Wollega University MBA Marketing Management Book Review Report

This report is a book review of "Principle of Marketing Management" by Philip Kotler, Veronica Wong, John Saunders, and Gary Armstrong, prepared by a student from Wollega University's MBA program. The review covers the core concepts of marketing including needs, wants, demands, products, value, satisfaction, exchange, and markets. It explores customer value, satisfaction, and quality, the marketing management philosophies, and the marketing process. The report also delves into strategic marketing, including strategic planning, the business portfolio, market segmentation, targeting, positioning, and the marketing mix (product, price, place, and promotion). The marketing environment (micro and macro), marketing research, relationship marketing, and competitive strategy are also discussed. The review highlights the importance of strategic marketing partners, the marketing environment, and the four marketing management functions: analysis, planning, implementation, and control. The report concludes with a discussion of marketing ROI.

WOLLEGA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF BUSINESS MANAGEMENT
SCHOOL OF GRADUATE STUDIES
MBA PROGRAM
ASSIGNMENT OF MARKETING MANAGEMENT
Book Review
PRINCIPLE OF MARKETING MANAGEMENT PHILIP KOTLER VERONICA
WONG JOHN SAUNDERS GARY ARMSTRONG, FOURTH EUROPEAN EDITION
Prepared BY: Lalise Amsalu
ID NO. WUSPG/355/16
Submitted to: Neeraj Bali (PhD)
JUNE: 2020
Nekemte, Ethiopia
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Chapter 1
Marketing now
Today’s successful companies – whether large or small, for-profit or non-profit, domestic or
global – share a strong focus and a heavy commitment to marketing. Many people think of
marketing as only selling or advertising. However, marketing combines many activities –
marketing research, product development, distribution, pricing, advertising, personal selling and
others – designed to sense, serve and satisfy consumer needs while meeting the organization’s
goals. Marketing seeks to attract new customers by promising superior value, and to keep current
customers by delivering satisfaction. We defined marketing as a social and managerial process
by which individuals and groups obtain what they need and want through creating and
exchanging products and value with others. The core concepts of marketing are needs, wants and
demands; products and services; value, satisfaction and quality; exchange, transactions and
relationships; and markets. Wants are the form assumed by human needs when shaped by culture
and individual personality. When backed by buying power, wants become demands. People
satisfy their needs, wants and demands with products and services. A product is anything that
can be offered to a market to satisfy a need, want or demand. Products also include services and
other entities such as persons, places, organizations, activities and ideas. We explained the
relationships between customer value, satisfaction and quality. In deciding which products and
services to buy, consumers rely on their perception of relative value. Customer value is the
difference between the values the customer gains from owning and using a product and the costs
of obtaining and using the product. Customer satisfaction depends on a product’s perceived
performance in delivering value relative to a buyer’s expectations. Customer satisfaction is
closely linked toquality,leading many companies to adopt total quality management (TQM)
practices. Marketing occurs when people satisfy their needs, wants and demands through
exchange. Beyond creating short-term exchanges, marketers need to build long-term
relationships with valued customers, distributors, dealers and suppliers. We then defined
marketing management and examined how marketers manage demand and build profitable
customer relationships. Marketing managements the analysis, planning, implementation and
control of programmers designed to create, build and maintain beneficial exchanges with target
buyers for the purpose of achieving organisational objectives. Marketing is at times also
concerned with changing or even reducing demand. Beyond designing strategies to attract new
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customers and create transactions with them, today’s companies are focusing on retaining current
customers and building lasting relationships through offering superior customer value
andsatisfaction.The five marketing management philosophies were compared. The production
concept holds that consumers favor products that are available and highly affordable;
management’s task is to improve production efficiency and bring down prices. The product
concept holds that consumers favor products that offer the most quality, performance and
innovative features; thus, little promotional effort is required. The selling concept holds that
consumers will not buy enough of the organization’s products unless it undertakes a large-scale
selling and promotion effort. The marketing concept holds that achieving organizational goals
depends on determining the needs and wants of target markets and delivering the desired
satisfactions more effectively and efficiently than competitors do. The societal marketing
concept holds that the company should determine the needs, wants and interests of target
markets. Generating customerPOM4_C01.qxd 6/21/06 7:54 AM Page 36
satisfaction and long-run societal well-being are the keys to achieving both the company’s goals
and its responsibilities. Finally, the marketing process linked together the full range of marketing
activities covered in the remainder of this book. Strategy, marketing and planning views
marketing as part of a wider organization where marketing is just one activity that helps deliver
customer value. Marketing, and all other functions, are driven by an organisation’smission and
vision. Chief among strategic marketing decisions is the choice among the portfolio of activities
that a company can pursue. The relationship between marketing and other business functions is
as critical to success as is the organization of marketing. Marketing exists within a
macroenvironmentof political, economic, social and technological issues that greatly influence
markets. Closer to a marketer is themicroenvironmentthat is particular to a company. Although
the macro- and microenvironments are always in flux and changing, there are three major trends
that are hugely important to marketing. These are the development of the Internet and e-
marketing, globalization, and the social environment and social responsibility.Customersare
central to marketing activity. All marketing activity ends with the consumers. In trying to
understand them, marketers draw on ideas from all areas of human knowledge. The study flows
from understanding lifestyles, attitudes andbehaviour before there is the need or want for a
product or service. It examines the processes that lead to an exchange and behavior after a
purchase. Most marketing is from business to business. Business-to-business buying is more
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complex than consumer buying because of the number of influences on corporate decisions. This
variety and complexity of business-to-business buying is made greater by government and
international involvement. Marketing research is a wide range of analysis tools. The variety of
these activities is huge and the technical requirements are so varied that marketing research is a
distinct sub-profession of marketing. Marketing strategy aligns an organization with a group of
customers whom it can serve better than its competitors do. Market segmentation breaks a
market into groups of similar customers. Target markets are chosen from among the market
segments and market positioning is used to form favorable associations in customers’ minds. No
longer does marketing focus on a single transaction but now it seeks to establish relationships.
Relationship marketing depends upon knowing customers and providing value. Competitive
strategy recognizes that an organization needs to address competitors ‘reactions in developing a
marketing strategy. Successful marketing strategy gives customers value in ways that
competitors find hard to match. Marketing is implemented through the four Ps of the marketing
mix: product,promotion,price and place. Each of the Ps has many facets and poses a myriad of
alternatives. The marketing strategy guides the choice among the marketing mix so that it
provides customer value.
Chapter 2:
Strategic marketing partners
Strategic planning is the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities. It is the base for
the long term planning of the firm. At a corporate level, the firm starts defining the company’s
mission. A mission statement is a statement of the organization’s purpose. The mission leads to
a hierarchy of goals.
Based on this, the management must plan the business portfolio: the collection of businesses
and products that make up the company. Portfolio analysis is the process by which
management evaluates the products and businesses that make up the company. The first step is
identifying the strategic business units (SBU) that are vital to the company. The well-known
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model of the Boston Consulting Group (BCG) sorts the SBUs into a growth-share matrix,
leading to four types of SBUs:
1. Stars: high growth and high share units, in need of investment.
2. Cash cows: low-growth, high share units, producing cash.
3. Question marks: low-share units, in high-growth markets. Require cash, but can turn out
to be unprofitable.
4. Dogs: low-growth, low-share units, which are not very profitable.
After the units are classified, the company should determine in which units to build share, hold
share, harvest the profits or divest the SBU.
Designing the business portfolio also means looking at future businesses. The product/market
expansion grid is a portfolio-planning tool for identifying company growth opportunities
through:
 Market penetration: company growth by increasing sales of current products to current
market segments without changing the product.
 Market development: company growth by identifying and developing new market
segments for current company products.
 Product development: company growth by offering modified or new products to current
market segments.
 Diversification: company growth through starting up or acquiring businesses outside the
company’s current products and markets.
Companies also need strategies for downsizing, which means reducing the business portfolio by
eliminating products or business units that are not profitable or that no longer fit the company’s
overall strategy.
Marketing provides a philosophy, input and strategies for the strategic business units. Besides
customer relationship management, marketers must also invest in partner relationship
management to form an effective value chain: the series of internal departments that carry out
value-creating activities to design, produce, market, deliver and support a firm’s products. When
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trying to create customer value, a firm must go beyond the internal value chain and partner up
with others in the value delivery network. The value delivery network is the network composed
of the company, its suppliers, its distributors and ultimately its customers who partner with each
other to improve the performance of the entire system.
Marketing strategy
Marketing strategy is the marketing logic by which the company hopes to create customer
value and achieve profitable customer relationships. The company must choose which customers
to serve and how to serve them. This process involves four steps:
1. Market segmentation: dividing a market into distinct groups of buyers who have
different, needs, characteristics or behavior and who might require separate products or
marketing programmers. A market segment is a group of consumers who respond in a
similar way to a given set of marketing efforts.
2. Market targeting is the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.
3. Positioning is arranging for a product to occupy a clear, distinctive and desirable place
relative to competing products in the minds of consumers.
4. Differentiation is actually differentiating the market offering to create superior -
customer value.
The marketing mix is the set of tactical marketing tools: product, price, place and promotion,
that the firm blends to produce the response it wants in the target market. Product refers to the
combination of goods and service the firm offers. Price is the amount the customer pays to
obtain the product. Place refers to the availability of the product. Promotion relates to the
activities that communicate the benefits of the product.
Managing the marketing process requires four marketing management functions. The first is
marketing analysis, starting with a SWOT analysis. A SWOT analysis is an overall evaluation
of the company’s strengths (S – internal capabilities), weaknesses (W – internal limitations),
opportunities (O – external factors that can be profitable) and threats (T – external factors that
might challenge the company). Secondly, marketing planning involves choosing the right
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marketing strategies. Third is marketing implementation: turning marketing strategies and
plans into marketing actions to accomplish strategic marketing objectives. And finally, there is
marketing control: measuring and evaluating the results of marketing strategies and plans and
taking corrective action to ensure that the objectives are achieved. Operating control refers to
checking the performance against the annual plan, while strategic control involves looking at the
match between strategies and opportunities.
Nowadays, marketers need to back up their spending by measurable results. The return on
marketing investment (marketing ROI) is the net return from a marketing investment divided
by the costs of the marketing investment. The marketing ROI measures the profits generated by
investments in marketing activities and can be a helpful tool, but is also difficult to measure.
Chapter 3: The marketing environment
The marketing environment consists of the actors and forces outside marketing that affect
marketing management’s ability to build and maintain successful relationships with target
customers. It consists both of the micro and macro environment.
The microenvironment
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The microenvironment consists of the actors close to the company that affect its ability to serve
its customers, such as: the company itself and its subdivisions and suppliers that provide the
resources the firm needs to produce its products.
But also of marketing intermediaries, which are firms that help the company to promote, sell
and distribute its goods to final buyers. Resellers are distribution channel firms. Physical
distribution firms help the company stock goods, while marketing service agencies are marketing
research firms. Financial intermediaries include banks and credit companies.
Other factors are competitors that operate in the same markets as the firm and the public: any
group that has an actual or potential interest in or impact on an organization’s ability to achieve
its objectives. These can be financial publics, media publics, government publics, local publics,
general public and internal publics.
Finally, customers are the most important actors. Consumers markets consist of individuals that
buy goods for personal consumption. Business markets buy goods for usage in production
processes, while reseller markets buy to resell at a profit. Government markets consist of buyers
who use the product for public service, and international markets consist of all these types of
markets across the border.
The microenvironment
The microenvironment consists of the larger societal forces that affect the microenvironment
and consists of multiple factors. Demography: the study of human populations in terms of size,
density, location, age, gender, face, occupational and other statistics. Changes in demographics
result in changes in markets. There are some important demographic trends in today’s world,
such as the world population growth and the changing age structure of the world population,
where some parts of the world are aging and others have younger populations.
In the developed world, there are often generational differences to be found. Baby boomers are
the 78 million people born during the years following the Second World War and lasting until
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1964. Generation X are the 45 million people born between 1965 and 1976 in the “birth death”
following the baby boom. Generation Y or the Millennial are the 83 million children of the
baby boomers born between 1977 and 2000. They are characterized by a high comfort in
technology.
Changes can also be found in the family structure. The traditional western household (husband,
wife and children) is no longer typical. People marry later and divorce more. There is an
increased number of working women and youngsters tend to stay at home longer. The workforce
is also aging, because people need to work beyond the previous retirement age. There are also
geographic shifts, such as migration. These movements in population lead to opportunities for
marketing niche products and services. There are also migration movements within countries,
namely from the rural to urban areas, also called urbanization.
The economic environment consists of economic factors that affect consumer purchasing power
and spending patterns. Countries vary in characteristics, some can be considered industrial
economies, while others can be subsistence economies, consuming most of their own output. In
between are developing economies that offer marketing opportunities. The BRIC (Brazil, Russia,
India, China) countries are a leading group of fast expanding nations.
There are also changes in customer spending patterns, such as the recent recessions, which can
lead to lifestyle changes. Marketers should also pay attention to income distribution and income
levels.
The natural environment involves natural resources that are needed as inputs by marketers or
that are affected by marketing activities. Changes in this environment involve an increase in
shortage of raw materials, increased pollution and increased governmental intervention.
Environmental sustainability involves developing strategies and practices that create a world
economy that the planet can support indefinitely.
The technological environment consists of forces that create new technologies, creating new
product and market opportunities. It can provide great opportunities, but also comes with certain
dangers.
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The political environment consists of laws, government agencies and pressure groups that
influence and limit various organization and individuals in a given society. Current trends in our
world today are increasing legislation affecting businesses globally and thus an increase in
governmental influence over businesses. There is also an increase in emphasis on ethics and
operating socially responsible. Cause-related marketing refers to companies linking themselves
to meaningful causes, to improve company image.
The cultural environment involves instructions and other forces that affect society’s basic
values, perceptions, preference and behavior. Cultural factors influence how people think and
consume. Core beliefs are fundamental and passed on by parents and reinforced by the
environment. Secondary beliefs are more open to change. People can vary in their views of
themselves, of others, of organization, but also in their views of society, nature and the universe.
In conclusion, firms should be pro-active rather than observing in respect to the marketing
environment.
Chapter 4:
Customer insights
Marketing relies on good customer information. Customer insights are fresh understanding of
customers and the marketplace derived from marketing information that become the basis for
creating customer value and relationships. To gain this information, companies must design
marketing information systems (MIS), which are people and procedures for assessing
information needs, developing the needed information and helping decision makers to use the
information to generate and validate actionable customer and market insights. A MIS helps to
assess information needs, develop needed information and analyze the right information to form
customer insights.
Internal databases are electronic collections of consumer and market information obtained from
data sources within the company network. Internal data can be a strong base for a competitive
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advantage, because of the potential of this information. Competitive marketing intelligence is
the systematic collection and analysis of publicly available information about consumers,
competitors and developments in the marketing environment. Good marketing intelligence helps
gain insights in how consumers think of and connect with the brand.
Marketing research
Marketing research is the systematic design, collection, analysis and reporting of data relevant
to a specific marketing situation facing an organization. The process of marketing research has
four steps:
1. Defining the problem and research objectives. The objective of exploratory research is
to gather preliminary information that will help define problems and suggest hypotheses.
The objective of descriptive research is to better describe marketing problems,
situations or markets. Causal research aims to test hypotheses about cause-and-effect
relationships.
2. Developing the research plan on how the information will be gathered.
Secondary data is information that already exists somewhere, having been collected for another
purpose. Secondary data can be accessed by using commercial online databases, which are
collections of information available from online commercial sources or accessible via the
Internet. Internet search engines can be used to locate secondary data, but the research must
verify that the found information is relevant, accurate, current and impartial.
Primary data is information collected for the specific purpose at hand. It can be collected via
observational research, which gathers primary data by observing relevant people, actions and
situations. Ethnographic research is a form of observational research that involves sending
trained observers to watch and interact with consumers in their “natural environments”.
Primary data can also be collected via survey research, which gathers information by asking
people questions about their knowledge, attitudes, preferences and buying behavior.
Experimental research gathers primary data by selecting matched groups of subjects, giving
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them different treatments, controlling related factors and checking for differences in group
responses.
Information can be collected via mail, telephone, personal interviews or online. Mail
questionnaires can be quite massive, while telephone information is also quickly gathered.
Personal interviewing can be individual or group interviews. Online marketing research
collects primary data online through Internet surveys, online focus groups, web-based
experiments or tracking consumer’s behavior online. Online focus groups gather a small group
of people online with a trained moderator to chat about a product, service or organization and
gain qualitative insights about consumer attitudes and behavior.
It is often impossible to collect information from the entire population, so marketers often base
conclusions on samples. A sample is a segment of the population selected for marketing research
to represent the population as a whole. Three decisions regarding the sample need to be made:
the sampling unit (who), sampling size (how many) and sampling procedure (how should they be
chosen). There are probability samples, in which each member of the population has an equal
chance of being included, such as simple random samples, stratified random samples and cluster
samples. But there are also non-probability samples, such as convenience samples, judgment
samples and quota sample categories.
When collecting primary data, there are two research instruments: the questionnaire and
mechanical devices. The questionnaire can be via email, phone or online and are flexible.
Mechanical instruments can help monitor consumer behavior.
3. Implementing the research plan means putting it into action. This means collecting,
processing and analyzing the information.
4. Interpreting and reporting the findings. The interpretation should not only be done by the
researchers, but also by the marketing managers who know about the problem and the
decisions that need to be made.
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Customer relationship management (CRM) is managing detailed information about individual
customers and carefully managing customer touch points to maximize loyalty. It means
capturing and using consumer data to manage customer interactions and build customer
relationships. Data mining techniques can be used to access customer data. By using CRM to
understand customers, relationships with them can be deeper.
When collecting marketing information, some things must be kept in mind. When executing
international marketing research, cultural differences and struggles in accessibility must be kept
in mind. There are also concerns regarding public policy and ethics in marketing research, such
as intrusions on privacy and the misuse of the findings of the research.
Chapter 5:
Consumer buyer behavior
Consumer buyer behavior is the buying behavior of final consumers: individuals and
households that buy goods and services for personal consumption. All these consumers add up to
the consumer market: all the households and individual that buy or acquire goods and services
for personal consumption. Consumers make buying decisions every day, but it can be difficult to
determine why they make certain decisions. Consumer purchases are influenced by different
characteristics.
Cultural factors
Cultural factors have an influence on consumer behavior. Culture is the set of basic values,
perceptions, wants and behaviors learned by a member of society from family and other
important institutions. A subculture is a group of people with shared value systems based on
common life experiences and situations. They are distinct, but not necessarily mutually
exclusive. Social classes are relatively permanent and ordered divisions in a society whose
members share similar values, interests and behaviors.
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Social factors
Another influence is social factors. Groups are two or more people who interact to accomplish
individual or mutual goals. Many small groups influence a person’s behavior. Membership
groups are groups in which a person belongs, while reference groups serve as direct points of
comparison.
Word-of-mouth influence of friends and other consumers can have a strong influence on buying
behavior. An opinion leader is a person within a reference group who, because of skills,
knowledge, personality or other characteristics, exerts social influence on others. Marketers try
to identify the opinion leader and aim their marketing efforts towards this person. Buzz
marketing involves creating opinion leaders to serve as brand ambassadors. Online social
networks are online communities, such as blogs, social networking sites or even virtual worlds,
where people socialize or exchange information and opinions.
Family can have a strong influence on buying behavior as well. Buying role patterns in families
change with evolving consumer lifestyles. A person belongs to many groups beside the family,
also clubs, organization and online communities. The position of a person in a group is defined
in terms of role and status. A role consists of the expected actions of a person. People usually
choose products appropriate to their role and status.
Personal factors
Personal characteristics also have an influence on consumer buyer behavior. These
characteristics can be the person’s age and life-cycle stage, the person’s occupation and
economic situation, but also lifestyle and personality. Lifestyle is a person’s pattern of living as
expressed in his or her activities, interests and opinions. Personality is the unique psychological
characteristics that distinguish a person or group.
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It can be said that brands also have personalities. A brand personality is the mix of human traits
that may be used to describe the brand. There are five general brand personality traits: sincerity,
excitement, competence, sophistication and ruggedness.
Psychological factors
Buying behavior is influenced by four major psychological factors: motivation, perception,
learning and beliefs and attitudes. Motive (drive) is a need that is sufficiently pressing to direct
the person to seek satisfaction of the need. Motivation research refers to qualitative research
designed to find consumer’s hidden motivations. Maslow’s hierarchy of needs categorizes needs
into a pyramid, consisting of psychological needs, safety needs, social needs, esteem needs and
self-actualization needs.
Perception is the process by which people select, organize and interpret information to form a
meaningful picture of the world. People form different perceptions of the same stimulus because
of three perceptual processes: selective attention, selective distortion and selective retention.
Learning describes changes in an individual’s behavior arising from experience. A drive is a
strong stimulus that calls for action. Cues are minor stimuli that determine how a person
responds.
A belief is a descriptive thought that a person holds about something. An attitude is a person’s
consistently favorable or unfavorable evaluations, feelings and tendencies toward an object or
idea. Attitudes can be difficult to change, because they are usually part of bigger pattern.
There are different types of buying decision behavior. Complex buying behavior is
characterized by high consumer involvement in a purchase and significant perceived differences
among brands. The buyer will pass through a learning process, developing beliefs and attitudes
and then a purchase choice will follow. Dissonance-reducing buying behavior is consumer
buying behavior characterized by high involvement, but few perceived differences among
brands.
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Habitual buying behavior is consumer buying behavior characterized by low consumer
involvement and few significantly perceived differences. Repetition of advertisements can create
brand familiarity (but not conviction), which can lead to habitual purchases. Variety-seeking
buying behavior is consumer buying behavior characterized by low consumer involvement, but
significant perceived brand differences.
The buyer decision process has five stages.
1. Need recognition is the first stage, in which the consumer recognizes a problem or need.
2. Information search is the stage in which the consumer is aroused to search for more
information, the consumer may simply have heightened attention or may go into active
information search. Information can be obtained from personal sources, commercial
sources, public sources and experiential sources.
3. Evaluation of alternatives. Alternative evaluation is the process in which the consumer
uses information to evaluate alternative brands in the choice set.
4. Purchase decision is the buyer’s decision about which brand to purchase. Both the
attitude of others and unexpected situational factors can influence the ultimate decision.
5. Post-purchase behavior is the stage of the buyer decision process in which consumers
take further action after purchase based on their satisfaction or dissatisfaction with a
purchase. Cognitive dissonance is buyer discomfort caused by post-purchase conflict.
The buyer decision process can be different for new products. A new product is a good, service
or idea that is perceived by some potential customers as new. The consumer must decide to adopt
them or not. The adoption process is the mental process through which an individual passes
from first hearing about an innovation to final adoption. There are five stages in the adoption
process: awareness, interest, evaluation, trial and adoption.
Chapter 6: Business markets
Business buy behavior of organizations that buy goods and services for use in the production of
other products and services that are sold, rented or supplied to others. The business buying
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process is the decision process by which business buyers determine which products and services
their organizations need to purchase and then find, evaluate and choose among alternative
suppliers and brands. The business market is bigger than the consumer markets, and differs in
many ways.
The business markets consist normally with less, but larger buyers than consumer markets.
Business demand is derived demand: business demand ultimately derives from the demand for
consumer goods. Business markets’ demand is more inelastic and is less affected by short-term
price changes, while demand also fluctuates more quickly.
The nature of the buying unit involves more decision participants and a more professional
purchasing effort. The business buyers’ decisions are often more complex and formalized.
Finally, buyer and seller often work on long-term relationships. Supplier development is the
systematic development of networks of supplier-partners to ensure an appropriate and
dependable supply of products and materials for use in making products or reselling them to
others.
There are three types of business buying situations. A straight rebury is a business buying
situation in which the buyer routinely reorders something without any modifications. A modified
rebury is when the buyer wants to modify the product specifications, prices, terms or suppliers.
A new task is a business buying situation in which the buyer purchases a product or service for
the first time. Systems selling (or solutions selling) is buying a packaged solution to a problem
from a single seller, thus avoiding all the separate decisions involved in a complex buying
situation.
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There are multiple participants in the business buying process. The buying centre are all the
individuals and units that play a role in the purchase decision-making process.
- Users are members of the buying organization who will actually use the purchased product
or service.
- Influencers are people in an organization’s buying centre who affect the buying decision,
they often help define specifications and also provide information for evaluating alternatives.
- Buyers are the people in an organization’s buying centre who make an actual purchase.
- Deciders are people who have formal or informal power to select or approve the final
suppliers.
- Gatekeepers are people in an organization’s buyer centre who control the flow of
information to others.
The buying centre is a set of buying roles assumed by different people.
There are a lot of things that can influence the business buyer, such as environmental factors.
These can include the economic environment, the supply of key materials and culture and
customs. Organizational factors such as objectives, systems and policies can also have an
influence. Also interpersonal factors, such as authority, status and persuasiveness can exercise
their influence. Lastly individual factors, such as age, income, education and risk attitudes can
play a role in the decision of the business buyer.
The business buying process
The business buying process has eight stages.
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1. Problem recognition: someone in the company recognizes a problem or need that can be
met by acquiring a good or a service.
2. General need description is the stage in the business buying process in which a buyer
describes the general characteristics and quantity of a needed item.
3. Product specification is the stage in the business buying process in which the buying
organization decides on and specifies the best technical product characteristics for a
needed item.
4. Supplier search is the stage in which the buyer tries to find the best vendors.
5. Proposal solicitation is the stage in which the buyer invites qualified suppliers to submit
proposals.
6. Supplier selection is the stage in which the buyer reviews proposals and select a supplier
or suppliers.
7. Order-routine specification is the stage in which the buyer writes the final order with
the chosen supplier(s), listing the technical specifications, quantity needed, expected time
of delivery, return policies and warranties.
8. Performance review is the stage in which the buyer assesses the performance of the
supplier and decided to continue, modify or drop the arrangement.
E-procurement involves purchasing through electronic connections between buyers and sellers,
usually online. This can be via reverse auctions, trading exchanges, company buying sites and
extranet links. Benefits of e-procurement are lower transaction costs and efficient purchasing.
The institutional market consists of schools, hospitals, nursing homes, prisons and other
institutions that provide goods and services to people in their care. These markets can be
extensive and are often characterized by low budgets. Government markets consist of
governmental units (federal, state and local) that purchase or rent goods and services for carrying
out the main functions of government.
Chapter 7: Customer-driven strategy
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Today, most companies moved from mass marketing to target marketing: identifying market
segments and selecting a few to produce for. There are four major steps in designing a customer-
driven marketing strategy.
Market segmentation
Market segmentation means dividing a market into smaller segments with the distinct needs,
characteristics or behavior that might require separate marketing strategies or mixes. There are
different ways to segment a market:
1. Geographic segmentation: dividing a market into different geographical units, such as
nations, states, regions, counties, cities or even neighbourhoods.
2. Demographic segmentation: dividing the market into different segments based on
variables such as age, gender, family size, family life cycle, income, occupation
education, religion, race, generation and nationality. Age and life-cycle segmentation is
dividing a market into different age and life-cycle groups. Gender segmentation means
dividing a market based on gender, while income segmentation divides a market based on
income levels.
3. Psychographic segmentation: dividing a market into different segments based on social
class, lifestyle or personality characteristics.
4. Behavioral segmentation: dividing a market into segments based on consumer
knowledge, attitudes, uses or responses to a product. This can be done via occasion
segmentation: dividing the market according to occasions when buyers get the idea to
buy, actually making their purchase or use the purchased items. Benefit segmentation:
dividing the market according to the benefits that customers seek from the product.
Markets can also be segmented based on user states, usage rate and loyalty status.
Marketers often use multiple segmentation bases to identify a well-defined target group. For
segmentation to be effective, market segments must be measurable, accessible, substantial,
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differentiable and actionable. Business markets can be segmented with the same variables, but
also with additional ones, such as customer operating characteristics, purchasing approaches and
situational factors. International markets can be segmented using a combination of variables.
Aftermarket segmentation (cross-market segmentation): forming segments of consumers who
have similar needs and buying behavior even though they are located in different countries.
Market targeting
Market targeting is the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter. When evaluating segments, a marketer must look at
segment size and growth, segment structural attractiveness and company objectives and
resources. A target market consists of a set of buyers sharing common needs or characteristics
that the company decides to serve. There are several forms of market targeting.
- Undifferentiated (mass) marketing: a marketing coverage strategy in which a firm
decides to ignore market segment differences and go after the whole market with one offer.
- Differentiated marketing or segmented marketing: a market-coverage strategy in which a
firm decides to target several market segments and designs separate offers for each.
- Concentrated marketing (niche): a market-coverage strategy in which a firm goes after a
large share of one or a few segments or niches.
Micromarketing is tailoring products and marketing programmers to the needs and wants of
specific individuals and local customer segments. It includes local marketing: tailoring brands
and promotions to the need and wants of local customer segments; cities, neighbourhoods and
even specific stores. It also includes individual marketing: tailoring products and marketing
programmers to the needs and preferences of individual customers, also called one-to-one
marketing, customized marketing and markets-of-one marketing.
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Companies need to consider a lot of factors when deciding upon a targeting strategy, such as
available resources, market variability and competitors’ marketing strategies.
Differentiation and positioning
Differentiation means differentiating the market offering to create superior customer value.
Positioning is arranging for a market offering to occupy a clear, distinctive and desirable place
relative to competing products in the mind of target consumers. A product position is the way
the product is defined by consumers on important attributes: the place the product occupies in the
consumers’ minds relative to competing products. Perceptual positioning maps show consumer
perceptions of brands versus competing products.
To build profitable relationships, marketers must understand customer needs. When a company
is differentiated by superior customer value, this can create a competitive advantage: an
advantage over competitors gained by offering greater customer value, either by having lower
prices or providing more benefits that justify high prices. The company can differentiate itself
via product differentiation, service differentiation, channel differentiation, people differentiation
or image differentiation.
When a company has multiple difference to promote, many marketers think the company should
focus on one unique selling point (USP), while some others think they can promote more.
Differences worthy to promote need to be important, distinctive, superior, communicable, not
easily copied, affordable and profitable.
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The value proposition is the full positioning of a brand: the full mix of benefits on which it is
positioned. There are multiple possible value propositions, of which five can be “winning”:
1. More for more: upscale products and higher prices.
2. More for the same: used to attack competitors by offering quality at a low price.
3. The same for less: a good deal.
4. Less for much less: a less optimal performance for a low price.
5. More for less: ultimately winning, but difficult to actually achieve.
A positioning statement is a statement that summarizes company or brand positioning. It takes
this form: To (target segment and needs) our (brand) is (concept) that (point of difference). Once
a position is chosen, a company must take action to deliver and communicate the position to its
target customers.
Chapter 8:
Building customer value
A product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need. A service is an activity, benefit or satisfaction
offered for sale that is essentially intangible and does not result in the ownership of anything.
Products are key in the overall market offering. The market offer might exist of only pure
tangible goods, pure services and everything in between. Product planners need to consider three
levels when deciding on services and products. The first one is the core customer value level.
Secondly, the core benefit must be turned into an actual product. Finally, an augmented product
must be built around the actual product by offering services.
Consumer and industrial products
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Products and services fall into two broad classes: consumer products and industrial products.
Consumer products are products bought by final consumers for personal consumption.
- Convenience products are a type of consumer product that consumers usually buy
frequently, immediately and with minimal comparison and buyer effort.
- Shopping products are consumer products that the customer, in the process of selecting
and purchasing, usually compares on such attributes as suitability, quality, price and style.
- Specialty products are a type of consumer product with unique characteristics or brand
identification for which a significant group of buyers is willing to make a special purchase effort.
- Unsought products are consumer products that the consumer either doesn’t know about,
or knows about but does not normally consider buying.
Industrial products are products bought by individuals and organizations for further processing
or for use in conducting a business. Materials and parts include raw materials (farm products,
natural products) and manufactured parts (component materials and parts).
Organization marketing consists of activities to create, maintain or change the attitudes and the
behavior of target customers. Corporate image advertising campaigns can be used to improve the
image of a firm. Person marketing consists of activities to change attitudes of specific people.
Place marketing involves activities to create, maintain or change attitudes towards particular
places. Social marketing is the use of commercial marketing concepts and tools in programmers
designed to influence individuals’ behavior to improve their well-being and that of society.
Decisions regarding products and services are made at three levels:
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1. Individual product and service decisions
Developing a product or service involves defining the benefits. Product quality are the
characteristics of a product or service that bear on its ability to satisfy stated or implied customer
needs. Total quality management (TQM) is an approach where the whole company is involved in
constantly improving the overall quality. Product quality is based on the quality level and
consistency. Other product and service attributes are product features and the product style
(appearance) and the design (heart of the product).
A brand is a name, term, sign, symbol, design or a combination of these that identifies the
products or services of one sell or group of sellers and differentiates them from those of
competitors. Packaging involves the activities of designing and producing the container or
wrapper for a product. Innovative packaging can give a competitive advantage. The final product
and service decisions include labels that help identifying a product or brand and supporting
services of the product.
2. Product line decisions
A product line is a group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same types of outlets or
fall within given price ranges. Major decisions include the product line length, which can be
adjusted by product line filling (adding more items within present range) and line stretching
(lengthen beyond current range).
3. Product mix decisions
A product mix (product portfolio) is the set of all product lines and items that a particular seller
offers for sale. Product mix width is the number of different product lines, while length refers to
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the total number of items within the product lines. The product mix depth refers to the number of
versions offered for each product in the line.
Services marketing
Firms must decide upon four service characteristics when designing marketing programmers.
Service intangibility: services cannot be seen, tasted, felt, heard or smelled before they are
bought. Service inseparability: service are produced and consumed at the same time and cannot
be separated from their providers. Service variability: the quality of services may greatly vary
depending on who provides them and when, where and how. Service perish ability: services
cannot be stored for later sale or use.
The service profit chain is the chain that links service firm profits with employee and customer
satisfaction. This chain consists of five links: internal service quality, satisfied and productive
service employees, greater service value, satisfied and loyal customers and ultimately healthy
service profits and growth. Service marketing is more than traditional external marketing, it also
consists of internal and interactive marketing. Internal marketing involves orienting and
motivating customer contact employees and supporting service people to work as a team to
provide customer satisfaction. Interactive marketing involves training services employees in
the fine art of interacting with customers to satisfy their needs.
Service marketers need to manage service differentiation, making sure that they stand out
amongst competitors. They also need to manage service quality, which can be harder to define
than product quality. Lastly, they need to manage service productivity by ensuring employees are
skilful and implementing the powers of technology.
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Branding
Brand equity is the differential effect that knowing the brand name has on customer response to
the product or its marketing. Brand equity can be a powerful asset. Brand valuation is the process
of estimating the total financial value of a brand. In order to build a strong brand, there are some
major brand strategy decisions to be made. Brand positioning involves positioning the brand in
the mind of the consumer. Brand name selection is important in order to select a good name. The
brand name should say something about the service benefits and should be easy to pronounce
and remember. It needs to be distinctive and extendable, easily translated and should be capable
of legal protection.
Brand sponsorship can be done via four ways. A product can be launched as a national
(manufacturer) brand or as a private brand or store brand. Another way is via licensed brands or
a co-brand with another company. A store brand is a brand created and owned by a reseller of a
product or service. Licensing involves lending the brand name to other manufacturers. Co-
branding is the practice of using the established brand names of two different companies on the
same product.
When developing brands, companies have four choices. Line extensions occur when extending
an existing brand name to new forms, colors, sizes, ingredients or flavors of an existing product
category. A brand extension extends a current brand name to new product categories.
Multiband means offering more than one brand in the same category. New brands can be
created when believed that the power of existing brands is fading.
Chapter 9:
The product life cycle
New product development is the development of original products, product improvements,
product modifications and new brands through the firm’s own product development efforts. New
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products are essential for the continuation of the company. New products aren’t easy to find.
There are eight major steps in the product development process.
1. Idea generation: the systematic search for new-product ideas. Ideas can be found via
internal sources, but also external idea sources. These can be distributors, suppliers, but
also competitors. Crowd sourcing means inviting broad communities of people –
customers, employees, independent scientists and researchers and even the public at large
– into the new-product innovation process.
2. Idea screening: screening new-product ideas to spot good ideas and drop poor ones as
soon as possible.
3. Concept development and testing. Product concept is a detailed version of the new
product idea stated in meaningful consumer terms. Concept testing means testing new
product concepts with a group of target consumers to find out if the concepts have strong
consumer appeal.
4. Marketing strategy development: designing an initial marketing strategy for a new
product based on the product concept. It consists of three parts: describing the target
market and value proposition, outlining the budgets and lastly describing the long-term
marketing mix strategy.
5. Business analysis is a review of the sales, cost and profit projections for a new product to
find out whether these factors satisfy the company’s objectives.
6. Product development: developing the product concept into a physical product to ensure
that the product idea can be turned into a workable market offering.
7. Test marketing: the stage of new product development in which the product and its
proposed marketing programmed are tested in realistic market settings. This can be done
in both controlled test markets and simulated test markets.
8. Commercialization: introducing a new product into the market.
Customer-centered new product development: new product development that focuses on
finding new ways to solve customer problems and create more customer satisfying experiences.
Team-based new product development is an approach to developing new products in which
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various company departments work closely together, overlapping the steps in the product
development process to save time and increase effectiveness. Systematic new product
development is preferred over haphazard and compartmentalized development. Innovation can be
messy and difficult to manage, especially in turbulent times.
The product life cycle (PLC) is the course of product’s sales and profits over its lifetime. It
involves five distinct stages:
1. Product development: development of the idea without any sales.
2. Introduction: slow sales growth when the product is introduced.
3. Growth: period of rapid acceptance.
4. Maturity: period of sale slowdown because of acceptance by most potential buyers.
5. Decline: the period when sales fall and the profit drops.
The PLC concept can also be applied to styles, fashions and fads. A style is a basic and
distinctive mode of expression. Fashion is a currently accepted or popular style in a given field.
Fad is temporary period of unusually high sales driven by consumer enthusiasm and immediate
product or brand popularity. Companies must continually innovate to keep up with the cycle.
There are different strategies for each stage.
The introduction stage is the PLC stage in which a new product is first distributed and made
available for purchase. Profits are generally low and the initial strategy must be consistent with
product positioning.
The growth stage is the stage in which a product’s sales start climbing quickly. Profits increase
and the firm faces a trade-off between high market share and high current profit.
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In the maturity stage, products sales are growing slowly or level off. The company tries to
increase consumption by finding new consumers, also known as modifying the market. The
company might also try to modify the product by changing characteristics.
In the decline stage, the product’s sales are declining or dropping to zero. Management might
decide to maintain the brand, reposition it or drop a product from the line.
When introducing product in international markets, it must be decided which products to offer in
which countries and how these product should be adapted. Packaging issues can be subtle, from
translating issues to different meanings of logos.
Chapter 10:
Pricing strategies
A price is the amount of money charged for a product or a service, the sum of the values that
customers exchange for the benefits of having or using the product or service. Price is the only
element in the marketing mix that produces revenue, all others are costs. Setting the right price is
one of the most complex tasks. Good pricing starts with customers and their perception of the
value of the product.
Customer value-based pricing: setting price based on buyer’s perceptions of value rather than
on the seller’s cost. The value customers attach to a product might be difficult to measure, so the
company must work hard to establish estimates. There are two other types of value-based
pricing: good-value pricing and value-added pricing. Good-value pricing means offering the
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right combination of quality and good service at a fair price. Value-added pricing means
attaching value-added features and services to differentiate a company’s offers and charging
higher prices.
Cost-based pricing means setting prices based on the cost for producing, distributing and selling
the product plus a fair rate of return for effort and risk. There are two forms of costs: fixed costs
(overhead) are costs that do not vary with production or sales level. Variable costs are costs that
vary directly with the level of production. Total costs are the sum of the fixed and variable costs
for any given level of production.
The experience curve (learning curve) is the drop in the average per-unit production costs that
comes with accumulated production experience. Put more simply: as workers become more
experienced, they become more efficient and costs drop.
The simplest pricing method is cost-plus pricing or mark-up pricing: it means adding a standard
mark-up to the cost of the product. However, this method ignores demand and competitors prices
and is therefore unlikely to lead to the best price. Break-even pricing (target return pricing)
means setting the price to break even on the costs of making and marketing a product or setting
price to make a target return. The break-even volume is the amount of units that need to be sold
to break even. Competition-based pricing means setting prices based on competitor’s
strategies, prices, costs and market offerings.
Beyond customer value perceptions, costs and competitor prices, the firm must also think of
other factors. Price is only one element of the marketing mix and the overall marketing strategy
must be determined first. Target costing is pricing that starts with an ideal selling price and then
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targets costs that ensure the price is met. Good pricing is based on an understanding of the
relationship between price and demand for the product.
Pricing can differ in different types of markets. In pure competition markets, there are numerous
buyers and sellers that all have little effect on the price. In monopolistic competition, there are
many buyers and sellers who trade over multiple prices. In an oligopolistic competition market,
there are few sellers who are highly sensitive to each other’s pricing strategies. In a pure
monopoly, the company is the only seller and can set any price it desires.
The demand curve is a curve that shows the number of units the market will buy in a given time
period, at different prices that might be charged. The price elasticity is a measure of sensitivity
of demand to changes in price. It is given by the following formula: price elasticity of demand = .
Chapter 11:
Pricing considerations
Pricing strategies can be challenging. There are two broad strategies. Market-skimming pricing
(price skimming) means setting a high price for a new product to skim maximum revenues layer
by layer from the segments willing to pay the high price, the company makes fewer but more
profitable sales. Market-penetration pricing means setting a low price for a new product to
attract a large number of buyers and a large market share.
There are five product mix pricing situations.
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1. Product line pricing: setting the price steps between various products in a product line
based on cost differences between the products, customer evaluations of different features and
competitor’s prices.
2. Optional product pricing: the pricing of optional or accessory products along with a main
product.
3. Captive product pricing: setting a price for products that must be used along with a main
product.
4. By-product pricing: setting a price for by-products to make the main product’s price more
competitive.
5. Product bundle pricing: combining several products and offering the bundle at a reduced
price.
There are also seven price adjustment strategies that can be used.
1. Discount: a straight reduction in price on purchases during a stated period of time or of
larger quantities. Allowance is promotional money paid by manufacturers to retailers in return
for an agreement to feature the manufacturer’s products in some way.
2. Segmented pricing: selling a product or service at two or more prices, where the difference
in prices is not based on costs. Customer-segment pricing involves different types of customers
paying different pricing. Product-form pricing involves different prices for different versions of
the same product. Location-based pricing involves different prices for different locations, while
time-based pricing involves different prices for different moments in time.
3. Psychological pricing: pricing that considers the psychology of prices, not simply the
economics, the price says something about the product. Reference prices are prices that buyers
carry in their minds and refer to when they look at a given product.
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4. Promotional pricing: temporarily pricing products below the list price, and sometimes
even below cost, to increase short-run sales.
5. Geographical pricing: setting prices for customers located in different parts of the country
or world. This can be FOB-origin pricing: a geographical pricing strategy in which goods are
placed free on board a carrier, the customer pays the freight from the factory to the destination.
Uniform-delivered pricing: a geographical pricing strategy in which the company charges the
same price plus freight to all customers, regardless of their location. Zone pricing: the company
sets up two or more zones. All customers within a zone pay the same total price, the more distant
the zone, the higher the price. Base-point pricing: a pricing strategy in which the seller
designates some city as a base point and charges all customers the freight cost from that city to
the customer. Freight-absorption pricing is a strategy in which the seller absorbs all or part of
the freight charges to get the desired business.
6. Dynamic pricing means adjusting pricing continually to meet the characteristics and needs
of individual customers and situations.
7. International pricing: charging different pricing for customers in different countries.
After setting prices, there are often situations in which companies need to change their prices.
Sometimes, the company finds it desirable to initiate price cuts, for instance when demand is
falling, or price increases to improve profits. Consumers can react differently to changes in
prices, as well as competitors. When competitors change prices first, the firm has to respond.
There are as many as four responses, namely: the firm can reduce its price, maintain its price but
raise the perceived value of the product, improve the quality and increase the price or launch a
low-price fighter brand to compete with the price change.
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There is legislation surrounding price fixing (talking to competitors to set prices), which is
illegal. Predatory pricing (selling below costs to punish competitor) is also prohibited. Many
countries also try to prevent unfair price discrimination and deceptive pricing.
Chapter 12:
Marketing channels
In order to produce a product, relationships with others in the supply chain are necessary. The
term demand chain might be better, because it suggests a sense-and-respond view of the market.
A value delivery network is composed of the company, suppliers, distributors and ultimately
the customers, who partner with each other to improve the performance of the entire system in
delivering customer value. The marketing channel (distribution channel) is a set of
interdependent organizations that help make a product or service available for use or
consumption by the consumer or business user. Channel members can add value by providing
more efficiency and specialization in making goods. Some of the key function channel members
do are: information gathering, promotion, contacting buyers, matching products and needs and
negotiating agreements. But also physical distribution, financing and taking over risks of
carrying out the work.
A channel level is a layer of intermediaries that performs some work in bringing the product and
its ownership closer to the final buyer. Channel 1 is a direct marketing channel: a marketing
channel that has no intermediary levels. Indirect marketing channels are channels containing
one or more intermediary levels. Channels are behavioral systems composed of real companies
and people, who interact to accomplish goals. Each channel member depends on others and they
behave differently, which can lead to channel conflict: disagreement among marketing channel
members on goals, roles and rewards, who should do what and for what rewards. Horizontal
conflict occurs among firms at the same channel level. Vertical conflict is between different
levels of the same channel.
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For channels to work well, the role of the channel members must be specified. A conventional
distribution channel is a channel consisting of one or more independent producers, wholesalers
and retailers, each is a separate business seeking to maximize its own profits, even at the expense
of profits for the system as a whole. In contrast with this is the vertical marketing system
(VMS), a distribution channel in which producers, wholesalers and retailers act as a unified
system. One channel member owns the others, has contracts with them or wields so much power
that they all cooperate. There are three major types of VMSs:
1. Corporate VMS is a vertical marketing system that combines successive stages of
production and distribution under single ownership. Channel leadership is accomplished through
common ownership.
2. Contractual VMS is a vertical marketing system in which independent firms at different
levels of production and distribution join together through contracts. The most common example
of a contractual VMS is the franchise organization: a contractual marketing system in which a
channel member (franchisor) links several stages in the production-distribution process. There
are also three types of franchises: manufacturer-sponsored retailer franchise systems,
manufacturer-sponsored wholesaler franchise systems and service-firm-sponsored retailer
franchise systems.
3. Administered VMS: a vertical marketing system that coordinates successive stages of
production and distribution through the size and power of one of the parties.
Another development regarding channels is the horizontal marketing system: a channel
arrangement in which two or more companies at one level join together to follow a new
marketing opportunity. This can be with competitors, but also with non-competitors. A multi-
channel distribution system is a distribution system in which a single firm sets up two or more
marketing channels to reach one or more customer segments. This occurs when a company sets
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up multiple marketing channels to reach multiple customer segments and is most beneficial in
complex markets, but also brings additional risks.
Current changes in the channel organization include disintermediation, which is the cutting out
of marketing channel intermediaries by product or service producers or the displacement of
traditional resellers by radical new types of intermediaries.
Channel design
Marketing channel design means designing effective marketing channels by analyzing
customer needs, setting channel objectives, identifying major channel alternatives and evaluating
those alternatives. The base is analyzing consumer needs, since marketing channels are actually
customer value delivery networks. Next comes setting the channel objectives. When identifying
major channel alternatives, the company should look at three things:
1. Types of intermediaries. The company should identify the different types of channel
members that can be involved in the channel.
2. The number of marketing intermediaries. Intensive distribution means stocking the
product in as many outlets as possible. Exclusive distribution means giving a limited number of
dealers the exclusive right to distribute the company’s products in their territories. Selective
distribution involves the use of more than one, but fewer than all, intermediaries who are
willing to carry the company’s products.
3. The responsibilities of the intermediaries.
Finally, the firm should evaluate all of the alternatives using economic criteria, control issues and
adaptability criteria.
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Marketing channel management means selecting, managing and motivating individual channel
members and evaluating their performance over time. Managing and motivating other channel
members means practicing partner relationship management to build long-term partnerships
with other channel members.
Marketing logistics, or physical distribution, is the planning, implementing and controlling the
physical flow of materials, final goods and related information from points of origin to points of
consumption to meet customer requirements at a profit. It basically means getting the right
product to the right customer at the right place and time. It includes both outbound (from
company to customer) and inbound distribution (within the channel) and reverse distribution
(moving returned products).
It involves the entire supply chain management: managing upstream and downstream value-
added flows of materials, final goods and related information among suppliers, the company,
resellers and final consumers. Logistics can be a source of competitive advantage and efficient
ones can cut cost drastically. There is however a trade-off between minimal distribution costs
and maximum customer service. Logistics include some major functions:
1. Warehousing. Distribution centers are large, highly automated warehouses designed to
receive goods from various plants and suppliers, take orders, fill them efficiently and deliver
goods to customers as quickly as possible.
2. Stock management involves deciding on the balance between too little and too much stock.
Just-in-time logistic systems involve small stocks, while new stock arrives exactly when needed.
3. Transportation affects the pricing of products, delivery times and the condition of the
goods. It can be via road, but also via railways, waterways and air carriers. Intermodal
transportation means combining two or more modes of transportation.
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Integrated logistics management is the logistics concept that emphasizes teamwork, both inside
the company and among all the marketing channel organizations, to maximize the performance
of the entire distribution system. Cross-functional teamwork inside the company means an
integrated and harmonized system. Companies should not only improve their logistics, but also
their logistic partnerships. Third-party logistics (3PL) provider is an independent logistics
provider that performs any or all of the functions required to get a client’s product to the market.
They often do this at a lower cost and more efficiently, while the company can focus on its core
business.
Chapter 13:
Retailing and wholesaling
Retailing includes all the activities involved in selling goods or services directly to final
consumer for their personal, non-business use. Retailers are businesses whose sales come
primarily from retailing. Retailing connects brands to consumers in the final steps (“last mile” of
buying process). Shopper marketing means using in-store promotions and advertising to extend
brand equity to the “last mile” and encourage favorable hi-store purchase decisions. There are
different types of retailers. Self-service retailers serve customers who are willing to perform part
of the service. Limited-service retailers provide some assistance in the service process, while
full-service retailers assist customers in every step of the buying process.
Retailers can also be classified by the length and breadth of their product line.
1. Specialty store: a retail store that carries a narrow product line with a deep assortment
within that line.
2. Department store: a retail organization that carries a wide variety of product lines. Each
line is operated as a separate department managed by specialist buyers or merchandisers.
3. Supermarkets are large, low-cost, low-margin, high-volume and self-service stores that
carry a wide variety of grocery and household products.
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4. Convenience stores are mall stores, located near residential areas and that carry a limited
line of high-turnover convenience goods.
5. Superstore: a store much larger than a regular supermarket that offers a large assortment of
routinely purchased food products, non-food items and services.
6. Category killer: a giant specialty store that carries a very deep assortment of a particular
line and is staffed by knowledgeable employees.
7. Service retailers: a retailer whose product line is actually a service.
Retailers can also be classified according to the price they charge for their goods and services.
- Discount store: a retail operation that sells standard merchandise at lower prices by
accepting lower margins and selling at higher volume.
- Off-price retailers are retailers that buy at less-than-regular wholesale price and sell at
less than retail.
- Independent off-price retailers are off-price retailers who are either independently owned
or is a division of a larger retail corporation.
- Factory outlet: an off-price retailing operation that is owned and operated by a
manufacturer and normally carries the manufacturer’s surplus discontinued or irregular goods.
- Warehouse clubs: an off-price retailer that sells a limited selection of brand name grocery
items, appliances, clothing and a hodgepodge of other goods at deep discounts to members who
pay annual membership fees.
Chain stores are two or more outlets that are commonly owned and controlled. Their size allows
for buying in large quantities at lower prices. A franchise is a contractual association between a
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manufacturer, wholesaler or service organization and independent businesspeople, who buy the
right to own and operate one or more units in the franchise system. Retailers must first segment
and define their target market, before deciding upon how to differentiate and position themselves
in these target markets. Retailers must decide upon three major product variables: product
assortment, services mix and store atmosphere. The product assortment should differentiate the
retailer from competitors. The services mix can help differentiate, while the store’s atmosphere is
another unique element to distinguish the retailer.
The price a retailer asks for its product must fit the target market and position of the retailer.
Retailers can use all of the five promotion tools to reach their customers, namely: advertising,
personal selling, sales promotion, public relations and direct marketing. The place of the
products, or location, is vital in retailing success. A shopping centre is a group of retail
businesses built on a site that is planned, developed, owned and managed as a unit. A regional
shopping centre is large, containing more than 50 to 100 stores. A community shopping centre
contains between 15 and 50 retailers. A neighborhood shopping centre or strip mall generally
holds 5 to 15 stores. Power centers are huge unenclosed shopping centers consisting of long
strips of retail stores. A lifestyle centre is a smaller open-air mall with up market stores.
Trends in retailing
In current times, retailers are dealing with changing lifestyles and fierce competition for
customer expenditure. The economic downturn provides a challenge for a lot of retailers. The
wheel-of-retailing concept states that new types of retailers usually begin as low-margin, low-
price, low-status operations but later evolve into higher priced, higher-service operations,
eventually becoming like the conventional retailers they replaced. The rise of mega-retailers also
has its influence on the environment, squeezing out small competitors. The growth of non-store
retailing via advanced technologies also provides new opportunities and challenges. Retailing
technologies have become important as competitive tools. There is also a trend of green retailing,
where retailers are adopting environmentally sustainable practices.
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Wholesaling
Wholesaling includes all the activities involved in selling goods and services to those buying for
resale or business use. A wholesaler is a firm engaged primarily in wholesaling activities.
Wholesalers add value by performing one or multiple of the following channel functions:
- Selling and promoting and thereby reaching many small customers.
- Buying and assortment building.
- Bulk breaking by buying in large quantities.
- Warehousing and holding stock.
- Transportation.
- Financing of customers and suppliers.
- Risk bearing.
- Providing market information.
- The management of services and giving advice.
Wholesalers fall into three major groups.
1. Merchant wholesalers are independently owned wholesale businesses that take title to the
merchandise it handles. They include full-service wholesalers, who provide a full set of services
and limited-service wholesalers who offer less services to their customers. Industrial distributors
sell to manufacturers, while wholesale merchants sell primarily to retailers. Cash-and-carry
wholesalers carry a limited line of fast moving goods. Drop shippers never carry stock, but
select manufacturers who ship the product upon order.
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2. Brokers and agents. A broker is a wholesaler who does not take title to goods and whose
function is to bring buyers and sellers together and assist in negotiation. An agent is a wholesaler
who represents buyers or sellers on a relatively permanent basis, performs only a few functions
and does not take title to goods. Selling agents have contractual authority to sell a manufacturer’s
entire output. Purchasing agents often have long-term relationships with buyers and make
purchases for them.
3. Manufacturers’ sales branches and offices: wholesaling by seller or buyers themselves
rather than through independent wholesalers.
Like retailers, wholesalers must also decide upon the product, prices, promotion and place of
their services. Today’s wholesalers are facing challenges in the need for greater efficiency and
changing needs of customers.
Chapter 14: Communications strategy
The promotion mix (marketing communication mix) is the specific blend of promotion tools
that the company uses to persuasively communicate customer value and build customer
relationships. It consists of five major promotion tools:
1. Advertising: any paid form of non-personal presentation and promotion of ideas, goods or
services by an identified sponsor.
2. Sales promotion: short-term incentives to encourage the purchase or sale of a product or a
service.
3. Personal selling: personal representation by the firm’s sales force for the purpose of
making sales and building customer relationships.
4. Public relations: building good relations with the company’s various public by obtaining
favorable publicity: building up a good corporate image and handling or heading off unfavorable
rumors, stories and events.
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5. Direct marketing: direct connections with carefully targeted individual consumers to both
obtain an immediate response and cultivate lasting customer relationships.
Several factors are changing today’s marketing communication. First, consumers are changing:
they are better informed and more empowered. Also, marketing strategies are shifting away from
traditional mass marketing. Finally, communications technology is changing the way companies
and customers communicate with each other. These changes come together in a need for
integrated marketing communications (IMC) which involves carefully integrating and
coordinating the company’s many communications channels to deliver a clear, consistent and
compelling message about an organization and its products. IMC recognizes all touch points
where the company and customers meet and ties together all messages.
In order to develop marketing communications, an understanding of the communication process
is required. A message is send from a sender to a receiver via media, but can be interrupted by
noise or encoding/decoding differences.
There are different steps necessary in developing effective marketing communication.
1. Identifying the target audience.
2. Determining the communication objectives. The target audience can be in any stage of the
buyer-readiness stages. The buyer-readiness stages are the stages consumers normally pass
through on their way to a purchase, including awareness, knowledge, liking, preference,
conviction and finally the actual purchase. A goal of a marketer is to move target customers
through the buying process.
3. Designing the message. The message should get attention, hold interest, arouse desire and
obtain action. Attention, interest, desire and action come together as the AIDA model. The
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marketer determines the content of the message. Rational appeals relate to the audience self-
interest and their benefits. Emotional appeals attempt to stir up emotions that can motivate
purchase. Marketers must also decide the message structure and the format.
4. Choosing the channels of communication. There are two broad categories. Personal
communication channels are channels through which two or more people communicate directly
with each other, including face to face, on the phone, via e-mail or even through Internet chat.
Personal communication channels include word-of-mouth influence: personal communications
about a product between target buyers and neighbors, friends, family members and associates.
Buzz marketing is cultivating opinion leaders and getting them to spread information about a
product or a service to others in their communities.
Non-personal communication channels are media that carry messages without personal contact
or feedback, including major media, atmospheres and events. Atmospheres are designed
environments that create the buyer’s leanings toward buying a product.
5. Selecting the message source. Highly credible sources are more persuasive.
6. Collecting feedback. The marketer must research the effect on the target audience.
When setting the total promotion budget, there are four common methods that can be used.
1. Affordable method: setting the promotion budget at the level management thinks the
company can afford.
2. Percentage-of-sales method: setting the promotion budget at a certain percentage of
current or forecasted sales or as a percentage of the unit sales prices.
3. Competitive-parity method: setting the promotion budget to match competitor’s outlays.
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4. Objective-and-task method: developing the promotion budget by (1) defining specific
promotion objectives, (2) determining the tasks needed to achieve these objectives and (3)
estimating the cost of performing these tasks. The sum of these costs is the proposed promotion
budget.
The promotion mix
The promotion mix consists of five tools. Advertising can reach masses of geographically
dispersed buyers at a low cost, but it cannot be as persuasive as people. Personal selling is the
most effective in certain stages of the buying process, but is quite costly. Sales promotion attracts
the customer’s attention, but the effect is often short lived. Public relations (PR) is believable but
is often underused. Direct marketing is less public and delivered to a certain person.
Marketers can choose from two basic promotion mix strategies. A push strategy calls for using
the sales force and trade promotion to push a product through channels. A producer promotes a
particular product to channel members, who in turn promote it to final consumers. A pull
strategy calls for spending a lot on consumer advertising and promotion to induce final
consumers to buy a particular product, creating a demand vacuum that “pulls” a product through
the channel.
Having set the promotion budget and mix, the next task is to integrate into a promotion mix.
There are legal and ethical issues to consider when thinking about marketing communications.
Marketers must avoid false or deceptive advertising and must follow the rules of fair
competition.
Chapter 15:
Advertising and PR
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Advertising is any paid form of non-personal presentation and promotion of ideas, goods or
services by an identified sponsor. The first step to advertising is setting advertising objectives
based on past decisions on the target market, positioning and the marketing mix. An advertising
objective is a specific communication task to be accomplished with a specific target audience
during a specific period of time. Informative advertising is often used when introducing a new
product. Persuasive advertising is more used when competition is increasing. Reminder
advertising is relevant for mature products and is used to maintain customer relationships.
After setting the advertising objectives, the advertising budget is set. The advertising budget is
the money and other resources allocated to a product or a company advertising programmed. The
budget is often dependent of multiple factors, such as the stage in the product life cycle, market
share and the number of competitors in the market.
The next thing in the advertising process is developing an advertising strategy: the strategy by
which the company accomplishes its advertising objectives. It consists of two major elements:
creative advertising messages and selecting advertising media.
The advertising message
When creating the advertising message, it is important to gain the attention of the customer and
to stand out from the clutter of all other advertisements. In order to stand out, many marketers
use “Madison & Vine”, a term that has come to represent the merging of advertising and
entertainment in an effort to break through the clutter and create new avenues for reaching
consumers with more engaging messages. The aim of “advertainment” is to make ads
entertaining enough, so that people actually want to watch them. Branded entertainment, or
brand integrations, involves making the brand an inseparable part of some form of entertainment.
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The message strategy is the general message that will be communicated to consumers. The
creative concept is the compelling “big idea” that will bring the advertising message strategy to
life in a distinctive and memorable way. Advertising appeals should have three characteristics.
They should be meaningful, believable and distinctive. After that, the message needs to be
executed. There are different execution styles: the approach style, tone, words and format used
for executing an advertising message. Some styles are:
- Slice of life: normal people using a product in a normal setting.
- Lifestyle: shows how a product fits within a certain lifestyle.
- Fantasy.
- Mood or image: builds a mood or certain image around the product.
- Musical: singing advertisement.
- Personality symbol: creates a character that represents the product.
- Technical expertise.
- Scientific evidence: proving the brand is better.
- Testimonial evidence or endorsement: featuring a highly believable or likable source.
The marketer must also decide upon the tone and format of the advertisement. The illustration is
the first thing noticed, while the headline must entice the right people to read to advertisement.
The copy (main block of text in the ad) must be simple, strong and convincing All of the
elements must work together in order to persuade the customer.
The other major part of developing an advertisement strategy is selecting advertising media.
Advertising media are the vehicles through which advertising messages are delivered to their
intended audiences. To select media, a marketer must decide upon the reach and frequency of
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advertising that is desired. Reach is a measure of the percentage of people reached in the target
market, while frequency is a measure to show how many times the average person is exposed to
the message.
An advertiser will want to reach the desired media impact: the qualitative value of the message
exposure. Media planners must also choose the best media vehicles: specific media within each
general media type. Furthermore, they need to consider audience quality, audience engagement
and editorial quality. Some media sources are more believable than others. Finally, the advertiser
must decide upon the media timing. Continuity means scheduling ads evenly within a given
period, while pulsing means scheduling ads unevenly over a given time period.
Measuring advertising effectiveness and the return on advertising are becoming important.
Return on advertising investment is the net return on advertising investment divided by the
costs of the advertising investment. There are two types of advertising results: communication
effects and sales and profit effects.
Advertising is organized differently in different companies. It ranges from someone handling it
in the sales department, to advertising departments and advertising agencies: a marketing
services firm that assists companies in planning, preparing, implementing and evaluating all or
portions of their advertising programmers.
Public relations (PR) means building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image and heading off unfavorable
rumors, stories and events. Activities involved in PR are press relations, product publicity, public
affairs, lobbying and managing investor relations. PR can have a strong impact on public
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awareness and results can be impressing. Some of the most important tools of PR are the news,
speeches, written materials, audio-visual material and public services activities.
Chapter 16:
Personal selling
Personal selling: are personal presentations by the firm’s sales force for the purpose of making
sales and building customer relationships. A salesperson is an individual representing a
company to customers by performing one or more of the following activities: prospecting,
communicating, selling, services, information gathering and relationship building. Personal
selling is an interpersonal part of the promotion mix. The sales force is a link between the
company and its customers. Sales people represent the company to customers, but at the same
time they represent customers to a particular company. The sales force should work closely with
other marketing functions in order to create value for its customers, but often sales and marketing
are approached as different functions.
Sales force management means analyzing, planning, implementing and controlling sales force
activities. There are six major steps in the sales force management process:
1. Designing the sales force strategy.
The sales force structure can have different shapes. A territorial sales force structure is a sales
force organization that assigns each salesperson to an exclusive geographic territory in which
that salesperson sells the company’s full line. Territory sales representatives report to territory
managers, who are under the supervision of regional managers, who in turn report to a director of
sales.
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A product sales force structure is a sales force organization in which salespersons specialize in
selling only a portion of the company’s products or lines. This might lead to trouble when
customers buy multiple products of the same company and could lead to double work.
A customer or market sales force structure is a sales force organization in which salespeople
specialize in selling only to certain customers or industries. This can help a company build closer
relationships with meaningful customers.
Finally combinations of sales force structures are possible, leading to complex structures. Once
the structure is set, the sales force size must be determined. This can be done by the workload
approach, where the number or salespersons are based on the amount of effort desired for
different classes of work. Sales management must also determine who will be involved in the
sales force. Outside sales force (field sales force) are salespeople who travel to call on
customers in the field. Inside sales force are salespeople who conduct business from their
offices via telephone, the Internet or visits from prospective buyers. Team selling means using a
team of people from sales, marketing, engineering, finance, technical support an even upper
management to service large, complex accounts.
2. Recruiting salespeople.
The success of a sales force operations depends on the skills of salespeople. Good sales people
are motivated, disciplined, have skills and knowledge and a great understanding of customer
needs.
3. Training salespeople
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Most companies provide continuous sales training. Training programmers teach salespeople
what they need to know about their customers and give them the necessary skills.
4. Compensating salespeople
To attract good salespeople, they need to be compensated. Compensation can consist of four
elements: a fixed amount, a variable amount, expenses and fringe benefits.
5. Supervising salespeople
The goal of supervision is to help salespeople work smart, by doing the right things the right
way. Motivation helps salespeople to work hard to reach the sales force goals. Supervising
salespeople can be done by period call plans and time-and-duty analysis. Sales 2.0 is the merging
of innovative sales practices within Web 2.0 technologies to improve sales force effectiveness
and efficiency. Beyond directing, sales managers must also motivate salespeople. Sales quota
are standards that state the amount a salesperson should sell and how sales should be divided
among the company’s products. Organizational climate describes the feeling salespeople have
about their opportunities and rewards. Sales meetings provide occasions to air feelings.
6. Evaluating salespeople
The last step in the process is evaluating the salespeople. Information can be gathered in different
ways: via sales reports call reports and expense reports.
The selling process are the steps that salespeople follow when selling, which include prospecting
and qualifying, pre-approaching, presenting an demonstrating, handling objections, closing and
following up.
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1. Prospecting: a salesperson or company identifies qualified potential customers.
2. Pre-approaching: a salesperson learns as much as possible about a prospective customer
before making a sales call.
3. Approaching: a salesperson meets the customer for the first time.
4. Presenting: a salesperson tells the “value story” to the buyers, showing how the company’s
offer solves the customer’s problems.
5. Handling objections: a salesperson seeks out, clarifies and overcomes any customer
objections to buying.
6. Closing: a salesperson asks the customer for an order.
7. Following up: a salesperson follows up after the sale to ensure customer satisfaction and
repeat business.
The steps in the selling process can be described as transaction oriented. But in most cases, the
long-term goals are to develop a profitable relationship.
Sales promotion: short-term incentives to encourage the purchase or sale of product or service.
Sales promotions tools are used by most companies and can be consumer promotions, trade
promotions, business promotions and sales force promotions. Sales promotion objectives can
vary widely and are used together with other promotion mix tools.
Consumer promotions are sales promotion tools used to boost short-term customer buying and
involvement or enhance long-term customer relationships. These can be samples (trial products),
coupons (saving certificates), cash refunds, price packs (money-off deals), or premiums (goods
offered at low cost). But also promotional products, point-of-sales (POS) promotions (displays
and demonstrations) and contests and games are sales promotion tools. Event marketing (event
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sponsorship) means creating a brand-marketing event or serving as a sole or participating
sponsor of events created by others.
Trade promotions are sales promotion tools used to persuade resellers to carry a brand, give it
shelf space, promote it in advertising and push it to consumers. Business promotions are sales
promotion tools used to generate business leads, stimulate purchases, reward customers and
motivate salespeople.
Chapter 17:
Direct customer relationships
Direct marketing means connecting directly with carefully targeted segments of individual
consumers, often on a one-to-one, interactive basis. For most companies, direct marketing is a
supplemental channel, but for others it is a complete way of doing business. Direct marketing is
expanding, it is key to the trend towards building close and interactive customer relationships.
Direct marketing has certain benefits for buyers: it is convenient, private, easy and gives a lot of
comparative information. It also has benefits for sellers: it is an important tool for building
customer relationships and is a low-cost and efficient way of reaching target markets. Direct
marketing begins with a good customer database.
A customer database is an organized collection of comprehensive data about individual
customers or prospects, including geographic, demographic, psychographic and behavioral data.
Companies can use this database to located potential customers, learn about their customers and
build relationships with them. There are several major forms of direct marketing:
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- Direct-mail marketing: direct marketing by sending an offer, announcement, reminder or
other item to a person at a particular physical or virtual address. It can be used well for direct
one-to-one communication, but can be resented as “junk mail”.
- Catalogue marketing: direct marketing through print, video or digital catalogues that are
mailed to select customers, made available in stores, or presented online. They eliminate mailing
costs and allow for real-time merchandising.
- Telephone marketing: using the telephone to sell directly to customers. However, the
recent do-not-call rules have been hurting the telemarketing industry.
- Direct-response television (DRTV) marketing: direct marketing via television, including
direct-response television advertising (or infomercials) and home shopping channels. Home-
shopping channels are television programmers or channels dedicated to selling goods and
services.
- Kiosk marketing is marketing via information and ordering machines.
- New digital direct-marketing technologies such as mobile phone marketing,
podcasts/podcasts and interactive TV are upcoming tools.
Online marketing are efforts to market products and service and build customer relationships
over the internet. The Internet is a vast public web of computer networks that connects users of
all types around the world to each other and an amazingly large information repository. Click-
only companies are the so-called dot-comes, which operate only online and have no brick-and-
mortar market presence. Click-and-mortar companies are traditional brick-and-mortar
companies that have added online marketing to their operations. There are four major online
marketing domains.
1. Business-to-consumer (B-to-C) online marketing: businesses selling goods and services
online to final consumers.
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2. Business-to-business (B-to-B) online marketing: businesses using online marketing to
reach new business customers serve current customers more effectively and obtain buying
efficiencies and better prices.
3. Consumer-to-consumer (C-to-C) online marketing: online exchanges of goods and
information between final consumers. Blogs are online journal where people post their thoughts,
usually on a narrowly defined topic. Companies can also advertise on blogs and influence
content there.
4. Consumer-to-business (C-to-B) online marketing: online exchanges in which consumers
search out sellers, learn about their offers and initiate purchases, sometimes even driving
transaction terms.
Either way, most companies now exist online. Corporate (brand) websites are websites
designed to build customer goodwill, collect customer feedback and supplement other sales
channels rather than sell the company’s products directly. A marketing website is a website that
engages consumers in interactions that will move them closer to a direct purchase or other
marketing outcome. However, creating a website is not enough, sites must be visited and
therefore a website must be promoted. This can be done via online advertising: advertising that
appears while consumers are browsing the Web, including display ads, search-related ads, online
classifieds and other forms. Rich media allow animation, sound, video and interactivity. The
largest form of online advertising is search-related ads (or contextual advertising). Viral
marketing is the Internet version of word-of-mouth marketing: websites, videos, email messages
or other marketing events that are so infectious that customers will want to pass them along to
friends.
Online social networks: online social communities, blogs, social networking websites or even
virtual worlds, where people socialize or exchange information and opinions. Marketers can
engage in online social networks by participating in existing Web communities or establishing
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their own. Social networking sites presents challenges, since companies do not really know how
to use them effectively. E-mail is an important and growing online marketing tool and it can be
the ultimate marketing medium. However, the explosion of spam (unsolicited, unwanted
commercial e-mail messages) can lead to customer irritation.
The direct-marketing industry has been facing some privacy concerns and cases of unfair
practices. Direct marketing can sometimes annoy customers. Internet fraud has become a serious
problem. Phishing, a type of online identity theft uses deceptive emails to fool users into
divulging their personal data. Customers also worry about online security and their privacy.
Many online marketers have become skilled at obtaining detailed consumer information.
Because of these challenges, various governments are putting up legislation to protect customers.
Chapter 18:
Competitive advantage
A competitive advantage is an advantage over competitors gained by offering consumers
greater value than competitors do. Competitive marketing strategies exist of competitor analysis
and developing competitive marketing strategies. Competitive marketing strategies are
strategies that strongly position the company against competitors and give the company the
strongest possible strategic advantage. Competitor analysis is the process of identifying key
competitors, assessing their objectives, strategies, strengths and weaknesses and reaction
patterns, and selecting which competitors to attack or avoid. It consists of three steps.
1. Identifying competitors. This might seem easy, but companies face a lot more competitors
than can be identified at first sight. Competitors can be identified from an industry point or a
market point of view.
2. Assessing competitors. When doing so, firms need to look at the competitor’s objectives
and identify competitor’s strategies. A strategic group is a group of firms in an industry
following the same or a similar strategy. It is also important to assess the strengths and weakness
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of competitors. This way, the firm can benchmark. Benchmarking is the process of comparing
one company’s products and processes to those of competitors or leading firms in other
industries to identify best practices and find ways to improve quality and performance. Finally,
the firm can estimate how competitors will react to changes and anticipate their moves.
3. Selecting which competitors to attack and avoid. A useful tool for assessing competitor’s
strengths and weaknesses is the customer value analysis: an analysis conducted to determine
what benefits target customer’s value and how they rate the relative value of various
competitors’ offers. The key to gaining competitive advantage is to take each segment and
examine how the company’s offer compares to that of competitors. Most companies compete
with close competitors, but they will also have distant competitors. Firms also benefit from
having competitors, they share the costs of market development and competitors may increase
total demand.
When the competitors are identified and evaluated, the firm must design a competitive strategy.
Strategies differ for every company. Approaches to marketing strategy often pass through three
stages: entrepreneurial marketing, formulated marketing and Intrepreneurial marketing.
Entrepreneurial marketing: most companies are started by individuals who have no explicit
strategy. Formulated marketing: as small companies are more successful, they move to more
formulated strategies. Intrepreneurial marketing: many large companies get stuck in
formulated marketing and should re-establish their entrepreneurial spirit.
Porter’s strategies
Porter is famous for his competitive positioning strategies: three winning ones and one losing
one. The three winning strategies are:
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- Cost leadership: the firm has the lowest production costs and can therefore ask the lowest
prices.
- Differentiation: the firm creates a highly differentiated product.
- Focus strategy: the firm focuses on a small niche market segment.
The losing strategy is the “middle of the roaders” and applies to firms with no clear strategy.
Companies can pursue any of three value discipline for delivering superior customer value:
- Operational excellence: the firm has leads in the industry by price and convenience.
- Customer intimacy: the firm provides superior value by precisely tailoring its products to
match the needs of their customers.
- Product leadership: the firm provides superior value by offering a continuous stream of
superior products.
There are multiple competitive positions in a given market.
1. Market leader: the firm in an industry with the largest market share. The leader has the
largest market share and usually sets the pace in the market. Market leaders can encourage users
to usage their products more. Leaders must be constantly prepared for other firms challenging its
strengths. Sometimes attack is the best defense, and market leaders should continuously
innovate.
2. Market challenger: a runner-up firm that is fighting hard to increase market share in an
industry. The runner-up can either challenge the market leader or play along with competitors
and not “rock the boat”. Challengers often become leaders by imitating and improving the ideas
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of previous leaders. It can attack the leader by a full frontal attack, by attacking the leader’s
strengths but also by an indirect attack by attacking the leader’s weaknesses.
3. Market follower: a runner-up firm that wants to hold its share in an industry without
rocking the boat. Followers can learn from the leader (who pays for the cost of innovation). A
follower must know how to current customers and win new ones.
4. Market nicer: a firm that serves small segments that the other firms in an industry overlook
or ignore. By focusing on such a specific segment, the firms are often good in exactly matching
the product to customer needs.
However, a company can also focus too much on its competitors. A competitor-centered
company is a company whose moves are mainly based on competitor’s actions and reactions. A
customer-centered company is a company that focuses on customer developments in designing
its marketing strategies and delivering superior value to its target customers. A market-centered
company is a company that pays balanced attention to both customers and competitors in
designing its marketing strategies.
Chapter 19:
Global marketplace
As global trade grows, global marketing also intensifies. A global firm is a firm that, by
operating in more than one country, gains R&D, production, marketing and financial advantages
in its costs and reputation that are not available to purely domestic competitors. A company faces
six major decisions in international marketing.
1. Looking at the global marketing environment.
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Companies must start by understanding the international trade system. Countries may set quotas
and limits on the amount of foreign import, which can lead to barriers. But there are also forces
helping the trade between nations. The GATT is a treaty to promote word trade by reducing trade
barriers. The World Trade Organization was created to enforce the GATT rules.
Certain countries have formed free-trade or economic communities: a group of nations
organized to work toward common goals in the regulation of international trade, such as the EU.
The international marketer must pay attention to the economic environment. The industrial
structure shapes its product and service needs. The four types of industrial structures are as
follows:
- Subsistence economies: the vast majority of people engage in simple agriculture, which
they consume themselves.
- Raw material exporting economies: economies are rich in natural resources, but not all of
them. Revenue comes from exporting these resources.
- Emerging economies are industrializing economies with rapid growth.
- Industrial economies are major exporters of manufactured goods.
Besides the industrial structure, the income distribution is also of importance.
Next to the economic environment, international marketers must also look at the political/legal
environment, such as political stability and monetary regulations, and the cultural environment.
Culture can have a big impact on marketing strategy. When advertising, cultural differences must
be taken into account.
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2. Deciding whether to go global.
Not all companies decide to dive into international markets. Local businesses only need to be
present in their local marketplace. However, companies that operate in global industries often are
strongly affected by global positions.
3. Deciding which markets to enter.
Before going abroad, the company should define their international marketing objectives and
policies. Most companies start small when they go abroad. Firms need to choose how many
countries and the types of countries to enter.
4. Deciding how to enter the market.
Once a company has decided upon entering a country, there are different modes of entry.
Exporting is entering a foreign market by selling goods produced in a company’s home country,
often with little modification.
Joint venturing is entering foreign markets by joining with foreign companies to produce or
market a product or services. Licensing is a method of entering a foreign market in which a
company enters into an agreement with a licensee in a foreign market. Contract manufacturing
is a joint venture in which a company contracts with manufacturers in a foreign market to
produce a product or provide a service. Management contracting: a joint venture in which a
domestic firm supplies the management know-how to a foreign company that supplies the
capital, the domestic firm exports management services rather than products. Joint ownership is
a joint venture in which a company joins investors in a foreign market to create local business in
which a company shares joint ownership and control.
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Direct investment means entering a foreign market by developing foreign-based assembly or
manufacturing facilities. The major global marketing decision is how much a firm should adapt
is marketing strategy to local markets.
5. Deciding on the global marketing programmed.
There are two extremes when deciding on adapting the marketing strategy. At one point is the
standardized global marketing: an international marketing strategy that basically uses the same
marketing strategy and mix in all of a company’s international markets. At the other end is
adapted global marketing: an international marketing strategy that adjusts the marketing
strategy and mix elements to each international target market, bearing more costs but hoping for
a larger market share and return.
There are five strategies that allow for adapting product and marketing communication strategies
to a global market. Three of them apply to the product, namely straight product extension,
product adaption and product invention. Straight product extension means marketing a product
in a foreign market without any change. Product adaption means adapting a product to meet
local conditions or wants in foreign markets. Product invention means creating new products or
services for foreign markets.
The other two apply to the communication strategy. Communication adaption means a global
communication strategy of fully adapting advertising messages to local markets. In dual
adaption, both the product and the communication strategy are adapted. Companies may also
consider adapting their prices.
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An international company must take a whole-channel view of the problem of distributing
products. A whole-channel view means designing international channels that take into account
the entire global supply chain and marketing channel, forging an effective global value delivery
network. It connects sellers with final buyers via channels between nations and channels within
nations.
6. Deciding on the global marketing organization.
Most companies manage their international marketing activities in three ways. First they
organize an export department, then create an international division and final become a global
organization. International divisions can be geographical organizations, world product groups or
international subsidiaries.
Today, major companies must become more global if they hope to compete.
Chapter 20:
Sustainable marketing
Sustainable marketing is socially and environmentally responsible marketing that meets the
present needs of consumers and business while also preserving or enhancing the ability of future
generations to meet their needs. Only satisfying consumers’ immediate needs, does not always
serve the future best interest of either customers or the business. The sustainable marketing
concepts considers both strategic planning and societal marketing.
Marketing receives much criticism. Many critics say that marketing causes prices to be higher,
because of three reasons. The high costs of intermediaries in the distribution channel lead to
price increases, as well as high advertising and promotion costs and excessive mark-ups. There is
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also criticism of deceptive practices. These can be because of deceptive pricing, deceptive
promotion and deceptive packaging. Deceptive practices have led to legislation and other
consumer protection actions.
Salespeople are sometimes accused of high-pressure selling, because they persuade people to
buy goods these consumers did not really wanted before. Another criticism concerns poor
product quality or function. Some companies have been accused of planned obsolescence,
causing their products to become obsolete on purpose, so that they need replacement. A final
piece of criticism is that of poor service to disadvantaged consumers.
Marketing also has an impact on society as a whole. Critics state that marketing is the cause of
creating false wants and materialism, of which the industry benefits but not so much the
customers. Businesses have also been accused of overselling private goods at the expense of
public goods. Marketing also supposedly led to the creation of cultural pollution. Because of
constant advertising, people’s minds are polluted with these messages.
Marketing also has an impact on other businesses. There are three big problems involved:
acquisition of competitors, marketing practices that create barriers to entry and unfair
competitive marketing practices.
Consumerism is an organized movement of citizens and government agencies to improve the
rights and power of buyers in relation to sellers. Traditional seller rights include:
 The right to introduce any product.
 The right to charge any price for a product, provided there is no discrimination.
 The right to send any amount on promotion, if it is not unfair.
 The right to use any product message, provided it is not misleading.
 The right to use buying incentive programmers, if they are not misleading.
Traditional buyers rights include:
 The right not buy a product that is offered for sale.
 The right to expect the product to be safe.
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 The right to expect the product to perform as claimed.
Consumer advocates also call for additional consumer rights:
 The right to be well informed.
 The right to be protected against questionable products.
 The right to influence products and marketing practices in ways that improve quality of
life.
 The right to consume in a way that will preserve the world for future generations.
Environmentalism is an organized movement of concerned citizens and government agencies to
protect and improve people’s current and future living environment. Modern environmentalists
are not against marketing, but just want people and organizations to operate with more care for
the environment. Environmental sustainability is a management approach that involves
developing strategies that both sustain the environment and produce profits for the company.
Environmental sustainability involves preserving the natural environment, while marketing
sustainability involves both the natural and social environments. There are generally four forms
of environmental sustainability.
1. Pollution prevention: eliminating or reducing waste before creation.
2. Product stewardship: minimising environmental impact throughout the entire life cycle
process.
3. New clean technology: developing new sets of environmental skills and capabilities.
4. Sustainability vision: creating a strategic framework for future sustainability.
In today’s world, environmental issues are high on the awareness list, but environmental policies
still vary widely from country to country. Marketers must take responsibility for sustainable
marketing.
There are five sustainable marketing principles:
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1. Consumer-oriented marketing: a principle of sustainable marketing that holds a
company should view and organize its marketing activities from the consumer’s point of
view.
2. Customer value marketing: a principle of sustainable marketing that holds a company
should put most of its resources into consumer value building marketing investments.
3. Innovative marketing: a principle of sustainable marketing that requires a company to
seek real product and marketing improvements.
4. Sense-of-mission marketing: a principle of sustainable that holds a company should
define its mission in broad social terms rather than narrow products terms.
5. Societal marketing: a principle of sustainable marketing that holds a company should
make marketing decisions by considering consumers’ wants, the company’s
requirements, consumer’s long-term interests and society’s long term interests.
Sustainable marketing calls for products that are not only pleasing, but also beneficial. Products
can be classified according to their degree of satisfaction and long term benefit. Deficient
products are products that have neither immediate appeal, nor long term benefits. Pleasing
products are products that give high immediate satisfaction, but may damage the consumer in
the long term. Salutary products are products that have low appeal but may benefit the
consumers in the long term. Desirable products are products that give both high immediate
satisfaction and high long-term benefits.
Good ethics are important in sustainable marketing. Increasingly, companies are responding to
need for guidelines of marketing ethics. Guidelines can’t resolve all the ethical decisions that
firms must make, but there are some general principles that can be applied. Ethical norms for
marketers include “do not harm”, “foster trust in the marketing system” and “embrace ethical
values”. Ethical values include honesty, responsibility, fairness, respect, transparency and
citizenship.
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The core of marketing is that firms will fulfill the needs of their customers. Sustainability goes
beyond the needs of today’s customers, but means having concern for tomorrow’s customers as
well.
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