0003 Marketing-Assessing Market Demand

Marketing Management
Create value for customers

Capture value from customers
Boris Durisin
Defining marketing
Marketing aim: How to build value
Source: Kotler and Keller

Understand the marketplace
• Forecast demand
• Conduct market research
• Analyze consumers (consumer behavior, psychological

processes, buying decision process)
• Explore customer value and the value proposition(s)

Forecasting market demand
Definitions
Market demand
Market
potential/
available Market demand
USAGE GAP (Industry level)
Market
forecast
COMPETITIVE GAP
Company’s demand
Company’s
(Company level)
forecast
Market
minimum
Planned
Industry marketing expenditure
expenditure
• The potential market is the set of consumers with a

sufficient level of interest in a market offer. However,
their interest is not enough to define a market unless they also
have sufficient income and access to the product.
• The available market [addressable market] is the
set of consumers who have interest, income, and access
to a particular offer. The company or government may
restrict sales to certain groups; a particular state might ban
motorcycle sales to anyone under 21 years of age. Eligible
adults constitute the qualified available market - the set of
consumers who have interest, income, access, and
qualifications for the market offer.
• The target market is the part of the qualified available
market the company decides to pursue. The company
might concentrate its marketing and distribution effort on the
East Coast.
• The penetrated market is the set of consumers who
are buying the company’s product.
• Market demand for a product is the total volume that

would be bought by a defined customer group in a
defined geographical area in a defined time period in a
defined marketing environment under a defined
marketing program.
• Market’s size: the level of primary demand for the
product class; compare the current and potential levels
of market demand: the market-penetration index. A low
index indicates substantial growth potential for all the firms. A
high index suggests it will be expensive to attract the few
remaining prospects.
• Company demand is the company’s estimated
share of market demand at alternative levels of
company marketing effort in a given time period.
• The company sales forecast is the expected level of
company sales based on a chosen marketing plan and
an assumed marketing environment; sales forecast is the
result of an assumed marketing expenditure plan.
Market sizing
Example
Households 20 million
Trial
Volume Trial Rate 10%
Number of Packages / Purchase 1.1
Trial Volume 2.2 million
+
Triers 2 million
Repeat
Volume Repeat Rate 40%
Number of Packages / Purchase 1.2
Repeats / Repeater 3.0
=
Repeat Volume 2.9 million
Total
Volume 5.1 million
Source: Nielsen
Why so difficult for established player?
The chasm
Relative
% of
customers
Innovators, Early adopters, Early majority, Late majority, Laggards,

Enthusiasts Visionaries Pragmatists Conservatives Skeptics
(2,5%) (13,5%) (34%) (34%) (16%)
Time
Customers want Customers want solutions

technology and and convenience
performance
Boris Durisin
Source: Moore
Example: Sous-vide cooking
Sous-vide cooking exhibits active promotion

by the world’s most reputated chefs
Thomas Keller of the French Laundery published book
“Under Pressure” on sous-vide cooking
Sous-vide cooking provides substantial benefits
• Sous vide is, in important ways, both easier and safer than other
cooking methods. Some of the advantages include ultra-precise
control (and corresponding prevention of cooking errors and waste),
extended hold times, intensified flavor, more efficient usage of labor,
space and ingredients, and the ability to accomplish certain end
results that are impossible with any other approach.
Sous-vide cooking involves an industrial process
“Romantics who complain that sous vide reduces the artistry
of cooking are ignoring the subjective, analog, soulful
decisions that the chef must make … Keller considers
the sense of loss at the diminution of artisanal craft as Time Magazine
technology supplants it.”

Source: http://www.amazon.com/Under-Pressure-Cooking-Sous-Vide/dp/1579653510
Example: sous-vide: Chef Cuisine in France
Innovation Characteristics
Rogers Five Characteristics that Speed Adoption
Relative Advantage
• The degree to which the innovation is perceived as better than the
idea it supersedes.
Compatibility
• The degree to which an innovation is perceived as being consistent
with the existing values, experiences, and needs of potential
adopters.
Complexity
• The degree to which an innovation is perceived as difficult to
understand and use.
Trialability
• The degree to which an innovation may be experimented with on a
limited basis.
Observability
• The degree to which the results of an innovation are visible to
others
Source: Rogers
Adoption of innovation as a social
phenomena
The chasm
Relative
% of
customers

(2,5%) (13,5%) (34%) (34%) (16%)
Time

performance
Source: Moore
phenomena
• Example:
Ugg boots
phenomena
• Example:
Barbour
phenomena
• Example:
Abercrombie &
Fitch
Adoption of innovation as a social phenomena
• Example:
IBM
“No one ever got fired for buying IBM.”

This phrase is often called the most powerful marketing
phrase ever created. In the 1980s, if you had to decide what
computer hardware to buy for your company, these words
rang through your head. It made your buying decision pretty
easy. And, if you were a competitor to IBM, that same
sentence made your job nearly impossible. Your product
could be superior in every way – features, price, warranty, etc
– and you still couldn’t beat IBM.
• Example:
Philips
Examples:
B-to-C
Abercrombie & Fitch
Barbour
Ugg boots
B-to-B
IBM
Philips
Flops
... Mobile TV?!?
B-to-C
Abercrombie &
The chasm Fitch
Relative
Barbour
% of
Ugg boots
customers
B-to-B
IBM
Philips
Flops
... Mobile TV?!?
(2,5%) (13,5%) (34%) (34%) (16%)
Time

performance
Source: Moore
Unit Sales (000)
0
100
200
300
400
500
600
700
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
Sales of Clothes Dryers in France
1991
1992
1993
1994
1995
1996
Boris Durisin
Unit Sales (000)
0
200
400
600
800
1000
1200
1400
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
Sales of Refrigerators in Spain
1986
1988
1990
1992
1994
1996
1998
Boris Durisin
Unit Sales (000)
100
150
200
250
300
350
400
450
500
0
50
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
Netherlands
1982
1984
1986
1988
1990
1992
Sales of Clothes Washing Machines in the
1994
1996
Boris Durisin
Unit Sales (000)
0
500
1000
1500
2000
2500
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
Sales of Microwaves in Germany
1992
1993
1994
1995
1996
Boris Durisin
Unit Sales (000)
0
200
400
600
800
1000
1200
1400
1600
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
Sales of VCRs in Italy
1989
1990
1991
1992
1993
1994
1995
Boris Durisin
Unit Sales (000)
100
120
20
40
60
80
-
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
Sales of Freezers in Norway
1984
1986
1988
1990
1992
1994
1996
Boris Durisin
Boris Durisin
Unit Sales (000)
0
100
200
300
400
500
600
700
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
Sales of Clothes Dryers in France
1991
1992
1993
1994
1995
1996
Boris Durisin
Diffusion and Adoption: Modeling
literature
Demand-side models
• Epidemic, direct contact or imitation of priors
• Bass, adopters consisting of innovators & imitators
• Probit, adopters with different thresholds
• Bayesian, adopters with different perceptions of benefits and
risks
Supply-side models
• Appropriability, emphasizing relative advantage of
innovation
• Dissemintation, emphasizing availability of information
• Utilization, emphasizing reduction of barriers to use
• Communication, emphasizing feedback developer and user
Boris Durisin
Sales Growth Model for Durables (The Bass Diffusion
Model)
St = p × Remaining + q × Adopters ×
Potential Remaining Potential
Innovation Imitation
Effect Effect
where:
St = sales at time t
p = “coefficient of innovation”
q = “coefficient of imitation”
# Adopters = S0 + S1 + • • • + St–1
Remaining = Total Potential – # Adopters
Potential
Source: Bass (1969) Boris Durisin
Parameters of the Bass Model in Several Product
Categories
Innovation Imitation
Product/ parameter parameter
Technology (p) (q)
B&W TV 0.028 0.25

Color TV 0.005 0.84
Air conditioners 0.010 0.42
Clothes dryers 0.017 0.36
Water softeners 0.018 0.30
Record players 0.025 0.65
Cellular telephones 0.004 1.76
Steam irons 0.029 0.33
Motels 0.007 0.36
McDonalds fast food 0.018 0.54
Hybrid corn 0.039 1.01
Electric blankets 0.006 0.24
A study by Sultan, Farley, and Lehmann suggests an

average value of 0.03 for p and an average value of 0.38
for q.
Boris Durisin
Bass Diffusion Model: 3 steps
Use Bass model to identify whether go/no go decision to

be taken (Identification of total demand and time to take-
off)
Steps involved
• Identification of reference product categories to which
you think your new product can be compared
• Identification of “innovation co-efficient” and “imitation
co-efficient” of the reference product
• Apply to your product categories using the Bass Model
equation
Boris Durisin
Generalized Bass Model
– And most of ALL it has a proven reliability:
• Adoption of answering machines:
Adoption of Answering Machines

1982-1993t
14000
12000
10000
8000
6000
4000
2000
0
82 83 84 85 86 87 88 89 90 91 92 93
Year
adoption of answering machines Fitted Adoption
Source: Frank M. Bass

• 35 mm Projectors:
Actual and Fitted Adoption of 35 mm Projectors, 1965-1986,

m=3.37 million, p=.009,q=.173
180000
160000
140000
120000
100000
Units
80000
60000
40000
20000
0
65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86
Year
35mm Proj Fitted

• Maniframe computers:
Generations of Mainframe Computers (Performance Units) 1974-1992
120000
100000
80000
Sales
60000
40000
20000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Year
Gen1 Actual Gen1 Fit and Forecast Gen2 Actual Gen2 Fit and Forecast
Gen3 Actual Gen3 Fit and Forecast Gen4 Actual Gen4 Fit and Forecast

Bass Model: Empirical Generalization: Always
(Almost) looks Like a Bass Curve

Bass Model: Empirical Generalization:
Always (Almost) Looks Like a Bass Curve
Adoption of Color TV
Color TV
7000
6000
5000
Sales (x 1000)
4000
Sales
Predicted
3000 Industry Built
Capacity For
2000
Peak in 14 million units
1968
1000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year

Bass Diffusion Model: 3 steps
Use Bass model to identify whether go/no go decision to

be taken (Identification of total demand and time to take-
off)
Steps involved
• Identification of reference product categories to which
you think your new product can be compared
• Identification of “innovation co-efficient” and “imitation
co-efficient” of the reference product
• Apply to your product categories using the Bass Model
equation
Boris Durisin
Technical Specification of the Bass Model
The Bass Model proposes that the likelihood that someone in the
population will purchase a new product at a particular time t given that
she has not already purchased the product until then, is summarized
by the following mathematical.
Formulation
Let:
L(t): Likelihood of purchase at t, given that consumer has not
purchased until t
f(t): Instantaneous likelihood of purchase at time t
F(t): Cumulative probability that a consumer would buy the product by
time t
Once f(t) is specified, then F(t) is simply the cumulative distribution of
f(t), and from Bayes Theorem, it follows that:
L(t) = f(t)/[1–F(t)] (1)

Boris Durisin
The Bass model proposes that L(t) is a linear function:

q
L(t) = p + –– N(t) (2)
N
where
p = Coefficient of innovation (or coefficient of external influence)
q = Coefficient of imitation (or coefficient of internal influence)
N(t) = Total number of adopters of the product up to time t
N = Total number of potential buyers of the new product
Then the number of customers who will purchase the product at time t
is equal to Nf(t) . From (1), it then follows that:
q
Nf(t) = [ p + –– N(t)][1 – N(t)] (3)
N
Nf(t) may be interpreted as the number of buyers of the product at time
t [ = (t)]. Likewise, NF(t ) is equal to the cumulative number of buyers
of the product up to time t [ = N(t)].
Boris Durisin
Noting that [n(t) = Nf(t)] is equal to the number of buyers at time t,

and [N(t) = NF(t)] is equal to the cumulative number of buyers until
time t, we get from (2):
q
Nf(t) = [ p + –– N(t)][1 – N(t)] (3)
N
After simplification, this gives the basic diffusion equation for

predicting new product sales:
q
n (t) = pN + (q – p) [N(t)] – –– [N(t)]2 (4)
N
Boris Durisin
Estimating the Parameters of the Bass Model Using
Non-Linear Regression
An equivalent way to represent N(t) in the Bass model is

the following equation:
q
n(t) = p + –– N(t–1) [N – N(t–1)]
N
Given four or more values of N(t) we can estimate the three

parameters of the above equation to minimize the sum of
squared deviations.
Boris Durisin
Estimating the Parameters of the Bass Model Using
Regression
The discretized version of the Bass model is obtained from (4):
n(t) = a + bN(t–1) + cN 2(t–1)
a, b, and c may be determined from ordinary least squares

regression. The values of the model parameters are then
obtained as follows:
–b – b2 – 4ac
N = ––––––––––––––
2c
a
p = ––
N
q = p + b
To be consistent with the model, N > 0, b≥ 0, and c < 0.
Boris Durisin
Market sizing
Common methods (for existing markets)

• Trend extrapolation
• Time series analysis
– Trend, cycle, seasonal, and erratic
– Exponential smoothing; statistical demand analysis (impact of
causal factors, such as income, marketing expenditures)
• Regression: Econometric models (also for new markets)
– Leading indicators
– Analogues
Exploratory methods
• Customer and market surveys
– also: survey of buyers’ intentions; composite sales force opinions
• Brainstorming
• Expert opinion: group-discussion method; pooling of
individual estimates: Delphi method
• Scenario development
Boris Durisin
• Forecast demand
• Analyze consumers (consumer behavior,

psychological processes, buying decision process)

Analyze consumers
Stages of the buying process
From a visual perspective, the model looks like the following:
Prepurchase stage Purchase stage
45
Source: Kotler & Keller

Analyze consumers
Consumer characteristics and consumer psychology:

Variables influencing buying decisions
Consumer characteristics and consumer psychology affect buying
decisions:
46

Analyze consumers: consumer psychology
Four key psychological processes fundamentally influence

consumer respones:
• Motivation: Freud, Herzberg, Maslow
• Perception
– Selective attention
– Selective distortion
– Selective retention
• Learning
– Learning (through classical conditioning and operant
conditioning) is produced through interplay of drives,
stimuli, cues, responses and reinforcement
• Memory
– short-term memory and long-term memory
– Memory encoding and memory retrieval 47
Analyze consumers: motivation
Consumer psychology
Motivation refers to consumer’s wants and needs addressed formerly.
A technique known as laddering aims at detecting underlying

motivations in a consumer’s buying decisions:
48
Source: Peter & Olson

Psychological processes : the means-end chain:
Customer value chain: Example from B-2-C: footwear
Financial self-respect Belongingness and
responsibility identity
Friendship
I can spend my
money on other Helps me be self- Makes me happy
things confident
Social acceptance
Conjures up
Improves pleasant memories Wear by people not Not part of my
performance in my group usual look
Saves money
PRODUCT PRODUCT PRODUCT PERSONALITY BRAND BRAND BRAND

Low price Good quality Attributes For basketball lovers Consolidated, well- Fashionable, Recommended
High Tech known Radical by friends
Analyze consumers: perception
Consumer psychology
Perception is the process by which people select, organize, and

interpret information to form a meaningful picture of the world from
three perceptual processes:
1. Selective attention is the tendency for people to screen out most of the
information to which they are exposed.
2. Selective distortion is the tendency for people to interpret information in

a way that will support what they already believe.
3. Selective retention is the tendency to remember good points made

about a brand they favor and forget good points about competing brands.
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Analyze consumers: perception
Consumer psychology
Example: Awareness test.
51
Analyze consumers:
buying decision process
The buying decision process
Problem Recognition
Information Search
Evaluation of alternatives
Purchase Decision
Postpurchase Behavior
52
Analyze consumers:
buying decision process
Buying decision process: stages of decision making
Along this process of decision making, consumers progressively reduce

the number of options they consider for purchase:
53

Analyze consumers:
buying decision process: purchase
Models of decision making
Four models of choice are possible:
1. Fishbein model: In this case, a consumer selects the alternative with the
highest score computed on the basis of all its key attributes weighted for
importance.
2. Conjunctive model: The consumer sets a minimum acceptable cutoff level for
each attribute and chooses the first alternative that meets the minimum
standard for all attributes.
3. Lexicographic model: The consumer chooses the best alternative on the

basis of its perceived most important attribute.
4. Elimination-by-aspects model: The consumer compares brands on an

attribute selected probabilistically—where the probability of choosing an
attribute is positively related to its importance—and eliminates brands that do
not meet minimum acceptable cutoffs.
54
Analyze consumers:
Example: Selecting a laptop
Attributes
Options
Weights (relevance of each attribute):
1. Memory capacity: 0.40

2. Graphics capability: 0.30
3. Size and weight: 0.20
4. Price: 0.10
Minimum cutoff on all attributes: 5 out of 10 55

Analyze consumers:
Example: Selecting a laptop
Attributes
Options
1. Fishbein: • Option A
2. Conjunctive model: • Option B
3. Lexicographic model: • Option C
4. Elimination by aspects model: • Likely to be option B again

56
Value assessment: the VFC function
“Commodities do not exist. It is possible to differentiate every product and service. Contrary to common wisdom, this is easier
in B-t-B markets than in B-t-C markets. “ T. Levitt, Harvard Business School
Functional/Psycho Implicit/Explicit
-socio/Experiential
Value Benefits
for =
Customer
Sacrifices for obtaining the benefits
Information Alternatives
search evaluation Purchase Use Repurchase
• Searching • Elaboration • Procurement • Operating • Conversion
costs costs costs costs costs
• Psychological • Transaction • Maintenance • Psychological
costs costs costs costs
• Learning costs • Dismission
• Depreciation costs
costs
Analyze consumers:
Variables increasing the complexity of decisions
It is largely assumed that the higher the consumer’s involvement, the

more compensatory/complex the decision he/she makes.
Involvement is positively correlated to perceived risks:
1. Functional risk: The product does not meet expectations.
2. Physical risk: The product poses a threat to the physical well-being or health
of the user or others.
3. Financial risk: The product is not worth the price paid.
4. Social risk: The product results in embarrassment in front of others.
5. Psychological risk: The product affects the mental well-being of the user.
6. Time risk: The failure of the product results in an opportunity cost of finding
another satisfactory product. 58
Buying behavior in b2b contexts
Differences
Simplifying, we can identify three main broad

differences between buying behaviors in b2b contexts:
1.Differences in the demand.
2.Differences in the stages of decision making.
3.Differences in the decision making models.
59
Complexity of buying process: Buying
Center
Decision maker
Initiator
Controller/
Approver
Gatekeeper
User Fo
Buyer
Buying behavior in b2b contexts
Differences in the decision making models
Unlike consumer contexts, decisions are always compensatory, and

so complex.
61

Analyze consumer: buying decision
process
Buying decision process: models of decision making
Four models of choice are possible:
1. Fishbein model: In this case, a consumer selects the alternative with the
highest score computed on the basis of all its key attributes weighted for
importance.
2. Conjunctive model: The consumer sets a minimum acceptable cutoff level for
each attribute and chooses the first alternative that meets the minimum
standard for all attributes.
3. Lexicographic model: The consumer chooses the best alternative on the

basis of its perceived most important attribute.
4. Elimination-by-aspects model: The consumer compares brands on an

attribute selected probabilistically—where the probability of choosing an
attribute is positively related to its importance—and eliminates brands that do
not meet minimum acceptable cutoffs.
62
Understand the market place:
analyze consumer
• Who buys our product or service?

• Who makes the decision to buy the product?
• Who influences the decision to buy the product?
• How is the purchase decision made? Who assumes what role?
• What does the customer buy? What needs must be satisfied?
• Why do customers buy a particular brand?
• Where do they go or look to buy the product or service?
• When do they buy? Any seasonality factors?
• How is our product perceived by customers?
• What are customers’ attitudes toward our product?
• What social factors might influence the purchase decision?
• Do customers’ lifestyles influence their decisions?
• How do personal or demographic factors influence the purchase
decision?
63
Source: Kotler & Keller, chapter 6

• Forecast demand
• Analyze consumers (consumer behavior, psychological

processes, buying decision process)

Market research
Objective of the research
Research question
Research approach Research strategy

•explorative
Data collection methods •descriptive
•causal
Data collection
Analysis and interpretation
Types of market research
Classification
Perfect
information
Exploratory Descriptive Causal

research research research
Purely Purely
qualitative quantitative
methods methods
• In-depth interviews. • Panels
• Focus groups. • Survey.
• Projective techniques. • Test markets
• Ethnography. (behavioral methods).
• Extended case studies. • Experiments.
• Immersion techniques. • Time series.
• Grounded theory. • Neuromarketing.
66
Types of market research
Classification
Qualitative Quantitative
Gain understanding of underlying motives; Test hypotheses; generalize from sample

Objective/purpose
explore ill-structured problems. results to the population of interest.
Small sample; unstructured, flexible, data Large sample; numerical values assigned to
Sample/data collection collection involving observation, interviews, subjects’ responses; primary survey data or
and field notes. secondary data.
Continuous as data is collected; analysis

Analysis takes place after all data collected;
Data analysis affects next step in the research; non-
statistical methods used.
statistical analysis.
Develop an initial understanding and/or

Planned outcome Provide a specific recommendation.
description; begin theory development.
Source: Silver et al.

market innovation and consumer insight
Cohen, Harvard Business School case study

“Howard Schultz had started thinking about the
potential coffee market in the early 1980s. He could see
a number of demographic, economic and social
developments were creating new consumer preferences
and enhancing the significance of specific older ones.
As his ideas about the demand side of the specialty

market took shape, he envisioned an offering – ... – that
met these emerging trends.
... [requires] consistent ability to interest, understand,

and emphasize with consumers around the world.”
market innovation and consumer insight
Cohen, Harvard Business School case study

“Howard Schultz had started thinking about the
potential coffee market in the early 1980s. He could see
a number of demographic, economic and social
developments were creating new consumer preferences
and enhancing the significance of specific older ones.
As his ideas about the demand side of the specialty

market took shape, he envisioned an offering – ... – that
met these emerging trends.
... [requires] consistent ability to interest, understand,

and emphasize with consumers around the world.”
Essence:
human insight rather than consumer insight
Customer value and value proposition
• The value proposition consists of the whole cluster of

benefits the company promises to deliver; it is more than
the core positioning of the offering.
– Volvo’s core positioning: “safety,” but more than just a
safe car; other benefits include good performance,
design, and safety for the environment.
• Whether the promise is kept depends on the company’s
ability to manage its value delivery system.
• The value delivery system includes all the experiences the

customer will have on the way to obtaining and using the
offering. At the heart of a good value delivery system is a
set of core business processes that help deliver
distinctive consumer value.
70

Defining marketing
71

Identifying market segments and target
• What are the different levels of market segmentation?
• How can a company divide a market into segments?
• What are the requirements for effective segmentation?
• How should a company choose the most attractive target

markets?
72
Identifying market segments and target
• Companies cannot connect with all customer in large, broad, or diverse

market.
• But they can divide such markets into groups of consumers and
segments with distinctive needs and wants.
• A company then needs to identify which market segments it can serve

effectively. This decision requires a keen understanding of consumer
behavior and careful strategic thinking.
• To develop the best marketing plans, managers need to understand

what makes each segments unique and different. Identifying and
satifying the right market segments is often key to marketing success.
73

Design customer-driven Marketing
Strategy:
Segmenting – Targeting – Positioning
• Market Segmentation:
– Identify and profile distinct groups who differ in their needs and wants
– What are the criteria along which customers make purchase
decisions?
– Describe the profile of the different segments
• Profile of the different competitors for the different segments
– Describe attractiveness of different segments
• Market Targeting
– Select specific segments to target/one or more segments to enter
– Justify your choice
• Market Positioning
– Provide positioning statement
• For (target market), (brand) is a brand of (consumer’s frame of reference)
that offers (benefits) and is different when compared to (main competitors)
because (reason why)
– Identify POD, POP for the specific segments selected to target
Marketing strategy: The STP-approach
Segmenting Targeting Positioning
• Identify some • Evaluate the relative • Define a desired

criterion based on attractiveness of positioning of the
which the market of each segment product in the mind
potential customers of the consumer
can be split into
– Absolute
homogeneous • Choose one or
sub-groups several segments – Relative to other
as target products
• Analyze the profile of
each segment
Adapt marketing mix (product, price, promotion, place) to

the needs, tastes and values of the target segment(s) in
75
order to achieve/ support desired positioning
Segmenting
Segmentation divides the market into useful sub-units of similar

consumers based on:
– Demographic/Geographic
– Psychographic
– Behavioral
76
Segmentation:
Segmentation criteria
Descriptive Psychographic Behavioral

criteria criteria criteria
• Geographic • Lifestyle and Values • Needs to be satisfied

– Country – Dynamic
– Region – Altruistic • Purchase occasion
– Habitat (urban – rural) – Hedonistic
– Climate – … • Importance during
– …
purchasing process
• Personality
• Demographic characteristics
• Consumption occasion
– Age – Ambition
– Gender – Authority • Degree of loyalty
– Income – Generosity
– Lifecycle – … • …
– Socio-economic status • Motivations
– …
• Physical characteristics
– Weight
– Height
– Hair type
– …
77
Segmenting: Developing measurement instrument
Criteria Common segmentation variables
Demographic segmentation -Age and life cycle

-Gender
-Size of family and family lifecycle
-Income and Job
-Education
-Generation
-Social class
-Race and Culture
Geographical segmentation -Climate
-Region
-Size of town
-Population density
Psycho-graphical segmentation -Social class and attitude

-Life-styles
-Personality
78
Segmenting: Developing measurement
instrument
Criteria Common segmentation variables
Segmentation according to behaviour -Decision roles

-Opportunities to use the product/brand
-User status (non user, ex-users, potential user,
first-time user, regular user)
-Frequency of product use/occasions (temporal
aspects: day, week, month, year)
- Usage rate (ligh, medium, heavy)
- Buyer-readiness stage
-Loyalty status (switchers, shifting, split, hard-
core)
-Purchase intention against information search
Segmentation according to the benefits Needs and benefits
sought -Importance of the place of use
-Perceived benefits of use of product
-Perceived benefits of use of brand
Source: Lilien and Rangaswamy; Kotler & Keller

The ex ante approach
Selection of segmentation criteria Age, gender Example: Chocolate market
Analysis Age Gender
9-15
Customer profiling, by
15-25 Male, female
grouping customers according 25-45
to the criteria 45+
9-15: taste, fun 15-25 M: variety

Analysis of benefits sought by 15-25: variety 15-25 F: diet
each group 25-45 : health sensitivity
9-15: partnership with Disney

15-25 M: increase product variety
Designing marketing mix 15-25 F: change ingredients
25-45: change ingredients
80
The ex ante approach: advantages and
disadvantages
Advantages
– Uses available information, less expensive compared
to ad hoc marketing researches
– Can be easily transformed in operative
recommendations
Disadvantages
– Secondary data are might not be available
– Sought benefits are deducted from ex ante criteria and
not directly observed into the market
81
The ex post approach
Methodological steps
Identifying main benefits that
customers might seek for Building a complete list of benefits
through a quantitative market research
Group similar customers

Cluster analysis
according to similarity
of benefits
Describe market segments

according to ex ante variables Customer profiling
Designing a marketing mix
82
Ex post approach: Benefit segmentation:
advantages and disadvantages
Advantage
– Provides a clear picture of the benefits sought by
different group of customers
Disadvantag
– Requires ad hoc researches
– Customer intentions may be different from customer
actual behaviours
83
Segmentation: Psychographic criteria
In psychographic segmentation, buyers are divided into

different groups on the basis of
• social class and attitude: psychological/ personality traits,
• lifestyle, or
• values.
People within the same demographic group can exhibit very

different psychographic profiles.
How do our customers view our brand?

Which brand do they perceive to be close competitors?
What attributes responsible for perceived differences?
84

Ex-post approach: Attitudinal: Perceptual
Maps: Comparing attributes
Heavy Popular
Full Bodied Heavy with Men
Special
Occasions
Blue Collar Dining Out Premium
Good Value
Budget Premium
Popular
Pale Color with
Women
On a
Budget Light Less Filling 85
Light
Ex-post approach: Attitudinal: Perceptual
Maps: Comparing brands
•
Old Milwaukee Budweiser
• Beck’s •
Meister Brau • Heineken
• Miller •
•
• Coors
Stroh’s
• Michelob
•
Miller • Coors
Light
• Lite
Old
Milwaukee Light 86
Perceptual map
Example: Perceptual and preference maps in the soda market.
87
Segmentation: Behavioral criteria
The task is to define segments by looking at behavioral

considerations, such as consumer responses to benefits,
usage occasions, or brands.
Next, it is analyzed whether different characteristics are

associated with each consumer-response segment.
For example, do people who want “quality” rather than “low

price” in an automobile differ in their geographic,
demographic, and psychographic makeup?
In behavioral segmentation, marketers divide buyers into groups

on the basis of their knowledge of, attitude toward, use of, or
response to a product.
88

Segmentation
Trade off between descriptive and behavioral criteria.
89
Segmentation
Behavioral criteria (direct): With reference to the consumer

usage, marketers can employ a marketing funnel to break down the
market into different buyer-readiness stages.
90

Segmentation
Behavioral criteria (direct): Combining different behavioral bases

provides a more comprehensive view of a market and its segments.
91

Segmentation
Demographic segmentation
Cross tabulation
Psychographic segmentation
People within the same demographic group can
exhibit very different psychographic profiles
Perceptual map: AR
Factor analysis + Cluster analysis
Perceptual map: OS
MDS
Behavioral segmentation
define segments by looking at behavioral
considerations and analyze whether different
characteristics are associated Cluster analysis 92

Targeting: Criteria
How to select target groups
To be useful, market segments must rate favorably on five criteria:
1. Measurability: The size, purchasing power, and characteristics of the

segments can be measured.
2. Substantiality: The segments are large and profitable enough to serve. A

segment should be the largest possible homogeneous group worth going
after with a tailored marketing program.
3. Accessibility: The segments can be effectively reached and served.
4. Differentiability: The segments are conceptually distinguishable and

respond differently to different marketing-mix elements and programs. If
married and unmarried women respond similarly to a sale on perfume,
they do not constitute separate segments.
5. Actionability: Effective programs can be formulated for attracting and

serving the segments.
93
Targeting: strategies
P1 P1 P1
P2 P2 P2
P3 P3 P3
M1 M2 M3 M1 M2 M3 M1 M2 M3
Single-segment Product Market

concentration specialization specialization
P1 P1
P2 P2
P3 P3
M1 M2 M3 M1 M2 M3
Selective Full market coverage

Specialization
• undifferentiated marketing
P: Product
• different marketing
M: Market
Target segments: “persona”
(a) Identify the key criteria to segment your market and suggest what
segments should be targeted (distinguish between main target and
secondary targets)
(b) Moving from the main target group you suggested, develop a deep
knowledge of this target and elaborate the profile of an archetypical
consumer belonging to this target (“persona”)
(c) For this persona, develop his/her typical consumer journey by

pointing out all key moments that matter: (i) for the purchase and
shopping moment of air purifiers; and, (ii) more broadly, for his/her
typical day.
Note: While identifying and describing this persona’s typical day, take into
account also how he/she uses the offering (where, with whom, when, what
he/she likes and don’t like, etc.)
95
Segmentation and personas
Example: Diana.
97
Segmentation and personas
Example: Mary Lou.
98
100
101
Product/Brand Positioning
• “Positioning refers to placing a brand in that

part of the market where it will have a favorable
reception compared to competing brands”
Subash Jain
• “A product’s position is the place the position
occupies in consumers’ minds relative to
competing products.”
Philip Kotler
For (target market), (brand) is a brand of

(consumer’s frame of reference) that offers
(benefits) and is different when compared to (main
competitors) because (reason why)
For [a target segment], the [concept] is [the
primary claim] because [it is the single most 10
important factor]. 2
Brand positioning components
• Key components to a superior brand positioning

– Brand mantra: articulation of heart and soul of the
brand (“brand essence”; “core promise”)
• What the brand is and what it is not
• Criteria: communicate, simplify, inspire
– Internal brand mantra; Nike “authentic athletic
performance”
– External brand slogan; Nike: “Just do it”
– Points-of-parity/points of difference: pop, pod
• Points-of-parity: Category, competitive
• Points-of-difference: strong, favorable, unique
– Substantiators: reason-to-believe (RTB)
• Attributes and benefits that provide factual or
demonstrable support for pop and pod
– Values, personality, character; visual identity 103
Starbucks’ bull’s eye
Consumer
takeaway:
Consumer
Starbucks gives
target:
Values/Personality/Character me the richest
Discerning possible
coffee drinker sensory
Substantiators experience
Consumer caring Stock options/ Thoughtful drinking coffee
insight: 24-h training of health benefits
Coffee and the baristas for baristas
drinking exp. Is Points-of-parity
often
unsatisfying Responsible, Fairly priced
locally involved
Brand
Mantra
Totally
integrated Relaxing, Rich, Rewarding Fresh Triple
Consumer system rewarding coffee high-qual. filtrated
need state: moments Rich experience Varied,
coffee water
sensory
Desire for better Convenient, exotic
cons. exp
coffee and a frielndly coffee
Green & drinks Siren
better cons. service
earth
exp.
colors
Points-of-difference logo
Competitive
product set:
Local cafés, fast- 104
food rest. & Executional properties/visual identity
convenience shops
Types of associations: primary and
secondary
Characters
Spokespersons (licensing)
(testimonials)
Other sources
Country of Attributes (ex. Awards, AOC/DOC)
Benefits
Origin/
territory
PRIMARY Values
Competitors Company
BRAND
Product
category Usage occasion
Target
customers
Distribution Other brands
channels (co-branding)
SECONDARY Events
Source: Kotler & Keller, Global Edition, Chapter 9: Crafting brand equity: Leveraging secondary associations (p. 252 – 253)
Dove + Apple
Dove
Dove evolution
https://www.youtube.com/watch?v=iYhCn0jf46U
Beauty pressure
https://www.youtube.com/watch?v=Ei6JvK0W60I
Dove True colors
https://www.youtube.com/watch?v=tUA8PvLsZgU
Apple
1984
https://www.youtube.com/watch?v=2zfqw8nhUwA
Think different
https://www.youtube.com/watch?v=SswMzUWOiJg
iPhone « hello «
https://www.youtube.com/watch?v=mmiWTKZzBLY
Microsoft redesigns iPod
https://www.youtube.com/watch?v=EUXnJraKM3k
106
Repositioning
Why reposition?
• Competitors position next to you

• Consumer preferences changed
• New consumer preference cluster
• Original mistake
• Repositioning among existing customers
• Repositioning among new users
• Repositioning for new uses
10
7
Starbucks: Delivering customer service
case questions
1. What is the problem?

a) What factors accounted for Starbucks success in the early 1990s?
b) How did Starbucks, its customer base, related consumption patterns and brand
perceptions present themeselves in 1992 and evolve over time?
2. How could this happen?
a) What has changed over the priod 1992-2002? How did the firm contribute to
the new situation?
b) How does Starbucks acquire customers in 2002?
c) What are the implications? What are the effects on customers’ perceptions of
their experience?
d) How does Starbucks define the customer service? What happened to its scores
in its customers service metrics?
e) Did its service decline? Are there other reasons to consider? Is it possible for
such a (mega-)brand to deliver customer intimacy? Should strive for Starbucks
customer intimacy?
3. How to fix the problem?
a) What is that Starbucks has to deliver to address the problem?
b) Should it make the $40m investment in labor in the stores? What are the
economics of the investment? 10
8
Branding – key terms
› Brand Name
› Brand Identity
› Branding
› Brand Contact
› Brand Equity
› Brand Knowledge
› Brand Promise
› Brand Architecture
› Brand Vocabulary
› Brand Community
Brands
Building strong brands
Keller’s brand pyramid model:

Brand value management processes
Defining Building Managing Measuring

brand brand brand brand
positioning positioning positioning performance
Brand Building through ... over time • Financial

marketing performance
programs • Market
performance
• Identity • Product • Brand • Consumer
reinforcement performance
• Values • IMC
• Elements • Pricing strategy
• Primary • Sales & • Brand
assoc. Distribut. revitalization
strategy
• Secondary
assoc.
Branding
First step:
• An introduction
• The value of brands
• Essentials of strong brands
• The brand report card
• Pitfalls of brand positioning
Next steps:
• Brand architecture
• Brand touchpoints
• Brand extension
Brand Architecture: Relationship Spectrum
Source: Aaker and Joachimsthaler

Defining the branding strategy
Designing a brand hierarchy and brand strategy involves decisions related

to the following:
1. The number of levels of the hierarchy to use in general
2. Desired brand awareness and image at each level
3. How brand elements from different levels of the hierarchy are
combined, if at all, for any one particular product
4. How any one brand element is linked, if at all, to multiple products
The following discussion reviews these decisions and can be summarized in

terms of five guidelines that assist the design of brand hierarchies:
1. Decide on the number of levels.
– Principle of simplicity: Employ as few levels as possible.
2. Decide on the levels of awareness and types of associations to be
created at each level.
– Principle of relevance: Create abstract associations that are relevant across
as many individual items as possible.
– Principle of differentiation: Differentiate individual items and brands.
3. Decide on how to link brands from different levels for a product.
– Principle of prominence: The relative prominence of brand elements affects
perceptions of product distance and the type of image created for new
products.
4. Decide on how to link a brand across products.
– Principle of commonality: The more common elements shared by products,
the stronger the linkages.
The touchpoint wheel
Factors Influencing Brand Extension
Because brand extensions reduce consumer risk and

significantly lower the cost of introductory marketing
programs, they have become the predominant new
product strategy.
Brand extension can be a double-edged sword
4 factors positively influence the success of a brand

extension:
– Similarity
– Reputation
– Perceived risk in buying a durable good
– Innovativeness
Defining marketing
117

Core concepts: 4Ps
Marketing: 4Ps of Marketing
Product
• Not aligned with the market requests
Promotion
• Limited/incorrect communication of offering
Placement
• Non-presence in parts of the distribution channels
Price
• Too high for a certain segment of the market
Product Management
Marketing research
Strategic
marketing
Product Place
management Management
Price Promotion
management management
Product Management is one of the four marketing mix tools

(P=Product): Product is the first and most important element of the
marketing mix. Product strategy calls for making coordinated decisions
on product mixes, product lines, brands, and packaging and labeling. 119
Source: Kotler & Keller, Global Edition, Chapter 12: p. 349
Introducing value
Customer value defined
Customer perceived value thus emerges from the comparison

between:
Total customer benefit Total customer cost
Product benefit Monetary cost
Services benefit Time cost
Personal benefit Energy cost
Image benefit Psychological cost
120

Bowling-Alley
121
Conceptualizing products
Key product decisions
Product management implies lots of decisions. Among them, we

develop the followings:
1. Pursuing differentiation.
2. Setting the optimal product range-length.
3. Product packaging.
122
Conceptualizing products
Augmented product
From core benefit to augmented or potential product
123
Levels of product hierarchy
Need family – core need: existence of product family

Product family– to satisfy a need
e.g. feet protection
Product class – a family of products with similar function
e.g. all shoes
Product line – a group of products with closely related
functions
e.g. sports shoes
Product type – products within a line with similar form
e.g. basket-ball shoes
Brand – a name representing a product or line
e.g. Nike
Item (SKU – Stock Keeping Unit) – a unit item
e.g. one pair of Nike basket-ball shoe
124
Source: Kotler & Keller, Global Edition, Chapter 12: Product and Brand relationships (p. 355 – 368)
Product systems and mixes:
Product range/assortment
The product range (also called product mix or product assortment)
is the totality of all products within the same product category sold
by the same company
The product range consists of several product lines
– Width: Number of product lines
– Length: Number of items in the product mix
– Depth: Number of references/variants of each product in the line
The consistency of the product mix describes how closely related

the various product lines are in end use, production
requirements, distribution channels, or some other way.
125
Source: Kotler & Keller, Global Edition, Chapter 12: Product and Brand relationships (p. 355 – 368)
Product packaging
• Packaging includes all the activities of designing and producing the container for a product.
Three layers: Cool Water cologne comes in a bottle (primary package) in a cardboard box
(secondary package) in a corrugated box (shipping package) containing six dozen bottles
in cardboard boxes.
• The package is the buyer’s first encounter with the product. A good package draws the
consumer in and encourages product choice. In effect, they can act as “five-second
commercials” for the product.
Communication function Technical function
• Create differentiation • Protect and preserve product

(Awareness)
• Facilitate transportation and stock keeping
• Transmit brand/ product codes
(Recognition) • Facilitate positioning of product in the shelf
• Support positioning and branding • Facilitate product usage

strategy
• Sustainable development/ Recycling
• Transmit legal and use information
126
Source: Kotler & Keller, Global Edition, Chapter 12: Packaging, Labeling, Warranties (p. 346 – 350)
Product lifecycle
Relevance of the model
Product typically evolve along a ‘natural’ lifecycle:
Utility
Anticipate sales evolution and adapt the

marketing mix accordingly.
Create and maintain a balanced product

portfolio.
Limits
Diversity of lifecycle forms.
Difficulty to position focal company

in real-time.
Endogeneity - Does lifecycle determine127

marketing mix or vice versa?
Product lifecycle
Marketing management along stages
Product life-cycle impacts the way products are to be managed:
Introduction Growth Maturity Decline
Industry structure: Industry structure: Industry structure: Industry structure:
Low competition Increasing competition Selection competitors Abandonment

Low volumes Increasing volumes Max volumes Decreasing volumes
Negative profits Max profits Decreasing profits Marginal profits
Mktg mix: Mktg mix: Mktg mix: Mktg mix:
Indifferentiated pdt Differentiated products Product fine-tuning Assortment reduction

Ongoing innovation Segmentation International markets Selection of retailers
High prices Decrasing prices Price differentiation New distribution
Salesforce training Extensive distribution Global distribution channels (outlets)
Communication Communication to Communication on new Low communication
investments induce loyalty uses and investments
Aggressive promotions Sampling improvements Special offers
Innovators and early Early majority Late majority Laggards 12

adopters 8
Market development strategies: the
different options
Increasing Identifying
purchased new modes of
Increasing quantities usage
penetration on
current customers Identifying
Increasing new modes of usage
usage within new
frequency occasions of usage
Multi-channel
Market Innovating management
development the value
strategies proposition
Entering
Broadening the new segments
customer base through
product/brand
repositioning
Brand
extension 129
Marketing: 4Ps of Marketing: Product
• Product:
– What are the characteristics/attributes that are attractive for
the select target segment?
– Customer value: what are benefits (functional, emotional,

explicit, implicit)? What are sacrifices (when recognizing the
problem, searching for information, evaluating alternatives,
purchase, post-purchase)?
– Product choice: quality, design, features, assortment,

warranties, returns, packaging, design, etc.
– Product attributes for innovators segment? Product attributes

for early adopter segment? Outline of “Bowling-Alley”?
– What is the minimum viable product (i.e., the product with
the fewest number of features and target segment customers
are willing to pay)?
Setting a product strategy
• Product characteristics and classifications

– Product levels: The customer-value hierarchy
– Product classifications
• Product and Services Differentiation
– Product differentiation
– Services differentiation
• Design
• Product and Brand relationships
– Product hierarchy
– Product systems and mixes
– Product line analysis
– Product line length
• Packaging, labeling, warranties, and guarantees
131

Competitive Dynamics
• Competitive Strategies for Market Leaders

– Expanding total market demand
– Protecting market share
– Increasing market share
• Other Competitive Strategies
– Market-challenger strategies
– Market-follower strategies
– Market-nicher strategies
• Product Lifecycles Marketing
– Strategies
• PLC; Style, Fashion, Fad Life Cycles; Evidence for the PLC
concept; Critique of the PLC concept; ...
– Marketing in a Downturn
132

Promotion Management
Marketing research
Strategic
marketing
Product Place
Price Promotion
Promotion Management is one of the four marketing mix tools

(P=Promotion): For most marketers, the question is not whether to
communicate but rather what to say, how and when to say it, to whom,
and how often. 133
Source: Kotler & Keller, Global Edition, Chapter 14

The changing marketing communications
environment
Marketers must be creative in using technology but not intrude in

consumers’ lives.
• During 90 min walk in city, 250 ads of 100 brands
• Commercial clutter is rampant. The average city dweller exposed to

estimated 3,000 to 5,000 ad messages a day.
• 60 percent and 70 percent of DVR owners fast-forward through commercials.

Research shows that while focusing on an ad in order to fast-forward
through it, consumers actually retain and recall a fair amount of
information.
135
“big idea” vs “path-to-purchase”
“agility” or “path-to-purchase”
… reflects the recent explosion of ‘big data’, the
rise of new platforms, and technology-driven
market disruption.
Social media and mobile technologies offer the
ability to respond in real-time, so the
consumer now expects businesses to react
immediately. These technologies are
transforming markets, putting huge pressure
KitKat example
on brands to keep up with consumer
preferences, shifting media habits and
increasing willingness to engage directly.
A word of caution:
“Be wary of diluting your brand values and core
messaging through the inconsistent communications of
a purely agile approach, for the sake of appearing at the
forefront of market trends.” 136
Source: BWP Group, 2015

http://www.thedrum.com/profile/bwp-group/news/207217/agility-vs-big-idea
The role of marketing communications
Marketing communications are the means by whith firms

attempt to inform, persuade and remind customers –
directly or indirectly – about the brands they market.
Market communications represents the ‘voice’ of the
company and its brands and are ways in which it can
establish a dialogue and build relationships with
customers.
• The role of marketing communications
• Developing effective comunications
• Deciding on the marketing communications mix
• Managing the integrated marketing communications mix
Source: Kotler & Keller: Chapter 17

Managing mass and personal
communications
Marketing communications are the means by whith firms attempt to

inform, persuade and remind customers about the brands they
market.
• Developing and managing an advertising program
• Deciding on media and measuring effectiveness
• Sales promotion
• Events and experiences
• Public relations
• Direct marketing
• Interactive marketing
• Word of mouth
• Designing and managing the sales force
Source: Kotler & Keller: Chapter 18 and chapter 19

Marketing communication mix: A
classification: digital/interactive perspective
Activities to be performed:
• Social media
• Social networks
• Customer collaboration
• Brand communities
• Referral programs
• Viral marketing
• Experiential marketing
• Influencer Marketing
• SEM
• User generated content
• Buzz marketing
Marketing communication mix: A classification:
digital/interactive perspective
• own media (Please note: always on)
– website, brochure, (temporary) retail store, microsite,
community, facebook fan page, mobile App; Search SEO
• paid media (Note: partly always on, partly campaign)
– Advertising; Search SEM
– Direct Marketing
– Personal selling
– Events and Experiences
• earned media (Please note: always on)
– PR and publicity and word-of-mouth marketing: user
reviews: References to our company on publications,
conferences, seminare and from bloggers and on social
media: facebook, twitter, YouTube, Flickr, blogs, forums
Basic thinking: earned media have strongest impact
Promotion/Advertising management
The advertising management process includes several stages:

1. Identifying the target audience
• potential buyers of the company’s products, current
users, deciders, or influencers, and individuals, groups,
particular publics, or the general public
2. Specifying the objectives
• Establishing category need, brand awareness, brand
attitude, brand purchase intent
3. Setting the budget
• affordable method, the percentage–of–sales method, the
competitive–parity method, and the objective-and-task
method
4. Defining the advertising strategy
• Message strategy (what to say), creative strategy (how to
say it), message source (who to say it)
• Brief
Promotion/Advertising management
The advertising management process includes several stages:

5. Designing the ad (copy strategy)
• Consumer benefit, body copy, pay-off, tone and manner
6. Selecting the media (media planning)
• Reach, Frequency, Impact: GRP: R*F
• Macroscheduling; microscheduling : concentrated,
continuous, intermittent
7. Implementing the campaign: timing, geographical
• continuity, concentration, intermittent (flighting, pulsing)
• geographical: ADI, ADM
8. Evaluating the performance
• communication-effect: copy testing, pre and post
• sales-effect: share of voice, of mind and heart, of market
• Share of market: competitors’ share of target market
• Share of mind: “name me the first company that comes to mind in this industry”
• Share of heart: “name the company from which you would prefer to buy the product”
10 questions to select right agency
1. How are you going to measure results?

2. Which media are the best to reach my target audience?
3. How well do you know my business sector?
4. .Who will be working on my account?
5. .How long with it take you to achieve results?
6. How will you define the contract period?
7. How much do your charge for specific services?
8. What is your social media experience?
9. What level of involvement do your need from me?
10. .How will you be communicating with me?
Source: Proper Propaganda

Marketing communications
Types of aims
Differentiate
To position a brand so that it is perceived to be different to its competitors.
E.g. to establish brand recognition.
Inform
To make customers aware of a brand’s existence or attributes.
E.g. to establish a category need.
Reinforce
To remind or reassure customers about a brand.
E.g. to reinforce brand awareness and brand recall.
Persuade
To encourage customers to behave in particular ways.
E.g. to modify attitudes, intentions, and behaviors.
144
Types of aims
Micromodels of marketing communications assume the buyer passes through

cognitive (learn), affective (feel), and behavioral (do) stages.
Yet, the order may change according to each case’s specificities.
145
Models of communication
Three main models emerge from both marketing literature and

managerial practice:
1. Linear model of communication.
2. Two-way model of communication.
3. Interaction model of communication.
146
1. Linear model of communication: A source-receiver frame.
Focus on
interpretation
Single source
147
Source: Elaborated upon Schramm (1995) and Shannon and Weaver (1962)
2. Two-way model of communication: A source-influencer-receiver

frame.
Focus on
diffusion
Multiple sources
Hierarchy in
sources
148
Source: Fill (2006)

Communication mix
Marketing communications comprise four key elements:
Two main types of content:
1. Information based messages

Use factual, rational content, often
featuring a product’s key
attributes. This style is often used
where the audience experiences
high involvement.
2. Emotional based messages

Use sensory, lifestyle and values
based content in order to provoke
an emotional response. This style
is often used where an audience
experiences low-involvement.
149
Tools
Mix of possible tools
As seen, these are the possible key communication tools:
Six core tools (Communication platforms):
Above-the line
1. Advertising communication (ATL)
2. Sales Promotion
3. Public Relations
Below-the- line
4. Direct Marketing communication (BTL)
5. Personal Selling
6. Others 150
Tools
How to select the right tools
Seven criteria help judge the pros and cons in the mix:
151
Media
Communication mix
As seen, six main types of media are possible:
Six main classes of media:
1. Broadcast
2. Print
3. Outdoor
4. Digital
5. In-Store
6. Other
152
Planning
Key decisions
The process of marketing communications planning covers the

following main decisions:
1. Target audience: Who should receive the messages?
2. Content: What the messages should say?
3. Positioning: What image of the organisation/brand receivers are expected

to retain?
4. Budget: How much is to be spent establishing this new established image?
5. Communication mix: How the messages are to be delivered?
6. Call to action: What actions the receivers should take?
7. Control measures: How to control the whole process once implemented?

153
8. Results measurement: What was achieved?

Defining marketing
154

Place Management
Marketing research
Strategic
marketing
Product Place
Price Promotion
Place Management is one of the four marketing mix tools (P=Place):

Distribution is one of the four marketing mix tools (P=Place): it includes
the specific functions that the marketing organization performs to
implement the marketing strategy/marketing plan, with respect to the 155
delivery of products and services to the final consumer.
• Sanjeev is an Indian chef and entrepreneur. Kapoor stars in the longest
runningTV show of its kind in Asia; it broadcasts in 120 countries and in
2010 had more than 500 million viewers.
• In 2013 he hosted and judged the show, Sanjeev Kapoor Ke Kitchen
Khiladi, which went on air on 16 September 2013 on Sony India.
• He was a celebrity judge on Master Chef India.
• He states
– For years I have done my shows and written my books with just one thought in
mind - to empower the woman by enabling her to cook better. But, apart from the
recipe a very important element in cooking well is the quality of your kitchen
appliances, the cookware you use and the tools you have to enable you to cook
tasty and healthy food more conveniently.
– In order to promote healthy yet tasty cooking, I am getting world's finest
cookware, appliances, bakeware and kitchen tools for you through Wonderchef.
• Sanjeev Kapoor & Wonderchef
• Wonderchef brings you world class cookware, bakeware, kitchen tools,
etc. Wonderchef products are designed for the Indian kitchen and Indian
food habits and are sold to Indian customers across 3500 towns and
cities through Premium Retail, Television Marketing, Internet, and via a
dynamic channel of over 15000 Self-employed, motivated & trained
women.
Different channels – different profitability
levels for the different operators
100% 0 0 0 0 0
10
90% 20
15
20 20
15
30
80% 40 40
35
30
70% 20
35
15 15
35
60% 15
20
15
5
10 10 10 10 10
50%
40% 15 15 15 15 15 15 15 15 15 15
Consumer (discounts)
30% Channel margin
20% 35 35 35 35 35 35 35 35 35 35
10% Manufacturer margin
0% G&A
COGS
Going to market:
the case of Canon (BS & CI divisions)
Going to market:
the set of available options
Customers and Prospects
Direct Agents / Value-Added Advertising& Tele- Internet

Sales Force Distributors / Partners Promotion / Channels
Retailers Direct Mail
Direct Indirect
Sales Force Options Non-Sales Force Options
Portfolio of Channel Participants
Company
Going to market
& the marketing strategy
Question 1: What is the best way to segment the market?
Question 2: What channel activity is required for each

segment?
Question 3: What portfolio of channel participants should

perform the channel activities?
Question 4: How should the channel be designed? Should

we use a direct or an indirect sales force?
Going to market: two key choices
1. Internal organization of distribution  What

kind of sales force
– It depends on:
• Related costs
• Level of service to the point of sales
2. External organization of distribution  What

kind of channel and channel management
policy
– It depends on:
• Channel profitability
• Product image perceived by the final customer
Distribution:
Three actors – Three types of Marketing
• Co-management of logistics and merchandising
• Co-promotion
• Co-management of the brand
• IT systems for automated information exchange
Marketing Mix
Trade
Marketing/
Producer Distributor
Category
management
Retailing Mix
• Product • Assortment
• Price • Price
• Promotion • Communication
• Place • Set-up
+
Consumer • Service
• Physical support
164
Trade marketing decisions
Sell-in
• Terms and Conditions: List price; payment conditions; discounts on
payment conditoin
• Discounts: Discounts within invoice (discounts on volume, discounts on
logistical support); discounts outside of invoice (incentives, awards)
• Canvass (una tantum related to specific actions)
• Trade promotions: training session, consulting services, IT support
• Listing fee
• Special packaging formats
Sell-out
• Merchandising
• Category management and space allocation
• Promotions and in-store communication: Sampling; coupons; bi-pack: 2 for
1; complementary products (razor-blade); point-of-purchase
communication material for events; Direct marketing; Promoter
• Logistics: simplified delivery
Example: French Retail market
Characteristics of the French Trade

• 7 retailing groups and 10 000 suppliers; consequently, «Loi de
Modernisation de l’Economie» - LME (Economy Modernization Law) 2008
• Manufacturers / suppliers have to sign a yearly “Convention Unique
Annuelle” (Legal Annual Agreement), specifying responsibilities
between the Manufacturers and the Retailers / Distributors. It includes:
• The “Conditions Générales de Vente” (General Sales Conditions). It
must include the following elements: The Sales Conditions («conditions de
vente»), the Retail Selling price («prix de vente»), the Price list («tarif»), the
Discounts («réductions de prix»), the Payment terms («conditions de
règlement»).
• The “Conditions Particulières de Vente” (Specific Sales Conditions),
which are specific for each retailer. The breakdown can be : 20% of
“Coopération commerciale » + 10% of “Specific Sales Conditions” (CPV).
The CPV (e.g. – 10%) must appear on the invoice. The CPV must be very
precise: they compensate for different services and objectives that the
retailer commits to such as: Objective of growth (business plan), turnover,
growth, etc.
Source: Board Bia, Irish Food Board, 2010
Example: French Retail market
Example based on characteristics of the French Trade
Retailing Selling Price (RSP) 100

VAT 5,5%
List price [15%] 80

Discount delivery to depot 5% 76
Specific sales conditions (CPV) 15% 64,5
3x net Price 64,5 ht
Revenues/unit for Retailer: 94,8

Margin/unit to Retailer : 30,3
Source: Board Bia, Irish Food Board, 2010

Barilla example
Barilla
• Barilla S.p.A. (Barilla G. e R. Fratelli Società per Azioni) is an Italian and
European food company. The company was founded in 1877 in Ponte Taro,
near Parma, Italy by Pietro Barilla.
• The company is privately held, and remains in the fourth generation of Barilla
family ownership and control.
• It offers pasta, ready-made sauces, and bakery products, such as biscuits,
toasted bread, cereals, snacks, pastries, soft bread, brioches, power snacks,
cakes and crisp bread.
• It has 20 brands and sales over €3.5bn in 2013.
• Its slogan is "Dove c'è Barilla c'è casa" (Where there is Barilla there is a
home).
• In New York, it set up directly operated restaurants: barillarestaurants.com
Barilla in France
• In France, its turnover is over €500m; it’s the second most important market
after Italy. Barilla is market share leader in whole weat and short pasta.
• Barilla employs in France about 1.400 persons.
Barilla example
Example “plat préparés” in France Barilla has launched what it calls

“Italian-style entrées” in the U.S.
RSP 100 €3,70 or “plat préparés” in France.
VAT 5,5% The consumer has just to peel back
the film (to dotted line) from
pack; microwave the product for
List price [15%] 80 €2,80 1 minute; hold left side of tray
Discount delivery 5% 76 and sauce cup, slowly peel back
CPV 15% 64,5 film to remove; and pour the
sauce on pasta, stir it to enjoy
the meal.
3x net Price 64,5 €2,40 ht
In France, they promoted it under
slogan “Le meilleur de la cuisine
italienne sans cuisiner”, i.e. “the
best of Italian cusine without
cooking” and in the US they
affirm that you can “savor a Chef
Quality Italian Ready to eat meal
http://www.barilla.fr/produits/plats_prepares/index.htm
in 60 seconds”
http://www.barilla.com/aggregator/product/1304
External organization of distribution
Placement: Distribution
– Marketing channel: Sales, delivery, service channel
– Channel flows: Forward flow: Physical flow, Title flow,
Promotion flow; Backward flow: Payment flow, Information flow
– Type of intermediaries: merchants, agents, facilitators

– Direct, short, long channel
– Number of intermediaries: Intensive distribution versus

selective (or exclusive) distribution
– Push versus pull strategy
– Individual channels vs vertical marketing systems

– Hybrid grid
Distribution channels
Functions
Therefore, within channels various flows occur: physical, transfer of

ownership, financial, informational, and promotional.
Example: The Forklift Trucks flows.
171
Source: Kotler and Keller (2012)

Typologies of channels: b2c
They range from direct (0-level) to indirect channels.
172

Typologies of channels: b2b
They also range from direct (0-level) to indirect channels but

intermediaries differ.
173

Hybrid grid:
Matching Tasks to channels, by segment
Presales
Generation
Post Sales
Tasks
Service
Qualify
Mgmt.
Close
Sales
Sales
Acct.
Lead
Channels
National Acct.
Mgmt. Big
Direct Sales
Medium
Telemarketing
Small
Direct Mail
Retail Sales
Distributors
Dealers/ VARs
Defining marketing
176

Going to market: two key choices
• 1. Internal organization of distribution  What kind

of sales force
– It depends on:
• Related costs
• Level of service to the point of sales
• 2. External organization of distribution  What kind

of channel and channel management policy
– It depends on:
• Channel profitability
• Product image perceived by the final customer
In designing the sales force, the company
assesses
• Sale force size; this involves, among others, to assess:

– Number of clients allocated to a sales person and typology of client group
(key client, prospect, standard, opportunistic)
– Frequency of visits for each client group (e.g.: key client 1 visit every 14
days – 22 visits per year, Standard 1 visit every 3 months – 4 visits per year,
etc.)
– Number of clients to multiply by number of visits und verify how many visits
per year have to be done and where there are enough resources allocated to be
able to do so.
• The company needs to consider the marketing funnel.
• sales force compensation; it usually comprises formal controls, which
include behavior control (BC) and outcome control (OC) types, which
are typically written and management-initiated.
– OC systems focus on getting salespeople to deliver certain kinds of results and
are essentially indifferent to how those results are obtained; BC systems value
how people make sales more than the number of sales they make
• In managing the sales force, the company addresses recruiting and
selecting representatives; training and supervising sales representatives;
Sales Rep productivity; motivating sales representatives; evaluating sales
representatives.
The 80/20 rule (Pareto)
100 %
95 %
80 %
Revenues
20 % 50 %
Number of clients
Boris Durisin
Marketing Funnel
market
Target
Aware
Open to
Recent user
trial
Most often used

Regular user
Trier
Loyal
Conversion ratio % time-wise: for first control to final order (45 days / 180 days)
What are conversion

ratio for different
I II III
client typologies ?
% % % % % % % % %
180 Boris Durisin

Marketing Funnel
Prospect
Potential
Prospect:
Material
1st contact
Requesting
meeting
another
Close to first
Testing
Trail/
order
Purchase
Conversion ratio % time-wise: for first control to final order (45 days / 180 days)
What are conversion

ratio for different I II III
client typologies ?
% % % % % % % % %
This allows undertaking ……………….
Boris Durisin
Deliverables specification: sales
objectives
There are three factors that influence the realization of the plan
Objectives = Number of How many prospects to visit to obtain the target?

meetings
x
Conversion How many of the visited prospects become
ratio clients?
x
Order value Average order value per client
(ABC clients)
Is the number of revenues to be generated from the different client

(typologies) in line with the number of visits done the on the different client
(typologies)?
Boris Durisin
Execution of the program/ deliverables
specification
1. How many visits are required to obtain the objectives?
2. How are those visits to be allocated to the different client

typologies?
3. How much time is to be allocated to acquire a new customer?
4. What is the match of my order book with my sales activities?
5. What kind of commercial offers and marketing

communication material is required to the different customer
groups?
6. ….
Key questions
To whom to sell
I
(Analysis of customer portfolio)
What to sell
II
(Analysis of product portfolio and commercial approach)
How to sell
III
(Analysis of sales activities – commercial budget)
Boris Durisin
Designing and managing integrated
marketing channels
• Marketing channels and value network

– The importance of channels; hybrid channels and multichannel
marketing; value networks
• The role of marketing channels
– Channel functions and flows; channel levels; service
sectors channels
• Channel-design decisions
– Analyzing customer needs and wants; establishing
objectives and constraints; identifying major channel
alternative; evaluating major channel alternatives
• Channel-management decisions
– Selecting channel members; training and motivation
channel members; evaluating channel members;
modifying channels design and arrangments; etc.
Designing and managing integrated
marketing channels
• Channel-management decisions
– Selecting channel members; training and motivation
channel members; evaluating channel members;
modifying channels design and arrangments; channel
modification decisions; Global channel considerations
• Channel integration and systems
– Vertical marketing systems; horizontal marketing systems;
integrating multichannel marketing systems
• Conflict, cooperation, and competition
– Types of conflict and competition; managing channel
conflict; dilution and cannibalization; legal, ethical issues
• E-commerce marketing practices
– Pure-click companies; brick-and-click companies
• Source:
M-commerce marketing practices
Kotler & Keller, Global Edition, Chapter 15
Managing personal communications:
Designing/managing sales force; Personal
selling
• Direct marketing
• Interactive marketing
• Word of mouth
• Designing the sales force
– Sale force size; sales force compensation
• Managing the sales force
– Recruiting and selecting representatives; training and
supervising sales representatives; Sales Rep productivity;
motivating sales representatives; evaluating sales
representatives
• Principles of personal selling
– The six steps; Relationship Marketing

Price Management
Marketing research
Strategic
marketing
Product Place
Price Promotion
Price Management is one of the four marketing mix tools (P=Price):

Marketers must take into account many factors in making pricing
decisions—the company, the customers, the competition, and the
marketing environment. Pricing decisions must be consistent with the 188
firm’s marketing strategy and its target markets and brand positionings.
Developing pricing strategies and
programs
Premise
• Price is the one element of the marketing mix that produces
revenues; other elements produce costs.
• Prices are perhaps the easiest element of the marketing mix
to adjust; product features, channels, and even
communications take more time.
• Price also communicates the company’s intended value
positioning of its product or brand.
• A well-designed and marketed product can command a price
premium and reap big profits.
• But new economic realities have caused many consumers to
pinch pennies, and many companies have had to carefully
review their pricing strategies.

The price effect
All marketing decisions cause costs,

except for pricing
How much would a 1% increase in price
affect economic results?
Increase in Increase in
price net profit
Coca Cola 1% 6,4%
Fuji 1% 16,7%
Nestlè 1% 17,5%
Ford 1% 26%
Philips 1% 28,7%
Source: Garda R., Marn N., (1993), “Price Wars”, Mc Kinsey Quarterly, 3: 87-100
A framework for pricing decisions
The pricing process
1. Selecting the
price objective
2. Assessment
2.1 Demand 2.2 Costs 2.3 Competitors
Determining
3.1 pricing method
3.2 price level
4. Price
management
and control
Marketing: 4Ps of Marketing: Pricing
• Pricing:
The “floor “and “ceiling” for pricing; “moment of truth”
– What is the revenue model you propose (revenue model: what are
you serving to whom ; who are you asking to pay for what?)
– Objective; Demand: demand curve structure, elasticity, sensitivity
– Cost-structure-based considerations: mark-up, cost plus
– Competition-related considerations: parity, discount, premium
– Demand-based consideration: elasticity, Fishbein, conjoint
Assessment of willingness-to-pay
– Consumer psychology: reference pricing, pricing endings, cues
– Skimming pricing; penetration pricing; discrimination pricing
(perfect, horizontal, vertical)
– Geographical pricing (cash, countertrade, barter); price discounts
and allowances; promotional pricing; differentiated pricing
– Different pricing methods or levels for different target segments
Marketing: 4Ps of Marketing: Pricing
• Pricing:
– What is the revenue model you propose (revenue model: what
are you serving to whom; who are you asking to pay for what?)
– Demand: demand curve structure, elasticity, sensitivity
– Cost-structure-based considerations: mark-up, cost plus
– Competition-related considerations: parity, discount, premium
– Demand-based consideration: elasticity, Fishbein, conjoint
Assessment of willingness-to-pay
– Consumer psychology: reference pricing, pricing endings, cues

– Skimming pricing; penetration pricing; discrimination pricing
(perfect, horizontal, vertical)
– Geographical pricing (cash, countertrade, barter); price discounts
and allowances; promotional pricing; differentiated pricing
– Different pricing methods or levels for different target segments
Developing pricing strategies and
programs
• Understanding pricing
– A changing price environment; how companies price; consumer
psychology and pricing
• Setting the price
– Step 1: Selecting the price objective; Step 2: Determining
demand; Step 3: Estimating costs; Step 4: Analyzing
competitors’ costs, prices, and offers; Step 5: Selecting a pricing
method; Step 6: Selecting the final price
• Adapting the price
– Geographical pricing (cash, countertrade, barter); price
discounts and allowances; promotional pricing; differentiated
pricing
• Initiating and responding to price changes
– Initiating price cuts; initiating price increases; responding
Defining marketing
197

Pre-amble
• Today, companies face their toughest competition ever. Moving

from a product-and-sales philosophy to a holistic marketing
philosophy, however, gives them a better chance of outperforming
the competition.
• The cornerstone of a well-conceived holistic marketing orientation
is strong customer relationships.
• Marketers must connect with customers – informing, engaging,
and maybe even energizing them in the process.
• Customer-centered companies are adept at building customer
relationships, not just products; they are skilled in market
engineering, not just product engineering.
198

Value-based marketing: A framework
A process which targets the interaction between

the company and its customer(s), starting from a
market-driving orientation managing existing
customer over time to maximize their financial
value in the long term.
Value
Value for Customer Customer
of the
Customer Satisfaction Loyalty
customer
Customer value: value for customer
Functional/Psycho- Implicit/Explicit
socio/Experiential
Benefits
Value
for =
Customer
Sacrifices for obtaining the benefits
Information Alternatives
search evaluation Purchase Use Repurchase
• Searching • Elaboration • Procurement • Operating • Conversion
costs costs costs costs costs
• Psychologic • Transaction • Maintenance • Psychologic
al costs costs costs al costs
• Learning • Dismission
costs costs
• Depreciation
costs
Customer value and value proposition
• The value proposition consists of the whole cluster of

benefits the company promises to deliver; it is more than
the core positioning of the offering.
– Volvo’s core positioning: “safety,” but more than just a
safe car; other benefits include good performance,
design, and safety for the environment.
• Whether the promise is kept depends on the company’s
ability to manage its value delivery system.
• The value delivery system includes all the experiences the

customer will have on the way to obtaining and using the
offering. At the heart of a good value delivery system is a
set of core business processes that help deliver
distinctive consumer value.
201

The mathematics of customer retention
Starting situation: 100 customers, 30 new customers every year
Annual
CRR Customers
growth
rate
A: 75% 100 105 109 112 114 115 3%
B: 80% 100 110 118 124 130 134 6%
C: 85% 100 115 128 139 148 156 9%

D: 90% 100 120 138 154 169 182 13%
years 1 2 3 4 5 6
Customer loyalty is critical.
Retaining customers and not losing
them …
New
customers
Lost
customers
Customer satisfaction
Customer satisfaction is a person’s feelings of pleasure

or disappointment that result from comparing a
product’s perceived performance (or outcome) to
expectations.
Customer assessments of product performance depend

on many factors, especially the type of loyalty
relationship the customer has with the brand; more
favorable perceptions of a product with a brand they
already feel positive about.
Xerox’s senior management found its “completely satisfied”

customers were six times more likely to repurchase Xerox
products over the following 18 months than even its “very
satisfied” customers.
Customer loyalty
Customer loyalty has been defined as

• “deeply held commitment to re-buy or re-patronise a
preferred product or service in the future despite situational
influences and marketing efforts having the potential to
cause switching behavior” (Oliver, 1999)
… at the core of the issue are two inherently different views:

“The consumer is not a moron. She is your wife”
vs.
consumers as “brand sluts” “consumer-as-slattern”
Customers want loyalty not perfection: “… our own loyalty

to customers?”
Source: Kotler, Keller et al.

Customer lifetime value
Customer lifetime value (CLV) describes the net present

value of the stream of future profits expected over the
customer’s lifetime purchases:
• expected revenues
– Subtract
• expected costs of attracting, selling, and servicing the account
of that customer,
• … and applying the appropriate discount rate.
Assess customer profitability
• Individually
• Market segment
• Channel
206

From Loyalty to Profitability: why are
customers more profitable over time?
Reichheld and Sasser, 1990

LTV: Understanding differences in Firm
value
Are differences in Firm Value due to changes in cash flow per

customer, retention rate or the number of customers?
From Loyalty to Profitability: The Net
Promoter Score
“The one number you need to grow”

Reichheld, 2003
“Would you recommend your company to a friend or

colleague?”
NPS= % promoters (9 – 10) - % detractors (0– 6)

Managing customer base
• Reducing the rate of customer defection

• Increasing the longevity of customer relationship
• Enhancing the growth potential of each customer
through “share of wallet,” cross-selling, and up-
selling
• Making low-profit customers more profitable or
terminating them
– buy more or in larger quantities; forgo certain
features or services; pay higher amounts or fees
• Focusing disproportionate effort on high-profit
customers
– Most profitable customers to be treated in a special
way 210

The customer concepts
The customer concept is the conduct of all marketing

activities with the belief that the individual customer is
the central unit of analysis and action.
Customer value and customer relationship
management
• Identifying different types of customers
– e.g., fashion victims, status oriented, frugal
• Developing specific strategies for interacting with each
one
– e.g., Fashion victims, status oriented, frugal
This includes:
• Developing better relationships with profitable
customers
• Locating and enticing new customers who will be
profitable
• Finding appropriate strategies of unprofitable customers
Source: Kumar & Reinartz, 2012 Boris Durisin
Value for customer (customer; offer) and
value of customers (economics;
infrastructure)
Customer segments
• Which customers and users are you serving?
• Which jobs do they really want to get done?
Value propositions
• What are you offering them? What is that getting done
for them? Do they care
Channels
• How does each customer segment want to be reached?
Through which interactions points?
Customer relationships
• What relationships are you establishing with each
segment? Personal? Automated? Acquisitive? Retentive
Revenue streams
• What are customers really willing to pay for? How? Are
you generating transactional or recurring revenues?
Key resources
• Which resources underpin your business model?
• Which assets are essential?
Key activities
• What activities do you need to perform well in your
business model? What is crucial?
Key partners
• Which partners and suppliers leverage your model?
• Who do you need to rely on?
Cost structure
• What is the resulting cost structure?
• Which elements drive your costs
From value for to value of customer
• Value pool/profit pool for scenarios for specific customer for

different segment (LTV)
– Impact of scenarios or definition/redefinition at segment-level &
understanding segment characteristics
• Value for customer (customer; offer) and value of customers

(economics; infrastructure)
– Benefits/sacrifices for customers
– Expected value – perceived performance
– Loyalty from customers – loyalty to customers

Boris Durisin
bdurisin@escpeurope.euc
What is marketing?
Marketing is the process of planning and

executing the conception, pricing, promotion,
and distribution of ideas, goods, and services to
create exchanges that satisfy individual and
organizational goals.
- American Marketing Association (’90s)
Implicit Assumptions:
• One sided – asymmetry
• One way – broadcast
• One time – transactions
• One type – firm-to-customer
• One entity – firm
What is marketing?
Marketing is 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
- American Marketing Association (2004)
Implicit Assumptions:
• Two sided – asymmetry vs. symmetry
• Two way – broadcast vs. dialogue
•More times – transactions vs. relationships
What is marketing?
Marketing is the adaptive process by which firms

collaborate with customers and partners and
manage relationships (engage collaborative
conversations rather than improve interactions) to
create and sustain value for all stakeholders.
- New conceptualization based on digital
paradigm
New assumptions:
• More ways: “Connect and collaborate”, not “command and control”
• More times: Market as forum for co-creation of experiences
• Multi-sided: Customers and partners as co-creators of value
• Multi type – firm-to-customer vs. peer-to-peer
• Multi entity – firm vs. ecosystem
• Value-centric processes: “Sense and respond”, not “make and sell”
What is marketing?
Marketing is the adaptive process by which firms

collaborate with customers and partners and
manage relationships (engage collaborative
conversations rather than improve interactions) to
create and sustain value for all stakeholders.
- New conceptualization based on digital
paradigm
New assumptions:
• Consumers used to "lean back" - as passive recipients of one-
way broadcast messages. Today, they "lean forward.“
• Consumers want a conversation, to dialogue, to participate, to
be more in control; engage the customer in a collaborative
conversation rather than improve customer interactions
• Consumers will expect personal attention, customization.
What is marketing?
Firms to evolve
From: interaction with customers (getting knowledge
about them to create a value proposition for them)
To: collaboration with customers (getting knowledge
from them to create a superior value proposition
with them)
The role of customers is changing on the Web along two
relevant dimension:
1. Customer empowerment – the evolving information
power balance
2. Customer involvement – the value creation process
Customer empowerment across
marketing activities
Self-inform: Customers can research products and issues on

their own without relying on experts (e.g., WebMD,
MedlinePlus.com)
Self-compare: Customers can compare product features and
prices side-by-side from competing manufacturers with few
clicks of a mouse (e.g., PriceGrabber.com, DealTime.com)
Self-police: Customers can monitor reputations of
manufacturers to assure themselves of product and service
quality (e.g., eBay, BizRate.com)
Self-organize: Customers can create or join communities of
interest or conduct conversations on products, interests,
lifestyles, or issues to share their experiences (e.g.,
iVillage.com, Experts-Exchange.com)
Self-advice: Customers can create feedback for their peers
based on their experiences with products and
manufacturers (e.g., Amazon.com, PlanetFeedback,
Epinions.com, Ciao.com)
Collaborative marketing, the digital
revolution and marketing strategy &
marketing mix
The Principals of Marketing per se

do not change
... what changes are the
mechanisms and tools to
generate value.
It is important to recognize the central role of customers
and involve them in the firm’s processes of product
definition (Collaborative Innovation), communication
(Customer Relationship Management) and
distribution/pricing (Channel and Price Management)
What is marketing?
Please do not forget!
“You cannot pay the bills with

engagement, you need
revenues for that”
Defining marketing
Subsequent definitions of marketing
The AMA provides the official definitions of marketing
Source: Boysen Anker, Moutinho, Sparks, and Gronroos (2013)
227
What is marketing management?
228
• Marketing management is the
• art and science
• of choosing target markets
• and getting, keeping, and growing
• customers through
• creating, delivering, and communicating
• superior customer value.
Source: Marketing Management, Kotler & co-authors

Company orientations toward the
marketplace
Production philosophy
– Idea of a product looking for a market; high production
efficiency, low cost, mass distribution
• The production concept
– Consumers prefer products widely available and
inexpensive
• The product concept
– Consumers prefer products that offer the most quality,
performance, or innovative features
– “better mousetrap” fallacy

marketplace
Selling philosophy
– Focus is on making sales rather than really understanding
the customer
– Consumers show buying inertia and must be coaxed into
buying: the purpose of marketing is selling more products
to more people more often for more money
• Selling vs. marketing philosophy
– Selling focuses on the needs of the seller; marketing on
the needs of the buyer.
– Selling is preoccupied with the seller’s need to convert his
product into cash; marketing with the idea of satisfying the
needs of the customers by creating, delivering, and
communicating product or service.

marketplace
Marketing philosophy
– Customer-centered, ‘sense-and-respond’ philosophy
• The marketing concept
– The purpose is not to find the right customers for your
products, but the right products for your customers
• The customer concept
– Shaping separate offers, services, and messages to
individual customers
http://nikeid.nike.com/nikeid/?sitesrc=uslp#launchBuilder,,_7a6f6f4d6f67324d6964313030352e2e31,,212214387,1,
– The marketing concept: being more effective than

competitors in creating, delivering, and communicating
superior customer value to your target markets.
Source: Kotler, Keller et al., Kotler & Keller

The marketing concept vs sales concept
PRODUCT/SALES CONCEPT
Profits through Sales

Products Selling & Promoting Volume
MARKETING CONCEPT
Profits through Customer

Customer Needs Integrated Marketing Satisfaction and Loyalty
Stages of the marketing process
Marketing is a four-step process
A visual model of the marketing process
Overall Marketing Marketing Marketing Marketing

company’s intelligence strategy execution control
strategy (marketing (strategic (marketing
research) marketing) mix)
233

Stages of the marketing process
Marketing is a four-step process
Marketing per se includes four stages, which will ground the structure
of our course.
Step Aims
Marketing intelligence - Identification of market opportunities
(Marketing research) - Assessment of opportunities
- Test
Iterative execution
Logical sequence
- …
Marketing strategy - Market segmentation
(Strategic marketing) - Targeting
- Positioning
Marketing execution - Product

(Marketing-Mix) - Price
- Promotion (Communication)
- Place (Distribution)
Marketing control - Assessment of competitive performances
- Assessment of financial performances
- … 234
Marketing: 4Ps of Marketing:
Product, promotion, placement,
price

7Ps components of the marketing
mix: People, process, physical
evidence
• People
– internal marketing: employees are critical to marketing
success; only as good as the people inside the firm.
– Participants, staff, customers to customer, co-creation
• Process
– Only by instituting the right set of processes to guide
activities and programs can firm engage in relationships.
– Service blueprint, process design, self-service
technologies, online service provision
• Physical evidence
– Service environment, sound, sight, smell, taste, touch,
service evidence

Marketing competence in corporation
• Marketing not influential • Marketing not influential

• Top Management priority – Top Management priority is
is on cost reduction and on financial community little
labour productivity. marketing experience.
• Disagreement and – Product and technology
ambiguity about role and focus in npd
importance of customer – Brands as cash cows for
orientation M&A
• Marketing influential • Marketing influential
• Top Management priority – Top Managment priority is
is on customers, on compelling vision of
resellers, key accounts. customer value.
• Clear and shared role of – Customer analysis ingrained
marketing and customer in npd
orientation in corporate
– Substantial investment to
culture
build and maintain brand
Wrong marketing
• The company is not sufficiently market focused/customer

driven.
• The company does not fully understand its target
customers.
• The company needs to better define and monitor its
competitors.
• The company has not properly managed its relationships
with its stakeholders.
• The company is not good at finding new opportunities.
• The company’s marketing plans and planning process are
deficient.
• The company’s product and service policies need
tightening.
• The company’s brand-building and communications skills
are weak.
Source: Kotler, Keller et al., Kotler &
Sample marketing plan
• Executive summary
• Situation analysis
– Category/competitor definition
– Category analysis: aggregate, category factors, PEST
– Company and competitor analysis
– Customer analysis: who are the customers? What buy? How use
it? Where/when buy? Why prefer? Buy again? Segments?
– Planning assumptions: potential, category and product forecasts
• Objectives
• Where do we want to go?
• How do we want to get there?
• Product/Brand Strategy: Value proposition, product positioning
• Supporting Marketing Programs
– Promotion, Sales, Pricing, channels of distribution, customer
management activities, Website, marketing research, partners
• Financial Documents
• Monitors and Controls; Contingency Plans
Source: Lehman & Winner
Defining marketing


Boris Durisin

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Marketing Management

Create value for customers

Marketing aim: How to build value

Source: Kotler and Keller

• Conduct market research

• Analyze consumers (consumer behavior, psychological

• Explore customer value and the value proposition(s)

• The potential market is the set of consumers with a

• Market demand for a product is the total volume that

Innovators, Early adopters, Early majority, Late majority, Laggards,

Customers want Customers want solutions

Sous-vide cooking exhibits active promotion

technology supplants it.”

Innovators, Early adopters, Early majority, Late majority, Laggards,

Customers want Customers want solutions

“No one ever got fired for buying IBM.”

Customers want Customers want solutions

B&W TV 0.028 0.25

A study by Sultan, Farley, and Lehmann suggests an

Use Bass model to identify whether go/no go decision to

– And most of ALL it has a proven reliability:

• Adoption of answering machines:

Adoption of Answering Machines

adoption of answering machines Fitted Adoption

Source: Frank M. Bass

Actual and Fitted Adoption of 35 mm Projectors, 1965-1986,

35mm Proj Fitted

Source: Frank M. Bass

Generations of Mainframe Computers (Performance Units) 1974-1992

Source: Frank M. Bass

Source: Frank M. Bass

Source: Frank M. Bass

Use Bass model to identify whether go/no go decision to

L(t) = f(t)/[1–F(t)] (1)

The Bass model proposes that L(t) is a linear function:

Noting that [n(t) = Nf(t)] is equal to the number of buyers at time t,

After simplification, this gives the basic diffusion equation for

An equivalent way to represent N(t) in the Bass model is

Given four or more values of N(t) we can estimate the three

The discretized version of the Bass model is obtained from (4):

n(t) = a + bN(t–1) + cN 2(t–1)

a, b, and c may be determined from ordinary least squares

Common methods (for existing markets)

• Conduct market research

• Analyze consumers (consumer behavior,

• Explore customer value and the value proposition(s)

Stages of the buying process

From a visual perspective, the model looks like the following:

Prepurchase stage Purchase stage

Source: Kotler & Keller

Consumer characteristics and consumer psychology:

Source: Kotler & Keller

Four key psychological processes fundamentally influence

Motivation refers to consumer’s wants and needs addressed formerly.

A technique known as laddering aims at detecting underlying

Source: Peter & Olson

PRODUCT PRODUCT PRODUCT PERSONALITY BRAND BRAND BRAND

Perception is the process by which people select, organize, and

2. Selective distortion is the tendency for people to interpret information in

3. Selective retention is the tendency to remember good points made

Example: Awareness test.

The buying decision process

Along this process of decision making, consumers progressively reduce