UNIT 1

WHAT IS MARKETING
“Marketing is a process by which companies create value for customers and build strong customer relationships in
order to capture value from customers in return.”

What has made Amazon such an amazing success story? Founder and CEO Jeff Bezos put it in three
words: “Obsess over customers.”
• Personalization: Amazon delivers a special experience to each customer
• Good value (Delivers more for less): huge selection, Prime service (video, data storage, music,
free delivery in 1-day, favorable return policy, etc. ), huge information convenience, and low
prices.
• Community: share opinions and reviews with other visitors, and chat online with authors and
experts. That ability to share opinions and reviews builds relationships with the company and with
other customers

CUSTOMER VS CONSUMER
 Customer is the buyer of the offering.
1. End-Customer – They are the people who buy the product offered for their own use, in turn becoming the
consumer of the specified product.
2. Reseller – They are the intermediary who buys the goods for selling it to others and hence just acting as a
customer and not as a consumer of the purchased product.

Consumer is the end-user who consumes the offering.

THE MARKETING PROCESS

1. Understand the marketplace and customer needs and wants

Human needs are states of felt deprivation
a. Physical- Needs for food, clothing, warmth and safety
b. Social— Needs for belonging and affection
c. Individual—Needs for knowledge and self-expression
Maslow´s Hierarchy of Needs. People have needs at different levels and they try to satisfy first, those from the
lowest levels.
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Wants are the form human needs take as they are shaped by culture and individual personality
Wants + Buying power= Demands
Demands are human wants that are backed by buying power

Marketing IDENTIFY needs

Marketing GUIDE wants
Marketing STIMULATE demands

How do companies learn about needs, wants and demands?

• Market research
• Observing customers when they go shopping and when they interact one each other (in store and online)

Market offerings are some combination of products, services, information, or experiences offered to a market to
satisfy a need or want.
Marketing myopia occurs when a company pays more attention to the specific products they offer than to the
benefits and experiences produced by these products

Ø Customers buy products to get benefits:

o Functional: Based on product attributes that provide the customer with functional utility.

o Psychological

1. Emotional: Provide customers with a positive feeling when they purchase or use a particular
brand.
2. Self-expression benefits: Provide an opportunity for someone to communicate his or her self-
image.
Ø Satisfaction: customer comparative judgment between the results obtained by a product and the previous
expectations he had for the product
1. Satisfied customers buy again and tell others about their positive experience
2. Satisfaction usually leads to loyalty
3. Dissatisfied customers switch to competitors
Exchange is the act of obtaining a desired object from someone by offering something in return.
• Transaction: Unique exchange
• Relationship: Set of exchanges or transactions
• Marketing consists of actions taken to create, maintain and grow desirable exchange relationships
with target audiences.
A market is the set of actual and potential buyers of a product or service
• Buyers share a need or want that can be fulfilled by exchange relationships.
• Current customers already have a need or want and have bought the product or service
• Potential customers have the need or want but they have not bought the product or service yet
• A marketing system consists of a set of agents (suppliers, company, competitors, intermediaries and final
users) that meet the needs of final customers and that is affected by major environmental forces
(demographic, economic, natural ,technological and social/cultural).
• A company´s success at engaging customers and building profitable relationships depends not only on its
own actions but also on how well the entire system serves the needs of final consumers.

2. Design a customer value-driven marketing strategy

Marketing management is the art and science of choosing target markets and building profitable relationships with
them.
a) Question 1. What customers will we serve? – WHO?: target market
o Market segmentation refers to dividing the markets into segments of customers
o Segment: group of customers with some similarity (needs, wants, buying behavior,
preferences, etc.)
o 2. Targeting refers to which segments to go after
 b) Question 2. How can we best serve these customers? – WHAT?: value proposition or set
of benefits to deliver
o A company’s value proposition is the set of benefits or values it promises to deliver to consumers to
satisfy their needs.
o How it will differentiate and position itself in the Marketplace?
o The value proposition should answer the question: Why should I buy your brand rather than a
competitor´s?

b) Choosing a Marketing Orientation

o Marketing Management wants to design strategies to achieve stable relationships with customers and
get loyalty from the target market. What philosophy should they follow?
o 5 Marketing Management Orientation:
1. Production Concept: holds that consumers will favor products that are available and highly affordable.
It is based on consumers' interest in low-cost products and easy location
Impersonal marketing and low-quality
Concept problems: Marketing myopia. Risk of focusing too much on their own operations and losing sight of the
real objective – satisfying customer needs and building customer relationships.
2. The product concept holds that consumers will favor products that offer the most in quality, performance
and innovative features.
3. The selling concept holds that consumers will not buy enough of the firm´s products unless it undertakes a
large-scale selling and promotion effort.
Companies should focus on promoting products (by informing and persuading using ads, promotions, salesforce,
etc.)
This concept is usually practiced with unsought (unsolicited) goods- those that buyers do not normally think of
buying, such as life insurance.
Concept problems
It focuses on creating sales transactions rather tan on building long-term, profitable customer relationships.
The aim often is to sell what the company makes rather than making what the market wants.
It tries to convince customers to buy the product
4. The marketing concept holds that achieving organizational goals depends on knowing the needs and
wants of target markets and delivering the desired satisfactions better than competitors do.It is about
collecting new services and products ideas to satisfy customer needs and wants.
5. The societal marketing concept holds the idea that companies´ marketing decisions should consider
customers’ wants, the company´s requirements, customers´ long-run interests, and society´s long-run
interests.
It calls for a sustainable marketing, socially and environmental responsible, which meets the present needs
of customers and businesses while also preserving the ability of future generations to meet their needs.

3. Construct an integrated marketing program that delivers superior value

An integrated marketing program will deliver the intended value to target customers, transforming marketing
strategy into action.
It consists of the firm´s marketing mix (set of marketing tools the firm uses to implement its marketing strategies).
groups of tools (four Ps of marketing: Product, Price, Place, and Promotion)

4. Engage customers, build profitable relationships, and create customer delight

Customer relationship management is the overall process of building and maintaining profitable
customer relationships by delivering superior value and satisfaction.
2 key concepts:
i. Customer-perceived value. It is the customer´s evaluation of the difference between all the benefits and
all the costs of a marketing offer relative to those of competing offers.
Customer-perceived value = Positive values – Negative values
Positive values: Functional and psychological benefits
Negative values: Product costs, price, time, energy, psychological
How can firms increase the customer-perceived value? Examples:
o Reducing prices
o Adding services to the product, such as home delivery
o Increase the brand value
o Improve the product packaging for a better storage

ii. Customer satisfaction. The extent to which a product´s perceived performance matches a buyer´s
expectations.
Comparison between experience and expectations
• Expectations depend on factors such as advertising, product information, Word of mouth (WOM),
experience
• Customers will re-buy products if they are satisfied
• Higher customer satisfaction usually leads to higher customer loyalty
• If customers are delighted, they might become “ambassadors”, and will tell other customers about their
positive experiences.
How customer satisfaction is monitored?
Ø Satisfaction surveys
Ø System for collecting consumers’ complaints and recommendations
Analysis of electronic Word of Mouth (eWOM)

Basic relationships
• Companies with many low-margin customers
• Relationship through advertising, Web sites, sales promotions or social media
Full partnership
• Companies with few customers and high-margins
• Through constant interaction with salesforce and close collaboration with customers

Digital technologies :
• Have changed the way people relate
• Have influenced how companies and brands connect with customers
• Have influenced how customers relate with other customers
OLD MARKETING: mass marketing to all customers (mass media advertising)
NEW MARKETING: focused on customer engagement

The goal of customer-engagement marketing is to make the brand a meaningful part of consumers´
conversations and lives by fostering direct and continuous customer involvement in shaping brand
conversations, brand experiences and brand community.
It goes beyond selling the brand. It is about making the brand part of consumers' conversations and lives.
Ø Today´s consumers are better informed, more connected and have more power than ever before.
Ø Companies combine mass marketing with digital marketing (social networks, mobile marketing, etc.). This
makes brands to be present in customers´ conversations.
Ø Consumers themselves play an important role in shaping the brand through their owns experiences and
those of others.
Ø It usually happen in a spontaneous way, through consumer-to-consumer exchanges in blogs, video-sharing
sites, social media and other digital forums.
Ø Increasingly, companies themselves are inviting consumers to play an important role in shaping products
and brand content

5.
Capture value from customers in return
Loyal customers spend more and stay around longer.
v It is five times cheaper to keep and old customer than acquire a new one
v Losing a customer means losing more than a single sale. It means losing the entire stream of purchases
that the customer would make over a lifetime.
Important concept:
 v Customer lifetime value (CLV). It is the value of the entire stream of purchases a customer makes over a
lifetime.
The share of customer is the portion of the customer´s purchasing that a company gets in its product categories
How to increase share of customer?
• Firms can offer greater variety to current customers
• They can create programs to
• cross-sell: Make consumers to buy complementary products or products from other categories.
• up-sell: Make customers to buy products or categories with more profit

Customer equity is the total combined customer lifetime values of all the company´s current and potential
customers

Building the right relationships with the right customers means treating customers as assets that need to be
managed and maximized
v Different customers require different customer relationship strategies
v Four Customer Relationship Groups

THE CHANGING MARKETING LANDSCAPE

Ø The Digital Age
Ø The Changing Economic Environment. Economy changes customer shopping behaviour.
Future after COVID-19?
Ø The Growth of Not-for-Profit Marketing. Marketing has become a major part of the strategies
of many not-for-profit organizations, such as universities, hospitals, museums, orchestras or even
churches. They compete for support and membership.
Ø Rapid Globalization. Almost every company is affected by a global competition.
Ø Sustainable Marketing. Today's customers expect companies to deliver value in a socially and
environmentally responsible way

UNIT 2

Company-wide Strategic Planning: Defining Marketing’s Role

Strategic planning arised in the 70´s:
• Before: stable environment, easy to predict, continuous growth. Companies should be managed as previous
years.
 • 70´s: turbulent environment, less predictable
Ø In that situation, it was necessary a tool to manage the company
Ø Strategic planning is the process of developing and maintaining a strategic fit between the organization´s
goals and capabilities and its changing marketing opportunities.

STEPS
1. Defining the company’s mission
Mission statement. A statement of the organization´s purpose – what it wants to accomplish in the larger
environment
a. It acts as the “invisible hand” that guides people in the organization
b. It answers the following questions:
i. What is our business?
ii. Who is the customer?
iii. What do consumers value?
iv. What should our business be?
Market-oriented mission. The mission statement should be market oriented and defined in terms of satisfying basic
customer needs.

Some companies define their missions myopically in product or technology (“We make and sell furniture” or “We
are a chemical-processing firm”.)

How a mission statement should be:

Ø It should highlight the policies and values of the company
Ø Not focusing only on the product (marketing myopia)
Ø You should not focus on achieving more sales or profits
Ø It should be motivating
Ø It should emphasize the main strengths of the company
Ø It must be realistic, concrete, based on distinctive competencies and motivating

2. Setting company objectives and goals

Important concepts to achieve objectives and goals:
v Vision: The vision statement gives the company direction; it is the future of the business.
• What do I want to achieve?
• Where do I want to be in the future?
• What could you be incorporating into the company that you are not doing?
• Who will I do it for?
v Values: The values for a company are ethical principles, beliefs or qualities on which the culture of the
company is based and allow us to create our behaviour guidelines.

Types of objectives:
 Company general objectives: increase benefits
• Marketing Sales: Increase sales, Increase the number of customers or increase the sales to each customer,
Increase sales of existing products or launch new products, Increase customer satisfaction

3. Designing the business portfolio

The business portfolio is the collection of businesses and products that make up the company.
Portfolio analysis is the process by which management evaluates the products and businesses that make up the
company. Major activity in strategic planning

Steps to analyze current business portfolio

1. Identify the key business areas that make up the company
(strategic business units, SBUs)
 Ø A Strategic business unit (SBU) is a unit of the company that has its own mission and objectives and
whose planning can be carried out independently of the rest of the business units of the company.
• Company division
• Product line within a division
• A single product or brand

2. Assess the attractiveness of its various SBUs

Most customer portfolio analysis methods evaluate SBUs based on two dimensions: the attractiveness of the SBU
market or industry and the strength of the SBU position in that market or industry.
The best-known portfolio-planning method is the Boston Consulting Group approach
A company classifies all its SBUs according to the growth-share matrix.
The growth-share matrix is a portfolio planning method that evaluates a company´s SBUs in terms of market
growth rate and relative market share.

Stars are businesses or products (SBUs):

Ø With high growth and high-share
Ø They require considerable investments to finance their rapid growth.
Ø In time they will turn into cash cows

Cash Cows are businesses or products (SBUs):

Ø With low growth and high-share
Ø That require few investments to maintain their market share
Ø They produce a lot of cash that the company uses to pay its bills and support other SBUs that need
investment
Question marks are businesses or products (SBUs):
Ø With low growth but operating in high-share markets
Ø They require a lot of cash to hold their share .
Management has to think hard about which question marks it should try to build into stars an which should be
phased out

Dogs are businesses or products (SBUs):

Ø With low growth and low share in the market
Ø They may generate enough cash to maintain themselves but do not promise to be large sources of cash

3. Decide how much support each SBU deserves

Ø Inversion strategies for SBUs:
• Invest more to increase market share
• Invest to maintain the market share
• Harvest (short-term cash flow)
 • Divestment (sale or disposal)

Ø Management may find it difficult to define SBUs and measure market share and growth:
• Time consuming
• Costly to implement
• These approaches focus on classifying current businesses but provide little advice for future planning
Ø Many companies have dropped forma matrix methods in favor of more customized approaches
Ø Today, strategic planning has been decentralized (not in hand of senior managers at company
headquarters)
Ø Product/market expansion grid (Ansoff matrix). A portfolio-planning tool for identifying company
growth opportunities through market penetration, market development, product development, or
diversification.
Existing
New products
products

Existing 1. Market 3. Product

markets penetration development

New 2. Market
4. Diversification
markets development

1. Market penetration. Company growth by increasing sales of current products to current market segments
without changing the product.
v Selling more to current customers without changing products
v Driving growth through improvements in the marketing mix: product design (e.g., new colours of the
same products), advertising, price (e.g., reducing the price) or distribution improvements (e.g., increasing
the number of distributors).

2. Market development. Company growth by identifying and developing new market segments for current
company products. For example:
v New distribution channels
v New demographic markets
v New geographic markets

3. Product development. Company growth by offering modified or new products to current market
segments.
v Incorporating new functions or attributes to the product
v Improving product quality/benefits
v Creation and launch of new products
4. Diversification. Company growth through starting up or acquiring businesses outside the company´s
current products and markets.
Why does a company diversify?
• Reduce risks
• Saturation, contraction or exhaustion of the traditional market
• Opportunity to invest financial surpluses
• Underutilized resources, excess capacity
• Strengthening of competitive capacity
v Companies must be prudent when diversifying so as not to over-extend brand positioning

DOWNSIZING STRATEGIES
There are reasons why companies might want to abandon products or markets:
 • Lack of experience in some areas because of a rapid growth
• Market gets not profitable because of environmental changes
• Some products or business units age and die
v Companies have to think of pruning, harvesting or divesting them
v Companies should focus on promising growth opportunities, not wasting energy trying to salvage fading
ones

2. Planning Marketing: Partnering to Build Customer Relationships

Partner relationship management

Ø Marketing plays a key role in the strategic planning of the company
• Provides a guiding philosophy
• Provides inputs to identify and assess opportunities
• Designs strategies to achieve the objectives of each SBU

Ø In addition to customer relationship management, marketers must collaborate:

1. With departments of the same company, to form an effective value chain that serves
the customer
2. With other companies in the marketing system to create a superior and competitive
value generation network
3.
1. Partnering with other Company Departments
Value chain. The series of internal departments that carry out value-creating activities to design, produce, market,
deliver, and support a firm´s products.
Satisfying customers should not be a function of the marketing department but should be part of the mission of the
company.
Marketing alone cannot attract customers and deliver superior value.
Success depends on how well each of the departments does their job in adding value for the customer and how well
activities are coordinated.

2. Partnering with others in the Marketing System

Ø Value deliver network. A network composed of the company, suppliers, distributors, and, ultimately,
customers who. partner with each other to improve the performance of the entire system in delivering
customer value
• To attract customers and create value for them, the company has to look beyond its own value chain.
For example, Amazon outsources the transportation service of its products, so the success of the company
also depends on the ability of those companies to deliver the products on time.

MARKETING STRATEGY AND THE MARKETING MIX

Ø Marketing strategy is the marketing logic by which the company hopes to create customer value and
achieve profitable customer relationships.
• Create customer value
• Achieve profitable customer relationships
Ø The company has to decide about:
1. Market segmentation
2. Market targeting
3. Differentiation and positioning

Ø Positioning. Arranging for a product to occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
Ø Effective positioning starts from differentiation: differentiating the market offering to create superior
value for the customer (which will provide a competitive advantage).

After deciding on the marketing strategy and guided by it, the company designs a marketing mix:
 Four Ps Four As

Product Acceptability
Price Affordability
Place Accessibility
Ø Marketing mix is the set of tactical marketing tool
Promotion Awareness -product, price, place, and promotion- that the firm blends
to produce the response it wants in the target market.
This set can be grouped into four groups, known as "the four Ps": product, price, position or place (distribution)
and promotion (or communication).

Managing the marketing process requires five functions: (1) analysis, (2) planning, (3) implementation and
organization, and (4) control.

1. Analysis: SWOT
2. Planning: involves making decisions about marketing strategies that will help the company attain its
overall strategic objectives. A detailed marketing plan is needed for each business, product or brand.
3. Implementation: process that turns marketing strategies and plans into marketing actions to
accomplish strategic marketing objectives.
A brilliant marketing strategy is of little use if the company does not apply it correctly.
It is usually easier to think of a good marketing strategy than to apply it.
Successful execution of the marketing plan depends on how well the company adjusts
 to employees
 its organizational structure
 its decision and reward systems
 its business culture

Common forms of marketing organization:

• Functional: It is the most common form of marketing organization, in which the different marketing
activities are directed by a specialist defined by the functions he performs.
• Geographic: Useful for companies that sell nationally or internationally. Managers are responsible for
developing strategies and plans for a specific region.
• Product management: Useful for companies with different products or brands. Managers are responsible for
developing strategies and plans for a specific product or brand.
• Market or customer management: Useful for companies with a product line that is sold to different markets
and consumers. Managers are responsible for developing strategies and plans for their specific markets or
customers.

4. Control: measures and evaluates the results of marketing strategies and plans taking corrective action
to ensure that the objectives are achieved.
Operating control involves checking ongoing performance against the annual plan and taking corrective action
when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its
annual plan.
Strategic control involves looking at whether the company's basic strategies are well matched to its opportunities.
Marketing strategies and programs cand quickly get outdated, and it should be periodically reassessed.

MEASURING AND MANAGING RETURN ON MARKETING INVESTMENT (ROI)

• In the past, many marketers spent freely on big, expensive marketing programs and advertising campaigns,
often without thinking carefully about the financial returns of their spending.
• Today, marketing is measured and accounted. Marketers have to link their strategies and tactics to
measurable marketing performance outcomes.
Ø Marketing return on investment (marketing ROI). The net return from a marketing investment divided
by the costs of the marketing investment. It measures the profits generated by investments in marketing
activities.
 How you can return on marketing investment be measured?
• Short-term indicators (this year sales) vs. Long-term indicators (CLV, customer lifetime value)
• Financial indicators (sales) vs. Non-financial indicators (Brand awareness, customer satisfaction, customer
engagement, Brand image, WOM, etc.)

UNIT 3 - CONSUMER MARKETS AND BUYER BEHAVIOR

1. Model of Consumer Behavior

- Consumer Market = buyers (individuals or households)
- Business market = organizations that buy goods/services
- Model of buyer behavior: environment  buyers’ black box  buyer response

2. Factors that affect buyer behavior: cultural, social, personal, psychological

CULTURAL
- Culture  set of values and perceptions learned by a member of society/ main cause of person’s desires
- Subculture  group of people with shared value systems/ racial groups, nationalities, religions/ example:
kosher
- Social classes  society’s permanent and ordered divisions whose members share values, interest and
behavior/ measures: income, profession, education
SOCIAL
- Groups and social networks 
- Groups: membership groups (direct influence), reference groups (for direct or indirect points of
comparison/ face to face reviews, or online reviews), aspirational group (group to which a person aspires to
belong)
- WOM  word of mouth influence  impact of a personal recommendations from close people
- Buzz marketing  marketing strategies to promote positive WOM
- Social Networks: opinion leader (social influencer), online social networks (communities where people
socialize and share opinions/ social media, blogs, online review pages)
- Family  Most important purchasing organization, has a big impact on buyer behavior.
- Important: the role of each member (mom buys the groceries)
- Roles and status  position of a person in a group
- Role = activities expected to be performed by one
- Status = consideration assigned by society to each role
PERSONAL
- Occupation  affects what a person buys (business man = suit)
- Economic situation  income, savings, interest rate = affect product choices.
- Age  affect what a person needs and wants to buy.
- Lifecycle stage  marriage, new parents, college, elderly
- Lifestyle  it changes when lifecycle stage changes and it is the life pattern of a person shaped by personal
factors such as AIO (Activities, Interests, Opinions)
- Personality  unique psychological characteristics
- Brand Personality  mix of human traits attributed to a brand
- Self-concept  image that an individual has of himself
- Actual/ private: how I actually see myself
- Actual / social: how others actually see me
- Ideal/private: how I would like to see myself
- Ideal/ social: how I would like others to see me
PSYCHOLOGICAL
- Motivation  motive/drive: a need that is strong enough to move a person to seek satisfaction
- Theories:
- A- Freud: individuals are UNAWARE of psychological forces that shape their behavior
- B- Maslow: a person will satisfy his need in order: basic, psychological, self-fulfillment
- dissonance  process by which people select, organize and interpret information to form a meaningful
picture of the world
- Different perceptions come from:
- selective attention: screen out most information we are exposed to
- selective distortion: retaining information in support of what we believe in
- selective retention: remember good points of a brand we favor and forget good points of competing brands
- Learning  changes in behavior that come from experience. Behavior is mostly learned. Positive brand
experience = buying again
- Beliefs  descriptive thought that a person holds about something. Based on knowledge, opinion, faith.
- Attitudes  describes a person’s relatively consistent evaluations, feelings and tendencies towards an
object or idea. Example: “American food is unhealthy”
- Example of application of marketing to change the market’s attitude: Spanish ice cream makers try to
change the attitude towards seasonal consumption of ice cream (attitude: “ice cream is for the summer”

3. Buying Decision Behavior

TYPES
a) High involvement – Significant difference between brands  COMPLEX BB
- Example: laptop
b) High involvement – Few differences between brands  DISSONANCE – REDUCING BB
- Example: carpet
c) Low involvement – Significant difference between brands  VARIETY SEEKING BB
- Example: cookies (it happens when one is seeking to vary from the usual)
d) Low involvement – Few differences between brands  HABITUAL BB
- Example: salt

- High involvement when: expensive, risky, not frequent.

- Leading (big) brands encourage HABITUAL BB by dominating shelf space, keeping them fully stocked
- Minor (smaller) brands encourage VARIETY SEEKING BB by offering lower prices, special deals, etc.

4. Buyer Decision Process

A- Need recognition  consumer recognizes a need or problem.

- Can be stimulated by: internal stimuli (person’s normal needs, hunger) or external stimuli (from an advert
or conversation)
B- Information search  happens if the buyer has time and motivation to search for more information. Info
can come from these sources:
- Personal: family, friends
- Commercial: advertising, sales-people
- Public: social media, reviews
- Experimental: product use/ experience with the product
C- Evaluation of alternatives  using information to evaluation alternative brands in the choice set
(consumers may go through a logical reflection, or they may buy on impulse)
D- Purchase decision  buyer’s decision about which brand to purchase
- Purchase intension: different from purchase decision, affected by attitudes of other people or unexpected
situational factors
E- Post-purchase behavior  buyers take further action after purchase based on their satisfaction of
dissatisfaction
- Satisfaction depends on consumers expectations and perceived performance of the product
 5. Buyer Decision Process for NEW products
- New product = good or service perceived by a potential consumer as new
- Adoption process = process through which and individual passes from first hearing about an innovation and
final adoption.
- Adoption = decision of the individual to become a regular user of the product
ADOPTION PROCESS
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption
- Individual Differences in Innovativeness  come from individual differences in the availability to test new
products. The innovative company should analyze characteristics of the innovators and early adopters.
a- Innovators = adventurers, they try new ideas with risk
b- Early adopters = guided by respect, adopt new ideas carefully. Leaders.
c- Early mainstream = not leaders, but adopt new ideas earlier than average. They are calculators.
d- Late mainstream = skeptical. Adopt when innovation has already been proven by the majority.
e- Lagging adopters = love tradition, reject change, embrace innovation only when it becomes tradition.
Rate of adoption
1- Relative advantage: degree to which innovation appears to be better
2- Compatibility: degree to which it conforms to the values of potential buyers.
3- Complexity: degree of difficulty understanding
4- Divisibility: degree to which innovation can be tested in a limited way.
5- Communicability: degree to which the results of using the innovation can be observed and described to
others.

UNIT 4 - CUSTOMER VALUE-DRIVEN MARKETING STRATEGY: CREATING VALUE FOR TARGET

CUSTOMERS

1. Customer-Driven Marketing Strategy

Which customers will we serve?
- Segmentation: divide the market into smaller segments.
- Targeting: select the segment or segments to enter.
How will we serve them?
- Differentiation: differentiate the marketing offering to create superior customer value
- Positioning: position the market offering in the minds of target customers

2. Market Segmentation
- Segmentation  dividing a market into smaller segments with distinct needs, characteristics, or behavior
that may require different marketing strategies or mixes.
- Segment  a group of customers who share distinctive needs, characteristics and behaviors and who
respond in the same way to a certain set of marketing stimuli.
TYPES
A- Segmenting CONSUMER markets
a- Geographic  divides into geographical units (nations, regions, states, countries, cities)
b- Demographic  divides by age, gender, family size, income, occupation, education, religion.
c- Large graphic  divides based on lifestyle or personality characteristics
d- Behavioral  divides based on knowledge, attitudes, uses or responses to a product or occasions
(seasons)
- Multiple segmentation criteria help identify smaller and more homogeneous segments

B- Segmenting INTERNATIONAL markets

 a- By countries or regions  geographic (grouping by region), economic factors (income levels and
economic development), political and legal factors (government stability and regulations), cultural
factors (language, religion)
b- By needs and buying behaviors across countries (intermarket segmentation)  it divides
consumers into groups with similar needs and buying behaviors even though they are located in
different countries.

3. Marketing Targeting
Targeting  selecting the market segment the company decides to serve.
Steps:
A- Evaluating Market Segments
1- Size and growth
2- Structural attractiveness  Porter’s 5 Forces Model:
o More competition = less attractive
o More Substitutes = less attractive
o Purchasing power = it conditions the marketing effectiveness
o Power from suppliers
3- Company objective and resources
o Goals: the segment should be discarded if it doesn’t fit the company’s long-term goals
o A company should target a segment for which it has resources, capabilities, strengths and
weaknesses.
B- Selecting Target Market Segments and Strategies
Types of Marketing Strategies (from most broad to most narrow)
a- Undifferentiated/ mass marketing: ALL buyers, ONE segment.
o ignoring segments and presenting a unique offer to the entire market.
o Focuses on what’s common rather than in the differences.
o Low costs but hard to satisfy the clients’ needs.
o Competing with focused/specific companies.
o Growing heterogeneity of the market: makes mass marketing hard to apply.
b- Differentiated/ segmented marketing:
o marketing mix #1 for segment #1
o marketing mix #2 for segment #2
c- Concentrated marketing: ONE attributes
d- s in ONE/FEW small segments.
o Niche: very specific group usually not served or ignored by large companies. (example: vegans,
celiac)
o Good for companies with limited resources
o Good to achieve a strong position in the market
o Need to specialize and know the customer of the segment very well
o Risk: the segment falls into decline/ face competition.
e- Micromarketing:
o Tailoring products and marketing programs to the needs and wants of specific people and local
customers segments.
o Local marketing  Tailoring products and marketing programs to the needs and wants of local
customers segments. (cities, neighborhoods, stores)
o Individual marketing  Tailoring products and marketing programs to the needs and preferences
of individual customers. (one-to-one marketing, mass customization, markets-of-one marketing)
o Disadvantage  high costs (reduces economies of scale)

Choosing a Marketing Strategy (what to consider)

- Company resources
- Product variability degree
- Stage in the product life cycle (is the product new?)
- Market variability (differences between segments)
- Competitor strategies
- Socially responsible marketing

4. Differentiation and Positioning

- The company has a value proposition based on differentiation and positioning.

A- Differentiation  making the offering different from competitors to create superior value
B- Positioning  the way the product is defined by target consumers on important attributes and the place the
product occupies in consumer’s minds relative to competing products.
- A product’s position is a complex set of perceptions, impressions and feelings that consumers have for the
product compared with competing products.
- Positioning/ perceptual maps: they show consumer perceptions of brands versus competing products on
important buying decisions.

Differentiation vs Positioning
- Differentiation involves making the product or service noticeably different from the competition so
consumers can recognize its distinctive properties or features more easily.
- Positioning is about establishing the product or service in the minds of the target consumers.

Brand Positioning
a- Choosing a position
1- Identifying a set of possible competitive advantages
o Sources of competitive advantage: product, service, personnel, channel, image.
2- Choosing the right competitive advantages
o A company should only promote one difference, or two that are compatible.
o The difference should be important, distinctive, superior, communicable…
3- Selecting an overall value proposition
o Brand’s value proposition: full mix of benefits on which a brand is differentiated and positioned. It
should answer: “why should I buy your brand?”
4- Developing a positioning statement
o Position statement: it summarizes company or brand positioning.
o It depends on benefits and price (more for more, more for less, less for less)
b- Communicating and delivering the chosen proposition
- The marketing mix should support the proposition
- The proposition should be communicated to the target audience

UNIT 5

PRODUCT

1. Concepts and Types of Product

- Product = anything that can be offered to a market for attention, acquisition, use or consumption that might
satisfy a want or need.
- A product can be a good, a service, a place, an idea, an experience.
- Service = it is a form of product that consists of activities, benefits or satisfactions offered for sale. They
are intangible and don’t result in the ownership of anything.
- Experience = they represent what the purchase of the product or service is going to do or the customer,
beyond the good or service.
- Market offering = it includes both tangible goods and services (with experiences)

Levels of a product
 1. Core customer value (core benefit)  the need that it is satisfying. What is the customer really
buying?
2. Actual product  brand name, features, packaging, design and other characteristics
3. Augmented product  the additional services and benefits it offers. It is built around the core benefit
and the actual product.

Product Classifications
a- Consumer product = products and services bought by final consumers for personal consumption.
They can be classified as:
o Convenience (frequent, cheap, low involvement)  toothpaste
o Shopping (less frequent, higher price, more involvement)  television
o Specialty (from strong brand preference and loyalty, little comparison, high price, exclusive
distribution)  Rolex
o Unsought (little awareness, varied price range, unexpected need)  life insurance

b- Industrial product = those products purchased for further processing or for use in conducting a
business. They can be classified as:
o Materials and parts (raw materials, manufactured products, parts sold for industrial use)
o Capital items (industrial products that assist in the production or activities of the industrial buyer)
o Supplies and services (operational supplies, repair and maintenance items, and office services)

Other concepts:
- Organization marketing: “selling” an organization itself. Used to change the attitude towards an
organization. For profit or nonprofit organizations. (ex. Universities)
- Person marketing: used to create/change the attitude or behavior towards particular people (ex. The
president)
- Place marketing: used to create/change the attitude or behavior towards particular places. (ex. Cities,
states, regions)
- Social marketing: using traditional marketing concepts to create behaviors that will create individual and
societal well-being (ex. Sustainability, recycling)

2. Individual product decisions

A- PRODUCT ATTRIBUTES
o Quality: a products ability to satisfy customer needs. It has two levels: performance quality (the
ability of a product to perform its functions) and conformance quality (freedom of defects and
consistency of delivering a targeted level of performance)
o Characteristics: attributes, features the customer likes.
o Style and design: style refers to appearance (modern, traditional, elegant) and design integrates
everything from utility to appearance.

B- BRANDING
o A brand is a name, term, sign, symbol or design that identifies the products or services of one
company and differentiates them from the competition.
o A brand adds value to a product and they represent the perceptions and feelings that consumers
have about a product and its performance.
o Consumers use brands to identify qualities, values and benefits.
o Companies use brands to create what will differentiate them from their competitors.
o Brand equity = the differential effect that knowing the brand name has on customer response to
the product or its marketing.
o Successful brands achieve deep connections with customers.
o Brand strength can be measured by:
o Differentiation (why does it stand out?), relevance (how does it meet my needs?), knowledge (how
much they know about it) and esteem (is it respected?).
o Brand value = total financial value of a brand
 Brand Strategy Decisions
a- Positioning: through  attributes (least recommended level/ can be copied), benefits, or beliefs
and values (more emotional and personal)
b- Name selection  it should be descriptive, easy to pronounce, distinctive, translatable
c- Sponsorship  national brands, store brand (hacendado), licensing (brands that use existing
movies, bands, characters), co-branding (collaborations between brands)
d- Development  types of development strategies:
o Line extension (existing brand and existing product) = all coke types
o Brand extension (existing brand and new product) = milka cookies
o Multi brand (new brand and existing product) = all soft drinks
o New brands (new brand and new product) = unilever derivatives

C- PACKAGING
- Consists of the design and production of the container or packaging of a product
- It must be attractive, innovative, sustainable...

D- LABELING
- Labels and logos
- Helps identify the brand or product
- It informs about the product features
- Create attachment of consumers to the product

E- PRODUCT SUPPORT SERVICES

- Part of the augmented product
- They are not products themselves
- Important competitive advantage and for the consumer’s overall experience
- Example: installation, repair

3. Product Line Decisions

- Product line = group of products that are closely related because they function in a similar manner, are sold
to the same customer groups, are marketed similarly and fall within
- You have to choose length, filling and stretching (downward or upward)

4. Decisions about Product Mix

- Product mix = set of all the product lines and items that company offers for sale
- Product mix dimensions include: width (# of product lines), length (# of items in each product line), depth
(# of product versions), consistency (how closely related)

5. Concept and Classification of Services

- Private sector services: banks, hotels
- Non-profit private sector: museums, schools
- Public sector: firefighters, hospitals
- Productive sector: accountants
- Services are: intangible, inseparable from their providers, variability, perishability
- Service-profit chain  the customer and the front-line employee interact
Types of service markets:
a- Internal marketing: the company should guide and motivate its employees to satisfy the customer.
(Company – Employee)
b- Interactive marketing: quality of services depends on the quality of the interaction between buyers and
sellers (Employee – Customer)
c- External marketing: customer – company.
- Service company should improve on differentiation, service quality, service productivity.

UNIT 6
NEW PRODUCT DEVELOPMENT

- “Marketing is a process by which companies create value for customers and build strong customer
relationships in order to capture value from customers in return.”
- We offer value to customers with products.

How to get a new product?

1) Acquisition (buying a company or a patent, licence to produce)
2) Creating a new product

Challenges:
1. Offer always new products (“new product development”)
2. Follow the different phases (“product life-cycle strategies”)

Products stages: birth to death

Product development
1. Idea generation
Systematic search for new product ideas
Sources:
a. Internal ideas sources: employees. Important to build culture of innovation.
b. External ideas sources: suppliers, distributors, clients. Advantages: Creating a AFOL (Adult fans
community): a roster of costumer ambassador who provides regular input.
CROWDSOURCING: Inviting broad communities of people -customers, employees, independent scientists and
researchers, and even the public at large- into the new product innovation process

2. Idea screening
Screening new product ideas to spot good ones and drop poor ones as soon as possible.
Importance: Product cost rise greatly in later stages: we have to go ahead just with the ideas worth considering.
How:
a. Usually executives re-write the ideas in a standard format that can be reviewed by a new product
committees.
b. Sometimes they add an estimate of market size, product price, manufacturing price, timing.
c. A comparison with general criteria: R-W-W (Real, Win, Worth doing).

3. Concept development and testing

Develop a Product concept: a detailed version of the idea stated in meaningful consumer terms.
Ø Product idea: an idea for a possible product that the company can see itself offering to the market
Ø Development
Ø : the way consumers perceive an actual or potential product
Ø Testing: testing new product concepts with a group of target consumers to find out if the concepts have
strong consumer appeals.
Ø Reactions: help decide if the concept is strong

4. Marketing strategy development

Designing an initial marketing strategy for a new product based on the product concept.
Steps
a. Describes the target market, the planned value proposition, the sales, market-share, and profit goals for the
first few years.
b. Outlines the product’s planned price, distribution, and marketing budget for the first year.
c. Describes the planned long-run sales, profit goals, and marketing mix strategy.

5. Business analysis
 - Review of the sales, costs and profit projections for a new product to find out whether these factors
satisfy the company’s objective
- Companies use the sales and costs figures to analyze the new product’s financial attractiveness.

6. Product development
- Developing the product concept into a physical
- Objective: design a prototype that will satisfy and excite consumers; that can be produced quickly and at
budgeted costs.

Considerations:
a. Usually is done by R&D (often marketers are involved and sometimes clients too).
b. It can take from weeks to years.
c. Moment of truth: it will show if the project can be turned into a workable product

Warnings:
a. Huge jump in investments!
B. Necessity to convey the intended psychological characteristics

7. Test marketing
- The stage of new product development in which the product and its proposed marketing program are tested
in realistic market settings.
- Advantages:
• gives experience to marketers before going to the great expense of full introduction
• gives the opportunity to test the entire marketing program (targeting and positioning, strategy, advertising,
distribution, pricing, branding and packaging, budget levels)
- Warnings:
a. Takes time
b. Highly cost

8. Commercialization
- Final introduction a new product in the market.
 High cost
 Timing is essential

INNOVATION
- is not just the result of some steps but a holistic approach that requires three efforts:

1) Customer-centered effort: we must be focused on finding new ways to solve customer problems and create
more customer-satisfying experiences. (Why? Because companies who
engage costumers in the process have twice the return on assets and triple the growth in operating income)

2) Team-based effort: various company departments work closely together, overlapping the steps in the
product development process to save time and increase effectiveness.

3) Systematic effort: innovation shouldn’t be confined into some areas, but it should create an innovation-
oriented culture.

Advantages of creating an innovation management system:

1. shows the committment of the top management.
2. In turbulent time it could “protect” good ideas.

Product Life-Cycle (PLC) Strategies

 1) Product development: sales are 0 and the company’s investments progressively increase.
2) Introduction: basic version of the product, slow sales growth, heavy expenses of promotion and so
nonexistence profits.
3) Growth: new product features, rapid market acceptance and increasing profits.
4) Maturity: normally is the longest, acceptance achieved by most potential buyers, slowdown in sales,
profits decline (increasing cost of marketing outlays to defend from competitors).
5) Decline: sales fall and profit drops, technology obsolescence (careful on the reputation!).

a. Not all products follow it

b. Is versatile
c. Helps us to understand the difference between
 Style: a basic and distinctive mode of expression
 Fashion: a popular style in a field
 Fads: a temporary period of unusually high sales driven by consumers enthusiasm and immediate product
or brand popularity

Consider public policy issues and regulations regarding acquiring or dropping products, patent protection, product
quality and safety, and product warranties.

If consumers have been injured by a product with a defective design, they could sue manifactures or dealers.

UNIT 7
PRICING: UNDERSTANDING AND CAPTURING CUSTOMER VALUE

PRICE
- the amount of money charged for a product or service
- the sum of all the values that customers exchange for the benefit of having or using a product or service
- essential factor affecting buyer’s choices
- small percentage changes of price can lead to large percentage increase in profit

Marketing mix: price, place, product, promotion

- PRICE is different from other elements of the marketing mix because:
- The only element that produces revenue
- Most flexible
- Pricing is a key strategic tool
- PRICE FLOOR  Lowest price = cost of production
- PRICE CEILING  Highest price = what the consumer think it is worth
- Right price  between these two extremes, it needs to deliver value and profits for the company.

1. MAJOR PRICING STRATEGIES

A- CUSTOMER VALUE-BASED PRICING
- Setting price based on customers perceptions of value
- Customer driven
- Price is considered BEFORE designing the marketing program
- Measuring satisfaction and value
- How can we measure it? Asking, conduct experiments

a- Good value pricing: offering just the right combination of quality and good service at a fair price.
o Everyday Low Pricing: charging constant low prices (no temporary discounts) example: Walmart.
o High-low Pricing: charging higher prices on a daily basis but having frequent promotions and
discounts. Example: Macy’s
b- Value-added pricing: attaches value added features to differentiate a company’s offers and charging higher
pricing.
o It challenges competitors not with lower prices but with value-added features and services that
differentiates their offer.

B- COST-BASED PRICING
- Setting prices based on costs of producing, distributing and selling the product
- Companies that use this strategy, aim to become low-cost producers in their industries.
- It is convenient if the company has competitive advantage over its competitors
- Key: managing the spread between cost and prices.
Types of costs:
- Fixed costs: don’t vary with production or sales level. Example: rent, interest, salaries.
- Variable costs: vary directly with level of production. Example: raw materials, packaging.  If I produce more
units, variable costs will be higher.
- Total costs: sum of fixed and variable costs.
- A company should at least cover its total costs.
- If a company’s cost of production is higher than its competitors, it will put him in a competitive disadvantage
and it will need to charge higher prices or make less profit.

Advantages:
- Sellers are certain about their costs
- Buyers feel it is fair
- No need for frequent adjustments when demand changes
Disadvantage:
- Ignores demand and competitors’ prices.

C- COMPETITION-BASED PRICING
- Setting prices based on competitors’ strategies, cost, prices and offerings.
- Consumers will base value on the comparison of the prices that competitors charge for a similar product.
 Companies have to consider:
- Value perception of my company: if consumers perceive my company as less valuable, I need to change that
perception or just lower my prices.
- Competition: if the market is dominated by large and low pricing companies, it may not be convenient or smart
to face them directly, but to target unserved niches.
- Unserved niches can be reached with value added products and higher priced products, because of the lack of
supply.

Evaluating competitor’s price changes

2. PRICE ADJUSTMENT STRATEGIES

- Pricing strategies change with lifecycle stage.
A- Introduction stage: it is challenging to set price at this point. Companies can choose between two
strategies:
a- Market-skimming pricing: by high prices initially to skim maximum revenue.
o This only makes sense if the product’s quality and image support its high price, if the buyers want that
product at that price, cost of produce less volume is not so high, the market should be hard to enter.
b- Market penetration pricing: setting a low price on new products to attract a large number of buyers and
reach a high market share.
o It works if the market is price sensitive, production costs must be low and decrease, the low prices
should keep competition away.
B- Discount and allowances
- Discount pricing: reduces prices on purchases during a stated period of time.
- Allowances discount: it lists prices by providing promotional money in return for an agreement to feature the
manufacturer’s products in some way.

C- Segmented pricing: selling a product in two or more prices which’s differences don’t depend on costs.
a- Customer-segment pricing: different prices for different consumers (lower prices for senior citizens, or
students)
b- Product form pricing: different prices for different versions of a product, but not because of cost
differences (business class flight tickets)
c- Location-based pricing: different prices in different locations even if costs is the same. (different prices
for different seats in movie theatres)
d- Time-based pricing: different prices in different seasons, occasions, months, days, etc.
- This strategy is effective if: market is segmentable, segments show a different degree of demand and different
value perceptions, costs of segmenting must not exceed extra revenue, and It must be legal.

D- Psychological pricing: considers the psychology of pricing, not just its economics.
- Reference prices: prices that consumers have in their minds as reference to compare other prices of similar
products.
- Is the 50$/h lawyer worse than the 500$/h lawyer?

E- Promotional pricing: temporarily pricing products below the list price or even below cost, to increase
short-run sales. It aims to move prospective customers over humps that are keeping them from making the
purchase decision.

F- Geographical pricing: used for customers in different parts of the country or the world.

o FOB pricing “free on board”  the customer pays the freight from the factory to the destination
o Uniform-delivered pricing  opposite from FOB, it is the same price plus freight to all customers,
regards their location
o Zone pricing  companies set up two zones where customers within a given zone pay the same price.
o Basing-point pricing  seller select a given city as a base point and charges a freight cost from that
city to the customer.
o Freight absorption pricing  seller absorbs all or part of the freight charges in order to get the desired
business. Used to hold on to increasingly competitive markets.

G- Dynamic pricing: it involves adjusting prices continually to meet the characteristics and needs of
individual customers and situations.
o It has become more popular thanks to the internet.
o Dynamic online pricing benefits buyers and sellers. Sellers can tailor their offers to fit shopper’s
behavior.
o Changing prices according to changes in demand, cost or competitors pricing.
o Online offers can be based on what specific customers search and buy.
o Showrooming: customers go to the store to test the product and then buy it on the internet for less.
H- International pricing: adjusting prices continually to meet characteristics and needs of individual
customers and situations from country to country. (a big mac is cheaper in the US than in Norway)

3. SYNERGY BETWEEN PRICE AND PRODUCT

Internal Factors:
- Company’s overall marketing strategy
- Specific targets
- Marketing mix
- Target costing: start by setting an ideal selling price based on customer value consideration, and then targeting
a cost that will ensure the price is met.
- Pricing strategy has to change when the product is part of a product mix. (when two or more products are sold
together or only work along with another product)
- Product mix pricing strategies:
1- Product line pricing  different prices for various products from the same product line. Management must
determine the price steps to set between the various products in line. Example: junior skis in the ski line.
2- Optional product pricing  takes into account optional or accessory products along with the main product.
Example: extra icemakers in refrigerators.
3- Captive product pricing  setting prices for products that must be used along with the main product. They
are usually sold for more, and the main product is sold for less. Example: gillete razors and its replacement
cartiges.
4- By-product pricing  sets a price for by-products in order to make the main product’s price more
competitive. If getting rid of by-products generated in the production of a product is costly, selling these
by-products will make the price of the main product more competitive. Turning trash into cash.
5- Product bundle pricing  combining several products and offering the bundle at a reduced price. Example:
fast food combos. It helps promote the sale of products that consumers don’t usually buy.

4. FINAL CONSIDERATIONS ON PRICE DECISIONS

- Price elasticity: measure of the sensitivity of demand to changes in price.
- Marketers have to be aware and know the price elasticity.
- Inelastic demand  when demand hardly changes with a small change in price  increase prices
- Elastic demand  when demand changes greatly with a small change in price  lower the price
- The actual economic conditions  boom, recession, inflation, interest rates are factors that affect consumer
spending, their perception of the products price and value and the costs of producing and selling a product.
- You have to be careful when lowering prices, because it is hard for a company to raise its price again.
- Instead of cutting prices  change market focus, add more affordable lines to product mixes, redefine value to
change price perceptions.
- Take into account the government rules
- Pick a price that will give the reseller a fair profit.

 PRICE AND VALUE ARE NOT THE SAME AT ALL.

 VALUE IS DETERMINED BY THOSE WHO CHOOSE TO PAY IT.

UNIT 8
MARKETING CHANNELS: DELIVERING CUSTOMER VALUE.

1. SUPPLY CHAINS AND VALUE DELIVERY NETWORK

- Supply chain: it consists of upstream and downstream partners

- Upstream  set of companies that supply raw materials, components, parts, information, finances and expertise
to create a product or service
- Downstream  the part of the chain that goes from the company to the final consumer which include partners
such as wholesalers and retailers.
- Marketing focuses on DOWNSTREAM
- Downstream partners: marketing channels and distribution channels
- Supply chain  “make and sell” perspective that suggests that the company’s raw materials, production inputs,
and factory capacity are the starting point for marketing planning
- Demand chain  “sense and respond” perspective that suggests that planning begins by identifying the needs
of target customers, and the company organizes a chain of resources and activities according to this.
- Value delivery network  network composed by the company, suppliers, distributors, and customers. This all
work together to improve the performance of the entire system

2. NATURE AND IMPORTANCE OF MARKETING CHANNELS

- Companies create marketing channels or distribution channels to sell goods to final consumers.
- Marketing/distribution channels  set of independent organizations that help make a product or service
available for use or consumption by the consumer or business user.
- Channel decisions affects all elements of the marketing mix
a- Adding value with channel members
b- Efficiency improvements: they make it easy to make good available to target markets. It requires less
transactions.
c- Intermediaries better match supply and demand. They solve the following discrepancies between producers
and consumers:
 1st discrepancy  time and place gaps (location)  companies usually produce in
locations far from consumption centers and consumers demand to have the product in
nearby places.  physical distribution adjustment
  2nd discrepancy  variety and assortment gaps  manufacturers usually produce large
quantities of a small/narrow range of goods and consumers demand small quantities of
wide variety of goods.  accumulation, variety setting and heterogeneity adjustment
Channel functions:
- Information  gathering and distributing information about consumers, producers and other forces in the
marketing environment that are needed for planning
- Promotion  developing and spreading persuasive communications about offers
- Contact  Finding and engaging prospective buyers
- Matching  shaping offers to meet buyer’s needs.
- Negotiation  reaching an agreement on price and other terms
- Physical distribution  transportation and storage of goods
- Financing  acquisition and use of funds to cover costs of the channel work
- Risk taking  assuming the risks of carrying out the channel work.

- Channel level: a layer of intermediaries that bring producers closer to final buyers
- Producer and consumers are both part of the channel.
- Number of intermediary levels  length of the channel
- Higher level = less control and greater channel complexity
Levels:
1- Direct channel (0-level)  producer – consumer
2- Indirect channel (1-level)  producer – retailer – consumer
3- Indirect channel (2-level)  producer – wholesaler – retailer – consumer

3. CHANNEL BEHAVIOR AND ORGANIZATION

- Distribution channels are complex behavioral systems in which people and companies interact to accomplish
individual, company and channel goals
- Each channel member plays a specialized role in it.
- Example: ford. The dealer depends on ford’s designs, and ford depends on the dealer to attract customers.
- The success of the channel depends on the success of each member of the channel.
- This don’t usually happen; members don’t have a broad view of the channel as a whole  CHANNEL
CONFLICT!!

Channel conflicts:
a- Horizontal  occurs among firms at the same level of the channel
- Example: ford distributor in NYC complains that other nearby ford distributor is offering lower prices.
- Example: pizza franchise complains that other store offers lower quality ingredients and services that affect the
whole image of the franchise
b- Vertical  occurs between different levels of the same channel (it is more common)
- Example: Estée lauder created a website to sell their Clinique brands and the Dayton Hudson department store
had to reduce the space and sales of this product
- Example: a company offers aggressive online discounts and physical sales of retailers go down.

Channel organization (types)

A- CONVENTIONAL DISTRIBUTION CHANNELS: they consist of one or more independent producers,
wholesalers and retailers.
- Each member tries to maximize its own benefits
- No leadership figures

B- VERTICAL MARKETING SYSTEM (VMS): consists of producers, wholesalers, and retailers, acting as a
unified system
- One channel member owns the other
- One channel can have a contract with the others
- It can be dominated by either the producer, wholesaler or retailer
Three types:
- Corporate VMS: it integrates successive stages of production and distribution under single ownership. Channel
ownership is established through common ownership.
- Example: ZARA is the manufactures and also the owner of the retailing stores.
- Example: APPLE owns its apple stores in which they sell their products.
- Contractual VMS: consist of independent firms at different levels of distribution that join together through
contracts to obtain more economies or sales impact than each could achieve alone
- Channel members coordinate their activities and manage conflict through contractual agreements. Most
common: franchise organization.
- Example: MCDONALDS Is a great example of a franchise organization, they are all very similar and offer the
same products and service.
- Administered VMS: leadership is assumed not through common ownership or contractual ties but through the
size and power of one or a few dominant channel members.
- Manufacturers have the power  they can obtain strong trade cooperation and support from resellers. Example:
P&G and head and shoulders, gillete, etc.
- Large retailers have the power over the manufacturer  can exert strong influence on the many manufacturers
that supply the products they sell. Example: Walmart.

C- HORIZONTAL MARKETING SYSTEM: channel agreement in which two or more companies at one level
join together to follow a new market opportunity
- Companies combine financial, production or marketing resources to accomplish more than one of them alone
- Joining forces with competitors or noncompetitors
- Collaborations that may or may not be temporary
- Example: Starbucks inside target and McDonald’s inside Walmart.
- Example: Nike and apple collab for the apple watch.

D- MULTICHANNEL DISTRIBUTION SYSTEM: system in which a single firm sets up two or more
marketing channels to reach one or more customer segments.
- One firm – two+ channels
- The firm establishes two or more distribution channels
- Very common for big companies.
- Examples of different distribution channels a single firm can use: internet, retailer, dealers, sales force.
- Example: bakeries can sell their products in their own stores, online and through a retailer.
- Advantages  greater presence in the market and greater adaptation to the customer’s way of buying.
- Disadvantage  competition between channels and control problems.

Changing channel organization

- Changes in technology
- Explosive growth of direct and online marketing
- Disintermediation: cutting out the marketing channel intermediaries by product or services producers or the
displacement of traditional resellers by radical new types of intermediaries.
- Example: online shopping is replacing in-store shopping
- Example: Netflix is replacing video rental stores

4. CHANNEL DESING DECISIONS

What is the best channel for the company?
To make channel design decisions a company needs:
1- Analyzing consumer needs
2- Setting channel objectives
3- Identifying major alternatives
4- Evaluating the major alternatives

1- Analyzing consumer needs

 how do consumers want to buy?
Examples:
- Discount retailing: consumers accept lower service levels in exchange for lower prices
- Expensive supermarkets: some supermarkets position themselves on higher service levels and customers are
willing to pay the higher prices

2- Setting Channel Objectives

- Channel objective: minimize total costs
- Ask: what can the company perform by itself and what can it leave in the hands of intermediaries?
- Ask: does the company want to compete in the same stores as its competitors or in nearby stores?
Factors that influence channel objectives:
- Characteristics of the company
- Product characteristics
- Characteristics of intermediaries
- Competitors’ characteristics
- Environment characteristics

3- Identifying Major Alternatives

- A company should identify: types, number and responsibility of channel members,
a- Types of intermediaries: NO intermediaries, retailers, resellers, distributors, importers
- More types = less control but reaching more types of buyers
b- Number of intermediaries
- Intensive distribution: stock products in as many outlets as possible
- Selective distribution: the use of more than one but fewer than all of the intermediaries who are willing to carry
a company’s products
- Exclusive distribution: the producer gives only a limited number of dealers the exclusive right to distribute its
products.
c- Responsibilities of channel members
- The producer and the intermediaries need to agree on the terms and responsibilities of each channel member 
price policies, conditions of sale, territory rights and services to be performed by each party.

4- Evaluating Major Alternatives

Main criteria to evaluate:
a- Economic criteria: likely sales, costs and profitability of the different alternatives
b- Control criteria: more control is better
c- Adaptability criteria: it should want to keep the channel flexibility to adapt to environmental
changes.

Designing International Distribution Channels

- Distribution systems vary for each country
- The design should allow adapting the company’s strategies to the existing in each country
- Example: in brazil there are thousands of self-employed vendors selling nestle products on door-to-door carts

5. CHANNEL MANAGEMENT DECISIONS

1- Selecting channel members.
Best characteristics:
- Number of years in the activity
- Product lines they work with
- Economic solvency
- Degree of cooperation
- Growth potential
2- Managing and motivating channel members
- Motivation is necessary for good performance
- Strong partner relationship management between companies and partners is important
- Motivation is achieved through: cooperative relationships, long-term collaborative relationship and distribution
scheduling.
 3- Evaluating channel members
- Period evaluations based on sales, existence level, delivery time, customer service
- Companies should recognize and reward good performing intermediaries and replace those that don’t perform
well

6. MARKETING LOGISTICS AND SUPPLY CHAIN MANAGEMENT

- Marketing logistics/ physical distribution  involves planning, implementing and controlling physical flow of
goods and services.
- This involves supply chain management
- Supply chain management  managing upstream and downstream value-added flow of materials, final goods
and related information among suppliers, the company, resellers and final consumers.
Major logistics functions:
a- Warehousing
b- Inventory management
c- Transportation
d- Logistics information management
- Integrated logistics management  emphasizes on teamwork inside the company and among marketing
channels
a- Cross-functional teamwork inside the company – to harmonize decisions
b- Creation of logistics collaborators – improve channel-wide distribution
c- External logistics providers – develop functions

UNIT 9
RETAILING AND WHOLESALING

1. TYPES OF RETAILING
- Retailing: all the activities in selling products or services directly to final consumers for their personal,
nonbusiness use.
- Retailers  businesses whose sales come primarily from retailing
- Manufacturers and wholesalers are retailers.
- Retailing plays an important role in marketing channels
- Retailers play an important role in connecting brands with consumers in the final phases
- “the last mile”  final stop in the consumer’s path to purchase. The distance a consumer travels between an
attitude and an action
- Shopper marketing  this concept focuses the entire marketing process on turning shoppers into buyers as
they approach the point of sale, whether during in-store, online or mobile shopping.
- “zero moment of truth”  when consumers begin the buying process by searching for and learning about
products online.
- Omni-buyers  make little distinction between in-store and online shopping, and whom path to a retail
purchase runs across multiple channels.
- Omni-channel retailing  the key to this is to integrate channels for a seamless buying experience and
creating a single shopping experience. It requires blending in-store, online, mobile and social media channels.
RETAILER CLASSIFICATION
Retailers can be classified according to various characteristics:
1. Amount of service they offer
a- Self-service retailers  they are willing to perform their own locate-compare-select process to save
money. Example: Walmart.
b- Limited-service retailers  provide more sales assistance because they carry more shopping goods
about which customers need more information. Example: jc penney
c- Full-service retailers  assist customers in every phase of the shopping process, resulting in higher
costs and for that, higher prices. Example: specialty stores
2. Product Line length/ assortment
a- Specialty stores  narrow product lines with deep assortments. Increased use of segmentation
b- Department stores  wide variety of product lines. They sell goods of many varieties belonging to
different departments. Service is their key differentiation factor
 c- Supermarkets  generally sell food and household items. Currently facing slow sales growth due to
slower population growth and increased competition.
d- Convenience stores  small stores that carry a limited line of high-turnover convenience goods
e- Superstores  much larger than regular supermarkets and offer a large assortment of routinely
purchased food, nonfood items and services. Example: Walmart, target
 Category killers  giant superstores that carry a deep assortment of a particular line
(best buy, petsmart)
f- Service retailers  the product is a service

3. Price
a. Discount store  sells standard merchandise at lower prices (lower margins for selling higher
volumes)
b. Off-price retailers  they buy at less-than-regular wholesale prices and charge customers less than
retail. Three main types:
 Independent: independently owned and run, or divisions of larger retail corporations.
Example: marshalls
 Factory outlets: manufacturer-owned and operated stores by firms. Example: Levi’s
 warehouse clubs: also known as membership warehouses, they operate in huge
warehouse facilities and offer few drills. They offer ultralow prices. Range from
necessities to extravagances. Example: costco
4. Organization
a) Corporate chains  two or more outlets that are commonly owned and controlled. They buy large
quantities at lower prices and gain promotional economies. Their advantage over independents is that
they can hire specialist to be in charge of prices, inventory control, merchandising.
Example: macy’s and cvs
b) Voluntary chains  wholesale-sponsored groups of independent retailers that engage in group buying
and common merchandising.
c) Retailer cooperatives  group of independent retailers that band together to set up a joint-owned,
central wholesale operation and conduct joint merchandising and promotion efforts. These
organizations give independents the buying and promotion economies they need to meet the prices of
corporate chains.
d) Franchises  contractual associations between a manufacturer, wholesaler or service organization
(franchisor) and independent business people (franchisees) who buy the right to own and operate units
of the franchise. It is normally based on some unique product or service; method of doing business.

2. RETAILER MARKETING DECISIONS

- First: retailers must segment and define their target markets
- Second: decide how they will differentiate and position themselves in these markets.
- Those who try to sell something for everyone end up satisfying no market well.
- Success: define target market and position strongly.
- Third: retailers must decide on a retail marketing mix (product/service, price, promotion, place)
- Retailers are more than just an assortment of goods.
- Retailers should stablish a price policy according to positioning, target market, competition. They should
combine the five promotion tools (advertising, personal selling, sales promotion, PR and direct marketing) to
reach consumers. They should also select an accessible location.

How can a retailer create value for its target retail customers?
1- Retail strategy  segmentation + targeting, store differentiation and positioning
2- Retail marketing mix  product and service assortment + retail prices + promotion + distribution/location

Establishing Marketing Mix

A- Product Assortment and Service decision
a- Product assortment  It should differentiate it while matching target shoppers’ expectations
 1st strategy: offer a highly targeted product assortment
 2nd strategy: offering merchandise that no other competitor carries.
 b- Services mix  this mix can help set one retailer apart from another. A retailer can achieve differentiation
through the services they offer.
c- Store’s atmosphere  retailers want to create a unique store experience, that suits the target market and
moves customers to buy.
 Experiential retailing: environments to be experienced by the people who shop in
them.

B- Price
- Price policy must fit the target market and positioning, product service and assortment, competition, and
economic factors.
- Two options: HIGH markup on lower volume or LOWER markup on higher volume.
- Specialty stores usually go for the high markup on lower volume
- Mass merchandisers/ discount stores go for the lower markup on higher volume
- Good-value pricing  offering just the right combination of quality and good service at a fair price.
 Everyday Low Pricing: charging constant low prices
 High- low pricing: higher daily prices but frequent promotions

C- Promotion
- Combination of 5 promotion tools:
a- Advertising: in newspaper and magazines
b- Personal selling:
c- Sales promotion: in-store demonstrations, displays, sales
d- Public relations: special events, blogs, newsletters
e- Direct marketing: websites and catalogs, ads and videos, social media, blogs, email

D- Place
- Retailers should choose locations that are accessible to the target market in areas that are consistent with the
retailer’s positioning.
- Shopping center: group of retail businesses planned, developed, owned and managed as a unit; they can be:
 Regional shopping center/mall: largest one, mini-town, has department stores. It
attracts customers from a wide area. (50-100 stores)
 Community shopping center: contains a branch of a department store or a variety
store, a supermarket, specialty stores, professional offices, and sometimes a bank. (15-
50 stores)
 Neighborhood shopping centers or strip malls: contain supermarket, discount stores,
and service stores. Located near customers. (5-15 stores)
 Power centers: newer. A huge unenclosed shopping center consisting of a long strip of
retail stores
 Lifestyle centers: smaller, open-air malls with upscale stores, convenient locations and
nonretail activities (playground, hotel, dining, skating rink)

3. RETAILING TRENDS AND DEVELOPMENTS

- Nowadays customers have cut back in their spending, which has been beneficial for discount stores.
- Although these economic difficulties may be beneficial, retailers must be careful of not damaging their long run
image and position when lowering their prices.
New retailing trends:
- rise of megaretailers  rise of mass merchandisers and specialty superstores, formation of vertical marketing
systems. They have superior information systems, buying power, and larger selection.
- rapid growth of direct, online and social media retailing  this has led to an increase in competition for all
types of retailers, who now all sell the same product at similar prices
- importance of retail technology  it provides better forecasts, inventory control, electronic ordering, transfer of
information, scanning, online transaction processing, etc. on of the most important advances is in the way
retailers connect with customers.
- a surge in green retailing  increased adoption of environmentally sustainable practices.
- global expansion of major retailers  retailers are expanding internationally to escape saturated home markets.
This implies the challenge of dramatically different retail environments when crossing countries.

4. WHOLESALING
- It includes all activities involved in selling goods and services to those buying for resale or business use.
- Wholesalers buy from producers and sell to retailers, industrial customers or other wholesalers.
- Usually unknown by final consumers

Types of wholesaling
1- Merchant wholesalers: take possession of the goods and account roughly for 50 percent of all wholesaling.
Include full-service wholesaling and limited-service wholesaling.
2- Brokers and agents: don’t take possession of the goods and are paid a commission for aiding companies in
buying and selling. They specialize by product line or customer type. Brokers bring buyers and sellers
together and assist in negotiations. Agents represent buyers and sellers. Manufacturer agent is the most
common type of agent wholesaler.
3- Manufacturers and retailers branches and offices: wholesaling operations conducted by non-wholesalers to
bypass the wholesalers.

Functions of wholesaling
a- Selling and promoting  the wholesaler helps manufacturer reach many small customers at low cost
b- Buying and assortment building  they select items and build assortment needed by customers
c- Bulk breaking  they buy in large quantities and break into smaller lots of customers.
d- Warehousing  they hold inventory and therefore reduce the customers’ inventory cost and risk
e- Transportation  they provide quick delivery due to its proximity to the buyer.
f- Financing  they provide credit and finance suppliers. They order early and pay on time
g- Risk bearing  they absorb risk by taking title and bearing the cost of theft, damage, spoilage and
obsolescence.
h- Market information  they provide information to suppliers and customers about competitors, new
products, and price developments
i- Management services and advice  they help retailers train their sales clerks, improve store layouts, and
set up accounting and inventory control systems.

Wholesaling Marketing Decisions

- To create value for target customers they need:
a- Wholesale strategy: segmentation + targeting, and differentiation and service positioning
b- Wholesale marketing mix: product/service assortment, wholesale prices, promotion, distribution/location

- Wholesalers cannot serve everyone. They need to choose a target market and differentiate and position
themselves strongly and effectively.
- They should choose target market according to customer size, need, type, etc.
- Their objective is to identify the most profitable customers, design stronger offers and build better relationships
with them.

Marketing Mix Decisions:

a- Product  now they are cutting number of lines they carry and choose to carry only the more profitable
one. A company should find the mix of services most valued by their target customers.
b- Price  they usually markup the cost of goods by a standard percentage. (example: 20%)
c- Promotion  this is critical for success. They should develop an overall promotion strategy and make
greater use of supplier promotion materials and programs
d- Distribution  location has to be chosen carefully. Today’s large progressive wholesalers have reacted to
rising costs by investing in automated warehouses and IT systems.

Today’s challenge for wholesalers  the need for ever-greater efficiency. Recent tighter economic conditions
have led to demands for even lower prices.
 Progressive wholesalers constantly watch for better ways to meet the changing needs of their suppliers and
target customers.
They recognize that their only reason for existence comes from adding value, which occurs by increasing the
efficiency and effectiveness of the entire marketing channel. As with other types of marketers, the goal is to
build value-adding customer relationships.

 Need for greater efficiency

 Value-adding customer relationships
 Increase in customer demand for services
 Increase in use of technology to boost productivity

UNIT 10
ENGAGING CONSUMERS AND COMMUNICATING CUSTOMER VALUE: INTEGRATED MARKETING
COMMUNICATION STRATEGY

1. PROMOTION MIX

- Also called marketing communications mix

- Consists of advertising, sales promotion, public relations, personal selling and direct and digital marketing
tools
- Used to engage consumers, communicate customer value and build customer relationships.

a. Advertising
- Paid form of nonpersonal presentation and promotion of ideas, goods or services.
- Example: radio, tv, magazines, billboards

b. Sales promotion
- Short-term incentives to drive the sale of a product or service
- Example: discounts, coupons

c. Public relations
- Activities designed to engage the company’s audiences and engage with them.
- Example: press release, sponsorship activities, events

d. Personal selling
- Personal customer interactions by the firm’s sales force to engage customers, make sales and build
customer relationships.
- Example: sales presentation, fairs, incentive programs

e. Direct and digital marketing

- Engaging directly individual consumers and customer activities to both obtain an immediate response and
build long lasting customer relationships.
- Example: catalogs, telemarketing, emails, phone, social media.

 the 4 Ps are also important!

 shape, design, price and packaging also communicate something to customers.

2. INTEGRATED MARKETING COMMUNICATIONS

a. One way communication model

 b. New marketing communication model: Communication in all directions

Causes for the new marketing communication model:

A. Consumers are changing: due to the digital era, more information, more control over the message, more
tools to search by themselves.
B. Strategies are changing: mass communication loses relevance, fragmented markets, more focused
relationships with micro markets, more personalized and interactive content
- advances in digital technology have changed the way we communicate.
C. Companies spend more on digital media rather than on mass media.
D. Change in the type of consumption.

Why do we need Integrated Marketing Communication?

- Customers are bombarded by commercial messages from many sources
- Messages may differ from one source to another, but consumers will relate all the different messages into a
single message of the brand.

INTEGRATED MARKETING COMMUNCIATION)

- Groups all communication sources in an organized way
- Helps convey a clear, coherent and attractive message about the organization and its brands.
- identifying the target audience
- Shaping a well-coordinated promotion program
- Achieved through a carefully blended mix of promotion tools (adv, personal selling, PR, direct marketing,
sales promotion)

3. DEVELOPING EFFECTIVE MARKETING COMMUNICATION

- Customer touch point: interaction between your business and a costumer. (before, during or after the
purchase)

A) Elements in the communication process

- Sender: sends the message
- Receiver: receives the message
- Message: set of symbols transmitted
- Media: channel through which the message moves
- Encoding: process of creating the message
- Decoding: process in which message is received and it is assigned a meaning.
- Response: reactions of the receiver after being exposed to the message
 - Feedback: part of the response that is sent back to the sender.
- Noise: unplanned distortion that may happen during a communication process.

Successful communication process:

- Encoding and decoding processes match.
- Messages, media and feedback channels must be based on the characteristics of the receiver.

B) Steps in developing an effective communication

1. Identify target audience
- Potential customers, current users, influencers or decision makers
- It can be individuals, groups, general public, special audience

2. Determine communication objectives

- Identify the stage of the willingness to buy the target audience is
- Different stages of the willingness to buy: awareness, knowledge, liking, preference, conviction and
purchase.

3. Designing the message

- The message should achieve AIDA: Attention, Interest, Desire and Action
- Three orientations: rational argument, emotional argument or moral argument
- Structure: explicitness, how to present the arguments, one-sided or two-sided arguments
- Message format: slogan, position of the message, color, sound, shape, size.

4. Choosing communication channels and media

- Personal communication channels: direct communication between people (WOM, Buzz Marketing or
Independent experts)
- Nonpersonal communication channels: no personal contact or feedback (mass media, atmosphere, events)

5. Selecting the message source

- Persuasive source  most credible

6. Setting the total promotion budget

- Affordable method
- Percentage-of-sales method
- Competitive-parity method
- Objective-and-task method

7. Shaping the overall promotion mix

8. Measuring the results

UNIT 11
COMMUNICATION STRATEGY: ADVERTISING AND PUBLIC RELATIONS

1. ADVERSTISING
- Any paid form of nonpersonal presentation and promotion of ideas, goods or services
- Used by commercial companies or nonprofit organizations
- It attracts, informs and persuades.

Major Advertising Decisions

 a. Objectives:
- A specific communication task that has to be accomplished with a specific target audience during a specific
period of time
- It can be classified as follows:
- Informative: used to introduce a new product category
- Persuasive: most used, it can be comparative
- Reminder: brief, used to keep a product in the minds of the consumers. Used in maturity stage.
b. Budget:
- We have to consider 4 main factors:
- Stage in the product life cycle  new products need more advertising
- Market share  the size of the company
- Competition  more competition = more advertising
- Degree of product differentiation  less differentiation = more advertising
c. Message:
- Advertising Strategy  strategy by which the company accomplishes its objectives
Elements of the message:
- Strategy: derived from the positioning strategy of the company
- Creative concept: guides other choices and gives life to the strategy (appeals to be used: meaningful,
believable and distinctive)
- Message execution: turn the idea into an actual ad. (examples to choose from: slice of life, lifestyle,
fantasy, mood or image, musical, personality symbol, technical expertise, scientific evidence, testimonial
evidence)
- Choose: tone, words and format
d. Media:
- Vehicles through which advertising messages are delivered to the target audience
- Steps:
- Determining reach, frequency, impact and engagement.
- Choosing major media type (print ad, television, radio, outdoor, online)
- When choosing the media, consider costs, quality, engagement and editorial quality of the vehicle.
- When choosing timing, consider product seasonality and ads pattern
e. Evaluation:
- Effect on communication objectives
- Effect on sales and profit

Other Advertising Considerations

a. Advertising organization
- External advertising agencies
- Advertising agency: marketing services company that helps plan, prepare execute and evaluate
b. Decisions on international advertising
- Trends, standardization., global strategies

2. PUBLIC RELATIONS
- Objective: engage the company’s various publics (consumers, investors, media, communities)
- Main functions: press relations, product and brand publicity, lobbying, investor relations and development.
Role and Impact
- Messages of the PR are more credible than advertising
- Costs are lower
- Needs planning of how and when
- Combined with other activities within the integrated communication program
Major Public Relations Tools
- News, special events, written materials, videos, activities, prescriptions, internet content.
UNIT 12
COMMUNICATION STRATEGY: PERSONAL SELLING AND SALES PROMOTION

1. PERSONAL SELLING
- It is the personal presentations by the firm’s sales force for the purpose of engaging customers, making
sales, and building customer relationships
- Good salespeople  listen to customers, advise them and organize the work of the company to solve their
problems
- Salesperson: an individual who represents a company to customers by performing one or more of the
following activities = prospecting, communicating, selling, servicing, information gathering, and
relationship building
- They can be order taker (behind the counter)
- Or they can be order getters (creative sellers, social sellers, relationship building)
- It involves a two-way communication between the seller and the customers.
- It can be face-to-face, by phone, by email, video, etc…
- B2B company  important role with customers
- B2C company  important role with intermediaries (wholesalers and retailers)
- Salesforce: a link between the company and its customers, achieving value for consumers and benefit for
the company through: representation of the company to customers, customers to company, collaboration
between the rest of the marketing department

1.1 MANAGING THE SALES FORCE

- Process of analyzing, planning, implementing and controlling sales force activities.
a- DESIGNING THE SALES FORCE STRATEGY AND STRUCTURE
1. The sales force structure
- Territorial sales force structure: organization that assigns each salesperson to an exclusive
geographic territory in which that salesperson sells the company’s full line.
- Product sales force structure: organization in which salespeople specialize in selling only a
portion of the company’s products or lines.
- Customer (or market) sales force structure: organization in which salespeople specialize in
selling only to certain customers or industries
- Complex sales force structure: when a company sells a wide variety of products to many types
of customers over a wide geographic area, it often combines several types of sales force structure.
(it can be by customer or by territory)

2. Sales force size

- The salespeople of a company are productive and expensive assets of a company
- Common approach to set sales force size:
 Workload approach: classification by homogeneous groups, first determine the desired frequency of
visits, then the average number of visits that a salesperson can make per year and then divide this by total
number of visits per year/average number of visits of a salesperson per year

3. Outside vs Inside Sales Forces

- Outside: salespeople who travel to call on customers in the field
- Inside: salespeople who conduct business from their offices via telephone online and social media
interactions, or visits from prospective buyers.
- In a digital environment  buyers are more receptive to online or telephone contacts rather than personal
contact.

b- RECRUITING AND SELECTING SALESPEOPLE

- Good sales people are important because they generate sales, they have a high replacement cost, more
productiveness.
Characteristics of good salesperson:
- Intrinsic motivation
- Disciplined work style
- Ability to close a sale
- Ability to build relationship with customers

c- TRAINING SALESPEOPLE
- Training for weeks or months
- Continuous training (seminars, meetings)
- Goals of training: knowledge of the company, product, customers, competitors, techniques and control of
their activity

d- COMPENSATING SALESPEOPLE
- Appealing compensation plans attract good salespeople
- Elements of a compensation plan: fixed salary, commissions or bonuses, allowances or extra social
benefits.
- It depends on the objective of the company.
- It motivates salespeople

e- SUPERVISING AND MOTIVATING SALESPEOPLE

1. Supervision
- Goal: help salespeople to work smart
- Through: call plan and time-and-duty analysis
2. Motivation
- Goal: encourage salespeople to achieve their proposed sales force goals
- Organizational climate  feeling about your opportunities, value and rewards
- Sales quotas  standards that states the amount a salesperson should sell
- Positive incentives  sales meetings, contests, awards, prizes, travel

f- EVALUATING SALESPEOPLE
- Sources of information: personal observation, customer surveys and conversations with other salespeople
- Evaluate effectiveness, organization and economic viability

1.2 SOCIAL SELLING

- Using online, mobile and social media to engage customers, build stronger customer relationships, and
augment sales performance.
- Use of digital tools to know about trends, identify potential customers and customers preferences.

1.3 PERSONAL SELLING PROCESS

- It consists of several steps that salespeople should master to gain new customers and obtain orders from
them
Steps:
a- PROSPECTING AND QUALIFYING
- Prospecting: identifying qualified potential customers. Sources: other customers, suppliers, dealers,
noncompeting salespeople, internet
- Qualifying: distinguishing between good and bad customers. Based on things such as: financial capability,
business volume, special needs, location, growth

b- PREAPPROACH, APPROACH AND PRESENTATION

- Pre-approach: Here the salesperson learns about the prospective customer before the call
- Approach: a salesperson meets the customer
- Presentation: salesperson tells the value story to the buyer and shows them the company’s offer

c- HANDLING OBJECTIONS, CLOSING AND FOLLOW-UP

- Handling objections: salesperson clarifies and overcomes any customer objections to buying
- Closing: salesperson asks the customer for an order
 - Follow-up: salesperson follows up after the sale to ensure customer satisfaction and repeat business.

2. SALES PROMOTION
- Short-term incentives to encourage the purchase or sale of a product or service
- Offers reasons to buy the product at that moment
Possible targets:
• Final buyers
• Retail and wholesalers
• Sales force members
• Prescribers
- Promotion congestion: increased used of sales promotion
- It should be temporary, discontinuous and sporadic
- Should be used as frequent consumer marketing programs and loyalty cards

2.1 MAJOR SALES PROMOTION TOOLS

a. For intermediaries  tools: exhibitions, shows, competitions, discounts, samples
b. For salespeople  tools: bonuses, awards, contests, honors
c. For prescriptors  free samples, gifts, seminars, conferences
d. For final consumers  sales, discounts, greater product content for the same price, samples, gifts

UNIT 13
DIRECT AND DIGITAL MARKETING

1. DIRECT AND DIGITAL MARKETING

- They involve engaging directly the targeted individual consumers to obtain immediate response and build
customer relationships
- Objective: tailor offers to the specific needs of a narrow segment or individual buyer
- Can be part of the direct distribution/ direct channel
a. Digital and social media marketing: online, social media and mobile marketing
b. Traditional direct marketing: face-to-face sales, direct-mail, catalog, telemarketing, kiosk
c. Omnichannel retailing: cross-channel experience, a mix of in-store and online shopping.
- Companies can combine these types and ways of marketing

Benefits of direct and digital marketing

- To buyers:
- More convenience and easier access to information
- Direct interaction with sellers
- Sense of brand community
To sellers:
- Lower costs and more efficiency
- Direct messages to small groups
- Direct interaction with consumers
- Feedback from customers
- Immediate marketing or real-time marketing

2. TRADITIONAL DIRECT MARKETING FORMS

a. Direct-mail marketing: sending an offer, announcement, reminder to a person physically
- Example: catalogs, ads, brochures
- Proven success for insurance, travel and clothing industry
- Tangible things that consumers can save
b. Catalog marketing: direct marketing through print, video or digital catalogs that are mailed to
customers, in-store or online
- Digital catalogs are currently trending
- Lower production and shipping costs
- Immediate
- Can be adjusted immediately
- No space limits
- Don’t reach an emotional connection like the physical catalogs
c. Telemarketing: using the telephone to sell directly to a consumer
- Outbound telemarketing: used to sell directly to consumers and businesses
- Inbound telemarketing: to receive orders referred from television and printed ads, direct mail, catalogs
and websites
- Direct-response television marketing: via television, persuasively describes a product and gives a number
to order to
d. Kiosks: information and ordering machines. Used to improve customer shopping experience

3. DIGITAL MARKETING
- Marketing via the internet
A. WEBSITES:
a. Corporate websites: improves brand image, builds relationship (no sales)
b. Marketing websites: engage consumers to move them closer to a direct purchase (sales)
c. Brand community websites: website that presents brand content that engages consumers and creates
a community (interactive content)
- To drive traffic to a website, content should be valuable and attractive
- Bounce rate: lets you know about visitors and their durance on your website

B. ONLINE ADVERTISING
- Advertising that appears while consumers are browsing online
a. SEM (Search Engine Monitoring)  companies purchase search terms from the company that owns
the search engine.
- PPC: Pay per click  The company only pays if consumers click the ad
- Key  choose keywords, can be one word, or a combination of words.
- CPC: Cost per click  each time your ad is clicked using a certain keyword, there is a cost to it. Costs
depend on the keyword.
- There are tools that help you choose the keywords
PPC
- Advantages: speed, easy implementation, position control, brand control, instant updates, access to
analytics.
- But you have to consider CPC, management.
- SEO (Search Engine Optimization  improves the web positioning of a site in search engines, to reach
more visibility and get more visits. It is free.
b. Display ads  most common form of display advertising (banners and pop-ups)
- Can be done through email or social media
- Banners: advertising space placed in a strategic place on a website or blog. It has now evolved from just
images, to videos and gifts.
- Goal of the banner: for the user to click on It to direct them to the website.
- Pop-ups: windows that appear when entering a website. They can be annoying and detracting.
Display advertising can be located as:
- Contextual advertising  ads related to the page content
- Behavioral advertising  uses consumer’s browsing information, like previously visited sites, searches
and viewed ads.

c. Social media ads  ads on social networks

- Main decisions: objective, target audience, where to publish it, budget, format

C. EMAIL MARKETING
- Important to generate traffic on web, increase sales and build customer relationships
- Open rate: percentage of the receivers that actually open the email

D. ONLINE VIDEOS
- Posting digital video content on brand websites or social media platforms
- Videos may be: instructions, PR videos, brand promotions, brand-related entertainment videos
- Viral marketing: digital version of WOM marketing. Attractive videos that are passed along viewers. It is
cheap and has a higher reach.

E. BLOGS
- Online forums where people and companies post their thoughts and other content, usually related to
narrowly defined topics. Useful for reaching consumer communities.

F. SOCIAL MEDIA MARKETING

- Social media: Independent and commercial online communities where people congregate, socialize and
exchange views and information.
- Advantages: targeted and personal, interactive, immediate, low costs, greater capacity of engagement
- Integrated social media marketing: social media must integrate all elements of the company’s strategy, to
create brand-related social sharing and community.
- Each social media platform has its own option to create a business account, through which the company
can promote their website, store and ads.
- Influencer marketing: occurs when companies partner with influencers to increase brand awareness or
conversions among specific target audience

G. MOBILE MARKETING
- Features marketing messages and promotions delivered to on-the-go consumers through their mobile
device
- Goal: attract consumers anywhere at any time in the purchasing process
- Encourages immediate purchase
- Offers truly useful information

4. DIGITAL MARKETING ANALYTICS

- Tools for the analysis of digital marketing results:
a. Website analysis
- Key metrics: audience, acquisition, behavior, conversions
b. Social media analysis
c. Free competitor website data analysis

QUIZLETS:
CHAPTER 1
https://quizlet.com/162028552/principles-of-marketing-kotler-and-armstrong-16e-chapter-1-flash-cards/
CHAPTER 2
https://quizlet.com/322755916/marketing-ch2-flash-cards/
https://quizlet.com/162028723/principles-of-marketing-kotler-and-armstrong-16e-chapter-2-flash-cards/

CHAPTER 5
https://quizlet.com/322882871/marketing-ch-5-flash-cards/

CHAPTER 7
https://quizlet.com/143539100/kotlerarmstrong-principles-of-marketing-marketing-chapter-7-test-flash-cards/

CHAPTER 8
https://quizlet.com/347948972/mktg-ch8-flash-cards/
CHAPTER 9
https://quizlet.com/333450861/mktg-ch-9-flash-cards/
CHAPTER 10
https://quizlet.com/348504712/mktg-ch10-flash-cards/

CHAPTER 11
https://quizlet.com/144144544/test-bank-principles-of-marketing-13e-kotler-chapter-11-flash-cards/

CHAPTER 12
https://quizlet.com/144299432/test-bank-principles-of-marketing-13e-by-kotler-chapter-12-flash-cards/

CHAPTER 14
https://quizlet.com/333496782/mktg-ch-14-flash-cards/

CHAPTER 16
https://quizlet.com/144912873/kotler-principles-of-marketing-ch-16-flash-cards/