What is marketing According to Kotler and Armstrong?

PRINCIPLES OF MARKETING Philip Kotler and Gary Armstrong Eighth Edition Philip Kotler and Gary Armstrong Chapter 1 Marketing in a Changing World: Creating Customer Value and Satisfaction

What is Marketing? Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. More simply: Marketing is the delivery of customer satisfaction at a profit.

Core Marketing Concepts Core Concepts This CTR corresponds to Figure 1-1 on p. 4 and relates to the discussion on pp. 3-10. Also to the CTRs numbers 4 - 8 which follow. Core Marketing Concepts Products and Services Core Concepts Needs. These emerge from a state of felt deprivation. Ask students to distinguish among physical, social, and individual needs. Wants. These are the form taken by human needs as they are shaped by culture and individual experience. Have students provide examples for different wants based upon geographical differences, gender, age, wealth. Link culture to socio-economic standing, education. Demands. These are wants backed by buying power. Discuss such popular items as dream vacations or favorite cars to illustrate the difference between wants and demands. You may want an Acura Legend but drive a Subaru Justy. Introduce the idea that demands are often for a bundle or group of benefits and may address a number of related needs and wants. Products. These are anything offered for sale to satisfy a need or want. Have students discuss an extended view of products to include services and ideas. Discuss the role of value in distinguishing products. Discussion Note: Ask students to identify their product choice set for cars, vacations, dating partners, or college professors. Exchanges. These are the act of obtaining desired objects by offering something in return. Link to barter economies and promises to pay (i.e., credit, checks). Transactions. These are an actual trade of value between at least two parties. Transaction marketing is part of the larger concept of relationship marketing in which parties build long-term, economic ties to enhance quality and customer-delivered value. Markets. These are the set of actual and potential buyers of a product. Markets may be decentralized or centralized. Markets exist wherever something of value is desired, such as in the labor market, the money market, even the donor market - for human “products” such as blood or organs. Needs, wants, and demands Core Marketing Concepts Markets Value, satisfaction, and quality Exchange, transactions, and relationships

What Motivates a Consumer to Take Action? Needs - state of felt deprivation for basic items such as food and clothing and complex needs such as for belonging. i.e. I am thirsty Wants - form that a human need takes as shaped by culture and individual personality. i.e. I want a Coca-Cola. Demands - human wants backed by buying power. i.e. I have money to buy a Coca-Cola.

What Will Satisfy Consumer’s Needs and Wants? Products - anything that can be offered to a market for attention, acquisition, use or consumption and that might satisfy a need or want. Examples: persons, places, organizations, activities, and ideas. Services - activities or benefits offered for sale that are essentially intangible and don’t result in the ownership of anything. Examples: banking, airlines, haircuts, and hotels.

How Do Consumers Choose Choose Among Products and Services? Customer Value - benefit that the customer gains from owning and using a product compared to the cost of obtaining the product. Customer Satisfaction - depends on the product’s perceived performance in delivering value relative to a buyer’s expectations. Linked to Quality and Total Quality Management (TQM).

How do Consumers Obtain Products and Services? Exchanges - act of obtaining a desired object from someone by offering something in return. Transactions - trade of values between parties. Usually involves money and a response. Relationships - building long-term relationships with consumers, distributors, dealers, and suppliers.

Who Purchases Products and Services? Actual Buyers Market - buyers who share a particular need or want that can be satisfied by a company’s products or services. Potential Buyers

Modern Marketing System Suppliers Modern Marketing System Modern Marketing System This CTR corresponds to Figure 1-3 on p.11 and relates to the material on p. 10. Competitors Company (Marketer) The Marketing System A modern marketing system consist of four levels of activity. In a very real sense, each level influences the other levels. Each level adds value to the system. Discussion Note: Consumers add value to the system when they buy products. Their purchase price in turn funds the efforts (as profits) of each of the other layers to create more value as the system continues the cycle. Suppliers. This level provides the inputs to the production of goods and services. Company and Competitors. Each company adds value to supplies to create the products (goods, services, or both) offered to various markets. Marketing Intermediaries. Because of specialization, one or more other firms can get products to consumers more efficiently than most producers can (though there are important exceptions). End User Market. The consumer is the “final cause” of the efforts of each level of the marketing system. Discussion Note: Ask students to comment on whether the schematic should have “dotted line” feedback connection from the end user to each level of the system. What form of communication does that feedback take? Purchase? Satisfaction level? Brand loyalty? Brand switching? You might encourage students to remember this system perspective throughout the course and relate examples back to this CTR from time to time. Marketing Intermediaries Environment Environment End User Market

Marketing Management Marketing Management Demand Management This CTR corresponds to the material on pp. 11 - 12. Marketing Management Implementing programs to create exchanges with target buyers to achieve organizational goals The Marketing Management Process The marketing concept suggests that businesses must actively manage an on-going relationship with customers. Key concepts of this perspective include: Marketing Management. The text defines marketing management as “the analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives.” Discussion Note: You might point out to students the influential role played by Professor Kotler in the development of marketing management, in both business and academic settings. Demand Management. Matching supply and demand can be a difficult balancing act. Traditional views of marketing were simplistic: build demand. Now marketers recognize the need to manage demand so that infrastructure resources are not overburdened. Discussion Note: It might help to compare demand management with Just-in-Time Inventory or Supply management. JIT lowers costs by not requiring extra capacity to hold things -- supplies or inventory -- before they are needed. By matching consumer demand to the systems designed to meet needs and wants, overall costs of marketing, and hence, the price of products, is reduced. Building Customer Relationships. Growing markets traditionally mean a plentiful supply of new customers. But as consumers become more sophisticated and as market growth slows, maintaining existing customers is the key to long term marketing success. As pointed out in the text, a continuing customer relationship means years of revenues for a company, not one time only sales. Further, existing customers are less expensive to promote to as they have already processed a great deal of product-specific information. Demand Management Finding and increasing demand, also changing or reducing demand Profitable Customer Relationships Attracting new customers and retaining current customers

Marketing Management Philosophies Five Marketing Philosophies This CTR relates to the material on pp. 12-17. Teaching Tip: You may find it useful to ask students to give their definitions of philosophy. How do they use philosophies for studying? dating? planning their time? Work from their examples to the idea that businesses too have philosophies about how to get things done. Marketing Management Philosophies Production Concept Consumers favor products that are available and highly affordable Improve production and distribution Consumers favor products that offer the most quality, performance, and innovative features Consumers will buy products only if the company promotes/ sells these product Focuses on needs/ wants of target markets & delivering satisfaction better than competitors markets & delivering superior value Society’s well-being Product Concept The Production Concept. One of the oldest concepts, it holds that consumers favor products that are available and affordable. Management emphasizes production and distribution efficiency. Examples from the text include Ford's Model T and Texas Instruments. The Product Concept . This concept focuses on the actual product in an effort to continuously improve quality, performance, and features. May lead to marketing myopia or the tendency to too narrowly define the scope of one's business. Consumers buy products for their benefits, not their features. The Selling Concept. This concept views consumers as unwillingly customers whose inherent opposition must be overcome to make a sale. It is most often used today for unsought goods. The selling concept tends to encourage sellers to misrepresent the true nature of their products or services and can lead to problems in maintaining high customer satisfaction. The Marketing Concept. This concept links the company's success with the consumer's continuing satisfaction. Its "outside-in" approach starts with a well defined target market, an analysis of their needs and wants, and then builds the company's offering around meeting those needs better than the competition (Note: the selling and marketing concepts are contrasted on the following CTR of Figure 1-4). The Societal Marketing Concept. This concept adds to the marketing concept the idea that the company should contribute to the betterment of society as a whole (Note: The societal marketing concept is developed in more detail on a following CTR of Figure 1-5 and the accompanying notes). Selling Concept Marketing Concept Societal Marketing Concept

Marketing & Sales Concepts Contrasted Marketing and Sales Concept Contrasted This CTR corresponds to Figure 1-4 on p. 15 and to the material on pp. 14-16. The Selling Concept Starting Point Focus Means Ends Factory Existing Products Selling and Promoting Profits through Volume Comparisons and Contrasts: The Selling Concept takes an inside-out perspective -- looking at the company’s needs and wants in terms of existing products and ways to find customers for them. The Marketing Concept takes an outside-in perspective - identifying the needs and wants of a clearly defined market and adjusting company efforts to make products that meet the needs. Discussion Note: Promotional tone may help indicate whether a company practices the selling or the marketing concept. Selling involves persuasion -- convincing the customer of their need to buy existing products. Marketing, at its best, involves information -- bringing the developed product to the awareness of a target market that recognizes need satisfying products. As the text notes, companies can let their own success lock them into a rigid selling structure. As times change, and they always do, those companies fail to see the need for meeting new and emerging consumer needs. The marketing concept helps companies focus on customer need satisfaction, leading to long-term success by customer retention. The Marketing Concept Market Customer Needs Integrated Marketing Profits through Satisfaction

Societal Marketing Concept This CTR corresponds to Figure 1-5 on p. 16 and relates to the material on pp. 16-17. Society (Human Welfare) Societal Marketing Concept The Societal Marketing Concept The Societal Marketing Concept holds that the organization should determine the needs, wants, and interests of target markets. In delivering the desired satisfactions more effectively and efficiently than the competition, the company should also maintain or improve both the consumer’s and society’s well being. Discussion Note: You may wish to consider extra-textual class discussion identifying the pros and cons of the societal marketing concept. Pros: Reasons for adopting the societal marketing concept include: 1. Public expectations. Social expectations of business have increased. 2. Long-run profits. Socially responsible marketing may lead to more secure long-run profits. 3. Ethical obligation. Business should recognize that responsible actions are right for their own sake. 4. Public image. A good public image helps firms gain more customers, better employees, access to money markets, and other benefits. 5. Better environment. Involvement by business can help solve difficult social problems, creating a better quality of life and a more desirable community in which to attract and hold skilled employees. 7. Balance of responsibility and power. Marketers have a large amount of power in society that requires an equally large amount of responsibility. 8. Stockholder interests. Socially responsible companies are considered less risky and safer investments 9. Possession of resources. Business has the financial resources, technical experts, and managerial talent to provide to support public causes. Cons: Reasons for not adopting the societal marketing concept include: 1. Violation of profit maximization. 2. Dilution of purpose. The pursuit of social goals dilutes business’s primary purpose. 3. Costs. Many socially responsible activities don’t pay their way. 4. Too much power. Business is already one of the most powerful institutions in society. 5. Lack of skills. Marketers may be poorly qualified to deal with social issues. 6. Lack of accountability. There are no direct lines of social accountability from the business sector to the public. 7. Lack of broad public support. Even favorable attitudes are general and lack consensus on specific actions marketers should take on social issues. Consumers (Wants) Company (Profits)

New Marketing Challenges This CTR relates to the material on pp. 17-24. Teaching Tip: Challenge students to see marketing as an exciting and creative field needing new ideas and new solutions to emerging business opportunities. New Marketing Landscape & Information Technology Nonprofit Marketing Emerging Challenges Growth of Nonprofit Marketing. More and more charitable firms and businesses that hold nonprofit status, like colleges and hospitals, are adopting a marketing orientation toward serving their constituencies. Globalization. Technological and economic developments continue to shrink the distances between countries. Computer and communications technology make possible truly global businesses that buy, sell, manufacturer, market, and service customers easily across international borders. Rising affluence creates new markets. Similarly, more European and Asian companies now compete successfully in the US. market. Changing World Economy. Even as new markets open to rising affluence in such countries as the “newly industrialized” pacific rim, poverty in many areas and slowed economies in previously industrial nations has already changed the world economy. Americans increasingly maintain living standards only by having two incomes per household. Value is hunted for by penny-wise consumers. Ethics and Responsibility. The greed of the 1980s and other problems has spurred a new interest in ethical conduct in business. Many consumers feel business in general has more of an obligation to those who generate profits -- the consumer! New Landscape and Information Technology. The new marketing landscape is a dynamic, fast-paced, and evolving function of all these changes and opportunities. More than ever, there is no static formula for success. Only strategies that incorporate and implement constant improvement in product quality and higher delivered customer value stand any chance of long-term success. Information and the internet have created a technology boom. Ethical Concerns Globalization Changing World Economy

Strategic Planning and the Marketing Process PRINCIPLES OF MARKETING Chapter 2 Strategic Planning and the Marketing Process

Strategic Planning Process Strategic Planning involves developing an overall company strategy for long-run survival and growth. This process involves: Defining a Mission: Statement of an organization’s purpose; should be market oriented. Setting Company Objectives: Supporting goals and objectives to guide the entire company. Designing a Business Portfolio: Collection of businesses and products that make up the company. Planning Functional Strategies: Detailed planning for each department designed to accomplish strategic objectives.

Designing the Business Portfolio The best portfolio is the one that best fits the company’s strengths and weaknesses to the opportunities in the environment. The company must: analyze its current business portfolio or Strategic Business Units (SBU’s) decide which SBU’s should receive more, less, or no investment develop growth strategies for adding new products or businesses to the portfolio

Analyzing Current SBU’s: Boston Consulting Group Approach This CTR corresponds to Figure 2-2 on p. 39 and relates to the discussion on pp. 38-39. Analyzing Current SBU’s: Boston Consulting Group Approach Relative Market Share High Low Designing the Business Portfolio The business portfolio is the collection of businesses and products that make up the company. In portfolio analysis, management evaluates the businesses for their strategic fit in meeting company objectives. Strategic Business Units (SBUs) consist of separate units of the company that can be planned independently from other company businesses. The BCG Matrix Stars. High growth, high share businesses. Stars often require heavy investment to build/maintain share in rapidly expanding markets. You may wish to discuss the importance of market share to product profitability at this point. Cash Cows. Low growth, high share businesses. Cows generate profits for investment in other businesses. Question Marks. High growth, low share businesses. Strategy must decide between further investment to move question marks to star status or phasing the product out. Dogs. Low growth, low share. Dogs are often targets for divestment, but may still be profitable and/or contribute to other organizational goals. Stars High growth & share Profit potential May need heavy investment to grow Question Marks High growth, low share Build into Stars/ phase out Requires cash to hold market share Market Growth Rate Low High Cash Cows Low growth, high share Established, successful SBU’s Produces cash Dogs Low growth & share Low profit potential

Analyzing Current SBU’s: GE Strategic Business-Planning Grid The GE Planning Grid This CTR corresponds to Figure 2-3 on p. 40 and relates to the material on pp. 39-40. Business Strength High Medium Low Strong Average Weak A B C D The General Electric Approach This matrix uses two dimensions of three zones each: Industry attractiveness is an index made up of such factors as market size, market growth, industry profit margin, amount of competition, seasonality & cyclicality of demand, and industry cost structure. Business strength is an index of factors like relative market share, price, competitiveness, product quality, customer & market knowledge, sales effectiveness, and geographic advantages. Which elements within these categories are utilized may vary from product to product and market to market. Strategies appropriate for each group of zones: Invest/Grow. This zone consists of the three green cells in the upper left corner and indicate strong SBUs. Selectivity/Earnings. This zone consists of the three yellow diagonal cells from the lower left to the upper right and represent SBUs of medium overall attractiveness. Sell or Reposition. This zone consists of the three red cells in the lower right corner and indicated SBUs with low overall attractiveness. Industry Attractiveness

Developing Growth Strategies Product/Market Expansion Grid This CTR corresponds to Figure 2-4 on p. 41 and relates to the material on pp. 41-42. Developing Growth Strategies Product/ Market Expansion Grid 1. Market Penetration 3. Product Development Existing Products New Products Developing Growth Strategies Market Penetration. A penetration strategy involves increasing sales to present target customers. The product itself remains unchanged although there may be a substantial change in how the product is promoted. You may wish to link market penetration with other company-wide strategies such as market leader if appropriate to course progress at this time. Market Development. A market development strategy involves identifying new segments for the current products offered by the company. Market development can be successful for old products like Arm & Hammer Baking Soda (used as a refrigerator deodorant). You may wish to link market development to emerging technologies such as geodemographics for identifying new market segments. Product Development. A product development seeks growth by modifying existing products or introducing new products to serve an existing market. Line extensions in snack foods are often useful for illustrating this strategy to students. You may ask your class how many flavors of Doritos they can name as an example. Diversification. This strategy involves taking profits from existing products or businesses to acquire or enter new markets, usually in different industries from previous company efforts. RJR buying Nabisco is an example. Existing Markets 2. Market Development 4. Diversification New Markets

Product/ Market Expansion Grid Market Penetration: increase sales to present customers with current products. How? Market Development: develop new markets with current products. How? Product Development: offering modified or new products to current customers. How? Diversification: new products for new markets.

Marketing’s Role in Strategic Planning Process of Selecting Target Consumers Market Segmentation: determining distinct groups of buyers (segments) with different needs. Market Targeting: evaluating and selecting which target segments to enter. Market Positioning: products distinctive and desirable place in the minds of target segments compared to competing products. Marketing Strategies for Competitive Advantage Market-Leader Market Challenger Market-Follower Market-Nicher

The Marketing Process Target Consumers Product Place Price Competitors This CTR corresponds to Figure 2-5 on p. 45 and to material on pp. 44-45. Teaching Tip: This material previews the focus on later chapters. You may wish to show this CTR as an introduction to the following discussion on target consumers. The lecture information below is provided if you wish to cover the strategic background information prior to coverage of details. The Marketing Process Target Consumers Product Place Price Promotion Implementation Marketing Planning Control Analysis Competitors Intermediaries Publics Suppliers Demographic- Economic Environment Technological- Natural Political- Legal Social- Cultural The Marketing Process This begins an extended discussion of planning, organization, and specific-actions that includes slide transparencies on the 4 Ps, factors affecting marketing strategy decisions, and a general outline of the contents of a marketing plan. These topics are covered in more detail on subsequent CTRs. Marketing Analysis (and Planning). Marketing must conduct a complete analysis of its situation and all relevant environmental influences. Further, marketing must provide each functional area of the company with the information from this analysis that affects their area-specific tasks. Selecting Target Markets. In evaluating analysis, it should become clear that the company cannot service each market opportunity equally well. Target market selection occurs by matching strengths and weaknesses identified in analysis to particular target markets. Marketing Implementation. Plans must be coordinated and launched with realistic logistical support if they are to succeed. Marketers must be able to translate plans into concrete action. Marketing Control. The need to measure, assess and evaluate performance all relate to control issues. These are discussed in more detail later.

Marketing Mix- The Four P’s The Four Ps of Marketing This CTR corresponds to Figure 2-6 on p. 49 and the material on pp. 47-50. Product “Goods-and-service” combination that a company offers a target market Price Amount of money that consumers have to pay to obtain the product The Marketing Mix Product. In the contemporary mix, product is the term for the "goods and service" offering sold by the company. As technology makes everything from stereos to computers more accessible to the average buyer, service increasingly makes the competitive difference, especially in creating brand loyalty and generating repeat customers. Place. Place refers as much to how the product arrives to the final outlet as where the customer actually buys it. Later in the course, when students distinguish between convenience, shopping, and specialty goods the logistics of getting the product to the "place" of purchase can be emphasized again. Discussion Note: You may wish to discuss the role of infrastructure on placing decisions -- highway, rail, and waterway conditions and/or airfreight costs. Price. Price too is an excellent source of discussion content. Students will undoubtedly know about list and discount prices as many will have had shopping experiences in discount malls. The manipulation of price in the channel of distribution through allowances, credit, and payment arrangements may be new to them. Promotion. Promotion covers most of what students will stereotypically identify as "real marketing." While the role of promotion is important you may remind them the dangers of too much emphasis on a single component of the mix. Target Customers Intended Positioning Activities that persuade target customers to buy the product Promotion Company activities that make the product available Place

Managing the Marketing Effort Marketing Analysis of Company’s Situation Managing the Marketing Effort This CTR corresponds to Figure 2-7 on p. 50 and relates to the material on pp. 50-55. Managing the Marketing Effort Managing the Marketing Effort Analysis. Tools of analysis include marketing research, marketing information systems, demand forecast models, and systematic if more subjective sources of information such as sales force composites and expert judgments. Even while taking advantage of constantly improving technologies, marketers must know when their own judgment must be relied on as well. If there is much science to marketing, there remains a great deal of art to it as well. Planning. Planning involves deciding on the marketing strategies that will help the company attain its overall objectives. The marketing plan is discussed on the following CTR. Implementation. Through implementation, the company turns the strategic and marketing plans into actions that will achieve the company’s strategic objectives. You may wish to remind students that planning can become a self-absorbing activity that needs constant re-connection to real world marketing constraints. Control. Control consists of measuring and evaluating the results of marketing plans and activities and taking corrective actions to make sure objectives are being reached. Discussion Note: Ask students to discuss how these steps in managing the marketing effort are interdependent and mutually influencing. How example, how does the experience a manager gains from taking corrective actions influence the planning process? Does it in turn affect how analysis is conducted? Resources used for analysis? Control Marketing Implementation Turn Marketing Plans into Action Plans to Achieve Objectives Marketing Planning Develop Marketing Strategies to Achieve Marketing Objectives Develop Marketing Plans & Budget Measure Results Evaluate Results Take Corrective Action

Elements of a Marketing Plan Executive Summary Current Marketing Situation Threats and Opportunities Objectives and Issues Marketing Planning This CTR relates to the material on pp. 51-52 and corresponds to the information in Table 2-2 on p. 51. Teaching Tip: If you are using a term marketing project in the course, you may wish to handout the assignment at this time. Elements of a Marketing Plan Marketing Strategy Action Programs Budgets Marketing Plan Components Executive Summary. This opening section provides a short summary of the main goals and recommendations for action. It should prepare the reader in anticipation of full explanations later. Teaching Tip: Hint for students: Write this section after completing the plan. Current Marketing Situation. This section describes the market and the company's position in it. A product review should compare all market entries. A distribution section reports sales trends and channel developments. Threats and Opportunities. This section distills environmental scanning efforts into an appraisal of how those forces and trends affect the company. Marketing plans should both identify and rank threats and opportunities. Objectives and Issues. This section begins the process whereby the manager translates analysis into terms for action. Based upon the preceding two steps the manager can set goals that will successfully implement company strategy. Marketing Strategies. Just as the company has strategies for growth, the manager must define the marketing logic or "game plan" to be used in running the specific business or product. The marketing plan here must provide specific strategies for target markets, the marketing mix, expenditures, and how strategies complement and support overall marketing goals. Action Programs. This section tells the who, what , when, and how much of the plan. Budgets. This section is essentially a projected profit-and-loss statement. You may wish to use it as part of a diagnostic if student plans are used with a simulation. Controls. All marketing plans must specify the means for evaluating their effectiveness. Financial goals by market by quarter are common. Controls

Marketing Implementation Marketing Strategy Marketing Implementation This CTR relates to the material on p. 52. Teaching Tip: Students may have initial difficulty in developing a solid approach to implementing marketing plans. After working through the planning process itself it is often hard for students to focus again on the more concrete activities required to implement their ideas. Marketing Implementation Organizational Structure Decision and Reward Human Resources Marketing Implementation Marketing Implementation is the process that turns marketing strategies and plans into actions in order to accomplish strategic marketing objectives. Action Program. This element of the implementation process coordinates the activities -- what people do -- of the plan. Decisions and deadlines for actions are specified. Lines of authority and reporting are specified. Procedures for resolving conflicts should also be provided. Organization Structure. It should be emphasized to students that there is no one "right" organization structure. Structure is appropriate to the kind of market and competitive conditions that exist. Fast changing markets in high technology are best served by decentralized structures. Management styles from formal to informal serve company interests better if they are linked to the kind of decisions that need to be made rather that personal preferences of management. While decentralized, informal approaches are popular in fast changing markets, formal and centralized structures are often more competitive for organizations in stable markets. Decision and Reward Systems. These must include issues of compensation but management will also benefit from attention to information networking opportunities and the role of praise and honor as effective additional roles that build a sense of company identity. Human Resources. Recruitment and training of motivated people with the necessary skills and abilities to perform specific tasks is crucial to successful implementation of marketing plans. Combined with reward systems, you may wish to introduce extra-textual discussion of theories of management such as Herzberg’s motivators and hygiene factors here. Climate and Culture. Company culture is a system of values and beliefs shared by people in the organization that provide collective meaning and identity. This system serves as the context for determining meaning and guides decision making. Action Programs Marketing Performance Climate and Culture Implementation

Marketing Control Set Marketing Goals Measure Performance Evaluate This CTR corresponds to Figure 2-8 on p. 53 and relates to the material on pp. 53-55 . Marketing Control Measure Performance Evaluate Performance Marketing Control Marketing control is the process of measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that marketing objectives are attained. Four Steps of Control Include: Set Goals. It is important that students understand that the control process is proactive in nature. Management starts by deciding which goals it wants to reach. Goals are integrated into all marketing plans and should be reasonable and specific. Measure Performance. In determining the success of the marketing efforts, performance in the marketplace and the company must be objectively measured. The measurements then become the basis for considering how things are working out for the company. Evaluate Performance. Many students will bring with them a negative connotation of the evaluation process. You may want to encourage them to think that the evaluation step is a diagnostic one. Few companies use this step or the following one for strictly punishing marketing personnel. Evaluation may identify a need for improvement for the marketers, but it also may indicated changed environmental conditions, new competitive threats, unrealistic goals, or faulty strategic assumptions. Encourage your students to articulate and discuss evaluation as a beneficial professional experience as well as an inevitable necessary part of strategic planning. Take Corrective Action. Again, many students will see “corrective” as a necessary evil. Invite them to consider that all organizations seek feedback on performance in order to make changes in their competitive behavior. Coaches use half-time and time outs to take corrective action. Marketing managers use the control process to “tinker” with the plans in order to help all members of the marketing team perform well. Take Corrective Action

Marketing Audits Environment Function Strategy Types of Marketing This CTR relates to the material on pp. 54-55 and summarizes the information in Table 2-3 on p. 56. Marketing Audits Organization Productivity Environment Systems Function Strategy Types of Marketing Audits Topical Areas for Marketing Audits Marketing Environment. This includes the macroenvironment and the task environment. Macroenvironmental questions address demographic, economic, natural, technological, political, and cultural questions that affect the companies marketing efforts. Task environment questions address markets, customers, competitors, channels, suppliers, and publics in relation to how the company interacts and responds to them Marketing Strategy. This audit questions the business mission, marketing objectives, marketing strategy, and budgetary issues. Audits here seek to ensure a clear sense of mission and strategic fit for the company. Marketing Organization. This audit examines the formal structure, functional efficiency, and interface efficiency of the company. Marketing Systems. This audit deals with the adequacy of the marketing information system, marketing planning system, marketing control system, and new-product development. In particular, audits in this area seek to identify whether or not each of these functions work well and meshes synergistically with the others. Marketing Productivity. This audit examines profitability and cost-effectiveness. Marketing Function. This audit evaluates the products, price, distribution, advertising, sales promotion, publicity, and salesforce efforts of the company. Efforts here correspond to a strategic review of the elements of the marketing mix with traditional promotional elements broken down into two related categories.

The Global Marketing Environment PRINCIPLES OF MARKETING Chapter 3 The Global Marketing Environment

Marketing Environment All the actors and forces influencing the company’s ability to transact business effectively with it’s target market. Includes: Microenvironment - forces close to the company that affect its ability to serve its customers. Macroenvironment - larger societal forces that affect the whole microenvironment.

The Marketing Environment Demographic Company Economic Cultural Company Publics Suppliers Competitors Customers Natural Political Intermediaries Technological

The Microenvironment Company Publics Competitors Intermediaries Suppliers Forces Affecting a Company’s Ability to Serve Customers Microenvironmental Forces Suppliers. Suppliers are the firms and persons that provide the resources needed by the company and competitors to produce goods and services. Company. Marketing plans must accommodate the needs of other functional areas of the firm to coordinate product/service delivery effectively (See following CTR and notes. Competitors. Competitors are usually considered those companies also serving a target market with similar products and services, although broader definitions may apply. Publics. Publics consist of any group that perceives itself having an interest in the actions of the firm. Publics can have positive as well as negative influences on the company's objectives. Intermediaries. Intermediaries include various middlemen and distribution firms as well as marketing service agencies and financial institutions. Customers. Customers consist of consumer, industrial, reseller, government, and international markets. Competitors Intermediaries Customers

The Company’s Microenvironment Company’s Internal Environment- functional areas such as top management, finance, and manufacturing, etc. Suppliers - provide the resources needed to produce goods and services. Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.

The Company’s Microenvironment Customers - five types of markets that purchase a company’s goods and services. Competitors - those who serve a target market with similar products and services. Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.

Customer Markets Company International Markets Consumer Markets This CTR corresponds to Figure 3-2 on p. 73 and relates to the material on p. 72. International Markets Consumer Markets Types of Customer Markets The company is concerned with five types of customer markets, including: Consumer Markets. These consist of individuals and households that buy goods and services for personal consumption. Business Markets. These buy goods and services for further processing or for use in their production process. Reseller Markets. Resellers buy goods and services for repackaging and reselling at a profit. Discussion Note: Students may have heard that these “middlemen” raise costs to end-users. You might point out that in most cases, resellers actually lower costs by performing marketing functions less expensively than could manufacturers. Government Markets. Governments buy goods and services to produce public services or to transfer them to needy constituents. International Markets. A growing concern for almost all marketers, these consist of those various types of buyers located in other countries. Company Government Markets Business Markets Reseller Markets

The Macroenvironment Demographic Cultural Economic Political Natural This CTR corresponds to Figure 3-4 on p. 75 and relates to the material on pp. 74-92. Teaching Tip: This CTR overviews the major forces in the company’s macroenvironment. You might use it as an introduction before exploring each area in detail. Each of the six major forces is covered in greater detail on subsequent CTRs. Demographic Cultural Economic Forces that Shape Opportunities and Pose Threats to a Company Macroenvironmental Forces Demographic. The demographic environment monitors population characteristics on such items as size, density, age, location. Economic. The economic environment includes income and spending pattern concerns. Natural. The natural environment addresses pollution concerns, energy costs, raw materials availability, and growing government roles in resource management. Technological. The technological environment includes such issues as the fast pace of change, emerging product forms, and high R&D. Political. The political environment addresses the role of government and policy in the regulation of business. Cultural. The cultural environment recognizes the influence of values and beliefs of a society on purchase decisions and consumption patterns. Political Natural Technological

The Company’s Macroenvironment Demographic - monitors population in terms of age, sex, race, occupation, location and other statistics. Economic - factors that affect consumer buying power and patterns. Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

Key U.S. Demographic Trends This CTR relates to the material on pp. 74-79. Changing Age Structure Population is getting older Changing Family Structure Marrying later, fewer children, working women, and nonfamily households Demographic Environment Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other aggregate statistics. Key Aspects of the US demographic environment include: Age Structures (esp.. Baby Boomers). The post W.W.II Baby Boom is the most significant demographic feature by its sheer size: 75 million or over 1/3 of the US population. This bulge in age distribution leads growth strategies in industries serving age-specific markets. Where boomers go, marketers must follow. Discussion Note: More proactively, marketers need to identify emerging boomer needs to plan strategically for an aging population that also lives longer than previous ones. Family Structure. The typical American family rarely exists anymore. Increasing age of those marrying, delayed child-bearing, increased two- income families, and non-family households are key demographic trends. Geographic Population Shifts. Americans are mobile. Trends include movement to Sunbelt states, rural to urban shifts, and present urbanites moving to suburbs. Trends in Education. Americans are becoming more educated and white-collar. Increasing Ethnic Diversity. The United States population is 73% white, 12% black, with the remaining percentage mostly Hispanic (22 million) and Asian (7 million). Geographic Shifts Moving to the Sunbelt and suburbs (MSA’s) Increased Education Increased college attendance and white-collar workers Growing Ethnic and Racial Diversity 73% Caucasian, 12% African-American, 10% Hispanic & 3.4% Asian

Economic Environment Key Economic Concerns for Marketers Economic This CTR relates to the material on pp. 79-82. Economic Development Changes in Income Key Economic Concerns for Marketers The Economic Environment The Economic Environment consists of factors that affect consumer purchasing power and spending patterns. Key considerations include: Economic Development. Nations vary greatly in their levels of and distribution of income, often as a result of their stage of economic development. Typical distinctions include: Subsistence Economies. These consume most of their own agricultural and industrial output. These countries are poor targets for most products. Industrial Economies. These offer rich markets for many different kinds of goods. Changes in Income. Rising incomes for most consumers have only kept pace with inflation. As a result, consumers are more sensitive to Value Marketing - the careful promotion of a high degree of quality and performance for the price. Income distribution is also of key importance: Upper-class consumers are not affected by current economic events. Middle-class consumers can afford the “good life” most of the time, but are careful about spending. Working-class consumers must budget carefully. Underclass consumers are often unable to participate fully in the marketing system. Changing Consumer Spending Patterns. Knowledge of Engel’s Laws remains important: As income rises, the percentage spent on food declines, the percentage spent on housing remains constant, and the percentage spent on savings and other categories increases. Changes in Consumer Spending Patterns

Natural Environment More Government Intervention Factors Affecting the Higher Pollution Levels Shortages of Raw Material Natural Environment There are several areas affecting marketing that stem from the natural environment. Shortages of Raw Materials. Shortages both increase demand and sprout counter-movements aimed at conservation. Discussion Note: Both sides of the "green" movement utilize sophisticated database marketing and lobbying techniques. Energy Costs. The cost of energy makes long-term growth of high energy industries and goods difficult to predict. Increased Pollution. Industrial growth almost always damages the natural environment. The so-called “green movement” seeks to operate businesses in such a way so as not to damage the natural environment. The varying political power of “greens” in different countries is a consideration in global marketing efforts. Government Intervention in Natural Resource Management. Changing philosophies on the role of government in managing natural resources also blends into the legal environment. Marketers must take care in identifying natural environmental trends. Discussion Note: You might further expand this discussion by pointing out that even agencies like the EPA vary greatly in the amount of environmental regulation they perform depending upon funding and the agenda of whoever occupies the White House. Increased Costs of Energy

The Company’s Macroenvironment Technological - forces that create new product and market opportunities. Political - laws, agencies and groups that influence or limit marketing actions. Cultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors.

Technological Environment Rapid Pace of Change High R & D Budgets Technological Environment Technological Environment This CTR relates to the material on pp. 83-84. Issues in the Technological Environment Technological Environment Key forces operating in the technological environment include: Fast Pace of Technological Change. Anyone trying to learn all the features of their current software programs before they are updated and outdated understands this force. Teaching Tip: You might point out to students raised on Star Trek and Star Wars how much of yesterday's sci-fi is already coming true. Cellular phones as Star Trek-type communicators might get class discussion going. High R&D Budgets. The United States spends more on research and development than any other country. Placing marketing personnel on research teams can help focus research efforts on consumer needs and practical applications. Focus on Minor Improvements. Risk factors associated with high costs of development often lead to minor improvements over substantive product changes. Discussion Note: While minor improvements help keep products "fresh" to the market, marketers must anticipate that changing consumer needs will limit the competitiveness of too little innovation. Increased Government Regulation. Faster introduction of increasingly complex products often leads to greater regulation as consumers seek assurances that products are tested and safe. Focus on Minor Improvements Increased Regulation

Political Environment This CTR relates to the material on pp. 84-87. Increased Legislation Changing Enforcement Key Trends in the Political Environment Political Environment The political macroenvironmental forces consist of laws, government agencies, and interest groups that seek regulation of business activities to forward their own interests. Business in general, more than other groups, uses lobbying efforts to try and obtain legislation favorable to their competitive interests. Key considerations include: Legislation. Laws generally attempt to protect companies from each other to create more competition that in turn creates more value for the consumer. Laws also aim at protecting consumers from unfair and sometimes dangerous business practices. Laws sometimes seek to protect society as a whole from practices that endanger whole communities or other publicly owned resources such as rivers, forests, and parks. Enforcement. The effect of laws depends upon the emphasis given to enforcing them within the regulatory agency responsible for administering the law. Regulation varies in intensity with political agendas of sitting presidents and budget allocations. Public interest groups too affect the degree of legislative activity and administrative enforcement. Increased Emphasis on Ethics. At both the grassroots and corporate level, more US companies are showing a greater concern for more ethical conduct and more socially responsible action. Discussion Note: Ethical companies often enjoy better consumer relations and public image. Bottom line contributions can be defensive. For example, when Johnson & Johnson behaved responsibly after the Tylenol poisonings, they did not suffer expensive lawsuits and were able to recapture all of their original market share when the product was re-introduced. Greater Concern for Ethics

Cultural Environment Of Organizations Nature Oneself Society Technological Environment This CTR relates to the material on pp. 87-92. Of Organizations Nature Oneself Society the Universe Others Views That Express Values Cultural Environment The key elements of the cultural macroenvironment include: Persistence of Cultural Values. Core beliefs and values are relatively enduring and must be considered by marketers positioning products. For example, product innovations that conflict with core values are unlikely to be adopted. Shifts in Secondary Values. These change over time and change more often than core values and may provide positioning opportunities. Cultural values are expressed in people’s views on the following: View of Themselves. People vary in their emphasis on how important serving themselves is compared to serving others. Personal ambition and materialism have increased significantly over time in the US. View of Others. Recently, there has been a trend toward more altruistic behavior, at least among some segments of the population. Discussion Note: You might link ambition and altruism to baby boomers and baby busters, respectively. It wont’ hold up forever, but might generate class participation. View of Organizations. Most people are willing to work for large companies but also believe that the companies are out for themselves. View of Society. Trends like “Buy American” are reflects of this view. View of Nature. This trend has changed over the last few decades from dominate and control to coexist and preserve. View of Universe. Linked in the US to religious observance, this trend has seen an overall decline among most and a simultaneous passionate activism among a small, but powerful group, usually called the “religious right.”

Responding to the Marketing Environment Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macroenvironment to affect changes that are favorable for the company. How? Hire lobbyists , run “advertorials”, file law suits and complaints, and form agreements.

Marketing Research and Information Systems PRINCIPLES OF MARKETING Chapter 4 Marketing Research and Information Systems

The Importance of Information This CTR relates to the material on p. 99 and provides a context for discussing marketing research and marketing information systems. Instructor’s Note: This information is extra- textual. Marketing Environment The Importance of Information A marketing information system is valuable for the information tools it provides in relation to the following areas: The Marketing Environment. Companies compete in an environment of social, legal, cultural, technological, natural, and competitive forces. Information on each aspect of the environment is crucial to effective market planning. Discussion Note: You may wish to discuss the role of environmental monitoring or scanning in class. Information gathering can be serendipitous or it can be planned. While not all environmental information needs can be identified in advance, it is possible to approach research and information systems planning with an eye to setting up ways of collecting information in an on-going fashion. Customer Needs and Wants. If environmental forces cause the company to seek information in a larger context, customer needs and wants focus the attention on the target market. Without information, identifying need and wants is guesswork -- or fortune telling. Competitors. The actions of competitors cannot go unnoticed by the company. Innovative companies not only identify competitive actions and offerings, they also consume competitors products -- in small quantities of course! For example, to understand the value of a competitors automobile it makes sense to drive it for awhile as a customer would and evaluate it in that fashion. Strategic Decision Making. Strategy formulation depends upon accurate & timely information most of all. Why Information Is Needed Competition Customer Needs Strategic Planning

What is a Marketing Information System (MIS)? Consists of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute needed, timely, and accurate information to marketing decision makers. Function: Assess, Develop and Distribute Information.

The Marketing Information System Marketing Managers The Marketing Information System This CTR corresponds to Figure 4-1 on p. 99 and relates to the material on pp. 99- 104. Discussion Note: The MIS Concept is one of those exciting new areas for marketing careers you may wish to discuss with your students. The Marketing Information System Distributing Information Assessing Information Needs Marketing Information System Components of the Marketing Information System The MIS consists of people, equipment, and procedures to gather, sort, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. Key components and functions include: Assessing Information Needs. Knowing what is needed or likely to be needed is a key feature of the MIS that underscores the importance of information. Quantity alone is not the answer as too much information can obscure important details. Also, not all desirable information is available. Competitors seldom volunteer information on their results. Distributing Information. This function requires organizing the MIS in a flexible and responsive manner that allows each user access to the combinations of information they need to make better decisions. Internal Records. An effective MIS organizes and summaries balance sheets, orders, schedules, shipments, and inventories into trends that can be linked to management decisions on marketing mix changes. Information Analysis. This function requires that the MIS director anticipate how the information is to be used. For example, if users from all business functions use the MIS on-line for short deadline decisions, then the analytical tools each area needs must be available on demand. Marketing Intelligence. This function provides the everyday information about environmental variables that managers need as the implement and adjust marketing plans. Marketing Research. This function links the consumer, customer, and public to the marketer through an exchange of information. Research is often project oriented and discussed in more detail on the following CTR. Information Analysis Marketing Environment Internal Data Developing Information Marketing Decisions and Communications Marketing Research Marketing Intelligence

Functions of a MIS: Assessing Information Needs Conduct Interviews and Determine What Information is Desired, Needed, and Feasible to Obtain. Monitors Environment for Information Managers Should Have Examine Cost/ Benefit of Desired Information

Functions of a MIS: Developing Information Obtains Needed Information for Marketing Managers From the Following Sources Internal Data Collection of Information from Data Sources Within the Company From: Accounting, Sales Force, Marketing, Manufacturing, Sales Marketing Intelligence Collection and Analysis of Publicly Available Information about Competitors and the Marketing Environment From: Employees, Suppliers, Customers, Competitors, Marketing Research Companies Marketing Research Design, Collection, Analysis, and Reporting of Data about a Situation

Functions of a MIS: Distributing Information Information Must be Distributed to the Right Managers at the Right Time. Distributes Routine Information for Decision Making Distributes Nonroutine Information for Special Situations

The Marketing Research Process Defining the Problem and the Research Objectives Developing the Research Plan The Marketing Research Process The Marketing Research Process This CTR corresponds to Figure 4-2 on p. 104 and relates to the material on pp. 104-119. Instructor’s Note: The CTR presents an overview of the research process. Details of each step are presented on subsequent CTR’s. Implementing the Research Plan Interpreting and Reporting the Findings The Research Process Defining the Problem and Research Objectives. Before researcher can provide managers with information, they must know what kind of problem the manager wishes to solve. Specifying a behaviorally-based information problem clearly is often hard to do. Objectives for research may be exploratory, descriptive, or causal. Discussion Note: One key is to remind students that people report problem symptoms more often than they identify problems. Objectives for research can only be linked to clear problem definitions. Developing the Research Plan and Collecting Information. Developing the plan includes the following steps: (1) Determining specific information needs; (2) Surveying secondary information sources; (3) Planning the primary data collection if necessary; (4) Choosing the contact method and sampling procedure appropriate; and (5) Presenting the plan to the client for approval. Implementing the Plan - Collecting and Analyzing the Data. In implementing the plan care must be taken that all personnel involved in collecting and analyzing data understand clearly the purpose of the research and are adequately trained and experienced to complete it professionally. Interpreting and Reporting the Findings. Interpreting research findings may involve statistical analyses or not but these tools of analysis should not be confused with the action-oriented information needed by marketing managers. Research is valuable only in its use to make better marketing decisions. Reports of findings should always be in the style and language of how the information will be used by the manager.

Marketing Research Process Step 1. Defining the Problem & Marketing Research Process Step 1. Defining the Problem & Research Objectives Gathers preliminary information that will help define the problem and suggest hypotheses. Exploratory Research Descriptive Research Describes things such as consumers’ attitudes and demographics or market potential for a product. Causal Research Test hypotheses about cause- and-effect relationships. Tests hypotheses about cause-

Marketing Research Process Step 2. Develop the Research Plan This CTR relates to the material on pp. 105-119. Teaching Tip: Students may not realize research seeks both primary and secondary information for marketing decision making. The need for careful and complete research information requires attention to both kinds of information. Determine the Specific Information Needed Secondary Data Data collected from other sources for other reasons serves as secondary data. Key factors to consider when using secondary information include: Relevant. Secondary research must fit the needs of the project. It is especially important that categories used previously match the same definitions you are using (like target market). Also, measurement units must be the same. Teaching Tip: For example, you cannot determine an “average” income from secondary research that reports respondents as having incomes as: Group 1: $10,000 to $14,999; 10 members Group 2: $15,000 to $19,999; 20 members Group 3: $20,000 to $24,999. 7 members This is categorical, not interval-scaled data. An average cannot be determined. Accurate. You must be able to determine that the data were reliably collected and reported. Current. The information must be up-to-date enough for the current project decisions. Impartial. The information must have been objectively collected and reported. Discussion Note: Impartiality also refers to ensuring that the researcher had no a priori agenda. For example, the Tobacco Institute continues to fund research projects designed to not find a relationship between cigarette smoking and lung cancer. Secondary Primary Information collected for the specific purpose at hand. Information that has been previously collected. Both Must Be: Relevant Accurate Current Impartial

Primary Data Collection Process Step 1. Research Approaches This CTR relates to information on pp. 109-112. Observational Research Gathering data by observing people, actions and situations (Exploratory) Primary Data Decisions on primary information needs include: Research Approaches. There are three common approaches for gathering primary data. Observations are linked to actual behaviors but may not help in understanding why people act as they do. Surveys can help describe reasons for people's behavior and provide the research with flexibility. But surveys can be plagued by problems in completion and demand characteristics from several factors. Experimental methods help identify cause and effect relationships but controlling for extraneous variables is usually difficult in real world situations. Survey Research Asking individuals about attitudes, preferences or buying behaviors (Descriptive) Experimental Research Using groups of people to determine cause-and-effect relationships (Causal)

Primary Data Collection Process Step 2. Contact Methods Collecting Information This CTR corresponds to the material in Table 4-3 on p. 112 and relates to the material on pp. 112-114. Contact Methods Data Collection Methods Mail Questionnaires. This method provides excellent control over the effects of having an interviewer influencing the respondents answers. Since no interviewer is present, no interpersonal influences are possible. Mail questionnaires may elicit more honest and in-depth information. Discuss with your class the kind of problems that may require this kind of information, such as social marketing issues on health care concerns. Still, lack of ability to distinguish respondents from nonrespondents makes inference to the general population difficult. Telephone Interviewing. Being able to control the sample and complete the data collection quickly are assets of telephone interviewing. Many marketing contexts, such as person marketing in political campaigns, need almost overnight information on the effectiveness of the latest promotions. Telephone technology can reach diverse geographic markets of interest and can be linked to computers for easy data analysis. Problems with respondent cooperation may becoming increasingly important over time. Personal Interviewing. Personal interviewing is very flexible and can provide a rich and deep volume of data for the researcher. Also, personal interviewers can follow-up unexpected or unusual responses that other collection methods are not prepared to handle. Using groups in personal interviews can also reveal social influences that may be important in consumer decision making.

Primary Data Collection Process Step 3. Developing a Sampling Plan Who is to be surveyed? Probability or Non-probability sampling? Sample - representative segment of the population How should the sample be chosen? How many should be surveyed?

Primary Data Collection Process Step 4. Research Instruments Questionnaire What to ask? Form of each question? Wording? Ordering? Mechanical Devices People Meters Grocery Scanners Galvanometer Tachistoscope

Marketing Research Process Step 3. Implementing the Research Plan Collection of Data Research Plan Processing of Data Analyzing the Data

Marketing Research Process Step 4. Interpreting and Reporting Findings Interpret the Findings Draw Conclusions Report to Management

PRINCIPLES OF MARKETING Consumer Buyer Behavior Chapter 5 Consumer Markets and Consumer Buyer Behavior

Consumer Buying Behavior Consumer Buying Behavior refers to the buying behavior of final consumers (individuals & households) who buy goods and services for personal consumption. Study consumer behavior to answer: “How do consumers respond to marketing efforts the company might use?”

Model of Consumer Behavior Marketing and Other Stimuli Model of Consumer Behavior Model of Consumer Behavior This CTR corresponds to Figure 5-1 on p. 135 and to the material on pp. 134-135. Product Price Place Promotion Economic Technological Political Cultural Buyer’s Black Box Consumer Behavior Consumer behavior refers to the buying behavior of final consumers -- individuals and households who buy goods and services for personal consumption. Model of Consumer Behavior Marketers control the stimuli or inputs consisting of the four Ps: Product, Place, Price, and Promotion. Environmental and situational influences, though perhaps beyond the control of the marketer, also influence many consumer choices. But what happens between the marketing stimuli input and the buyer’s response or output? That “black box” processing is the central question for marketers. Teaching Tip: You may wish to discuss the “buyer’s black box” in more detail at this stage. Students sometimes become involved in the controversy regarding the presence or absence of consciousness in consumers. Consider using a two-side in-class discussion: Side A: Experimental psychologists argue that what we call consciousness is merely a set of complex learned responses -- an ordinary physiological function. Side B: Sociologists and social psychologists argue that consciousness is greater than the sum of its physiological parts. For marketers, the issue is sometimes linked to free will: Do marketers create needs by conditioning consumers? Do marketers offer need-fulfillers to needs consumer’s create in their “black box?” Buyer’s Decision Process Characteristics Affecting Consumer Behavior Buyer’s Response Purchase Timing Purchase Amount Product Choice Brand Choice Dealer Choice

Characteristics Affecting Consumer Behavior This CTR relates to Figure 5-2 on p.135 and previews the material on pp. 135-150. Culture Social Influences on Consumers Cultural. Culture is the most basic influence on a person's values, priorities, and beliefs. Cultural shifts make marketing opportunities although most such changes are in secondary rather than core cultural values. Subcultures are important markets as these groups are often significantly different in their needs to warrant different marketing approaches. Social. Social class is determined by a combination of income, occupation, education, wealth and other variables. Social factors within one's class that affect consumer behavior include reference groups & aspirational groups. Families also exert strong social influences. Finally, each relationship a person has with his or her group carries with it certain roles and status that may carry consumptive responsibilities. Personal. Major personal factors are age and life cycle stage, occupation, economic situation, life style and personality/self-concept. Texts vary in their treatment of the PLC stages but it is clear that singles buy different products than do young marrieds with small children. Occupations differ in time constraints and social pressures to conform that affect consumption decisions. Lifestyles measured by AIO or VALS typologies can reveal different consumption patterns across otherwise dissimilar groups. The unique characteristics of each person that make up their personality also affect behavior. Psychological. Maslow's hierarchy reminds marketers that need states vary in their intensity or motivation. Perception is the process of organizing stimuli and is influenced by selective exposure, distortion, & retention. Learning occurs in response to the presentation of information linked to relevant drives, cues, responses, and reinforcement only some of which is under the control of the marketer. Beliefs and attitudes, though shaped by cultural and social forces, may vary considerably on the individual level. Personal Psychological Buyer

Factors Affecting Consumer Behavior: Culture Most basic cause of a person's wants and behavior. Values Perceptions Subculture Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers Social Class People within a social class tend to exhibit similar buying behavior. Occupation Income Education Wealth

Factors Affecting Consumer Behavior: Social Social Factors This CTR relates to the material on pp. 140-142. Factors Affecting Consumer Behavior: Social Groups Membership Reference Family Husband, wife, kids Influencer, buyer, user Social Factors Group Influence on Brand Choice Groups vary in their influence on product and brand purchases as illustrated on the CTR. Consumers belong to several different membership groups. Primary Groups. Primary groups are those with which we have regular but informal interaction. These include family, friends, neighbors, and co-workers. Secondary Groups. Secondary groups are those with which we have more formal and less regular interaction such as religious groups, professional associations, and trade unions. Reference Groups. These groups serve as direct (face-to-face) or indirect points of comparison and evaluation in a person’s formation of attitudes or behavior. Aspirational Groups. This type of group is one to which the individual wishes to belong and emulates in adopting behaviors appropriate to that group. Opinion Leaders. These are people within a reference group who exert influence over others due to special knowledge, skill, personality, or other characteristic. Roles and Status

Factors Affecting Consumer Behavior: Personal Personal Influences Factors Affecting Consumer Behavior: Personal This CTR corresponds to Table 5-2 on p. 142 and the material on pp. 142-146. Factors Affecting Consumer Behavior: Personal Lifestyle Identification Age and Family Life Cycle Stage Occupation Economic Situation Personality & Self-Concept Personal Factors Age and Family Life-Cycle Stage. Buyers’ choices are affected by changes in their age and family structure over time. Young singles have different tastes in clothes, furniture, food, and recreation than do middle aged persons with their own children. Older consumers continue to change in their preferences and additionally acquire new buyer needs such as increased health care needs. Occupation. A person’s occupation carries with it distinct consumptive needs. White collar workers need different clothes than blue collar workers. Also, occupations usually carry their own subcultural norms and values that influence buyer behavior. Economic Situation. Means constrain buyer behavior for almost everyone except for the most wealthy. Personality and Self-Concept. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting response to one’s own environment. Self-concept is the basic perception that people have about who they are. Lifestyle Lifestyle is a person’s pattern of living as expressed in her or his activities, interests, and opinions. Determining lifestyle involves measuring AIO dimensions -- the Activities, Interests, and Opinions of consumers. Psychographics. Lifestyle measures combined with demographic information can identify distinct market segments for consumer products and services. The best known of these methods, VALS 2, is addressed on the following CTR. Activities Opinions Interests

VALS 2 Abundant Resources Actualizers Principle Oriented VALS 2 Segments This CTR corresponds to Figure 5-3 on p. 144 and relates to the material on pp. 143-145. VALS 2 Actualizers VALS 2 Segments The VALS 2 Segmentation by lifestyle incorporates both psychological aspects such as principles, status, and action orientations as well as resource-based orientations (abundant versus minimal). Descriptions of each area include: Fulfilleds. Fulfilleds are principles oriented individuals who are mature responsible well-educated professionals. Leisure centers around the home but they are also well-informed about the world. High income but practical, value-oriented consumers. Believers. Believers principles oriented individuals who have more modest incomes, are conservative and predictable consumers who favor American products. Achievers. Achievers are status oriented individuals who get satisfaction from jobs and families. Conservatives who respect authority. Products show off success. Strivers. Strivers are status oriented individuals who seek to emulate achievers but have fewer resources. Experiencers. Experiencers are action oriented individuals who like to affect the environment in tangible ways. This group is active and outgoing and likes new things. Makers. Makers are action oriented individuals who also like to affect their environment but in more practical ways. They value self-sufficiency, family, and have little interest in the larger world. Actualizers. Actualizers are resource oriented individuals with the highest incomes and so many resources that they can indulge any or all self-orientations. Image is an expression of taste, independence, and character. They can buy anything; need nothing. Strugglers. Strugglers are resource oriented individuals who have the lowest income and tend to be brand loyal. Strugglers are concerned with survival. Principle Oriented Status Oriented Action Oriented Fulfilleds Achievers Experiencers Believers Strivers Makers Minimal Resources Strugglers

Factors Affecting Consumer Behavior: Psychological Motivation Psychological Factors Perception Beliefs and Attitudes Learning

Maslow’s Hierarchy of Needs This CTR relates to the material on p. 146-147 and corresponds to Figure 5-4. Self Actualization (Self-development) Esteem Needs (self-esteem, status) Maslow’s Hierarchy of Needs Maslow suggests that lower level needs must be satisfied before individuals become motivated to satisfy higher level needs. Thus consumers will respond to lower level products and promotions until those needs are met. Only then can other marketing offers be of interest. Needs include: Physiological. Physical needs such as hunger, thirst, and bodily functions are the lowest level need and require satisfaction before other needs become important to the individual. Sometimes this helps students understand the difference between needs and wants. A thirsty person may still want an expensive car but if thirsty enough will take a drink of water. Safety. Safety needs for security and protection are the next level needs in the hierarchy. So long as physiological needs are met, safety needs will take precedence over other needs. Fear appeals for consumer products are often linked to safety needs. Social. Human beings are social, gregarious animals. We group together in part to fulfill physiological and safety needs but also because we enjoy and need the company of others. Going to malls to "hang out" fulfills social needs. Esteem. To be recognized as an individual fulfills esteem needs. Self-esteem is the value a person places on himself or herself. As lower level needs become more stable, esteem needs become more important to the individual. Self-actualization. Beyond esteem needs very successful people may still be driven to improve themselves and "accomplish something." These people are driven to self-actualize their potential. Social Needs (sense of belonging, love) Safety Needs (security, protection) Physiological Needs (hunger, thirst)

Types of Buying Decisions This CTR corresponds to Figure 5-5 on p. 151 and relates to the material on pp. 151-152. Types of Buying Decisions Complex Buying Behavior Variety- Seeking Behavior High Involvement Low Involvement Types of Buying Decision Behavior Complex Buying Behavior. Consumers undertake this type of behavior when they are highly involved in a purchase and perceive differences among brands. Involvement increases with the product is expensive, infrequently purchased, risky, and highly self-expressive. Dissonance-Reducing Buying Behavior. Consumers engage in this behavior when they are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands. Without objective differentiation to confirm the purchase, buyers often seek support to reduce postpurchase dissonance -- the feeling they may have made the wrong decision. Habitual Buying Behavior. This behavior occurs under conditions of low consumer involvement and little significant brand differences. Consumers do not search extensively for information about brands. Brand familiarity aids in promoting products under essentially passive learning conditions. Variety-Seeking Buying Behavior. Consumers may seek variety when involvement is low and there are significant perceived differences among brands. Differences may be product features -- new taste, improvements, extra ingredients -- or promotional benefits such as coupons, rebates, and price reductions. Significant differences between brands Dissonance- Reducing Buying Behavior Habitual Buying Behavior Few differences between brands

The Buyer Decision Process Need Recognition Information Search The Buyer Decision Process The Buyer Decision Making Process This CTR corresponds to Figure 5-6 on p. 153 and relates to the material on pp. 152-156. Teaching Tip: Consider asking students to describe some of their purchases decisions made at the beginning of the term and link them to steps in the process. Evaluation of Alternatives Purchase Decision Postpurchase Behavior Stages in the Buyer Decision Process Need Recognition. Problems are recognized when people sense a difference between an actual state and some desired state. Problem recognition can be triggered by either internal or external stimuli. Information Search. Consumers vary in the amount of information search they conduct. Information search may be a survey of information stored in memory or may be based upon information available externally. Search effort varies from heightened awareness corresponding to increased receptivity for relevant information to active information search modes where the person expends some energy to obtain information that is desired. External information vary in their informational and legitimizing characteristics. Riskier decisions usually elicit more search behavior than non-risky decisions. Evaluation of Alternatives. Following information search, the person compares decisional alternatives available. Criterion for evaluation compares product attributes of the alternatives against degrees of importance each attribute has in meeting needs, beliefs about the product or brand's ability and utility, and an evaluation procedure that ranks the alternatives by preference that forms an intention to buy. Purchase Decision. - The individual buys a product. Purchasing other than the intended product may be due to attitudes of others exerted after the evaluation of alternatives is completed or unexpected situational factors such as point of purchases promotions that affect the alternatives' ranking. Post-purchase Behavior. This involves comparing the expected performance of the product against the perceived performance received. Cognitive dissonance describes the tendency to accentuate benefits and downplay shortcomings.

Difference between an actual state and a desired state The Buyer Decision Process Step 1. Need Recognition Need Recognition Difference between an actual state and a desired state Internal Stimuli Hunger Thirst A person’s normal needs External Stimuli TV advertising Magazine ad Radio slogan Stimuli in the environment

The Buyer Decision Process Step 2. Information Search Personal Sources The Buyer Decision Process Step 2. Information Search Commercial Sources Family, friends, neighbors Most influential source of information Public Sources Advertising, salespeople Receives most information from these sources Experiential Sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product

The Buyer Decision Process Step 3. Evaluation of Alternatives Product Attributes Evaluation of Quality, Price, & Features Degree of Importance Which attributes matter most to me? Brand Beliefs What do I believe about each available brand? Total Product Satisfaction Based on what I’m looking for, how satisfied would I be with each product? Evaluation Procedures Choosing a product (and brand) based on one or more attributes.

The Buyer Decision Process Step 4. Purchase Decision Purchase Intention Desire to buy the most preferred brand Unexpected situational factors Attitudes of others Purchase Decision

Consumer’s Expectations of Product’s Performance Dissatisfied Customer The Buyer Decision Process Step 5. Postpurchase Behavior Consumer’s Expectations of Product’s Performance Product’s Perceived Performance Satisfied Customer! Dissatisfied Customer Cognitive Dissonance

Stages in the Adoption Process Awareness Stages in the Adoption Process Stages in the Adoption Process This CTR relates to the material on p. 157. Interest Evaluation Stages in the Adoption Process The new product adoption process parallels the buyer decision process but focuses more on the interaction of consumer needs with product adoption. The new product adoption process may work best to explain how regularly used products requiring re-purchase are considered for inclusion in the consumer's consumptive behavior patterns but may also apply to some durables as well. Awareness. In this stage the consumer is aware of the new product but lacks further information about it. Interest. The consumer is motivated to seek information about the new product. Evaluation. The consumer determines whether or not to try the new product. Trial. The consumer tries the new product on a small scale to test its efficacy in meeting his or her needs. Trial can be imagined use of the product in some cases. Adoption. The consumer decides to make use of the product on a regular basis. Trial Adoption

Adoption of Innovations This CTR corresponds to Figure 5-7 on p. 157 and relates to the material on pp. 157-158. Adoption of Innovations Individual Differences in Innovativeness Innovators. Innovators include the first 2.5% of buyers who adopt a new product idea. Innovators help get the product exposure but are not often perceived by the majority of potential buyers as typical consumers. Innovators like risk taking and enjoy buying new products. Innovators may purchase at skimming prices. Discussion Note: You might discuss the ethical implications of skimming. Is it fair? Also, are there cost considerations associated with new product development that make skimming to recover high start up costs more ethical than it may seem? Early Adopters. Early Adopters comprise about 13.5% of the buyers who adopt new products. This group serves as opinion leaders to the rest of the market and their product usage outcomes serve as motivation to later buyers to get the product. Early Majority. Early Majority are some 34% of buyers adopting the product. They are deliberate consumers who adopt new ideas before the average person but seldom lead the market. Late Majority. Late Majority comprise another 34% of buyers adopting the product. This group is skeptical of new products and only buys after the majority of the market has tried it. Laggards. Laggards are the final 16% of adopters and are tradition-bound. They are suspicious of change and only adopt innovation that have already become something of a tradition. Early Majority Late Majority Percentage of Adopters Early Adopters Innovators Laggards 34% 34% 13.5% 16% 2.5% Time of Adoption Early Late

Influences on the Rate of Adoption of New Products This CTR relates to the material on pp. 158-159. Teaching Tip: The adoption of innovations may be initially confusing to students but they will usually become involved in discussion when new products of importance to them are used as examples. Influences on the Rate of Adoption of New Products Communicability Can results be easily observed or described to others? Relative Advantage Is the innovation superior to existing products? Product Characteristics Influences Relative Advantage. This refers to the degree to which the innovation appears superior to existing products. The greater the perceived relative advantage, the sooner the innovation will be adopted. Compatibility. This refers to the degree to which the innovation fits the values and experiences of the potential consumers. Increased compatibility will accelerate adoption of the innovation. Complexity. This refers to the degree to which the innovation is difficult to understand or use. Greater complexity will slow the rate of adoption of the innovation. Divisibility. This refers to the degree to which the innovation can be tried on a limited basis. Greater divisibility will help increase the rate of adoption of the innovation. Communicability. This refers to the degree to which the results of using the innovation can be observed or described to others. Greater communicability will increase the rate of adoption of innovation. Product Characteristics Compatibility Does the innovation fit the values and experience of the target market? Divisibility Can the innovation be used on a trial basis? Complexity Is the innovation difficult to understand or use?

Targeting, and Positioning for Competitive Advantage PRINCIPLES OF MARKETING Chapter 7 Market Segmentation, Targeting, and Positioning for Competitive Advantage

Steps in Segmentation, Targeting, and Positioning This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196. Steps in Segmentation, Targeting, and Positioning 6. Develop Marketing Mix for Each Target Segment Steps in Segmentation, Targeting, and Positioning Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes. Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them. Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy. Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer. Discussion Note: The product's position is defined by how consumers view it on important attributes. Market Positioning 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) Market Targeting 3. Develop Measures of Segment Attractiveness 2. Develop Profiles of Resulting Segments Market Segmentation 1. Identify Bases for Segmenting the Market

Step 1. Market Segmentation Levels of Market Segmentation Mass Marketing Same product to all consumers (no segmentation) Segment Marketing Different products to one or more segments (some segmentation) Step 1. Market Segmentation Levels of Market Segmentation Stages in Market Orientation This CTR relates to the discussion on pp. 197-202. Niche Marketing Different products to subgroups within segments ( more segmentation) Micromarketing Products to suit the tastes of individuals or locations (complete segmentation) Stages in Market Orientation Sellers traditionally have passed through three stages of orientation or philosophy of identifying markets that lead to greater use of segmentation, targeting, and positioning strategies: Mass Marketing. In mass marketing, the seller produces, mass distributes, and mass promotes one product to all buyers. The argument for mass marketing is that it [should] lead to the lowest costs (through economies of scale) and prices and create the largest potential market. Segment Marketing. Here the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to meeting the needs of those selected segments. As more competitors adopt this practice, fragmentation of the market leads to Niche Marketing. Here the seller focuses on subgroups within market segments who may seek a special combination of benefits. Micromarketing. This is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

Step 1. Market Segmentation Bases for Segmenting Consumer Markets This CTR relates to Table 7-1 on p. 203 and the material on pp. 202-209. Geographic Nations, states, regions or cities Bases for Segmenting Consumer Markets Geographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes. Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation. Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves. Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude. Demographic Age, gender, family size and life cycle, or income Psychographic Social class, lifestyle, or personality Behavioral Occasions, benefits, uses, or responses

Using Multiple Segmentation Bases: Geodemographics This CTR combines text and extra-textual information and relates to material on pp. 210-212. Using Multiple Segmentation Bases: Geodemographics Geodemographics Geodemographics combine demographic, geographic, psychographic, and behavioristic segmentation variables to identify markets for products much more narrowly than other segmentation strategies. Geodemographics lends itself best to marketing mix strategies utilizing technological innovation to reach consumers with product information. The two marketing areas that benefit most from geodemography are direct marketing via mail and telephone and computer-based marketing. Direct Marketing. The direct marketing industry benefits from increasingly specific information on potential customers. Use of telephones and postal mailings without prior qualification of leads is generating grass roots movements for regulation. Geodemography makes it more likely that direct marketers will contact more people who have already expressed an interest in the product or are very likely, statistically speaking, to appreciate information on a relevant product for their geodemographic group. In discussion, you may want to raise questions about the role of marketing ethics in generating and using these increasingly specific databases. Computer-based Marketing. Millions of people now subscribe to computer shopping services such as AMERICA ON-LINE and PRODIGY that provides consumers with on-line information and services via their personal computer and modem. PC Consumers can bank, order from catalogs, receive information, check stock prices and do trades -- all right at their desktop. While the user requests information on-line, mainframe computers track their information search patterns and record orders and requests for more detailed information to create more databases segmentation.

Step 1. Market Segmentation Bases for Segmenting Business Markets This CTR corresponds to Table 7-3 on p. 213 relates to the material on pp. 212. Step 1. Market Segmentation Bases for Segmenting Business Markets Personal Characteristics Demographics Major Segmentation Variables for Business Markets Demographics. Industry segmentation focuses on which industries buy the product. Company size can be used. Geographic location may be used to group businesses by proximity. Operating Variables. Business markets can be segmented by technology (what customer technologies should we focus on?), user/nonuser status (heavy, medium, light), or customer capabilities (those needing many or few services). Purchasing Approaches. Five approaches are possible. Segmentation can be by purchasing function organization (centralized or decentralized), power structure (selecting companies controlled by a functional specialty), the nature of existing relationships (current desirable customers or new desirable customers), general purchase policies (focus on companies that prefer some arrangements over others such as leasing, related support service contracts, sealed bids), or purchasing criteria (focus on noncompensatory criteria such as price, service, or quality). Situational Factors. Situational segmentation may be based upon urgency (such as quick delivery needs), specific application (specific uses for the product) or size of order (few large or many small accounts). Personal Characteristics. Personal comparisons can lead to segmentation by buyer-seller similarity (companies with similar personnel and values), attitudes toward risk (focus on risk-taking or risk-avoiding companies), or loyalty (focus on companies that show high loyalty to their suppliers. Bases for Segmenting Business Markets Situational Factors Operating Characteristics Purchasing Approaches

Step 1. Market Segmentation Bases for Segmenting International Markets This CTR relates to the discussion on pp. 213-215. Industrial Markets Segmenting International Markets Geographic Segmentation. This works well when proximity is the critical segmentation variable. Economic Factors. Countries might be grouped by population income levels or by overall level of economic development. Political and Legal Factors. Segmentation may be most appropriate in terms of the level of government stability, monetary regulations, receptivity to foreign firms, or the amount of bureaucracy encountered when conducting business. Cultural Factors. Segmentation by common language, religion, or values might be the best way to proceed. Intermarket Segmentation. This involves forming segments of consumer who have similar needs and buying behavior even though they are located in different countries. Geographic Economic Political/ Legal Cultural Intermarket

Step 1. Market Segmentation Requirements for Effective Segmentation Measurable Effective Segmentation This CTR relates to the material on pp. 215. Step 1. Market Segmentation Requirements for Effective Segmentation Accessible Substantial Size, purchasing power, profiles of segments can be measured. Requirements for Effective Segmentation Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important. Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer. Substantiality. This refers to the degree to which the segments are large or profitable enough to service. Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues. Segments must be effectively reached and served. Differential Segments must be large or profitable enough to serve. Actionable Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Step 2. Market Targeting Evaluating Market Segments This CTR relates to the material on pp. 215-216. Segment Size and Growth Analyze sales, growth rates and expected profitability. Segment Structural Attractiveness Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers. Company Objectives and Resources Company skills & resources relative to the segment(s). Look for Competitive Advantages. Evaluating Market Segments Segment Size and Growth. The company must collect and analyze data on current dollar sales, projected sales-growth, and expected profit margins for each market segment. Segment Structural Attractiveness. Long run attractiveness includes an assessment of current and potential competitors, the threats of substitutes, and the power of buyers and suppliers. Company Objectives and Resources. The company’s resources and core business strengths should also fit well with the market segment opportunities.

Step 2. Market Targeting Market Coverage Strategies This CTR corresponds to Figure 7-4 on p. 217 and relates to the discussion on pp. 216-219. Company Marketing Mix Market Company Marketing Mix 1 Segment 1 Company Marketing Mix 2 Segment 2 A. Undifferentiated Marketing Market Coverage Strategies Undifferentiated Marketing. This strategy uses the same marketing mix for the entire market. This strategy focuses on the common needs of the market rather than differences in it. Undifferentiated marketing provides economies of scale on product costs but may be limited in application. Differentiated Marketing. This strategy targets several market segments and designs separate marketing mixes for each of them. Product and marketing variation also helps company image and may produce loyalty in consumers as they change segments. Concentrated Marketing. This strategy commits a company to pursue a large share of one or more submarkets. Economies and segment knowledge and service are strengths of this approach but risk due to smaller market size is greater. Company Marketing Mix 3 Segment 3 Segment 1 Company Marketing Mix Segment 2 B. Differentiated Marketing Segment 3 C. Concentrated Marketing

Step 2. Market Targeting Choosing a Market-Coverage Strategy This CTR relates to the discussion on pp. 219-220. Company Resources Choosing a Market-Coverage Strategy Factors to consider in choosing a market-coverage strategy include: Company Resources. Sometimes the resources of a firm make a strategy decision fairly simple. For example, a small firm with limited resources is more likely to be successful implementing a concentrated strategy than a full coverage one. Product Variability. The higher the degree of product variation or differentiation, the greater the likelihood that a differentiated or concentrated strategy will be necessary to meet consumer demands for choice. Stage in Life Cycle. Introduction and early growth stages of the product life cycle are more likely to support single-version products. As the market matures, greater consumer numbers and a wider variety of tastes demand more differentiation. Discussion Note: The cost of developing new products is often given as a reason for single-version rollouts. But it is important to remember that consumers don’t know how to use new products as well and so it makes sense to keep a product simple to help consumer learn about its benefits first and then let their experience with product use guide the introduction of additional features. Market Variability. If taste differences in the market are small, then undifferentiated marketing is appropriate. Competitor’s Marketing Strategies. Selecting a coverage strategy is not done in a vacuum. When the market is already served by competitor using a segmentation strategy, undifferentiated marketing is less likely to be successful. However, competitors using undifferentiated strategies may be vulnerable to a well-planned and executed differentiation strategy. Product Variability Product’s Stage in the Product Life Cycle Market Variability Competitors’ Marketing Strategies

Step 3. Positioning for Competitive Advantage Product’s Position - the place the product occupies in consumers’ minds relative to competing products; i.e. Volvo positions on “safety”. Marketers must: Plan positions to give products the greatest advantage Develop marketing mixes to create planned positions

Step 3. Positioning for Competitive Advantage: Strategies Product Positioning This CTR relates to the material on pp. 220. Step 3. Positioning for Competitive Advantage: Strategies Product Class Product Attributes Away from Competitors Benefits Offered Market Positioning Strategies A product's position is the way the product is defined by consumers on important attributes. More directly, product position is the place the product occupies in the consumers’ minds relative to competing products. Discussion Note: Students may need prompting to realize that marketers don’t control the product’s position, consumers do. The strategies discussed below represent the inputs marketers make to influence how the consumer ultimately determine the product’s position. A product's position can be based on a number of variables including: Product Attributes. This positions the product on unique or distinguishing features it possesses such as a low price, unique technology, versatility or other features. Benefits Offered. Positioning can be based upon the specific value provided. Usage Occasions. The product usage associated can with special occasions or values ("Andre for the Holidays") Users. A product can be positioned to its most important users (Miller Beer's heavy user positioning, "Tastes Great Less Filling") Against a Competitor. This strategy is appropriate for substitutes that cost less. Away from Competitors. This positions the product as unique in some respect and/or worth it. Product Class. The company may vary positioning as needed in relation to one or more competitors. B A E D C H G F Against a Competitor Usage Occasions Users

Steps to Choosing and Implementing a Positioning Strategy Step 1. Identifying a set of possible competitive advantages: Competitive Differentiation. Step 2. Selecting the right competitive advantage. Step 3. Effectively communicating and delivering the chosen position to the market.

Developing Competitive Differentiation Product Service Developing Competitive Differentiation Positioning for Competitive Advantage This CTR relates to the discussion on pp. 221-223. Areas for Competitive Differentiation Competitive Advantage Competitive Advantage is created by differentiating the product from those of competitors. Key areas for competitive differentiation include: Product Differentiation. This can be based upon features or performance. Teaching Tip: Drive a Hyundai and a Lexus on the same afternoon to experience performance differentiation. Services Differentiation. This may come from delivery, installation, repair, or training advantages. Teaching Tip: Does anyone think that television cable service would not improve if there were more than one cable provider per area? Personnel Differentiation. This is derived from a superior workforce. Teaching Tip: Surely students appreciate their experience in your class versus those marketing classes at that other school in state? Image Differentiation. This can be generated from effective use of symbols in association with product consumption. Teaching Tip: Examples of effective use of symbols include Prudential Securities, “Rock Solid - Market Wise” and Merrill Lynch “Bullish on America.” Personnel Image

Selecting the Right Competitive Advantages Promoting Differences This CTR relates to the material on pp. 223-226. Discussion Note: The key to selecting the right competitive advantage is to develop a unique selling proposition (USP) for the product and stick to it. Selecting the Right Competitive Advantages Important Profitable Distinctive Selecting the Right Competitive Advantage Differences selected to promote competitive advantage should satisfy the following criteria: Important. The difference must deliver a highly valued benefit to target buyers. Distinctive. Competitors do not offer the difference, or the company offers the difference in a more distinctive way. Superior. The difference should be superior to other ways that customers might obtain the same benefit. Communicable. The difference is communicable and visible to buyers. Preemptive. Competitors cannot easily copy the difference. This may be a result of innovative technology, production economies, distribution economies, and/or proprietary rights. Affordable. Buyers in the target market must be able to pay for the difference. Profitable. The difference must be profitable for the company to offer. Criteria for Determining Which Differences to Promote Affordable Superior Communicable Preemptive

Product and Services Strategy PRINCIPLES OF MARKETING Chapter 8 Product and Services Strategy

What is a Product? Anything that can be offered to a market for attention, acquisition, use or consumption. Satisfies a want or a need. Includes: Physical Products Services Persons Places Organizations Ideas Combinations of the above

Levels of Product Core Benefit or Service Augmented Product Product Levels This CTR corresponds to Figure 8-1 on p. 239 and relates to the material on pp. 239-240. Levels of Product Installation Packaging Features Brand Name Product A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products can be physical objects, services, persons, places, organizations, and ideas. Product Levels Core Product. This concept refers to the use-benefit, problem-solving service that the consumer is really buying when purchasing a product. Actual Product. The actual product is the tangible product or intangible service that serves as the medium for receiving core product benefits. Five characteristics: Quality Level refers to product performance. Features include combinations of product attributes. Design consists of aesthetic or ergonomic aspects of the product. Brand Name may help consumers position and identify the product. Packaging serves to both protect the product and to promote it to consumers. Augmented Product. The augmented consists of the measures taken to help the consumer put the actual product to sustained use. Measures can include installation, delivery & credit, warranties, and after sale service. Delivery & Credit After- Sale Service Core Benefit or Service Quality Level Design Warranty Actual Product Core Product

Product Classifications Consumer Products Consumer Product Classifications This CTR corresponds to Table 8-1 on p. 240 and relates to the material on pp. 240-241. Product Classifications Consumer Products Convenience Products Buy frequently & immediately Low priced Many purchase locations Includes: Staple goods Impulse goods Emergency goods Shopping Products Buy less frequently Gather product information Fewer purchase locations Compare for: Suitability & Quality Price & Style Consumer Goods Consumer products are those bought by final consumers for personal consumption. Marketers typically classify these products based on how consumer go about buying them. Classifications include: Convenience Products. These products are purchased frequently with a minimum of comparison and buying effort. Convenience products may be further divided: Staples. Staples are products that consumers buy on a regular basis. Impulse Products. Impulse products are purchased “on the spur of the moment” and without much, if any, prior consideration. Emergency Products. Emergency products are purchased to fill an urgent and immediate need. These products are prompted by some unexpected external event like a flood or heavy snow fall. Shopping Products. These products are compared on such bases as suitability, quality, price, and style. Shopping products may be further distinguished homogeneous and heterogeneous shopping products. Price negotiation is more common for homogeneous shopping products. Specialty Products. These products have unique characteristics or identification with buyers and are generally specifically sought by the consumer. Unsought Products. These products may be unknown to the buyer or not normally considered for purchase. Unsought goods require special marketing effort. Specialty Products Special purchase efforts Unique characteristics Brand identification Few purchase locations Unsought Products New innovations Products consumers don’t want to think about Require much advertising & personal selling

Product Classifications Industrial Products Industrial Product Classifications This CTR relates to the discussion on pp. 241. Materials and Parts Industrial Product Classifications Industrial Products are those purchased for further processing or for use in conducting a business. Three groups of industrial products include: Materials & Parts. These products enter the manufacturer's product in production. They include: Raw Materials. These include farm products (wheat, vegetables, fruit, livestock) and natural products (fish, lumber, oil, mineral ores). Manufactured Materials and Parts. Manufactured materials, such as steel, are used with further refinement or processing to become part of a product. For example, sheet metal is used to make car bodies. Component parts are complete products in themselves, such as machine-tooled cogs, that are used as is within the finished product. Capital Items. Capital items indirectly contribute to production by aiding the buyer’s operations but do not end up in the resulting products themselves. Categories include: Installations. These consist of buildings and fixed equipment. Accessories. These include portable equipment and office equipment. Supplies & Services. do not enter into production at all. Supplies include operating supplies and repair and maintenance items. Business services are often offered under contract to do the actual repair and maintenance. Many equipment manufacturers include repair and maintenance agreements in combination with installations. Capital Items Supplies and Services

Product Classifications Other Marketable Entities Marketed to create, maintain, or change the attitudes or behavior toward the following: Organizations - Profit (businesses) and nonprofit (schools and churches). Person - Political and sports figures, entertainers, doctors and lawyers. Place - Business sites and tourism. Social - Reduce smoking, clean air, conservation.

Individual Product Decisions Product Attributes Branding Individual Product Decisions Individual Product Decisions This CTR corresponds to Figure 8-2 on p. 244 and relates to the material on pp. 244-255. Instructor’s Note: The CTR provides an overview on each of the decision areas. Each area is covered in more detail on subsequent CTRs. Packaging Labeling Product Attribute Decisions Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management, first by the Japanese and now increasingly by U.S. firms. Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value. Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance. Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone. Product Support Services

Product Attribute Decisions This CTR relates to the material on pp. 244-245. Features Quality Product Attribute Decisions Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management. Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value. Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance. Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone. Design

Brands Consistency Quality & Value Attributes Identification This CTR relates to the material on pp. 245-247. Consistency Quality & Value Attributes Identification Advantages of Brand Names Brand Equity Brands A brand is a name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Powerful brands names have consumer franchise -- they command consumer loyalty. Levels of Brand Meaning Attributes. A brand elicits certain product attributes in the minds of consumers. The company may use one or more of these attributes in its advertising to reinforce these perceptions in the consumer. Benefits. Consumers buy benefits, not attributes. A key aspect of a successful marketing program is linking attribute perceptions to tangible product benefits. The benefits may produce objective need-satisfiers, such as increased safety, or psychological benefits, such as enhanced self-esteem. But in both cases, the actual benefit must be available in the product. Values. Brands communicate information about the buyer’s values. The benefits of the brand indicate that these things are important to the consumer who chooses them. Some consumers, especially those of luxury goods, often select a particular brand in part because of what it communicates to others about the owners values. Personality. Brands project a personality. People personify brands and products. Psychologists have pointed out that we tend to be attracted to those like us, those we aspire to be like, and those we want others to view us as being like. Brands can help people, almost literally, become the type of person the want to be. Brand Equity Brands are used to create awareness, build preference, and ultimately, to command loyalty among consumers. Companies with strong brands often attempt to build brand portfolios by acquiring brands with strong brand equity from other companies. Association Loyalty Credibility Awareness

Major Brand Decisions Brand Name Selection Brand Sponsor Protection Major Branding Decisions This CTR corresponds to Figure 8-3 on p. 247 and relates to the material on pp. 247-252. Major Brand Decisions Brand Sponsor Manufacturer’s Brand Private Brand Licensed Brand Co-branding Major Branding Decisions Brand Decision. At this stage, the company must decide whether or not to place a brand name on its product. Brands usually command higher profit margins than non-brands. Brand Name Selection. Desirable qualities for a brand name include: 1. It should suggest something about the product’s benefits. 2. It should be easy to pronounce and remember. 3. It should be distinctive. 4. It should translate easily into foreign languages. 5. It should be eligible for registration and legal protection. Brand Sponsor. Who sponsors the brand must also be decided. Manufacturer's or National brands are owned by the producer. Private brands are created and owned by a reseller. Mixed-brand strategies combine both approaches. Brand Strategy. This decision area consists of at least four choices, covered in greater detail on the following CTR. Brand Strategy Line Extensions Brand Extensions Multibrands New Brands

Brand Strategy Product Category Line Brand Extension Extension This CTR corresponds to Figure 8-4 on p. 251 and relates to the discussion on pp. 250-252. Line Extension Brand Extension Product Category Existing New Brand Strategy Companies may implement at least four brand-name strategies, including: Line Extension. This strategy occurs when a company introduces additional items in a given product category under the same brand name. The vast majority of new product introductions are line extensions. Brand Extension. This strategy seeks to extend existing brand qualities to launch new products or modified products in a new category. Multibrand. This strategy develops two or more products in the same product category. P & G pioneered multibranding. New Brands. Here a company creates a new brand name when it enters a new product category for which none of the company’s current brand names are appropriate. Multibrands New Brands Existing Brand Name New

Brand Strategy Line Extension Brand Extension Multibrands New Brands Existing brand names extended to new forms, sizes, and flavors of an existing product category. Brand Extension Existing brand names extended to new product categories. Multibrands New brand names introduced in the same product category. New Brands New brand names in new product categories.

Packaging Sales Tasks Competitive Advantages Product Safety Packaging Packaging Decisions This CTR relates to the material on pp. 253-254. Sales Tasks Competitive Advantages Product Safety Packaging Concept The packaging concept states what the package should be or do for the product in support of marketing objectives. Packaging includes the activities of designing and producing the container or wrapper for a product. The package includes the immediate container (that holds the product for use), a secondary package that is discarded prior to use, and a shipping package necessary for storage and shipping. Discussion Note: Both environmentalists and consumer groups have complained about unnecessary packaging. Environmentalists point out the ecological costs of more packages to throw away. Many firms now recycle packages to reduce wastes and save money. Consumer groups, such as Consumer’s Union (publisher of Consumer Reports), express concern that unnecessary packaging costs consumers more. Labeling Decisions Labels perform several functions. Labels identify, describe, and promote the product. Also, labels must meet the demands of legal regulations. Identifies. Especially in support of brand strategies, labels distinguish the product from others. Describes. Labels can provide information about contents, production, freshness, and instructions on safe and effective use. Promotes. Use of color and graphics can stimulate and arouse consumer attention for the product. Legal Regulation Mis-use of labels has lead to regulation on product claims, the addition of unit prices, open dating, and nutritional labeling for processed foods. Including all required information is necessary to ward off governmental investigations. Packaging Labeling Identifies Promotes Describes

Product - Support Services Companies should design its support services to profitably meet the needs of target customers. How? Step 1. Survey customers to determine satisfaction with current services and any desired new services. Step 2. Assess costs of providing desired services. Step 3. Develop a package of services to delight customers and yield profits.

Product Line Decisions This CTR relates to the material on pp. 255-257. Product Line Length Number of Items in the Product Line Product Line Decisions Product Line Length. This refers to the number of products in the line. The line is too short if adding items increases profits; too long if dropping items increases profits. Company objectives of full-line offerings may decrease strict profit criterion on length. Product Line Stretching. This occurs when a company lengths is product line beyond its current range. Downward stretch offers items to lower end of the market. Upward stretch introduces items to high end of market. Two-way stretch extends the line both upward and downward. Product Line Filling. This adds items within the existing product range of the line. Stretching Lengthen beyond current range Filling Lengthen within current range Downward Upward

Product Mix Decisions Consistency This CTR relates to the material on pp. 257-258. Width - number of different product lines Length - total number of items within the lines Product Mix - all the product lines offered Product Mix Decisions Mix Width. This refers to how many product lines the company carries. Mix Length. This refers to the total number of products the company carries. Mix Depth. This refers to how many versions are offered of each product in the line. Mix Consistency. This refers to how closely related the various product lines are in end use, production requirements, distribution channels, or other ways. Consistency Depth - number of versions of each product

Characteristics of Services Intangibility Inseparability Can’t be seen, tasted, felt, heard, or smelled before purchase. Can’t be separated from service providers. Quality depends on who provides them and when, where and how. Can’t be stored for later sale or use. Variability Perishability

Internal Service Quality The Service-Quality Chain Health Service Profits and Growth Satisfied and Productive Service Employees Satisfied and Loyal Customers Greater Service Value

Marketing Strategies for Service Firms Managing Service Differentiation Develop offer, delivery and image with competitive advantages. Managing Service Quality Empower employees Become “Customer obsessed” Develop high service quality standards Watch service performance closely Managing Service Productivity Train current or new employees Increase quantity by decreasing quality Utilize technology