing strategy,” aimed at a segment or target market. The development of this well-defined,
written marketing plan will help the Marketing Manager create guidelines for the marketing execution.
The marketing plan is the written compilation of all marketing activities and strategies.
Step 2 – Execute the Plan – The Marketing Manager will direct the execution of his or her marketing
plan. A key in the execution of the marketing plan is communication. It’s important that key
stakeholders (anyone with a stake in the business) and decision-makers be aware of the marketing
strategy or marketing plan. Communicating the plan makes the execution or implementation easier.
Step 3 – Evaluate, Analyze and Control the Plan as it Unfolds – As the marketing plan is executed, the
marketing manager must monitor the performance of the plan. If the plan is obtaining expected results,
the marketing manager can leave the plan alone or adjust the plan for even better results. However,
there are times when marketing plans begin to fail. It is the job of the marketing manager to re-evaluate
the plan. This may mean that the manager goes back to Step 1 and starts over, or it may mean that
several minor adjustments are needed.

The overall business environment is changing, and the marketing manager must understand these
changes and the strategic planning process to effectively market the business. Often learning and
investigation reveal better ways to do business.
LEARNING OBJECTIVE: DESCRIBE AND APPLY ELEMENTS OF MARKET SEGMENTATION THAT CAN
INFLUENCE A FIRM'S TARGET MARKET.
To identify a target market, we must first understand and execute a market segmentation process to
understand the market and to reveal which segment may become the best target market to meet
objectives with our product and/or service offerings.
1. Outline the firm's current situation. What are the firm's strengths in relationship to the
opportunity? What is the firm's present financial health in regard to taking on another venture?
Does the firm have the management in place to meet this new opportunity or will the firm have
to hire more people?
2. Define consumer needs and wants. Usually, a market research study is completed to identify
what the consumer needs and wants are, because consumer needs and wants drive a firm's
growth. Therefore, market research that shows consumer needs and wants can help determine
whether or not the market is favorable for a particular product or service (i.e. where the product
will be needed or wanted). We cannot guess where the market is, so we use research to show
where potential customers exist based on their needs and wants.
3. Divide markets on relevant dimensions. There are many ways to divide or segment a market.
The purpose of segmentation is to group people with similar needs, wants or buying behaviors
so that our marketing efforts can be most effective. It would be too difficult and costly to try to
market to everyone. Therefore, we tailor messages to specific people who we believe will
respond to our marketing most favorably.
According to tutor2u.net, there are two broad ways to divide markets: NEEDS or PROFILERS. As
we’ve said previously, needs are most often determined through market research. By identifying
the needs of the market, we can group people with similar needs together. Profilers relate to
descriptive, measurable characteristics such as gender, age, geography, income, etc. Common
examples of profilers include geographic, demographic, psychographic and behavioral.

GEOGRAPHIC
• Region of the country
• Urban or rural
DEMOGRAPHIC
• Age, sex, family size
• Income, occupation, education
• Religion, race, nationality
PSYCHOGRAPHIC
• Social class
• Lifestyle type
• Personality type
BEHAVIORAL
• Product usage (light, medium, heavy
users)
• Brand loyalty (none, medium, high)
• Type of user (with meals, special
occasions)
Source: http://www.tutor2u.net/business/marketing/segmentation_bases_introduction.asp
4. Develop product “positioning.” This is the stage in which the marketing manager needs to find
a way to position the firm's product in the customers’ mind. Offering one firm’s advantages over
the competition’s advantages is what positioning is all about. In the car market, Hyundai is less
expensive, Volvo is safer, Toyota and Honda have higher quality and Lexus means prestige. This
is positioning. Each firm must create a “position” in the mind of the consumer to let him or her
know what the firm has to offer. The main focus in segmentation is to determine what position
the competition already has in the minds of consumers. For instance, Hertz Rent A Car began as
the number one car-rental business in the country. Avis came back with its ad that said it was
number two, and that is why “We Try Harder.” This ad positioned Avis into the rental-car
business not only as number two, but it also implies that Avis works harder to help its customers
than Hertz.

5. Decide on its segmentation strategy. Once a firm segments its marketplace, it can then choose
a strategy:
a. The segment may be so small that it will not be profitable to enter that market.
b. The firm may decide to mass-market like Wal-Mart does.
c. The firm may decide to only enter one segment of the market or the one that is the
most lucrative.
d. Finally, the firm may decide to combine two or more segments that have the same
needs and formulate a message and theme to meet all of these segments.
In most cases, the fourth choice is the best because it is more economical. We will later discuss
the key characteristics of an attractive market segment.
6. Design marketing mix strategy. Once the segments are known, the firm can choose the best
product, price, place and promotion mix, or the 4P’s, to best reach the needs of the customers
in the chosen segment.
The following example regarding Southwest Airlines will help you understand the importance of
why identifying a market segment, and thus identifying a target market, can be crucial to
success.
The strength of Southwest Airlines was its ability to segment the

market while most of its competition didn't see a new "traveler's
need." Southwest Air began its $25 flights almost 20 years ago and
has created a revolution in becoming a low-cost carrier. Southwest Air
took the lead from Delta in being the highest volume carrier in 2004.
So what gave Southwest Air the advantage over Delta? Delta believes
that its target market is the elite business traveler. This is the reason
that Delta continues with its high-fare, first-class flights. Southwest Air
recognized a different traveler whose needs were not being met by the other airlines. Southwest Air saw
an opportunity that Delta never realized. While Delta was busy "grabbing dollars," Southwest Air was
"charging dimes and nickels," and by doing so, it became the nation's largest low-end provider. So,
Southwest Air, with its low fair "peanut" flights has found a niche. Southwest Air fills every flight,
meeting its needs as well as the consumer's needs. It was Southwest Air's ability to see a new niche or
target-market opening that the other airlines completely overlooked, which has made Southwest Air the
highest volume airliner in the U.S. In fact, as a market development program, Southwest Air is seriously
thinking of revolutionizing the whole industry by creating international "peanut flights," too.

LEARNING OBJECTIVE: LIST THE KEY CHARACTERISTICS OF AN ATTRACTIVE MARKET SEGMENT.
Marketers must keep five variables in mind as they develop their unique market segments. It is often
better to have a marketing consultant firm involved in the development of these five variables.
Remember, identifying a segment is not enough. We must determine if the segment is attractive, or
worthwhile, before we can target that segment.
The five criteria used in selecting a target market segment are:
1. Market Size - The larger the market size, the better the chance that the firm can create a niche
that will grow over time. When Ray Kroc put together his first two McDonald's franchises, he
didn't realize how big McDonald's was going to become. However, firms today potentially have
more to lose and therefore need to have a better picture of market growth than Ray did in the
1950s.
2. Expected Growth - Even if the size of the market is very small at the beginning, it may grow
significantly over time. Much to McDonald's benefit, it is estimated that by the year 2007,
consumers will be eating out three times per week.
3. Competitive Position - The less competition, the better. When McDonald's started its first fast-
food restaurant, there were only a few "mom and pop" hamburger and fry diners. After it began
its franchising operations in the 1960s, it was clear that McDonald's would soon be the fast-food
leader.
4. Cost of Reaching the Segment - Knowing which groups of people want the product is how
targeting needs to be done. The McDonald's strategy from the 1960s to the 1990s was to
advertise to children. Imagine the costs of targeting to children. What benefits may be reaped
later?
5. Compatibility with the Organization's Objectives and Resources - A firm should focus on the
capabilities and resources it does have while perhaps leaving open the possibility to change or
expand. Although McDonald's sold only burgers and fries for many years, it eventually realized
how cheaply breakfast could be produced. Since it saw another period during which it could
make money, and also had the capability of making breakfast food, McDonald's is now also in
the breakfast market, which helps to achieve its objective of being a fast-food leader.

LEARNING OBJECTIVE: LIST AND DISCUSS THE THREE STEPS OF TARGET MARKETING.
The success of any marketing plan is derived from a marketing strategy based on the following three
dimensions.
ESTABLISHING A MARKETING OBJECTIVE
Marketing objectives usually are derived from an organization's overall objectives. The term "usually" is
used here, because there sometimes are new product-development activities that generate unexpected
results and that occur as a result of investigating a totally different aspect of a marketing idea. For
example, 3M was researching glues for various uses and, in the process, inadvertently came up with a
product we use today: Post-It Notes. We can hardly run an office without this valuable contribution to
our daily business lives. Yet, 3M did not seek to create the product, but rather discovered the product
idea as a result of other new product development activities. When 3M stumbled onto the idea, it
needed to have enough flexibility in its marketing strategies and resources to react to what it had found.
So, while objectives drive most of the marketing activities, the organization needs to remain flexible
with regard to new developments.
When using objectives as a framework for new product and market development, these objectives must
be specified, and performance needs to be measured. When we refer to measurement, we mean that
there are genuine metrics that are established to track both customer experiences with a product or
service, as well as the organization's experience of managing a business with revenue, cost and
profitability targets as standards of performance. Throughout our business training, we refer to specific
and measurable objectives as meeting the “SMART” guidelines for development: SPECIFIC,
MEASURABLE, ATTAINABLE, REALISTIC and TIMELY. When these guidelines are used for each
objective, the goals of the organization and how to achieve them become clear to everyone involved.
Yet another example of a measurable aspect of an objective is that of “standards of

performance.” SALES VOLUMES and PROFITABILITY BY A CERTAIN DATE are two important
performance measures for the marketing executive. In most cases, profit is a better indicator than sales,
because a sales indicator can become too ambiguous if it doesn't contain the cost factors.

MARKET STRUCTURES
In economics, a firm sets “marginal revenue” (MR) to “marginal cost”

(MC), or MR = MC, which is the profit maximizing rule for the firm. We
can apply this equation to the four types of market structures that we
will be discussing: perfect competition, monopolistic competition,
oligopoly and monopoly. The difference between these types of firms is
representative to the number of firms within a given industry.
PERFECT COMPETITION
The first type of market structure is one we refer to as is pure competition or perfect competition.
Operating in perfect competition means there are many, many sellers producing and selling the same
product. These products are typically referred to as commodities and represent the types of products
that are available in large quantities. Commodities are typically supplied by many, many producers. In
addition, these producers all compete for the purchasing dollar of the buyer, with little flexibility in the
product being sold. A firm in perfect competition tries to set MR = MC, but because there are so many
firms in that market, it has to keep its prices in line with its competition. Therefore, a firm in perfect
competition sets Price = Marginal Cost because it has to set its price at the same level as other firms in
the area to remain in business.
Another example of a perfect competition is small-grain farming. In a business that sells wheat used for
making bread and that is in perfect competition, the producer must accept
the price offered by the market. As a commodity product, the price of wheat
is based on the market price for the going rate for wheat. Therefore, a firm
operating in perfect competition infrastructure has little control over price. A
bakery that bakes wheat bread must accept the price received by natural
market forces in the bakery industry. The reason for this is that it is easy for
firms to understand the know-how and to enter the marketplace as a
competitor in this industry. The result is that there are many suppliers of
wheat bread, each vying for the consumer's dollar. Therefore, a firm in
perfect competition has almost no control over price.
Take, for instance, the four corners of an intersection where there are four
independent gas companies vying for the customer to stop and fill up his or her tank or a convenience
mart where a person may buy gas and other items. Gas prices, as well as the prices of the food and drink
items, are about the same in most convenience marts.

MONOPOLISTIC COMPETITION
“Monopolistic competition” should not be confused with “monopoly.” Most

of today’s firms reside in the industry infrastructure called monopolistic
competition. Most fast-food firms, like McDonald’s, reside in this category.
Most of these firms can differentiate their products from other fast-food
operations to attract more customers. By doing this, they are able to have a
little more control over their prices. These businesses have a price range that
they must maintain, because there are MANY fast-food chains competing for
the same customers. If McDonald’s decided to price its products too high,
customers would choose to eat at another fast-food restaurant other than
McDonald’s in favor of a better price point for the product. Depending on
the product, McDonald’s has a flexibility in price range of between $.25 to $1.00 where it must keep its
prices to keep them competitive with the prices of Burger King or Wendy’s, and to be able to keep its
customer base. They can’t set prices too high, but they can set prices close enough to where MR = MC to
make a difference in their profit margin. Firms in monopolistic competition have higher profit margins or
can make higher profits than firms in perfect competition. Therefore, they have more control over
increasing their prices.
OLIGOPOLY
An oligopoly represents the title of the next type of industry

infrastructure. In an oligopoly, there are a few very large producers of
a product that dominate the entire market. General Motors, or GM, is
an oligopoly firm, producing automobiles for the industry worldwide.
The car industry can be referred to as an oligopoly, as there are just a
few very large and dominant car manufacturers that hold primary
market share in the car industry. A firm operating in an oligopoly has
the ability to manage the price structure of the marketplace. GM can
control market price, because it sells more cars than any other car manufacturer. This allows GM to
become the PRICE LEADER, or the dominant firm in the industry that sets the price points for all other
automobile manufacturers.
Because there are only a few firms that are able to set their prices close to where MR = MC, if GM can
get every other car manufacturer to keep its prices high, it can artificially reduce output and create a
shortage to be able to set MR = MC. Now GM is acting like a monopoly.
GM sets its price, and other firms will follow. Oligopoly firms will not use price to competitively retaliate
in the marketplace as often as they will use advertising or some other non-price competitive factor to
drive competitors from the market.

MONOPOLY
Our last infrastructure type is referred to as a monopoly. “Mono”

means one, and monopolistic industries are characterized by one
company that controls the marketplace. One of the best examples of
a monopoly in the recent past would have been the power companies
in most of our neighborhoods in the United States. Until the
deregulation of the power industry, one power company would have
been the only deliverer of electricity for the entire area to which they
were assigned. And even now, for those monopolies surviving
deregulation thrusts in the United States, there are typically government regulations, or a regulating
body of some kind, that control the industry.
A monopoly can set MR = MC by reducing the supply of its product. One for-profit organization that can
be referred to as a monopoly because of the size of its market share and its international reach is
Microsoft. Microsoft has very few competitors in its software business. Having few competitors allows
these monopolistic firms freedoms that other firms operating in a more competitive marketplace do not
share. For instance, Microsoft can artificially create a shortage to set the price to a level it wants, within
reason. For example, a CD may cost $.05 to manufacture, yet Microsoft can charge $100 or more per
disk. This represents a 2,000 percent return on its material costs.
Firms in these types of industries have special control over the products or services offered, and as such,
have special control over their markets. Governments watch this type of manipulation closely to make
certain that the consumers in these industries receive a fair purchase price for products or services.
Government intervention is often required, as the market in these industries cannot balance the
relationship of price and demand due to the special circumstances of control by the firm introducing a
product or service. Microsoft is a classic example of this type of special control over the market due to
the innovation and discontinuous change offered by Microsoft’s new product development.
In such a marketplace, the consumer is at the whim of the company when purchasing the products or
services needed. Such markets are watched and are controlled by the Sherman Antitrust Act, which
prohibits monopolies from price gouging, and other market control features that might preclude
competition from entering the market. In other words, in the absence of fair competition, the
government intervenes in the market and ensures that the consumers are fairly treated.
Conduct an Internet search on the Sherman Antitrust Act to understand more of the impact of these
laws and regulations upon firms operating in industries where there is a monopoly industry
infrastructure.
To summarize market structures, monopolistic industries are the industries where there is no
competition. Purely or perfectly competitive industries are industries that are characterized by extreme
competition. The prices of products are controlled by the amount of competition within the industry,

creating the conditions where a firm can or cannot charge prices that are above the mean or average
price in the industry, based on the economic infrastructure of the industry itself.
SELECTING THE TARGET MARKET
If you will recall the introduction to the course, marketing over 20 years ago was called MASS
MARKETING. Firms would blast a message over the radio or television hoping that those who were
interested would be listening.
Over the years, mass marketing has proven to be ineffective. Marketers have
discovered a better method of marketing. This method is called NICHE or
TARGET MARKETING. Target marketing takes more work and requires more
attention to the customer’s needs than does mass marketing. However, once
a firm targets its market, its rise to success is much easier. To use another
hunting analogy, target or niche marketing is like a hunter going out to hunt
deer. He doesn’t use a shotgun this time, but a rifle. The idea is to find the
game and hit only one animal at a time. Just as a deer is in a hunter’s target,
so are customers in the target of a target marketer. A firm using target
marketing directs all of its attention and efforts, not toward a mass market,
but to one or a few specific groups of potential consumers. So, a firm that target markets its products is
very specific about who receives its message and what media it uses to find its customers. When a firm
selects a target market, it must ask specific questions of its customers to determine if the target market
will be worthwhile.
The first question the firm asks is, “what do customers want or need?” The marketer needs to know
how needs and wants drive consumer demand. Some marketing authors call it searching for a Unique
Selling Opportunity (USO). When we refer to a UNIQUE SELLING OPPORTUNITY, we are discussing the
specific characteristics of a customer’s need. Once a firm understands the needs of the customer, it will
have found a legitimate USO and can then apply the 4Ps of marketing (product, price, place and
promotion) toward meeting the consumer’s needs. A company has to sufficiently satisfy a customer or
group of customer’s needs and wants before a business has a chance of surviving. Today, mass
marketing, except perhaps for huge firms such as Wal-Mart, would represent a costly waste of time and
resources for the majority of specialized firms.
The second question a firm asks is, “What must be done to satisfy these needs or wants?” Does the firm
have the capability to meet the customers’ need? At this point, the firm steps back to look at its position
in the marketplace relative to the need and want of the consumer in an identified product area. The
SWOT analysis aids the firm in assessing the firm's capabilities in resources, product knowledge, and its
general capabilities to supply the product or service to a group of consumers in the market. Through
such an analysis, the firm can prevent any deficiency or limitation it may experience, should it elect to
pursue a segment of the market which may offer challenges and demands otherwise unnoticed before
market entrance. Without such an analysis, the firm assumes risk.

The last issue of concern for the marketing professional deals with the profitability of the target
market. As we stated earlier, there are five criteria used in selecting a target market: market size,
expected growth, competitive position, cost of reaching the segment and compatibility with the
organization’s objectives and resources. If these criteria appear to be in our favor, it is likely a profitable
market segment and the firm should purse the target market.
DEVELOPING THE MARKETING MIX
As we’ve mentioned, the “marketing mix” or “4P’s” is a set of manageable variables that will satisfy the
target market and achieve the firm's objectives, Each of the four P’s — product, price, place and
promotion — must be tailored to meet the needs of the target market.
Every target market must contain these four variables and will require a different strategy or
combination to meet customers’ needs and wants, and that in turn will generate customer
demand. Let’s look at several examples to see how these different marketing mixes play in different
industries:
Simon-Delivers is a Minneapolis-based grocery and delivery service

that delivers groceries to the customer’s door. It also collects
information about the buying patterns of its customers. For example,
if you usually purchase one jar of peanut butter per week, chances
are, when you place your next grocery order you will receive an e-
mail, as a customer service, asking whether you need an additional
jar. The target market is “working adults with families” — those
people who would rather spend their time enjoying family activities or
relaxing, rather than buying groceries in a grocery store. The prices of the products do not vary much
from those in the average grocery store. However, consumers in this marketplace will pay a premium
price to be able to spend their time in other ways. The consumer is charged for the SERVICE of providing
and delivering groceries to the door. Based on this information, who is the target market for Simon
Delivers?
Frontgate is a unique retailer because its sales are catalog and Internet sales.
Frontgate has no retail stores from which it sells its products. Most of its
products are designed for those people with a taste for high quality and
distinctive styles. Such products are not found in more common retailers
such as Wal-Mart. Social elites, or members of the upper class, will buy most
of their products from Frontgate because they know that they can show
their wealth by displaying items that most people cannot afford. Exclusivity
of product, price and place become a dimension by which Frontgate sells its
products. For more information, read Frontgate's company profile from
www.frontgate.com.

LEARNING OBJECTIVE: DISCUSS THE KEY ELEMENTS IN A MARKET-COVERED STRATEGY.
The key elements in a market-covered strategy are focused on two primary objectives. According to
Pride and Ferrell (2003), the first is the selection of an appropriate target market for a firm's products or
services, and second, the creation of a marketing mix that will satisfy the needs of the chosen target
market. An important factor here is to follow the target market closely, and ensure that the market is
not shifting (based on demographics, age, etc.).
You can see the value of identifying a target market, because these consumers are have similar needs
and wants. Identifying a target market is not enough. The marketing mix (product, price, place,
promotion) must be tailored to each target market to maximize the effectiveness of marketing activities.
The marketing mix will be discussed further in the next learning plan.

ACTIVITIES
1. Think of your favorite childhood restaurant. Is it still in business today? How do you perceive its
strategy changing since you were a child? How might it continue to change and why? Think
about your favorite store (clothing, furniture, supermarket, etc.). Why does it appeal to you?
Does it also appeal to people that are culturally or demographically different? Why?
http://mystrategicplan.com/index.html
http://www.answers.com/topic/target-market
4. Participate in the following interactive activities and view a description of each:

Marketing Process
Marketing Procedures of the Marketing Manager
5. Peter Drucker, a notable business writer, suggests that a firm's mission statement must contain
three important elements. Find three corporate mission statements on the Internet and
determine whether they are A. achievable, B. Motivational, C. Specific. Do you agree or disagree
that these three elements are necessary? Why? What other elements may be missing?
6. Compare two Internet sites that highlight competing brands of one of the following:
automobiles, computers, clothing or music. Evaluate these sites based on the market segment
concepts you read about in the instructional materials. What market segments are the brands
being marketed to? How do you know? What are differences in marketing strategies for the two
items that you compared?
8. Graded Discussion 3.1: SWOT Analysis
Discuss with your class the benefits of SWOT analysis and its impact on the marketing function
of an organization.

GRADED ASSIGNMENTS
Assignment: Strategic Planning and Marketing

Do a library or web search for Best Buy (http://www.bestbuyinc.com/). Read the article about Best Buy
at:
http://nauproxy01.national.edu:2053/pqdweb?index=5&did=1482669051&SrchMode=1&sid=1&Fmt=3
&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1216245210&clientId=9003
Identify the elements of Best Buy’s strategic plan

Discuss how Best Buy’s marketing strategy fits the strategic plan.
Identify forces that are influencing Best Buy’s marketing process.
Discuss how Best Buy is using the three steps of target marketing.
Discuss the key elements in a market-covered strategy as it applies to Best Buy.
Rating Scale

1-2 Work reflects an attempt to meet criterion, but significant misunderstandings/misconceptions
are apparent.
Criteria
1. Learner identified the elements of Best Buy’s strategic plan
2. Learner discussed how Best Buy’s marketing strategy fits the strategic plan.
3. Learner identified forces that are influencing Best Buy’s marketing process.
4. Learner discussed how Best Buy is using the three steps of target marketing.
5. Learner discussed the key elements in a market-covered strategy as it applies to Best Buy.

WEB SITES
http://www.1000ventures.com/business_guide/marketing_strategy.html
http://www.collegegrad.com/jobsearch/1-5.shtml
http://mystrategicplan.com/index.html
http://www.answers.com/topic/target-market
http://www.businessplans.org/Segment.html
http://www.netmba.com/marketing/market/segmentation/
www.census.gov
http://www.topsearch10.com/search.php?aid=31128&q=Direct+Mail
Best Practices Help Grow a Grocery Store Automation Business. Visit

http://www.pragmaticmarketing.com/productmarketing/magazine/3/1/tci.asp
Causer, Craig (2004). Technology Spending is Picking Up. The Nonprofit Times. Visit
http://www.marketingpower.com.content24174.php
China and the European Union: business issues and opportunities. Visit
http://www.accenture.com/xd/xd.asp?it=enweb&xd=ideas\pca\china_european.xml
Christ, Paul (2005). Internet Technologies are changing public relations. New Roles and New Tools for
PR. Visit http://www.knowthis.com/articles/marketing/public_relations.htm
Competing on Digital Content: The New Frontier of Value Creation. Visit:

http://www.accenture.com/xdoc/en/industries/communications/media/medi_frontier.pdf
Dooley, Maria (2003). Discordant Harmony. Precision Management. July 18, 2003.
Duris, Sue (2004). Launch Tactics 2004. M4 Communications. Visit

http://www.pragmaticmarketing.com/productmarketing/topics/04/0401sd/asp
Eechambadi, Naras (2005). Unraveling the marketing mystique: try a portfolio approach to managing
marketing spending. Strategic Finance. July, 2005. Vol. 6, Pg. 41-47.

Helm, Christopher. CRM Overview.
Javed, Naseem. Avoiding Cyber Oblivion. Visit
http://www.pragmaticmarketing.com/productmarketing/topics/05/0504nj.asp
Jensen, Chris. Catch the Wave: Taking Advantage of the Latest Technology Systems. Retail Technology.
Do-It-Yourself retailing. March 2005. Pg. 42-46.
Livnech , Eran. The secret of Moulin Rouge and the Art of Product Positioning. Visit
http://www.pragmaticmarketing.com/productmarketing/topics/03/0307el.asp
Lara, Conception (2004). Seven Missteps to Avoid in Targeting Latinos. Cinemercado. March, 2004. Pg. 8-
9.
Marketing: Underrated, Undervalued, and Unimportant? Visit
http://www.accenture.com/xdoc/en/services/crm/insights/workforce.pdf
McManus, John (2004). Stumbling into Intelligence. American Demographics. Pg.3.
Murphy, Jacques. Pride, Denial, and Product Positioning. Product Management Challenges. Visit
http://www.pragmaticmarketing.com/productmarketing/topics/04/0410jm1.asp
Special Report: Retail technology: Technology’s new role in the retail supply chain. Supply Chain
Management Review – Logistics Management. Pg. 53 – 56.
White, Erin (2005). New Grads Avoid Government Jobs. College Journal. Visit
http://www.marketingpower.com/content25863.php
Read: Dunne, David (2006). That’s Segmentation, Not Sales. MARKETING, Vol.111, Iss. 34; pg. 16, 1 pg.
Retrieved November 22, 2006, from ProQuest database:
http://proquest.umi.com/pqdweb?did=1164200101&sid=20&Fmt=3&clientId=9003&RQT=309&VName
=PQD
Pride, W.M., Ferrell, O.C. (2003). Marketing: Concepts and Strategies, 12th ed. New York: Houghton
Mifflin Company.
http://www.tutor2u.net/business/marketing/segmentation_bases_introduction.asp
Read: How to do Customer Segmentation Right. (2005). CIO. Retrieved November 22, 2006, from
http://www.cio.com/archive/100105/cus_segment.html

LEARNING PLAN 4: FINDING AND GROWING PRODUCTS
COMPETENCIES
RELATE THE MARKETING MIX TO THE TOOLS MARKETERS USE TO IMPLEMENT STRATEGIES.
EXPLORE THE PROCESS FOR FINDING AND GROWING SUCCESSFUL NEW PRODUCTS.
a) Identify the major classifications of products and services.

b) Describe how a company develops strategies for branding, packaging, labeling and product
support.
c) Identify the four characteristics affecting the marketing of a service.
d) Describe marketing considerations unique to services.
e) Describe marketing considerations unique to non-profit organizations.
f) Identify the basic process companies use to find and develop new-product ideas.
g) Describe the eight steps in new-product development.
h) Identify key elements of the product life-cycle.
i) Describe ways marketing strategies change during a product’s life-cycle.
OVERVIEW
Think about the different types of food markets. Why are there so
many? Can you get all the products at all the stores? How do their
product offerings differ? Why? If you had the opportunity, what
product would you invent? Why? What is the reason it hasn’t been
invented already?
In this learning plan, we will explore the major classifications of

consumer goods and services, and their unique characteristics.
Branding strategies are discussed, assessing the importance of establishing a "mind share," or an image
of the product or service in the mind of the customer through discrete marketing activities designed to
capture and influence the attention of the consumer, and to hold the consumer's attention for future
purchases of products or services from an organization.
So why is the marketing program of today so important to the overall corporate strategic plan? It is new
ideas regarding meeting customer wants and needs rather than old ideas that are making the difference
in a corporation’s revenue streams, enhancing a longer corporate life.
Today, if a firm has a good idea, it may go out of popularity in just a few years, if not sooner. Just think
of all of the software companies of 10 years ago that are out of business today. Product and marketing
developments have become the main core of a business’ survival. The old era where accounting and
management were in control of the firm has gone. Products have shorter lives now than ever before,
and that is putting new product creation and marketing at the forefront of business. For this reason,

marketing courses will become one of the most important classes you take.
In this learning plan, we will discuss the processes and techniques used by marketers to find and
develop new product ideas, and for growing both new and existing markets through product
development processes.
LEARNING OBJECTIVE: IDENTIFY MAJOR CLASSIFICATIONS OF PRODUCTS AND SERVICES.
The way consumers purchase goods differs from product to product because of effort, attributes,
frequency, and value.
1. Effort made by the consumer when he or she makes his or her decision. Does it require a quick
decision, or does it take time for the consumer to decide?
2. Attributes used in the purchase — the more attributes, the more information required to make
a decision.
3. Frequency of purchase. If the consumer makes the decision once in a while, then he or she
doesn't need to create a purchasing plan. However, if it is a repeated purchase, a purchasing
plan or other procedures will be necessary.
4. Value significance of the purchase in terms of its value in relationship to a person's budget.
Because of these reasons, there are different classifications of products and services. You may recall
from a previous learning plan that the main classifications of consumer goods and services are:
convenience, shopping, specialty, and unsought goods.
CONSUMER GOODS
Convenience goods are goods that a consumer purchases with very little thought or effort. Toothpaste
is an item that requires little decision-making time. When we enter the supermarket, very little thought
is expended as to what brand or price of toothpaste is being offered. Let’s face it —a tube of toothpaste
does not drastically affect a person's budget, so we can make a rapid decision without much regret if we
buy a product that doesn’t suit our needs. Impulse items, those items bought on a whim, are also
convenience products because they are usually inexpensive.
Shopping goods are goods for which a consumer will pay more than for convenience goods or are those
products that will consume a larger portion of an individual’s budget. As a result, he or she compares
each good with comparable goods. An example of a shopping good is an article of clothing. The article of
clothing costs more than toothpaste. It is not just the cost of the item itself, but resulting behaviors may
occur when one is purchasing something of more significant value, such as in having to drive back to the
store to exchange the item if one makes a wrong choice. When purchasing a shopping good, a consumer
will usually compare prices, quality, and styles and typically these decisions take time before the
decision to purchase is made.

Specialty goods are items that require a personal choice that an individual will make and that probably
is unique to that person. An example of a specialty good may be the purchase of a Rolex watch. A
consumer must make a concerted effort to seek out and then purchase such an item. Diamonds, too,
are specialty goods, and a person may visit several jewelry stores to find a diamond that is to his or her
liking. Specialty goods make up an even higher percentage of a person’s budget, so much more time and
effort will be taken before purchasing these higher priced items.
Unsought goods are commodities that a consumer knows very little about and has little care toward.
The importance (or lack of importance) that an individual places on the purchase of a particular item
may place it into the unsought category. If a person has no interest in or doesn’t understand the
significance of a product or service, the individual will not seek it out. For example, let’s say that you live
in West Texas, where a pair of ostrich leather cowboy boots is a part of the cultural experience of the
area, and that when one has a pair of ostrich leather cowboy boots, one is known to be in the “popular”
crowd. If you are not a part of the West Texas culture and don’t understand the importance of this type
of cowboy boot, the ostrich leather cowboy boot would be an example of an unsought good.
LEARNING OBJECTIVE: DESCRIBE HOW A COMPANY DEVELOPS STRATEGIES FOR BRANDING,

PACKAGING, LABELING, AND PRODUCT SUPPORT SYSTEMS.
BRANDING STRATEGY
There are four types of branding strategies. The first branding strategy is
known as manufacturer branding. It is made up of both MULTI-PRODUCT
and MULTI-BRANDING strategies. Multi-product is defined as A
MANUFACTURER BUILDING MANY PRODUCTS UNDER ONE BRAND NAME.
Let’s use Toro lawn and garden equipment as an example. The Toro products
include Toro snow-blowers, lawn mowers, garden hoses, and sprinklers —
each under the Toro name. Marketers refer to products as “a package.” A
package can be developed for sale and includes parts and supplies from all
over the globe. Using Toro as an example, supplies and parts used in making
Toro products arrive at manufacturing facilities from every corner of the
globe. The manufacturing facility assembles or creates the package for sale, either in the U.S. or abroad.
So that you understand the concept of “a package,” let’s use Dell as yet another example of a product
package assembled as a result of receiving parts and supplies from around the globe. If you have ever
received a Dell computer (or any other computer that comes in a box shipped directly to your door), you
know what packaging is all about. You would have noticed that within the box you received was the
hardware, wires, and software, as well as your Dell computer. It was sent as a total Dell package.
Attention is paid to “bundling” the product with all of the necessary peripherals and gadgets you need
as a consumer to use the product you ordered. The “package” is decided upon by the marketer and is
assembled according to specifications gathered in market research activities to ensure that the

consumers’ needs are met. Further, these needs are met from suppliers and contributors to the product
from around the globe.
Multi-branding is a strategy deployed by Procter & Gamble, which creates the “battle of the brands.”
Such a practice is called the battle of the brands because P&G creates competition among its own
products so as to reduce the number of competitors entering into the market and thereby maintaining
P&G’s market share. For example, detergents that P&G produces are Tide, Cheer, Ivory Snow, and Bold.
P&G specifically advertises all of these products on television, which gives most customers the
perception that competition exists in the detergent marketplace, while, in fact, all of the products are
created and distributed by P&G.
Private branding , or private labeling as it is sometimes referred to, helps an organization develop a
brand identity of its own. For example, Sears uses private branding or private labeling in marketing
products and services to its customers. In private labeling, Sears may approach Toro to have it create a
special lawnmower product under the Sears name. The consumer obtains the product quality that Toro
is known for, but the Sears name and brand image, as a supplier of lawnmowers, becomes the image a
consumer holds in mind as he or she purchases the product or as he or she has the product serviced
through Sears’ service facilities. You can see that this type of private labeling pertains to both labeling
and to product support services. Sears’ own private brand for its appliances is called Kenmore. Sears
may, in fact, contract with Maytag to make its Kenmore appliance line. Sears has Maytag put the
Kenmore label on all of its appliances. Customers purchasing the Kenmore line assume that Sears makes
Kenmore appliances. Why is that so important? The customer knows that if Sears/Kenmore makes the
appliance then Sears/Kenmore will service their machine if the appliance breaks down.
In the mind of a customer, “packaging service” is an important part of the product package. When a
necessary appliance breaks down, a consumer can feel a tremendous amount of anguish, as these items
are critical to the effective running of a household. Sears knows this. Sears promotes seamless service as
a part of the market strategy, indicating that when you purchase a Kenmore appliance, the Sears
warranty will cover the repair of all of their Kenmore products. When a customer buys a Sears
appliance, he or she is receiving peace of mind. Sears’ private brand, Kenmore, adds a service factor into
all of the appliances it sells. In the eyes of a consumer, it is the servicing of an appliance that earns most
of Sears’ sales.
A mixed brand strategy represents a compromise made between using the manufacturer brand and
private branding. Epson makes its own printers, as well as manufacturing IBM’s printers. A firm such as
Epson will manufacture a different printer for IBM and a different printer for its own Epson label. Using
these same examples, the major difference between private labeling and mixed brand strategies is that
Maytag makes the very same appliance for Sears or its Kenmore product as it does for its own
customers who purchase Maytag products. All Maytag does is put the Kenmore label onto a Maytag
washer or dryer. This strategy allows a supplier like Maytag to have its products assembled all over the
globe, holding down the costs of manufacturing as a result. Epson is producing a different printer under
IBM’s exact specifications. The Epson printer manufactured specifically for Epson customers and the IBM

model manufactured to IBM specifications are different printers. So IBM is not just putting its IBM label
onto an Epson printer; IBM has contracted its printer manufacturing to Epson. What does this do for
IBM? The strategy allows IBM to focus its time and attention on what it does best: selling and
consulting. Epson wins, too, because it has an extra income source other than its own printer sales.
Underlying this discussion, there is another business principle at work. Most of our production today is
done in remote locations throughout the world and is shipped to the U.S. for delivery. The reason for
foreign production is a need to reduce costs of doing business. Moving operations to developing
countries allows manufacturers to reduce labor, shipping, and warehouse costs. As markets and price of
the product become more competitive, manufacturers seek additional margins from reduction in costs
rather than from price increases. As U.S. labor costs continually rise at a higher percentage than labor
abroad, U.S. firms use foreign labor or highly sophisticated manufacturing techniques, such as robotics,
to aid in cost reduction and management of margins of profitability in most manufacturing activities
today.
LEARNING OBJECTIVE: IDENTIFY THE FOUR CHARACTERISTICS AFFECTING THE MARKETING OF

A SERVICE.
Since products and services are different, their marketing needs are different as well. While we most
often think of products, we should also understand the four characteristics that affect the marketing of
services. These four are: Intangibility, inconsistency, inseparability, and inventory.
Intangibility: As we have discussed previously, one of the differences between products and services is
tangibility. TANGIBILITY refers to the actual features, functions, and capacity of a product to perform
some set of outcomes for a consumer. For instance, a dryer has the capacity to dry clothes and can do
so in a specific amount of time. It has features for the accommodation of different fabrics so that the
dryer will leave clothes wrinkle free. These tangible aspects of a product can be identified and are
proven to be available to the customer through trial tests or product demonstrations.
Intangible, however, refers to the inability to touch something. Service is an INTANGIBLE benefit to
customers. Customers may or may not need to have an appliance repaired, but if they should require it,
the service will be available to them when they need it. It is very much like an insurance policy that
reassures customers who know that if something should occur, they will be taken care of by the service
policies of the supplier of a product. What marketers need to do is to provide examples to consumers
about services that are as tangible to the customer’s way of thinking as possible. For example, financial
planners can tell a client exactly how much money he or she will have accumulated by the time he or
she retires, if a set amount of money is put each month into an investment plan.
Inconsistency refers to the inability of a service provider to keep their services the same each time a
consumer uses them. Customers usually expect that services are provided consistently or the same each
time they are used. Consistency is also an attempt for businesses to ensure quality of service. Because

services depend on the job performance of the person performing the service, however, the quality of
service varies with each person’s capabilities and thus affects the way it is marketed.
Inseparability occurs when what the company represents and what the person providing the service
represents differ. For example, a university may represent high quality, but a particular instructor of that
university may not. Therefore, the perception of the university from the students in the instructor’s class
is not likely to be the true indication of a university’s standard as a whole. In effect, it is difficult to
separate the instructor from the school. How could this situation be effectively marketed?
Inventory within a service has a slightly different meaning than when we are referring to physical
inventory. If a service worker in a medical clinic spends time waiting for patients, rather than caring for a
patient, the medical clinic will still have to pay this worker while he or she is biding his or her time.
Inventory here refers to the capacity of the service worker to provide service, and when the service
worker is not fully deployed against a consumer’s need, there is an inventory of service provision that is
underused. Underuse of a service worker can be very costly to an organization because service
organizations are typically very labor intensive. The job of an individual who is managing a service
operation is to fully deploy its people against the needs of the consumer.
Economists believe that the service sector will become larger than the product sector in years to come.
So how did our attention to service begin? Over 50 years ago, McDonald’s created the first self-service,
cafeteria-style restaurant. Ray Kroc, the original owner of McDonald’s, created a cafeteria-style
operation for fast food so that the customer would feel in control. But it was not only the food. It was
also McDonald’s attention to service or innovation and in making the customer feel as though he or she
was in control that made McDonald’s so successful. A person eating at McDonald’s gets to choose
exactly what he or she wants to eat and how much, given the menu that McDonald’s offers. McDonald’s
lets people feel they are in control, even if that feeling is realized for only a few minutes a day. So as the
U.S. economy keeps moving into the service sector from the products sector, economists suggest that it
is services rather than products that will be the market of choice in the next century.
LEARNING OBJECTIVE: DESCRIBE MARKETING CONSIDERATIONS THAT AFFECT MARKETING

THAT ARE UNIQUE TO SERVICES.
When a customer has an experience with a service organization, the customer doesn't own a product.
The product is in the form of an experience. He or she only has a memory and the outcome of a
transaction. The goal of a service organization is to make each customer's service experience unique.
Service experiences cannot be stockpiled like capital and occur on a moment-by-moment basis. The
product customer is an end-user for a product, and the service customer is a partner in the creation of a
service experience. The organization creates a service, and the consumer receives the service
experience. The customer conducts quality control by comparing past experiences of service with the
organization. If the consumer has a poor service experience, apologies or reparations may be the only
means of recovery. Customers can determine the amount of service they are willing to receive
throughout the service-delivery process. There is a high degree of trust and collaboration between the

buyer and the seller of a service. Finally, there are more product brands but fewer services available to a
customer.
LEARNING OBJECTIVE: DESCRIBE MARKETING CONSIDERATIONS UNIQUE TO NONPROFIT

ORGANIZATIONS.
The major difference between a profit-based organization and a not-for-

profit organization is that a profit organization makes profits that can be
distributed to shareholders. However, in the case of nonprofit organizations,
extra income has to remain within the organization. Historically, nonprofit
organizations have kept a low profile in comparison to corporate, for-profit
organizations. As we stated before, service industries are on the rise. Service
nonprofit organizations account for about 7 percent of the Gross Domestic
Product (GDP), which is the total market value of all the goods and services
produced within the borders of a nation during a specified period.
The American Red Cross, the United Way, the Salvation Army, the U.S. Postal Service, the police, fire
departments, hospitals, and many universities are all nonprofit organizations. Marketers for these not-
for-profit organizations need to understand the business environment in which they operate. These
organizations are faced with increased competition for funds. Advertising is beginning to play an
important role in how they let the public know what products/services they provide. The nonprofit
group is also expected to rise as the U.S. enters the service economy.
OVERVIEW
So why is the marketing program of today so important to the overall

corporate strategic plan? It is new ideas regarding meeting customer
wants and needs rather than old ideas that are making the difference
in a corporation's revenue streams, enhancing a longer corporate life.
Today, if a firm has a good idea it may go out of popularity in just a

few years, if not sooner. Just think of all of the software companies of
10 years ago that are out of business today. Product and marketing
development has become the main core of a business' survival. The old era where accounting and
management was in control of the firm has gone. Products have shorter lives now than ever before, and
that is putting new product creation and marketing at the forefront of business. For this reason,
marketing courses will become one of the most important classes you take.
In this part of the learning plan, we will discuss the processes and techniques used by marketers to find
and develop new product ideas, and for growing both new and existing markets through product
development processes.

Before we address the process for finding and growing successful new
products, we should examine the importance of market timing or when to
introduce a new product. Being first to market, or being ahead of the
market, may not always be a good policy. In such cases, an organization must
develop a need for the product or service. For example, we have had caller-
ID technology for about 25 years. AT&T and the Bell System, nationwide in
the U.S., did not introduce the product immediately because they didn't
believe that the consumer would be willing to pay for the service. AT&T and
the Bell System waited until voice-mail was well-integrated. Changes in our
lifestyles, and perhaps security issues that occurred in the last part of the
20th century, indicated that the time was right to introduce the product. Most consumers today actively
use caller-ID services as a part of their communicative patterns. Here you can see that if AT&T and the
Bell System would have introduced the product in the United States earlier than they did, the paying
consumer may not have been interested in the service.
It is the role of the marketing professionals within the organization to determine whether or not a
customer is ready for a product or service. If it will take a few years to develop and test the readiness of
a product, the organization will have to bear the burden of development costs without an accompanying
revenue stream to pay back investments in new product development. The customer has to feel a need
or want for the product. Without a consumer need or want, and therefore without a sufficient revenue
stream to support the product, a company's chances of survival in the market are slim.
LEARNING OBJECTIVE: IDENTIFY THE BASIC PROCESS COMPANIES USE TO FIND AND DEVELOP
NEW PRODUCT IDEAS.
As mentioned throughout this course, one of the primary responsibilities of a marketing group is the
identification of new streams of revenue for the organization. New streams of revenue help ensure the
viability of the organization in its marketplace by identifying and then producing products and services
for the market. Years ago, many firms were able to continue in business for 20 to 30 years selling one
product. However, times have changed. Firms that pay attention to discovering new products each year
continue in business, and those that don't, fail. For this reason, new product formulation is probably the
most important part of the marketing process. The following grid identifies the relationship between
new and existing products and services as well as new and existing markets that can be developed or
mined, and the opportunities that exist when these factors of products and markets come together.

Figure 8.1 Organization Strategies based on Products and Markets
Products
Markets Present Products New Products
Present Customers Market Penetration Product Development
New Customers Market Development Diversification
Figure 8.1 exemplifies the four primary market strategies of a firm. This helps show the marketing
strategy that may work best given the relationship between new and existing markets and new and
existing products. Understanding these strategies promotes optimal performance of an organization.
You'll notice that the left-hand side identifies the customers or markets category of the grid. We find
that both "Present" and "New" markets are defined here as opportunities available to the market
planner for new products and services. Across the top, we have the “Products” category of the grid.
Products can be "present" or existing products and services, or "new" products or areas of product that
are yet to be developed and sold. Within the grid, we have identified the types of activities that a
marketer will pursue, given the relationship of the “present” or “new” condition of the market, and the
"present" or "new" condition of the products within the market. Let's look within the grid to understand
the options available to the marketer.
Where the grid identifies a present market and a present product, the grid identifies “Market
Penetration” as an option for the marketer in managing the marketplace. When we refer to "market
penetration," we are referring to the opportunity of the marketer to take a larger share of the market by
further marketing the products and services of the company, and by encouraging consumers in the
market to “share shift,” or move away, from an existing supplier of a product or service. For example, if
a firm decides to step up its sales in its present products with its present customers, this is called Market
Penetration. “Got Milk,” the ad used by the Dairy Association, applied such a strategy.
Many firms do not like change and hold onto old ideas and fail to meet the demand of an ever-changing
industry. However, more aggressive firms see their business as always expanding. This is referred to as
Market Development. If there is the opportunity for a new market for a present product or service, the
grid identifies that “Market Development,” or the creation of a market for a product or service would be
the appropriate activity for a marketer to pursue. For example, even McDonald’s, after many years of
reduced franchise growth throughout the U.S., has taken its business abroad.
However, as we said earlier, most firms must continue creating new products that meet existing
consumers’ needs to survive. This type of market strategy is referred to as Product Development. For
example, Ping Golf Equipment Company is continually upgrading its clubs and related golf equipment as

it markets to its existing customers. In other words, they are not static in their product offerings.
Product Development will be discussed in further detail in the next section.
Where there is a need for a product or service and no existing market, “Diversification” is an attractive
option for the organization. By diversification, we mean development of new product revenue streams
for the organization as it branches or diversifies into new product and service offerings, perhaps even
away from those products and services upon which it has built its reputation in an existing market.
Diversification refers to a firm that moves into a totally new business that is different from the parent
company. Philip Morris, seeing its cigarette business declining, bought Kraft Foods to diversify its
holdings. Nestle Quick sold powdered chocolate and strawberry varieties of flavoring for milk products
in most supermarkets. However, Nestle, seeing the ready-to-drink market expanding, diversified its
product offering through new customers and new products. Nestle now sells a wide assortment of its
ready-to-drink milk or chocolate milk products to many stores all over the U.S. Firms such as Nestle see
new markets either as those that have not been tapped nationally or abroad as expansion opportunities.
In the case of Philip Morris, the company chose a completely new line of products, but Nestle chose
products closely related to its core business.
C. Merle Crawford and C. Anthony Di Benedetto, authors of NEW PRODUCTS MANAGEMENT, offer
perspectives on new product strategies. Product Development or Diversification may be reflected in the
following examples depending on whether these new products are marketed for existing or new
customers.
1. New-to-the-world products. These are products that are new to even the present customers of
your firm. Examples of these are the Polaroid camera, the first car, and personal digital
assistants (PDA).
2. Additions to product lines. Products that are extensions of current products. Examples are Tide
Liquid Detergent, Bud Light, and Apple’s Power Mac.
3. Product improvements. Most firms must make some adjustments as consumers begin using a
product. Test marketing is used to understand how the product will perform in a market.
However, the real market test begins after the product launch into the market. It is here that
additional product data is gathered and adjustments, sometimes major, are made to the
product after introduction. Crest Whitestrips, for example, proved to be successful in the
market. They were so successful that Crest launched Whitestrips Premium, Premium Plus, and
Renewal.
4. Repositioning. Products that are retargeted for a new use or application. One such product is
Arm & Hammer baking soda incorporated into toothpaste and underarm deodorant, and is used
as a refrigerator freshener. Baby shampoo became another repositioned product by entering
the senior market.

5. New category entries. Products that take a firm into a category that is new for the firm but not
new to the world. Examples are Procter & Gamble’s first shampoo product and Hallmark gift
products.
LEARNING OBJECTIVE: DESCRIBE THE EIGHT STEPS IN NEW PRODUCT DEVELOPMENT.
As indicated in the chart on the previous page, when a new market indicates the need for the
development of a new product or service, new-product development becomes an attractive feature for
an organization. "New-product development" is a rigorous and important set of decisions and activities,
because the firm will invest significant money into the research and development of new products and
services to meet market needs. The features of the new-product process are as follows:
1. New Product Strategy Development. Usually, new-product development will take on a team
dimension, because information from alternative departments within the organization sheds
light on the potential product and market features required for successful development activity.
Hewlett-Packard employs cross-functional teams that are small groups of technical and staff
professionals from several departments. Members of a new-product team may be the
marketing manager, a sales representative, a research and development (R&D) representative,
an accountant, an engineer, a chemist, etc. Each person has his or her role in providing
information to examine the feasibility of a new product offering.
2. Idea Generation. This is a very creative process for a brand

new product, but it becomes a less creative process for an already
existing product. At this stage, in the new-product development
process, the firm will talk to customers, suppliers, employees,
research and development engineers, etc. As an example, at Sony,
new-product division engineers have been able to assimilate four
new projects every day. This represents research and development
by the corporation. Sony has hired these individuals specifically to
search for new products, knowing that they will only glean a few
relevant product ideas worth commercialization. Most of the
product ideas will not work because of some problem, such as
whether it is unfeasible to create, whether the revenue or cost is not favorable or whether
consumer testing suggests that customers would not accept the product once it were marketed.
One of the problems with research and development is that there are so many obstacles to get
past, most product ideas are certain not to make it. Only a small percentage of products that are
invented will ever make it to full acceptance. However, two products that made Sony's success
list were the Walkman and the VCR. These two product successes represent only a small
percentage of all of the other product ideas that failed this marketing process.
3. Screening and Evaluation. Screening and evaluation involve an INTERNAL review, followed by
an external review. During the INTERNAL REVIEW process, the team will examine whether the
new product ideas can meet the firm’s objectives and whether or not the technical difficulties
can be overcome. Also, the relationship between the price the company will be able to charge
for the product or service and the cost for manufacturing or developing the product or service

will be assessed to determine whether the product is a viable one. One of the most significant
business considerations facing the marketer is the attractiveness of a product or service based
on its “profit margin” — the difference between price and cost for overall profitability of a
stream of revenue from a product. At this stage in the process, a brief analysis of price and cost
is undertaken. This analysis is not as extensive as will be done during a BUSINESS ANALYSIS, but
if the idea is too expensive, the idea will likely be discarded. All of the ”what if” bugs are worked
out before an external audit is taken.
Within the screening and analysis phase of the new-product development process, the team will
perform an EXTERNAL AUDIT. An external audit is executed only after an INTERNAL REVIEW
(identified above) has been accepted. Drawings and promotional literature are designed as the
team continues checking the new product’s feasibility in product and service design, market
assessment, and data gathering. Market situations, as determined by the market research, are
vital to this phase.
4. Business Analysis. In the business analysis phase, marketers

will forecast the market potential, growth, revenues, and overall
costs of introducing a product or service. Forecasting allows an
organization to determine the overall profitability of a product or
service before the introduction of the product or service in the
market. This is where a complex forecast of its feasibility will be
done either by the accounting department or by the company
finance officer. To forecast the profitability of a product or service, a
full marketing plan indicating the growth and diffusion of an idea
into a market will be assessed, cost and price factors analyzed and
the overall anticipated results of the introduction of a new product
or service will be developed into a marketing plan.
5. Prototype. Finally, a prototype of the product will be created for its 3D effects. Most of these
new-product costs are captured under research and development. Careful accounting of new-
product development costs in research and development are recorded because many of them
are eligible for investment tax credit but, more important, because new-product development is
an expensive and risky activity. Business and marketing executives keep a watchful eye on new-
product development money, anticipating future revenue streams from the investments made
in new products and markets.
6. Test Marketing. Now that the product has been identified and a prototype has been developed,
test marketers take a new product or service to the marketplace to develop information about
how customers perceive the features, function, and overall price of the product. Test marketers
test the product or service by identifying a normative test market situation. The test marketer
will create a controlled experiment in a limited geographic location. An example of a controlled
experiment might be where a group of people are given product A, which is the product the firm
wants to test, and compares it with product B, the competition. Then, each of the people in the
group responds to which one he or she liked best and why. Or the test marketers might take
two groups of people, have the first group test product A, and have the second group test
product B, then compare the responses of the two groups. If there is a significant difference and
the firm’s new product is liked the best, then commercialization will be the next step. While

they are testing the new product, the test marketers may also be able to discover other
activities that the firm could do to make the commercialization process more successful, such as
packaging or advertising ideas for the new product.
7. Commercialization. Assuming that all other stages indicate that a product or service is a good
investment, the company will proceed to the commercialization phase of the new-product
development process. Most companies should proceed very slowly and carefully when moving
into the commercialization stage. They “go slow to go fast” because this is the most expensive
step. This phase can cost millions of dollars, so most firms will first conduct a series of tests. It is
the same approach a statistician makes: Study a small group first because it is cheaper. If the
test result fails, the firm is not out much. For example, if Pepsi wanted to commercialize a new
product, it might test the new product in a localized area. If it succeeds, then the researcher will
try a larger test to see if that one passes. If it fails, the firm, in this case Pepsi, is still not out
much. If it passes, then the firm moves on to a still bigger test. Can you now see why a firm
“goes slowly to go fast”? Research is a very expensive proposition, but because it must be done,
it is better that a researcher do it in increments. So, the researcher will move from a smaller
group to successively larger groups with its market research roll-out. By going slowly rather than
too fast, an organization can minimize its losses.
If a firm is in an industry with a very short product life cycle and there is a chance that other
firms might steal its idea, then this firm will probably use a TEAM INTRODUCTION METHOD
and will be operating several studies at once. Cost is not an issue here but speed is, so the firm
that gets to market first wins the prize. In the case of many high-tech industries, speed rather
than money is important.
8. Product or Market Improvements. More often than not, as a company enters the
commercialization stage, it will find some oddities in rolling out the product. This is a time for
the firm to experiment beforehand so that it can get the regional launch right before it proceeds
with a national launch.
LEARNING OBJECTIVE: IDENTIFY KEY ELEMENTS OF THE PRODUCT LIFE CYCLE.
As we've mentioned earlier, products do not last forever. As a general rule of thumb, a consumer
product will not last as long in the market as a business product. The life of products, including
consumer and business, usually go through four stages called the product life-cycle. The four product life
cycle stages are: INTRODUCTION, GROWTH, MATURITY, and DECLINE.
The following graphic depicts the life cycle of products. It is important for a marketer to know how the
market is characterized in this life cycle. In other words, the marketer will manage the market differently
if the product is in "introduction" or "growth" as opposed to "maturity" or "decline."
1. Introduction Stage. The first stage is the introduction stage, companies spend heavily on
research and development for new product launches. Once a product is developed, they also

spend heavily on advertising to create an awareness of a firm’s new product. This makes
product launches very expensive. For example, Gillette spent $1 billion to launch its Mach3
razor.
TAKE A LOOK AT “SURVIVING INNOVATION” AT:

http://www.copernicusmarketing.com/about/docs/surviving_innovation.htm, AND YOU WILL
SEE HOW DIFFICULT IT MAY BE TO INTRODUCE A NEW PRODUCT INTO THE MARKET.
2. Growth Stage. Once the introduction stage succeeds and the product slowly gains acceptance,
the growth stage begins. Remember, this happens only if the product satisfies the market, in
which case, sales begin climbing. This is also the period in which copycat firms will enter.
Whether the firm began with “skimming” or “penetration” pricing will determine the number of
copycat firms that will enter. In most cases, firms will enter skimming, trying to make as much as
they can out of the launch. However, once other firms see the profitability, they also will enter.
For example, fax machines cost over $3,000 as they entered the market, and the number of
firms that entered the market grew exponentially from 1986 to 1992. That was the “growth
stage” of that business. Right after the growth stage, the price dropped to half, or from $3,000
to $1,500.
3. Maturity Stage. The maturity stage, often called ”saturation,” is marked by many firms in the
market, which forces sales prices to level-off or drop. From 1992 to 2000 was the maturity stage
of the fax industry. During the maturity stage, there were over $9 billion in fax sales. As prices
began to drop, weaker businesses were forced to leave the market and only a few firms
remained. By 2002, 80 percent of the fax market was controlled by four firms: Brother, Canon,
Panasonic, and Sharp. This is the stage in which firms have two choices —either hold on to what
they have or try to differentiate their products from the competition. In most cases, it is the
differentiators that remain.
4. Decline Stage. The decline stage is signaled by a steady and sustained fall in sales after the
maturity/saturation phase. This is where the decision to remain or abandon the market is
critical, because the product quickly moves from a positive to negative revenue situation. Fax
sales began to drop around 2002. The Internet with e-mail caused most of the fax bubble to
burst. Technological advances, such as the Internet, came at the middle of the maturity stage of
fax machines in 1996. It took six more years before its decline stage kicked in. When a firm is in
a decline tailspin, it has one of two choices: It can delete or drop the product, or it can
“harvest,” or keep producing but reduce marketing costs, so that the outgoing costs are very
low. The product continues to be offered by over-the-counter sellers rather than a company’s
sales staff.
LEARNING OBJECTIVE: DESCRIBE WAYS IN WHICH MARKETING STRATEGIES CHANGE DURING A

PRODUCT'S LIFE CYCLE.
Marketing strategies will change considerably during the four-stage life cycle. During the introduction,
the firm will enter applying either of two approaches. The first is "skimming." The firm will try to get the
highest price possible from the start. This is the method that most firms will take. However, some firms

with deeper pockets, such as Wal-Mart, may decide to prevent other firms from entering the market.
These firms will use "market penetration." They will set the lowest price possible.
Once the product enters the growth stage, the marketing arm of the company will try to increase its
market share. The bigger firms are forced to continue advertising or they will not remain into the
maturity stage. Other firms begin to enter at this stage, so the firm needs to increase its promotional
activities to gain a higher market share as new firms enter.
During the maturity stage, the firm will advertise to defend its market and profits. This is the time when
only a few strong firms can survive and all others will be forced to exit.
Finally, during the decline stage a firm will do very little promoting. However, it may search for other
markets to be able to spread its products. Some firms have been able to take their products, during their
decline, to other foreign markets to keep profits coming in. Companies may also reduce but not
eliminate manufacturing of the product and make it available on a much smaller scale.

ACTIVITIES
1. Think about the different types of food markets. Why are there so many? Can you get all the
products at all the stores? How do their product offerings differ? Why? If you had the
opportunity, what product would you invent? Why? What is the reason it hasn’t been invented
already?
2. Read the Learning Plan instructional materials and the articles at the following links:
http://www.pg.com/en_US/products/all_products/index.jhtml
http://www.npd-solutions.com/bok.html

The Way Consumers Purchase Goods
Types of Consumer Goods
Characteristics that Affect Marketing Service
New Product Strategies
The Product Lifecycle
5. Create a poster or PowerPoint slide outlining the major classifications of products and services.
Use pictures to provide examples of each type of classification for both products and services.
6. There are four marketing considerations for services: inconsistency, intangibility, inseparability
and inventory. For each of these, brainstorm an example of how to effectively address each
consideration using a commonly known service.
10. Graded Discussion 4.1: Profit or Not to Profit:

Discuss how marketing activities would/would not change for both a For-Profit and a Not-
for-Profit hospital.
11. Graded Discussion 4.2 Product Life Cycle:

Select a product you remember from childhood. Consider its product life cycle, as you see it.
Identify each of the stages of the cycle. Discuss the competition at each stage in the process.
Describe the reasons it is or is not still in use today. If it has been replaced by another product,
why? If it is still in use, has the product life cycle been extended? How?

GRADED ASSIGNMENTS
Graded Assignment: Implementation of Strategies
Review the information about Dell Computers in your instructional material, and do a web or library
search on the company for further information (www.dell.com).
What is Dell’s brand image?
Discuss any of the four characteristics affecting the marketing of Dell’s service.
If Dell were to develop a new product line, describe the steps the company should take for this
development.
Identify key elements of the product life-cycle of Dell’s products.
Describe ways Dell’s marketing strategies may have changed during a products life-cycle.
Rating Scale
Criteria
1. Learner described Dell’s brand image.

2. Learner discussed any of the four characteristics affecting the marketing of Dell’s service.
3. Learner described the steps Dell should take for development of a new product line.
4. Learner identified key elements of the product life-cycle of Dell’s products.
5. Learner described ways Dell’s marketing strategies may have changed during a product’s life-cycle.

WEB SITES
http://www.npgoodpractice.org/Marketing/
http://www.pg.com/en_US/products/all_products/index.jhtml
http://www.valuebasedmanagement.net/methods_marketing_mix.html
http://www.npd-solutions.com/bok.html
http://www.prod-dev.com/
http://tolearn.net/marketing/plc.htm
Nucifora, A. (2006, November 22). Marketing Solutions For The Beleaguered Not-For-Profit. Alf Nucifora.
Retrieved November 22, 2006, from http://www.nucifora.com/art_258.html
Wise, Rick, & Niren, Sirohi. (2005) Finding the Best Marketing Mix. JOURNAL OF BUSINESS STRATEGY.
Vol.26, Iss. 6; pg. 10, 2 pgs. Retrieved November 22, 2006, from ProQuest database
http://proquest.umi.com/pqdweb?did=947460411&sid=22&Fmt=3&clientId=9003&RQT=309&VName=
PQD
Brockenbrough , Martha, “Greatest Mistakes of All Time” retrieved November 21, 2006
http://encarta.msn.com/encnet/features/Columns/?Article=accidentalinventions
Davis, Trevor & Bradbury, Ian. (2006). Bouncing Ideas Around. MANAGEMENT TODAY. London: pg. 99,
1 pg. Retrieved November 22, 2006, from ProQuest database:
=PQD
http://www.learnmarketing.net/productlifecycle.htm

LEARNING PLAN 5: FACTORS AFFECTING PRICING AND THE MAJOR CHANNEL
INTERMEDIARIES
COMPETENCIES
APPLY THE FACTORS THAT AFFECT PRICING STRATEGIES AND DECISIONS.

EXAMINE THE TWO MAJOR CHANNEL INTERMEDIARIES.
a) Identify the external and internal factors affecting a firm’s pricing decisions.
b) Distinguish among the three approaches to setting prices.
c) Describe major strategies for pricing new products.
d) Describe the concept of setting prices to maximize profits from the total product mix.
e) Discuss how companies adjust their prices to take into account different types of customers and
situations.
f) Identify the key issues used to initiate and respond to price changes.
g) Describe the need for distribution channels.
h) Discuss interaction among channel members.
i) Assess the benefits of utilizing major channel alternatives.
j) Describe ways companies can motivate and evaluate channel members.
k) Describe marketing logistics of product distribution.
OVERVIEW
Think about your favorite music group. What was the price of their
last CD? What factors do you believe go into the purchase price? How
did the CD get to you?
One of the biggest factors that determines whether a product or

service is bought is price. Knowing the right pricing strategies and
market conditions is crucial in knowing at what price to sell your
product or service. In some markets, pricing is dictated by the number
of competitors in the marketplace. For instance, in the airline
industry, the over-capacity of the industry relative to consumer demand makes it impossible for an
airline to set its own pricing structure. Rather, the market demand and competitive forces shaping the
pricing structure can create conditions of very low profitability for firms engaging in this industry. This
learning plan explores various pricing strategies.
Now that we have discussed prices, we should examine the major channels or paths that products take
from manufacturer to consumer. Marketing channel management refers to the manner in which the
marketing group decides to move the product from the manufacturer to the end consumer. This
includes either industrial or consumer products. Each industry is made up of “middlemen” who support
the movement of products and services within the industry. This learning plan will examine the different

types of distribution channels and the importance of thinking through the channel issues as part of the
overall marketing strategy for an organization.
LEARNING OBJECTIVE: DESCRIBE THE CONCEPT OF SETTING PRICES TO MAXIMIZE PROFITS

FROM THE TOTAL PRODUCT MIX.
A firm uses a policy to set prices to maximize profits or charge customers a profit goal (such as a 20
percent ROI or “return on investment”). This means that for every product or service sold, they make 20
percent of the price in profit. This is done by adding 20 percent to the cost to produce the product as
the final price for consumers. Although this is a simple concept, developing a pricing strategy to
maximize profits can be complicated. In most businesses, product popularity is essential to a firm’s
success. If the product is not popular, its ROI will be low, so firms have one of two choices:
Product popularity is an important concern for a business, and selling only those products that create a
high ROI percentage profit is an important approach for a business, striving to maximize its profits. For
example, if a 3M product does not meet ROI criteria, it is dropped from the company’s product line and
no longer produced in its existing form.
LEARNING OBJECTIVE: IDENTIFY THE EXTERNAL AND INTERNAL FACTORS AFFECTING A FIRM’S
PRICING DECISIONS.
The economic structure and situation will affect a firm’s pricing decisions. We will discuss both micro-
and macro-economic geographies.
MICRO-ECONOMIC PRICING DECISIONS DUE TO A FIRM’S POWER OVER PRICE

We first mentioned the four kinds of market structures in a previous Learning Plan. We should review
these structures to better understand the pricing strategy associated with each.
From Figure 5.1, we can see that as the number of sellers

decreases, our price control goes up. For example, monopolies
have a high control over price, because there are no other real
competitors in the market. In perfect or pure competition,
however, there is little or no control over price, because the
market is flooded with sellers. Thus, the market determines the
price. Oligopolies and Monopolistic situations represent the
middle ground and have some control over price. Their pricing
strategies are important because choosing the wrong price may
adversely affect their sales or image. Depending on what
market structure you are in greatly determines the amount of
control you have over price.
MICRO-ECONOMICS INELASTIC OR ELASTIC DEMAND CURVE
Prices are said to be elastic or inelastic. The terms elastic and inelastic refer to the decision-making
processes of the consumer as he or she makes a buying decision. The easiest way to explain the
difference between an inelastic and an elastic demand curve is to look at a customer’s budget toward an
expenditure. The smaller the expenditure, the more inelastic the demand curve, meaning that the
supplier of the product or service has more ability to adjust the price without affecting the consumer’s
buying decision. Therefore, the smaller the expenditure the more inelastic the demand curve. To explain
the differences in these elasticity curves requires us to understand the mind of the customer when the
customer is purchasing a product.
A person will take more time to search for the “best deal” for products that constitute a larger portion
of his or her budget than for those products that represent a smaller portion of his or her budget. In the
general sense, those products with lower prices are referred to as necessities. These are the products
that have an INELASTIC DEMAND, and if their prices change, most consumers will continue to buy
them. Luxuries are products with higher prices and have ELASTIC DEMANDS, so most people will
substitute a higher-priced product with a lower-priced product, as long as quality is not jeopardized.
Let’s suppose you go to the store to buy a loaf of bread for $1.50 and you find out the loaf is now $1.95,
or a 30 percent increase in the purchase price of the loaf of bread. Would you drive across town for a
cheaper loaf? Because the loaf is not a large portion of your budget, you will most likely not shop for a
less-expensive loaf of bread but buy the more convenient yet more expensive loaf. This represents
inelastic demand.
This, however, would probably not be the case for larger purchases. The larger the expenditure the
more elastic the demand curve. In other words, you will shop around for a comparable price on larger-

ticketed items, making it more difficult for the supplier of those products and services to charge
exorbitant prices for a product. For example, if you were to buy a car, which has an elastic demand,
paying possibly between $400 to $500 a month, this payment would likely represent a significant
portion of your budget. If the price of a particular car at one car dealership is $1,000 more than at
another dealer, you are going to search for the cheapest car because it would reduce your monthly
payment by $50 or more. Products that constitute a larger portion of a person’s budget will create the
conditions where a consumer will take more time to search for the best deal, as opposed to one where
the purchase is a smaller portion of his or her budget.
The elastic nature of the product or service you are selling will help you determine an appropriate
pricing strategy.
LEARNING OBJECTIVE: DISTINGUISH AMONG THE APPROACHES TO SETTING PRICES.
There are demand-oriented approaches, cost-oriented approaches,

profit-oriented approaches and finally competitive-oriented
approaches to pricing.
The most applied demand-oriented approaches to pricing are

SKIMMING and MARKET PENETRATION. If you remember the
product life cycle, you will remember that a firm has a choice when it
puts a new product into the market. The firm can recoup its research and development (R&D) costs by
applying a skimming policy. This means that a firm can charge a higher price to recoup most of its initial
expenditures and make a higher profit early on to help it establish its place in the market before more
competitors enter the marketplace. IBM was a firm that used this philosophy, because it was one of the
first computer hardware firms to enter the market.
The other choice a firm has is to use penetration pricing. This is where a firm’s overhead is cheaper than
its competition’s overhead. The firm will reduce prices to the point where other firms cannot enter the
business. As you’ll recall, Wal-Mart is a firm that uses market penetration policy.
Cost-oriented approaches can be done in the construction business. A building contractor may set up a
cost-plus arrangement when building a home for a customer. The contractor will buy all of the supplies
and build the home, and then add a percentage (such as 15 percent) onto the total price to meet his
time and labor. Generally, the contractor and customer agree on the percentage before the contractor
begins work on the house.
Next is the profit-oriented approach. Here, the profit is created where revenues minus expenses are
tabulated and added into the equation as a profit percentage. This method is very similar to the cost-
oriented approach. The difference is that a profit-oriented approach adds a profit percentage, where the
cost-oriented approach a percentage is added onto the cost. Each method uses a profit or expense
viewpoint.

Last is the competitive-oriented approach to price. This approach identifies what competitors charge
for identical or very similar products or services and sets their prices to match. An example would be a
restaurant that gets its competitors’ menu prices and prices all of its meals using its competitors’ prices.
LEARNING OBJECTIVE: DESCRIBE MAJOR STRATEGIES FOR PRICING NEW PRODUCTS.
We’ve discussed skimming and market penetration during the introduction pricing for the product life
cycle, as well as the previous section on approaches to setting price. What other economic factors or
organizational objectives may affect pricing of new products? In addition to your brainstorm, consider
the following section on adjusting prices for different situations.
LEARNING OBJECTIVE: DISCUSS HOW COMPANIES ADJUST THEIR PRICES TO TAKE INTO
ACCOUNT DIFFERENT TYPES OF CUSTOMERS AND SITUATIONS.
There are many reasons for changing prices for different situations. Sometimes, this is price
discrimination, and other times it’s due to product positioning or branding.
Economically speaking, price discrimination occurs when a firm sets prices that are according to what
the customer can pay rather than according to product costs. This practice might also be used to give
the seller a competitive edge over the competition. Most firms in the U.S. apply a “one price” pricing
method where all consumers pay one price. However, geographic area is the criterion most often used
for practicing price discrimination in the U.S. For example, there may be one price set for urban
locations while another price is set for a rural setting. Another price difference can be created through
different state or local governmental policies. There may be many approaches toward pricing variations
that different companies may use.
Companies also set prices to form certain images in consumer minds.

When something is priced high, what do you think about the product?
Do you think it’s a luxury item? Is it high quality? Companies may set
prices high to form an image of luxury or high quality. A certain status
is achieved when you purchase the product. For example, Harley-
Davidson prices its motorcycles high. This is because of high quality
but also because of luxury or status.
One thing to keep in mind is that laws and regulations exist that
govern price. One such pricing phenomenon is PRICE GOUGING. Price gouging is a sharp increase in
prices when demand has risen. This is often a temporary rise. The most common example of price
gouging is when a natural disaster strikes and the cost of building materials or necessities go up.
Recently, oil companies have been accused of price gouging, because gasoline prices have dramatically
increased. A lawyer should be consulted before setting or changing prices to help prevent a legal
dispute.

LEARNING OBJECTIVE: IDENTIFY KEY ISSUES USED TO INITIATE AND RESPOND TO PRICE
CHANGES.
Firms usually set up policies or standards in dealing with product price

changes. There are three steps a firm will use to create a final price:
Step 1: The firm needs to select an approximate price level. Marketing

managers will choose a general pricing approach of what the demand
will bear, a profit of 20 percent, costs or what the competition
charges.
Step 2: The company will then decide whether it will allow for either a “one price” strategy, such as the
one Saturn uses, or a flexible price standard such as Dell, which offers flexibility in pricing.
Step 3: If, in Step 2, one standard price is decided upon, then there is no Step 3. If, on the other hand,
the firm is leaving flexibility in its prices, then the firm must outline what flexible prices it will extend and
when and how they will be accepted. Some firms will create a list price, or advertised price, but allow
room for different discounts. One common discount is the cash discount. These are allowances that
many firms offer because cash is vital to business operations. A cash discount is where a supplier allows
a buyer a discount if it pays for its product within 10 days. This is usually a 2 or 3 percent discount. This
gives the buyer an incentive to pay early, thus providing the seller with an increase in cash flow.
Allowances also act like discounts where a firm is allowed trade-in allowances (batteries) or promotional
allowances such as Free on Board (FOB) which means that shipping costs are paid.
MAJOR CHANNELS
Now that we have discussed prices, we should examine the major channels or paths that products take
from manufacturer to consumer. Marketing channel management refers to the manner in which the
marketing group decides to move the product from the manufacturer to the end consumer. This
includes industrial and consumer products. Each industry is made up of “middlemen” who support the
movement of products and services within the industry. This learning plan will examine the different
types of distribution channels and the importance of thinking through the channel issues as part of the
overall marketing strategy for an organization.

LEARNING OBJECTIVE: DESCRIBE THE NEED FOR DISTRIBUTION CHANNELS.
So what is a marketing channel? A marketing channel consists of people

and/or firms directly or indirectly involved in this distribution process so that
its products can reach the ultimate consumer. When we speak of the 4Ps of
marketing, distribution refers to the PLACE, or the channel structures that
connect an organization with its market. Not just any channel will work,
however. Sellers must choose channels that are cost-effective and add value
to their marketing objectives.
Creating a channel system that can successfully reach potential buyers and
that can easily tap into the market revenue stream for an organization is a
challenge for marketers. When the firm’s and the customers’ needs are met
through the development of a suitable channel, customers are able to find their goods or services
through such a channel system, and the organization reaps the benefits of sales.
There are three main functions that a marketing channel member performs. The first is a transactional
function. Channel members, such as the car dealership example mentioned before, can move the title
for a product or service from the manufacturer to the channel member. This creates the condition
where the inventory cost is moved away from the manufacturer to the channel member, freeing up the
manufacturer’s cash to allow investment in new activities and away from having its money tied up in
additional inventory.
Second, the channel member can use its local strength in a market to
bring customers into its firm and sell the product directly to the
customer. In this way, some of the risk is spread out between both
the manufacturer and the channel member.
Third, the LOGISTIC PROCESS of storing, sorting and transporting the

product from the manufacturer to the customer can be borne by the
channel member. Channel members often act as a warehouse for
products, as the product moves from the manufacturer to the ultimate consumer, leaving the
manufacturer to do what it does best, which is producing and upgrading its products.
We have been discussing channels involving consumer products that move from a manufacturer
through channel members to the ultimate consumers. Industrial consumer channel management
operates somewhat differently. Firms sell directly to businesses in industrial consumer marketing, and
the channel may have immediate and final market and sales activities directly with a business. If you
have ever stayed at a Marriott Hotel, you may have used the soaps, hair shampoos and conditioners
made available to you by the hotel. Many of these products come either directly from Procter & Gamble
or from one of its warehouses. If P&G doesn’t have a particular product available, such as lotions for
instance, P&G will search for vendors to supply lotion bottles to most of its hotel chains all over the U.S.

P&G will also make sure that its other soap products used for housekeeping are also established in the
hotel chains.
LEARNING OBJECTIVE: DESCRIBE WAYS COMPANIES CAN MOTIVATE AND EVALUATE CHANNEL
MEMBERS.
There are basically three ways that a firm can decide on the best channel to support movement and the
ultimate sale of its products. Companies can ask the following three questions to help determine the
best channel:
1. Which channel gets the best coverage in its target market?

2. Which channel will satisfy the buyer’s requirements in its target market?
3. Which of the channel opportunities are most profitable?
The correct balance of market channel members is important because having too few will create a lack
of sales coverage, and having too many members will create a dilution of benefits for channel members.
A firm has to choose the right number of channel members, and those members that will make the best
contribution to coverage and toward profitability. There are three approaches a firm can take in getting
its product to consumers: INTENSIVE, EXCLUSIVE and SELECTIVE.
Some firms take a stance on channel management in favor of

INTENSIVE market distribution. Intensive market distribution refers to
a market presence where a firm places its products in as many
markets as possible. No matter what convenience mart you enter, you
will see examples of an intensive market. You will stumble over
Hershey’s candy bar displays and Coke beverages while trying to reach
the counter to pay for your gas. Convenience mart shelves are racked
full of similar high-traffic, intensive market products. In fact, once you
enter a convenience mart, you will have a difficult time NOT grabbing a candy bar, a bottle of soda or
water, or any other quick and fast convenience product. An intensive market strategy seeks to sell its
products in many different places, making the product accessible to many consumers.
An EXCLUSIVE market offers a different sort of market display. Many of its products are in specialty
shops that sell deeper product offerings. An exclusive market caters to firms who wish to have a
superior and unique market presence. Exclusivity means that a manufacturer will choose one vendor to
sell its particular line of products. Gucci and its relationship with upscale retail establishments, and
Compaq's unique relationship with RadioShack are excellent examples of such exclusivity arrangements
between channel members and manufacturers.
Finally, there exists a SELECTIVE distribution approach where a vendor such as Wilson tennis products
will only have two or three vendors selling its products.

Managing channel relationships is an important part of a marketing professional’s activity, because
channel conflicts can occur. One such conflict, VERTICAL CHANNEL CONFLICT, is where a member of
the channel decides to sell directly to the customer, bypassing another member of the channel. This
creates what is commonly referred to as DISINTERMEDIATION. For example, a wholesaler such as
Wonder Bread may sell its product to customers directly out of its warehouse and bypass some of its
retail firms. As long as the other retail firms don’t know or there are not a large number of customers
buying directly from the wholesaler, a retailer would probably not say much. However, if it’s a
company’s sales volume was significantly reduced, then disintermediation would develop.
Conflicts as to profit percentages will also emerge. Some manufacturers believe that either wholesalers
or retailers may not give their product adequate attention. To avoid this problem, some firms offer
cooperative advertising policies of a 50/50 cost split to ensure that their products meet the attention of
buyers. To provide for a reduction in channel conflict, many manufacturers such as P&G will create a
CHANNEL CAPTAIN, such as Wal-Mart, that will take on the responsibility in the channel to distribute its
product throughout its stores. Because of Wal-Mart's huge presence and expertise, most channel
members will be more accepting of Wal-Mart’s direction than that of a smaller and less-experienced
channel member.
LEARNING OBJECTIVE: ASSESS THE BENEFITS OF MAJOR CHANNEL ALTERNATIVES.
There are two different types of channels, direct and indirect. A DIRECT CHANNEL is evidenced where
product title, or ownership, transfers from the vendor to the customer.
Schwan’s is a producer of many of its own frozen food products, and it sells most of its products through
home delivery directly to the customer.
Dell computers have revolutionized the consumer product

distribution channel by working directly with the consumer through
call centers. It has virtually changed the face of the distribution
channel in consumer computer sales by eliminating the "corporate
store" and by working directly with consumers online. Dell knew that
consumers were not necessarily ready for this change in the
purchasing method and would require a lot of tutoring and mentoring
for the organization to succeed. But it provided assistance for its
customers through call centers and through well-constructed and user-friendly instructions to follow
online. By doing this, Dell trimmed out excessive corporate selling expenses as a result of being able to
work directly with the consumer to serve their computer needs. In the highly competitive business of
computer sales, the price of computers is determined largely by the amount of competition. However,
costs are managed to improve the margins in the business as a result of removing excessive computer
sales costs.

An INDIRECT CHANNEL is characterized by the manufacturer who goes to a
middleman, such as an agent, wholesaler, retailer, or any combination, to
get the manufacturer’s product into stores. A manufacturer may use a series
of indirect channel members to make sure the product is passed efficiently
to the customer. Each of these market intermediaries is referred to as a
CHANNEL MEMBER. This process is referred to as an indirect process,
because the product title passes from the manufacturer to the middleman
and isn’t sold directly to the customer. Examples of indirect channel
members can be seen in the snack food industry. Doritos Tortilla Chips arrive
from an indirect channel of intermediaries that move the product from the
manufacturer to a wholesaler in a particular region of the country, from the wholesaler to a grocery
chain, and from the grocery chain to a grocery or retail store where a customer will buy the bag of
Doritos. Another example is women's beauty products. Visit any women’s department in a store that
sells beauty products and you will find facial lotions from Revlon. Revlon manufactures the product, sells
the product to distributors or wholesalers, and the wholesalers move the product from their
warehouses into retail operations such as Target or Walgreen’s Drug Store. All such products travel
through a logical series of marketing channels that move the product from the manufacturer to the
customer.
The most commonly applied series of channels progresses from manufacturer to retailer and then to the
buyer. The next is from manufacturer to wholesaler and then from retailer to consumer. However, there
are many variations, each depending on the easiest and least costly route of moving from the
manufacturer to the customer. Both the wholesaler and the retailer, and any other combination, are
referred to as a series of MIDDLEMEN.
You can see that the value of one channel may be higher for one company but not as valuable to
another. Not every channel will work for every company. Therefore, each marketer must determine
which channel will be best.
LEARNING OBJECTIVE: DESCRIBE MARKETING LOGISTIC OF PRODUCT DISTRIBUTION.
As mentioned in the need for distribution channels, marketing logistics refers to storing, sorting and
transporting products from the manufacturer to the customer. Logistics can refer to any combination of
distribution channels used by a manufacturer. What distribution channels may be the most problematic
to manage? Why?

LEARNING OBJECTIVE: DISCUSS INTERACTIONS AMONG CHANNEL MEMBERS.
The distribution channel for Jiff Peanut Butter is an example of a

marketing channel that moves the product from the manufacturer to
a wholesaler such as Associated Grocers. The peanut butter product is
sent to an independent grocer for sale to the final purchaser.
A manufacturer may sell a camping knife directly to Wal-Mart, which

acts as a retailer and is responsible for selling the knife to a customer
who is going out on a weekend campout.
GM will build cars and send them to a car distributor that owns a GM franchise. The car distributor will
go to a local bank and borrow funds to purchase the car, and the distributor will put the car on the car
lot for sale to the consumer.
Plumbing, heating and electrical products will move through the wholesaler network to a retailer, such
as Home Depot. Home Depot's role in the distribution channel is to work with and sell the product
directly to the customer. There is a movement in the industry to remove middle intermediaries from the
market.
Retail chains such as Home Depot and Lowe’s are trying to change the old WHOLESALER TO RETAILER
channel to a MANUFACTURER TO RETAILER provision by moving products away from wholesalers and
having them transported directly from the manufacturer to the retail chain, thereby giving them more
profit and reducing the price for the consumer. Removing the middle intermediary would reduce the
inevitable costs that accumulate as multiple channel members handle the product, charging their fees
and adding to the cost and the ultimate price charged overall for products.
Channel development in new-product development presents some unique channel management

challenges to a firm that is introducing a new product. For instance, Arm & Hammer may want to sell a
new soap product to a completely different market sector, so Arm & Hammer may seek a
manufacturers’ agent that usually represents a series of similar soap products. An agent will contract
with Arm & Hammer to distribute the new soap product into as many venues as possible. In fact, the
manufacturers’ agent might try a more creative approach than Arm & Hammer usually uses. For
example, the agent might get the product established in Marriott Hotels or promote the product to local
laundry services as new channels that Arm & Hammer may not have known about or sought out for its
new products. In market development, it is beneficial for Arm & Hammer to find alternative uses for its
soaps and other products. As it creates a successful product entrance for a new soap product, Arm &
Hammer may be able to infuse more products into a different market than on the supermarket shelf.
Over the past few years, Arm & Hammer has been able to accomplish more new and existing market
developments for its products than any other U.S. firm. Arm & Hammer has moved into markets for
toothpaste, cleaning supplies, air fresheners and a host of other venues through its aggressive market

development strategies. More often than not, it has been manufacturers’ agents who have first
promoted their market development into many markets.
Can multiple distribution channels be used? Yes. Some vendors will use several different distribution
methods. A number of food vendors, such as Nabisco, will sell many of its baking products to
supermarkets through brokers and at the same time sell its own food products, such as cookies, directly
to the retailer.

ACTIVITIES
1. Think about your favorite music group. What was the price of their last CD? What factors do you
believe go into the purchase price? How did the CD get to you?
http://www.learnmarketing.net/price.htm
http://www.marketingteacher.com/Lessons/lesson_place.htm
4. Participate in the following interactive activity and view the description:

Micro-economics Inelastic or Elastic Demand
6. Graded Discussion 5.1 Industry Infrastructure:
Describe the four kinds of industry infrastructure, giving examples of each. Which is best for
consumers? Why? Also discuss why companies change the price of their product from the time
the product is introduced to the end of the product’s life. How does this change to
accommodate a target market? Provide examples.
7. Graded Discussion 5.2: Distribution Channels
For each of the following products, list and explain two factors that would determine the
distribution channel: bananas, laser pointers and shoes. How are these products similar to or
different from the current market channel and related intermediaries from other products or
services.

GRADED ASSIGNMENTS
Assignment: Pricing and Distribution
Pick a product sold by any company to demonstrate factors that affect pricing and illustrate the
distribution channel of this product from manufacturer to consumer.
Write a one to two page paper with the following points.
Discuss the external and internal factors that may affect the price of the product.
Discuss key issues that may be used to initiate and respond to price changes of the product.
Describe the complete channel the product takes from manufacturer to consumer, detailing
transportation methods used in the process.
Include why the specific channel is used for the product.
Include target markets of the channel members, place in the distribution channel, price,
locations, etc.
Rating Scale

Criteria
1. Learner discussed the external and internal factors that may affect the price of the product.
2. Learner discussed key issues that may be used to initiate and respond to price changes of the
product.
3. Learner described the complete channel the product takes from manufacturer to consumer,
detailing transportation methods used in the process.
4. Learner included why the specific channel is used for the product.
5. Learner included target markets of the channel members, place in the distribution channel, price,
locations, etc.

WEB SITES
http://www.knowthis.com/tutorials/principles-of-marketing/setting-price.htm
http://www.learnmarketing.net/price.htm
http://www.netmba.com/marketing/pricing/
http://www.bizhelp24.com/marketing
http://www.marketingteacher.com/Lessons/lesson_place.htm
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=perfect+competition
Read: Cortese, Amy. (1998) There’s More Than One Way to Play Monopoly. BUSINESSWEEK, Iss. 3562;
pg. 36. Retrieved November 22, 2006, from ProQuest database:
QD
Read: Boyle, L. & Trollinger S. (2006). Conducting a Multichannel Creative Critique. MULTICHANNEL
MERCHANT, Vol.23, Iss. 10; pg. 40. Retrieved November 22, 2006 from ProQuest database:
=PQD
Read: Feig, N. (2006). Changing Channels – Banks are tapping SOA to achieve multichannel integration,
enabling seamless customer service, increased speed to market and accelerated organic growth. BANK
SYSTEMS & TECHNOLOGY, Vol.43, Iss. 11; pg. 32. Retrieved November 22, 2006, from ProQuest
database:
=PQD
Read: Morelli, G. (2006). Using Marketing Channels To Beat The Competition. THE BRITISH JOURNAL OF
ADMINISTRATIVE MANAGEMENT, Oct/Nov 2006. pg. 20, 3 pgs. Retrieved November 22, 2006, from
ProQuest database:
=PQD

LEARNING PLAN 6: RETAILING AND INTEGRATED MARKETING COMMUNICATION
COMPETENCIES
EXAMINE RETAILING AND WHOLESALING.

APPLY INTEGRATED MARKETING COMMUNICATION CONCEPTS.
a) Describe the roles of retailing and wholesaling in the distribution channel.

b) Identify the major types of retailers.
c) Describe major types of wholesalers.
d) Distinguish between marketing decisions facing retailers and wholesalers.
e) Describe the advantages of integrated marketing communications.
f) Identify five promotional tools.
g) Describe the integration of public relations with a company’s stakeholders.
h) Discuss key factors in developing sales promotion campaigns.
OVERVIEW
Make a list of the retailers you use most frequently. Where do these
retailers get their products from? Have you ever been to a trade or
home show? Were your favorite retailers or their wholesalers at the
trade show? What kinds of communication and promotion did they
use?
After learning about the different types of channels and their

importance to the seller, let’s examine two common intermediaries,
or channel members: retailers and wholesalers. We are probably
familiar with these two terms, but this learning plan will focus on their different roles and the major
types of both retailers and wholesalers. Just like manufacturers, retailers and wholesalers must sell
goods and therefore must engage in marketing activities. We will identify examples of marketing
decisions affecting retailing and wholesaling.
In this learning plan, we will learn about the importance and complexity of communication concepts and
strategies underlying effective marketing techniques, and about the implementation of successful
marketing strategies. We will discuss the advantages of communication through various promotional
tools. This discussion will include sales campaigns and public-relations activities. Through understanding
the various stages of communication, marketers will be prepared to design and implement effective
marketing strategies.

LEARNING OBJECTIVE: DESCRIBE THE ROLES OF RETAILING AND WHOLESALING IN THE
DISTRIBUTION CHANNEL.
We learned about many different channel partners and how they work together to meet both the needs
of the firm and the customer. Now, we are going to discuss the major characteristics of the retailer and
the wholesaler.
RETAILING
Retailing is all activities engaged in the selling, housing, and transporting of goods and services from the
firm to the customer, and is thus the last step in the distribution channel. Retailing involves the
movement of products or services into the hands of the right consumer and is a vitally critical marketing
endeavor. In an economic sense, the retailer provides a service to the marketplace by getting the right
product or service to the right customer. This activity creates value for consumers.
Here is an example of how a company adds value for a consumer by providing the transport of goods
and services in the marketplace. Throughout the U.S., Bank of America has populated the marketplace
with its banks and related services. You will see Bank of America ATM sites in most cities. The ATM sites
act as kiosks where the consumer can receive “cash on demand” with a simple swipe of a card and the
use of a pin number. The consumer gets what he or she wants without waiting in line. The service offers
another operations feature to a bank using the ATM: While the consumer is provided excellent service
at the ATM, the bank saves on tellers’ wages.
THE RETAIL LIFE CYCLE
Because the consumer is king in the marketplace, consumer desire for products and services can change
the nature of any industry, including the hundred-year-old gas station industry. Through examination of
the industry, we can see how the life cycle of a retailer can and must change, and how retail businesses
must react to consumer demands.
Henry Ford and the manufacture of the Model T Ford created an instant revolution throughout the U.S.
Over time, gas stations sprung up on every city corner. In addition to needing gasoline for the vehicle,
every consumer needed someone to fix his or her car. The mechanic who owned the station pumped
gas but created a sideline business in automobile maintenance. The
primary business became car maintenance and repair, and its
secondary function was a place to fill up with gas.
In the 1950s, with the invention of franchising, the whole idea of

convenience using “convenience marts” began. McDonald’s and many
of its other fast-food competitors created the idea of convenience and
“have it your own way” in the minds of consumers. We discussed

earlier how McDonald’s created a cafeteria style of consumerism, where customers could design their
own meal. In our fast-paced world, consumers decided that if they could do their convenience shopping
with “one stop,” they would prefer that the gas station offered them a loaf of bread and a gallon of milk,
as well as the ability to gas up their automobiles. The next move in the gas station industry was away
from actual mechanics and filling gas tanks. Gas was merely a sideline to selling cigarettes, soft drinks,
and candy bars. Most mechanically oriented service station owners were ill-equipped for this move
away from the gas pump and the role of the mechanic. The skill of merchandising and retailing other
products and services needed by consumers created the condition where convenience marts arose in
response to the customers’ needs, moving consumers away from the gas station type of facility to a
place where other needs of the consumer could be fulfilled: gasoline and other products needed for
“one-stop” convenience shopping.
Gas stations declined, and convenience marts sprung up on every other corner. What function does a
retailer play? As evidenced in this example, the retailer’s prime function is discovering what customers
want and giving them exactly what they want. As you can see, a retailer cannot have the mindset of a
mechanic. A retailer’s primary function is to notice opportunities in the market and move resources in
that direction. This is exactly what most convenience-mart owners have done over the past 50 years.
They have simply bought out gas station owners and have created convenience stores.
You can see that the retail life cycle is concerned with the “how” of getting products and services to
consumers over time. Therefore, retailers must identify with consumer needs and wants and change the
way they sell goods and services according to trends in consumer demands.
WHOLESALING
Wholesalers, on the other hand, serve a different function than retailers. Because there are so many
manufacturers, it becomes very difficult for many retailers to keep track of them. Therefore, many
retailers use wholesalers that wholesale, or warehouse, a whole range of different products within one
industry.
There are several types of these intermediaries as we explained earlier. There are wholesalers and
agents who work at distributing various manufacturers’ products. These intermediaries contact retailers
to see if they can move product for the manufacturers they represent. If a product is new, they may
represent the products on consignment. Consignment in this case refers to a retailer attempting to sell
goods that it does not own or have title to in exchange for a portion of the profit. Goods on consignment
that do not sell will be returned to the wholesaler. After the product has been successfully introduced,
the wholesaler may be willing to purchase the product for resale. As long as the product has been
successful and there is less risk to a wholesaler, wholesalers will be more inclined to take immediate
possession of a product as an intermediary, taking product title away from the manufacturer, so the
manufacturer can spend more time and money on production and the development of new products
and services.

The major groups of wholesalers are called “merchant wholesalers” that move product for about 83
percent of the wholesale business; these larger wholesalers aggregate and beneficially work together to
move through the market. In such a way, they have greater market coverage with less risk and more
opportunity.
LEARNING OBJECTIVE: IDENTIFY THE MAJOR TYPES OF RETAILERS.
Now that we have discussed the roles of both retailers and wholesalers, let’s look more carefully at the
major types of retailers.
INDEPENDENT RETAILER
Most retailers sell to the ultimate decision-maker, the customer. The first type of retailer is an
independent retailer. This entity is owned by an individual, partnership, or small corporation. These are
“mom and pop” (meaning small or family-like) businesses that represent 1.5 million business
organizations. Jewelry, florists, and sporting-goods stores can be examples of such businesses.
CORPORATE CHAINS
Most corporate chain retailers are department stores that have migrated to multiple states and
countries. Examples are Wal-Mart, Mervyn’s, Best Buy, Marshall Field’s, and hundreds of other names
that are probably familiar to you. Mass coverage is the benefit of the chain retailer. In addition, cost
containment is also a feature of these large entities. A chain can bargain with the manufacturer for

special discounts, especially when it purchases products by ordering them in bulk. Customers receive
cheaper and more consistent products when and wherever they shop from chain department stores.
Contractual stores are stores such as Independent Grocers Alliance stores (IGAs). Even franchises such
as McDonald’s act as such a store. Just as the chain store does, contractual stores order in bulk and are
able to negotiate a lower cost of goods and services from their suppliers. Ace Hardware, RadioShack,
and fast-food restaurants are part of this group.
LEARNING OBJECTIVE: DESCRIBE MAJOR TYPES OF WHOLESALERS.
There are two major types of FULL-SERVICE wholesalers. General merchandise (or full-line)
wholesalers carry a wide assortment of merchandise and perform all of the channel functions. This
wholesaler is commonly in the hardware, drug, and clothing industries. Because it carries so many
different items, its offerings aren’t as deep. Because it covers a breadth of products, its depth or variety
within any one category is limited.
Specialty wholesalers do what general wholesalers can’t do. Specialty wholesalers will assume a narrow
range of offerings but will provide a broad variety of each product. In other words, they give up breadth
of product coverage in favor of a deep product offering of a limited number of different products. A few
examples are health food, automotive, and seafood industries.

Limited-service wholesalers are another major type of wholesaler. There are four major types of
limited-service wholesalers.
1) Rack jobbers furnish the racks of offerings such as Frito-Lay products. The manufacturer still retains
title on these products. They sell their products on consignment to retailers and give them a portion of
their profit in exchange for the retailer allowing them space. Other industries that hire rack jobbers are
those that deal with hosiery, toys, house wares, and beauty products.
2) Cash and carry wholesalers assume the title for these products. These wholesalers provide no
transportation, but they are willing to extend credit and give valuable information. These wholesalers
are in the areas of electric, plumbing, hardware, and groceries.
3) Drop-shippers are wholesalers that maintain the product title but are willing to drop their customer’s
product into the mail or send products by FedEx or UPS. Most of their orders are faxed or are sent over
the phone and are shipped from the manufacturer or firms who order the products sent.
4) Truckers are yet another type of limited-service wholesaler. A trucker is a firm that may be in the
perishable food market. This wholesaler will deliver products from their original boxes to their recipient.
Dairy products, fruits, vegetables, and meats are products that truckers deliver to grocery stores and
restaurants.
Finally, there are manufacturers’ agents and brokers. These wholesalers act as the sales arm of a
company in a territory. This sales activity allows a firm that has a new product to sell the product
separately from its other products or product lines. A firm just beginning to sell a product will come to a
manufacturers’ representative to market its product. A manufacturers’ broker fulfills the very same
function as a manufacturers’ agent but will only serve as a one-time representative. The real-estate
industry incorporates this terminal type of relationship.
LEARNING OBJECTIVE: DISTINGUISH BETWEEN MARKETING DECISIONS FACING RETAILERS AND

WHOLESALERS.
Malcolm P. McNair proposed the idea of the “Wheel of Retailing,” which is similar to the idea of the
“Wheel of Fortune” or the “WHEEL OF MISFORTUNE” as the industry is affected by new retail entrants.
As we discuss the Wheel of Retailing and align this model to the product life cycle, notice how this
Wheel of Retailing could also affect wholesalers. Just as Subway restaurants have begun to attack the
burger chain market, wholesalers of the burger companies that sell hamburgers could be affected.
Remember, it takes both a wholesaler and a retailer to make a sale. Therefore, serious declines due to a
firm moving into the declining stage of its product life cycle can affect both retailers and wholesalers
equally. So, as we discuss our Wheel of Retailing example, notice how product life cycle changes may, in
fact, affect specialist wholesalers just as much as they affect retailers.

The model is represented by a circle that goes from 1 to 2 to 3 and finally to 4, clockwise, representing a
life cycle or a “wheel of retailing” over the product life cycle. We can use McDonald’s as an example and
apply it to the model:
As all successful businesses begin at stage 1, so did McDonald’s begin with low prices, low margins, and
low status. After several successful years, the owners began to add new furnishings to upgrade their
establishment. However, to pay for those added features, customers needed to pay more for their
burgers and fries. As McDonald’s became more popular, or gained a higher status, customers were
willing to pay higher prices. At this point, McDonald’s was in the growth stage of the product life cycle at
2. So it continued for several years, demanding higher prices and enjoying higher margins, and
eventually moved from the growth stage into the maturity stage at 3. During the maturity stage,
McDonald’s continued to be popular and continued to enjoy high margins and high status. However, at
this stage, new competitors opened their doors. McDonald’s soon had Burger King and then Wendy’s
nearby. These new firms entered the market at stage 4. Each of these new businesses began with low
prices, low margins and low status, and hoped of taking away some of McDonald’s business. McDonald’s
couldn’t continue offering its old menu items at its high prices. To keep its present customers and stay in
competition with Burger King and Wendy’s, McDonald’s need to change its menu and the food items it
offered.
At stage 3, if the owner of a business doesn’t make some serious changes, the competition that arrives
at stage 4 might put the owner out of business. The power of the Wheel of Retailing, along with the
product life cycle, is that it gives the marketer a road map of a likely future. It’s up to the marketer to
take this information and steer the path to success, prolonging the life of the product and preventing
failure.

LEARNING OBJECTIVE: DESCRIBE THE ADVANTAGES OF INTEGRATED MARKETING
COMMUNICATIONS.
A firm’s integrated marketing communication strategy offers the firm an AUDIENCE WITH THE
CONSUMER and, therefore, a chance to influence the consumer to purchase or otherwise engage in a
product or service idea offered by the company. An integrated marketing communication strategy is
composed of different types of communication activities, which are as follows:
1. Advertising – A paid form of non-personal communication about an organization, product,

service, or idea that benefits a sponsor.
2. Personal selling – A two-way flow of communication between buyer and seller, or agent of the
seller, often face-to-face or over the phone, and designed to influence a person or an
organization’s purchase decision.
3. Sales promotion – A short-term offer of value extended to an individual or organization to

arouse interest in purchasing a product or service within a specified time.
4. Public relations – Communication by which an organization wishes to influence the opinions,

beliefs, or feelings held by customers, projected customers, stockholders, suppliers, employees,
or the general public about a company’s image, products, or services.
5. Direct marketing – A promotional element that uses direct communication with consumers to
generate a response in the form of an order, a request for further information, or a visit to a
retail or wholesale outlet.
To understand how these different communication strategies might come together as an integrated
approach, let’s look at the techniques of a company that is one of the leading consumer
communications organizations in the world: The Disney Corporation.
The best way to introduce a well-integrated marketing communications project is to describe one in
action. One of the biggest integrated marketing communications projects was Disney’s 100 Years of
Magic anniversary celebration, commemorating Walt Disney, its founder. Why did Disney decide to
implement an integrated marketing communication plan? Disney wanted nothing about the celebration
to be left to chance. Therefore, Disney Corporation created a well-orchestrated and highly integrated
marketing communication program for the celebration.
Disney created a $250 million budget to be spent over a 15-month period. Disney used this huge budget
for the company to benefit in a gain of over $500 million from promotional exposure as it advertised
with leading vendors, such as McDonald’s, Coca-Cola, American Express, and Kellogg’s. Included in its
planning, Hallmark was the “front door” for its marketing communication strategy. Disney sought
Hallmark to help tie-in the direct mailing cards and thank-you notes for people who came to the event,
with Hallmark’s own consumer market. As a “back door” strategy, Disney advertised with several

magazines and joint-ventured the advertising media with Toys R Us. These initiatives created the
possibility of twice the media coverage. Individuals who were buying products or shopping in stores
were exposed to the Disney event through this cooperative advertising, while the stores and eating
establishments themselves benefited from the image of being associated with the Disney Corporation.
This became an advertising campaign that cooperatively benefited all participants.
Continuing its promotion campaign, Disney set up radio ads all over the U.S. Disney’s “Stars on Ice” was
involved as well, going to various locations all over the country to spread the news. Disney kiosks in
several department stores and malls all over the U.S. offered yet another advertising venue for the
entertainment giant. As a utilization of its advertising budget, Disney gave its 300,000 members special
rates and discounts to enter Disneyland and to take part in its celebration. Disney also gave reduced
rates for members who brought their families or friends to the celebration.
You can see that Disney used every promotional effort it could in the form of advertising, personal
selling, sales promotion, public relations, and direct marketing over a 15-month period to accomplishing
three basic things:
1) Disney informed prospective members about the events included in the celebration and when it
was to take place, and about the benefits of being a member.
2) Disney asked the general public to come and take part in the extravaganza.
3) After the event, Disney wished to remind people of the benefits they enjoyed in being a part of the
festivities and to return often.
This is an excellent example of an integrated marketing communication strategy that optimized the
investment of marketing dollars across a broad spectrum of marketing venues, all designed to influence
the consumer to spend his or her entertainment dollars with the Disney Corporation.
Just as Disney did, other firms are being forced to implement well-integrated, marketing communication
plans. Marketing budgets are becoming increasingly more valuable as the global marketplace becomes
more and more competitive. The idea of an integrated marketing strategy is simply this: How can a
company receive the biggest “bang for its buck?” Using an integrated strategy gets more mileage out of
the firm’s investment dollar in influencing its consumers. As markets across the globe become more and
more competitive, it will be necessary for more firms to adopt a similar integrated strategy, laying down
a whole plan of activities and investments before the event and negotiating with other suppliers and
vendors by engaging them in the activities to share both expenses and visibility to the consumer.

WHAT IS A COMMUNICATION PROCESS?
Communication is not a single event, but rather AN INTERACTIVE PROCESS. The following model
identifies the individual components of a communication event. It is critical that individuals designing
communication strategies understand each of these steps to communicate well and efficiently with the
marketplace. In other words, don’t think of this as a single act but as a process.
Wilbur Schramm, in his essay, “How Communications Works” outlined the following process of mass
communications. The “Communication Process” model is as follows; to understand the communication
process, we will analyze and discuss these seven variables:
1) The source is the sender of the message.
2) Encoding is the sender creating a message that will be understood by the receiver. Encoding is
transforming an idea into a set of symbols for an audience.
3) The message is information sent by a source, which has to go through a message channel to reach the
receiver, or target market. The message channel is the advertising or promotional agency delivering the
message.
4) The message has to be decoded or understood by the receiver. Decoding is the reverse of encoding. It
is a process of having the receiver take a set of symbols, the message, and transform them back to an
idea.
5) A receiver is a customer who reads, hears, or sees the message sent by the source.
6) Next, the receiver has to respond by acting on the message that was sent.
7) Feedback from the response comes back to the source. Now, the source has to decide whether the
message created the desired response from the receiver. If not, the source will have to change its
message and/or message channel, and proceed again from steps 1 through 7.
So let’s give some examples of a successful message sent to and received by its target market. Then, we
will discuss an unsuccessful ad that never met its target market. Finally, we will examine an ad that was
successful but was withdrawn by the FCC because it was inappropriate for children.
An example of ad-product messages that were received by their destined targets is, McDonald’s ads
targeting children. Many of the McDonald’s commercials are aired during Saturday morning cartoons,
and most of the ads use children as main characters. McDonald’s knew that mothers shopping with
children would often stop there for lunch and that the children looked forward to eating at McDonald’s.
For many years, McDonald’s even promoted itself as a place to hold children’s birthday parties. So for
30-plus years, McDonald’s has purposely advertised to children because feedback indicated that

children wanted their parents to take them to McDonald’s to eat, because the message had been
reached by the targeted audience. McDonald’s also knew that one day these kids would grow up and
would bring their own children, and later, their grandchildren to eat at McDonald’s.
Another successful marketing strategy was with the Ford Mustang. At one point, the Ford Mustang was
marketed to college student-body presidents who were given huge discounts to purchase this car. Ford
marketed this product successfully from stage 1 to stage 7 in the above process, initially targeting
teenagers and young adults. Today, the Mustang’s target market spans all ages and is still Ford’s best-
selling automobile. However, it wasn’t that way with all Ford cars. An unsuccessful target and message
campaign was the Ford Edsel. The target market for an Edsel would have been those consumers in the
middle to upper income range. In 1958, Ford was mass marketing, and the prime target market did not
receive the message. Because Ford mass marketed the Edsel and never had a target market, Ford had to
close its Edsel manufacturing production. The Edsel had become such a big failure that Ford couldn’t go
back to Step 1 and start over.
Next is an ad campaign that reached the right target but also reached a wrong audience. If you recall,
the 2005 Carl’s Jr. burger ad was taken off of the air. Paris Hilton starred in this ad, washing a black
Bentley and wearing a revealing swimsuit. Every once in a while, she would take a huge bite out of a
Carl’s Jr. “Spicy Burger.” Carl’s Jr. was targeting men who like to eat and probably liked Paris Hilton’s
style. Carl’s Jr. felt that the men who most likely ate its huge burgers would be attracted to this ad. The
ad did, in fact, double Carl’s Jr.’s sales and was enormously successful. However, the ad only lasted two
weeks before it was canceled. The commercial was being shown on prime time television, and the FCC
felt that it was unacceptable for children. So Carl’s Jr. had to cancel a successful ad and had to start over.
However, the restaurant still enjoys the benefits that the controversy of the “failed” ad created.
When Yoplait first began, it was not immediately successful. It decided to use celebrities to market the
message that Yoplait yogurt was superior to all other brands and to enter the market with a higher price
than the competition. Because its advertising and production costs were very high for a perishable
product, it eventually realized huge losses. Management was able to change its marketing and
production processes, and to bring down its costs and price to meet the competition, and so, Yoplait
remains a part of the market today.
The McDonald’s and the Ford Mustang “receivers” did get the message and did respond positively.
However, in the case of the Edsel, there were no receivers receiving the message, and therefore the
Edsel failed. As for the Carl’s Jr. ad, the receiver understood the message and responded, but the ad was
also perceived as having a negative influence on a market that wasn’t targeted. So, we can see that a
firm needs to create not only a successful message but also a publicly acceptable message for it to work.
Yoplait had a successful message and receiver but was unrealistic about the response and the revenue it
would generate in relation to its overhead.
In summary, a marketing strategist can enhance the overall effectiveness of an integrated marketing
plan by focusing on the unique and discrete events that occur within the process as a whole. To do so

will ensure that effective consideration has occurred at each and every point in the communication
process for an overall effective outcome.
LEARNING OBJECTIVE: IDENTIFY FIVE PROMOTIONAL TOOLS.
The five promotional tools and the strengths and weaknesses of each are as follows:
ADVERTISING
Advertising can reach a wide variety of consumers, but relative to other communication vehicles
available to the marketing strategist in the organization, advertising costs can be high while still creating
an element of risk. The risk is that the marketing strategist is not certain that the advertising will reach
the correct audience. Simply said, the marketing strategist worries about whether the right people will
receive and act on the message.
When you hear “M’m! M’m! Good!,” what product do you think of?
When you hear “Zoom-Zoom!” what product comes to mind? Forget
the specific product name—what KIND of product do you visualize?
From these two examples, we can see the impact of the branding of a
product or service. Marketing professionals have created a deep
awareness in us of a specific brand image or product image based on
certain identifiers associated with that product or service. In this case,
Campbell’s soup is “M’m! M’m! Good!” One even gets an image of
comfort on a cold winter’s day with a cup of hot Campbell’s soup. Health, family, nurturing, and comfort
are qualities of the product. Zoom-Zoom! What images pop into your head? A small dark-haired boy,
watching a car race down the road? The type or brand of automobile does not necessarily come to
mind, but winding roads and a small boy who is thrilled with automobiles and speed often arise in the
mind of the consumer.
Brand characteristic is an important concept for the marketer, as the more aware we are of the product
and its capabilities, the less likely we are to switch to another similar or alternative product. If there is a
switching cost, consumers will often stay with a product or service rather than having an additional cost
of taking on a new one. Leasing companies often have a $1,500 benefit for consumers who stay with
their firm when they are leasing a new car. To switch to a new leasing company, the individual would
lose the $1,500 credit made available to him or her by staying with the existing firm. For this reason, it is
imperative for consumers to know and trust a company’s brand. Advertising plays a key role in what
image a company has in the minds of consumers.

Advertising comes in many forms that include radio, TV, Internet,
billboards, and magazine/newspaper ads to name a few. Product
placement is another form of advertising that has become
increasingly popular. Think about the last movie you saw. Did you
notice any products used by the actors? These products didn’t get
there by chance. Companies often pay producers to ”place” their
products in films. For example, a car manufacturer may provide a car
to be used in a film, or a beverage may be supplied by the
manufacturer as well.
To see more about advertising, take a look at http://historymatters.gmu.edu/mse/Ads/question3.html

and explore how advertising may be geared to target markets.
PERSONAL SELLING
With personal selling, the marketing strategist is certain that the consumer received the message, and
the marketer receives immediate feedback rather than waiting for a response. However, the expenses
for this type of activity are extremely high because personal selling requires an individual to make a call
on a consumer or to visit with a group of consumers. Commissioned salespeople can make more money
than middle managers. Sales commissions become a large portion of a firm’s business expenses.
Insurance sales may be an example of personal selling. We will discuss personal selling further in the
next learning plan.
PUBLIC RELATIONS
This form of marketing communication is less expensive. Further, carefully crafted communications can
create a positive image in the mind of the consumer. However, this type of advertising campaign takes
skilled resources and time to develop. Further, public-relations media are often difficult to obtain, as
they require support of the news media. Cooperation of this kind can come at a high price and usually
means that individuals involved in media relations spend important time and attention courting the
media on behalf of the organization. Public relations is discussed further in the last section.

SALES PROMOTION
Sales promotion can create a positive effect in the short run, and it is
very flexible. However, there is an exposure risk. The competition can
very easily duplicate the efforts of an organization in a look-alike
activity, making it difficult to differentiate one advertising company
from another. Right now, all of the car companies are following the
GM advertising maneuver, where consumers pay the employee price
for his or her car. This is a type of sales promotion. When all
companies follow the same advertising techniques, it dilutes the
benefit of the advertising expenditure.
DIRECT MARKETING
The direct-marketing message is easily created and implemented. The risk with this type of advertising
expenditure is the possibility of low customer response. As a consumer, think about the large number of
ads and “junk mail” that you receive each day. What do you do with these pieces of mail? Marketers
must consider the costs and the target market before choosing direct marketing. There are, however,
several benefits of direct marketing to both buyers and sellers. For buyers, direct marketing is
convenient, easy, and private. It provides shoppers with product access and selection, gives consumers
access to a wealth of comparative information and is interactive and immediate. For sellers, direct
marketing is a powerful tool for customer relationship building. It reduces costs and increases speed and
efficiency. It also offers flexibility and has become a global medium that allows buyers and sellers to
access the product or service in seconds.
We will discuss direct marketing further in the next learning plans.
LEARNING OBJECTIVE: DISCUSS KEY FACTORS IN DEVELOPING SALES PROMOTION CAMPAIGNS.
Sales promotions can be directed toward consumers, resellers, or salespeople. A firm needs to know
which group it wishes to influence and how much benefit it will receive from offering sales promotions
to any of these three groups. The best choice would be the group that would influence the most
customers. The three groups toward which sales promotions might be directed are:
CUSTOMERS
A sales promotion that is directed toward the customer is called a PULL STRATEGY. The aim is to pull
the customer into the store, enticing them to try the product. A new-product promotion may direct the
product toward both new and regular users. A sales promotion can encourage regular users to purchase
the product more often. It can also bring more people into a retail store to purchase other products.

And finally, if new users, as well as regular users, like the product then the promotion may increase the
number of consumers using the product.
RESELLERS AND SALESPEOPLE
A sales promotion that is directed toward resellers and salespeople is called a PUSH STRATEGY. The
reason it is called a push strategy is because resellers and salespeople are trying to push consumers into
purchasing the product. Sales promotions directed toward resellers attempt to increase the reseller’s
inventories. These sales promotions are also employed to motivate salespeople and serve to educate
the sales force. Sales promotions that are displays support the vendor, selling more of a firm’s products.
Good promotions also help the flow of products and services in the distribution process. And finally,
sales promotions can be used to gain more and better shelf space as well as stabilize sales volume.
LEARNING OBJECTIVE: DESCRIBE THE INTEGRATION OF PUBLIC RELATIONS WITH A COMPANY’S

STAKEHOLDERS.
A public-relations campaign attempts to influence the public in a positive way toward the organization
and/or the product. It is a form of influence seeking to persuade customers, prospective customers,
stockholders, employees, and others to view a company’s products or services in a favorable light. This
concept is integrated into business operations as a somewhat continual means of creating a positive
image.
In a broader sense, public relations can mean any public activity in which a company is involved and is
often executed in one of four forms.
The first is a news release. This is an announcement provided to the news media to announce an item
of importance, which may include a new product offering, company expansion, higher than normal
earnings, community involvement, philanthropy, etc. The news release is usually done in writing.
Second, is a news conference. This is similar to a news release, but a

meeting is set up between an officer of a company and the news
media to discuss some item of importance. Again, this may include a
new-product offering, company expansion, company closure, etc.
Third is a sponsorship. When a firm supports an event, it is facilitating

a sponsorship role. For example, a company may provide money and
advertising to sponsor a charity event, or it may send one of its staff
members to the local high school for career day.
Fourth, is public service promotion. Many not-for-profit organizations do not have the money to
promote a goodwill event and will call upon a local radio or television station to defer its advertising
costs. This activity becomes a public-relations activity because a company will probably be thought of
positively if the public knows they are helping a not-for-profit organization.

ACTIVITIES
1. Make a list of the retailers you use most frequently. Where do these retailers get their products
from? Have you ever been to a trade or home show? Were your favorite retailers or their
wholesalers at the trade show? What kinds of communication and promotion did they use?
http://www.nrf.com
http://www.advertisementave.com/

Major Types of Wholesalers
Communication Activities
Communication Process
6. Graded Discussion 6.1 Wholesalers:
Discuss with the class why wholesalers came into existence. What is the future of wholesalers
and retailers? What are the target markets of retailers and wholesalers? How does this affect
marketing decisions? How do retailers and wholesalers reach their target markets?
7. Graded Discussion 6.2 Misleading Marketing:
Identify a piece of misleading advertising either on the Internet, in a magazine or newspaper, or

on television. Describe how the marketing or advertising is misleading. Speculate on reasons
that a company might make the advertising decisions that they do. How does misleading
marketing influence consumers?

GRADED ASSIGNMENTS
Graded Assignment: Retailing & Wholesaling
Do a web (www.homedepot.com) or library search on Home Depot and then discuss the following:
Is Home Depot a retailer or wholesaler?

What type of retailer or wholesaler is Home Depot?
Describe Home Depot’s integrated marketing communications.
Identify which promotional tools Home Depot utilizes.
Describe the integration of public relations or the public activity that Home Depot is involved in.
Rating Scale

Criteria
1. Student correctly determined whether Home Depot is a retailer or wholesaler.

2. Student discussed the type of retailer or wholesaler.
3. Student described Home Depot’s integrated marketing communications.
4. Student identified which promotional tools Home Depot utilizes.
5. Student described the integration of public relations or the public activity that Home Depot is
involved in.

WEB SITES
http://www.nrf.com
http://www.topwholesalesuppliers.com/
http://www.advertisementave.com/
http://money.cnn.com/magazines/fortune/mostadmired/full_list/
http://www.productplacement.biz/
http://www.publicityinsider.com/release.asp
Hogsett, D. (2006). It’s Better to Be a Retailer than a Supplier. HOME TEXTILES TODAY, Vol.27, Iss. 39;
pg. 1. Retrieved November 22, 2006, from Proquest database:
PQD
Howard, L. (2003). Retail-wholesale Conflicts Debated. NATIONAL UNDERWRITER, Vol.107, Iss. 17; pg.
30, 1 pg. Retrieved November 22, 2006, from ProQuest database:
PQD
Kiley, David (2004, October 14). Can You Name That Slogan? BUSINESSWEEK. Retrieved November 21,
2006, from
http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041014_4965_db035.htm
Wilbur Schramm, "How Communication Works", in Wilbur Schramm, ed, THE PROCESS AND EFFECTS
OF MASS COMMUNICATION. (Urbana IL: University of Illinois Press, 1955.) pp 3-26.

LEARNING PLAN 7: PERSONAL SELLING, DIRECT MARKETING AND THE INTERNET
COMPETENCIES
EXPLORE THE CONCEPTS OF PERSONAL SELLING AND DIRECT MARKETING.

IDENTIFY FORCES THAT ARE SHAPING THE NEW INTERNET ENVIRONMENT.
a) Describe the relationship between a company’s salespeople and customer relationships.

b) List the key features in sales force management.
c) Distinguish between transaction-oriented marketing and relationship marketing.
d) Discuss the primary goals of direct marketing.
e) Describe types of direct marketing.
f) Identify elements of companywide strategic planning.
g) Describe the relationship between marketing’s role and strategic planning.
h) Identify forces that influence the marketing process.
i) Describe ways marketing management functions are included in the marketing plan.
OVERVIEW
Reflect on a time when you had a positive or negative sales

experience. What was the reason for the outcome? Why was the
Internet invented? What do you think are the most common reasons
people use the Internet? Why do you use the Internet and how often
do you use it?
In this learning plan, we will discuss the importance of sales force

management as a primary interface between the organization
manufacturing a product or service and the consumer. Sales, as an intermediary function, are the face of
the organization to the customer. Understanding the importance of the relationship between the
customer and the organization is the role of the sales staff. An appropriate selling relationship and
strategy is of critical importance to the overall success of the organization and the customer.
One of the most significant changes in the business world in the past 10+ years has been the Internet.
The Internet continues to be an important part of business and will likely continue to be a vital tool in
marketing to consumers. Since the invention of the Internet, most of the conventional marketing
models, methods and procedures are becoming obsolete. Because of these changes, as well as rapid
improvements in information technology, a new marketing paradigm is developing. It is important to
understand how the Internet is shaping the way we do business in the 21st century. Without this
knowledge, our competitors will likely surpass us in meeting the needs of our consumers. In this learning
plan, we will learn the key elements shaping the age of the Internet, benefits and examples of e-
commerce, and discuss the challenges that Internet business will face in the future.

LEARNING OBJECTIVE: DESCRIBE THE RELATIONSHIP BETWEEN A COMPANY’S SALESPEOPLE
AND CUSTOMER RELATIONSHIPS.
Selling is one of the oldest professions in the world. The people who
do the selling go by many names: salespeople, sales reps, account
executives, superintendents, sales consultants, sales engineers,
agents, district managers, etc.
Today, most salespeople are well-educated, well-trained professionals

who work to build and maintain long-term customer relationships by
listening to their customers, assessing customer needs and organizing
the company’s efforts to solve customer problems. A salesperson might be categorized as any one of the
following types of sales personnel:
ORDER TAKER – the one standing behind the counter; responsible for cash receipts.
ORDER GETTER – responsible for the creative selling of products and services ranging from
appliances to airplanes.
MISSIONARY SELLER – not expected or permitted to take an order, but whose role is only to
build good will or educate buyers.
Each of these roles plays an important part in the management of the relationship between the
customer and the organization serving it.
Personal selling involves two-way personal communication between salespeople and individual
customers. Personal selling can be more effective than advertising by phone, because this technique can
also probe customers to learn more about their purchasing issues. This knowledge can help sales
professionals adjust their strategy to fit the special needs of each customer and can help to negotiate
the terms of sale.
The role of salespeople varies from company to company. In some companies, salespeople may be the
only contact a customer has. For the customers of Xerox, the company’s salespeople are the only agents
with whom the customer has direct contact. Other companies, such as Procter & Gamble, sell through
intermediaries such as Publix and Walgreen’s, who merchandise their products. The consumers rarely
meet the salespeople or even know about them in these organizations that are represented by
intermediaries.
Sales professionals provide an important link between the consumer and the organization. These
linkages can be described as follows:
1. SALES PROFESSIONALS REPRESENT THE COMPANY TO CUSTOMERS.
Sales professionals find and develop new customers, and communicate information about the
company’s products and services. They sell products by approaching customers, presenting the

products, answering questions and objections, negotiating prices and terms and closing sales. In
addition, salespeople provide services to customers, carry out market research and intelligence work,
and fill out sales call reports.
2. SALES PROFESSIONALS REPRESENT CUSTOMERS TO THE COMPANY.
Acting inside the firm as "champions" of customers’ interests, salespeople relay customers’ concerns
about the company’s products and actions back to those who are responsible for assessing and
responding to the feedback. They learn about customers’ needs and work with others in the company to
develop greater customer value. The salesperson often acts as an account manager who manages the
relationship between the seller and buyer. Thus, salespeople must work closely with other marketing
and non-marketing people within the firm.
Salespeople are concerned with more than just producing sales. They also know how to produce
customer satisfaction and company profit. Beyond winning new customers and making sales, they are
able to help the company create long-term, profitable relationships with customers. In other words,
sales staff who don’t generate a sale today know that their interaction with the consumer may influence
a sale tomorrow. Therefore, a salesperson has a public-relations function for the company: to promote a
positive image in the consumer’s mind.
In the Michigan State University Extension article called "Good Customer Relations with Improved
Personal Selling," Dale Zetocha (http://web1.msue.msu.edu/imp/modtd/33209601.html) reminds us
that customers discontinue patronizing a retail or service business for a variety of reasons. Experience
indicates that 68 percent of the customers do not return because of the indifferent attitude of an

employee, 14 percent because of product dissatisfaction, 9 percent because of competitive reasons, 5
percent shop at a friend's establishment, 3 percent move away, and 1 percent die.
The article also mentions some ways in which a salesperson can improve or destroy his/her own job or
place of business:
"The sales clerk informs the customer that the store does not carry that particular brand but fails to
offer to show the customer the brand which the store does carry."
Often, the specific brand is not as important to the customer as the actual product he or she is trying to
find, and the salesperson could make a sale with the brand that the store does carry.
"Failure to show customers a variety of styles that are available."
If, for instance, Bloomingdale’s doesn’t have a particular dress style on hand, the sales clerk can show
the customer other styles available in the store that may be a close substitute for the style the customer
needs.
"The salesperson's attitude of showing impatience (verbal or non-verbal) while waiting for the customer
to make up his or her mind."
Imagine shopping at a retail store. You need to find the perfect gift for your
sibling for their birthday. While browsing, the salesclerk greets you and asks
if you need help. You state what you’re looking for, and the sales clerk rattles
off some ideas and points you in a new department. You stay within the
department while the sales clerk stares at you while you shop. Maybe you’ve
been in a grocery store just before closing and have the sales clerk turn the
lights off.
"Two or more sales clerks visiting with each other rather than offering to
assist customers."
You’ve been walking around in the mall and find a great clothing and accessory shop. You look inside to
see if they have a messenger bag. While browsing, you notice that the sales clerks are having a
conversation about their boyfriends and some of the customers in the store. You approach them to ask
a question, but they keep talking and will hardly look at you.
"Conversely, in a quality restaurant customers may be annoyed by "chatty" waitresses when they want a
quiet evening dining by candlelight."
"You have to try our special from today. It’s not as good as my grandmother’s, but it’s good. Did your
grandmother make that dish?" Then, she sits down with you at your table to have a quick conversation
before getting your drinks or taking your order.

"The reasons salespeople let opportunities for making profitable sales slip by are lack of product
knowledge, improper training, indifference to their work and lack of concern for customers. However,
the main reasons for missed sales opportunities often lie with the owner/manager. First, the manager
may not be aware of these opportunities. Second, he or she may hire people who are not capable of
being developed into salespeople. Finally, the manager may not insist that the people they hire actually
try to sell."
LEARNING OBJECTIVE: LIST THE KEY FEATURES IN SALES FORCE MANAGEMENT.
Sales force management is the analysis, planning, implementation and control of sales force activities. It
includes designing sales force strategy and structure, and recruiting, selecting, training, compensating,
supervising and evaluating the firm’s salespeople.
DESIGNING SALES FORCE STRATEGY AND STRUCTURE
The company may divide sales responsibilities a number of different ways. If the company sells only one
product line to one industry with customers in many locations, the company may use a TERRITORIAL
SALES FORCE STRUCTURE. If the company sells many products to many types of customers, it might
need a PRODUCT SALES FORCE STRUCTURE, a CUSTOMER SALES FORCE STRUCTURE or a combination
of the two.
In the territorial sales force structure, each salesperson is assigned to an exclusive geographic area and
sells the company’s full line of products or services to all customers in that territory. For example, Frito-
Lay may sell Sunchips and other snacks to Publix in Florida using one sales manager. This sales manager
may contact Publix to sell the product to all Publix stores in a given region. This helps clearly define the
salesperson’s job, and because only one salesperson works in the territory, he or she gets all of the
credit or blame for territory sales.
The territorial sales force structure also increases the salesperson’s desire to build local business
relationships, which in turn improve chances for further sales. Finally, because each salesperson travels
within a limited geographic area, travel expenses are relatively small.
In a product sales force structure, salespeople must know their products, which can be numerous and
complex. For example, Kodak uses a different sales force for its film products than for its industrial
products. The film products sales force deals with complex products that require technical
understanding. A good example of product sales force is Pharmaceutical Representatives, who call on
doctors to prescribe their company’s drugs.
The product sales force structure can lead to problems, however, if a single large customer buys
different products from the same company. Several salespeople may travel over the same routes and
wait to see the same customer’s purchasing agents. These extra costs must be compared with the
benefits of better product knowledge and attention to individual products.

In a customer sales force structure, companies organize the sales forces along customer or industry
lines. Organizing the sales force around customers helps a company to become more customer focused
and to build closer relationships with important customers. For example, IBM employs a single "client
executive" for each large customer and who manages a team of "IBMers" to work directly with the
customer.
Another example of a customer sales force structure is Procter & Gamble. P&G moved to a customer
sales force structure and is now organized into "customer business development teams," or CBD. Each
CBD team is assigned to a major P&G customer. Each team is responsible for a specific product and
consists of a customer development manager, several account executives and specialists in marketing
strategy, operations, information systems, logistics and finance.
RECRUITING AND SELECTING SALESPEOPLE
The second feature in sales force management is recruiting and selecting salespeople. What qualities
would make a great salesperson? Job duties and responsibilities must first be assessed and might
include planning, travel availability, customer complaints, budget management, effective
communication skills, dealing with high-level buyers, etc.
When the company starts the recruitment process, the Human Resources Department, or HR, is very
instrumental. HR seeks applicants in a variety of ways, including from current salespeople, employment
agencies, classified ads in local newspapers, sales journals, competitors’ salespeople and college
students, to name a few.
When selecting salespeople, HR may use a single informal interview, or it may use multiple interviews
and lengthy testing. Tests typically measure sales aptitude, analytical and organizational skills,
personality traits and other characteristics that help hiring managers choose the right person for the
sales position.
TRAINING SALESPEOPLE
Training is often achieved through education programs and general

instructions provided by the employer. There are several goals in training
sales staff: to teach the salesperson to know and identify with the company,
to give a description of the company’s history and objectives, its
organization, its financial structure and facilities, and to inform the
salesperson of its chief products and markets.
Salespeople need to know the company’s products, so sales trainees are

shown how the products are produced and how they work. They also need
to know customers’ and competitors’ characteristics, so the training program

teaches trainees about competitors’ strategies and about different types of customers and their needs,
buying motives and buying behaviors.
Finally, because salespeople need to know how to make effective presentations, they are trained in the
principles of selling and in field procedures and responsibilities. This may include modeling other
salesperson’s strategies, adopting a specific sales technique, watching videos, participating in mock sales
situations, etc.
COMPENSATING SALESPEOPLE
The next feature in sales force management is compensation. To attract good salespeople who create
better customer value than competitors, a company must have an appealing compensation plan.
Mary Kay, the beauty product supplier, has its pink rewards, which are given according to how many
points each salesperson accumulates with sales. Each sale would be given a point value. The points are
tabulated and redeemed through the company’s incentive program.
Compensation consists of a fixed amount, a variable amount, expenses and fringe benefits.
The FIXED AMOUNT is the salary, which gives the salesperson a stable income regardless of sales
performance. The VARIABLE AMOUNT, which might be commissions and bonuses, is based on sales
performance and rewards the salesperson for a greater effort made. For example, sales staff may
receive a percentage of every sale they make, thus making their income higher. Expense allowances
repay salespeople for job-related expenses and allow salespeople to undertake needed and desirable
selling efforts. For example, some managers are given an American Express gold card to take
prospective customers out for lunch or for dinners.
Finally, FRINGE BENEFITS, such as paid vacations, sickness or accident benefits, pensions and life
insurance, add to the sales staff’s overall compensation package. Companies that do not offer
competitive salaries and fringe benefits may lose their staff to competitors.
SUPERVISING SALESPEOPLE
Through supervision, the company directs and motivates the sales

force to do a better job. For salespeople working in a territory,
receiving new information regarding the company’s goals and mission
may happen infrequently because they may not have daily contact
with company management. However, salespeople who work, for
instance, in a department store would be subject to supervision and
information on a daily basis. Technology, however, is making
communication with sales staff much more accessible, even if they are traveling.

Motivating salespeople can be directly related to their compensation. While many sales staff would
work hard regardless of additional compensation, motivating factors may be required to motivate the
sales staff in reaching sales objectives. Motivational activities that a company may offer include possible
promotions, time off, professional development, setting sales contests, choosing an "agent of the
month," offering travel rewards, giving Christmas or holiday parties or picnics, and offering bonuses as
an acknowledgement and thanks for the employees’ hard work and achievements.
EVALUATING SALESPEOPLE
The last feature we are discussing in sales force management is evaluation. Evaluation is the way that
company management determines whether the sales staff is meeting company expectations and sales
targets. This is the time to communicate with the sales staff about weaknesses as well as strengths. It
can also provide an opportunity for the staff member to convey to management what types of rewards
and resources may be needed to help him or her succeed.
The process requires good feedback and gathering information on a regular basis about the company’s
salespeople to evaluate their performance. Management gets information about its salespeople in
different ways: sales reports that include weekly or monthly work plans and longer-term territory
marketing plans; call reports that include the salespeople’s completed activities and expense reports.
The sales manager may begin with a qualitative evaluation, which looks at a salesperson’s knowledge of
the company and its products. He or she may conduct evaluations of the salespeople by using
intellectual and attitudinal tests. The manager might also make a formal evaluation by comparing a
salesperson’s current performance against the performance of the other salespeople or against his or
her own past performance. Such comparison should directly indicate the person’s progress. It’s
important that sales managers develop ongoing communications with sales staff so the sales staff can
know how they are doing and what is expected from them. This way, sales staff can continue to make
adjustments in their selling strategies to improve their overall performance.
LEARNING OBJECTIVE: DISTINGUISH BETWEEN TRANSACTION-ORIENTED MARKETING AND

RELATIONSHIP MARKETING.
The goal of transaction-oriented marketing is used to help salespeople close a specific sale with a
customer. It is short-term and focused on one sale at a time. Relationship marketing emphasizes
maintaining profitable long-term relationships with customers by creating superior customer value and
satisfaction. Relationship marketing is becoming increasingly popular. Marketers understand the value
of such relationships in the long-term versus the short-term.

LEARNING OBJECTIVE: DISCUSS THE PRIMARY GOALS OF DIRECT MARKETING.
As we discussed in the previous learning plan, there are benefits of direct marketing for both buyers and
sellers. The benefits must outweigh the cost before choosing direct marketing, which may have a low
return rate. What exactly is the goal of direct marketing? According to the direct-marketing association
(www.the-dma.org), the goal of direct marketing is to directly distribute information tailored to the
interests and needs of a consumer. This tailored information is distributed in different ways. These types of
direct marketing follow.
LEARNING OBJECTIVE: DESCRIBE TYPES OF DIRECT MARKETING.
When direct marketing is chosen, it is important to choose the best form of direct marketing to achieve
marketing objectives. It is possible; however, that multiple means of direct marketing may be used. But
care must be taken not to overkill direct marketing efforts. Now that we understand the goal of direct
marketing, we can examine its different types. These include face-to-face, telemarketing, direct mail,
catalog, direct-response television and kiosk.
TYPES OF DIRECT MARKETING
1. FACE-TO-FACE SELLING: This form of direct marketing occurs when the marketer can interact
with consumers in real time or face to face. This is the oldest form of direct marketing. Some
examples for this method are Amway, Tupperware, Avon and Mary Kay.
2. TELEMARKETING: This method uses the telephone to sell directly to consumers and accounts
for over 38 percent of all direct-marketing media expenditures. Keep in mind that the Do Not
Call registry established by the Federal Trade Commission (FTC) protects consumers who wish to
be removed from call lists used by telemarketers.
3. DIRECT-MAIL MARKETING: Involves selling through an offer, announcement, reminder or other

item mailed to a person at a particular address.
4. CATALOG MARKETING: When marketers use catalogs to display and inform consumers about
product offerings. Examples of this type of direct marketing are JCPenney and Spiegel stores,
which sell a full line of merchandise through catalogs.
5. DIRECT RESPONSE TELEVISION MARKETING: "AS SEEN ON TV." Direct marketers air television
spots that persuasively describe a product and give customers a toll-free number for ordering.
Some product examples are, Proactiv Solution, Ginsu knives and home fitness equipment. There
are home-shopping channels that provide television programs dedicated to selling goods and
services, such as QVC (Quality Value Convenience) and HSN (Home Shopping Network). QVC
sells more than $1.6 billion worth of merchandise each year and averages 113,000 orders per
day.

See how people try to sell their products using this method. Visit
http://www.ehow.com/how_107688_sell-product-tv.html and explore some tips that most of
the organizations follow when implementing this type of marketing.
6. KIOSK MARKETING: Using a kiosk (a stand-alone structure that is used to vend merchandise or
provide information and services) to directly inform consumers or transact purchases. Two
examples of businesses that use kiosk marketing are Hallmark and American Greetings cards.
These kiosks allow customers to create and purchase personalized greeting cards without having
to enter a retail establishment.
E-COMMERCE
The rise of electronic commerce activities (e-commerce) has caused businesses to rethink the way they
deliver products and services to other businesses, as well as to their consumers. Companies are
continually looking for more sophisticated and relevant capabilities, and e-providers are beginning to
respond with promised improvements and innovations.
When determining the most influential forces for a company in assessing its market opportunities, the
one that continuously grows and allows access to both reliable and accurate information is the Internet.
This macro-environmental force arises from the fact that human history is tremendously influenced by
technological innovations. The Internet is a vast and continually growing web of computer networks that
links computers around the world. The development of this web has made getting access to information
relatively easy and user friendly for ordinary people. Arising from this user-friendly system, we have e-
commerce, which is a general term for the buying and selling processes through the Internet. Using the
Internet is every competitive organization’s tool to increase revenue and to reach a wide and sometimes
even global audience. Marketing is about identifying and satisfying customer needs and wants more
efficiently and effectively than the competition. We must assume that if customers did not want to
become e-commerce customers, so many people would have never adopted the technology in the first
place. Therefore, we also must accept e-commerce as being a crucial marketing tool that could help
every organization through its competitive analysis of market opportunities.
An e-commerce site should be viewed as a business service that assists the

sales process and provides its customers with instant access to quality
information. The customer benefits through the availability of 24/7 (24 hours
a day, seven days a week) access to product information, support and
ordering.
In the realms of e-commerce, we find several different activities, such as

buying goods and services online, downloading software and media, banking
online, stocks purchasing or investing, online auctions and travel ticketing.

Digital technology has radically changed the way that consumers relate to products and markets.
Internet or "cyber" consumers have developed a different relationship with and have higher
expectations from the companies from which they purchase services or products. These cyber-
consumers illustrate the need for new marketing approaches. They expect to be able to customize the
products and services they buy and even the price they are willing to pay. Most consumers are no longer
satisfied being simply the recipients of marketing messages. Instead, they want to play an active role.
This has created a fundamental shift in the dynamics of marketing and has placed the customer in
charge. Empowered by current technology, customers are more knowledgeable and more demanding
than any consumer of the past, in part because they can sort products based on any desired attribute
(price, functionality, etc.) or combination of attributes such as price value. As the Internet grows, more
and more competitors are using it. Thus, consumers have more options when purchasing online, making
marketing efforts of businesses increasingly important.
LEARNING OBJECTIVE: IDENTIFY KEY ELEMENTS SHAPING THE INTERNET AGE.
The Internet is now a common part of everyday life for many Americans. Today’s schoolchildren are
growing up with the Internet and will be unaccustomed to life without it. Therefore, they will be
increasingly dependent on the Internet. Those who have not grown up with it but still subscribe often
readily become Internet-savvy using the convenience provided. This growth, as well as digital marketing
and development, will continue to influence the Internet age.
DYNAMICS OF GROWTH
No other form of communication has evolved or developed as quickly as the Internet. See the chart
below for the number of users between 2000 and 2004 according to e-Marketer (www.emarketer.com):
1600
1400
1200
1000
800
600
400
200
0
2000 2001 2002 2003 2004 2006 2008

Internetworldstats.com estimates that as of March 2008 there are 1,407,724,920 or 21.1% of the
world’s population users online (http://www.internetworldstats.com/stats.htm). As the world
population increases and the cost of technology progressively drops, growth of connectivity is likely to
continue. To grasp the extent of this medium, telephone customers reached the 1 billion mark only in
1999.
DIGITAL MARKETING
The Internet is changing considerably the speed, cost and potential of all business functions. The
executive buyer is not only a cyber-consumer in his or her personal life but is also backed by an affluent
and rising infrastructure that facilitates improved efficiency and innovative ways of performing long-
established corporate functions such as finance, human resources and ENTERPRISE RESOURCE
PLANNING (ERP).
The surfacing of VIRTUAL MARKETPLACES, bulletin boards and especially

auction-oriented sites is bringing together buyers and sellers, and is shifting
the nature of business-to-business activities.
The major development and achievement of so many of the new e-

businesses can be credited to the fact that, in a digital world, customers
expect to be able to get products and services interactively, anywhere in the
world, at any time. To achieve this goal, companies had to redesign their
supply chains and find the right balance between digital and material
distribution. For digital services and products, this is a fairly simple plan
because the product (new software, a music CD or a movie, for example) can be downloaded and
charged entirely online. For physical products such as flowers or books, the transaction is more complex
because the digital component is just a part of the equation; it must be associated to a distribution
network that is either owned by the company or other corporations such as FedEx or UPS.
DEVELOPMENT
INTERNET BEHAVIORAL DATA
The explosive growth of Internet access has changed most aspects of traditional marketing research.
Traditional data collection (mall intercept, telephone interviews, self-administered mail surveys, etc.) is
backed and improved by Internet surveys and, most important, by automatic capturing of "Internet-
behavioral data." The results are enormous amounts of data, much reduced costs, and lightning speed in
getting the needed information while obtaining this data. Now, it’s possible to design almost any study
from Internet surveys within 48 hours.

Technology benefits marketing by making undeclared data more
accessible. Some of the most important facts about customers, such
as their shopping patterns, interests, activities, profiles, payment
transactions and chat-room discussions are now available through
Internet technology. However, this raises other issues for many
customers, such as privacy and trust. This discussion will be detailed
further in the next learning plan.
While DATA MINING, a means to determine the patterns in information, has become a very popular
tool, the rest of marketing research cannot simply stay as it is. A crucial reinvention of the marketing
research functions is needed. Some of these aspects include:
Diagnosing problems rather than just test solutions.

Using new information technology to increase speed and efficiency.
Implementing an integrated approach.
Expanding the strategic impact of marketing.
Further developments in information technology have expanded computers from the confines of
keyboards and screens into objects we talk to, drive with, touch or even wear. For example, mobile
phones and PDAs using Bluetooth technology are breaking barriers and expanding e-commerce limits.
These technology enhancements are fundamentally changing how we learn, how we work, how we
entertain ourselves and ultimately how we live.
This global accessibility is one of colossal strategic uncertainty. While planning in more stable
environments calls for a better-developed strategy, planning in the global digital environment is mostly
based on flexibility and experimentation. The environment has changed so rapidly and randomly that
when an "optimal" solution is developed, it is usually obsolete.
Speed and flexibility have become key. To attain this flexibility, companies need to manage portfolios of
options and products, and remodel an organizational structure capable of rapid responses to changing
conditions and innovative testing of new strategies that focus on characteristics such as:
Integrated cross-functional solutions: These are targeted at solving business process challenges through
the integration of marketing, operations and customer service.
Strategic alliances: Consider for example the recently reached agreement of MP3 music as a secure,
digital initiative involving a coalition of hundreds of electronic and high-tech companies (Napster.com,
Apple’s iPod and iTunes, etc.) that solved the controversy surrounding MP3 downloads.
Time competitive and global perspective: Making faster decisions and saving time become fundamental
goals in a worldwide market where any given company may have no knowledge of its customer needs,
preferences and likely behavior.

Consequently, these goals are creating new business models that are dramatically different from the
ones we have grown accustomed to.
NEW BUSINESS MODELS
Modern organizations are built on new principles. In contrast to old

models that have focused on profits, returns and physical assets, new
business models are founded on market share and growing
information. Moreover, new business models are designed to
incorporate unpredictable prospects by redefining the company’s
relationship with its customers and by creating new earning streams.
Consider for instance the innovative business model introduced by

Domino's Pizza in a non-Internet environment (in direct rivalry with long-established pizza restaurants
such as Pizza Hut). In the Domino's Pizza model:
The customer contact and his or her customized order are made by phone.
The buying decision can be made at any time and at any place.
The value proposition is speed.
Location is irrelevant.
Database marketing and its related reasoning are critical.
Now, for the e-commerce world, consider Dell, which introduced an even more radically new business
model that shares many of the qualities of the Domino Pizza model but also includes:
The value proposition is customer-customized PCs at reasonable and competitive prices.

The customer interaction is by Internet, fax or phone.
The supply chain is fully integrated made to order, and Dell's suppliers have access to Dell's
customers’ orders.
Value is secured by ways of marketing the company’s latest gear upgrades (upselling) and low-
cost delivery.
A distinctive aspect of new business models relies on the strategy or ability to patent them as BUSINESS
METHODS PATENTS. Some Internet companies such as priceline.com are based on a number of patents.
To get right to the heart of the issues surrounding patents for business concepts, log on to
www.walkerdigital.com. This is the Web site of Walker Digital Inc., the company that "spun off" its
Priceline.com subsidiary, a separate company that uses the Internet to match buyers with sellers. Here
is what you will read:
We [Walker Digital Inc.] conceive, research, and prepare our patented business systems in-house. Our
team of specialists prepares cases that solve real-life problems for a wide variety of industries such as
retail, telecommunications, credit cards, casinos and more. So far, we've filed over 250 U.S. and

international patent applications to create a portfolio that we believe is unlike anything anywhere else
in the world.
These business process patents are an extension of the traditional process patents and are based on
new ways of doing business—such as the business model of Priceline.com. For more information on
business models, read this article by Robert Merges at
http://www.law.berkeley.edu/journals/btlj/articles/vol14/Merges/html/text.html.
OTHER FUNDAMENTAL CHANGES THAT CANNOT BE IGNORED
Product design that assures product updates: Nokia, for example, designs its line of mobile phones with
this option.
Speed of development: A rising number of companies focus on innovative parallel new product
development (NPD) processes, customer interest in the design process and other methods.
Creative pricing: This is a strategic means of pricing WHERE THE PRICE CHANGES due to many factors,
which may include VALUE, PERCEIVED VALUE, COMPETITION, SUPPLY AND DEMAND, OBJECTIVES,
etc. Creative pricing attempts to maximize profits given these differing factors.
Anytime-anyplace distribution: One of the major impacts of e-commerce has been on the
disintermediation of an escalating number of industries. "Bricks and mortar" distributors and merchants,
i.e., businesses having a physical location, such as Barnes & Noble, faced a new reality of online
businesses such as Amazon.com, which forced them to redesign their business strategies.
Viral marketing: This is a ground-breaking way of offering "supply and promote" products and services,
and is the Internet version of the conventional "sampling." Viral marketing proposes free services with
the hope that they will capture the attention of potential customers and lead to trial and word of
mouth, or "buzz." Hotmail, for example, was one of the pioneers of this type of distribution with its free
e-mail service and was sold to Microsoft for $400 million.
Advertising as interactive: Advertising and marketing are shaped by the mass media. Digital technology
created a new interactive media by generating a process of an exchange of ideas with customers. It is
more forward and responsive, shifting from broadcast media to interactive media.
The subject of communications has also changed. Customers are no longer a passive audience for ads or
commercials, but instead they are active participants in an interactive, educational and entertaining
process. The consumer seeks the tools to learn about the products and services while being entertained,
inspired and persuaded.
Integration: Another significant change in the communication process is the integration of all
communication channels. Media advertising, public relations, packaging, customer service and any other

point of contact between the company and its potential or established costumers, has to be integrated.
Given the advances in database marketing and data analysis, the company and its customers can have
continuous interaction at any point of contact, allowing both the firm and its customers to customize
the information they get, its content, format, mode, and time and place of delivery.
Adaptive experimentation: Advances in database marketing permit a better analysis of the results of
adaptive experiments at the individual level and gain further insights into the nature of the market-
response function.
Strategy and organizational processes: The changes and uncertainty brought about by the digital
marketing revolution forced a change in the way marketing strategies are implemented and in the
nature of the organizational structure required to support the strategy.
LEARNING OBJECTIVE: CATEGORIZE EXAMPLES OF THE FOUR E-COMMERCE DOMAINS.
There are four e-commerce domains. The digitsmith.com Web site provides good information regarding
these domains, which include BUSINESS-TO-BUSINESS (B2B), BUSINESS-TO-CONSUMER (B2C),
CONSUMER-TO-BUSINESS (C2B), and CONSUMER-TO-CONSUMER (C2C).
In a B2B situation, we have two businesses conducting business with each other. This can take on many
forms. An example would be a manufacturer selling to a warehouse or a warehouse selling to a retailer.
Another example may be an office-equipment manufacturer selling directly to another business. Price is
usually determined by quantity and is often negotiable.
We probably are most familiar with the B2C arrangement. Any business selling to the general public is
considered B2C. Fossil watches or American Eagle Outfitters are examples of companies selling directly
to the public.

The C2B situation is less common but allows consumers to show projects and budgets so that businesses
can review and bid on the consumer’s offer. Consumers will choose the business that made the best bid.
Elance.com is a Web site designed for such business.
C2C transactions happen when one consumer sells to another consumer. These type of transactions are
made possible by online classifieds or auctions, such as eBay.com.
LEARNING OBJECTIVE: DISCUSS THE BENEFITS OF E-COMMERCE.
Why do business on the Internet? There are actually numerous reasons to engage in e-commerce. The
ecommerceprogram.com Web site highlights many benefits of e-commerce. Excerpts from this Web site
include:
No boundaries and timeless – Anyone, anywhere at any time can log on and make a purchase.
Cheaper – Transactions are automated and therefore do not need a human to process.
Convenient – Purchases can be made without leaving home and with informed decisions from
information also available electronically.
Faster – Transactions can quickly be completed, invoices are readily available, delivery time is
usually shortened, and errors can be more easily detected.

Niche-friendly – Businesses can target niche customers, which given the expanse of the Internet,
can provide sizable orders.
Innovative – E-commerce forces companies to innovate their products or e-commerce processes
to meet consumer needs or market forces.
SOURCE: HTTP://WWW.ECOMMERCEPROGRAM.COM/ECOMMERCE/BENEFITS-OF-
ECOMMERCE.ASP
DEMONSTRATE EXAMPLES OF THE CHALLENGES E-COMMERCE PRESENTS FOR THE FUTURE.
Examine the following considerations that business managers and marketers must face when dealing
with the Internet as it continues to grow.
Evaluate how to establish what "pricing" means in a business landscape in which buyers propose
their own prices (such as at Priceline.com).
Evaluate how buyers and sellers negotiate unaided in business-to-business auction sites such as
eBay.
Analyze whether brands are more significant or less significant as we deal with closer-to-perfect
information.
Evaluate new approaches to marketing, given that e-commerce companies are able to track
every click of the decision-making process.
Analyze how companies can shift from broadcast communications to interactive communication
while educating, entertaining and persuading the consumer.
Managers and marketers alike must also focus on the following approaches to management:
A vision that combines the company’s own aspirations with the type of firm that will succeed in
the changing environment.
The development of creative strategies. No business strategy today can ignore an e-business.
A re-examination of the business model and value proposition.
Innovative strategies reflecting the new rules of marketing.
Attention, which should be given to the determination of the best organizational design.
Incorporating e-business throughout the organization (for example, Prudential California
Realty).
Creating e-business subsidiaries (for example, MagazineOutlet.com, a subsidiary of Newsweek
Services Inc.).
Creating separate e-business subsidiaries for separate online activities (for example,
BarnesandNoble.com, which was created by Barnes & Noble as a separate publishing company.

Investing in or merging with Internet companies (for example, Rite Aid investment in
Drugstore.com).
Shifting the entire business to the Web (for example, Latham [real estate] auctioneers changed
their business to a Web only operation called Homebid.com).
The organizational structure, culture and values.
The value-creation processes.
The required technology and especially the information technology (IT) infrastructure.
The required resources.
The performance measures and incentives.

ACTIVITIES
1. Reflect on a time when you had a positive or negative sales experience. What was the reason for
the outcome? Why was the Internet invented? What do you think are the most common
reasons people use the Internet? Why do you use the Internet and how often do you use it?
http://www.the-dma.org/
http:// www.UBMtechnology.com

Sales Force Structures
Types of Direct Marketing
5. Consider what a job description for a sales person for a company might look like. What skills are
necessary? Why? How would this job description be the same or different for other companies?
6. Be sure you understand the four e-commerce domains and be able to explain the benefits of e-
commerce for each. This is not an assignment that you need to submit. Simply consider this
something that you need to be capable of doing to be competent within this course.
9. Graded Discussion 7.1 Transaction-Relationship-Direct:
Distinguish between transaction-oriented marketing and relationship marketing and provide

examples of each. Also, describe direct marketing and evaluate how this approach is used by
retailers.
10. Graded Discussion 7.2 Online Purchases:
Think about times when you purchased a product online. What cultural or personal factors
influenced your decision? What do you know about your purchase now that you didn’t know
before making it? If you have not made online purchases, why not? Why have Internet sales
jumped in recent years? How is promotion used on the Internet? Speculate what the Internet
environment will be like in five or 10 years.

GRADED ASSIGNMENTS
1. Case Study: Due in Learning Plan 8
Case Study: Braum’s Ice Cream and Dairy Stores
Follow this link to read the case study about Braum’s Ice Cream and Dairy Stores and then answer the
following questions.
1. Historical Perspective:
Identify the company’s historical strategies and structure and how development and growth
have taken place.
2. Current Situation:
Identify and describe the company’s current situation. What are its strengths, weaknesses,
opportunities and threats.
3. Central Issues:
Identify and describe a marketing problem/situation that Braum’s could be incurring.
4. Options:
Identify and describe some relevant marketing alternatives that Braum’s could pursue.
5. Recommendation:
After evaluating the options select the best option and explain your logic.
6. Implementation Plan:
Develop a marketing implantation plan for your recommendation.
If you need more information about this company, do a library or web search (www.braums.com).
This assignment is worth 120 points and will be graded according to the criteria in Learning Plan 8. This
assignment is due in Learning Plan 8.

SUGGESTED CASE STUDY SCORING GUIDE
Rating Scale

Criteria
1. Learner identified and described the company’s historical strategies and structure and how
development and growth have taken place.
2. Learner identified and described the company’s current situation including its strengths,
weaknesses, opportunities and threats.
3. Learner identified and described a marketing problem/situation that Braum’s could be
incurring.
4. Learner identified some relevant marketing alternatives that Braum’s could pursue.
5. Learner evaluated the options and selected the best option and explained the logic behind
the recommendation.
6. Learner developed a marketing implantation plan for the recommendation.

2. Graded Assignment: Internet Sales
Salesmanship Comes to the Online Stores, but Please Call It a Chat. Bob Tedeschi. New York Times. (Late
Edition (East Coast)). New York , N.Y. : Aug 7, 2006. Pg. C.9
=PQD
After reading the article:
Identify and explain the type of sales force structure Land End utilizes on-line.
Identify whether this type of internet sales uses transaction or relationship marketing.
Discuss the benefits Lands End using on-line sales.
Identify how companies such as Lands End are shaping the internet age.
Identify some of the challenges e-commerce and Lands End presents for the future.
Rating Scale

Criteria
1. Student identified and explained the type of sales force structure Land End utilizes on-line.
2. Student identified whether this type of internet sales uses transaction or relationship marketing.
3. Student discussed the benefits Lands End using on-line sales.
4. Student identified how companies such as Lands End are shaping the internet age.
5. Student identified some of the challenges e-commerce and Lands End presents for the future.

WEB SITES
http://www.asseenontv.com/
http://www.nasp.com/
http://www.UBMtechnology.com
http://digitalenterprise.org/
http://www.ecommercetimes.com/
http://www.internetworldstats.com/
http://www.wilsonweb.com/
Anderson, Barb (2005). Stores-on-wheels. A Marketing "Hole-in-one." AGRI MARKETING.

January/February 2005. Pg. 22-25.
Broyles, Phil, & Leadem, Joe (2004) The Art of Prospecting in the Do Not Call Era. Research.
REGULATORY CHALLENGES. April 2004. Pgs. 44-45.
Campbell, Dan. Iowa Hearing Examines Key Issues Affecting Co-ops. Rural Cooperatives. September –
October 2004. Pgs. 32-33.
Read: Connelly, M. (2006). Marketers turn off TV, connect with consumers. AUTOMOTIVE NEWS,
Vol.81, Iss. 6223; pg. 32, 1 pg. Retrieved November 26, 2006 from Proquest database:
PQD
Garber, Tal & Goldenberg, Jacob (2004). From Density to Destiny: Using Spatial Dimension of Sales Data
for Early Prediction of new Products Success. MARKETING SCIENCE. Vol. 23, No. 3, Pg. 419 – 428.
Harris, Wendy (2004). Network Marketing or Pyramid Scheme? BLACK ENTERPRISE. November, 2004.
Pgs. 103-108.
Kotler, Philip & Amstrong, Philip (2001). Principles of Marketing. Upper Saddle River, New Jersey. Pgs.
523.

Lancaster, Geoff & Reynolds, Paul (2004). Marketing. Pgs. 434.
http://web1.msue.msu.edu/imp/modtd/33209601.html
http://www.m-w.com/cgi-bin/netdict?kiosk
Unilever Takes Bertolli Brand Frozen; Premium Dinner Line Debuts in USA. QUICK FROZEN FOODS
INTERNATIONAL, January 2005. Pgs. 88-89.
HTTP://WWW.ECOMMERCEPROGRAM.COM/ECOMMERCE/BENEFITS-OF-ECOMMERCE.ASP
For a better understanding of the way macro-environments affect marketing, visit www.census.gov. By
navigating through this link, you will have access to the most accurate data provided by the U.S.
government regarding demographics and economy.
This article shows a very interesting technological approach in image managing through public relations:
(http://www.knowthis.com/articles/marketing/public_relations.htm). In this article, you will see one of
the ways marketers use PR as a method to cut through the excessive promotional clutter that can
inundate consumers.
Another technological approach from marketers can be found at

http://www.accenture.com/xdoc/en/industries/communications/media/medi_frontier.pdf. This article
will introduce you to how companies retain services to digitalize their visual contents on the Web to stay
competitive.
A display of both macro- and micro-environments affecting the market can be assessed through a
special report on business issues and opportunities in China and Europe at
http://www.accenture.com/xd/xd.asp?it=enweb&xd=ideas\pca\china_european.xml. When reading this
report, pay special attention to the characteristics of each country to be able to easily identify each
variable on both macro- and micro-environments.
For more marketing research information go to

http://www.topsearch10.com/search.php?aid=31128&q=Direct+Mail. This source will provide you with
the best links to assess all of the data that marketers need to target their customers.
4 E-commerce domains: http://www.digitsmith.com/ecommerce-definition.html
Wilbur Schramm, "How Communication Works", in Wilbur Schramm, ed, THE PROCESS AND EFFECTS
OF MASS COMMUNICATION. (Urbana IL: University of Illinois Press, 1955.) pp 3-26.

LEARNING PLAN 8: GLOBAL MARKETING, SOCIAL RESPONSIBLILTY AND ETHICS
COMPETENCIES
ANALYZE THE IMPACT OF SOCIAL RESPONSIBIL ITY AND ETHICS ON BUSINESS OPERATIONS.
EXAMINE GLOBAL MARKETING ISSUES.
a) Discuss the key social concerns of marketing.

b) Distinguish between consumerism and environmentalism.
c) Describe ways that a company practices principles of socially responsible marketing.
d) Provide examples of company’s policies and guidelines to help managers deal with ethical
behavior in marketing.
e) Describe ways that firms are affected by the international trade system, economic, political and
cultural environments.
f) List three approaches to entering international markets.
g) Describe ways companies adapt their marketing mix to international markets.
h) Identify the key organizational elements for international marketing.
OVERVIEW
Does it matter to you if a company is ethical or not? Would you buy

from unethical companies? How do you determine if a company is
ethical? What companies have been in the news lately for
ethical/unethical behavior? Why have companies begun looking to
overseas markets? Do you think that moving operations overseas is
easy? Why?
This learning plan presents information on the prominent

developments and concerns in the field of marketing from a social responsibility and ethical perspective.
This discussion includes the environment and the damaging effects produced by everyday activities such
as continuous consumption, marketing, manufacturing, processing, and polluting, along with several
environmental disasters. There are various responses to "green" issues that companies have adopted,
leading to enhanced corporate social responsibility.
Furthermore, a number of significant business-ethics issues have emerged since the increase in
marketing communications on the Internet. While regulatory agencies have increased their vigilance in
protecting consumers from injury, the uniqueness of business via the Internet has challenged these
agencies to respond in evolving ways.
In the present era of international marketing, as more companies enter global markets, ethical problems
are likely to intensify. Marketing ethics require firms to show responsibility to society. Business

corporations also have a moral responsibility to take into account the interests of their stakeholders.
The stakeholders of organizations include customers, employees, suppliers, intermediaries,
governments, and local communities. Additionally, while e-commerce has grown rapidly in recent years,
some of the practices associated with several aspects of marketing on the Internet, such as "pop-ups,"
"spam," and "cookies," have raised concerns on the part of Web users. Undoubtedly, new Internet
marketing techniques are moving us beyond the traditional treatment of the ethics of marketing and
advertising. However, the questions they raise ultimately turn upon the ways in which technologies can
transform the fundamental means by which relationships are established and maintained within a social
environment. Security concerns, spamming, Web sites that do not carry an "advertising" label, online
marketing to children, and intellectual property (sharing music, movies, software, etc.) are some of the
issues blurring the lines that distinguish between what is legal and what is moral.
LEARNING OBJECTIVE: DISCUSS THE KEY SOCIAL CONCERNS OF MARKETING.
As mentioned previously, the invention of the Internet alone has caused

social concerns. These concerns, combined with more traditional social
concerns, create important questions regarding the way marketing is
conducted in a socially responsible and ethical way. Some of these concerns
include spam, privacy, consumer confidence, health care, financial services,
and regulations.
SPAM MARKETING
Spam is unsolicited bulk e-mail or junk mail. There are many concerns associated with spam. Legislative
and administrative initiatives are balancing the interests of consumers and Internet service providers
with those of direct marketers. E-mail marketing is an excellent, low-cost way to reach consumers. For
direct marketing, e-mail is a unique medium, offering a low-cost means to target individuals. Many
online users are bothered by spam—unsolicited offers for everything from lower mortgage rates to
pornography to pharmaceuticals. Congress passed an anti-spam law in November 2003, with the
backing of several of the biggest Internet companies. Spammers seem undeterred, and San Francisco-
based Ferris Research estimates the time lost by employees dodging spam will have cost U.S. businesses
$17 billion as of 2005. The Direct Marketing Association offers an Electronic Mail Preference Service
where consumers register to be removed from lists. However, not all e-mail marketers are conscientious
in using this information. When used in a mutually agreeable manner, e-mail marketing has the
potential to lower transaction costs, making the exchange process more efficient. Spam accounts for an
estimated 60 percent of all Internet e-mail, according to January 2004 statistics compiled by
Brightmail.com, a spam-filtering software company.

PRIVACY
Trust plays a key role in any marketplace. There are issues between personalization and privacy
protection. The electronic market is still surrounded by high uncertainty and lack of legal protection.
Building trust online is proposed as a solution to consumers' privacy concerns. Take for instance Google,
which automatically keeps records of which search terms people use and when, attaching the
information to a user's numeric Internet address and a unique ID number stored in a Web browser
"cookie" file that Google uploads to computers unless users reconfigure their browsers to reject them.
Like most Internet companies, Google says it doesn't consider the data personally identifiable, but
Internet addresses can often be traced to a specific user.
CONSUMER CONFIDENCE
This refers to whether customers feel the economy is or will do well and often affects consumer
spending. The lack of consumer confidence in information privacy has been identified as a major
problem threatening the growth of e-commerce. Despite the importance of understanding the nature of
online consumers' concerns for information privacy, this topic has received little attention in the
information-systems community.
HEALTH CARE
As e-commerce gains more significance in our lives, the world of health care
is bound to have its share of the pie. Accordingly, we have been seeing
online marketing practices involving health-care service providers, payers
and patients. There are reports claiming that health-care providers in the
United States can conditionally use patients' protected health information to
target their marketing campaigns.
FINANCIAL SERVICES
With the phenomenal growth of e-commerce, most industries, including the banking and financial
services sector, have been influenced in one way or another. Several studies suggest that customers
have not adopted B2C e-commerce to this same degree, primarily because of risk concerns and trust-
related issues. This issue extends into an area of information-systems research from a financial-services
marketing context by looking into the element of trust and risk in e-banking. A conceptual model of trust
in e-banking is proposed with two main presumptions that influence a customer’s trust: perceived
security and perceived privacy. These presumptions are moderated by the perceived trustworthiness
attributes of the bank, which includes benevolence, integrity, and competence. Trust is being defined as

A FUNCTION OF THE DEGREE OF RISK INVOLVED in the e-banking transaction, and the outcome of
trust is proposed to be “reduced perceived risk,” leading to positive intentions toward adoption of e-
banking.
REGULATIONS
Individualized customer information is at the heart of online commerce. Using increasing amounts of
customer-specific data enhances the success and value of direct online marketing, but the extensive
gathering and use of data specific to individuals also causes alarm over the loss of digital privacy, putting
e-commerce and society at odds. Governments and nations, particularly in Europe, have reacted with a
reliance on sweeping laws governing digital privacy protection, while other nations, such as the U.S.,
have generally preferred to allow companies and industry associations to regulate themselves. The
biggest problem appears to be the overuse of crude direct marketing vehicles such as "cold calling,"
unsolicited mail-outs, and ill-conceived online direct marketing, all of which contribute to direct
marketing's continuing image problem as a low-end marketing tool.
LEARNING OBJECTIVE: DISTINGUISH BETWEEN CONSUMERISM AND ENVIRONMENTALISM.
Consumerism can refer to several things, including the theory that

spending is good for the economy, the movement of increased
options and protections for consumers, and the illusion that the
individual will be gratified and integrated by consuming. In the latter
case, the public substitutes consumer ideals for the lost experiences
of art, religion, and family. While consumerism offers the tangible
goal of owning a product, it lacks the realization of other cultural
traditions. Consumerism offers only short-term gratification for those
who can afford the luxury, and frustration for those who cannot. It
exists as an incomplete and inadequately engineered system of values as a replacement for a weakening
cultural heritage. Even intimate relationships become affected. Linking friendship, dating, and sex to
consumerism isn't anything new, even if the eagerness with which affluent or wealthy customers sell
themselves is now unparalleled.
Environmentalism: Environmental issues are becoming increasingly

important in an organization’s theory and practice. Corporate
environmentalism is the process by which firms integrate environmental
concerns into their decision-making. Corporate environmental orientation
and environmental strategy focus are the two most important aspects of
corporate environmentalism. Managerial perceptions of regulatory forces,
public environmental concern, top management commitment, and need for
competitive advantages are some of the factors adjusting a firm’s
environmental strategies. Throughout the 30 years of regulatory
environmentalism, firms have focused on achieving compliance as a
mainstay of their environmental strategies. Recently, leading firms have begun to tie environmental

performance and money-making with an ability to answer the needs of stakeholders. Yet, many
environmental professionals and most business leaders have failed to build the personal leadership skills
necessary for changing the environmental direction of the firm.
A study published in MANAGEMENT SCIENCE in August 2000 found a relationship between market
value and environmental responsibility in multinational companies. Some observers say companies that
dismiss the notion of environmental stewardship of technology are tossing a profit opportunity in the
landfill.
LEARNING OBJECTIVE: PROVIDE EXAMPLES OF A COMPANY’S POLICIES AND GUIDELINES TO

HELP MANAGERS DEAL WITH ETHICAL BEHAVIOR IN MARKETING.
Every profession and business has to wrestle with ethical questions. The wave of business scandals over
inaccurate reporting of sales and profits, and excessive pay and privileges for top executives has brought
questions of business ethics to the foreground. Lawyers have been accused of ambulance chasing, jury
manipulation, and inflated fees, leaving plaintiffs with much less than called for in the judgment.
Physicians have been known to recommend certain drugs as being more effective then others as
compensation for receiving support from pharmaceutical companies. Drawing a clear line between
normal marketing practice and unethical behavior isn't easy. Yet it is important for marketing scholars
and those interested in public policy to raise questions about practices that they may normally endorse
but that may not coincide with the public interest.
The human resources profession emphasizes the personal and interpersonal aspects of work that make
it conscious of complex ethical issues in regards to relationships in the workplace, while finance
specialists are concerned with routine compliance with regulations. Marketing professionals are under
pressure to produce revenue results. As these departments go head to head, coordination is vitally
important in all aspects, including the commitment to environmentalism and social responsibility that
will impact the organization as a whole.
Consider the following:
Companies are never likely to put the environment ahead of all other issues, but they seem to
increasingly consider it to be a part of the equation.
As Nike discovered, when admitting to unacceptable working conditions at its Indonesian plants,
a high price is often paid when underestimating the consumer’s conscience.
Businesses today have to consider adverse media attention and the effect it can have on their
reputations, as well as the inevitable cost of crisis management.

As companies are aware of the impact of ethics and social responsibility on their image and internal
operations and productivity, they are increasingly moving to internal ethics programs. This may include
ethics training for all staff or attending ethics conferences for top leaders who then train other
organizational members. Other avenues companies may take are to adopt a code of ethics and hire an
ethics officer. The code of ethics is a written document outlining the ethical policies of the company and
the methods for conducting business. For example, the code of ethics may preclude anyone in the
organization from accepting gifts from any party. Hiring ethics officers is another way to help ensure
that companies are ethical. The ethics officer often reviews policies to ensure that they are ethical and
also acts as a consultant when ethical questions arise.
LEARNING OBJECTIVE: DESCRIBE WAYS THAT A COMPANY PRACTICES PRINCIPLES OF SOCIALLY

RESPONSIBLE MARKETING.
From the food people eat, to the clothes they wear, to the coffee they drink, consumers are becoming
more aware of the origins of the everyday things they buy. As a result, the line between corporate social
responsibility (CSR) policy and marketing strategy is increasingly blurred. Each year, BUSINESS ETHICS
magazine publishes the 100 best U.S. companies out of 1,000 evaluated. The publication examines the
degree to which the companies serve seven stakeholder groups: shareholders, communities, minorities
and women, employees, environment, non-U.S. stakeholders, and customers.
The earmarks of a socially responsible company include:
Living out a deep set of company values that drive company purpose, goals, strategies, and
tactics.
Caring about the environmental impact of its activities and supply chain.
Treating customers with fairness, openness, and a quick response to inquiries and complaints.
Treating employees, suppliers, and distributors fairly.
Behaving in a consistently ethical fashion.
GLOBAL MARKET
To be successful in the international or global arena, businesses need

to develop new enterprises more effectively and efficiently than the
competition. As we’ve stated throughout this course, meeting
consumers’ needs and wants is the key to success. Technology has
allowed businesses to more readily meet some of these demands, and
in so doing, have caused the marketplace to expand globally. As
businesses seek to innovate and reach additional consumers, the
global market will continue to be appealing. Without global
expansion, many companies in highly competitive and global industries will face extinction. Therefore, it
is increasingly important that businesses understand the global environment and how to manage it
effectively. In this learning plan, we will discuss what affects international firms, approaches to

international markets, how companies alter their marketing mix for international markets, and key
organizational elements for international marketing.
In the global market, companies must develop a way to thrive in the new world economy. Borders may
no longer be geographic, but they are real nonetheless. Even on the Internet, borders exist for
companies and consumers. Companies wishing to expand must sell goods and are still governed by the
national laws in which they are hosted. Ordering material from, securing products in, and shipping of
merchandise to a physical location must occur within a national border. All of this requires speed,
flexibility, and openness to innovation in everything from advertising to project development.
Without boundaries of a national or physical nature, how does the company scan the environment and
locate its potential consumers? What are the rules that govern its business practices as well as
marketing law? What are culturally acceptable ways of presenting a product, and which are not?
Because the business environment has become so diffuse, the corporation must redefine itself and its
marketing strategy. As a result, corporations have to re-examine and reanalyze their approach to
marketing in international markets. How do they do it?
LEARNING OBJECTIVE: DESCRIBE WAYS THAT FIRMS ARE AFFECTED BY THE INTERNATIONAL
TRADE SYSTEM, ECONOMIC, POLITICAL, AND CULTURAL ENVIRONMENTS.
Economic Environment: International economic conditions complicate consumption information and a

marketer’s response. Varying currency inflation rates might require changing a product (making it more
economical without compromising quality), adjusting its promotion (adding more rational appeals), and
its distribution (building more customer involvement). Local government price controls might make it
impossible to sell a product for an acceptable profit. Debt is another persistent international marketing
problem. Many developing countries shoulder huge debts measured in trillions of dollars. Debt crises
crush nations’ buying power and force imports down and exports up to meet interest payments.
Political Environment: Just as America has foreign-trade policies—laws that affect business transactions
between countries—so do other countries. The United Nations also imposes guidelines on international
business. These international laws, combined with the local and national laws of other countries, make
the political environment a very serious matter. When doing international business or marketing, it’s
important to recognize these laws and to remain compliant to remain competitive.
Cultural Environment: Because of the close relationship between economic and social development,
many aspects of economic data are social indicators as well. Consider the following factors and the
significance of each: The share of urban population, life expectancy, number of physicians per capita,
literacy rate, percentage of income received by the richest 5 percent of the population, and percentage
of the population with access to electricity. Other variables are cultural indicators: Number of public
libraries, registered borrowings, book titles published, and number of daily newspapers, for example.
One important aspect is the phenomenon of ethnicity, a driving force behind political instability. Firms

must assess political risks and government actions that could adversely affect the long-run profitability
or value of a firm.
LEARNING OBJECTIVE: LIST THREE APPROACHES TO ENTERING INTERNATIONAL MARKETS.
There are three main approaches to entering international markets. These include exporting, joint
venturing, and direct investment. The dictionary.com website defines these in the following manner:
1. Exporting - To send or transport (a commodity, for example) abroad, especially for trade or sale.
2. Joint Venture or "JV" - The cooperation of two or more individuals or businesses—each agreeing
to share profit, loss, and control—in a specific enterprise.
3. Foreign Direct Investment or "FDI" - An investment abroad, usually where the company being
invested in is controlled by the foreign corporation.
The approach used in entering international markets will be determined by a number of factors that
include available resources, economic conditions, marketing objectives, and political climate. As with
any international endeavor, lawyers, especially those with a background in international relations,
should be consulted.
LEARNING OBJECTIVE: DESCRIBE WAYS COMPANIES ADAPT THEIR MARKETING MIX TO

INTERNATIONAL MARKETS.
We recall that the marketing mix is commonly referred to as the 4P’s. While these 4P’s are used in
international markets, they must be adapted from domestic to international markets to ensure that
marketing objectives are met and to avoid costly mistakes.
Product – Will domestic products meet the needs of an international market? Maybe. There are,
however, changes that may need to happen in terms of functionality, package, and size, to name a few.
For example, if you produce an electrical device, it is likely that it won’t work abroad, because it uses a
different number of electrical cycles. Perhaps the package may need to be changed, or the size. In Asian
countries, where apartment living is common, the size of products may be an issue.

Price – One of the main issues affecting price is the exchange rate. How much would international
consumers have to pay for the product, and how does that compare to other international suppliers or
substitute products in the international market? How will payments be accepted? The cost of the
distribution channel may be of great concern as well.
Place – How will I get my product to international consumers? What intermediaries will I need, and
which ones will know and understand the market the best? What geographic areas may be best to
penetrate the market? This is probably one of the most difficult components of the marketing mix to
adapt. Freight forwarders specialize in handling the shipping function to overseas destinations. In-
country decisions will be affected by the mode of entry chosen. For example, with a joint venture, a
company will have representatives of the joint venture to help make distribution decisions based on
their localized expertise. Companies, however, will need to evaluate channel options just as they would
for domestic channels.
Promotion – The key factors in the promotion of your products is language, translation, and the type of
promotion to use. Marketing overseas means a different language. Even for English-speaking countries,
there are differences among spellings and meanings. For example, in Britain, “chips” often refers to
French fries, not potato chips. Exercise caution when translating your product name or promotional
activities, because they often do not translate well. Sometimes, a translation can come out meaning the
wrong thing in another country. For example, Pepsi started introducing beverages in China several years
ago. At first, it actually translated "Pepsi Brings You Back to Life" literally. The slogan in Chinese really
meant, "Pepsi Brings Your Ancestors Back from the Grave." For this example and other examples visit:
http://bears.ece.ucsb.edu/
Imagine the consequences of using the same marketing mix for both domestic and international
consumers.
LEARNING OBJECTIVE: IDENTIFY THE KEY ORGANIZATIONAL ELEMENTS FOR INTERNATIONAL

MARKETING.
THE GLOBAL BUSINESS ENVIRONMENT

The Global Marketplace is complex, interdependent, and dynamic. Challenges include politics, culture,
and technology. Managers must find a balance between social responsibility, company image, and
competitive strategies. Global competition is characterized by networks that bind countries to one
another.

Globalism trends:
A borderless world
Increase in exports
Increase in direct foreign investment
Dominance of trading blocs
Regional Trading Blocs:
TRIAD Market
European Union
Asian Market
China, Japan, South Asia
NAFTA
CAFTA
Information Technology:
Information is no longer central or secretly controlled by governments.

Information technology is boosting productivity and electronic commerce around the world.
Information technology is transforming the international manager’s agenda more than any
other item.
The Globalization of Human Capital:
Forrester Research predicts that 3.3 million U.S. jobs will move offshore by 2015.
45 percent of the 500 U.S. companies surveyed state that they use a global sourcing model.

ACTIVITIES
1. Does it matter to you if a company is ethical or not? Would you buy from unethical companies?
How do you determine if a company is ethical? What companies have been in the news lately
for ethical/unethical behavior? Why have companies begun looking to overseas markets? Do
you think that moving operations overseas is easy? Why?
2. Read the Learning Plan instructional materials and the articles at the following links:
http://www.bsr.org/index.cfm
3. Please review the terminology in the glossary for this learning plan at:
Learning Plan 8 Glossary

Socially Responsible Company

International Trade System
“4P’S” of the Marketing Mix
5. Brainstorm ways that companies may practice the principles of socially responsible marketing.
What is socially responsible marketing? How do we ensure that our marketing efforts are ethical
and socially responsible?
6. Personal Information:
Visit the Web site of a large national company of your choosing. If you were going to request
information, make a purchase or use customer service, how much of your personal information
would you have to provide? Is the site clear about what the company plans to do with your
personal information? How much information should the company be allowed to collect? What
should the company be allowed to do with the information collected from its customers? What
is the line between market research and personal privacy? Locate an article on the Internet or
hard-copy newspaper that deals with this issue for the company you chose or another company.
8. Graded Discussion 8.1 Global Market:

Name an international company. Share with the class the ways a U.S. company is affected by a
global market, including the international trade system, economies, governments and cultural
factors.

GRADED ASSIGNMENTS
1. Final Exam: The final exam for this course is worth a total of 100 points
2. Graded Assignment: Global Marketing Issues
Proctor and Gamble (www.pg.com) is a U.S. owned company which operates in 80 countries. Examine
its global marketing issues and analyze the impact of social responsibility and ethics on its business
operations.
Discuss the key social concerns of its marketing operations.
Describe ways that Proctor and Gamble practices principles of social responsibility in marketing.
Provide examples of its policies and guidelines to help managers deal with ethical behavior in
marketing.
Describe ways the Proctor and Gamble has adapted their marketing mix to international
markets.
Describe ways that Proctor and Gamble could be affected by the international trade system,
economic, political and cultural environments.
Rating Scale

Criteria
1. Learner discussed the key social concerns of Proctor and Gamble’s marketing operations.
2. Learner described ways that Proctor and Gamble practices principles of social responsibility in
marketing.
3. Learner provided examples of its policies and guidelines to help managers deal with ethical
behavior in marketing.
4. Learner described ways the Proctor and Gamble has adapted their marketing mix to
international markets.
5. Learner described ways that Proctor and Gamble could be affected by the international trade
system, economic, political and cultural environments.

Case Study: Braum’s Ice Cream and Dairy Stores
Follow this link to read the case study about Braum’s Ice Cream and Dairy Stores and then answer the
following questions.
1. Historical Perspective
Identify the company’s historical strategies and structure and how development and growth
have taken place.
2. Current Situation
Identify and describe the company’s current situation. What are its strengths, weaknesses,
opportunities and threats.
3. Central Issues
Identify and describe a marketing problem/situation that Braum’s could be incurring.
4. Options
Identify and describe some relevant marketing alternatives that Braum’s could pursue.
5. Recommendation
After evaluating the options select the best option and explain your logic.
6. Implementation Plan
Develop a marketing implantation plan for your recommendation.
If you need more information about this company, do a library or web search (www.braums.com).
Submit the Case Study analysis to your instructor.
This assignment is worth 120 points and will be graded according to the criteria below.

SUGGESTED CASE STUDY SCORING GUIDE
Rating Scale

Criteria
1. Learner identified and described the company’s historical strategies and structure and how
development and growth have taken place.
2. Learner identified and described the company’s current situation including its strengths,
weaknesses, opportunities and threats.
3. Learner identified and described a marketing problem/situation that Braum’s could be
incurring.
4. Learner identified some relevant marketing alternatives that Braum’s could pursue.
5. Learner evaluated the options and selected the best option and explained the logic behind
the recommendation.
6. Learner developed a marketing implantation plan for the recommendation.

WEB SITES
http://www.anu.edu.au/people/Roger.Clarke/EC/WillPay.html
http://www.bsr.org/index.cfm
http://www.ethicsweb.ca/codes/coe2.htm
http://web.mit.edu/gtmarx/www/privantt.html
http://www-rohan.sdsu.edu/~renglish/370/notes/chapt04/
http://www.diversityhotwire.com/
http://www.tradepointsystems.com/
http://www.library.okstate.edu/govdocs/browsetopics/itrade.html
http://www.ita.doc.gov/td/industry/otea/usfth/fth_faq.html
Carrigan M., Marinova, S., Szmigin I. (2005). Ethics and international marketing: Research background
and challenges. INTERNATIONAL MARKETING REVIEW, Vol.22, Iss. 5; pg. 481, 13 pgs. Retrieved
November 26, 2006 from ProQuest database:
QD
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Principles of Marketing Instructional Material

Version 2.1 Date: 10/27/08

Welcome to Marketing! Principles of Marketing is an introductory

This course will take you on a journey through understanding what

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Read the learning plan activities

Complete assignments as directed by the instructor.

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Learning Plan 1: The Basics of Marketing ......................................................................................................................6

Learning Plan 3: Strategic Planning and Marketing Strategy.......................................................................................50

Learning Plan 4: Finding and Growing Products ..........................................................................................................72

Learning Plan 6: Retailing and Integrated Marketing Communication .....................................................................105

Learning Plan 8: Global Marketing, Social Responsiblilty and Ethics.........................................................................148

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APPLY BASIC MARKETING TERMS AND CONCEPTS.

a) Distinguish between consumer needs, wants, and demands.

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Out of necessity, business organizations require revenue or income to

“Needs” are states of felt deprivation. A customer “need” may be physical,

A physical need is a particular requirement by the body to be able to achieve

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According to Kano’s Model of Customer Satisfaction (Kano, 1984),

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Once the customer’s want is satisfied by the product or service, which is

MARKETING OPPORTUNITY ANALYSIS OR MARKETING MIX: THE “4PS”

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MARKETING OPPORTUNITY ANALYSIS OR MARKETING MIX: THE "4PS"

A product is a good-and-service combination offered to a target market. The

PRODUCT - CONSUMER PRODUCTS AND SERVICES

Consumer products are those products and services related to the

Consumer buying patterns are likely to be highly differentiated in

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PRODUCT LIFE CYCLE

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Just as the word suggests, "promotion" in the 4P's attempts to promote a

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THE FIVE MARKETING PHILOSOPHIES

Now that we understand the key aspects of the marketing mix, we

Marketing management is defined as the practical application of

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SOCIETAL MARKETING PHILOSOPHY

Understanding the marketing mix and marketing philosophies,

Technology and globalization have been fostered by new and

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Information is a key to a marketer's success. Therefore, marketers use a

APPLY MARKETING RESEARCH PRINCIPLES

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LEARNING OBJECTIVE: DISCUSS WHY ACCURATE INFORMATION IS IMPORTANT TO A COMPANY

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LEARNING OBJECTIVE: DEFINE MARKETING INFORMATION SYSTEM.

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ASSESSING INFORMATION NEEDS

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STEPS IN THE MARKETING RESEARCH PROCESS

1. Defining the problem and research objectives

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