Section 3

ANALYZING THE MARKETING ENVIRONMENT

Agenda
• 3.1 Microenvironment
• 3.2 SWOT, TOWS analysis
• 3.3 Macroenvironment
• 3.4 PEST analysis ANALYZIN
G T HE
• 3.5 Responding to the Marketing environment MARKETI
NG
ENVIRON
MENT
MARKETING ENVIRONMENT

The actors and forces outside marketing that affect marketing management’s
ability to:
• Provide values
• Build and maintain successful relationships with target customers.

• Microenvironment: Actors close to the company

• Macroenvironment: The larger societal forces
The Microenvironment
The microenvironment contains 6 major actors that have
important relationships to form the value delivery network.
• The Company
• Suppliers
• Marketing Intermediaries The company , Suppliers,
• Competitors Marketing intermediates,
• Publics Competitors, Publics,
• Customers Customers...
Value delivery network
In making and marketing just one of its many models, the Ford Escape hybrid—Ford manages a huge
network of people within Ford plus thousand of suppliers and dealers outside the company who
work together to give final customers “the most fuel-efficient SUV on the market.
3.1.1 The company
• Company resources and departments have impacts on the
marketing activities and department

• Such as management, finance, HR, R&D, purchasing, operations,

technology, accounting and corporate culture.
3.1.2 The Suppliers
• Provide resources needed to produce goods and services for company.
• Are an important link in the company’s overall customer “value delivery
network”
• Help to create and deliver customer value and must be treated as partners
 Q.3.1: Discuss the effects of supplier actors on the
operation and marketing ability of company in normal
situation and in covid 19 pandemic?
Regarding to global supply chain
3.1.3 Marketing Intermediaries
o Firms that help the company promote, sell, and distribute its
products to final buyers.
o Marketing intermediaries are important partners to performance
optimization.
o 4 types of intermediates: Resellers (wholesalers & Retailer),
Physical distribution firms, Marketing service agencies, and
Financial intermediaries.
3.1.4 Competitors
• Companies must gain a strategic advantage by positioning their
offerings strongly against competitors’ offerings in the minds of
consumers.
• Firms consider its own size and industry position in comparison to
others.
• Conducting competitor analysis is critical for success
3.1.5 Publics
• Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives. 7 types of publics:
o Financial Publics – Influences ability to obtain funds
o Media Publics – Carries news, features, and editorial opinion.
o Government Publics – Government developments or laws
o Citizen-action Publics – May question marketing decisions
o Local Publics – Local and community organizations and people
o General Publics – All the people of an area, their image of the company
is important to buying.
o Internal Publics – Company people whose influence may spill over to
the external.
3.1.6 Customer market
• The most actors in the microenvironment. 5 types of customer market:
o Consumer Markets – Individuals/households that buy goods and
services for personal consumption.
o Business Markets – Buy goods/services for further processing or
for production.
o Reseller Markets – Buy goods/services to resell at a profit.
o Government Markets – government agencies that buy
goods/services for public services or for transferring.
o International Markets – Buyers in other countries, including all the
previous markets.
Activity: Analyzing Microenvironment
Choose a company and work together to analyze their current
microenvironment actors.

• Work in group of 5-7 (on class)

• Highlight the main actors that may have the strong and significant
impacts on the company’s operation and marketing ability.

• Summarize and submit (next class section)

3.2 SWOT ANALYSIS

Positive Negative • Acronym of Strengths, Weaknesses,

Threats and Opportunities

• Created by Albert Humphrey – leader of Stanford

Internal

Strengths Weaknesses University’s project research in the decade of

1970s

• Popular used in strategic business and project

planning.

• Analyze corporate's internal and external

External

Oppotunities Threats environment and resources.

3.2.1 Internal v/s External
• Strengths and Weaknesses

o Are the corporate’s internal factors (HR, Capital, fixed assets,

technologies..)

o Mostly related to current situation

• Opportunities and threats

o Are the corporate’s external factors

o Related to the impacts from the external environments (competitors,

government policies, consumers’ behaviors, partners and market)
Q.3.1: May internal factors be opportunities and threats?
3.2.2 Why do we need SWOT analysis?
• Help decision maker and strategic planner understand clearly about
corporate’s internal/external situation
• Analyze the issues/problems which may lead to success/failure.

• Prevent costly mistakes

3.2.3 When do we need SWOT analysis?

• Changing business direction/perspective
• New product launching/new market entering

• Decision making

• Competition re-evaluation
• New business strategic planning
3.2.4 Strengths

• Things you/your business is good at

• Provide a clear competitive advantages over rivals (competitors)

• Distinctive/core competencies and resources

• Should be protected and built upon.

• Possible strengths: Market share, Technology, Economies of scale,

Leadership, Brand reputation and loyalty, High quality, Financial
resources, R&D..
To identify the strengths, ask…

• What advantages does your company have?

• What do you do better than anyone else?

• What unique or lowest-cost resources do you have access to?

• What do people in your market see as your strengths?

• What factors mean that you "get the sale"?

Q.3.2: In case, your company does not have any strength,
what should you do?
3.2.5 Weaknesses

• Things you/your business lacks or does poorly

• A source of competitive disadvantage à Places the business at a

disadvantage

• May hinder or constrain the business in achieving proposed

objectives

• Should seek ways to reduce or eliminate weaknesses before

exploiting further competition

• Possible weaknesses: Low market share, undifferentiated, outdated

technology, poor quality, lack of innovation, a weak brand name,
High costs…
To identify the weaknesess, ask…

• What could you improve?

• What should you avoid?

• What are people in your market likely to see as weaknesses?

• What factors lose you sales?

3.2.6 Opportunities
• Things that create the chance to make greater profits or get better
business results.
• Arises when an organization may take benefits from the external
environment.
• Should be recognize the opportunities to improve the business
situation.
• Opportunities always coming along with the risks
• Possible opportunities: Technology, higher economic innovation
growth, new demand, new market, trade liberalization, market
growth/diversification, social or lifestyle change, government spending
programs.
To identify the opportunities, ask…

• Where are the good opportunities facing you?

• What are the interesting trends you are aware of?

Q.3.2: In case, your company does not have any strength,
what should you do?
3.2.7 Threats
• Things may harms or trouble you/your business

• Any external factors that may hinder or prevent you/ your business
from achieving proposed objectives or place the business at risks.

• Threats are not controllable

• Possible threats: New market entrants , economic downturn,

change in consuming behaviors, the rise of low cost tastes or needs
production abroad, higher or unstable input sources/prices, new
regulations, competitive pressure
To identify the threats, ask…

• What obstacles do you face?

• What are your competitors doing?

• Are quality standards or specifications for your job, products or

services changing?

• Is changing technology threatening your position?

• Do you have bad debt or cash-flow problems?

• Could any of your weaknesses seriously threaten your business?

3.2.8 SWOT Analysis layouts

Strengths Weaknesses
• … • …
• … • …

Opportunities Threats
• … • …
• … • …
3.2.9 Common mistakes of SWOT analysis
• An unclear goal

• Developing long lists.

• Labeling items "strengths” even if you aren’t any better than the competition.

• Conducting biased assessments.

• Confusing strategies and opportunities. A strategy is an action. An opportunity is an event or

condition that exists independent of your actions.

• Ignoring the internal and external environment factors identified when evaluating strategies
3.2.9 Tips for SWOT analysis
• Be realistic

• Be specific and fair in evaluation.

• Keep your SWOT analysis short and simple. Avoid the complexity

• Distinguish between where your organization is today and where it could be in the future
Activity: SWOT Analysis
Based on the microenvironment actors analysis, draft
the SWOT analysis for company with a specific
product/service in a specific market.

• Work in group of 5-7 (on class)

• 20 minutes allowed

• Summarize and submit (next class section)

3.2.10 SWOT à TOWS
• By analyzing the external environment (threats and opportunities), and your internal environment (weaknesses
and strengths), you can use these techniques to think about the strategy of your whole organization
• Think about a process, a marketing campaign, or even your own skills and experience
• Use TWOS analysis to answer these following questions:
o Make the most of your strengths?
o Circumvent your weaknesses
o Capitalize on your opportunities?
o Manage your threats?
3.2.11 Formulate strategies from SWOT
• SO strategy: Strengths and Opportunities – Use Strengths to take
advantages of opportunities

• WO strategy: Weaknesses and opportunities – Over come

weaknesses by taking advantages of opportunities

• WT strategy: Weaknesses and Threats: Minimize the Weaknesses

and avoid Threats

• ST strategy : Strengths and Threats – Use strengths to avoid threats

3.2.12 TOWS Analysis layouts
External Opportunities (O) External Threats (T)
1. 1.
2. 2.
3. 3.

Internal Strengths (S)

1. SO "Maxi-Maxi" Strategy ST "Maxi-Mini" Strategy
2. Strategies that use strengths to Strategies that use strengths to
3.
maximize opportunities. minimize threats.

Internal Weaknesses (W)

1. WO WT "Mini-Mini" Strategy
2. "Mini-Maxi" Strategy Strategies that minimize weaknesses
3.
Strategies that minimize weaknesses by and avoid threats.
taking advantage of opportunities
Activity: TOWS Analysis
Based on the SWOT analysis, draft the TOWS matrix for
company with

• Work in group of 5-7 (on class)

• 20 minutes allowed

• Summarize and submit (next class section)

The Macroenvironment
There are six major forces in the company’s macro environment of forces that
shape opportunities and pose threats:
• Demographic
• Economic
• Natural
• Technological
• Political
• Cultural
3.3.1 Demographical Environment
• Demography: the study of human populations in terms of size, density, location, age,
gender, race, occupation, and other statistics.
o Demographic environment is important because it involves people, and people
make up markets
o Any population contains several generational groups.
o Demographic trends include family structure, geographic population shifts,
educational characteristics, and population growth and diversity
o Segmenting by generational groups helps to develop effective marketing strategies
3.3.2 Economical Environment
• Economic factors that affect consumer purchasing power and
spending patterns
• Consumers now spend carefully and desire greater value
• “Back to basics frugality” – Consumers tend to buy less and look for
greater value in the things they do and buy.
• “Value marketing”: Ways to offer financially cautious buyers greater
value - the right combination of quality and service at a fair price
• Nations vary in levels and distribution of oncome – such as industrial
economies, subsistence economies, and developing economies.
Engel’s Laws
• Proposed by Ernst Engel (German Economist). As family
income rises:
• The percentage spent on food declines
• The percentage spent on housing remains about constant
(except utilities which decrease)
• The percentage spent on savings, insurance and most other
categories increases
3.3.3 Natural & Environmental Environment
• Natural Resources that are needed as inputs by marketers or that are
affected by marketing activities.
• Environmental concerns have grown steadily with several notable trends:
o Growing Shortages of Raw Materials – Air, food, water, and
renewable and non-renewable resources.
o Increased Pollution – Industry damages quality of the natural
environment, through disposal and littering.
o Increased Government Intervention – The government tends to
pursue environmental quality by requesting social responsibility.
o Environmental Sustainability – Developing strategies and practices
that create a world economy that the planet can support indefinitely.
3.3.4 Technological Environment
• Forces that create new technologies, creating new product, and market
opportunities.
• Most dramatic force in changing the marketplace
• Has released wonders, horrors, and mixed blessings.
o Offers new opportunities for marketers to provide advantages, such
as tracking technology (RFID) through various points in the distribution
channel, usage, and eventual disposal.
o New technologies replace old technologies and may cause certain
businesses to decline if they do not keep up.
o Research is carried out by research teams – products should be technical
and commercial so that they can be practical and affordable.
Q.3.3 What have you seen in technology movements in the past five years that
may significant impact on business, society and MARKETING?
Q.3.4 Changes in Technological environment have creates both opportunities
and challenges for companies?
3.3.5 Political & Social Environment
• Consists of laws, government agencies, and pressure groups that influence or limit
various organizations and individuals in a given society
• Increasing legislation regulating business
o Public Policy - Free market economies require some degree of regulation for
encouraging competition and ensuring fair markets.
o Increasing Legislation – Protects companies from each other, protects
consumers from unfair business practices, and protects the interest of society
against unrestrained business behavior.
o Changing Government Agency Enforcement – Regulations enforce trade
policies and regulations. (municipal, provincial, national, and international laws.
o Increasing emphasis on ethics (socially responsible behavior & cause-related
marketing)
3.3.6 Cultural Environment
• Consists of institutions and other forces that affect a society’s basic
values, perceptions, preferences, and behaviors. The Persistence of
Cultural Values:
o Core beliefs and values have a high degree of persistence – these
include cultural diversity, democracy, sustainable development,
universal health care, a love of nature, hard work, and being honest.
§ Core Beliefs and Values – Passed on from parents to children
and reinforced by social institutions.
o Secondary Beliefs and Values – More open to change.
Q.3.5 Cultural environments shape the customer minds, perception and behaviors
Shifts in Secondary Cultural Values
• People’s Views of Themselves – People view themselves differently and buy
products/services based on such views.
• People’s Views of Others – Attitudes toward others has shifted “me” to “we”
and want to buy similar products.
• People’s Views of Organizations – People are willing to work for major
organizations and buy from them expecting.
• People’s Views of Society – People vary in this regard though national pride
and patriotic products and promotions are often major.
• People’s Views of Nature – some feel ruled by it, others feel in harmony with
it, and some seek to master it.
• People’s Views of the Universe – Renew interest in religion and spirituality
3.4 PEST ANALYSIS

Harvard professor Francis Aguilar is the creator of PEST Analysis. He included a

scanning tool called ETPS
This helps you understand the "big picture" forces of change that you're exposed
to, and, from this, take advantage of the opportunities that they
3.4.1 Why do we need PEST analysis?

• Helps you to spot business or personal opportunities

• Gives you advanced warning of significant threats.
• Helps you to shape what you're doing, so that you work with change,
rather than against it.
• Helps you to avoid starting projects that are likely to fail
• It can help you break free of unconscious assumptions when you enter a
new country, region, or market; because it helps you develop an objective
view of this new environment.
3.4.2 Other versions of PEST
There are variations of PEST Analysis that bring other factors into
consideration:
• PESTLE/PESTEL: Political, Economic, Socio-Cultural,
Technological, Legal, Environmental.
• PESTLIED: Political, Economic, Socio-Cultural, Technological,
Legal, International, Environmental, Demographic.
• STEEPLE: Social/Demographic, Technological, Economic,
Environmental, Political, Legal, Ethical.
• SLEPT: Socio-Cultural, Legal, Economic, Political, Technological.
• LONGPESTLE: Local, National, and Global versions of PESTLE.
(These are best used for understanding change in multinational
organizations.)
Activity: Country analysis
• Work in group (at home)

• Make the report about your selected country’s pestle analysis

• Submit next week

3.5 Responding to the Marketing environment
There are three kinds of companies: those who make things happen,
those who watch things happen, and those who wonder what’s
happened
• Many companies view the marketing environment as an
uncontrollable element to which they must react and adapt.
They passively accept the marketing environment and do not
try to change it.
• Other companies take a proactive stance toward the marketing
environment. these firms develop strategies to change the
environment.
• smart marketing managers will take a proactive rather than
reactive approach to the marketing environment
 Section 4
MANAGING MARKETING INFORMATION
TO GAIN THE CUSTOMER INSIGHT
Agenda
• 4.1 Marketing information & Customer insight
• 4.2 Marketing Research
• 4.3 Touchpoint/Customer relationship management

MANAGIN
GMARKETIN
TO GAIN T G INFORM
HE CUSTO ATION
MER INSIG
HT
4.1.1 Marketing Information
• Today’s marketers have ready accessed to plenty of marketing
information.
• Now, the quantities of information is not matter. Far from lacking
information, most marketing managers are now overloaded with data.
• Marketers frequently complain that they lack enough information of the
right kind.
• They don’t need more information; they need better information. And they
need to make better use of the information they already have.
• Consumers themselves are now generating tons of “bottom-up”
marketing information.
• The value is in the customer insights gained from the information and how
these insights are used to make better marketing decisions.
Q4.1: “Marketing information itself has little value.”
Bottom – up Marketing Information
“Not long ago, the only way a consumer could communicate with an
organization was by mailing a handwritten letter. Then came the
call center, followed by e-mail, text messaging, instant messaging
and, indirectly, blogging, Facebook, Twitter, and so on.
• Each one has contributed to a growing tidal wave of “bottom-
up” information that individuals volunteer to each other and to
organizations.
• Organizations able to . . . elicit and use such volunteered
information will be able to gain much richer, more timely
customer insight at lower cost”
Q4.2: How to can marketers and managers dig marketing information?
4.1.2 Marketing Information System
• People and procedures for assessing information needs, developing the needed information, and helping decision
makers to use the information to generate and validate actionable customer and market insights.

o Interacts with information users (marketing

managers, internal/external partners, etc.)
to assess information needs.
o Interacts with marketing environment to develop
needed information through databases,
activities, and research.
o Helps users analyze and use information
to develop customer insights, make marketing
decisions, and manage customer relationships.
Accessing the Marketing Information
• The Marketing information system begins and end with users
• First assessing the information needs then assessing information the
meets the needs
• The Marketing information system primarily serves the company’s
marketing and other managers – also the external partners as
suppliers, resellers or marketing agencies.
• Too much information can be harmful as too little.
• The problem is not finding the information, the world is bursting with
information.
• The real challenge is to find the right information from inside and
outsides sources. Then turn into customer insight
Developing the Marketing Information
• Marketers can obtain the needed information from internal data, marketing
intelligence and marketing research
• Internal data: electronic collections of consumer and market information
obtained from sources within the company network. (marketing
department, customer service department, accounting department,
operational department, sale force).
• Competitive marketing intelligence: The systematic collection of publicity
available information about consumers, competitors and development in
the marketing environment. (blogs, tweets, videos, comments..)
• Marketing research: The systematic design, collection, analysis, and
reporting of data relevant to a specific marketing situation facing an
organization
4.1.3 Customer insights
Fresh understandings of customers and the marketplace derived from
marketing information that become the basis for creating customer value and
relationships.
• Companies use such customer insights to develop competitive advantage
• The race for competitive advantage is really a race for customer and
market insight.
• Such insights come from good marketing information.
• Company should form customer insight teams:
o Include all company functional areas
o Use insights to create more value for their customer
o Customer controlled could be a problem
Q4.3: Discuss: “Use insights to create more value for their customer”
Activity: Analyzing the customer insights
• Work in group (at home)

• Using the marketing information collected online, identify the

customer insights and propose some recommendation for product
design.
4.2 Marketing research
The marketing research process has four steps: (1) Defining the problem and research objectives, (2) Developing the
research plan, (3) Implementing the research plan and (4) the interpreting and reporting the findings.
4.2.1 Defining the problem and Research objectives
• This first step is probably the most difficult but also the most important
one. It guides the entire research process.
• Marketing managers and researchers must work closely together to define
the problem and agree on research objectives.
• A marketing research project might have one of three types of objectives.

• exploratory research is to gather preliminary information that will

help define the problem and suggest hypotheses.
• descriptive research is to describe things, such as the market
potential for a product or the demographics and attitudes of
consumers who buy the product.
• causal research is to test hypotheses about cause-and-effect
relationships. Regression analysis. Y=ax + b
4.2.2 Developing the Research plan
• Researchers must determine the exact information needed, develop
a plan for gathering it efficiently, and present the plan to
management
• The research plan outlines sources of existing data and spells out
the specific research approaches, contact methods, sampling plans,
and instruments that re-searchers will use to gather new data.
• Research objectives must be translated into specific information
needs
• Secondary data: Information that already exists somewhere,
Primary data: Information collected at hand.
Q4.4: When do we need, Where can we collect the secondary data?
Q4.5: What are the advantages/drawbacks of secondary data?
Gathering Secondary data
• Researchers usually start by gathering secondary data
• The company’s internal database provides a good
starting point
• The company can also tap into a wide assortment of
external information sources, including commercial
data services and government sources
• Secondary data can usually be obtained more quickly
and at a lower cost than primary data.
• Secondary data can also present problems.
• The needed information may not exist; researchers
can rarely obtain all the data they need from secondary
sources
Gathering Primary Data Collection
• The company must also collect primary data.
• Just as researchers must carefully evaluate the quality of secondary information, they also must take great care when
collecting primary data. They need to make sure that it will be relevant, accurate, current, and unbiased
• Designing a plan for primary data collection calls for a number of decisions on research approaches, contact
methods, the sampling plan, and research instruments.
Q4.6: What is the most popular/easiest/effective method to collect primary data? Why?
Observation research
• Gathering primary data by observing relevant people, actions, and
situations
• Researchers often observe consumer behavior to glean customer insights
they can’t obtain by simply asking customers questions
• Marketers not only observe what consumers do but also observe what
consumers are saying
• Observational research can obtain information that people are unwilling or
unable to provide.
• Often use observation along with other data collection methods.
• Ethnographic research: sending observers to watch and interact with
consumers in their “natural environments.” The observers might be trained
anthropologists and psychologists or company researchers and managers
Experimental research
• Gathering primary data by selecting matched groups of subjects,
giving them different treatments, controlling related factors, and
checking for differences in group responses.
• Whereas observation is best suited for exploratory research and
surveys for descriptive research
• Experimental research tries to explain cause-and-effect relationships.
Survey research
• The most widely used method for primary data collection, is the
approach best suited for gathering descriptive information
• The major advantage of survey research is its flexibility; it can be used
to obtain many different kinds of information in many different
situations.
• Surveys addressing almost any marketing question or decision can be
conducted by phone or mail, in person, or on the Web.
• However, survey research also presents some problems. Sometimes
people are unable to answer survey questions because they cannot
remember or have never thought about what they do and why.
• Respondents may answer survey questions even when they do not
know the answer
Contact methods
• Mail, Telephone, and Personal Interviewing (individual interviewing,
group interviewing), Online Marketing research
o Individual interviewing: talking with people in their homes or
offices, on the street, or in shopping malls. Interviewers can guide
interviews, explain questions, and explore issues.
o Group interviewing – focus group interviewing: inviting six to ten
people to meet with a moderator to talk about a product, service, or
organization. Researchers and marketers watch the focus group
discussions from behind.
o Along with observational research, focus group interviewing is one
of the major qualitative marketing research tools for gaining fresh
insights into consumer thoughts and feelings.
Contact methods (2)
o Online marketing research: Collecting primary data online
through Internet surveys, online focus groups, Web-based
experiments, or tracking consumers’ online behavior.
o The Internet is especially well suited to quantitative research.
o Online research usually costs much less than research conducted
through mail, phone, or personal interviews.
o Online research can take many forms: Web-based questionnaires,
email, web link, popup questions.
o It can create online panels that provide regular feedback or
conduct live discussions or online focus groups.
Sampling plan
• Sample: A segment of the population selected for
marketing research to represent the population as a
whole.
• Designing the sample requires three decisions.
• First, who is to be studied (what sampling unit)?
• Second, how many people should be included (what
sample size)
• Finally, how should the people in the sample be
chosen (what sampling procedure)
Q4.7: Why do marketers have to choose sample to do market research?
Kinds of samples
• Two kinds of samples: Probability samples and nonprobability samples
o Probability samples: utilizes some form of random selection.
o All the eligible individuals have a chance of selecting the sample from the whole
sample space.
o This method is more time consuming and expensive than the non-probability
sampling method.
o The benefit of using probability sampling is that it guarantees the sample that should
be the representative of the population.
o 3 common types; Random, cluster and stratified
• Random: choose some from them without any sequence
• Cluster: by respondents’ characteristics: age range: <23, 23-35, 36-45, >45.
• Stratified: by proportion of the whole: new/rebuy customer percentage
Kinds of samples (2)
o Non - probability samples – Convenience sampling method
o Suitable with cost and time limited research.
o The most common method of sampling method in applied social science, practical research.
o The participants are selected based on their convenience (for the researchers)
o Some common forms of convenience sampling: mall-intercept samples, volunteer samples, river samples, expert and
snowball samples
o Mall – intercept: recruit shoppers or other passersby at shopping malls to take part in a study – customer
behavior
o Volunteer (opt-in) sample: the volunteers sign up for study (one or multiple studies) – vaccine test
o River sample: is the web-based opt-in sampling, sample created from website users – online poll
o Expert: use a “panel of experts” who have professional, practical experience of research subject.
o Snowball: start interviewing with a person then ask he/she recommend others who meet the criteria.
Q4.8: What should you do to eliminate the errors and
limitations of non-probability sampling method?
Research instruments
o In collecting primary data, marketing researchers have a choice of two main
research instruments: the questionnaire and mechanical devices.
o Questionnaires - Quantitative research instrument: Close -end questions:
very flexible— there are many ways to ask questions.
• Closed-end questions: include all the possible answers, and subjects
make choices among them (Single answer, multiple-choice questions
and scale questions – Likert 5,7,10).
• Scale should be in positive format. Eg: the quality of X product is
good.
o Interview guide – Qualitative research instrument: Open-end questions:
allow respondents to answer in their own words. useful in exploratory
research, trying to find out what people think.
Q4.9: Give examples for Close – end questions.
Activity: Survey your customers
• Work in group (at home)

• Draft a quantitative questionnaire to understand the consumption

trend/habit and the perception of customer with your
products/brand.
Research instruments (2)
• Mechanical Instruments: measuring brain activity to learn how consumers
feel and respond
• Using MRI scans and EEG devices have learned that tracking brain
electrical activity and blood flow can provide companies with insights into
what turns consumers on and off regarding their brands and marketing -
Neuromarketing
o Neuromarketing: reaching consumers where the action is: the brain.
o Neuromarketing techniques can measure consumer involvement and
emotional responses second by second, such brain responses can be
difficult to interpret.
o Neuromarketing is usually used in combination with other research
approaches to gain a more complete picture.
4.2.3 Implementing the Research plan
• Put the marketing research plan into action - involve collecting,
processing, and analyzing the information
• Data collection can be carried out by the company’s marketing
research staff or outside firms
• Should watch closely to make sure that the plan is implemented
correctly.
• Guard against problems with interacting with respondents, with the
quality of participants’ response, and with interviewers.
• Process and analyze the collected data to isolate important information
and insight.
• Check data for accuracy and completeness and code it for analysis.
• Tabulate the results and compute statistical measures.
4.2.4 Interpreting the Report and Findings
• Interpret the findings, draw conclusions, and report them to
management
• Present important findings and insights that are useful in the major
decisions faced by management
• Findings can be interpreted in different ways, and discussions between
researchers and managers will help point to the best interpretations
• Managers and researchers must work together closely when
interpreting research results, and both must share responsibility for the
research process and resulting decisions.
4.3 Touch point/Customer relationship management
Companies capture information at every possible customer touch point.
o Touch points: every contact between a customer and a company -
customer purchases, sales force contacts, service and support calls,
Web site visits, satisfaction surveys, credit and payment interactions,
market research studies.
o At each touchpoint, customer may have either good or bad emotional
experience and behavioral responses.
o Companies should optimize customer touch points to smooth customer
journey and maximize customer loyalty.
o Customer relationship management (CRM): manage detailed
information about individual customers
Activity: Touch your customers
• Work in group (at home)

• Identifying touchpoints that brand interact with customers

• Imagine, you were your customer, how would you feel at those
touchpoints

• Draft some recommendations to gain better customer experience at

those touchpoints.
 Activity: Touch your customers
• Work in group (at home)

• Identifying touchpoints that brand interact with customers

• Imagine, you were your customer, how would you feel at those
touchpoints

• Draft some recommendations to gain better customer experience at

those touchpoints.

Section 5
CONSUMER MARKETS AND CONSUMER BUYER BEHAVIOR
Agenda
• 5.1 Model of Customer Behavior
• 5.2 Characteristics affecting consumer behavior
• 5.3 Type of Buying Decision Behavior
• 5.4 The Buyer Decision Process
CONSUME
R MARKET
S AND
• 5.5 The Buyer Decision process for new product CONSUME
R BUYER B
EHAVIOR
o Consumers vary tremendously in age, income, education level, and
tastes.
o They also buy an incredible variety of goods and services.
o The world around them impacts their choices among various products,
services, and companies..
o Consumer buyer behavior: buying/purchasing behavior of final
consumers/end users.
• Consumers could be individuals and households who by goods
and services for personal consumption
o Consumer market: all the personal consumption of final consumers.
Q5.1: Discuss: Consumers make many buying decisions every day,
and the buying decision is the focal point of the marketer’s effort

….and Consumers themselves don’t know

exactly what influences their purchases
5.1. Model of Consumer behavior

o Model of consumer behavior is so called stimuli-responses model.

o Marketing and other stimuli enter the consumer’s “black box” and
produce certain buyer responses.
• Stimuli: Marketing (4Ps) and other stimuli come from the
economic, technology, political and cultural environment.
• Black box: Buyer’s characteristics (how customer perceives the
stimuli) and buyer’s decision process.
• Buyer responses: Buyer’s attitudes and preferences, purchase
behavior and brand-customer relationship.
5.2. Characteristics affecting consumer behavior
o Consumer purchases are influenced strongly by multi-layer factors:
cultural, social, personal, and psychological characteristics
o Marketers cannot control such factors, but they must take them into
account.
5.2.1 Cultural factors
o Cultural factors exert a broad and deep influence on consumer behavior.
o Marketers need to understand the role played by the buyer’s culture,
subculture, and social class.
• Culture: is the most basic cause of a person’s wants. Basic values,
perceptions, wants and behavior learned from family and other
institution. Marketers are always trying to spot cultural shifts
• Sub-culture: groups of people within a culture with share value
systems based on common life experiences and situations.
• Culture contains smaller subcultures (nationalities, religions,
races, geo). Subculture make up market segments
• Social class: members share similar values, interests, and behaviors.
(income, occupation, education, wealth..).
Q5.2: Discuss: “Culture is not born DNA”
Q5.4: Discuss: “Marketers are interested in social class because people within a
given social class tend to exhibit similar buying behavior”
Q5.3: Discuss: “Customers from different culture perceived differently of the
same product”

The culture shift create greater chance for new products and businesses
5.2.2 Social factors
o Consumer’s behavior also is influenced by social factors: consumer’s
small groups, family, and social roles and status
• Group: Two or more people who interact to accomplish individual or
mutual goals. (membership groups, reference group, aspirational
group)
• Word-of-Mouth influence: The personal words and
recommendations of trusted friends, associates, and other
consumers.
• Most word-of-mouth influence happens naturally. However, rather
than leaving it to chance, marketers can help to create positive
conversations about their brands.
Q5.5: WOM tends to be more credible than those coming from commercial
sources, such as advertisements or salespeople
5.2.2 Social factors (2)
• Key 0pinion leader (KOL): A person within a reference group who,
because of special skills, knowledge, personality, or other
characteristics, exerts social influence on others.
• Some experts call this group the influencers or leading adopters..
• Marketers try to identify key opinion leaders for their products and
direct marketing efforts toward them.
• Buzz Marketing: Enlisting or even creating opinion leaders to serve
as “brand ambassadors” who spread the company’s products.
• They are so called celebrity endorsers.
• Online social network: Online social communities—blogs, social
networking, Web sites where people socialize or exchange
information and opinions.
Q5.6: Comment: “When these influencers talk, consumers listen” and the tole
of KOL in marketing.
Activity: Brand ambassador Pros and Cons
• Work in group (at home)

• Research on internet and figure out the pros and cons of marketing
by brand ambassador program.
5.2.2 Social factors (3)
• Family: Family members can strongly influence buyer behavior.
• The family is the most important consumer buying organization in
society.
• They could be the most effective reference group.
• Social role and status: The person’s position in each group can be
defined in terms of both role and status.
• A role consists of the activities people are expected to perform
according to the people around them.
• People usually choose products appropriate to their roles and status.
5.2.3 Personal factors
o A buyer’s decisions also are influenced by personal characteristics such as
the buyer’s age and life-cycle stage, occupation, economic situation,
lifestyle, and personality and self-concept.
• Lifestyle: Pattern of living as expressed in his or her activities,
interests, and opinions.
• Measuring consumers’ major AIO dimensions—activities (work,
hobbies, shopping, sports, social events), interests (food, fashion,
family, recreation), and opinions (about themselves, social issues,
business, products)
5.2.3 Personal factors (2)
• Personality and self-concept: Each person’s distinct personality
influences his or her buying behavior.
• Personality refers to the unique psychological characteristics that
distinguish a person or group.
• Personality is usually described in terms of traits such as self-
confidence, dominance, sociability, autonomy, defensiveness,
adaptability, and aggressiveness.
• Personality can be useful in analyzing consumer behavior for certain
product or brand choices.
5.2.4 Psychological factors
o A person’s buying choices are further influenced by four major
psychological factors: motivation, perception, learning, and beliefs
and attitudes.
• Motive (drive): Need that is sufficiently pressing to direct the
person to seek satisfaction.
• Perception: the process by which people select, organize, and
interpret information to form a meaningful picture of the world.
• Learning: occurs through the interplay of drives, stimuli, cues,
responses, and reinforcement.
• Belief and Attitude: Belief based on real knowledge, opinion, or
faith Attitude: evaluations, feelings, and tendencies toward an
object or idea.
5.3 Types of Buying Decision behavior
o Some purchases are simple and routine, even habitual.
o Others are far more complex—involving extensive information gathering
and evaluation
o There are four types of Buying behavior: Complex buying behavior,
Variety seeking buying behavior, Dissonance – reducing buying
behavior and Habitual Buying behavior.
5.3 .2 Complex buying behavior
o Buys an expensive and costly product
o High involvement – Significant differences among brand.
o Consumer would consult with his friends, colleagues, and relatives
o Consumers research thoroughly before committing to a purchase.
o Example: Car, house, luxury products
o Marketers should differentiate their brand’s features and motivate store
salespeople and the buyer’s acquaintances to influence the final brand
choice.
Q5.7: Marketers should develop beliefs about the product, then attitudes, and
then making a thoughtful purchase choice
5.3 .2 Dissonance-Reducing Buying Behavior
o Buys an expensive and costly product
o High involvement - Little difference among brands
o Consumers may shop around to learn what is available but buy
relatively quickly
o They may respond primarily to a good price or purchase convenience
o Example: Mobile phone (Apple, Samsung)
o After the purchase, consumers might experience postpurchase
dissonance (aftersale discomfort)
o Marketers should provide evidence and support to help consumers feel
good about their brand choices
5.3 .3 Variety seeking buying behavior
o Low involvement - significantly perceived brand difference.
o Consumers often do a lot of brand switching – evaluation –
reevaluation – try something different.
o Brand switching occurs for the sake of variety rather than because of
dissatisfaction.
o Example: any kinds of daily products
o Marketers will encourage variety seeking by offering lower prices,
special deals, coupons, free samples, and advertising that presents
reasons for trying something new ( small brand option)
5.3 .4 Habitual buying behavior
o Low involvement - few significantly perceived brand difference.
o Consumers simply go to the store and reach for a brand
o Consumer passively receive information as they watch television or
read magazines. Ad repetition creates brand familiarity rather than
brand conviction
o Example: instant noodle, soft drink
o Marketers often use sales promotions and advertising to promote their
products (market leader option)
5.4 The buyer decision process
o The consumer buying process starts long before the actual purchase
and continues long after.
o The buyer decision process con- sists of five stages: need recognition,
information search, evaluation of alternatives, purchase decision, and
post purchase behavior.
o Consumer pass through all five stages with every purchase.
o But in more routine purchases, consumers often skip or reverse some of these
stages
5.4.1 Need recognition
o The first stage of the buyer decision process, in which the consumer
recognizes a problem or need
o The need can be triggered by internal stimuli when one of the person’s
normal need or by external stimuli
o Mostly used the Maslow hierarchy of needs for this stage
o At this stage, the marketer should research consumers to find out what
kinds of needs or problems arise, what brought them about and how
they led the consumer to this particular product
5.4.2 Information search
o Consumers can obtain information from any of several sources.
o These include personal sources (family, friends, neighbors,
acquaintances), commercial sources (advertising, salespeople, dealer
Web sites, packaging, displays), public sources (mass media,
consumer rating organizations, Internet searches), and experiential
sources (handling, examining, using the product).
o Commercial sources normally inform the buyer, but personal sources
evaluate products for the buyer
Q5.8: The vital task of marketer is diversifying the ways of creating and
delivering product information to customers.
5.4.3 Evaluation of alternatives
o Consumer uses information to evaluate alternative brands in the choice set.
o Consumers do not use a simple and single evaluation process in all buying
situations. Several evaluation processes are at work
o In the evaluation stage, the consumer ranks brands by attributes as design,
quality, price, brand preference…
o Marketers should study buyers to find out how they actually evaluate brand
alternatives.
o If marketers know what evaluative processes go on, they can take steps to
influence the buyer’s decision.
5.4.4 Purchase decision
o The consumer’s purchase decision will be to buy the most preferred
brand.
o Two factors can come between the purchase intention and the
purchase decision
• The first factor is the attitudes of others.
• The second factor is unexpected situational factors
o Preferences and even purchase intentions do not always result in
actual purchase choice.
5.4.5 Post purchase behavior
o Consumers take further action after purchase based on their
satisfaction or dissatisfaction with a purchase
• What determines whether the buyer is satisfied or dissatisfied with
a purchase? The answer lies in the relationship between the
consumer’s expectations and the product’s perceived performance
• If the product falls short of expectations, the consumer is
disappointed
• If it meets expectations, the consumer is satisfied;
• If it exceeds expectations, the consumer is delighted.
o Customer satisfaction is a key to building profitable relationships with
consumers—to keeping and growing consumers and reaping their
customer lifetime value
Activity: Your customer buying behavior
• Work in group (at home)

• Identify:

• the simuli (both the internal and external) of your customer

• The type of customer buying decision behavior

• The buying behavior process

• Give recommendation to each step of how to satisfy customers

5.5 The buyer decision process for new product
o Adoption process is the mental process an individuals goes through from
first learning about an innovation to final regular use.
o 5 stages include: Awareness -> Interest -> Evaluation -> Trial -> Adoption
 Section 6
BUSINESS MARKETS AND BUSINESS BUYING BEHAVIOR
Agenda
• 6.1 Business market
• 6.2 Business buyer behavior
• 6.3 The business buying process

MANAGIN
GMARKETIN
TO GAIN T G INFORM
HE CUSTO ATION
MER INSIG
HT
6.1.1 Business market (B2B Market)
o Business buyer behavior is the buying behavior of organizations that
buy goods and services for use in the production of other products
and services that are sold, rented or supplied to others.
o Institutional market: Schools, hospitals, nursing homes, prisons, and
other institutions that provide goods and services to people in their
care
o Government market: Governmental units—federal, state, and local—
that purchase or rent goods and services for carrying out the main
functions of government.
Q6.1: Is the buying behavior of corporations similar with consumers?
Q6.2: Is the buying behavior of corporations similar with consumers?
6.1.1 Market structure and demand
• Fewer but larger buyers than consumer market
• Derived demand: business demand comes from the demand for
consumer goods
o Inelastic demand : the demand is not much affected by price
changes, in the short run.
o Fluctuation demand: demand tend to change more and more
quicky than the demand for consumer goods/services.
o Buyers and sellers more dependent on each others.
6.1.2 Nature of the buying unit
o More decision participants, More formalized and more professional
purchasing effort.
o Consist of trained purchasing agents who spend their working lives
learning how to buy better.
o Buying committees composed of technical experts and top management
o Companies must have well-trained marketers and salesperson to deal
with well-trained buyers.
6.2.1 Major Influences on Business Buyers
o Business buying decisions can range from routine to incredibly
complex, involving only a few or very many decision makers and
buying influences.
o Within the organization, buying activity consists of two major parts:
• The buying center: composed of all the people involved in the
buying decision.
• The buying decision process
6.2.2 Major type of Buying situations
o There are three major types of buying situations: straight rebuy,
modified rebuy, new task:
• Straight rebuy: The buyer re-orders something without any
modifications.
• Modified rebuy: The buyer wants to modify product specifications,
prices, terms or suppliers.
• New task: The buyer purchases a product or service for the first
time.
o System selling: Business buyers prefers to buy a complete solution to a
problem from a single seller rather than separate products and services
from several suppliers and putting them together.
Q6.3: Buying a complete solution from 1 supplier. Do you think, this is
wise option? Discuss
6.2.3 Participants in the Business Buying Process
o Buying center: all the individuals and units that play a role in the
business purchase decision making process.
• Users: Who actually use the purchased product/service.
• Influencers: Who affect the buying decision – help define
specifications and provide evaluated information.
• Buyers: Who make actual purchase
• Deciders: Who have formal or informal power to select or approve
the final suppliers
• Gate keepers: Who control the flow of information.
 The ad’s headline then offers the solution: “Our application engineers love the scary parts.”
The ad goes on to reassure customers that Makino can help them with their most difficult-
to-machine parts and urges, “Don’t be afraid of the part.”
iption
6.3 TheGeneral
s buying process
es the general
Business Buying process
Need Description
Having recognized a need, the buyer next prepares a general need description that de-
tity of a
scribes the characteristics and quantity of the needed item. For standard items, this process
o Eight stages of the business buying process
Problem General need Product Supplier
ess recognition description specification search

ying
l of
uys Proposal Supplier Order-routine Performance
Either solicitation selection specification review
ss is
d than
sts.

• Problem recognition: someone in the company recognizes a

problem a need that can be met by acquiring a good or a service
• General need description: a buyer describes the general
characteristics and quantity of a needed item
• Product specification: organization decides on and specifies the
best technical product characteristics for a needed item. (product
value analysis.
Q6.4: With each stage, what should marketers do to closer approach the
final B2B buying decision.
6.3 The Business Buying process (cont.)
• Supplier search: the buyer find the best vendors
• Proposal solicitation: the buyer invites qualified suppliers to
submit proposal
• Supplier selection: the buyer reviews proposals and select
suppliers
• Order-routine specification: the buyer writes the final order
with the chosen supplier, listing the technical specifications,
quantity needed, expected time of delivery, return policies and
warranties.
• Performance review: the buyer assesses the performance of the
supplier and decides to continue, modify, or drop the
arrangement.
Mid – term exam 1
Work in group (group 1-8): with you chosen product and brand
• Do market, customer (you can choose of of consumer or corporate customer) analysis
• Identify the customer persona and insight of each type.
• Make SWOT, TWOS analysis
• Stimuli and buying behavior process
• Give the recommendation for each stage and each responded action of customer in their buying journey.
Present on Sunday 3/10/2021 (7h30 a.m). 20 minutes for presentation and 10 minutes for Q&A
Mid – term exam 2
Work in group (group 9-15)
• Do market segmentation
• Do Competitors analysis
• Draft the marketing mix 4Ps plan
Present on Wednesday 13/10/2021 (12h20 p.m). 20 minutes for presentation and 10 minutes for Q&A
 Section 7
CUSTOMER –DRIVEN MARKETING STRATEGY
Creating value for Target customers
Agenda
• 7.1 Customer – driven marketing strategy
• 7.2 Market segmentation
• 7.3 Market targeting
• 7.4 Differentiation and positioning Creating V
al ue for Targ
e t
Customers
o Marketing boils down to two questions:
o Which customers will we serve?
o How will we serve them?
o The goal is to create more value to customers we serve than competitors
do.
o Focusing on the buyer who have greater interest in the values they
create best
 7.1.1 Segmenting consumer markets
• There is no single way to segment a market.
• Companies divide large large market into smaller segments that can be
reached more efficiently and effectively with products and services that match
their unique needs.
o Market segmentation should be relied on the distinct needs, characteristics or
behavior that might require separate marketing strategies.
Chapter 7 | Customer-Driven Marketing Strategy: Creating Value for Target Customers 191

Select customers to serve Decide on a value proposition

egy Segmentation Differentiation

Divide the total market into
smaller segments
Targeting
Select the segment or
segments to enter
Differentiate the market offering
Create value to create superior customer value
for targeted
customers Positioning
Position the market offering in
the minds of target customers
Q7.1: Could we apply successful marketing strategies of a specific region
or segment to the whole marketplace.
7.1.1 Segmenting consumer markets (cont)
o A marketer has to try different segmentation variables, alone and in
combination.
o Marketers rarely limit their segmentation analysis to only one or a few
variables only. Rather, they often use multiple segmentation bases in an effort
to identify smaller, better defined target groups.
7.1.1 Segmenting consumer markets (cont)
o Four major variables: geographic, demographic, psychographic and
behavior.
o Geographic segmentation: geographical units, such as nations,
states, regions, countries, cities or even neighborhood.
o Demographic segmentation: age, gender, family size, income,
occupation, education, religion, race, generation and
nationality
o Psychographic segmentation: social class, lifestyle, personal
characteristics
o Behavior segmentation: knowledge, Attitudes, occasions,
benefit sought, responses, usage rate, user status, loyalty status
(seems to be the most effective market segmenting method)
Geographic
Geographic
World
World region
region or
or country
country North
NorthAmerica,
America,Canada,
Canada,Western
WesternEurope,
Europe,Middle
MiddleEast,
East,Pacific Rim,
Pacific China,
Rim, India,
China, Brazil
India, Brazil
Country
Country region
region Pacific,
Pacific,Mountain,
Mountain,West
WestNorth
NorthCentral,
Central,West
WestSouth
SouthCentral,
Central, East North
East Central,
North Central,East South
East Central,
South South
Central, South
Atlantic, Middle Atlantic, New England
Atlantic, Middle Atlantic, New England
City
City or
or metro
metro size
size Under
Under5,000;
5,000;5,000–20,000;
5,000–20,000;20,000–50,000;
20,000–50,000;50,000–100,000;
50,000–100,000;100,000–250,000;
100,000–250,000;
250,000–500,000; 500,000–1,000,000; 1,000,000–4,000,000; over
250,000–500,000; 500,000–1,000,000; 1,000,000–4,000,000; over 4,000,000
4,000,000
Density
Density Urban,
Urban,suburban,
suburban,exurban,
exurban,rural
rural
Climate
Climate Northern,
Northern,southern
southern

Demographic
Demographic
Age Under 6, 6–11, 12–19, 20–34, 35–49, 50–64, 65 and over
Age Under 6, 6–11, 12–19, 20–34, 35–49, 50–64, 65 and over
Gender Male, female
Gender Male, female
Family size 1–2, 3–4, 5 or more
Family size 1–2, 3–4, 5 or more
Family life cycle Young, single; married, no children; married with children; single parents; unmarried couples; older,
Family life cycle Young, single; married, no children; married with children; single parents; unmarried couples; older,
married, no children under 18; older, single; other
married, no children under 18; older, single; other
Income Under $20,000; $20,000–$30,000; $30,000–$50,000; $50,000–$100,000; $100,000–$250,000;
Income Under $20,000; $20,000–$30,000; $30,000–$50,000; $50,000–$100,000; $100,000–$250,000;
over $250,000
over $250,000
Occupation Professional and technical; managers, officials, and proprietors; clerical; sales; craftspeople; supervisors;
Occupation Professional
farmers; and technical;
students; managers,
homemakers; officials,
unemployed; and proprietors; clerical; sales; craftspeople; supervisors;
retired
farmers; students; homemakers; unemployed; retired
Education Primary school or less; some high school; high school graduate; some college; college graduate,
Education Primary school
advanced degreeor less; some high school; high school graduate; some college; college graduate,
advanced degree
Religion Catholic, Protestant, Jewish, Muslim, Hindu, other
Religion Catholic, Protestant, Jewish, Muslim, Hindu, other
Race Asian, Hispanic, Black, White
Race Asian, Hispanic, Black, White
Generation Baby boomer, Generation X, Millennial
Generation Baby boomer, Generation X, Millennial
Nationality North American, South American, British, French, German, Russian, Japanese
Nationality North American, South American, British, French, German, Russian, Japanese
Nationality North American, South American, British, French, German, Russian, Japanese

Psychographic
Social class Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers
Lifestyle Achievers, strivers, survivors
Personality Compulsive, outgoing, authoritarian, ambitious

Behavioral
Occasions Regular occasion; special occasion; holiday; seasonal
Benefits Quality, service, economy, convenience, speed
User status Nonuser, ex-user, potential user, first-time user, regular user
User rates Light user, medium user, heavy user
Loyalty status None, medium, strong, absolute
Readiness stage Unaware, aware, informed, interested, desirous, intending to buy
Attitude toward product Enthusiastic, positive, indifferent, negative, hostile

Oscar Mayer offers Lunchables, full of fun, kid-appealing finger food. For older genera-
tions, it markets Deli Creations, “with all the warmth, flavor, and fresh-baked taste you
look forward to—in a microwave minute without having to go out.”
Other companies focus on the specific age of life-stage groups. For example, although
Activity: Segmenting your consumer market
• Work in group (at home)

• Choose variables to do market segmenting

• With each variables, identify specific indicators

• Segmenting the whole market to smaller segments

“VUA CUA” RESTAURANT

1. Step 1: Identify Variables: Region, Gender, Age range, Income, family size, family life cycle, Occupation, personality, service
standard (types of restaurant), User rates, loyalty status
2. Step 2: break down the indicators
• Region: City metro, Sub-urban, Tourism places, market, super-market, entertainment centres.
• Gender: Male, female, Others
• Age range: <18, 18-23, 23-35, 36-45, >45
• Income: N/A, < 6 mil VND, 6-11 million, 11-20 mil, >20 mil
• Family life cycle: Single, Married- no children, Married- with children
• Occupation: pupil- student, officer, worker, free-lancer, pensioner, business owner, un-employee.
• User rates:
• Step 3: choose the most effective groups.
• Segment 1: Metro, Male, 23-35, < 6 mil, Married- with children, officer
• Segment 2: Sub-urban, Male, 23-35, < 6 mil, Married- with children, officer
• Segment 3: Sub-urban, Male, 23-35, 11-20mil, Married- no children, officer
7.1.2 Segmenting business market
o Consumer and business marketers use many of the same variables to segment
their markets.
o Business buyers may use some variables for market segmentation:
geographically, demographically (industry, company size), or by benefits
sought, user status, usage rate, and loyalty status.
o Business marketers also use some additional variables, such as customer
operating characteristics, purchasing approaches, situational factors, and
personal characteristics.
7.1.3 Requirements for effective segmentation
• There are many ways to segment a market, but not all segmentations are
effective.
o Measurable: The size, purchasing power, and profiles of the
segments can be measured.
o Accessible: The market segments can be effectively reached and
served.
o Substantial: The market segments are large or profitable enough to
serve.
o Differentiable: The segments are conceptually distinguishable
o Actionable: Effective programs can be designed for attracting and
serving the segments
7.2 Market targeting
• Market targeting is firm evaluates various segments and decide how
many and which segments it can serve best.
Q7.2: What happens if a firm choose the segment that they are not the
best?
7.2.1 Evaluating the market segments
• Firm must look at three factors: segment size and growth, segment
structural attractiveness, and company objectives and resources.
• But “right size and growth” is a relative matter.
• The largest, fastest growing segments are not always the most attractive
ones for every company.
• Smaller companies may lack the skills and resources needed to serve
larger segments.
eeds
competitors.

Selecting
7.2.2 Selecting Target targetMarket
market Segments
segments
ch
After evaluating different segments, the company must decide which and how many seg-
ments it will target. A target market consists of a set of buyers who share common needs
he • Target market: A set of buyers sharing common needs or characteristics
or characteristics that the company decides to serve. Market targeting can be carried out at
several different levels. Figure 7.2 shows that companies can target very broadly (undif-
that the company decides to serve.
ferentiated marketing), very narrowly (micromarketing), or somewhere in between (differ-
entiated or concentrated marketing).
• Companies can target very broadly (undifferentiated marketing), very
Undifferentiated Marketing
narrowly (micromarketing),
Using an undifferentiated or somewhere
marketing in between
(or mass marketing) strategy, a(differentiated
firm might decide or
to ignore market segment differences and target the whole market with one offer. Such a
concentrated marketing).
strategy focuses on what is common in the needs of consumers rather than on what is
different. The company designs a product and a marketing program that will appeal to the
largest number of buyers.

Differentiated Concentrated Micromarketing

Undifferentiated
(segmented) (niche) (local or individual
(mass) marketing
marketing marketing marketing)

Targeting Targeting
broadly narrowly

FIGURE | 7.2
Market Targeting Strategies
Activity: Targeting the best market segments

• Work in group (at home)

• Evaluate all segments that you already have in the previous activity

• Selecting the target market for your products? Explain.

7.2.3 Undifferentiated marketing
• Or mass marketing strategy: firm might decide to ignore market segment
differences and target the whole market with one offer.
• Such a strategy focuses on what is common in the needs of consumers
rather than on what is different.
• The company designs a product and a marketing program that will
appeal to the largest number of buyers
• Difficulties arise in developing a product or brand that will satisfy all
consumers.
• Mass marketers often have trouble competing with more-focused firms
that do a better job of satisfying the needs of specific segments and
niches
Q7.3: What types of firm should choose the undifferentiated marketing
strategy?
7.2.4 Differentiated marketing
• Segmented marketing strategy, a firm decides to target several market
segments and designs separate offers for each.
• By offering product and marketing variations to segments, companies
hope for higher sales and a stronger position within each market
segment.
• Increases the costs of doing business.
• Developing separate marketing plans for the separate segments requires
extra marketing research, forecasting, sales analysis, promotion
planning, and channel management.
• Trying to reach different market segments with different advertising
campaigns increases promotion costs.
7.2.5 Concentrated marketing
• Niche marketing strategy: Instead of going after a small share of a large
market, a firm goes after a large share of one or a few smaller segments
or niches.
• The firm achieves a strong market position because of its greater
knowledge of consumer needs in the niches it serves and the special
reputation it acquires.
• It can market more effectively by fine tuning its products, prices, and
programs to the needs of carefully defined segments.
• It can also market more efficiently, targeting its products or services,
channels, and communications programs toward only consumers that it
can serve best and most profitably.
Q7.4: Some companies choose starting as nichers to get a foothold
against larger and then grow into broader competitors. Discuss.
And
Should mega marketers develop niche products?
7.2.5 Micro-marketing
• Micromarketing is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and locations.
• Rather than seeing a customer in every individual, micro marketers see
the individual in every customer.
• Micromarketing includes local marketing and individual marketing.
o Local marketing: tailoring brands and promotions to the needs and
wants of local customer groups cities, neighborhoods, and even
specific stores.
o Individual marketing: tailoring products and marketing programs to
the needs and preferences of individual customers. Individual
marketing has also been labeled one-to-one marketing, mass
customization, and markets-of-one marketing.
Q7.5: Give examples for mass customization marketing.
7.2.6 Choosing a targeting strategy
• Companies consider many factors when choosing a market-targeting
strategy: resources, market variability, competitors’ marketing strategy.
o Resources: When the firm’s resources are limited, concentrated
marketing makes the most sense. Undifferentiated marketing is
more suited for uniform products. Products that can vary in design,
are more suited to differentiation or concentration
o Market variability: If most buyers have the same tastes, buy the same
amounts, and react the same way to marketing efforts,
undifferentiated marketing is appropriate.
o Competitors’ marketing strategies: When competitors use
differentiated or concentrated marketing, undifferentiated
marketing can be suicidal
Activity: Choosing marketing strategy

• Work in group (at home)

• Which marketing strategy will you adopt?

• What will you do to approach that direction?


7.3 Differentiation and Positioning
• A product’s position is the way the product is defined
defined target markets. For example, although both Dunkin’ Donuts and Starbucks are cof-
fee shops, they offer very different product assortments and store atmospheres. Yet each
succeeds because it creates just the right value proposition for its unique mix of customers.
(See Real Marketing 7.2.)
The differentiation and positioning task consists of three steps: identifying a set of dif-
ferentiating competitive advantages on which to build a position, choosing the right com-
petitive advantages, and selecting an overall positioning strategy. The company must then
effectively communicate and deliver the chosen position to the market.

by consumers on important attributes, the place the

product occupies in consumers’ minds
FIGURErelative
| 7.3 to 85
Positioning Map: Large Luxury Cadillac Escalade
competing products. SUVs

Price (thousands of $)
Infiniti QX56
Source: Based on data provided by WardsAuto 75 Lexus LX570
.com and Edmunds.com, 2010.
• Products are made in factories, but brands happen in Lincoln Navigator
Toyota Land Cruiser
65
Land Rover Range Rover
the minds of consumers.
The location of each circle shows where
55
• A product’s position is the complex set of
consumers position a brand on two dimensions:
price and luxury-performance orientation. The
size of each circle indicates the brand’s relative
market share in the segment. Thus, Toyota's Land
perceptions, impressions, and feelings that
Cruiser is a niche brand that is perceived to be
relatively affordable and more performance oriented.
45
Luxury Performance
Orientation
consumers have for the product compared with
competing products.
 Section 8
PRODUCTS/ SERVICES AND BRANDS
Agenda
• 8.1 What is a product?
• 8.2 Product and service decision
• 8.3Branding strategy

Product/se
rvice and B
rand
8.1 What is a product?
• A product as anything that can be offered to a market for attention,
acquisition, use, or consumption that might satisfy a want or need.
o Products include more than just tangible objects.
o Broadly defined, “products” also include services, events, persons,
places, organizations, ideas, or a mixture of these
• Services are a form of product that consists of activities, benefits, or
satisfactions offered for sale that are essentially intangible and do not result
in the ownership of anything
o Pure services, consists primarily of a service
o Many goods-and-services combinations are possible.
• Beyond simply making products and delivering services, Firms are creating
and managing customer experiences with their brands or company.
8.1.1 Levels of a product and service?
226 Part Three | Designing a Customer-Driven Strategy and Mix
• There are three levels of product and each level adds more customer
FIGURE | 8.1
value: core customer value, actual product
Three and augmented
Levels of Product product
Augmented product
o Core customer value: addresses the question What is the buyer
Delivery Actual product After-
really buying? and sale
credit Brand service
o Actual product: Develop product and service features, design, a name
Features
Core At th
customer
quality level, a brand name, and packaging value
“Wh
exam
Quality
level Design buy
o Augmented product: Actual product by offering additional dev
con
Packaging
consumer services and benefits Product
help

support Warranty
• Marketers first must identify the core customer value that consumers
seek from the product. They must then design the actual product and
find ways to augment it to create this customer value and the most
Finally, product planners must build an augmented produ
satisfying customer experience. actual product by offering additional consumer services an
more than just a communications device. It provides consum
8.1.2 Product and service classifications?
• Products and services fall into two broad classes based on the types of
consumers that use them: consumer products and industrial product
o Consumer products: are products and services bought by final
consumers for personal consumption.
o Industrial products: are those purchased for further processing
or for use in conducting a business.
8.1.3 Consumer products
• Consumer products include convenience products, shopping
products, specialty products, and unsought products
o Convenience products: customers usually buy, immediately,
and with minimal comparison and buying effort.
o Usually low priced, placed in many locations to make them
readily available
o Shopping products: are less frequently purchased. Customers
compare carefully on suitability, quality, price, and style.
o Consumers spend much time and effort in gathering
information and making comparisons.
8.1.3 Consumer products (cont)
o Specialty products: have unique characteristics or brand
identification for which a significant group of buyers is willing to
make a special purchase effort
o Buyers normally do not compare specialty products. They invest
only the time needed to reach dealers carrying the wanted
products.
o Unsought products: consumer either does not know about but
does not normally consider buying.
o Most major new innovations are unsought until the consumer
becomes aware of them through advertising
8.1.4 Industrial products
• Products purchased for further processing or for use in
conducting a business
• Classified by the purpose for which the product is purchased:
o Materials and parts
o Capital
o Raw materials
 A specific brand’s life cycle can change quickly because of changing
competitive attacks and responses. For example, although laundry soaps profits in the short run.
iod of rapid market acceptance and increasing profits.
(product class) and powdered detergents (product form) have enjoyed Finally, management may decide to drop the product from its line. It can sell it to an-
fairly long life cycles, the life cycles of specific brands have tended to be other firm or simply liquidate it at salvage value. In recent years, P&G has sold off several
eriod of slowdown in sales growth because the product has achieved ac-
8.2 Product life cycle (PLC)
ost potential buyers. Profits level off or decline
much shorter. Today’s leading brands of powdered laundry soap are Tide
because
and Cheer; of increased
the leading mar-
brands almost 100 years ago were Fels-Naptha,
lesser or declining brands, such as Folgers coffee, Crisco oil, Comet cleanser, Sure deodor-
ant, Duncan Hines cake mixes, and Jif peanut butter. If the company plans to find a buyer,
to defend the product against competition. Octagon, and Kirkman. it will not want to run down the product through harvesting.
The PLC concept also can be applied to what are known as styles, Table 9.2 summarizes the key characteristics of each stage of the PLC. The table also
eriod when sales fall off and profits drop. fashions, and fads. Their special life cycles are shown in Figure 9.3. A lists the marketing objectives and strategies for each stage.33
• The course of product’s sales and profits over its lifetime. It involves 5 distinct stages: product development, introduction,
style is a basic and distinctive mode of expression. For example, styles
s Product
followlifeall five
cycle: stages
Some of die
products thequickly;
PLC.others
Some productsappear in are
homesintroduced and
(colonial, ranch, die
transitional), clothing (formal, casual),
it maySummary
| 9.2 of Product Life-Cycle Characteristics, Objectives, and Strategies
tay in the mature stage for a long, long time.
isTABLE
growth, maturity, decline
in the mature
TABASCO® stage
sauce is “over
o totally whup your butt!”
for old
140 years a long,
and yetlong
and art (realist, surrealist,
time. Some enter the decline stage
still able
abstract). Once a style invented,
for generations, passing in and out of vogue. A style has a cycle showing
last

several periods of renewed interest. Introduction Growth Maturity Decline

A fashion is a currently accepted or popular style in a given field.
Style Sales and Characteristics
For example, the more formal “business attire” look of corporate dress of the 1980s and
A basic andprofits
distinctive ($)
mode of 1990s gave way to the “business casual” look of the 2000s. FashionsSales tend to grow slowly,Lowre-sales Rapidly rising sales Peak sales Declining sales
xpression. main popular for a while, and then decline slowly. Costs High cost per customer Average cost per customer Low cost per customer Low cost per customer
Fashion Fads are temporary periods of unusuallySaleshigh sales driven by consumer
Profits enthusiasm
Negative Rising profits High profits Declining profits
A currently accepted or popular style in a and immediate product or brand popularity.29 A fad may be part of an otherwise normal life
Customers Innovators Early adopters Middle majority Laggards
given field. cycle, as in the case of recent surges in the sales of poker chips and accessories. Or the fad
Competitors Few Growing number Stable number Declining number
Fad may comprise a brand’s or product’s entire life cycle. “Pet rocks” are a classic example.
Profits beginning to decline
A temporary period of unusually high Upon hearing his friends complain about how expensive it was to care for their dogs, ad-
ales driven by consumer enthusiasm and vertising copywriter Gary Dahl joked about his pet rock. He soonMarketing wrote a spoofObjectives
of a dog-
mmediate product or brand popularity. training manual for it, titled “The Care and Training of Your Pet Rock.” Soon Dahl was
0 Time Create
selling some 1.5 million ordinary beach pebbles at $4 a pop. Yet the fad, which broke one product Maximize market share Maximize profit while Reduce expenditure
October, had sunk like a stone by the next February. Dahl’s advice to those who want toawareness suc- and trial defending market share and milk the brand
Product ceed with a fad: “Enjoy it while it lasts.” Other examples of fads include the Rubik’s Cube
development Introduction and low-carbGrowth
diets.30 Maturity Decline Strategies
Marketers can apply the PLC concept as a useful framework for describing how prod-
Losses/ Product Offer a basic product Offer product extensions, Diversify brand Phase out weak items
ucts and markets work. And when used carefully, the PLC concept can help in developing service, warranty and models
investment
FIGURE | 9.3 ($) good marketing strategies for its different stages. But using the PLC concept for forecasting
Price Use cost-plus Price to penetrate market Price to match or beat Cut price
Styles, Fashions, and Fads competitors
Distribution Build selective distribution Build intensive distribution Build more intensive Go selective: phase out
Style Fashion Fad
Examples of fads: The Pet Rock distribution unprofitable outlets
fad broke out one OctoberBuild
Advertising but product awareness Build awareness and interest Stress brand differences Reduce to level needed
had sunk like a stone by the
among early adopters in the mass market and benefits to retain hard-core loyals
Sales

Sales

Sales

next February. Low-carb diets

followed a similar pattern.and dealers
Sales Promotion Use heavy sales promotion Reduce to take advantage Increase to encourage Reduce to minimal level
to entice trial of heavy consumer demand brand switching

Time Time Time Source: Philip Kotler and Kevin Lane Keller, Marketing Management, 13th ed. (Upper Saddle River, NJ: Prentice Hall, 2009), p. 288. © 2009. Printed and Electronically
reproduced by permission of Pearson Education, Inc., Upper Saddle River, New Jersey.
8.2 Growth– Share Matrix (BCG matrix)
• Growth –share matrix: a portfolio planning method that evaluates a
company’s SBU (strategics business units) in terms of its market growth rateChapter 2 | Company and Marketing Strategy: Partnering to Build Customer
and relative market share. FIGURE | 2.2
The BCG Growth-Share Matrix Star Question mark

• There are four type of SBUs: Stars, Cash Cows, Question marks, Dogs

High
rate
o Stars: high growth- high share. Need heavy investments to finance to

Market growth
o
rapid growth Under the classic BCG portfolio planning approach,
the company invests funds from mature, successful

Low
products and businesses (cash cows) to support
o Cash cows: Low growth – High share. Less investment, high share
promising products and businesses in faster-growing
T
markets (stars and question marks), hoping to turn
h
them into future cash cows. Cash cow Dog
gain. (successful SBUs)
e
(S
High Low d
h
Relative market share
o Question marks: low share- high growth. Require lots of cash to
maintain the share. produce a lot of the cash that the company uses to pay its bills and
that need investment.
o Dogs: Low growth – low share. Do not promise to be large sources of 3. Question Marks. Question marks are low-share business units in hi
They require a lot of cash to hold their share, let alone increase it.
cash. think hard about which question marks it should try to build in
should be phased out.
4. Dogs. Dogs are low-growth, low-share businesses and products.
 A portfolio-planning tool for identifying grid, shown in Figure 2.3.7 We apply it here to performan
company growth opportunities through der Armour. Only 14 years ago, Under Armour introduced
market penetration, market development,
moisture-wicking shirts and shorts. Since then, it has grown ra
8.2 Developing strategies for Growth and Downsizing product development, or diversification.
niche. Over just the past three years, even as retail sales slum
down economy, Under Armour’s sales more than doubled,
Market penetration
Looking forward, the company must look for new ways to ke
• Product/market expansion grid: a portfolio planning toolbyfor
Company growth increasing sales of
current products to current market First, Under Armour might consider whether the compan
penetration—making more sales without changing its origin
identifying company growth opportunities through market penetration
segments without changing the product.

market development, product development or diversification.

FIGURE | 2.3 Existing New
products products
o Market penetration: company growth byThe
increasing sales of current
Product/Market
Expansion Grid Market Product
Existing
products to current market segments without changing the markets penetration development Through
grow by
product. Companies can grow by better penetrating
current markets with current products. For
New Market
outside t
example
development Diversification
example, Under Armour offers an ever-
s
markets and mark
o Market development: identifying and developing new market
increasing range of styles and colors, has
be carefu
boosted its promotion spending, and
recently added new direct distribution
segments for current product channels—its own retail stores, Web site,
and toll-free call center.

o Product development: modifying or new products to current

market segments
o Diversification: starting up or acquiring businesses outside the
company’s current products and markets
Activity: Break down levels of your product

• Work in group (at home)

• Based on the levels of product model, break your current product.

8.2 Product and service decisions
• Marketers make product and service decisions at three levels: individual
product decisions, product line decisions, and product mix decisions.
 ual products and services. We will focus on decisions about product attributes, branding,
us packaging, labeling, and product support services.

8.2.1 Individual product decisions

eate

Product
s Product
Branding Packaging Labeling support
attributes
services

• Product attributes are the benefits of the product or service:

o Product Quality: Quality level and Quality consistency
o Product Features: value to customers versus the cost of company.
o Product Style and Design: Appearance, usefulness and looks
Packaging & Labelling
• Packaging: Involves in designing and producing the container or
wrapper for a product
• Labels: identify the product or brand, describe attributes and provide
promotion.

Product & Service support

• Support services are an important part of the customer’s overall brand
experience
• Keeping customers happy after the sale is the key to building lasting
relationships.
8.2.2 Product line decision
• Product line: A group of products that are closely related because they
function in a similar manner, are sold to the same customer groups, are
marketed through the same types of outlets, or fall within given price
ranges.
o Product line length: the number of items in the product line.
o Product line filling involves adding more items within the present
range of the line (reaching for extra profits, satisfying dealers,
using excess capacity)
o Product line stretching occurs when a company lengthens its
product line beyond its cur rent range.
8.2.3 Product Mix decision
• Product mix (or product portfolio): The set of all product lines and
items that a particular seller offers for sale
o Product mix width refers to the number of different product lines
the company carries
o Product mix length refers to the total number of items a company
carries within its product lines
o Product mix depth refers to the number of versions offered for
each product in the line.
o The consistency of the product mix refers to how closely related
the various product lines are in end use, production requirements,
distribution channels, or some other way.
8.3 Branding strategy
• Brands represent consumers’ perceptions and feelings about a product
and its performance. In the final analysis, brands exist in the heads of
consumers.
• Brand equity: The differential effect that knowing the brand name has
on customer response to the product or its marketing.
• Four consumer perception dimensions:
o Differentiation (what makes the brand stand out)
o Relevance (how consumers feel it meets their needs)
o Knowledge (how much consumers know about the brand)
o Esteem (how highly consumers regard and respect the brand).
 Branding poses challenging decisions to the marketer. Figure 8.5 shows that the major
brand strategy decisions involve brand positioning, brand name selection, brand sponsorship,
and brand development.

8.3.1 Building strong

Brand Positioningbrand
Marketers need to position their brands clearly in target customers’ minds. They can posi-
tion brands at any of three levels.30 At the lowest level, they can position the brand on product
• Brand strategy decisions involve brand positioning, brand name
ands are powerful assets that
ust be carefully developed and
attributes. For example, P&G invented the disposable diaper category with its Pampers
brand. Early Pampers marketing focused on attributes such as fluid absorption, fit, and dis-
naged. As this figure suggests,
ilding strong brands involves posability. In general, however, attributes are the least desirable level for brand positioning.
selection, brand sponsorship, and brand development.
ny challenging decisions.
Competitors can easily copy attributes. More importantly, customers are not interested in
attributes as such; they are interested in what the attributes will do for them.

Brand positioning Brand name selection Brand sponsorship Brand development

Attributes Selection Manufacturer’s brand Line extensions

Benefits Protection Private brand Brand extensions
Beliefs and values Licensing Multibrands
Co-branding New brands

FIGURE | 8.5
o Brand positioning: marketers need to position their brands
Major Brand Strategy Decisions

clearly in target customer’s mind. Three levels of brand

positioning: product attributes, benefits and beliefs and values
8.3.2 Brand name selection
• Brand name selection: careful review of the product and its benefits,
the target market and proposed marketing strategies.
o Desirable qualities for a brand name:
o Suggest something about product’s benefits and qualities.
o Easy to pronounce, recognize and remember
o Distinctive
o Be extendable
o Translate easily into foreign languages
o Available
o Capable of registration and legal protection
8.3.3 Brand Sponsorship
• A manufacturer has four sponsorship options:
o National brand
o Private/store brand
o Licensed brand:
o Co-Brand: brand established by two companies on the same
product.
8.3.4 Brand Development
• There are four choices to develop a brand:
|
250 Part Three Designing a Customer-Driven Strategy and Mix
o Line extensions: extending an existing brand name to new forms,
FIGURE | 8.6
colors, sizes, ingredients or flavors.
Product category
Brand Development Strategies Existing New
o Brand extensions: Extending an existing brand name to new
Line Brand
Existing

Brand name
product categories extension extension

o Multiband: offer different features that appeal to different

customer segments
o New brands: create a new brand name when it enters a new product
category Line extension
Extending an existing brand name to new
forms, colors, sizes, ingredients, or flavors
of an existing product category.
New Multibrands New brands
Line Extensions. Line extensions occur when
to new forms, colors, sizes, ingredients, or flavors
Cheerios line of cereals includes Honey Nut, Fro
Nut, Yogurt Burst, and several other variations.
A company might introduce line extensions
new products. Or it might want to meet consumer
simply command more shelf space from resellers
Activity: Product re-creation

• Work in group (at home)

• Draft the re-creation policy for your current product

Section 9
PRICING STRATEGIES
Agenda
• 9.1 What’s a price?
• 9.2 Major pricing strategies
• 9.3 Factors affecting price decisions
• 9.4 Pricing strategies
Pricing stra
tegies
9.1 What’s a price?
• Price is the amount of money charged for a product or service.
• It is the sum of all the values that consumers give up in order to gain
the benefits of having or using a product or service.
• Price is the element that produces revenue.
• Price is most flexible marketing mix elements. (change quickly)
• Marketers treat pricing as a key strategic tool for creating and
capturing customer value and building customer relationship.
• There are three major pricing strategies: cost-based pricing ,
customer value – based pricing, and competition – based pricing.
 9.2.1 Cost-Based pricing
• Setting prices based on the costs for producing, distributing and
selling product at a fair rate of return for its effort and risk.
• Cost –Based pricing is product driven
• Two forms of costs: Fixed cost (over head) and variable cost
o Fixed cost: costs that do not vary with production and sales
level.
o Variable cost: vary directly with the level of production
o Total cost: sum of the fixed and variable cost.
• Higher cost è higher price quote
| Designing a Customer-Driven Strategy and Mix

Cost-based pricing
Versus
Convince buyers
Design a Determine Set price based
of product’s
good product product costs on cost
value

Value-based pricing
le in
Experience curve, cost-plus pricing
• Experience curve: (Learning curve): when average cost falls as
production because fixed costs are spread over more units.
• Cost – plus pricing: adds a standard markup to the cost of the
product.
• Pricing power: ability to escape price competition and to justify
higher prices and margins without losing market share.
 9.2.2 Customer value –Based pricing
• Using the buyer’s perception of value, not the seller’s cost as the key
to pricing.
• Value-based pricing is customer driven
• Customer pay for perception value and experience attached to the
product/service.
• Two types of value-based pricing: good value and value-added
o Good value: offering the right combination of quality and good
ee service at Strategy
| Designing a Customer-Driven a fairand
price
Mix

.2
cing Versus Value-added:
oCost-based pricing
attaching value-added features and services to
ng Convince buyers
Design a Determine Set price based
of product’s
differentiate a company’s offers and charging higher price
good product product costs on cost
value

Value-based pricing
tant role in
ke everything Assess customer Set target price to Determine costs Design product
ood pricing needs and value match customer that can be to deliver desired
mer. perceptions perceived value incurred value at target
price
Everyday low pricing, High-low pricing
• Everyday low pricing (EDLP): charging a constant everyday low
price with few or temporary price discount.
• High low pricing: charging higher prices on an everyday basis but
running frequent promotions to lower prices temporarily on selected
items.
9.2.3 Competition – Based pricing.
• Setting prices based on competitors' strategies, prices, costs and
market offerings.
• Consumers will base their judgments of a product’s value on the
prices that competitors charge for similar product
• Customer Value driven pricing
Q9.1: No matter what price you charge – high –low or in between, be certain to
give customer superior value
9.3 Factors affecting Price decision
• Customer perceptions of value set the upper limit for prices and
costs set the lower limit
• Target costing: ideals selling price based on consumer value
considerations and target costs that will ensure the price is met.
• Organizational factors: Who set and influence the price.
• Relationship between price and demand for its product
• Competition: Pure, Monopolistic, Oligopolistic, pure monopoly.
Q9.2: Which factor mostly affects the price change? And in which situation?
9.4 New product pricing strategies
• Market – skimming pricing: Setting a high price for a new product to
skim maximum revenues layer by layer from the segments willing to
pay high price; the company makes fewer but more profitable sales.
o Product quality and image must support higher price
o Enough buyer must want the product at that price.
o Cost of producing a smaller volume cannot be high that they
cancel the advantage of charging more.
o Competitors should not be able to enter the market easily and
undercut the high price
9.4 New product pricing strategies (cont)
• Market penetration pricing: Setting a low price for a new product to
attract a large number of buyers and a large market share
• Companies set a low initial price to penetrate the market quickly
and deeply
• Price sensitive market
• Low price must keep competition out of the market
9.5 Product mix pricing strategies
• There are five product mix situation: product line pricing, optional product
pricing, captive pricing , by-product pricing and product bundle pricing.
o Product line pricing: setting price steps between various products in a
product line based on cost differences between the products, customer
evaluations of different features and competitors prices.
o Optional product pricing: the pricing of optional or accessory products
along with the main product.
o Captive product pricing: must be used along with a main product.
o By-product pricing: make the product’s price more competitive
o Product bundle pricing: combining several products and offering the bundle
at reduced price
 lowances are price reductions given for turning in an old item when buying a new one. Trade-
or an in allowances are most common in the automobile industry but are also given for other
rer’s
durable goods. Promotional allowances are payments or price reductions to reward dealers for
9.6 Price adjustment strategies
participating in advertising and sales support programs.

• Segmented
There are sevenPricing
price adjustment strategies: discount and allowance
Companies will often adjust their basic prices to allow for differences in customers,
pricing, segmented
products, and pricing,
locations. In psychological
segmented pricingsells
pricing, the company , promotional
a product or service
at two or more prices, even though the difference in prices is not based on differences in
costs. pricing,
costs. geographical pricing, dynamic pricing and international
product bundle pricing.
TABLE | 11.2 Price Adjustments

Strategy Description

Discount and allowance pricing
Segmented pricing
Psychological pricing
Promotional pricing
Geographical pricing
Dynamic pricing
International pricing
Reducing prices to reward customer responses such as
paying early or promoting the product
Adjusting prices to allow for differences in customers,
products, or locations
Adjusting prices for psychological effect
Temporarily reducing prices to increase short-run sales
Adjusting prices to account for the geographic location
of customers
Adjusting prices continually to meet the characteristics
and needs of individual customers and situations
Adjusting prices for international markets
Q9.3: Advantages and disadvantages of segmented pricing ? Is that similar with
geographical pricing and situational pricing?
9.6 Price changes
• There are five product mix situation: product line pricing, optional
product pricing, captive pricing , by-product pricing and product
bundle pricing.
o Product line pricing: setting price steps between various products
in a product line based on cost differences between the products,
customer evaluations of different features and competitors prices.
o Optional product pricing: the pricing of optional or accessory
products along with the main product.
o Captive product pricing: must be used along with a main product.
o By-product pricing: make the product’s price more competitive
o Product bundle pricing: combining several products and offering
the bundle at reduced price
Section 10
PLACING STRATEGIES
Agenda
• 10.1 The nature and Importance of Marketing Channels
• 10.2 Retailers and Wholesalers
• 10.3 Channel design decision

Placing stra
tegies
 Some help to complete transactions:
• Information: Gathering and distrib

10.1.1 The Nature of Marketing Channels tion about actors and forces in th
aiding exchange.
• Promotion: Developing and spread
• Marketing Channel: distribution channel – a set of interdependent organizations that • Contact: Finding and communicati
• Matching: Shaping and fitting the o
help make a product or service available for use consumption by the consumer or manufacturing, grading, assemblin

business user. FIGURE | 12.1 1

Manufacturer Customer
How Adding a
• Channel members add value by bridging the major time, place and procession gaps
Distributor Reduces
2
3
the Number of
that separate goods and services. Some key functions of distributionChannel
channels are:
Transactions 4

Manufacturer 5
• Information: Gathering and distributing marketing research andMarketing
information
channel intermediaries
Customer

make buying a lot easier for 6

about actors and forces consumers. Again, think about
life without grocery retailers. How 7
would you go about buying that
8
• Promotion: developing and spreading persuasive communications about an offer12-pack of Coke or any of the
hundreds of other items that you
Manufacturer
9
Customer

now routinely drop into your

• Contact: finding and communicating with prospective buyers shopping cart? A. Number of contacts without a distributor
M×C=3×3=9

• Matching: shaping and fitting the offer to the buyer’s needs

• Negotiation: Reaching and agreement on price and other terms of the offer that
ownership or procession can be transferred
 aiding exchange.
• Promotion: Developing and spreading persuasive communications about an offer.

10.1.1 The Nature of Marketing Channels (cont)

• Contact: Finding and communicating with prospective buyers.
• Matching: Shaping and fitting the offer to the buyer’s needs, including activities such as
manufacturing, grading, assembling, and packaging.
• Physical distribution: Transporting and storing goods
• Financing:
FIGUREAcquiring
| 12.1 and using funds to1cover the cots of channel
Manufacturer Customer Manufacturer Customer
How Adding a 2
work.
Distributor Reduces
1 4
3
the Number of
• Risk taking: Assuming the risks of carrying out the channel work.
Channel Transactions 4
2 5
Manufacturer 5 Customer Manufacturer Distributor Customer
Marketing channel intermediaries
make buying a lot easier for 6
consumers. Again, think about 6
life without grocery retailers. How 7 3
would you go about buying that
8
12-pack of Coke or any of the Manufacturer Customer Manufacturer Customer
hundreds of other items that you 9
now routinely drop into your
shopping cart? A. Number of contacts without a distributor B. Number of contacts with a distributor
M×C=3×3=9 M+C=3+3=6
 the various functions should be assigned toconsumers
the channel members
(no surprise there!). who can add theto final
most buyers. Examples: most of the th
value for the cost. Examples: GEICO and Amway. buy—everything from toothpaste, to cam

Number of ChannelProducer
Levels
10.1.2 Number of channel levels Producer
Companies can design their distribution channels to make products and services available
to customers in different ways. Each layer of marketing intermediaries that performs some
Producer Producer

Channel level work in bringing the product and its ownership closer to the final buyer is a channel level.

• Channel level: a layer of intermediaries Asome

that preforms some and itswork in
layer of intermediaries that performs
work in bringing the product
Because both the producer and the final consumer perform some work, they
every channel.
are part of
Wholesaler

ownership closer to the final buyer.

The number of intermediary levels indicates the length of a channel. Figure 12.2A
bridging the product and its ownership Direct
closet to the
marketing final buyer
channel shows several consumer distribution channels of different lengths. Channel 1, called a
direct marketing channel, has no intermediary levels; the company sells directly to con-
A marketing channel that has no
intermediary levels. sumers. For example, Mary Kay Cosmetics and Amway sell their productsRetailer
door-to-door,
• Number of intermediates levels indicates themarketing
lengthchannel
of channel.
Retailer
Indirect through home and office sales parties, and on the Internet; GEICO sells insurance direct via
Channel containing one or more the telephone and the Internet. The remaining channels in Figure 12.2A are indirect mar-
keting channels, containing one or more intermediaries.
o Direct marketing channel (no intermediate)
intermediary levels.

Consumer Consumer Consumer Business

customer

o Indirect marketing channels (one or more intermediates) Using direct channels, a

company sells directly to
consumers (no surprise there!).
Using indirect channels,Channel
the company 1uses one or
more levels of intermediaries to help bring its products
to final buyers. Examples: most of the things
Channel 2 Channel 3 Channel 1

A.youCustomer marketing channels B

Examples: GEICO and Amway. buy—everything from toothpaste, to cameras, to cars.
FIGURE | 12.2
Consumer and Business Marketing Channels
Producer Producer Producer Producer Producer Producer

Wholesaler Manufacturer’s
representatives
or sales branch

Retailer Retailer Business Business

distributor distributor

Consumer Consumer Consumer Business Business Business

customer customer customer
Channel 1 Channel 2 Channel 3 Channel 1 Channel 2 Channel 3

A. Customer marketing channels B. Business marketing channels

Q10.1: Which type of firms should adopt the direct and indirect distribution
system?
10.1.3 Vertical/Horizontal marketing systems
346 Part Three | Designing a Customer-Driven Strategy and Mix

• Conventional distribution channel:FIGURE

Consists of one or more
| 12.3
Producer
Comparison of Conventional
independent producers, wholesalers and retailers.
Distribution Channel with Vertical Producer
Marketing System
• No channel member has much control over the others and no
Retailer
Wholesaler Wholesaler
formal means for assigning roles.
• Vertical marketing system: consist of producer, wholesalers
and retailers acting as unified system. Retailer
V
a
c
• One channel member owns the others has contract with them w
(h
or wields so much power that they must all cooperate. u
a
Consumer Consumer
• Horizontal marketing systems: a channel agreement inwhich
Conventional Vertical
two or more companies at one level join together to follow a marketing marketing
channel system
Contractual VMS
new marketing opportunity. A vertical marketing system in which
independent firms at different levels of world’s largest optical chains—LensCrafters, Pearle Vision, and Sun
production and distribution join together owns.4 Controlling the entire distribution chain has turned Spanish c
through contracts. the world’s fastest-growing fashion retailer (see Real Marketing 12.1
 and yellow lawn and garden equipment to consumers and
commercial users through several channels, including Lowe’s tems are harder to control, and they generate conflict as more chan-
home improvement stores and online. It sells its agricultural nels compete for customers and sales. For example, when John
equipment through the premium John Deere dealer network. Deere began selling selected consumer products through Lowe’s
10.1.3 Multichannel distribution system home improvement stores, many of its dealers complained loudly.
To avoid such conflicts in its Internet marketing channels, the company routes all of its Web
site sales to John Deere dealers.
• Multichannel distribution system: A distribution system
inwhich a single firm sets up two orFIGURE
more| marketing
12.4 channels
Producer
Multichannel Distribution System
to reach one of more customer segments.
o Almost companies distribute though multiple channels
Distributors
o Multichannel distribution systems offer many advantages
Most large companies distribute through
to companies facing large and complex markets
multiple channels. For example, you could
buy a familiar green and yellow John Deere
Catalogs,
telephone, Sales
lawn tractor from a neighborhood John Internet Retailers Dealers force

o But it is hard to control and potentially generate conflicts

Deere dealer or from Lowe’s. A large farm
or forestry business would buy larger
John Deere equipment from a premium
full-service John Deere dealer and its
sales force.
Consumer Consumer Business Business
segment 1 segment 2 segment 1 segment 2
10.2.1 Retailing
• Retailing: all the activities in selling goods or services directly to final
consumers for their personal, nonbusiness use
o Shopper marketing: in-store promotions and advertising to
extend brand equity to encourage in-store purchase decisions.
o Non-store retailing: selling to final consumers via Internet,
direct mail, catalogs, telephone and other direct selling
• Retailers: a business whose sales come primarily form retailing
• Retailers are classified by amount of service, product lines and relative
prices and how they are organized
• Amount of service: three levels: self-service , limited service and
full service.
 store Types of Retailers
such as apparel stores, sporting-goodsdescribed
sumers viainthe Table
stores, 13.1direct
furniture
Internet, and discussed
stores, in the the
mail, catalogs, following sections.
telephone, and They
othercan be classifiedap-
direct-selling in
florists, and bookstores. ARetail terms
proaches. of
clothing several
storesstore
Wecome characteristics,
wouldin be
discuss such
all ashapes including
single-line
direct-marketing the approaches
and sizes—from amount
yourof service they in
in detail
local offer,
hairstyling the breadth
Chapter
salon 17. In and
this
or family-
store, a men’s clothing store depthwouldofrestaurant
their limited-line
be aproduct lines,store, and a prices they charge, and how they are organized.
thespecialty
relative
chapter,
owned we focus on to store
national retailing. chain retailers such as REI or Williams-Sonoma to
men’s custom-shirt store would be a superspecialty store.
megadiscounters such as Costco or Walmart. The most important types of retail stores are

10.2.2 Types of Retailer Department

store
A store that carries several

TABLE | 13.1separate Major Store managed

department
product lines—typically
Types of Retailers
described in Table 13.1
furnishings, and household goods—with each line operated as a
clothing, home in the
and discussed Macy’s, Sears,sections.
following
|
NeimanThey
terms of several characteristics, including the amount of service they offer, the breadth375
Retailer
Retail by Types
stores comebuyers
specialist in all or
Chapter 13 Retailing
Marcus
and
can be classified in
Wholesaling
shapes and sizes—from your local hairstyling salon or family-
and
merchandisers. depth of their product lines, the relative prices they charge, and how they are organized.
Shopper marketing owned restaurant
Shopper to national
marketing involves specialty
focusingchain
the retailers such as REI
entire marketing or Williams-Sonoma
process—from product and to
Type
Supermarket Description
A relatively large, low-cost, megadiscounters
low-margin, such
high-volume, as Costco or Walmart.
self-service Examples
The most
Kroger, important
Safeway, types
Supervalu, of retail
Publix stores are
• Product line: classified by the length and breadth
Using in-store promotions and advertising brand development to logistics, promotion, and merchandising—toward turning shoppers
to extend brand equityoperation
to “the designed
last mile” to serve intothe
described consumer’s
buyers inat the Table
total
point13.1needs andfor
of sale. Ofgrocery
discussed
course,inevery
the following sections.
well-designed They can
marketing be classified
effort focuses onin
Specialty A
andstore that carries
household a narrow
products. product line with a deep assortment, REI, RadioofShack, Williams-Sonoma
andTABLE
store
encourage13.1
| favorable Major
in-store Store Retailer customerTypes
terms of several
buying characteristics,
behavior. But including the amount service they offer, the
the concept of shopper marketing suggests that these efforts breadth and
purchase
Conveniencedecisions. such as apparel stores, sporting-goods
A relatively small store located depthnear ofbetheir
stores, furniture
productareas,
residential lines, open
stores,
the relative
long prices they charge,
7-Eleven, and how
Stop-N-Go, they are
Circle organized.
K, Sheetz
of product assortments: specialty stores, store
Type
florists, and bookstores. Ashould
hours seven
Description days a
store, a men’s clothing store
week,
clothing
and
working carrying
coordinated
store
wouldbackward,
a
would be
limited
around
line
you design
be a limited-line
turnover convenience products at slightly higher prices.
of
the
a single-line
high-
store, anand
shopping
integrated
a
process itself. “By starting with
program that make sense to the consumer.”5
Examples
the store and

men’s custom-shirt store would be a superspecialty

Although most retailing store.
is done in retail stores, in recent years nonstore retailing has been
Specialty
Discount A store that carries standard a narrow product
merchandise line faster
with
sold aatthan
deep
lower assortment,
prices with REI, Radio
Walmart, Shack,includes
Target, Williams-Sonoma
Kohl’s
department stores, super market, convenience Department
TABLE | 13.1such
store
store
lowerMajor
A store that
asmargins
apparel Store
carries
andstores,
furnishings, and household
higher
growing
Retailer
several product
sporting-goods
volumes.
sumers
much
Types
lines—typically store
clothing,
stores, furniture stores,
via the each
goods—with
florists, and bookstores. A clothing store would be a single-line
Internet,
retailing.
direct mail,
line operated
home Nonstore Macy’s, retailing
Sears, Neiman selling to final con-
Marcus
as acatalogs, the telephone, and other direct-selling ap-
Off-price A store that
separate sells merchandise
department managed bought
proaches. Weat
by specialist less-than-regular
buyers wholesale
or direct-marketing Mikasa (factoryin outlet); TJ Maxx (independent
Type store, a men’s clothing store
Description would be a discuss
limited-line such store, and a approaches
Examples
detail in Chapter 17. In this
retailer prices and sold at less than
merchandisers. retail: often leftover goods, overruns, off-price retailer); Costco, Sam’s Club, BJ’s
store, super stores Supermarket
Specialty
Department
men’s custom-shirt store would
A that
that carries
A storeretailers.
other carries
These a narrow
several
chapter,

include
bewe
low-margin,
product
product
focus on storestore.
a superspecialty
and irregulars obtained at reduced prices from manufacturers or
A store
relatively large, low-cost, linehigh-volume,
with
factorylines—typically
outlets a deep
owned
retailing.
self-service
assortment,
clothing,
and home by
operated
Wholesale Club (warehouse clubs)
Kroger,
REI, Safeway,
Radio
Macy’s, Shack,
Sears,
Supervalu, Publix
Williams-Sonoma
Neiman Marcus
store
store
operation
such as
furnishings,
manufacturers;
and household
designed
apparel stores,to
andindependent Types of Retailers
serve the
household goods—with
consumer’s
sporting-goods stores,
off-price retailers
total
products.A clothing store would be a single-line
needs
furniture
each owned
line operated
for grocery
stores,
and run asby
a
• Relative prices; classified by prices they changes: Convenience
florists,
separate
store,
A relatively
and
entrepreneurs
a men’s
merchandisers.
warehouse
bookstores.
department
(or clothing
smallwholesale)
managed
or by divisions Retail
store
store located
of by
would
clubs
owned
near
specialist
larger
stores
sellingbe
retail
come
residential
restaurant
buyers
limited
to
areas,
or
corporations;
in
aa limited-lineall shapes
store,
selection
national
and
openofand
and
long a sizes—from
brand-
specialty chain
your local hairstyling salon or family-
7-Eleven, Stop-N-Go, Circle K, Sheetz
retailers such as REI or Williams-Sonoma to
store men’s groceries,
hours
name custom-shirt
seven days a storeweek,wouldand be a superspecialty
carrying a limited linestore.
of athigh-
Supermarket A relatively large,appliances,
low-cost, clothing,
low-margin,
megadiscounters
and other goods
high-volume,
such as Costco
deep
self-service
or Walmart. Kroger,
The Safeway,
most importantSupervalu,
types ofPublix
retail stores are
turnover convenience products atmembership
slightly higher prices.
discount stores and off-price (outlet) Department
store
Discount
Superstore
discounts
A store that
operation
furnishings,
A very
and
A store
to consumers
carries
designed
that and
household
large carries
store
several
household
who
to serve pay
product
the
described
standardgoods—with
products.
traditionally
terms
lines—typically
consumer’s
in
merchandise
aimed at meeting
of several
each
fees.
total
Table 13.1
sold line
clothing,
needs and for
operated
atconsumers’
lower
characteristics,
home
grocery
discussed
pricesas a
with
total
including
in
the
Macy’s, Sears, Neiman Marcus
the following sections.
Walmart,Supercenter,
Walmart
amount
They can be classified in
Target, Kohl’sSuperTarget, Meijer
of service they offer, the breadth and
store separate
lower
needs fordepartment
margins and higher
routinely managed
purchased volumes.by specialist
food and buyers
nonfood or This
items. (discount stores); BestCircle
Buy, PetSmart, Staples,
Convenience A relatively
merchandisers. small store located
depth near
of residential
their product areas,
lines, open
the long
relative prices 7-Eleven,
they charge,Stop-N-Go,
and how they K,
are Sheetz
organized.
Off-price
store category
A storeseven
hours includes
that sells asupercenters,
days merchandise
week, and bought combined
carrying at supermarket
less-than-regular
a limited andwholesale
line of high- discount Barnes
Mikasa & Noble outlet);
(factory (categoryTJ killers)
Maxx (independent
Supermarket
retailer stores,
A
prices
turnover and
relatively
and category
large,
sold
convenience lesskillers,
at low-cost, which
than retail:
products carry leftover
low-margin,
at often
slightly ahigh-volume,
deep
higherassortment
goods, in a
prices.self-service
overruns, Kroger,
off-priceSafeway,
retailer);Supervalu, Publix
Costco, Sam’s Club, BJ’s
particular
operation
and irregulars category
designed
obtained and have
to serve a knowledgeable
the
at reduced consumer’s
prices from staff.
total needs for grocery
manufacturers or Wholesale Club (warehouse clubs)
Discount A store
and that carries standard merchandise sold at lower prices with Walmart, Target, Kohl’s
otherhousehold products.
retailers. These include factory outlets owned and operated by
TABLE | 13.1lowerMajor
store marginsStoreand higher Retailer
volumes. Types
Convenience A relatively smallindependent
manufacturers; store locatedoff-price retailers owned
near residential areas, open and run
longby 7-Eleven, Stop-N-Go, Circle K, Sheetz
Off-price
store A storeseven
hours that sells
entrepreneurs or merchandise
days by divisions
a week, andofbought at
larger retail
carrying less-than-regular
corporations;
a limited line of high- wholesale
and Mikasa (factory outlet); TJ Maxx (independent
Type
retailer Description
prices
warehouse
turnover andconvenience
sold at less products
(or wholesale) thanclubs
retail: often
selling
at slightly aleftover
highergoods,
limited prices. overruns,
selection of brand- Examples
off-price retailer); Costco, Sam’s Club, BJ’s
and irregulars obtained at reduced prices
name groceries, appliances, clothing, and other goods at deep from manufacturers or Wholesale Club (warehouse clubs)
Discount
Specialty A
A store that
storeretailers.
that carries standard merchandise sold aatdeep
lower prices withby Walmart,
REI, RadioTarget,
Shack, Kohl’s
other
discounts to carries
These
consumers a narrow
who product
include factory
pay line with
outlets
membership owned
fees. and assortment,
operated Williams-Sonoma
store
store lower
such asmargins
appareland
manufacturers; higher
stores,
independent volumes.
sporting-goods stores, furniture
off-price retailers owned and stores,
run by
Superstore A very large store traditionally aimed at meeting consumers’ total Walmart Supercenter, SuperTarget, Meijer
Off-price florists,
A and bookstores.
entrepreneurs
store that or merchandise
sells by divisionsA clothing
ofbought
largerstore would
retail be a single-line
corporations;
at less-than-regular and
wholesale Mikasa (factory outlet); TJ Maxx (independent
needs for routinely purchased food and nonfood items. This (discount stores); Best Buy, PetSmart, Staples,
retailer store,
warehouse
prices aandmen’s
(or clothing
sold wholesale)
at less than store would
clubs selling
retail: often limited-line
be aleftover
limited goods, store,
selection ofand a
brand-
overruns, off-price retailer); Costco, Sam’s Club, BJ’s
category includes supercenters, combined supermarket and discount Barnes & Noble (category killers)
men’s
name
and custom-shirt
groceries,
irregulars obtained storeatwould
appliances, clothing,
reduced superspecialty
be aprices
and from store.
othermanufacturers
goods at deepor Wholesale Club (warehouse clubs)
stores, and category killers, which carry a deep assortment in a
Department discounts
other to carries
A storeretailers.
that consumers
These who
include
several pay
product membership
factory outlets owned
lines—typically fees.clothing,
and operated home by Macy’s, Sears, Neiman Marcus
particular category and have a knowledgeable staff.
store
Superstore manufacturers;
furnishings,
A very large and storeindependent
household
traditionally off-price
aimed atretailers
goods—with each owned
meeting line and run
operated
consumers’ as by
a
total Walmart Supercenter, SuperTarget, Meijer
entrepreneurs
separate
needs or bypurchased
fordepartment
routinely divisions
managed offood
larger
by andretail
specialist corporations;
buyers
nonfood or This
items. and (discount stores); Best Buy, PetSmart, Staples,
warehouse
merchandisers.
category includes(or wholesale)
supercenters,clubs combined
selling a limited selection
supermarket of discount
and brand- Barnes & Noble (category killers)
name
stores, groceries,
category
and large, appliances, clothing,
killers, low-margin,
which carryand otherassortment
goods at deep
ahigh-volume,
deep in a
Supermarket A relatively
discounts category low-cost,
to consumers have who apay membership fees. self-service Kroger, Safeway, Supervalu, Publix
particular
operation designedand to serve the knowledgeable
consumer’s total staff.needs for grocery
Superstore A
andvery large store
household traditionally aimed at meeting consumers’ total
products. Walmart Supercenter, SuperTarget, Meijer
needs for routinely purchased food and nonfood items. This (discount stores); Best Buy, PetSmart, Staples,
Convenience A relatively small store located near residential areas, open long 7-Eleven, Stop-N-Go, Circle K, Sheetz
10.2.3 Organizational approach
• Organizational approach: corporate chains,
voluntary chanin, retailer cooperative and 382 Part Three | Designing a Customer-Driven Strategy and Mix
TABLE | 13.2 Major Types of Retail Organizations
franchise organizations. Type Description Examples

Corporate Two or more outlets that are commonly owned and controlled. Sears (department stores), Target (discount
chain store Corporate chains appear in all types of retailing, but they are stores), Kroger (grocery stores), CVS
strongest in department stores, discount stores, food stores, drug (drugstores)
stores, and restaurants.
Voluntary Wholesaler-sponsored group of independent retailers engaged in Independent Grocers Alliance (IGA), Do-It
chain group buying and merchandising. Best (hardware), Western Auto, True Value
Retailer Group of independent retailers who jointly establish a central buying Associated Grocers (groceries), Ace Hardware
cooperative organization and conduct joint promotion efforts. (hardware)
Franchise Contractual association between a franchisor (a manufacturer, McDonald’s, Subway, Pizza Hut, Jiffy Lube,
organization wholesaler, or service organization) and franchisees (independent Meineke Mufflers, 7-Eleven
businesspeople who buy the right to own and operate one or more
units in the franchise system).

cooperatives) is that franchise systems are normally based on some unique product or ser-
vice; a method of doing business; or the trade name, goodwill, or patent that the franchisor
has developed. Franchising has been prominent in fast-food restaurants, motels, health and
fitness centers, auto sales and service, and real estate.
But franchising covers a lot more than just burger joints and fitness centers. Franchises
have sprung up to meet just about any need. For example, Mad Science Group franchisees
put on science programs for schools, scout troops, and birthday parties. And Mr. Handy-
man provides repair services for homeowners, while Merry Maids tidies up their houses.
Once considered upstarts among independent businesses, franchises now command
40 percent of all retail sales in the United States. These days, it’s nearly impossible to stroll
down a city block or drive on a city street without seeing a McDonald’s, Subway, Jiffy Lube,
or Holiday Inn. One of the best-known and most successful franchisers, McDonald’s, now
has 32,000 stores in 118 countries, including almost 14,000 in the United States. It serves

10.2.4 Wholesaling
Type
• Wholesaling: all the selling goods and services
Merchant wholesalers
to those buying for resale or business use.
• Wholesaler: a firm engage primarily in
wholesaling activities.
• Wholesalers buy mostly from producers
and sell mostly to retailers, industrial
consumers and other wholesalers.
• Wholesalers fall into three major groups:
merchant wholesalers, agents and
brokers, manufacturers’ sales branches
and offices.
Brokers and agents
| Retailing and Wholesaling
Chapter 13 397
TABLE | 13.3 Major Types of Wholesalers
Description
Independently owned businesses that take title to all merchandise handled. There are full-service
wholesalers and limited-service wholesalers.
Full-service wholesalers Provide a full line of services: carrying stock, maintaining a sales force, offering credit, making
deliveries, and providing management assistance. Full-service wholesalers include wholesale
merchants and industrial distributors.
Wholesale merchants Sell primarily to retailers and provides a full range of services. General merchandise wholesalers
carry several merchandise lines, whereas general line wholesalers carry one or two lines in great
depth. Specialty wholesalers specialize in carrying only part of a line.
Industrial distributors Sell to manufacturers rather than to retailers. Provide several services, such as carrying stock,
offering credit, and providing delivery. May carry a broad range of merchandise,
a general line, or a specialty line.
Limited-service wholesalers Offer fewer services than full-service wholesalers. Limited-service wholesalers are
of several types:
Cash-and-carry
wholesalers
Carry a limited line of fast-moving goods and sell to small retailers for cash. Normally
do not deliver.
Truck wholesalers Perform primarily a selling and delivery function. Carry a limited line of semiperishable
(or truck jobbers) merchandise (such as milk, bread, snack foods), which is sold for cash as deliveries are made to
supermarkets, small groceries, hospitals, restaurants, factory cafeterias, and hotels.
Drop shippers Do not carry inventory or handle the product. On receiving an order, drop shippers select
a manufacturer, who then ships the merchandise directly to the customer. Drop shippers operate
in bulk industries, such as coal, lumber, and heavy equipment.
Rack jobbers Serve grocery and drug retailers, mostly in nonfood items. Rack jobbers send delivery trucks to
stores, where the delivery people set up toys, paperbacks, hardware items, health and beauty
aids, or other items. Rack jobbers price the goods, keep them fresh, set up point-of-purchase
displays, and keep inventory records.
Producers’ cooperatives Farmer-owned members that assemble farm produce for sale in local markets. Producers’
cooperatives often attempt to improve product quality and promote a co-op brand name, such as
Sun-Maid raisins, Sunkist oranges, or Diamond walnuts.
Mail-order or Send catalogs to or maintain Web sites for retail, industrial, and institutional customers featuring
Web wholesalers jewelry, cosmetics, specialty foods, and other small items. Its primary customers are businesses in
small outlying areas.
Do not take title to goods. Main function is to facilitate buying and selling, for which they earn a
commission on the selling price. Generally specialize by product line or customer type.
Brokers Bring buyers and sellers together and assist in negotiation. Brokers are paid by the party who
Section 11
PROMOTION STRATEGIES
Agenda
• 11.1 Promotion Mix
• 11.2 Promotion Mix strategies
• 11.3 Marketing Communication process

Promotion
strategies
11.1 The promotion Mix
• Promotion Mix (marketing communication mix) : the specific
blend of promotion tools that the company uses to persuasively
communicate customer value and build customer relationships.
• There are 5 major promotion tools: Advertising, sales promotion,
Personal selling, Public relations, Direct marketing.
11.1.1 Advertising
• Advertising: Any paid form of nonpersonal presentation and promotion of
ideas, goods or services by identified sponsor.
• Forms: broadcast, print, Internet, outdoor and other forms
• Pros:
o Can reach masses of geographically buyers at a low cost per exposure
o Enables the seller to repeat a message many times.
o Used to build up a long-term image for a product
o Trigger quick sales
• Cons:
o Very expressive.
o Impersonal and cannot be as directly persuasive as company salespeople.
o Can carry on only a one-way communication with an audience.
11.1.2 Sales Promotion
• Sales promotion: short term incentives to encourage the purchase or
sale of a product or service.
• Forms: coupons, contests, cents-off deals, premiums, and others.
• Pros:
o Attract consumer attention, offer strong incentives to purchase
o Dramatize product offers and boost sagging sales
o Invite and reward quick response.
• Cons:
o The effects are often short lived.
o Often are not as effective as advertising or personal selling in
building long-run brand preference and customer relationships.
Q11.1: Whereas advertising says, “Buy our product,”
Sales promotion says, “Buy it now.”
11.1.3 Personal selling
• Personal selling: Personal presentation by firm’s sales force for the purpose of
making sales and building customer relationship
• Forms: Personal interaction between two or more people.
• Pros:
• Most effective tool at certain stages of the buying process, particularly in
building up buyers’ preferences, convictions, and actions
• Quick adjustments.
• Build a long-term relationship by solving a customer’s problems
• The buyer usually feels a greater need to listen and respond.
• Cons:
o Requires a longer-term commitment, but the sales force is hard to change.
o Personal selling is also the company’s most expensive promotion tool
11.1.4 Public relations
• Public relations: Building good relations with the company ‘s various
publics by optioning favorable publicity, building up a good corporate
image and handling or heading off favorable rumors, stories and events.
• Forms: news stories, features, sponsorships, and events.
• Pros:
o Seem more real and believable to readers than ads do.
o Reach many prospects who avoid salespeople and advertisements
o Gets to buyers as “news” rather than as a sales communication.
o PR campaign used with other promotion mix elements can be very
effective and economical.
• Cons: take time and need deep understanding of customer psychology
11.1.5 Direct marketing
• Direct marketing: direct connection with carefully targeted individual
consumers to both obtain an immediate response and cultivate lasting customer
relationships.
• Forms: catalogs, telephone marketing, kiosks, the Internet, mobile marketing..
• Pros:
• Immediate and customized. : Messages can be prepared very quickly and
can be tailored
• Interactive: allows dialogue between the marketing team and the consumer,
messages can be altered depending on the consumer’s response.
• Well suited to highly targeted marketing efforts and building one-to-one
customer relationships.
• Cons: Direct marketing is less public.
11.2 The promotion Mix strategies
• Marketers can choose from two basic promotion mix strategies: push promotion or pull promotion
• Push strategy: using the sales force and trade promotion to push the product through channels.
• Pull strategy: spending a lot on consumer advertising and promotion to induce final consumers to buy the product,
creating a demand vacuum that “pulls” the product through the channel
426 Part Three | Designing a Customer-Driven Strategy and Mix
Producer marketing activities Reseller marketing activities
(personal selling, trade (personal selling, advertising,
promotion, other) sales promotion, other)
Retailers and
Producer Consumers
wholesalers

In a push strategy, the Push strategy

company “pushes” the
product to resellers,
who in turn “push” it
to consumers.
Demand Demand
Retailers and
Producer Consumers
wholesalers

Producer marketing activities (consumer advertising, sales promotion, other)

Pull strategy
 keter needs to assess what influence each communication experience will have at different
stages of the buying process. This understanding helps marketers allocate their communi-
cation dollars more efficiently and effectively.

11.3 Communication process To communicate effectively, marketers need to understand how communication works.
Communication involves the nine elements shown in Figure 14.2. Two of these elements
are the major parties in a communication—the sender and the receiver. Another two are the

• Marketing communications focus on immediate awareness, image, or preference goals in the target market.
major communication tools—the message and the media. Four more are major communica-
tion functions—encoding, decoding, response, and feedback. The last element is noise in the sys-
tem. Definitions of these elements follow and are applied to a McDonald’s “i’m lovin’ it”
• Marketers are moving toward viewing communications as managing the customer relationship over time.
television commercial.

• Communication involves the nine elements: the sender and the receiver, the message, media, encoding, decoding,
FIGURE | 14.2 There is a lot going on in this figure! For example, apply this model to McDonald’s.
Elements in the Communication
response, and feedback.
Process
To create great adertising—such as its long-running “i'm lovin’ it” campaign—McDonald’s
must thoroughly understand its customers and how communication works.

Sender Encoding Message Decoding Receiver

Media

Noise

Feedback Response

Sender’s field Receiver’s field

of experience of experience