Marketing Management

Rocelyn M. Barroga
Chapter 1

OVERVIEW OF MARKETING MANAGEMENT

Marketing Management is a business discipline which is focused on the practical

application of marketing techniques and the management of a firm's marketing resources
and activities.

Rapidly emerging forces of globalization have led firms to market beyond the borders of
their home countries, making international marketing highly significant and an integral
part of a firm's marketing strategy. Marketing managers are often responsible for
influencing the level, timing, and composition of customer demand accepted definition of
the term. In part, this is because the role of a marketing manager can vary significantly
based on a business's size, corporate culture, and industry context. For example, in a large
consumer products company, the marketing manager may act as the overall general
manager of his or her assigned product to create an effective, cost-efficient Marketing
management strategy, firms must possess a detailed, objective understanding of their own
business and the marketing which they operate. In analyzing these issues, the discipline
of marketing management often overlaps with the related discipline of strategic planning.

Structure

Traditionally, marketing analysis was structured into three areas: customer analysis,
company analysis, and competitor analysis (so-called "3 Cs" analysis). More recently, it
has become fashionable in some marketing circles to divide these further into certain five
"Cs": customer analysis, company analysis, collaborator analysis, competitor analysis,
and analysis of the industry context.

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Customer analysis is to develop a schematic diagram for market segmentation, breaking
down the market into various constituent groups of customers, which are called customer
segments or market segmentation's. Marketing managers work to develop detailed
profiles of each segment, focusing on any number of variables that may differ among the
segments: demographic, psycho graphic, geographic, behavioral, needs-benefit, and other
factors may all be examined. Marketers also attempt to track these segments' perceptions
of the various products in the market using tools such as perceptual mapping.

In company analysis, marketers focus on understanding the company's cost structure and
cost position relative to competitors, as well as working to identify a firm's core
competencies and other competitively distinct company resources. Marketing managers
may also work with the accounting department to analyze the profits the firm is
generating from various product lines and customer accounts. The company may also
conduct periodic brand audits to assess the strength of its brands and sources of brand
equity.

The firm's collaborators may also be profiled, which may include various
suppliers, distributors and other channel partners, joint venture partners, and others. An
analysis of complementary products may also be performed if such products exist.

Marketing management employs various tools from economics and competitive

strategy to analyze the industry context in which the firm operates. These include Porter's
five forces, analysis of strategic groups of competitors, value chain analysis and
others. Depending on the industry, the regulatory context may also be important to
examine in detail.

In competitor analysis, marketers build detailed profiles of each competitor in the market,
focusing especially on their relative competitive strengths and weaknesses using SWOT
analysis. Marketing managers will examine each competitor's cost structure, sources of
profits, resources and competencies, competitive positioning and product differentiation,

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degree of vertical integration, historical responses to industry developments, and other
factors.

Marketing management often finds it necessary to invest in research to collect the data
required to perform accurate marketing analysis. As such, they often conduct market
research (alternately marketing research) to obtain this information. Marketers employ a
variety of techniques to conduct market research, but some of the more common include:

 Qualitative marketing research, such as focus groups and various types of

interviews
 Quantitative marketing research, such as statistical surveys
 Experimental techniques such as test markets
 Observational techniques such as ethnographic (on-site) observation

Marketing managers may also design and oversee various environmental

scanning and competitive intelligence processes to help identify trends and inform the
company's marketing analysis.

A brand audit is a thorough examination of a brand’s current position in an industry

compared to its competitors and the examination of its effectiveness. When it comes to
brand auditing, five questions should be carefully examined and assessed. These five
questions are how well the business’ current brand strategy is working, what are the
company’s established resource strengths and weaknesses, what are its external
opportunities and threats, how competitive are the business’ prices and costs, how strong
is the business’ competitive position in comparison to its competitors, and what strategic
issues are facing the business.

Generally, when a business is conducting a brand audit, the main goal is to uncover
business’ resource strengths, deficiencies, best market opportunities, outside threats,
future profitability, and its competitive standing in comparison to existing competitors. A
brand audit establishes the strategic elements needed to improve brand position and

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competitive capabilities within the industry. Once a brand is audited, any business that
ends up with a strong financial performance and market position is more likely than not
to have a properly conceived and effectively executed brand strategy.

A brand audit examines whether a business’ share of the market is increasing, decreasing,
or stable. It determines if the company’s margin of profit is improving, decreasing, and
how much it is in comparison to the profit margin of established competitors.
Additionally, a brand audit investigates trends in a business’ net profits, the return on
existing investments, and its established economic value. It determines whether or not the
business’ entire financial strength and credit rating is improving or getting worse. This
kind of audit also assesses a business’ image and reputation with its customers.
Furthermore, a brand audit seeks to determine whether or not a business is perceived as
an industry leader in technology, offering product or service innovations, along with
exceptional customer service, among other relevant issues that customers use to decide
on a brand of preference.

A brand audit usually focuses on a business’ strengths and resource capabilities because
these are the elements that enhance its competitiveness. A business’ competitive strengths
can exist in several forms. Some of these forms include skilled or pertinent expertise,
valuable physical assets, valuable human assets, valuable organizational assets, valuable
intangible assets, competitive capabilities, achievements and attributes that position the
business into a competitive advantage, and alliances or cooperative ventures.

The basic concept of a brand audit is to determine whether a business’ resource strengths
are competitive assets or competitive liabilities. This type of audit seeks to ensure that a
business maintains a distinctive competence that allows it to build and reinforce its
competitive advantage. What’s more, a successful brand audit seeks to establish what a
business capitalizes on best, its level of expertise, resource strengths, and strongest
competitive capabilities, while aiming to identify a business’ position and future
performance.

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Marketing strategy

If the company has obtained an adequate understanding of the customer base and its own
competitive position in the industry, marketing managers are able to make their own key
strategic decisions and develop a marketing strategy designed to maximize
the revenues and profits of the firm. The selected strategy may aim for any of a variety of
specific objectives, including optimizing short-term unit margins, revenue growth, market
share, long-term profitability, or other goals.

To achieve the desired objectives, marketers typically identify one or more target
customer segments which they intend to pursue. Customer segments are often selected as
targets because they score highly on two dimensions: 1) The segment is attractive to
serve because it is large, growing, makes frequent purchases, is not price sensitive (i.e. is
willing to pay high prices), or other factors; and 2) The company has the resources and
capabilities to compete for the segment's business, can meet their needs better than the
competition, and can do so profitably. In fact, a commonly cited definition of marketing
is simply "meeting needs profitably." 

The implication of selecting target segments is that the business will subsequently
allocate more resources to acquire and retain customers in the target segment(s) than it
will for other, non-targeted customers. In some cases, the firm may go so far as to turn
away customers who are not in its target segment. The doorman at a swanky nightclub,
for example, may deny entry to unfashionably dressed individuals because the business
has made a strategic decision to target the "high fashion" segment of nightclub patrons.

In conjunction with targeting decisions, marketing managers will identify the

desired positioning they want the company, product, or brand to occupy in the target
customer's mind. This positioning is often an encapsulation of a key benefit the
company's product or service offers that is differentiated and superior to the benefits
offered by competitive products. For example, Volvo has traditionally positioned its
products in the automobile market in North America in order to be perceived as the

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leader in "safety", whereas BMW has traditionally positioned its brand to be perceived as
the leader in "performance".

Ideally, a firm's positioning can be maintained over a long period of time because the
company possesses, or can develop, some form of sustainable competitive advantage.
The positioning should also be sufficiently relevant to the target segment such that it will
drive the purchasing behavior of target customers.

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Chapter 2
THE P’s OF MARKETING MIX

Marketing professionals and specialist use many tactics to attract and retain their
customers. These activities comprise of different concepts, the most important one being
the marketing mix. There are two concepts for marketing mix: 4P and 7P. It is essential to
balance the 4Ps or the 7Ps of the marketing mix. The concept of 4Ps has been long used
for the product industry while the latter has emerged as a successful proposition for the
services industry.

The marketing mix is the combination of marketing activities that an organization

engages in so as to best meet the needs of its targeted market. Getting the mix of these
elements right enables the organization to meet its marketing objectives and to satisfy the
requirements of customers. In addition to the traditional four Ps it is now customary to
add some more Ps to the mix to give us Seven Ps. The additional Ps have been added
because today marketing is far more customer oriented than ever before, and because the
service sector of the economy has come to dominate economic activity in this country.

The term "marketing mix" became popularized after Neil H. Borden published his 1964
article, The Concept of the Marketing Mix. Borden began using the term in his teaching in
the late 1940's after James Culliton had described the marketing manager as a "mixer of
ingredients". The ingredients in Borden's marketing mix included product planning,
pricing, branding, distribution channels, personal selling, advertising, promotions,
packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome
McCarthy later grouped these ingredients into the four categories that today are known as
the 4 P's of marketing, depicted below:

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The Basic P’s of the marketing mix can be discussed as:

Product - what you are selling; it must provide value to a customer but does not have to
be tangible at the same time. Basically, it involves introducing new products or
improvising the existing products.

The term "product" refers to tangible, physical products as well as services. Here are
some examples of the product decisions to be made:

 Brand name
 Functionality
 Styling
 Quality
 Safety
 Packaging
 Repairs and Support
 Warranty
 Accessories and services

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Price - how much you are charging for your product; Pricing must be competitive and
must entail profit. The pricing strategy can comprise discounts, offers and the like.

Some examples of pricing decisions to be made include:

 Pricing strategy (skim, penetration, etc.)

 Suggested retail price
 Volume discounts and wholesale pricing
 Cash and early payment discounts
 Seasonal pricing
 Bundling
 Price flexibility
 Price discrimination

Place – where and how people can buy your product; It refers to the place where the
customers can buy the product and how the product reaches out to that place. This is done
through different channels, like Internet, wholesalers and retailers.

Distribution is about getting the products to the customer. Some examples of distribution
decisions include:

 Distribution channels
 Market coverage (inclusive, selective, or exclusive distribution)
 Specific channel members
 Inventory management
 Warehousing
 Distribution centers
 Order processing
 Transportation
 Reverse logistics

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Promotion - how you tell people about your offer i.e. your product and price; It includes
the various ways of communicating to the customers of what the company has to offer. It
is about communicating about the benefits of using a particular product or service rather
than just talking about its features.

In the context of the marketing mix, promotion represents the various aspects of
marketing communication, that is, the communication of information about the product
with the goal of generating a positive customer response. Marketing communication
decisions include:

 Promotional strategy (push, pull, etc.)

 Advertising
 Personal selling & sales force
 Sales promotions
 Public relations & publicity
 Marketing communications budget

These four P's are the parameters that the marketing manager can control, subject to the
internal and external constraints of the marketing environment. The goal is to make
decisions that center the four P's on the customers in the target market in order to create
perceived value and generate a positive response.

Limitation of the Marketing Mix Framework

The marketing mix framework was particularly useful in the early days of the marketing
concept when physical products represented a larger portion of the economy. Today, with
marketing more integrated into organizations and with a wider variety of products and
markets, some authors have attempted to extend its usefulness by proposing a fifth P,
such as packaging, people, process, etc. Today however, the marketing mix most
commonly remains based on the 4 P's. Despite its limitations and perhaps because of its

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simplicity, the use of this framework remains strong and many marketing textbooks have
been organized around it.

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Extended Marketing Mix

People - People refer to the customers, employees, management and everybody else
involved in it. It is essential for everyone to realize that the reputation of the brand that
you are involved with is in the people's hands.

An essential ingredient to any service provision is the use of appropriate staff and people.
Recruiting the right staff and training them appropriately in the delivery of their service is
essential if the organization wants to obtain a form of competitive advantage. Consumers
make judgments and deliver perceptions of the service based on the employees they
interact with. Staff should have the appropriate interpersonal skills, aptitude, and service
knowledge to provide the service that consumers are paying for.

Process - It refers to the methods and process of providing a service and is hence
essential to have a thorough knowledge on whether the services are helpful to the
customers, if they are provided in time, if the customers are informed in hand about the
services and many such things. It is associated with customer service are a number of
processes involved in making marketing effective in an organization e.g. processes for
handling customer complaints, processes for identifying customer needs and
requirements, processes for handling order etc

Refers to the systems used to assist the organization in delivering the service. Imagine
you walk into a Farmers’ Market and you order a “longganisa”, you get it delivered
within 2 minutes. What was the process that allowed you to obtain an efficient service
delivery? Can u imagine a Piggery Farm wherein all pigs have chips embedded in their
ears? We have these already. This is to minimize feed wastage because we all know that
feed costs constitute about 70% of the total operating expenses. With this technology, it
is expected that production costs is minimized and therefore, producers can sell their
animals at a reduced price. Modern technology facilitates all of these but we have to
anticipate a high initial capital investment.

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Physical (evidence) - It refers to the experience of using a product or service. When a
service goes out to the customer, it is essential that you help him see what he is buying or
not. For example- brochures, pamphlets etc serve this purpose. Where is the service being
delivered? Physical Evidence is the element of the service mix which allows the
consumer again to make judgments on the organization. If you walk into a restaurant
your expectations are of a clean, friendly environment. Physical evidence is an essential
ingredient of the service mix, consumers will make perceptions based on their sight of the
service provision which will have an impact on the organizations perceptual plan of the
service.

In the Philippines, small and big bakeries tend to show their customers how bread is
done. They allow their customers to tour around the plant to see for themselves the
technology or processes that they use and quality standards they maintain. A good
example of this is Gardenia Breads in Sta Rosa, Laguna where breads are made but
basically “do not pass the hands of the workers”. The plant is extremely clean and
maintains quality in their output. No wonder, even if the bread costs more than those
sold in local areas, Gardenia Breads are easily sold.

Customer service lies at the heart of modern service industries. Customers are likely to be
loyal to organizations that serve them well - from the way, in which a telephone query is
handled, to direct face-to-face interactions. Although the 'have a nice day' approach is a
bit corny, it is certainly better than a couldn't care less approach to customer relations.
Call centre staff and customer interfacing personnel are the front line troops of any
organization and therefore need to be thoroughly familiar with good customer relation's
practice.

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Note:

So for any marketer, the aim is simple - To sell the right product (that customers want) at
the right price (which customers can afford and are willing to pay) at a convenient place
using effective promotions. Each element of the marketing mix should be consistent, fit
together and reinforce the other elements.

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Chapter 3
CUSTOMER SATISFACTION AND STRATEGIC PLANNING

What is Strategic Marketing Plan?

Every CEO and marketing executive periodically faces urgent strategic marketing
challenges that can affect the future of the company for many years. Frequently these
decisions are made without having an opportunity to study the situation and make the
best possible decision.

Making spur of the moment strategic decisions reduces the likelihood that these decisions
are the best.

A better approach is to perform an annual comprehensive review of markets and

opportunities, then make long-term strategic decisions without the distractions of day-to-
day marketing and sales activities. Daily decisions then fit into the company's overall
strategic marketing goals.

It's important for a strategic marketing planning process to look at the company from the
customer's point of view by asking questions that have a long time horizon, such as:

 What needs or problems cause customers to consider buying from our company?
 What improvements in the customer's personal or business life can we enable or
improve?
 Which customer market segments are attracted to our company or products?
 Which customer motivations or values lead people to decide to purchase our
products?
 What changes or trends in our customer base are affecting their general interest or
attraction to products like ours?

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Strategic vs. Tactical Marketing Plans

What makes a strategic marketing plan different from a more tactical marketing
communications plan? The key difference is the focus on meshing overall customer
situations with your overall company direction.

For business-to-business marketers, this means combining industry sector segmentation

and product use with other factors related to purchase decisions. These include the
purchase criteria and decision motivations that affect large, enterprise size purchases.

For example, the trend toward increased use of outsourcing to both domestic and global
vendors creates markets for those suppliers. However, those vendors need to have a
strategic marketing vision in order to see these new markets early enough to take
advantage of the opportunity.

For consumer marketers, this means using geographic and demographic segmentation, as
well as psychographic segmentation (i.e., values, attitudes, lifestyles), and product usage
motivations.

For example, the aging population bubble creates a general increase in demand for a wide
range of products. It also creates market niches that are large enough to make product
development and marketing worthwhile.

The same shifts can also reduce demand for other products. These long term shifts in
markets are frequently misinterpreted as short-term competitive pressures or fluctuations
in the economy. Instead of increasing advertising or sales efforts, it might be better to
abandon a declining market.

Without a strategic marketing plan a company could waste resources or miss an

opportunity.

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What's the cost of missing an opportunity? Of course, it's impossible to know at the time
the opportunity is missed, but years later it will become clear when a competitor opens a
new factory or enters a new market -- and their revenue grows faster than their
competitors.

In other words, the annual cost of a strategic marketing plan review is miniscule
compared to the revenue, market share, and profitability it can generate.

Developing the Strategic Marketing Plan

The strategic marketing plan process typically has three stages:

1. Segment the market

 Geographic
 Demographic
 Psychographic
 Behavior
2. Profile the market segments
 Revenue potential
 Market share potential
 Profitability potential
3. Develop a market segment marketing strategy
 Market leader or product line extension
 Mass marketing or targeted marketing
 Direct or indirect sales

After analyzing market segments, customer interests, and the purchase process, it's time
to create the strategic marketing plan. The strategic marketing plan document usually
includes:

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 Situational Analysis - Where is the company now?
a. Market Characteristics
b. Key Success Factors
c. Competition and Product Comparisons
d. Technology Considerations
e. Legal Environment
f. Social Environment
g. Problems and Opportunities
 Marketing Objectives - Where does management want the company to go?
a. Product Profile
b. Target Market
c. Target Volume in Dollars and/or Units
 Marketing Strategies - What should the company do to achieve its objectives?
a. Product Strategy
b. Pricing Strategy
c. Promotion Strategy
d. Distribution Strategy
e. Marketing Strategy Projection

How to Use a Strategic Marketing Plan

Once a company's executive team has approved the strategic marketing plan it's time to
take the next step -- create the tactical marketing programs and projects needed to
implement the plan.

These tactical programs usually include:

 Product Development Plan

 Marketing Communications Plan
 Sales Development Plan
 Customer Service Plan

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Benefiting from a Strategic Marketing Plan

The top-down process of developing a strategic marketing plan helps insure that all
tactical marketing programs support the company's goals and objectives, as well as
convey a consistent message to customers.

This approach improves company efficiency in all areas, which helps improve revenue
and market share growth, and minimizes expenses -- all of which lead to higher
profitability.

STRATEGIC PLAN

Key Goals and Objectives:

1.0 ENHANCE CUSTOMER FOCUS AND ORIENTATION

1.1 Continuous Improvement - In order to better serve internal and external customers,
Administration will continue its commitment to continuously improve its service
offerings and emphasize its customer focus. Administrative departments are firmly
committed to utilizing modern management tools including Total Quality Management
(TQM), Business Process Transformation (BPT), and various emerging information
technologies.

1.2 Customer Orientation - The needs of our internal and external customers will help
determine the array of products and services that we offer, and the manner in which they
are delivered.

1.3 Customer Satisfaction - Customer satisfaction is the key indicator of how well we are
doing in providing our product and service offerings and how well we are supporting the
campus's strategic missions and goals.

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2.0 ENHANCE HUMAN INFRASTRUCTURE

2.1 Professional Development - Administration is committed to the ongoing professional

development of our employees. As the demands and requirements placed on
administrative departments change over time, our employees must have opportunities to
develop the technical and other professional skills necessary to meet the challenges of the
future. Our commitment to employee development through training, facilitation, and
technology will provide the basis for developing new service and product offerings and
improving our ability to deliver them.

2.2 Supportive Work Environment - A climate free from sexual and other forms of
harassment is essential in providing a work environment that supports the maximum
efforts and results from our employees. Administration is committed to training,
facilitation, and, as necessary, the enforcement of campus policies and values necessary
to maintain an open and supportive work environment.

2.3 Commitment to Diversity - Improving and maintaining the diversity of our workforce
is absolutely necessary to support the larger campus goals and aspirations. The
productivity of our workforce is directly related to our ability to work together in a
manner that is respectful of each other and promotes open communication and the
sharing of ideas. Administrative departments will continue to improve the composition of
its already diverse workforce. More importantly, we will continue to focus on developing
and maintaining a climate where people value individual and group differences, respect
the perspectives of others, and communicate in a courteous and open manner.

2.4 Safe Environment - Individuals must feel safe and secure in performing their
individual and group responsibilities if they are to stay focused and effective.
Administrative departments are integral in providing a safe working and learning
environment that minimizes harmful and distracting exposure to crime, safety hazards,
and environmental risks. Our effectiveness in providing a safe environment is dependent
on our ability to involve faculty, staff, and students to help identify risks and to assist

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administrative departments in developing plans and programs to help minimize or
eliminate these risks.

2.5 Employee Compensation - Administration is committed to the development of

compensation plans for all employees, providing a direct link between performance and
reward as well as salary equity among employees. Particular emphasis needs to be placed
on team performance as well as personal contribution. Rewards other than monetary
compensation need to be equally emphasized in order to provide recognition and
encouragement for exemplary personal and group efforts and results.

3.0 IMPROVE EFFECTIVENESS OF DECISION-MAKING

3.1 Decentralization of Authority - Administrative departments are committed to

improving productivity and customer service by involving all levels of the organization in
decision-making. The best allocation of scarce resources and the development of service
delivery methods occur at the most decentralized levels possible. This implies that
individuals who are closest to the customer, and best understand customer needs and
requirements, should play an active role in budget decision-making and in developing
work methods.

3.2 Integrated Decision-making - Administrative departments will include internal

customers, including faculty and students, in decision-making as a means to improve
customer focus and service. Program integration with the other Vice Chancellor areas in
departmental planning, evaluation, and resource allocation decisions will be emphasized.

3.3 Capital Planning - It is essential that the campus improve its capital planning and
resource allocation processes. Administration will ensure that investment opportunities
are properly prioritized, consistent with the campus strategic plan, fully reviewed and
evaluated, and properly coordinated among all participating groups.

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3.4 Administrative Effectiveness - The campus should analyze and evaluate existing
administrative organizational structures. Realignments should be considered where
improvements can be made to customer service and where process efficiencies can be
identified.

4.0 INCREASE REVENUES AND RETURNS TO THE UNIVERSITY

4.1 Revenue Enhancements - Given the current austere budget environment of the
campus, an emphasis will be placed on aggressively pursuing opportunities for revenue
enhancements and increased business returns to the University.

4.2 Entrepreneurial Culture - Auxiliary budget managers will be encouraged, to the extent
practical, to optimize income to the overall campus. A highly entrepreneurial climate will
be encouraged. Auxiliary units will seek new sources of income, particularly by offering
new and useful services to internal customers, and by expanding the distribution methods
and scope of services to external customers.

4.3 Alternative Income Strategies - The campus will continue to seek opportunities to
develop income sources from its long-term, fixed assets including land, buildings, and
water rights. Interim uses will be particularly considered as alternative income strategies
until the campus requires these assets for its own growth and development.

5.0 IMPROVE OPERATIONAL EFFICIENCIES AND PRODUCTIVITY

5.1 Strategic Investment - Administration is committed to supporting selective key

strategic investments that will enable the campus and individual operating units to
continuously improve efficiency while maintaining the lowest cost structure possible.

5.2 Information Technologies - Improvements in operating efficiencies and productivity

will be realized by continuously investing in emerging information technologies
including greater use of the Internet, improved software for transactional processing and

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decision support, and the upgrading of computing hardware to take advantage of future
opportunities.

5.3 Process Orientation - Many of the campus's support services are provided through the
coordinated efforts of departments that often cross organizational boundaries. Customer
service and cost efficiencies will be maximized by identifying and engineering critical
processes in a manner that fully involves all affected departments with a strong focus on
customer needs.

6.0 ENHANCE PHYSICAL INFRASTRUCTURE

6.1 Environmental Management - Environmental health and safety are a top priority for
the campus. Compliance with state and federal regulations is an essential part of our
commitment. Administration strives to manage resources in ways that reduce negative
environmental impacts. Programs in waste management and recycling, alternative
transportation, hazardous waste minimization, and energy and water conservation have
tangible benefits that are important to the campus community and to the public.

6.2 Life-Cycle Maintenance - The ongoing physical decay and deterioration of campus
buildings and physical infrastructure will jeopardize academic, research, and student life
unless treated in an aggressive fashion. The campus must increase its commitment to
funding its increasing deferred maintenance requirements and the administrative units
which provide for the ongoing care of its facilities and physical plant.

6.3 Improve Space Utilization - As the campus continues to increase enrollments and
research activities, it must improve space utilization within existing buildings and
properly plan for the development and construction of new buildings so that decisions to
build additional new space will not be constrained by infrastructure limitations.
Administration will aggressively pursue utilities and infrastructure planning and
development.

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6.4 Optimize Land Use - The campus needs to protect the existing open space and the
architectural quality of its buildings and land. As the campus moves closer to the natural
limits of its potential build-out, additional land will be required. Administration will
continue to develop and implement a thoughtful land planning and acquisition strategy.

Increase Customer Satisfaction with Strategic Key Account Planning

Most large organizations have a set of customers they characterize as key accounts.
Because these key accounts often produce a large share of sales revenue for a company,
it’s critical to develop excellent relationships with them. Effective key account
management requires having a strategy that enables you to understand the needs of these
customers so you can serve them better. One critical tool for accomplishing this is a
strategic account plan.

Strategic account plans benefit a utility’s account management group as well as its key
account customers. Yet, only slightly more than half of the 29 utilities surveyed in the
E Source 2009 Account Management Assessment create customized strategic plans for
key account customers. Strategic account planning is the overall best way to keep track of
your customers’ wants, needs, and preferences, which ultimately allows you to build
rapport, develop trust, and provide optimum value to your most important business
customers.

Take, for example, the experiences of a large utility in the western U.S. The utility had
been participating in a nationwide customer satisfaction survey of commercial and
industrial customers for nearly 20 years. After ranking in the bottom third of the largest
U.S. utilities, the utility jumped to the top 10 when it started focusing its strategic
planning process on what the utility would do for the customer. The utility vaulted to No.
1 after incorporating flexibility into its strategic plans and expanding the scope of the
plans from listing a few basic goals to including specific agenda items and goals.

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Strategic plans put all of your knowledge about a key account business customer into a
single document that can be used for planning and meeting with customers. The plans can
also incorporate the utility’s goals at the corporate or account management department
level as well as any regulatory or legislative goals the utility is required to meet. E Source
considers it a best practice to create individual strategic account plans for each key
account customer, but you may want to start with just your top 10 to 25 accounts to get
the ball rolling. An effective strategic account plan includes:

 All of the basic information about the customer such as budget cycle and key
drivers for decision-making

 Pertinent historical information, such as demand and energy output

 Identification of all members of the utility team who are responsible for serving
the customer (to be shared with the customer)

 Strategic plans for the customer for areas such as customer service,
communications, and energy reliability

 The market potential for utility products and programs, along with strategies for
promoting them (for internal use only)

 A summary of what the customer can expect from the utility and what the utility
can expect from the customer in return (to be shared with the customer)

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MAKE MORE STRATEGIC USE OF CUSTOMER SATISFACTION SURVEYS

Customer surveys can yield need-to-know intelligence, but all

too often they produce only nice-to-know facts

Why Customer Surveys Fail

There are three major reasons why customer satisfaction survey programs don’t provide
strategic value.

1. Customer surveys are viewed as merely a performance appraisal tool. In response

to poor customer ratings, managers typically use Band-Aids rather than perform major

surgery. Instead of focusing primarily on training and motivating employees to provide

better service, management should focus on more fundamental issues such as

whether the organization’s products, services, and culture need to change in order to

improve customer satisfaction.

2. The wrong people are involved. Customer satisfaction is critically important to all

organizations, yet the job of gathering and interpreting customer satisfaction data is

often relegated to lower levels of the organization. These people are not in a position

to evaluate the results from a strategic perspective, nor are they able to implement the

major organization-wide changes that may be needed.

3. Management engages in analysis paralysis. Far too often, customer satisfaction

survey data is over-analyzed, scrutinized, and beaten to death. Management responds

with denial and finger-pointing instead of constructive actions or strategic decisions.

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Guidelines for Success

Here are seven general guidelines to help you establish a useful customer satisfaction
survey program, one that will provide meaningful input to your strategic plans.

1. Establish Clear, Quantifiable Objectives Related to Your Strategic Plans.

Conducting an exploratory customer satisfaction survey to find out what your customers
think about your organization’s products and services typically does not serve any useful
strategic purpose. The survey should be developed with specific objectives in mind.

Consider the following examples.

Objective of a major pharmaceutical company: Cost-effectively outsource desktop

computer services by maintaining costs at the previous year’s level and achieving a
minimum of 85% customer satisfaction. Approach: (1) Assess the effectiveness of our
desktop computer services vendor by conducting an internal customer satisfaction survey
to determine whether or not 85% of our employees are satisfied with the services they are
receiving. (2) If 85% are not satisfied, we will enforce the penalty provisions of our
contract with the vendor and identify improvements that must be made within this fiscal
year. (3) If 85% are satisfied, we will continue and perhaps renew the vendor’s contract
next year. Objective of a mid-sized adhesives manufacturer: Increase the gross revenue
from our B-customers by 20% within the next two years.

Approach: (1) Conduct a customer satisfaction survey that will identify the specific needs
of B-customers. (2) Use the survey to identify how the needs of these B-customers differ
from those of A- and C-customers. (3) Reconfigure the product and service offerings
provided to B-customers by the end of this fiscal year.

Objective of a mid-sized retirement services organization: Reduce customer turnover

from 10% to 5% within the first year and from 5% to under 2% by the end of the second
year.

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Approach: (1) Conduct customer satisfaction surveys twice a year that will identify those
customers who are considering taking their business elsewhere. (2) Implement a customer
retention program that includes personal quarterly visits by senior management to these
customer sites.

2. Involve Senior Management. Delegating the implementation of a customer

satisfaction survey program to middle management is fine, but if senior management
does not embrace the process, little good will result. The program will succeed only if
senior management is involved in setting its objectives, monitoring the data gathering
process, interpreting the results, and actively implementing the solutions.

3. Make Certain that Customer Perspectives Are Included in the Survey. In

developing a customer satisfaction survey, always get input from your customers first.
For example, management may want to know about the technical requirements customers
foresee for next year, but customers see issues such as delivery time and warranties as
more important. These issues should be included on the survey as well.

The survey must provide an opportunity for customers to voice their opinions, both
positive and negative. There are several ways to identify the key issues of importance to
customers before developing the survey.

Conduct pre-survey interviews with customers. Ask a representative sample of customers

what they particularly like and dislike about the products and services your organization
provides to them. This will help identify their key concerns.

Ask front-line employees for their input. Front line employees probably have a better
perspective than senior managers about customers’ major concerns. They should
therefore have input into the creation of the survey instrument.

4. Do Everything Possible to Encourage Customers to Respond. If you do not receive

a good response rate, senior management will spend more time focusing on the credibility
of the data than on what actions should be taken to improve customer satisfaction. A

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survey professional can help you determine an adequate sample size. Here are some
things that can be done to increase the response rate.

Use multiple methods. Some customers prefer to respond to mail surveys and others may
be more inclined to use the Web. Offer both methods. For more exploratory
investigations, telephone interviewing is more appropriate.

Provide an incentive. Incentives that have proved successful include entry to a raffle for a
vacation, a contribution to a charity for every completed survey returned, a gift certificate
to amazon.com, or a discount on the company’s products.

Over-communicate. Send personalized letters from a CEO or other high-ranking

executive telling customers that a survey will be arriving shortly and that their input is
important.

Have your sales staff telephone customers to ask them to complete the survey. Send
several follow-up reminders via telephone and email. Make follow-up telephone calls to
those who have not responded by the deadline.

Personalize the survey. Customers don’t like to wade through a lot of irrelevant
questions. Develop personalized surveys that ask only those questions relevant for the
customer. For example, it makes little sense to ask executives about day-to-day issues
and makes little sense to ask frontline contacts about issues such as long-term purchasing
plans. Develop two survey forms, one for executives and another for the day-to-day
customer contacts.

Make it easy for customers to respond. Consider providing postage-paid, pre-addressed

reply envelopes or offering a toll free phone number for customers’ verbal comments.

5. Develop an Action Plan Implementation Process. The key to the success of any
customer satisfaction survey program is what happens after the data is collected. Many
organizations spend a tremendous amount of time honing the appropriate questions but
precious little time on how the results will be acted upon. A plan that outlines who will

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review the results and who will be responsible for acting on them should be put in place
at the very start of the program.

What Doesn’t Work? Here are two commonly used approaches that typically don’t work.

We’ll Just See What Happens and Keep Our Fingers Crossed. The Senior Management
Team (SMT) reviews the results, acknowledges that there are problems, and then does
nothing. No specific actions are identified, no timetables are outlined, and no one is held
responsible. Also, the results are not discussed in terms of the objectives of the survey
program or their implications for the strategic plans of the organization.

Let Customer Service Take Care of It. The SMT never even reviews the results. Customer
service gathers the data and then is expected to develop the appropriate action plans and
make certain they are implemented throughout the organization. However, customer
service lacks the authority to make changes outside of its own small domain. Also, this
approach does not provide an opportunity for the SMT to review the implications of the
results for the organization’s strategic plan.

What Does Work? Four approaches can be effective.

The “Senior Management Team Do it All” Approach. (This approach is recommended

for organizations in which the CEO believes that delegating action planning to
department heads or to an employee team will not be effective.)

The SMT reviews the results in light of the study’s objectives and assesses the
implications of the results for the strategic plan. They then target three to five specific
areas for improvement. Each member of the team then volunteers to be responsible for
developing and implementing one of the action plans according to a timetable defined by
the CEO. Implementing the action plans becomes part of the goals and objectives of each
SMT member.

The “Delegate Through the Hierarchy” Approach. (This is effective when the CEO
believes department heads can be entrusted to implement important action plans

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successfully.) The SMT reviews the results and identifies three to five specific areas for
improvement. They then delegate the responsibility for implementing these plans to the
appropriate departments (e.g., operations, customer service, marketing, and sales). The
heads of each department are held accountable for implementation.

The “Establish a Committee” Approach. (Use this approach in relatively flat

organizations when employee involvement is critically important to really make things
happen in the organization. This approach helps to empower employees and is ideal when
grassroots problem solving is needed.) The SMT reviews the results, targets three to five
specific areas for improvement, and then delegates implementation to a “Customer
Satisfaction Team.” The team, comprised of key members of each department, is charged
with developing and carrying out the action plans. Ideally, the CEO or a key member of
the SMT serves as the facilitator of the group and provides the clout that may be needed
throughout the organization to make certain the action plans are implemented.

The “Use a Consultant” Approach. (Use this approach when the credibility and expertise
of an outsider will increase the probability that action plans will be implemented.) The
SMT reviews the results with an experienced outside consultant. The results are
discussed in light of the study’s objectives and the strategic plan. Three or four specific
areas are targeted for improvement. The consultant is then empowered to work with key
department heads to implement the action plans. Typically, the consultant works with
employee teams within each department.

6. Communicate the Results Widely. The results of the survey, as well as the actions
that will be taken should be communicated to three major audiences.

All Customers. Soon after the study has been completed, the CEO should send a letter to
all customers. The letter should thank them for participating, tell them the major results
(both positive and negative), and outline what measures will be taken to address any
areas of concern.

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Concerned Customers. Special letters, phone calls, or visits should be made to customers
who have expressed specific concerns. Senior management should make these contacts,
not the employees who may be the source of the problem. Tell these customers how you
will address their concerns.

Employees. The results of the study should also be communicated to all employees. They
should know which customers expressed concerns and what they are expected to do to
improve the situation.

7. Make the Survey Process Ongoing Rather than a One-time Event. Surveying your
customers should become part of how you conduct your business, not an isolated event.
Surveying on an annual basis will enable you to track trends and assess the effects of
changes you have made in response to prior surveys. It will also enable you to continue to
assess the viability of your strategic plans.

A properly conducted customer satisfaction survey program can be an extremely valuable

tool for assessing the effectiveness of strategic plans and fine tuning those plans.

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Chapter 4
MARKET RESEARCH AND MARKET ENVIRONMENT

Marketing research is the systematic gathering, recording, and analysis of data about
issues relating to marketing products and services. The goal of marketing research is to
identify and assess how changing elements of the marketing mix impacts customer
behavior. The term is commonly interchanged with market research; however, expert
practitioners may wish to draw a distinction, in that market research is concerned
specifically with markets, while marketing research is concerned specifically about
marketing processes. It has been described as "the function that links the consumers,
customers, and public to the marketer through information — information used to
identify and define marketing opportunities and problems; generate, refine, and evaluate
marketing actions; monitor marketing performance; and improve understanding of
marketing as a process. Marketing research specifies the information required to address
these issues, designs the method for collecting information, manages and implements the
data collection process, analyzes the results, and communicates the findings and their
implications."
Marketing research is often partitioned into two sets of categorical pairs, either by target
market:

 Consumer marketing research, and

 Business-to-business (B2B) marketing research
Or, alternatively, by methodological approach:

 Qualitative marketing research, and

 Quantitative marketing research
Consumer marketing research is a form of applied sociology that concentrates on
understanding the preferences, attitudes, and behaviors of consumers in a market-based
economy, and it aims to understand the effects and comparative success of marketing
campaigns. The field of consumer marketing research as a statistical science was
pioneered by Arthur Nielsen with the founding of the ACNielsen Company in 1923.
Thus, marketing research may also be described as the systematic and objective
identification, collection, analysis, and dissemination of information for the purpose of

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assisting management in decision making related to the identification and solution of

problems and opportunities in marketing.

The Role of Marketing Research (MR)

The task of marketing research (MR) is to provide management with relevant, accurate,
reliable, valid, and current information. Competitive marketing environment and the
ever-increasing costs attributed to poor decision making require that marketing research
provide sound information. Sound decisions are not based on gut feeling, intuition, or
even pure judgment.

Marketing managers make numerous strategic and tactical decisions in the process of

identifying and satisfying customer needs. They make decisions about potential
opportunities, target market selection, market segmentation, planning and implementing
marketing programs, marketing performance, and control. These decisions are
complicated by interactions between the controllable marketing variables of product,
pricing, promotion, and distribution. Further complications are added by uncontrollable
environmental factors such as general economic conditions, technology, public policies
and laws, political environment, competition, and social and cultural changes. Another
factor in this mix is the complexity of consumers. Marketing research helps the marketing
manager link the marketing variables with the environment and the consumers. It helps
remove some of the uncertainty by providing relevant information about the marketing
variables, environment, and consumers. In the absence of relevant information,
consumers' response to marketing programs cannot be predicted reliably or accurately.
Ongoing marketing research programs provide information on controllable and non-
controllable factors and consumers; this information enhances the effectiveness of
decisions made by marketing managers.

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Traditionally, marketing researchers were responsible for providing the
relevant information and marketing decisions were made by the managers. However, the
roles are changing and marketing researchers are becoming more involved in decision
making, whereas marketing managers are becoming more involved with research. The
role of marketing research in managerial decision making is explained further using the
framework of the "DECIDE" model:

The DECIDE model conceptualizes managerial decision making as a series of six steps.
The decision process begins by precisely defining the problem or opportunity, along with
the objectives and constraints.  Next, the possible decision factors that make up the
alternative courses of action (controllable factors) and uncertainties (uncontrollable
factors) are enumerated. Then, relevant information on the alternatives and possible
outcomes is collected. The next step is to identify and select the best alternative based on
chosen criteria or measures of success. Then a detailed plan to develop and implement
the alternative selected is developed and put into effect. Last, the outcome of the decision
and the decision process itself are evaluated.

Characteristics of Marketing Research

First, marketing research is systematic. Thus systematic planning is required at all the

stages of the marketing research process. The procedures followed at each stage are
methodologically sound, well documented, and, as much as possible, planned in advance.
Marketing research uses the scientific method in that data are collected and analyzed to
test prior notions or hypotheses. Experts in marketing research have shown that studies
featuring multiple and often competing hypotheses yield more meaningful results than
those featuring only one dominant hypothesis.

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Marketing research is objective. It attempts to provide accurate information that reflects a
true state of affairs. It should be conducted impartially. While research is always
influenced by the researcher's research philosophy, it should be free from the personal or
political biases of the researcher or the management. Research which is motivated by
personal or political gain involves a breach of professional standards. Such research is
deliberately biased so as to result in predetermined findings. The objective nature of
marketing research underscores the importance of ethical considerations. Also,
researchers should always be objective with regard to the selection of information to be
featured in reference texts because such literature should offer a comprehensive view on
marketing. Research has shown, however, that many marketing textbooks do not feature
important principles in marketing research. 

Types of Marketing Research

Marketing research techniques come in many forms, including:

 Ad Tracking – periodic or continuous in-market research to monitor

a brand’s performance using measures such as brand awareness, brand preference,
and product usage.
 Advertising Research – used to predict copy testing or track the efficacy of
advertisements for any medium, measured by the ad’s ability to get attention
(measured with Attention Tracking), communicate the message, build the brand’s
image, and motivate the consumer to purchase the product or service. (Young, 2005)
 Brand equity research - how favorably do consumers view the brand?
 Brand association research - what do consumers associate with the brand?
 Brand attribute research - what are the key traits that describe the brand promise?
 Brand name testing - what do consumers feel about the names of the products?
 Commercial eye tracking research - examine advertisements, package designs,
websites, etc. by analyzing visual behavior of the consumer

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 Concept testing - to test the acceptance of a concept by target consumers
 Cool hunting - to make observations and predictions in changes of new or existing
cultural trends in areas such as fashion, music, films, television, youth culture and
lifestyle
 Buyer decision processes research - to determine what motivates people to buy and
what decision-making process they use
 Copy testing – predicts in-market performance of an ad before it airs by analyzing
audience levels of attention, brand linkage, motivation, entertainment, and
communication, as well as breaking down the ad’s flow of attention and flow of
emotion.
 Customer satisfaction research - quantitative or qualitative studies that yields an
understanding of a customer's satisfaction with a transaction
 Demand estimation - to determine the approximate level of demand for the product
 Distribution channel audits - to assess distributors’ and retailers’ attitudes toward a
product, brand, or company
 Internet strategic intelligence - searching for customer opinions in the Internet: chats,
forums, web pages, blogs... where people express freely about their experiences with
products, becoming strong opinion formers.
 Marketing effectiveness and analytics - Building models and measuring results to
determine the effectiveness of individual marketing activities.
 Mystery consumer or mystery shopping - An employee or representative of the
market research firm anonymously contacts a salesperson and indicates he or she is
shopping for a product. The shopper then records the entire experience. This method
is often used for quality control or for researching competitors' products.
 Positioning research - how does the target market see the brand relative to
competitors? - what does the brand stand for?
 Price elasticity testing - to determine how sensitive customers are to price changes
 Sales forecasting - to determine the expected level of sales given the level of demand.
With respect to other factors like Advertising expenditure, sales promotion etc.

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 Segmentation research - to determine the demographic, psychographic, and
behavioral characteristics of potential buyers
 Online panel - a group of individual who accepted to respond to marketing research
online
 Store audit - to measure the sales of a product or product line at a statistically selected
store sample in order to determine market share, or to determine whether a retail store
provides adequate service
 Test marketing - a small-scale product launch used to determine the likely acceptance
of the product when it is introduced into a wider market
 Viral Marketing Research - refers to marketing research designed to estimate the
probability that specific communications will be transmitted throughout an
individual's Social Network. Estimates of Social Networking Potential (SNP) are
combined with estimates of selling effectiveness to estimate ROI on specific
combinations of messages and media.

All of these forms of marketing research can be classified as either problem-identification

research or as problem-solving research.

There are two main sources of data - primary and secondary. Primary research is
conducted from scratch. It is original and collected to solve the problem in hand.
Secondary research already exists since it has been collected for other purposes. It is
conducted on data published previously and usually by someone else. Secondary research
costs far less than primary research, but seldom comes in a form that exactly meets the
needs of the researcher.

A similar distinction exists between exploratory research and conclusive research.

Exploratory research provides insights into and comprehension of an issue or situation. It

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should draw definitive conclusions only with extreme caution. Conclusive research draws
conclusions: the results of the study can be generalized to the whole population.

Exploratory research is conducted to explore a problem to get some basic idea about the
solution at the preliminary stages of research. It may serve as the input to conclusive
research. Exploratory research information is collected by focus group interviews,
reviewing literature or books, discussing with experts, etc. This is unstructured and
qualitative in nature. If a secondary source of data is unable to serve the purpose, a
convenience sample of small size can be collected. Conclusive research is conducted to
draw some conclusion about the problem. It is essentially, structured and quantitative
research, and the output of this research is the input to management information
systems (MIS).

Exploratory research is also conducted to simplify the findings of the conclusive or

descriptive research, if the findings are very hard to interpret for the marketing managers.

Methods of Marketing Research

Methodologically, marketing research uses the following types of research designs:[8]

Based on questioning

 Qualitative marketing research - generally used for exploratory purposes -

small number of respondents - not generalizing to the whole population -
statistical significance and confidence not calculated - examples include focus
groups, in-depth interviews, and projective techniques
 Quantitative marketing research - generally used to draw conclusions - tests a
specific hypothesis - uses random sampling techniques so as to infer from the
sample to the population - involves a large number of respondents - examples
include surveys and questionnaires. Techniques include choice modeling,
maximum difference preference scaling, and covariance analysis.

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Based on observations

 Ethnographic studies - by nature qualitative, the researcher observes social

phenomena in their natural setting - observations can occur cross-sectionally
(observations made at one time) or longitudinally (observations occur over
several time-periods) - examples include product-use analysis and computer
cookie traces..
 Experimental techniques - by nature quantitative, the researcher creates a
quasi-artificial environment to try to control spurious factors, then
manipulates at least one of the variables - examples include purchase
laboratories and test markets
Researchers often use more than one research design. They may start with
secondary research to get background information, then conduct a focus group
(qualitative research design) to explore the issues. Finally they might do a full
nation-wide survey (quantitative research design) in order to devise specific
recommendations for the client.

MARKET ENVIRONMENT

The market environment is a marketing term and refers to factors and forces that affect
a firm’s ability to build and maintain successful relationships with customers.Three levels
of the environment are: Micro (internal) environment - ma forces within the company
that affect its ability to serve its customers. Macro (national) environment - larger societal
forces that affect the microenvironment

Micro-Environment (Internal Environment)

The microenvironment refers to the forces that are close to the company and affect its
ability to serve its customers. It includes the company itself, its suppliers, marketing
intermediaries, customer markets, competitors, and publics.

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The company aspect of microenvironment refers to the internal environment of the
company. This includes all departments, such as management, finance, research and
development, purchasing, operations and accounting. Each of these departments has an
impact on marketing decisions. For example, research and development have input as to
the features a product can perform and accounting approves the financial side of
marketing plans and budgets.

The suppliers of a company are also an important aspect of the microenvironment

because even the slightest delay in receiving supplies can result in customer
dissatisfaction. Marketing managers must watch supply availability and other trends
dealing with suppliers to ensure that product will be delivered to customers in the time
frame required in order to maintain a strong customer relationship.

Marketing intermediaries refers to resellers, physical distribution firms, marketing

services agencies, and financial intermediaries. These are the people that help the
company promote, sell, and distribute its products to final buyers. Resellers are those that
hold and sell the company’s product. They match the distribution to the customers and
include places such as Wal-Mart, Target, and Best Buy. Physical distribution firms are
places such as warehouses that store and transport the company’s product from its origin
to its destination. Marketing services agencies are companies that offer services such as
conducting marketing research, advertising, and consulting. Financial intermediaries are
institutions such as banks, credit companies and insurance companies.

Another aspect of microenvironment is the customers. There are different types of

customer markets including consumer markets, business markets, government
markets, international markets, and reseller markets. The consumer market is made up of
individuals who buy goods and services for their own personal use or use in their
household. Business markets include those that buy goods and services for use in
producing their own products to sell. This is different from the reseller market which

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includes businesses that purchase goods to resell as is for a profit. These are the same
companies mentioned as market intermediaries. The government market consists of
government agencies that buy goods to produce public services or transfer goods to
others who need them. International markets include buyers in other countries and
includes customers from the previous categories.

Competitors are also a factor in the microenvironment and include companies with
similar offerings for goods and services. To remain competitive a company must consider
who their biggest competitors are while considering its own size and position in the
industry. The company should develop a strategic advantage over their competitors.

The final aspect of the microenvironment is publics, which is any group that has an
interest in or impact on the organization’s ability to meet its goals. For example, financial
publics can hinder a company’s ability to obtain funds affecting the level of credit a
company has. Media publics include newspapers and magazines that can publish articles
of interest regarding the company and editorials that may influence customers’ opinions.
Government publics can affect the company by passing legislation and laws that put
restrictions on the company’s actions. Citizen-action publics include environmental
groups and minority groups and can question the actions of a company and put them in
the public spotlight. Local publics are neighborhood and community organizations and
will also question a company’s impact on the local area and the level of responsibility of
their actions. The general public can greatly affect the company as any change in their
attitude, whether positive or negative, can cause sales to go up or down because the
general public is often the company’s customer base. And finally those who are
employed within the company and deal with the organization and construction of the
company’s product.

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Macro-Environment (External Environment)

The macro-environment refers to all forces that are part of the larger society and affect
the microenvironment. It includes concepts such as demography, economy, natural
forces, technology, politics, and culture.

Demography refers to studying human populations in terms of size, density, location, age,

gender, race, and occupation. This is a very important factor to study for marketers and
helps to divide the population into market segments and target markets. An example of
demography is classifying groups of people according to the year they were born. These
classifications can be referred to as baby boomers, who are born between 1946 and
1964, generation X, who are born between 1965 and 1976, and generation Y, who are
born between 1977 and 1994. Each classification has different characteristics and causes
they find important. This can be beneficial to a marketer as they can decide who their
product would benefit most and tailor their marketing plan to attract that segment.
Demography covers many aspects that are important to marketers including family
dynamics, geographic shifts, work force changes, and levels of diversity in any given
area.

Another aspect of the macro-environment is the economic environment. This refers to

the purchasing power of potential customers and the ways in which people spend their
money. Within this area are two different economies, subsistence and industrialized.
Subsistence economies are based more in agriculture and consume their own industrial
output. Industrial economies have markets that are diverse and carry many different types
of goods. Each is important to the marketer because each has a highly different spending
pattern as well as different distribution of wealth.

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The natural environment is another important factor of the macro-environment. This
includes the natural resources that a company uses as inputs and affects their marketing
activities. The concern in this area is the increased pollution, shortages of raw materials
and increased governmental intervention. As raw materials become increasingly scarcer,
the ability to create a company’s product gets much harder. Also, pollution can go as far
as negatively affecting a company’s reputation if they are known for damaging the
environment. The last concern, government intervention can make it increasingly harder
for a company to fulfill their goals as requirements get more stringent.

The technological environment is perhaps one of the fastest changing factors in the
macro-environment. This includes all developments from antibiotics and surgery
to nuclear missiles and chemical weapons to automobiles and credit cards. As these
markets develop it can create new markets and new uses for products. It also requires a
company to stay ahead of others and update their own technology as it becomes outdated.
They must stay informed of trends so they can be part of the next big thing, rather than
becoming outdated and suffering the consequences financially.

The political environment includes all laws, government agencies, and groups that

influence or limit other organizations and individuals within a society. It is important for
marketers to be aware of these restrictions as they can be complex. Some products are
regulated by both state and federal laws. There are even restrictions for some products as
to who the target market may be, for example, cigarettes should not be marketed to
younger children. There are also many restrictions on subliminal messages and
monopolies. As laws and regulations change often, this is a very important aspect for a
marketer to monitor.

The final aspect of the macro-environment is the cultural environment, which consists of
institutions and basic values and beliefs of a group of people. The values can also be
further categorized into core beliefs, which passed on from generation to generation and

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very difficult to change, and secondary beliefs, which tend to be easier to influence. As a
marketer, it is important to know the difference between the two and to focus your
marketing campaign to reflect the values of a target audience.

When dealing with the marketing environment it is important for a company to become
proactive. By doing so, they can create the kind of environment that they will prosper in
and can become more efficient by marketing in areas with the greatest customer potential.
It is important to place equal emphasis on both the macro and microenvironment and to
react accordingly to changes within them.

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Chapter 5
CONSUMER BEHAVIOR AND BUSINESS BUYING BEHAVIOR

1 Importance of understanding customer motives

The task of marketing is to identify consumers’ needs and wants accurately, then to
develop products and services that will satisfy them. For marketing to be successful, it is
not sufficient to merely discover what customers require, but to find out why it is
required. Only by gaining a deep and comprehensive understanding of buyer behavior
can marketing’s goals be realized. Such an understanding of buyer behavior works to the
mutual advantage of the consumer and marketer, allowing the marketer to become better
equipped to satisfy the consumer’s needs efficiently and establish a loyal group of
customers with positive attitudes towards the company’s products.

Consumer behavior can be formally defined as: the acts of individuals directly involved
in obtaining and using economic goods and services, including the decision processes
that precede and determine these acts. The underlying concepts of this chapter form a
system in which the individual consumer is the core, surrounded by an immediate and a
wider environment that influences his or her goals. These goals are ultimately satisfied
by passing through a number of problem-solving stages leading to purchase decisions.
The study and practice of marketing draws on a great many sources that contribute
theory, information, inspiration and advice. In the past, the main input to the theory of
consumer behavior has come from psychology. More recently, the interdisciplinary
importance of consumer behavior has increased such that sociology, anthropology,
economics and mathematics also contribute to the science relating to this subject.

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2 Social and cultural influences

Culture is ‘learned’ behavior that has been passed down over time, reinforced in our daily
lives through the family unit and through educational and religious institutions. Cultural
influences, therefore, are powerful ones and if a company does not understand the culture
in which a particular market operates, it cannot hope to develop products and market
them successfully in that market.

It is important to recognize that culture, although immensely powerful, is not fixed

forever. Changes in culture tend to be slow and are not fully assimilated until a
generation or more has passed. An example of this is the custom of marriage, which has
been openly challenged in the UK over the past twenty years. When couples first began
to set up home together and raise families outside marriage, society, for the most part,
adopted an attitude of condemnation, whereas today there is a much more relaxed attitude
to those who choose to ignore the convention.

The twentieth century has witnessed significant cultural changes, for example, changing
attitudes towards work and pleasure. It is no longer accepted that work should be
difficult or injurious to mind or body, and many employers make great efforts to ensure
that the work-place is as pleasant an environment as possible, realizing that this probably
increases productivity. Employees now more frequently regard work as a means to earn
the money to spend on goods or services that give them pleasure, and not just to pay for
the necessities of life. The shortened working week, paid holidays and labor-saving
devices in the home have all led to increased leisure time that influences how, when and
what the consumer buys. Another major cultural change in this century is the changing
role of women in society. Increased independence and economic power have not only
changed the lives of women, but have also influenced society and women’s own
perception of their socio-economic role.

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In most Western societies today, when considering culture, we must also consider
subcultures. Immigrant communities have become large enough in many countries to
form a significant proportion of the population of that country, and marketers must
consider them because of their interactive influence on society and because, in some
cases, they constitute individual market segments for certain product areas. Subcultures
can also exist within the same racial groups sharing common nationality. Their bases
may be geographical, religious or linguistic differences and marketers must recognize
these differences and should regard them as providing opportunities rather than posing
problems.

3. Specific social influences

3.1 Social class

This is the most prominent social influence. Traditionally, one of the chief determinants
of social class was income. Since pay structures have altered a great deal in terms of the
lower C2, D and E categories moving more towards levels previously enjoyed by the
higher A, B and C1 categories over the past thirty years or so, classification of consumers
on the basis of ‘life style’ is becoming more meaningful today. Income aside, social class
is an indicator of life style and its existence exerts a strong influence on individual
consumers and their behavior. There is evidence to suggest that whatever income level a
consumer reaches during his or her lifetime, basic attitudes and preferences do not change
radically. As consumers, we usually identify with a particular class or group, but often it
is not the actual social class that is revealing, but that which the consumer aspires to.
Income and/or education allows young people to ‘cross’ social class barriers and adopt
life styles which are different from those of their parents. They will tend to absorb the
influences of the group to which they aspire and gradually reject the life styles of their
parents and relations. It can thus be seen that occupation is a strong determinant towards
an individual’s behavioral patterns, which includes buyer behavior.

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When studying social class, the marketer should make decisions on the basis of
information revealed by objectively designed research, without any preconceptions or
associations with inferiority or superiority in ‘lower’ or ‘higher’ social groupings. This is
the only way that changes in behavior can be identified.

3.2 Reference groups

This can be described as group of people whose standards of conduct mould an

individual’s dispositions, beliefs and values. This group can be small or large. Reference
groups can range from the immediate family to the place of work. They can also be
found in a person’s social life. An individual is unlikely to deviate too far from the
behavioral norms laid down by the members of a club or hobby group. Reference group
theory does not state that individualism cannot exist within a group, but it does suggest
that even rigid independent thinkers will at least be aware of what is considered ‘normal’
within a group.

In a small group like the family the advice and opinions of those who are regarded as
knowledgeable will be highly regarded. Such people are termed ‘opinion leaders’.
Extraneous group’s influences might also be at work in opinion forming, and here there is
the existence of opinion leaders who are outside of the immediate group. Their opinions
are taken up by ‘opinion followers’. In the case of a number of products, a deliberate
direct appeal is made to the so-called ‘snob appeal’. This is done by using a marketing
strategy of making a company’s products acceptable to opinion leaders, or famous
personalities (who are paid for their endorsement) in the hope that other sectors of the
population will follow them.

The family is perhaps the strongest reference group for most people because of its
intimacy and relative permanence. Strong associations mean that individuals within this
group will influence each other.

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The family life cycle traditionally contains six stages, although more recently different
divisions have been quoted. These divisions are:

1. Unmarried Here, financial commitments and family responsibilities tend to be low,

with disposable income being high. These younger unmarried consumers tend to be
more leisure-orientated and more fashion conscious. This segment thus comprises a
very important market for many new and innovative products.

2. Young newly married couples - no children This group focuses its expenditure on
those items considered necessary for setting up home.

3. Young married couples with children Outlay here is children-orientated, and there is
little surplus cash for luxury items. Although they are receptive to new product ideas,
this group sees economy as being the over-riding factor when making purchases.

4. Older married couples still with children at home Disposable income will probably
have increased, often with both parents working and children being relatively
independent. In some cases children may be working and the parents are able to
engage increasingly in leisure activities often in the form of more than the ‘standard’
annual holiday. Consumer durables, including major items of furniture, are often
replaced at this stage. Such purchases are often made with different motivations to the
original motivations of strict functionality and economy that was necessary at an
earlier life cycle stage.

5. Older married couples with no children living in the home Here, disposable income
can be quite high. However, tastes are likely to be firmly rooted reflected in
unchanging purchasing patterns. Thus marketers will have difficulty when attempting
to change predispositions, so the best policy will be through attempts to refine and add
value rather than to introduce new concepts and ideas.

6. Older retired couples and single people At this stage, most consumer durables have
been purchased although occasional replacements will be required. Purchasing is low
and patterns of purchasing are conservative and predictable. This group of consumers
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is increasing rapidly. Such people tend to be less reliant solely on the ‘State pension’,
many having subscribed to occupational pensions from former employers, which
boosts the State pension. This allows this group to lead more active lives and the
tourist industry now actively targets this particular market segment.

In the past the tendency was for clearer demarcations of purchasing responsibility in
terms which partner was responsible for which purchases. Nowadays, this distinction is
far less clear cut as family roles have tended to merge in terms of women taking on
traditionally viewed male roles and vice versa. Marketers should, therefore, engage in
research before determining whom to target for their marketing efforts.

3.3 Individual buyer behavior

As well as being influenced by the outside environment, people also have their own
individual beliefs. It is important that we should know what these are in order that we
can better understand how individuals respond to marketing efforts. Individuals are
different in terms of how they look, their education, their feelings and their responses to
marketing efforts. Some will behave predictably and others less predictably according to
an individual’s personality. The individual consumer absorbs information and develops
attitudes and perceptions. In marketing terms, this will affect an individual’s needs as
well as determining how to satisfy them. The task of marketing is to identify patterns of
behaviour which are predictable under given conditions, which will increase the
marketer’s ability to satisfy customer needs, which is at the very base of marketing. In
order to more fully understand this concept we shall concentrate on five psychological
concepts which are recognised as being very important when attempting to understand
buyer behaviour:

 personality and self concept

This means how we think other people see us, and how we see ourselves. As
individuals we might wish to create a picture of ourselves that is acceptable to our
reference group. This is communicated to the outside world by our individual

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behavior. Marketers are interested in this behavior as it relates to our purchase
and consumption of goods. The sum of this behavior is an individual self-
statement and is a non-verbal form of communication. This self image is
expressed in a way which relates to our inner selves and this promotes acceptance
within a group. Direct advertising appeals to the self image are now being made
through behavioral segmentation.

‘Self’ is influenced by social interaction and people make purchases that are
consistent with their self concept in order to protect and enhance it. The constant
process of re-evaluating and modifying the self concept results from a changing
environment and changing personal situations.

Personality is the principal component of the self concept. It has a strong effect
upon buyer behavior. Many purchase decisions are likely to reflect personality,
and marketers must consider personality when making marketing appeals.
Psychological theory suggests that we are born with instinctive desires which
cannot be satisfied in a socially acceptable manner and are thus repressed. The
task of marketing in this context is to appeal to inner needs, whilst, at the same
time, providing products which enable them to be satisfied in a socially
acceptable way.

 Motivation

An early thinker insofar as motivation is concerned was the psychologist,

Sigmund Freud who lived between 1856 and 1939. His theories have been
criticised since, but as a theorist, his theories are of fundamental value. He was
responsible for identifying three levels of consciousness:

 The conscious which includes all sensations and experiences of which we are
aware;

 The pre-conscious which includes the memories and thoughts which we have
stored from our experiences and we can bring to mind when we wish;

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 The unconscious that is the major driving force behind our behaviour and this
includes our wishes and desires of which we are not always aware.

Within these levels of consciousness there are mental forces at work attempting to
reconcile our instincts with the social world in which we live and these are not
always in accord so we experience emotional difficulties. Freud’s term for these
are:

 The ‘Id’ which is the reservoir for all our physiological and sensual instincts.
It is selfish and seeks instant gratification regardless of social consequences;

 The ‘superego’ which develops as we grow and learn from family, friends,
teachers and other influences. It functions as our internal representation of the
values and morals of the society in which we have grown up. It is a potent
force and comes into conflict with the demands made by our id for the
gratification of what might be anti-social desires;

 The ‘ego’ which attempts to resolve the conflict between the id and the
superego and tries to redirect our id impulses into socially and morally
acceptable modes of expression.

Marketers are interested in motivation when it relates to purchasing behaviour.

This behaviour relates to the motive for wishing to possess the goods or services
in question, and it has been termed ‘goal-related behaviour’. For a motive to exist
there must be a corresponding need. Motives like hunger, thirst, warmth and
shelter are physiological. Others, like approval, success and prestige are
psychological. Motives like staying alive are instinctive whilst motives like
cleanliness, tidiness and proficiency are motives that are learned during life. We
can also discern between rational and emotional motives. Most purchasing
decisions are a composite of such motives, quite often a deciding factor might be
price which is of course more of an economic restriction than a motive. It can,
therefore, be seen that a number of motives might be at play when making a

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purchasing decision - some motives stronger than others - and the final decision
might be a compromise solution.

In 1954 the psychologist Abraham Maslow put forward his classic ‘hierarchy of
needs’ which is shown in Figure 1. This hierarchy is now central to much
thinking in buyer behaviour.

Self
actualiz-
ation
Achievement
qualifications
Respect and self-
esteem
Social needs - recognition
and belonging
Safety needs - protection
and security
Physiological needs - hunger,
thirst and shelter
Figure 1 Hierarchy of needs (from A.H.Maslow)

Physiological needs are concerned with self preservation and these are the basic
needs of life involving those elements required to sustain and advance the human
race. Safety needs relate to protection against danger and deprivation. Once the
more basic needs have been satisfied behaviour is influenced by the need for
belonging, association and acceptance by others. In many texts the next two
needs are put together, but here we have separated respect and self esteem in
terms of confidence, competence and knowledge and have then placed

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achievement in terms of qualifications and recognition above this. The final need
is what Maslow termed ‘self actualisation’ which means self-fulfilment in terms
of becoming all that one is capable of being and one has reached the pinnacle of
personal potential.

It is argued that when more basic needs like hunger ant thirst have been satisfied,
then individuals will move towards satisfying higher order needs towards the apex
of the pyramid and look increasingly for satisfactions that will increase status and
social acceptability. When the apex of the pyramid has been reached and other
satisfactions have been achieved the prime motivation is then one of acquiring
products and accomplishing activities that allow self expression. This can be in
the form of hobbies, particularly collecting, which may have been desired for a
long time, but have been neglected until the lower order needs have been
satisfied. It is of course not possible to formulate marketing strategies on the
hierarchy theory on its own. Its real value is that it suggests that marketers should
understand and direct their effort at the specific needs of their customers,
wherever the goods one is attempting to promote is in the hierarchy.

Maslow was not the only theorist to focus upon human needs as the motivating
force behind human behavior. McGregor argued that two sets of theories
motivate people and these he labeled Theory X and Theory Y. Such motivations
apply principally to the place of work, but the workplace is where attitudes and
opinions are accumulated, so its relevance to marketing is in an indirect sense.
Under Theory X certain assumptions are made:
 people have an inherent dislike for work and will avoid it if possible;

 because of this, they must be coerced, controlled, directed and threatened with
punishment in order to complete their work satisfactorily;

 people like to be directed and don’t crave responsibility. They have little
ambition and want security.

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Under Theory Y he makes an alternative set of assumptions:
 people are not naturally passive or resistant to organisational needs. They have
become so as the result of experience in organisations;

 motivation and the capacity to develop and assume responsibility are all
present and it is management’s responsibility to develop these characteristics;

 it is management’s responsibility to organise production towards economic

ends, but it is their task to arrange conditions and methods of operation so that
people can achieve their own goals best by directing their own efforts towards
organisational objectives;

 if the right conditions prevail, individuals will not only accept responsibility.
They will actively seek it;

 most of the population is capable of imagination, ingenuity and creativity in

problem solving within an organisation;

 Industrialisation has meant that such capabilities are under-utilised.

There are thus two ways in which human behaviour can be interpreted, depending
upon whether the observer assumes Theory X or Theory Y. What McGregor
argued was that management by control (Theory X) was based on an inaccurate
set of negative assumptions and that organisations would work more effectively if
‘management by objectives’ (MBO) or Theory Y, was applied.

Frederick Herzberg also contributed to motivation theory through his ‘Motivation-

hygiene’ theory. He believed that performance is at its pinnacle when people are
satisfied with their jobs as long as the necessary resources are provided to carry
out this work effectively. Satisfaction with work and personal happiness do not
necessarily work in harmony, but when they are and when the person is stretched
to the limits of his or her ability then there may be a feeling of ‘self actualisation’
(see Figure 1). Whilst this feeling might be more evident in recreational or home

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situations, it is less common in the workplace because of the conditions and
deadlines imposed in an occupational situation. According to Herzberg, self
actualisation depends on what he terms ‘motivators’ and these he distinguishes
from another set of factors termed ‘hygiene factors’. Motivators can positively
contribute to satisfaction at work, whereas hygiene factors cannot promote
satisfaction, but they can prevent dissatisfaction. He uses the medical analogy to
describe hygiene factors and cited the case of unhygienic conditions as being a
source of infection that may make a person unhealthy. In an organisation,
hygiene factors are:

 financial reward;

 supervision;

 working conditions;

 company policy;

 status and relationships with colleagues.

. Similarly, in an organisation motivators are:

 recognition for achievement;

 opportunities for advancement;

 responsibility;

 the job itself.

It can be seen that motivating factors are those that are part of the job whereas
hygiene factors are more concerned with the job environment

 Perception

Unlike motivation that requires a reaction to a stimulus, perception relates to the

meaning that is assigned to that stimulus. As marketers we are interested in how

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buyers perceive and react to products in relation to such matters as quality,
aesthetics, price and image, since products not only exist in practical terms, but
also how they are perceived by consumers in relation to need satisfaction. This
perception by the buyer is affected by the nature of the product itself, by the
circumstances of the individual buyer, and by the buyer’s innate situation in terms
of how ready they are to make the purchase in terms of needing it at a particular
point in time. It is, or course, necessary that the product or service (i.e. the
stimulus) receives the attention of the potential buyer. Buyers have numerous
stimuli competing for their attention, so marketers must make their stimuli as
interesting and attractive as possible because potential buyers only act on
information that is retained, and this is the foundation of how the product or
service is communicated together with the choice of media. There is of course no
certainty that perception of a product or service will be as the marketer expected,
even though the marketer has successfully alerted the consumer to a particular
offering through successful manipulation of the marketing mix. Consumers might
be influenced by many kinds of illogical motives as well as the practical ones
presented to them by the marketer. These might be favourable or unfavourable
preconceptions from personal experience, from peer group or family advice, or
from other psychological motives, all combining to alter and shape the final
perception and indeed the ultimate buying decision.

 Attitudes

Our strongest basic attitudes are implanted in our formative years and these come
largely from the influence of our close family group and other social interaction.
More refined attitudes develop later. In marketing terms, the sum total of our
attitudes can be regarded as a set of cognitions that a potential buyer has in
relation to a potential purchase or a purchasing environment. This is why certain
stores or companies go out of their way to engender favourable attitudes and it is
why manufacturers seek to induce loyalty towards their particular brand or
product. Once this attitude has been established in the mind of the consumer, it

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might be difficult to alter. Even a minor dissatisfaction can cause a fundamental
shift in disposition. This process can work for and against a manufacturer or
retail establishment, an a method of attempting to change attitude is through
promotional appeals and through a programme of public relations.

 Learning

Experience precedes learning and this can alter perceptions and attitudes. It also
intensifies a shift in behaviour, so when a buyer perceives that certain products
are more favourable than others within his or her reference group, repeat
purchases are made to promote this acceptability. Every time a satisfactory
purchase is made, the consumer becomes less likely to depart from this
purchasing behaviour. The result is brand loyalty, and the ultimate success of
marketing is in terms of customers making repeat purchases or becoming ‘brand
loyal’.

In the context of marketing, learning is a result of information received through

advertising or other publicity or through some reference group or other. In order
to have an effect on motives or attitudes, marketing effort should associate the
product with positive drives and reinforcing messages.

A fundamental aim of marketers is to bring about satisfaction for their customers,

and this is cardinal to the concept of marketing. Having looked at some of the
issues that make up consumer behaviour, we can now look at the consumer’s
central goal. Because they are continually occupied in the quest for satisfaction,
competitive offerings will always have potential appeal. Firms must seek
continuous improvement to the products or services and the levels of support they
provide. This is a matter of balancing costs and potential profit with customer
demands, as ‘total satisfaction’, except in a minority of cases, is an unrealistically
expensive goal.

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4 Models of consumer behavior

Now that we have examined the psychological factors that influence consumer buyer
behaviour we are now in a position to examine some consumer behaviour models. The
aim is to bring together our present understanding by presenting a series of models that
endeavour to explain the purchase decision process in relation to pertinent variables.

4.1 The buyer/decision process

Different buying tasks present different levels of complexity to the purchaser. The
‘AIDA’ model that is presented in Figure 2 considers the steps leading to a purchase in
the form of a sequential problem-solving process:

Awareness

Interest

Desire

Action

Figure 2 AIDA Model of buying behavior

This classical model was first promoted by E.K.Strong in 1925 and it is still useful today
because it is easy to apply as it describes the activities involved in the buyer decision
process. Products and services vary in the complexity of decision making involved in
their acquisition. The purchase of a new shower unit, for instance, is more complicated
than the purchase of a tube of shower gel.

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Robinson, Faris and Wind in 1967 put forward a model that viewed purchasing as a
problem. This is shown in Figure 3 and it describes the activities involved in the
purchasing process:

Problem
recognition

Information search

Evaluation of
alternatives

Purchase decision

Post-purchase
behavior

Figure 3 The buyer/decision model

An individual needs a particular product. Information will be sought from a variety of

sources including family and friends (called ‘word of mouth’) from advertising, from
catalogues, from visits to retail establishments, and from many other sources. The more
complex the product, the greater will tend to be this information search. The task of
marketing is to ensure that the company’s products receive high exposure during this
‘information search’ period and that the best points of the product are emphasized during
the ‘evaluation of alternatives’ phase. This will put the company’s product in the best
light prior to the ‘purchase decision’, because even then the consumer is still susceptible

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to further influences in relating to making the correct choice. Marketers must also be
aware of ‘post-purchase behavior’ because this can affect repeat business and forward
looking companies attach as much importance to after-sales service as they do to making
the initial sale. This reduces the degree of dissatisfaction (or dissonance) in the case of
genuine complaints. One method that is now practiced for sales of major items like new
motor cars is where companies follow up a sale by some form of communication by letter
or telephone with their customers. This builds confidence in the mind of the customer in
having made the ‘correct’ purchasing decision. The terminology that has been attached
to this kind of after-sales follow-up is ‘customer care’.

Knowledge of how the buyer/decision process works is critical to the success of

marketing strategy. For simple products, the task of marketing is to direct the purchasing
routine in favour of the company’s products, perhaps through an effective mass
advertising campaign. For more complicated purchases, the more important it is that
customers are helped in their problem-solving process and that reassure is provided to
show that their choice has been a wise one.

4.2 The adoption process

The buyer/decision model (Figure 3) was not specifically designed for new products and
its substance was concerned with search and problem solving. The model shown in
Figure 4 was advanced by Everett Rogers, and it relates to new products. It begins with
awareness. Marketers must first create awareness and then assist customers through
subsequent stages of the process. Consumers cannot begin to consider a new product or
service as a solution to need-related problems without this awareness. Successful
innovative products should attempt to be problem-solving as far as the customer is
concerned.

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Awareness

Interest/Information

Evaluation

Trial

Adoption

Post-adoption
confirmation

Figure 4 The adoption process

Awareness can come about as a result of the marketing effort of the company or simply
by ‘word of mouth’ communication. If the product has potential interest and appeal, then
potential purchasers will seek further information. Consumers then evaluate the new
product against existing products, and then make an initial adoption by obtaining a trial
sample, which might be a free sample or a ‘trial’ purchase. The adoption stage is when a
decision is made whether to use the product (in the case of a fast moving consumer good
on a repeat purchase basis). Post adoption confirmation is when the product has been
adopted and the consumer is seeking reassurance about the wisdom of the purchase.
After a major purchase, dissonance (termed cognitive dissonance) is present in the sign of
unease that what was thought to be value for money at the time of purchase may not, after
all, turn out to be true value. Such dissonance should be countered by the provision of
some kind of follow-up - either written or through the telephone.

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It is important that we look at innovator categories insofar as purchasing behaviour is

concerned because consumers, as individuals, can be more, or less, receptive to new
product or service ideas.

The process of the diffusion of innovations proposes that certain groups of consumers
will take on new ideas more quickly than other groups and they tend to influence later
consumer groups. These groups have particular common features.

1. Innovators are the first small segment to take on new product ideas and they are likely
to be younger people, from well-educated, relatively affluent backgrounds and having
a high social status. They are more probably unprejudiced, discerning people whose
understanding of the new product has been more objectively ascertained than through
salespeople or company promotional material.

2. Early adopters, possess some of the characteristics of innovators, but they are more
part of ‘local’ systems, acting as opinion leaders within their specific group.

3. Early majority adopters tend to be above average in terms of social class and rely upon
company promotional efforts for data. Opinion leaders of the early adopter category
will tend to be their biggest inspiration.

4. Late majority adopters tend to adopt the product or service because it has become
generally accepted by earlier groups.

5. Laggards make up the final group. They tend to be more careful and older and of a
lower socio-economic standing.

Clearly, adopter categories will tend to differ depending upon the new product or service
being marketed.

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4.3 Hierarchy of effects

Lavidge and Steiner produced a ‘hierarchy of effects’ model of purchasing behaviour in

1961. The model starts at the awareness stage, but it could be argued that there is a stage
prior to this which is when the potential purchaser is completely unaware of the product
or service offering, and it is through marketing communication that such awareness is
made known. The model is described in Figure 5:

AWARENESS

KNOWLEDGE

LIKING

PREFERENCE

CONVICTION

PURCHASE

Figure 5. The Innovation/Adoption model

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5 Organizational buying behavior

The term ‘organizational buying’ reflects purchasing in three different buying situations
as shown in Figure 6:

ORGANIZATIONAL BUYING

Industrial buying Buying for resale Institutional buying

Figure 6. Elements of organizational buying

Industrial buying and organisation buying tend to be used interchangeably in the

literature, but as we can see, industrial buying is really a subset of organisational buying.
The process of organisational buying behaviour differs from consumer buying in that the
psychological and emotional considerations attached to the latter should not apply here.
However, organisational buyers are human, so clearly some ‘emotion’ might be involved,
but generally it can be said that commercial considerations are of prime significance
when arriving at purchasing decisions.

The principal similarity between consumer and organisational purchasing is that they
both represent a need satisfying process. This need reflects itself in buying behaviour,
and this is why it is important that marketers understand purchasing motives in order to
target their marketing efforts effectively in a way that satisfies these needs.

It can be seen that organisational purchasers have to work with more stringent purchasing
constraints, because they have the commercial and budgetary interests of their respective
organisations to serve. They also have logistical factors like delivery schedules to

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maintain. There is little opportunity for ‘impulse’ purchasing in which everyday
consumers can indulge. As purchasing professionals they should have a great deal of
technical and commercial knowledge about their prospective purchases.

5.1 Models of organizational buying

In figure 8 we propose a model of the organisational purchasing decision process. It is,

perhaps, more precise in its application than the models that were suggested for consumer
buying behaviour as items for purchase require a more business-like description through
a formal specification at the ‘need description’ and ‘product specification’ stages.
Likely suppliers tend to be more rigorously vetted prior to a first order being placed, and
it is not uncommon for purchasing and other executives to visit the supplying company
beforehand, in order to ascertain whether or not the supplying company measures up to
quality, financial and other reliability criteria. The purchase routine specification will
instruct the supplying company in relation to quantities to be delivered at specific dates
through a delivery schedule if the entire order is not all needed at once.

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Problem
recognition

Need description

Product
specification

Supplier search

Supplier selection

Purchasing routine
specification

Performance
review

Figure 7 The organizational purchasing decision process

Having said that organisational purchasing is more ‘scientific’ than consumer goods
purchasing, individual organisational purchasers are of course subjected to the marketing
actions and efforts of their current and potential suppliers. Reference groups also exist
within organisational situations, and there can be influences from outside of the
purchasing department, which is dealt with later in this chapter. It should also be noted

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that individual buyers have discrete psychological attributes which can also influence
decision making.

Figure 8 shows a more refined model that was developed by Yoram Wind in 1978.
He contended that it is critical for marketers to locate powerful buyers, because they tend
to have more direct say in purchasing decisions at the negotiation stage. This does not
ultimately mean those who are most important within the organisation at which the
marketing approach is being directed. Buyers of relatively low status may be able to
impede a purchase for a variety of reasons. Five power bases have been identified in this
respect:

1. Reward Ability to provide monetary, social, political, or psychological rewards to

others for compliance.

2. Coercive Ability to withhold monetary payments or other punishments for non-

compliance.

3. Attraction Ability to elicit compliance from others because they like you.

4. Expert Ability to elicit compliance because of actual or reputed technical

expertise.

5. Status Compliance from the ability derived from a legitimate position of power
in a company.

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Identification of needs

Establish specification

Search for alternatives

Establish contact

Set purchase and

usage criteria

Evaluate alternatives

Budget availability

Evaluate specific
alternatives

Negotiate

Buy

Use

Post-purchase
evaluation

Figure 8 Wind’s organizational purchasing model

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5.2 Organisational and consumer purchasing compared
How do purchasers in organisational buying situations differ from consumer buyers in
their purchasing decision making processes?

 Rationality of purchasing motives

 Derived demand especially in industrial buying situations, where demand is dependent
upon purchases further down the supply chain and this creates demand further up the
chain
 Small numbers of individual buyers
 Large number of influences on individual buyers
 Often multi-person purchasing decision-making unit
 Suppliers are sometimes in active competition with each other
 Industrial customers may have more power
 Many products are pre-specified by the buyer’s organisation
 Commercial relationships between buyers and sellers is often long term
 Unequal purchasing power of customers
 Distribution is more direct
 Higher value of purchases
 There is sometimes a geographical concentration of purchasers
 Company policies, for instance in relation to suppliers being ‘listed’ for a particular
quality standard, may act as a constraint on the buyer
 Possible ‘reciprocal’ purchasing arrangements, in that certain markets may be closed
off because of a mutual trading agreement
 A sale is often preceded by lengthy negotiation
 Relationships between buyers and sellers tend to be more long term, rather than
depending on a single commercial transaction

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5.3 The structured nature of organisational purchasing
Each time a consumer makes a purchase from a retailer, a derived demand is created for a
series of materials and components which make up the final product. Added to this is an
elaborate chain of supply from companies who buy and sell ancillary products like
packaging materials, machinery and maintenance equipment. So that companies can
control this steady flow of goods and services, they must organise their purchasing
activities so that they have:

1. A constant supply of goods and services of the requisite quality as and when required

2. A system which monitors supplier performance in terms of the above

3. A system of review of existing suppliers and potential suppliers

The larger the organisation, the more structured the methods of buying should be. There
should be an established procedure for each of the steps outlined in Figure 8. Purchasing
will tend to be more critical in flow production situations than in a jobbing works. Even
a minor delivery or quality problem could cause substantial losses in terms of lost
production and loss of customer goodwill. Organisational purchasers tend to be far more
demanding than consumer purchasers because of the implications just outlined, so the
notion of ‘customer care’, which is dealt with in more detail later in the text, has
profound significance in modern marketing.

5.4 Organizational buying situations

Three major types of organisational buying situation have been identified, together with
the problems surrounding each, as shown in Figure 9:

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STRAIGHT REBUY
ž continuing or recurrent item or commodity
ž involves little purchasing effort
ž routinely dealt with within current purchasing arrangements
ž suppliers are already known
ž represents much of purchasing activity in many companies
ž past experience has established a reliable supply pattern
ž difficult for new suppliers to enter the market

Figure 9(a)

MODIFIED REBUY
ž continuing need but at an expanded (or decreased) level
ž minor changes to product specification needing additional
information
ž change of regular supplier for some reason
ž possibly due to some outside event (e.g. shortage of material)
ž companies who are not already supplying sometimes attempt
to convert straight rebuy into modified rebuy
ž internal circumstances (e.g. new buyer) might want to look for
cost reductions or better service or better quality
ž sometimes develops from new buy or new task
Figure 9(b)

NEW TASK
ž unfamiliar or new product or new specification
ž extensive need description
ž supplier search
ž challenging purchasing task as no past experience to draw
upon
ž infrequent occurrence
ž sets the pattern for more routine straight rebuy and modified
rebuy situations later
ž creative marketers will anticipate this event and will make
appropriate marketing appeals

Figure 9(c)

Figure 9. Organisational Buying Situations

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Chapter 6
COMPETITION

Everyone has competition – understand yours

Who competes with you for your customers’ time and money? Are they directly selling
competitive products and services, substitutes, or possible substitutes? What are their
strengths and weaknesses? How are they positioned in the market?

Your competitive analysis

A good competitive analysis varies according to what industry you’re in and your
specific marketing plan and situation. A comprehensive competitive analysis does have
some common themes.
Begin by explaining the general nature of competition in your type of business, and how
customers seem to choose one provider over another. What might make customers
decide? Price or billing rates, reputation, or image and visibility? Are brand names
important? How influential is word of mouth in providing long-term satisfied customers?
For example, competition in the restaurant business might depend on reputation and
trends in one part of the market and on location and parking in another. For the Internet
and Internet service providers, busy signals for dial-up customers might be important. A
purchase decision for an automobile may be based on style, or speed, or reputation for
reliability.

For many professional service practices, the nature of competition depends on word of
mouth because advertising is not completely accepted and therefore not as influential. Is
there price competition between accountants, doctors, and lawyers?
How do people choose travel agencies or florists for weddings? Why does someone hire
one landscape architect over another? Why would a customer choose Starbucks, a
national brand, over the local coffee house? Why select a Dell computer instead of one

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from H-P or Gateway? What factors make the most difference for your business? Why?
This type of information is invaluable in understanding the nature of competition.
Compare your product or service in the light of those factors of competition. How do you
stack up against the others? For example:
 As a travel agent your agency might offer better airline ticketing than others, or perhaps it
is located next to a major university and caters to student traffic. Other travel agents
might offer better service, better selection, or better computer connections.
 The computer you sell is faster and better, or perhaps comes in fruity colors. Other
computers offer better price or service.
 Your graphic design business might be mid-range in price, but well known for
proficiency in creative technical skills.
 Your automobile is safer, or faster, or more economical.
 Your management consulting business is a one-person home office business, but enjoys
excellent relationships with major personal computer manufacturers who call on you for
work in a vertical market in which you specialize.
In other words, you should know how you are positioned in the market. Why do people
buy your product or services instead of the others offered in the same general categories?
What benefits do you offer at what price, to whom, and how does your mix compare to
others? Think about specific kinds of benefits, features, and market groups, comparing
where you think you can show the difference.
Describe each of your major competitors in terms of those same factors. This may
include their size, the market share they command, their comparative product quality,
their growth, available capital and resources, image, marketing strategy, target markets,
or whatever else you consider important.
Make sure you specifically describe the strengths and weaknesses of each competitor,
and compare them to your own. Consider their service, pricing, reputation, management,
financial position, brand awareness, business development, technology, or other factors
that you feel are important. In what segments of the market do they operate? What seems

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to be their strategy? How much do they impact your business, and what threats and
opportunities do they represent?
Finding information on competitors
You can find an amazing wealth of market data on the Internet. The hard part, of course,
is sorting through it and knowing what to stress.
Your access to competitive information will vary, depending on where you are and who
the competition is. Competitors that are publicly traded may have a significant amount of
information available, as regular financial reporting is a requirement of every serious
stock market in the world. Wherever your target is listed for public trading, it has to
report data.
Competitive information may be limited in situations where your competitors are
privately held. If possible, you may want to take on the task of playing the role of a
potential customer and gain information from that perspective.
Industry associations, industry publications, media coverage, information from the
financial community, and their own marketing materials and websites may be good
resources to identify these factors and “rate” the performance and position of each
competitor.

Product Differentiation

In economics and marketing, product differentiation (also known simply as

"differentiation") is the process of distinguishing a product or offering from others, to
make it more attractive to a particular target market. This involves differentiating it
from competitors' products as well as a firm's own product offerings. 

Differentiation can be a source of competitive advantage. Although research in a niche

market may result in changing a product in order to improve differentiation, the changes
themselves are not differentiation. Marketing or product differentiation is the process of
describing the differences between products or services, or the resulting list of

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differences. This is done in order to demonstrate the unique aspects of a firm's product
and create a sense of value. Marketing textbooks are firm on the point that any
differentiation must be valued by buyers (e.g.). The term unique selling proposition refers
to advertising to communicate a product's differentiation.

In economics, successful product differentiation leads to monopolistic competition and is

inconsistent with the conditions for perfect competition, which include the requirement
that the products of competing firms should be perfect substitutes. There are three types
of product differentiation: 1. Simple: based on a variety of characteristics 2. Horizontal :
based on a single characteristic but consumers are not clear on quality 3. Vertical : based
on a single characteristic and consumers are clear on its quality 

The brand differences are usually minor; they can be merely a difference in packaging or
an advertising theme. The physical product need not change, but it could. Differentiation
is due to buyers perceiving a difference, hence causes of differentiation may be functional
aspects of the product or service, how it is distributed and marketed, or who buys it. The
major sources of product differentiation are as follows.

 Differences in quality which are usually accompanied by differences in price

 Differences in functional features or design
 Ignorance of buyers regarding the essential characteristics and qualities of goods they
are purchasing
 Sales promotion activities of sellers and, in particular, advertising
 Differences in availability (e.g. timing and location).

The objective of differentiation is to develop a position that potential customers see as

unique. The term is used frequently when dealing with freemium business models, in
which businesses market a free and paid version of a given product. Given they target a

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same group of customers; it is imperative that free and paid versions be effectively
differentiated.

Differentiation primarily impacts performance through reducing directness of

competition: As the product becomes more different, categorization becomes more
difficult and hence draws fewer comparisons with its competition. A successful product
differentiation strategy will move your product from competing based primarily
on price to competing on non-price factors (such as product characteristics, distribution
strategy, or promotional variables).

Most people would say that the implication of differentiation is the possibility of
charging a price premium; however, this is a gross simplification. If customers value the
firm's offer, they will be less sensitive to aspects of competing offers; price may not be
one of these aspects. Differentiation makes customers in a given segment have a lower
sensitivity to other features (non-price) of the product.

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Chapter 7
SEGMENTATION, TARGETING AND POSITIONING

Segmentation, targeting, and positioning, together comprise a three stage process.  We

first (1) determine which kinds of customers exist, then (2) select which ones we are best
off trying to serve and, finally, (3) implement our segmentation by optimizing our
products/services for that segment and communicating that we have made the choice to
distinguish ourselves that way.

Segmentation involves finding out what kinds of consumers with different needs exist.  In
the auto market, for example, some consumers demand speed and performance, while
others are much more concerned about roominess and safety.  In general, it holds true
that “You can’t be all things to all people,” and experience has demonstrated that firms
that specialize in meeting the needs of one group of consumers over another tend to be
more profitable.

Generically, there are three approaches to marketing.  In the undifferentiated strategy, all

consumers are treated as the same, with firms not making any specific efforts to satisfy
particular groups.  This may work when the product is a standard one where one
competitor really can’t offer much that another one can’t.  Usually, this is the case only

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for commodities.  In the concentrated strategy, one firm chooses to focus on one of
several segments that exist while leaving other segments to competitors.  For example,
Southwest Airlines focuses on price sensitive consumers who will forego meals and
assigned seating for low prices.  In contrast, most airlines follow
the differentiated strategy:  They offer high priced tickets to those who are inflexible in
that they cannot tell in advance when they need to fly and find it impractical to stay over
a Saturday.  These travelers—usually business travelers—pay high fares but can only fill
the planes up partially.  The same airlines then sell some of the remaining seats to more
price sensitive customers who can buy two weeks in advance and stay over.

Note that segmentation calls for some tough choices.  There may be a large number of
variables that can be used to differentiate consumers of a given product category; yet, in
practice, it becomes impossibly cumbersome to work with more than a few at a time. 
Thus, we need to determine which variables will be most useful in distinguishing
different groups of consumers.  We might thus decide, for example, that the variables that
are most relevant in separating different kinds of soft drink consumers are (1) preference
for taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivity—
willingness to pay for brand names; and (4) heavy vs. light consumers.  We now put these
variables together to arrive at various combinations. 
Several different kinds of variables can be used for segmentation. 

 Demographic variables essentially refer to personal statistics such as income,

gender, education, location (rural vs. urban, East vs. West), ethnicity, and family
size.  Campbell’s soup, for instance, has found that Western U.S. consumers on
the average prefer spicier soups—thus, you get a different product in the same
cans at the East and West coasts.  Facing flat sales of guns in the traditional male
dominated market, a manufacturer came out with the Lady Remmington, a more
compact, handier gun more attractive to women.  Taking this a step farther, it is
also possible to segment on lifestyle and values.” 

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 Some consumers want to be seen as similar to others, while a different segment
wants to stand apart from the crowd. 
 Another basis for segmentation is behavior.  Some consumers are “brand loyal”—
i.e., they tend to stick with their preferred brands even when a competing one is
on sale.  Some consumers are “heavy” users while others are “light” users.  For
example, research conducted by the wine industry shows that some 80% of the
product is consumed by 20% of the consumers—presumably a rather intoxicated
group. 
 One can also segment on benefits sought, essentially bypassing demographic
explanatory variables.  Some consumers, for example, like scented soap (a
segment likely to be attracted to brands such as Irish Spring), while others prefer
the “clean” feeling of unscented soap (the “Ivory” segment).  Some consumers
use toothpaste primarily to promote oral health, while another segment is more
interested in breath freshening.

In the next step, we decide to target one or more segments.  Our choice should generally
depend on several factors.  First, how well are existing segments served
by other manufacturers?  It will be more difficult to appeal to a segment that is already
well served than to one whose needs are not currently being served well.  Secondly, how
large is the segment, and how can we expect it to grow?  (Note that a downside to a large,
rapidly growing segment is that it tends to attract competition).  Thirdly, do we have
strengths as a company that will help us appeal particularly to one group of consumers? 
Firms may already have an established reputation.  While McDonald’s has a great
reputation for fast, consistent quality, family friendly food, it would be difficult to
convince consumers that McDonald’s now offers gourmet food.  Thus, McD’s would
probably be better off targeting families in search of consistent quality food in nice, clean
restaurants.

Positioning involves implementing our targeting.  For example, Apple Computer has

chosen to position itself as a maker of user-friendly computers.  Thus, Apple has done a

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lot through its advertising to promote itself, through its unintimidating icons, as a
computer for “non-geeks.”  The Visual C software programming language, in contrast, is
aimed a “techies.”

Michael Treacy and Fred Wiersema suggested in their 1993 book The Discipline of
Market Leaders that most successful firms fall into one of three categories:

 Operationally excellent firms, which maintain a strong competitive advantage by

maintaining exceptional efficiency, thus enabling the firm to provide reliable
service to the customer at a significantly lower cost than those of less well
organized and well run competitors.  The emphasis here is mostly on low cost,
subject to reliable performance, and less value is put on customizing the offering
for the specific customer.  Wal-Mart is an example of this discipline.  Elaborate
logistical designs allow goods to be moved at the lowest cost, with extensive
systems predicting when specific quantities of supplies will be needed.
 Customer intimate firms, which excel in serving the specific needs of the
individual customer well.  There is less emphasis on efficiency, which is
sacrificed for providing more precisely what is wanted by the customer. 
Reliability is also stressed.  Nordstrom’s and IBM are examples of this discipline.

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 Technologically excellent firms, which produce the most advanced products
currently available with the latest technology, constantly maintaining leadership
in innovation.  These firms, because they work with costly technology that needs
constant refinement, cannot be as efficient as the operationally excellent firms and
often cannot adapt their products as well to the needs of the individual customer. 
Intel is an example of this discipline.

Treacy and Wiersema suggest that in addition to excelling on one of the three value
dimensions, firms must meet acceptable levels on the other two.  Wal-Mart, for example,
does maintain some level of customer service.  Nordstrom’s and Intel both must meet
some standards of cost effectiveness.  The emphasis, beyond meeting the minimum
required level in the two other dimensions, is on the dimension of strength.
Repositioning involves an attempt to change consumer perceptions of a brand, usually
because the existing position that the brand holds has become less attractive.  Sears, for
example, attempted to reposition itself from a place that offered great sales but
unattractive prices the rest of the time to a store that consistently offered “everyday low
prices.”  Repositioning in practice is very difficult to accomplish.  A great deal of money
is often needed for advertising and other promotional efforts, and in many cases, the
repositioning fails.

To effectively attempt repositioning, it is important to understand how one’s brand and

those of competitors are perceived.  One approach to identifying consumer product
perceptions is multidimensional scaling.  Here, we identify how products are perceived
on two or more “dimensions,” allowing us to plot brands against each other.  It may then
be possible to attempt to “move” one’s brand in a more desirable direction by selectively
promoting certain points.  There are two main approaches to multi-dimensional scaling. 
In the a priori approach, market researchers identify dimensions of interest and then ask
consumers about their perceptions on each dimension for each brand.  This is useful
when (1) the market researcher knows which dimensions are of interest and (2) the
customer’s perception on each dimension is relatively clear (as opposed to being “made

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up” on the spot to be able to give the researcher a desired answer).  In the similarity
rating approach, respondents are not asked about their perceptions of brands on any
specific dimensions.  Instead, subjects are asked to rate the extent of similarity of
different pairs of products (e.g., How similar, on a scale of 1-7, is Snicker’s to Kitkat, and
how similar is Toblerone to Three Musketeers?)  Using computer algorithms, the
computer then identifies positions of each brand on a map of a given number of
dimensions.  The computer does not reveal what each dimension means—that must be
left to human interpretation based on what the variations in each dimension appears to
reveal.  This second method is more useful when no specific product dimensions have
been identified as being of particular interest or when it is not clear what the variables of
difference are for the product category.

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Chapter 8
GLOBAL MARKETING

Global marketing is defined as “marketing on a worldwide scale reconciling or taking

commercial advantage of global operational differences, similarities and opportunities in
order to meet global objectives.”

Worldwide Competition

One of the product categories in which global competition has been easy to track in
U.S.is automotive sales. The increasing intensity of competition in global markets is a
challenge facing companies at all stages of involvement in international markets. As
markets open up, and become more integrated, the pace of change accelerates,
technology shrinks distances between markets and reduces the scale advantages of large
firms, new sources of competition emerge, and competitive pressures mount at all levels
of the organization. Also, the threat of competition from companies in countries such as
India, China, Malaysia, and Brazil is on the rise, as their own domestic markets are
opening up to foreign competition, stimulating greater awareness of international market
opportunities and of the need to be internationally competitive. Companies which
previously focused on protected domestic markets are entering into markets in other
countries, creating new sources of competition, often targeted to price-sensitive market
segments. Not only is competition intensifying for all firms regardless of their degree of
global market involvement, but the basis for competition is changing. Competition
continues to be market-based and ultimately relies on delivering superior value to
consumers. However, success in global markets depends on knowledge accumulation and
deployment.

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Evolution to Global Marketing

Global marketing is not a revolutionary shift, it is an evolutionary process. While the

following does not apply to all companies, it does apply to most companies that begin as
domestic-only companies.

Domestic Marketing

A marketing restricted to the political boundaries of a country, is called "Domestic

Marketing". A company marketing only within its national boundaries only has to
consider domestic competition. Even if that competition includes companies from foreign
markets, it still only has to focus on the competition that exists in its home market.
Products and services are developed for customers in the home market without thought of
how the product or service could be used in other markets. All marketing decisions are
made at headquarters.

The biggest obstacle these marketers face is being blindsided by emerging global
marketers. Because domestic marketers do not generally focus on the changes in the
global marketplace, they may not be aware of a potential competitor who is a market
leader on three continents until they simultaneously open 20 stores in the Northeastern
U.S. These marketers can be considered ethnocentric as they are most concerned with
how they are perceived in their home country.

International Marketing

If the exporting departments are becoming successful but the costs of doing business
from headquarters plus time differences, language barriers, and cultural ignorance are
hindering the company’s competitiveness in the foreign market, then offices could be
built in the foreign countries. Sometimes companies buy firms in the foreign countries to
take advantage of relationships, storefronts, factories, and personnel already in place.

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These offices still report to headquarters in the home market but most of the marketing
mix decisions are made in the individual countries since that staff is the most
knowledgeable about the target markets. Local product development is based on the
needs of local customers. These marketers are considered polycentric because they
acknowledge that each market/country has different needs. these are negotiation
variables.

Elements of Global Mix marketing

The “Four P’s” of marketing: product, price, placement, and promotion are all affected as
a company moves through the five evolutionary phases to become a global company.
Ultimately, at the global marketing level, a company trying to speak with one voice is
faced with many challenges when creating a worldwide marketing plan. Unless a
company holds the same position against its competition in all markets (market leader,
low cost, etc.) it is impossible to launch identical marketing plans worldwide.

Product

A global company is one that can create a single product and only have to tweak
elements for different markets. For example, Coca-Cola uses two formulas (one with
sugar, one with corn syrup) for all markets. The product packaging in every country
incorporates the contour bottle design and the dynamic ribbon in some way, shape, or
form. However, the bottle can also include the country’s native language and is the same
size as other beverage bottles or cans in that same country.

Price

Price will always vary from market to market. Price is affected by many variables: cost of
product development (produced locally or imported), cost of ingredients, cost of delivery
(transportation, tariffs, etc.), and much more. Additionally, the product’s position in
relation to the competition influences the ultimate profit margin. Whether this product is

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considered the high-end, expensive choice, the economical, low-cost choice, or
something in-between helps determine the price point.

Place

How the product is distributed is also a country-by-country decision influenced by how

the competition is being offered to the target market. Using Coca-Cola as an example
again, not all cultures use vending machines. In the United States, beverages are sold by
the pallet via warehouse stores. In India, this is not an option. Placement decisions must
also consider the product’s position in the market place. For example, a high-end product
would not want to be distributed via a “dollar store” in the United States. Conversely, a
product promoted as the low-cost option in France would find limited success in a pricey
boutique.

Promotion

After product research, development and creation, promotion (specifically advertising) is

generally the largest line item in a global company’s marketing budget. At this stage of a
company’s development, integrated marketing is the goal. The global corporation seeks
to reduce costs, minimize redundancies in personnel and work, maximize speed of
implementation, and to speak with one voice. If the goal of a global company is to send
the same message worldwide, then delivering that message in a relevant, engaging, and
cost-effective way is the challenge.

Effective global advertising techniques do exist. The key is testing advertising ideas
using a marketing research system proven to provide results that can be compared across
countries. The ability to identify which elements or moments of an ad are contributing to
that success is how economies of scale are maximized. Market research measures such
as Flow of Attention, Flow of Emotion and branding moments provide insights into what
is working in an ad in any country because the measures are based on visual, not verbal,
elements of the ad.

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Advantages

The advantages of global market we can introduce our product by using advertising:

 Economies of scale in production and distribution

 Lower marketing costs
 Power and scope
 Consistency in brand image
 Ability to leverage good ideas quickly and efficiently
 Uniformity of marketing practices
 Helps to establish relationships outside of the "political arena"
 Helps to encourage ancillary industries to be set up to cater for the needs of the global
player
 Benefits of eMarketing over traditional marketing

Disadvantages

 Differences in consumer needs, wants, and usage patterns for products

 Differences in consumer response to marketing mix elements
 Differences in brand and product development and the competitive environment
 Differences in the legal environment, some of which may conflict with those of the
home market
 Differences in the institutions available, some of which may call for the creation of
entirely new ones (e.g. infrastructure)
 Differences in administrative procedures
 Differences in product placement.
 Differences in the administrative procedures and product placement can occur

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Chapter 9
PRODUCTS, BRANDS & SERVICES

In order to brand your service firm the right way and take advantage of the same benefits that product
companies receive from great branding, there are four key distinctions to consider.

Brand is paramount in the product arena; it creates awareness, drives perception, and
improves desirability. Brands with top-of-mind awareness have higher perceived value,
which allows charging higher price points.

Many service companies, however, have not embraced brand, because they believe it to
be largely the domain of product companies. But many of the same basic marketing
principles apply: brand drives perception, preference, top-of-mind awareness, higher fees,
and so on. So why can't service firms reap the same benefits?

They can, when branding for a service firm is done right. In order to brand your service
firm the right way and take advantage of the same benefits that product companies
receive from great branding, there are four key distinctions between product and services
branding strategy that you need to be aware of.

1. Don't Mass Market To Your Target Market 

Product companies sell to the masses through large scale advertising efforts. Following in
the footsteps of these companies, many service firms, when attempting to build their
brand, start advertising to the masses as if they were selling Wrigley's Spearmint Gum or
Coca Cola. But for a service brand, this is a waste. It's not targeted enough, and it costs
too much, given the return that it provides.

The dynamics of brand implementation are just different for service companies. Service
firms need consistent articulation of their value proposition across all touch points of the
marketing and sales process.

While catchy jingles during primetime TV might work for a product company, they are
simply inappropriate for service firms. But the right marketing program that "touches"

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your prospects regularly with highly targeted messages will increase awareness and
recognition, so the next time you call to schedule a meeting, they're more likely to take it.

2. Focus On Relevance Over Differentiation 

Differentiation is important to product companies. Most brand models (and business
schools) argue the need to differentiate. But it is a rare service brand that can stake the
claim to categorical differentiation. Let's face it, many service firms offer similar
services. As such, it is difficult to own a unique market position. So forget about those
product oriented, one-word descriptions.

Instead of attempting to be amazingly different from the rest, focus on being relevant.
Specifically, relevance as it pertains to the client. The ideal service brand merges the
needs, wants, and desires of the client with the character and values of the company.

The key lies in creating a space where customer needs meet company essence, an ideal
combination of rational and emotional attributes that apply to both groups. This common
ground approach develops a brand that not only resonates with the client by delivering
what is important to them, but also develops a brand that is genuine, appropriate, and
defensible by the company.

By staking a claim for what you stand for, communicating how you help your clients
succeed, and communicating how reliable you are in doing this, you'll develop a unique
identity. Most service firms don't have the stick-to-it ability to get this far, but if they do,
they'll stand out in the market.

3. Worry About Growing Revenue, Not Market Share 

Product companies are taught that they must be number one or two, in terms of market
position, to be successful. Service brands should concentrate on growing revenue, not
gaining market share, as product companies do.

In a service industry, whether it be accounting, law, architecture, or consulting, even local

markets are usually fragmented and crowded with many successful firms generating
considerable revenue from like-services.

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Instead of concerning yourself with your position in the market, focus your efforts on
improving the bottom line.

4. Help Your People Be Your Brand 

Service firms do not have a tangible display of products that you can see, touch, and test
out before deciding to purchase. As a service firm, your face to the world, what carries
your brand most is your people. As such, do not underestimate the internal components of
brand development.

To create a collaborative culture, communicate your brand message to the troops so that
each individual becomes a brand ambassador. This helps to ensure that every sales call,
every client interaction, and every elevator conversation delivers the brand as intended.

Don't attempt to be Big Brother, but do provide a rallying point for the entire
organization, because "speaking in one voice" is far more important for service firms who
rely on direct, one-to-one interaction with clients.

What Is This Really All About? 

A successful brand is really about a client-centric approach tied closely to the firm's
business strategy. Even in its simplest form, brands offer tangible benefits to the vast
majority of service firms. So, think strategically, roll up your sleeves, and you can expect
the following out of a well developed and implemented brand:

 A genuine and defensible market position

 Improved external awareness, perception, and desirability

 The development of a collaborative internal culture

 Alignment and integration of all messaging

 Revenue growth

 I'll add one final note about branding: your marketing materials are important, but
don't go overboard.

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Consumer brands focus on their position in the market and differentiation, using the
pretty designs of a brochure, website, or advertisement to play a large role in driving their
brand and growing their market share. But for service brands, good design is just one
supporting part of success. We must take a fundamentally different approach than
consumer brands to attain the same results.

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Chapter 10
MARKETING CHANNELS, RETAILING & WHOLESALING

Distribution-activities that make products available to customers when and where they
need them.

A channel of distribution or marketing channel is a group of individuals and

organizations that directs the flow of products from producers and customers.

Marketing Intermediaries link producers to other intermediaries or to the ultimate users

of the product. Operate between the producer and the final buyer.

Types of utility distribution offers:

 TIME...when the customers want to purchase the product.

 PLACE...where the customers want to purchase the product.
 POSSESSION...facilitates customer ownership of the product.
 FORM...sometimes, if changes have been made to the product in the distribution
channel, i.e. Pepsi/Coke, concentrate to bottlers.

Each channel member has different responsibilities within the overall structure of the
distribution of the system; mutual profit/success is obtained through cooperation.

The distribution system:

 determines a product's marketing presence and the buyers' accessibility

to the product
 entails a long-term commitment, easier to change other aspects of the
marketing mix.

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Justification for Intermediaries
"we've eliminated the middle man and we're passing on the savings to you"-a typical
broadcast from Supermarket XYZ

Why do we use intermediaries?

Without intermediaries:
May be able to reduce distribution costs, if the supermarket can perform those
functions more efficiently than a wholesaler, but the supermarket inventory costs may
increase as a consequence, therefore no savings and less efficient.

Number 1 Reason
Improve exchange efficiency.
There are certain costs associated with an exchange, therefore need to try to reduce the
number of transactions (exchanges):

*Chicken *Customer1 With 1 intermediary---10 transactions

*Potatoes *Customer2 With no intermediaries---25 transactions

*Carrots * *Customer3

*Plates *Customer4

*Silverware *Customer5

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Without an intermediary, each buyer has to negotiate and exchange with each seller. With
one intermediary, each buyer negotiates with one intermediary (as opposed to 5 sellers),
and each seller negotiates with one intermediary (as opposed to 5 buyers).

Number 2 Reason
Intermediaries are specialists in the exchange process, provide access to and control over
important resources for the proper functioning of the marketing channel. Division of
labor.

Still need services that intermediaries (wholesalers, retailers etc.) provide; if they were
eliminated then someone else would have to assume the tasks (either producer or
customer). Functions can be shifted and shared among channel members, but cannot be
eliminated, unless the buyer assumes them.

"you can eliminate the middle man, but you can't eliminate their functions"-a well
accepted maxim in marketing.

Functions of Intermediaries
Primary role of middlemen is to transform the assortment of products made by producers
in the assortments desired by consumers.
Producers make narrow assortments in large quantities, consumers
want broad assortments in small quantities, discrepancy in quantity and assortment.

Match Supply and Demand:

*Chicken *Customer1
*Potatoes *Customer2
*Carrots *Customer3
*Plates *Customer4
*Silverware *Customer5

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PRODUCER Specialization in production, economies of scale etc., therefore wants to
produce large quantities but narrow product mixes.

efficiently
CUSTOMER Wants a broad assortment (products produced by many manufacturers) of
products made available conveniently (within easy reach).

Other functions of intermediaries include:

 assuming risk--Provide working capital by paying for goods before they are sold.
 information Flow
 financing
 payment and title flow.
 negotiation
 contacts
 promotion

A producer will use an intermediary when it believes that the intermediary can perform
the function(s) more economically and efficiently than it can.

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Types of Channels of Distribution

Consumer Channels

Channels for Consumer Products.

Vertical dimensions, determined by the # in the channel.

Channel A:
Producer
|
|
|
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v
Consumer
IE door to door purchases, Unsought products IE Encyclopedias. Fruit picking orchards.
Services often use direct channels since the service provider, in most cases, must be there
to provide the service.
Simplest method, not necessarily the most effective.
Technological developments are making the direct channel more common:

 TV Home shopping
 CDs
 Catalogs, LL Bean etc.
 Internet, WWW

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When you can use the media of communication to effect exchange...1-800#s, Credit
Cards etc.

Handout...Microsoft's Ali Baba Software-Selling Plan Has Rivals Boiling.

Discusses Microsoft's method of distributing its software directly from its Window's CD.

Channel B:
Producer
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|
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v
Retailer
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v
Consumer
Large retailers, JC Penney, KMart, no discrepancy in quantity supplied and demanded.
Popular for shopping products, clothing. Automobiles...cost of transportation and
inventory is high.

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Channel C:
Producer
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v
Wholesaler
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v
Retailer
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v
Consumer
Smaller retailers, widely distributed products, convenience products.

Channel D:
Producer
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v
Agent
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v

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Wholesaler
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v
Retailer
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v
Consumer
Mass distribution, IE processed food; also when there are a number of small producers
etc. May be the most efficient distribution channel for consumer products. Convenience
products.

Horizontal dimensions, the # of channel members at the same level. IE Chevrolet much
wider distribution than Rolls Royce.

Business to Business Channels

Channel E:
Producer
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V
Buyer

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Very popular, especially for high cost items that need after sale support. Fewer customers
clustered geographically. This is a more common structure than the direct channel in
consumer markets.

Channel F:
Producer
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v
BB distributor
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V
Buyer
Distributor takes title. Used when there are many customers. IE consumable supplies etc.

Channel G:
Producer
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v
Agent
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v
Buyer

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When a company does not have a marketing department or sales force, the agent
performs those tasks.

Channel H:
Producer
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v
Agent
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|

v
Distributor
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v
Buyer
Used as above, with many customers, IE exporting.

Nature and Importance of Wholesaling

Approximately a $1.94 trillion industry in the US
300,000 wholesaling establishments in the US
Employ 6.5 million people, down from 6.57 million in 1989
Very competitive. Wholesalers will be eliminated from a channel if they do not perform
valuable functions effectively and efficiently.

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Types of Wholesale Intermediaries
2 Types of intermediaries:

 Merchant intermediaries

--buy products and resell them.

 Functional intermediaries

--do not take title, they expedite exchanges among producers and resellers,
compensated by fees and/or commission.

Merchant Wholesalers

Take title.
Account for approximately 83% of wholesalers, 50% of wholesale sales. Employ 4.5
million people.
Two types:

 Full Service Wholesalers-offer widest possible range of functions. Categorized as:

o General Merchandise-wide mix (unrelated), limited depth.
o Limited Line-only few products but an extensive assortment.
o Specialty Line-narrowest range of products.
o Rack Jobbers-are specialty line that own and maintain display racks, take
back unsold products.
 Limited Service Merchant Wholesalers-only provide some marketing functions.
o Cash and Carry wholesaler-customers pay and furnish their own
transportation, No credit.
o Truck Wholesalers-Operate rolling warehouses and sell a limited line of
products directly from their trucks to their customers. Follow regular
routes, primarily perishable products.

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o Drop Shippers (desk jobbers)-take title, negotiate sales but do not take
possession.
o Mail Order Wholesalers-use catalogues instead of sales force to sell.

Agents and Brokers

Negotiate purchases, expedite sales but do not take title.

Functional middlemen, that bring buyers and sellers together.
Compensated with commission.

Agents represent buyers and sellers on a permanent basis.

Brokers represent buyers and sellers on a temporary basis.

10.4% of wholesalers total sales volume.

 Manufacturers Agent-over half of all agents. Represent two or more sellers and
offer customers complete lines. Handle non- competing (complementary)
products. Written agreements.
 Selling Agent-market either all specified line or manufacturers entire output.
Perform every wholesaling activity except taking title of the product. Used in
place of a marketing department. Represent non-competing product lines.
 Commission Merchant-focus primarily on the selling task. Receive goods on
consignment from local sellers and negotiate sales in large central markets.
 Auction Companies-provide storage for inspection. Sales made to the highest
bidder.
 Brokers-negotiate exchanges-perform the fewest intermediary functions. Assume
no risk.

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Selection of Distribution Channels
Should determine what the final buyer wants and determine the best way to reach them.
Marketing Oriented!!
Determined by:

1. Organizational Goals, Objectives (same day delivery), resources and capabilities.

Companies with wide product mixes can sell more directly to the retailers, have
more promotional skills etc. (P&G)
2. Market Characteristics, Geography, greater distance use more intermediaries,
market density, clustering, market size etc., industrial vs. consumer, Buyer
Behavior, Where?/How?/ May need creativity , L'Eggs
3. Product Attributes, IE Need to provide a service. Perishability-short channels,
storage requirements, space, fashion, size (reduce handling), complexity,
standard.
4. Environmental Forces, IE Competition, Technology

Need to determine the # of Intermediaries

Determine the channel width, intensity of distribution, the products market exposure.

 Intensive Distribution:

All available outlets are chosen for maximum exposure (within reason)....THAT A
CONSUMER WOULD PURCHASE THAT TYPE OF PRODUCT. Timex sells
through 45,000 drug stores and thousands of other stores.
Used for convenience products, especially when sales have a direct relationship to
availability. Availability more important than the nature of the outlet. Gas station
vs convenience store
Convenience products have a high replacement rate and require no servicing.
P&G rely on intensive distribution. Good for consumer package goods. PLACE
UTILITY
Manufacturer promotional support.

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Handout....Food Franchisers Expand by Pursuing Customers Into Every
Nook and Cranny.

This article focuses on the importance of intensive distribution in the fast-food

industry...make the product (i.e. Taco Bell) available where a customer may want
to purchase fast-food, in the gas station, shopping mall carts etc. Taco Bell have
quintrupled its "points of access" to nearly 25,000 from 4,500 the end of 1992.
Issues of Dual Distribution must be covered that may lead to channel
conflict...who services these additional points of access, the franchisor (Taco
Bell), or the franchisee.

 Selective Distribution:

Only some available outlets (usually geographic) are chosen. Typically shopping

products.
Buyers prefer to spend time searching.
Customer service important.
Selective distribution motivates retail support.
Producers have more control.
Retailer promotional support.

 Exclusive Distribution:

One outlet in a relatively large area. Products purchased infrequently, last a long
time and require service.
Used as an incentive to sellers. No one to undercut them. (Place Utility)
Allows for the highest control.
Easier to get retailers to carry a complete inventory and to provide service and
repair facilities.
May be used to introduce new products, then change when market is more
competitive (Move from introduction to the growth stage of the product life cycle.

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Chapter 11
DIRECT MARKETING & ONLINE MARKETING

Direct marketing is a channel-agnostic form of advertising that allows businesses and

nonprofits to communicate straight to the customer, with advertising techniques such as
mobile messaging, email, interactive consumer websites, online display ads, fliers,
catalog distribution, promotional letters, and outdoor advertising.

Direct marketing messages emphasize a focus on the customer, data, and accountability.
Characteristics that distinguish direct marketing are:

1. Marketing messages are addressed directly to customers. Direct marketing relies

on being able to address the members of a target market. Addressability comes in
a variety of forms including email addresses, mobile phone numbers, Web
browser cookies, fax numbers and United States and international postal
addresses.
2. Direct marketing seeks to drive a specific "call to action." For example, an
advertisement may ask the prospect to call a free phone number or click on a link
to a website.
3. Direct marketing emphasizes trackable, measurable responses from customers —
regardless of medium.

Benefits

Direct marketing is attractive to many marketers because its positive results can be

measured directly. For example, if a marketer sends out 1,000 solicitations by mail and
100 respond to the promotion, the marketer can say with confidence that campaign led
directly to 10% direct responses. This metric is known as the 'response rate,' and it is one
of many clearly quantifiable success metrics employed by direct marketers. In contrast,

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general advertising uses indirect measurements, such as awareness or engagement, since
there is no direct response from a consumer.

Measurement of results is a fundamental element in successful direct marketing. The

Internet has made it easier for marketing managers to measure the results of a campaign.
This is often achieved by using a specific website landing page directly relating to the
promotional material. A call to action will ask the customer to visit the landing page, and
the effectiveness of the campaign can be measured by taking the number of promotional
messages distributed (e.g., 1,000) and dividing it by the number of responses (people
visiting the unique website page). Another way to measure the results is to compare the
projected sales or generated leads for a given term with the actual sales or leads after a
direct advertising campaign.

Direct Marketing Channels

Any medium that can be used to deliver a communication to a customer can be employed
in direct marketing, including:

Email Marketing

Sending marketing messages through email or Email marketing is one of the most widely
used direct-marketing methods. One reason for email marketing's popularity is that it is
relatively inexpensive to design, test, and send an email message. It also allows marketers
to deliver messages around the clock, and to accurately measure responses.

Online Tools

With the expansion of digital technology and tools, direct marketing is increasingly
taking place through online channels. Most online advertising is delivered to a focused
group of customers and has a trackable response.

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 Display Ads are interactive ads that appear on the Web next to content on Web pages
or Web services. Formats include static banners, pop ups, videos, and floating units.
Customers can click on the ad to respond directly to the message or to find more
detailed information. According to research by eMarketer, expenditures on online
display ads rose 24.5% between 2010 and 2011.[11]

 Search: 49% of US spending on Internet ads go to search, in which advertisers pay

for prominent placement among listings in search engines whenever a potential
customer enters a relevant search term, allowing ads to be delivered to customers
based upon their already-indicated search criteria.[12] This paid placement industry
generates more than $10 billion dollars for search companies. Marketers also
use search engine optimization to drive traffic to their sites.

 Social Media Sites, such as Facebook and Twitter, also provide opportunities for
direct marketers to communicate directly with customers by creating content to
which customers can respond.

Marketing Tools Guide

Did you know there are now over 2 Billion Internet users around the world? And that
number is increasing every day.

That's roughly 30% of the world's population now using the web to surf, to find
information, and of course - to shop... that's one enormous marketplace.

Likewise, many individuals just like yourself, have taken advantage of this new medium
and created successful online websites and businesses. In the process these online
marketers have carved out an envious lifestyle - working at home or wherever they want,
working their own hours, creating part-time or full-time incomes for themselves and their
families.

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Many have attained a level of personal and financial freedom, rarely experienced this
side of a Bill Gates' luncheon.

Along the way many of these marketers and ordinary people have realized in order to
fully maximize their benefits from sales and traffic you need professional marketing
tools. In other words, you need high quality proven marketing tools and software to
make your job easier and quicker. These marketing tools will save you time, money and
stress! A whole lot of stress!

But more importantly, it is these effective marketing tools which give you the freedom
that makes the whole online marketing experience so envious. These tools will Liberate
you from hours or even days of tedious work. These marketing tools do most of the work
for you. Professional marketers know a one-time investment in high quality effective
marketing tools will pay dividends again and again... they also know it is the only way
to proceed.

Top 10 Internet Marketing Strategies

Internet marketing can attract more people to your website, increase customers for your
business, and enhance branding of your company and products. If you are just beginning
your online marketing strategy the top 10 list below will get you started on a plan that has
worked for many.
1. Start with a web promotion plan and an effective web design and development
strategy.
2. Get ranked at the top in major search engines, and practice good Search
Optimization Techniques.
3. Learn to use Email Marketing Effectively.
4. Dominate your marketing niche with affiliate, reseller, and associate programs.

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5. Request an analysis from an Internet marketing coach or Internet marketing
consultant.
6. Build a responsive opt-in email list.
7. Publish articles or get listed in news stories.
8. Write and publish online press releases.
9. Facilitate and run contests and giveaways via your web site.
10. Blog and interact with your visitors.

By following the above tips you'll be on your way to creating a concrete internet
marketing strategy that could boost your business substantially.

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REFERENCES

Kotler, Philip. 1984. Marketing Management: analysis, planning, and control. 5th Edition.
Prentice-Hall International, Inc.

http://marketing-management-tasks.blogspot.com/

http://marketing.about.com

http://www.marketingtoolguide.com/

www.marketingforsuccess.com/

www.managementstudyguide.com/

www.businessdictionary.com

www.quickmba.com

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