Chapter 7 Analyzing business markets

Chapter 7 Analyzing business marketsWhat is organizational buying?

Organizational buying:The decision-making process by which formal organizations establish (vaststellen) the need for purchased products and services and identity, evaluate, and choose among alternative brands and suppliers.

The business market versus the consumer market- Business market:Consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others.

- Business markets have several characteristics that contrast sharply with those of consumers markets:- fewer, larger buyers-close supplier-customer relationship- professional purchasing business goods are often purchased by trained purchasing agents

- several buying influences more people typically influence business buying decisions

- multiple sales calls

- derived demand the demand for business goods is ultimately derived from the demand for consumer goods

- inelastic demand the total demand for many business goods and services is inelastic (not much affected by price changes)

- fluctuating demand the demand for business goods and services tends to be more volatile than the demand for consumer goods and services

- geographically concentrated buyers more than half of U.S. business buyers are concentrated in seven states

- direct purchasing business buyers often buy directly from manufacturers rather than through intermediaries, especially items that are technically complex or expensive

Buying situations

straight rebuy the purchasing department reorders on a routine basis and choose from suppliers on an approved list modified rebuy the buyer wants to modify product specifications, prices, delivery requirements or other terms new task a purchaser buys a product or service for the first timePurchasing agents (inkoopmedewerkers) are influential in straight-rebuy and modified-rebuy situations, whereas other department personnel are more influential in new-buy situations. Engineering personnel usually have a major influence in selecting product components, and purchasing agents dominate in selecting suppliers.

Systems buying and selling The buying center:

All members of the organization who play any of seven roles in the purchase decision process:

initiators those who request that something be purchased. They may be users of others in the organizationusers those who will use the product or serviceinfluencers people who influence the buying decision, ex. technical personneldeciders people who decide on product requirements or on suppliersapprovers people who authorize the proposed actions of deciders or buyersbuyers people who have formal authority to select the supplier and arrange the purchase termsgatekeepers people who have the power to prevent sellers or information from reaching members of the buying centre Buying center influences

Buying center targetingFour types of business customers can often be identified, with corresponding marketing implications:price-oriented customers (transactional selling), price is everything

solution-oriented customers (consultative selling), they want low prices but will respond to arguments about lower total cost or more dependable supply or service

gold-standard customers (quality selling), they want the best performance in terms of product quality, assistance, reliable delivery, and so on

strategic-value customers (enterprise selling), they want a fairly permanent sole-supplier relationship with your company

The purchasing/procurement process Purchasing orientationsThree company purchasing orientations:- buying orientation the purchasers focus is short term and tactical- procurement orientation buyers simultaneously seek quality improvements and cost reductions- supply chain management orientation purchasings role is further broadened to become a more strategic, value-adding operation Types of purchasing processesFour product-related purchasing processes:

routine products these products have low value and cost to the customer and involve little risk

leverage products these products have high value and cost to the customer but involve little risk of supply

strategic products these products have high value and cost to the customer and also involve high risk

bottleneck products these products have low value and cost to the customer but they involve some risk

Purchasing organization and administrationMarketers need to understand how business purchasing departments work. These departments purchase many types of products, and the purchasing process will vary depending on the types of products involved.

Stages in the buying process: problem recognition

general need description and product specification

supplier search

E-procurement

proposal solicitation

supplier selection

order-routine specification

performance review

Managing business-to-business customer relationships

The benefits of vertical coordination

The relationship between advertising agencies and clients illustrates these findings:in the relationship formation stage, one partner experienced substantial market growth

information asymmetry between partners was such that a partnership would generate more profits than if the partner attempted to invade the other firms area

at least one partner had high barriers to entry that would prevent the other partner from entering the business

dependence asymmetry existed such that one partner was more able to control or influence the others conduct

one partner benefited from economies of scale related to the relationship

Eight different categories of classified buyer-supplier relationships:basic buying and sellingbare bones

contractual transaction

customer supply

cooperative systems

collaborative

mutually adaptive

customer is king

Business relationships: risks and opportunismInstitutional and government marketsInstitutional market:Consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care.

Chapter 8 Identifying market segments and targetsTarget marketing involves three activities: market segmentation, market targeting, and market positioning.

Levels of market segmentation: Mass marketing:In this the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers.

Segment marketing

Flexible market offering:Consists of two parts: a naked solution containing the product and service elements that all segment members value, and discretionary options that some segment members value.

Niche marketing:Niche: a more narrowly defined group Local marketing

Customerization:Combination of operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice

Segmenting consumer markets: geographic segmentation:Calls for dividing the market into different geographical units such as nations, states, regions, counties, cities or neighborhoods

demographic segmentation:The market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationally, and social class. age and life-cycle stage

life stage gender

income

generation

social class

psychographic segmentation:Buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values.

Psychographics:

Is the science of using psychology and demographics to better understand consumersThe major tendencies of the four groups with higher resources are:innovators

thinkers

achievers

experiencers

The major tendencies of the four groups with lower resources are:believers

strivers

makers

survivors

behavioral segmentation:In this, buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product

decision rolesbehavioral variables

occasions

benefits

user status

usage rate

buyer-readiness stage

loyalty status

attitude

the conversion modelBases for segmenting business markets Marketing to small businesses Sequential segmentationMarket targeting Effective segmentation criteriaTo be useful, market segments must rate favourable on five key criteria:- measurable the size, purchasing power, and characteristics of the segments can be measured

- substantial the segments are large and profitable enough to serve

- accessible the segments can be effectively reached and served

- differentiable the segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs

- actionable effective programs can be formulated for attracting and serving the segments

Evaluating and selecting the market segments

Single-segment concentration

Supersegment:Is a set of segments sharing some exploitable similarity

selective specialization product specialization

market specialization

full market coverage

managing multiple segments

differentiated marketing costs Additional considerations segment-by-segment invasion plans

Mega marketing:Is the strategic coordination of economic, psychological, political, and public relations skills, to gain the cooperation of a number of parties in order to enter or operate in a given market.

updating segmentation schemes

Market partitioning:The process of investigating the hierarchy of attributes consumers examine in choosing a brand if they use phased decision strategies.

ethical choice of market targetsChapter 9 Creating brand equityWhat is brand equity?

Brand:

A product or service that adds dimensions that differentiate it in some way from other products or services designed to satisfy the same need.

The role of brands the scope of branding Branding:Is endowing products and services with the power of a brand.

Defining brand equity Brand equity:Is the added value endowed to products and services.

Customer-based brand equity:The differential effect that brand knowledge has on consumer response to the marketing of that brand

Brand knowledge:Consists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand

Brand equity as a bridge Brand promise:Is the marketers vision of what the brand must be and do for consumers

Brand equity modelsbrand asset valuator (BAV)Four key components of brand equity, according to BAV:

- differentiation measures the degree to which a brand is seen as different from others

- relevance measures the breadth of a brands appeal

-esteem measures how well the brand is regarded and respected

- knowledge measures how familiar and intimate consumers are with the brand

aaker model- core identify

- extended identify

brandzBRANDZ five steps:

- presence

Do I know about it?

- relevance

Does it offer me something?

- performance

Can it deliver?

-advantage

Does it offer something better than others?

- bonding

Nothing else beats it brand resonanceThe blocks of the brand resonance pyramid:

- brand salience relates to how often and easily the brand is evoked under various purchase or consumption situations

- brand performance relates to how the product or service meets customers functional needs

- brand imagery deals with the extrinsic properties of the product or service, including the ways in

which the brand attempts to meet customers psychological or social needs

- brand judgments focus un customers own personal opinions and evaluations

- brand feelings are customers emotional responses and reactions with respect to the brand

- brand resonance refers to the nature of the relationship that customers have with the brand and the extent to which customers feel that they are in sync with the brand.

Building Brand EquityFrom a marketing management perspective, there are three main sets of brand equity drivers:- the initial choices for the brand elements or identities making up the brand

- the product and service and all accompanying marketing activities and supporting marketing programs- other associations indirectly transferred to the brand by linking it to some other entity

Choosing Brand elementsBrand elements:Are those trademarkable devices that serve to identify and differentiate the brand

Brand element choice criteria (six)memorable how easily is the brand element recalled?

meaningful to what extent is the brand element credible and suggestive of the corresponding category?

likeability how aesthetically appealing do consumers find the brand element?

transferable can the brand element be used to introduce new products in the same or different categories?

adaptable how adaptable and updatable is the brand element?

protectible how legally is the brand element? How competitively protectible? Can it be easily copied?

Developing brand elements

Designing holistic marketing activitiesBrand contact:Can be defined as any information-bearing experience a customer or prospect has with the brand, the product category, or the market that relates to the marketers product or service.

Personalization Integration- Integrating marketing:Is about mixing and matching marketing activities to maximize their individual and collective effects

- Brand awareness:Is consumers ability to identify the brand under different conditions, as reflected by their brand recognition or recall performance

- Brand image:Is the perceptions and beliefs held by consumers, as reflected in the associations held in consumer memory

Internationalization- Internal branding:Is activities and processes that help to inform and inspire employees

Leveraging secondary associationsMeasuring brand equity

Brand audits:Is a consumer-focused exercise that involves a series of procedures to assess the health of the brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equityBrand inventoryThe purpose of this is to provide a current, comprehensive profile of how all the products and services sold by a company are marketed and branded.

Brand exploratory:Is research activity conducted to understand what consumers think and feel about the brand and its corresponding product category to identify sources of brand equity.

Brand tracking Tracking studies:Collect information from consumers on a routine basis over time

Brand valuation:Is the job of estimating the total financial value of the brand

Managing brand equity

Brand reinforcement

Brand revitalization

Brand crisis

Devising a branding strategy

Branding strategy:For a firm reflects the number and nature of common and distinctive brand elements applied do the different products sold by the firm.

When a firm introduces a new product, it has three main choices:- it can develop new brand elements for the new product

- it can apply some of its existing brand elements

- it can use a combination of new and existing brand elements

Brand extension:When a firm uses an established brand to introduce a new product

Sub-brand:When a new brand is combined with an existing brand, the brand extension can also be called so

Parent brand:An existing brand that gives birth to a brand extension

Family brand:If the parent brand is already associated with multiple products through brand extensions, then it may also be called so

Line extension:The parent brand is used to brand a new product that targets a new market segment within a product category currently served by the parent brand

Category extension:The parent brand is used to enter a different product category from that currently served by the parent brand

Brand line:Consists of all products sold under a particular brand

Brand mix:Is the set of all brand lines that a particular seller makes available to buyers

Branded variants:Specific brand lines supplied to specific retailers or distribution channels

Licensed product:Is one whose brand name has been licensed to other manufacturers who actually make the product

Branding decision: to brand or not to brand?Assuming a firm decides to brand its products or services, it must then choose which brand names to use. Four general strategies are often used:

- Individual names

- Blanket family names

- Separate family names for all products

- Corporate name combined with individual product names

Brand extensionsAdvantages of brand extensions

Two main advantages of brand extension are that they can facilitate new-product acceptance, as well as provide positive feedback to the parent brand and company. Disadvantages of brand extensionsBrand dilution:Occurs when consumers no longer associate a brand with a specific product of highly similar products and start thinking less of the brand.

Success characteristics Brand portfoliosReasons for introducing multiple brands in a category include:- to increase shelf presence and retailer dependence in the store

- to attract consumers seeking variety who may otherwise have switched to another brand

- to increase internal competition within the firm

- to yield economies of scale in advertising, sales, merchandising, and physical distribution

Brand portfolio:Is the set of all brands and brand lines a particular firm offers for sale to buyers in a particular category. Different brands may be designed and marketed to appeal to different marketed segments

Chapter 10 Crafting the brand positioningDeveloping and communicating a positioning strategy

Positioning:Is the act of designing the companys offering and image to occupy a distinctive place in the mind of the target market

Competitive frame of reference Category membership:The products or sets of products with which a brand competes and which function as close substitutes

Points-of-parity and points-of difference Points-of-difference (PODs):Are attributes or benefits consumers strongly associate with a brand, positively evaluate, and belief that they could not find to the same extent with a competitive brand. Points-of-parity (POPs):Are associations that are not necessarily unique to the brand but may in fact be shared with other brands

Points-of-parity versus points-of-differenceOnce the competitive frame of reference for positioning has been fixed by defining the customer target market and nature of competition, marketers can define the appropriate points-of-difference and points-of-parity associations.

Establishing category membership

There are three main ways to convey a brands category membership:

- announcing category benefits to reassure consumers that a brand will deliver on the fundamental reason for using a category, benefits are frequently used to announce category membership

- comparing to exemplars well-known, noteworthy brands in a category can also be used to specify category membership

- relying on the product descriptor the product descriptor that follows the brand name is often a concise means of conveying category origin

Choosing POPs and PODsThere are three key consumer desirability criteria for PODs:

1. relevance target consumers must find the POD personally relevant and important2. distinctions target consumers must find the POD distinctive and superior3. believability target consumers must find the POD believable and credibleThere are three key deliverability criteria:

1. feasibility the firm must be able to actually create the POD.

2. communicability it is very difficult to create an association that is not consistent with existing consumer knowledge or that consumers, for whatever reason, have trouble believing

3. sustainability is the positioning pre-emptive, defensible, and difficult to attack?

Creating POPs and PODs Present separately

Leverage equity of another entity

Redefine the relationshipDifferentiation strategies

product differentiation

personnel differentiation

channel differentiation

image differentiationProduct life-cycle marketing strategies

Product life clycles

The product live-cycle curve is typically divided into four stages:

1. introduction a period of slow sales growth as the product is introduced in the market. Profits are nonexistent because of the heavy expenses of product introduction

2. growth a period of rapid market acceptance and substantial profit improvement

3. maturity a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition

4. decline sales show a downward drift and profits erode

Style, fashion, and fad life cyclesWe need to distinguish three special categories of product life cycles: styles, fashions, and fads.

Marketing strategies: introduction stage and the pioneer advantage Marketing strategies: growth stage

The firm uses several strategies to sustain rapid market growth, for example: it improves product quality and adds new product features and improved styling

it enters new market segments it lower prices to attract the next layer of price-sensitive buyers

Marketing strategies: maturity stage

market modification

Volume = number of brand users x usage rate per userproduct modificationmarketing program modificationProduct managers might try to stimulate sales by modifying other marketing program elements, they should ask the following questions:- prices

would a price cut attract new buyers?

- distribution

can the company obtain more product support and display in existing outlets?

- advertising

should advertising expenditures be increased?

- sales promotionshould the company step up sales promotion?- personal sellingshould the number or quality of salespeople be increased?

- services

can the company speed up delivery?

Marketing strategies: decline stage

Five strategies are available to the firm, some examples:

increasing the firms investment

divesting the business quickly by disposing of its assets as advantageously as possible

The product life-cycle concept: critiqueMarket evolution

emergencegrowth

maturity

declineChapter 11 Dealing with competitionCompetitive forces

There are five forces that determine the intrinsic long-run attractiveness of a market or market segment: industry competitors, potential entrants, substitutes, buyers, and suppliers. The threats these forces pose are as follows:

Threat of intense segment rivalry a segment is unattractive if it already contains numerous, strong, or aggressive competitors.

Threat of new entrants a segments attractiveness varies with the height of its entry and exit barriers

Threat of substitute products a segment is unattractive when there are actual or potential substitutes for the product.

Threat of buyers growing bargaining power a segment is unattractive if buyers possess strong or growing bargaining power

Threat of suppliers growing bargaining power a segment is unattractive if the companys suppliers are able to raise prices or reduce quantity supplied

Identifying competitors Industry concept of competition Industry:Is a group of firms that offer a product or class of products that are close substitutes for one another.

Number of sellers and degree of differentiation

The starting point for describing an industry is to specify the number of sellers and whether the product is homogeneous or highly differentiated. These characteristics give rise to four industry structure types:

1. pure monopoly

2. oligopoly

3. monopolistic competition

4. pure competition

Entry, mobility, and exit barriers Cost structure

Degree of vertical integration Vertical integration:Situation in which manufacturers try to control or own their suppliers, distributors, or other intermediaries

Degree of globalization Market concept of competition

Analyzing competitors Strategies Strategic group: A group of firms following the same strategy in a given target market

Objectives Strengts and weaknessesIn general, a company should monitor three variables when analyzing competitors:

1. share of market the competitors share of the target market

2. share of mind the percentage of customers who named the competitor in responding to the statement, Name the first company that comes to mind in this industry

3. share of heart the percentage of who named the competitor in responding to the statement, Name the company from which you would prefer to buy the product.

Selecting competitorsCompetitive Strategies for Market leadersExpanding the total market

New customers

More usage

Defending market share Position defense:Involves occupying the most desirable market space in the minds of the consumers, making the brand almost impregnable

Flank defense:Although position defense is important, the market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack.

Pre-emptive defense:A more aggressive maneuver is to attack before the enemy starts its offense.

Counteroffensive defense:The leader can meet the attacker frontally or hit its flank or launch a pincer movement.

Mobile defense:The leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification.

Contraction defense:Large companies sometimes recognize that they can no longer defend all of their territory

Expending market shareOther competitive strategies

Market-challenger strategiesDefining the strategic objective and opponent(s)

Choosing a general attack strategy

Frontal attack the attacker matches its opponents product, advertising, price, and distribution

Flank attack can be directed along two strategic dimensions geographic and segmental

Encirclement attack an attempt to capture a wide slice of the enemys territory through a blitz Bypass attack bypassing the enemy and attacking easier markets to broaden ones resource base Guerilla warfare consists of waging small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds

Choosing a specific attack strategyThe challenger must go beyond the five broad strategies and develop more specific strategies, some examples:

price discount

lower price goods

manufacturing-cost reduction

Market-follower strategiesFour broad strategies can be distinguished:

counterfeiter duplicates the leaders product and package and sells it on the black market or through disreputable dealers

cloner emulates the leaders products, name, and packaging, with slight variations

imitator copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing or location

adapter takes the leaders products and adapts or improves them

Market-nicher strategiesBalancing customer and competitor orientations

competitor-centered companies

customer-centered companiesChapter 12 Setting product strategyProduct characteristics and classifications

Product: Is anything that can be offered to a market to satisfy a want or need Product levels: the customer value hierarchy Customer value hierarchy

Each level adds more customer value, and the five constitute thisFive product levels (constitute a customer value hierarchy) in a circle. From outside to inside: potential product encompasses all the possible augmentations and transformations the product

or offering might undergo in the future

augmented product exceeds customer expectations

expected product a set of attributes and conditions buyers normally expect when they purchase this product

basic product nothing special, maybe things are not clean or something like that

core benefit the service or benefit the customer is really buying (ex. a hotel guest is buying rest and sleep)

Consumption system: The way the user performs the tasks of getting and using products and related services

Product classifications Durability and tangibilityAccording to durability and tangibility products can be classified into three groups:

1. nondurable goods are tangible goods normally consumed in one or few uses, like beer and soap.

2. durable goods are tangible goods that normally survive many uses: refrigerators, machine tools, and clothing

3. services are intangible, inseparable, variable, and perishable products

Marketers have traditionally classified products on basis of characteristics: durability, tangibility, and use (consumer or industrial). Each product type has an appropriate marketing-mix strategy. Consumer goods classification: convenience goods goods which are usually purchased frequently, immediately, and with a minimum of effort

shopping goods are goods that the consumer, in the process of selection and purchase, characteristically compares on such

bases as suitability, quality, price, and style

specialty goods have unique characteristics or brand identification for which a sufficient number of buyers are willing to make

a special purchasing effort.

unsought goods are those the consumer does not know about or does not normally think of buying, like smoke detectors

Industrial-goods classification: materials and parts are goods that enter the manufacturers product completely

capital items are long-lasting goods that facilitate developing or managing the finished product

supplies and business services are short-term goods and services that facilitate developing or managing the finished product

Differentiation

Product differentiation: form the size, shape, or physical structure of a product

features things that enhance the basic function of a product performance quality is the level at which the products primary characteristics operate conformance quality is the degree to which all the produced units are identical and meet the promised specifications durability a measure of the products expected operating life under natural or stressful conditions reliability a measure of the probability that a product will not malfunction or fail within a specified time period repairability a measure of the ease of fixing a product when it malfunctions or fails style describes the products look and feel to the buyer Design: the integrative force Design Is the totality of features that affect how a product looks and functions in terms of consumer

requirements

Services differentiation: ordering ease refers to how easy it is for the customer to place an order with the company

delivery refers to how well the product or service is delivered to the customer installation refers to the work done to make a product operational in its planned location customer training refers to training the customers employees to use the vendors equipment properly and efficiently customer consulting refers to data, information systems, and advice services that the seller offers to buyers maintenance and repair describes the service programs for helping customers keep purchased products in good working order

Product and brand relationships

The product hierarchy

The product hierarchy stretches from basic needs to particular items that satisfy those needs. We can identify six levels of the product hierarchy:

1. Need family the core need that underlies the existence of a product family

2. Product family all the product classes that can satisfy a core need with reasonable effectiveness

3. Product class a group of products within the product family recognized as having a certain functional coherence. Also known as product category

4. Product line a group of products within a product class that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels,or fall within given price ranges

5. Product type a group of items within a product line that share one of several possible forms of the product

6. Item (also called stockkeeping unit or product variant) a distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute.

Product systems and mixes Product system: A group of diverse but related items that function in a compatible manner

Product mix (also called product assortment): Is the set of all products and items a particular seller offers for sale

Product-line analysis Sales and profits

Market profile

Product-line length

Line stretching: occurs when a company lengthens its product line beyond its current ranged down-market stretch

up-market stretch

two-way stretch

Line filling

Line modernization, featuring, and pruning

Product-mix pricing We can distinguish six situations involving product-mix pricing:

product-line pricing companies normally develop product lines rather than single products and introduce price steps

optional-feature pricing many companies offer optional products, features, and services along with their main product

captive-product pricing captive products are necessary to the use of other products

two-part pricing consists of a fixed fee plus a variable usage fee

by-product pricing the production of certain goods (meats, petroleum products) often results in by-products

product-bundling pricing sellers often bundle products and features

- pure bundling occurs when a firm only offers its products as a bundle

- mixed bundling the seller offers goods both individually and in bundles

Co-branding and ingredient branding Co-branding (also called dual branding or brand bundling): In this two or more well-known existing brands are combined into a joint product and/or marketed

together in some fashion

Ingredient branding: Is a special case of co-branding. It involves creating brand equity for materials, components, or

parts that are necessarily contained within other branded products

Packaging, labelling, warranties, and guarantees

Packaging:All the activities of designing and producing the container for a product

Various factors have contributed to the growing use of packaging as a marketing tool: self-service

consumer affluence company and brand image innovation opportunity

Labeling

Warranties and guarantees

Chapter 13 Designing and managing servicesThe nature of services

Service industries are everywhere

Service: Is any act or performance that one party can offer to another that is essentially intangible and does

not result in the ownership of anything.

Categories of service mixFive categories of offerings can be distinguished:

1. pure tangible good the offering consists primarily of a tangible good such as soap, toothpaste, or salt. No services accompany the product

2. tangible good with accompanying services the offering consists of a tangible good accompanied by one or more services

3. hybrid the offering consists of equal parts of goods and services

4. major service with accompanying minor goods and services the offering consists of a major service along with additional services of supporting goods

5. pure service the offering consists primarily of a service

Distinctive characteristics of services: intangibilityThrough a number of marketing tools a positioning strategy could be made tangible:

1. place the exterior and interior should have clean lines

2. people personnel should be busy. There should be a sufficient number of employees to manage the workload

3. equipment computers, copying machines, desks should be and look state of the art

4. communication materials printed materials (text and photos) should suggest efficiency and speed5. symbols the name and symbol should suggest fast service

6. price the bank could advertise that it will deposit 5 in the account of any customer who waits in line for more than five minutes inseparability

variabilityThree steps service firms can take to increase quality control:

1. invest in good hiring and training procedures

2. standardize the service-performance process throughout the organization

3. monitor customer satisfaction

perishability

Marketing Strategies for service firms A shifting customer relationship

Holistic marketing for services

Managing service qualities

Customer expectations

There is a service-quality model that highlights the main requirements for delivering high service quality. The model identifies five gaps that cause unsuccessful delivery:

1. gap between consumer expectation and management perception

2. gap between management perception and service-quality specifications

3. gap between service-quality specifications and service delivery

4. gap between service delivery and external communications

5. gap between perceived service and expected service

Based on the model from above, the following five determinations of service quality are identified, in order of importance:

1. reliability the ability to perform the promised service dependably and accurately

2. responsiveness the willingness to help customers and to provide prompt service

3. assurance the knowledge and courtesy of employees and their ability to convey trust and confidence

4. empathy the provision of caring, individualized attention to customers

5. tangibles the appearance of physical facilities, equipment, personnel, and communication materials

Best practices of service-quality management:

strategic concept

top-management commitment

high standards

self-service technologies (SSTS)

monitoring systems

satisfying customer complaints

satisfying employees as well as customers

Managing service brands

Differentiation services

Developing brand strategies for services

choosing brand elements

establishing image dimensions

devising branding strategy

Managing product support services

Identifying and satisfying customer needs Life-cycle cost: Is the products purchase cost plus the discounted cost of maintenance and repair less the

discounted salvage value

Postsale service strategyChapter 14 Developing pricing strategies and programsUnderstanding pricing

How companies price

Consumer psychology and pricing

Reference prices:Pricing information a consumer retains in memory which is used to interpret and evaluate a new price

Price-quality inferences Price cues

Setting the price: Step 1: Selecting the pricing objectiveThe company first decides where it wants to position its market offering. The clearer a firms objectives, the easier it is to set price. A company can pursue any of five major objectives through pricing:

survival if companies are plagued with overcapacity, intense competition, or changing consumer wants maximum current profit companies estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, or rate of return on investment

maximum market share companies believe that a higher sales volume will lead to lower unit costs and higher long-run profit

maximum market skimming companies unveiling a new technology favor setting high prices to maximize market skimming

product-quality leadership Market-penetration pricing:Companies set the lowest price, assuming the market is price sensitive

Market-skimming pricing:Prices start high and are slowly lowered over time

Step 2: Determining demand Price sensitivity

Estimating demand curves

Most companies make some attempt to measure their demand curves using several different methods:

statistical analysis of past prices, quantities sold, and other factors can reveal their relationships

price experiments

surveys can explore how many units consumers would buy at different proposed prices.

Price elasticity of demand

Step 3: Estimating costs Types of costs and levels of production

Accumulated production

Experience curve / Learning curve:A decline in the average cost with accumulated production experience

Activity-based cost accountingActivity-based costing (ABC):Procedures that can quantify the true profitability of different activities by identifying their actual costs

Target costing:Deducting the desired profit margin from the price at which a product will sell, given its appeal and competitors prices.

Step 4: Analyzing competitors costs, prices and offers

Step 5: Selecting a pricing methodSix price-setting methods:

markup pricing pricing an item by adding a standard increase to the products cost

target-return pricing the firm determines the price that would yield its target rate of return on investment (ROI)

perceived-value pricing the value promised by the companys value proposition and perceived by the customer

value-pricing win loyal customers by charging a fairly low price for a high-quality offering

Everyday low pricing (EDLP):In retailing, a constant low price with few or no price promotions and special sales

High-low pricing:The retailer charges higher prices on an everyday basis but then runs frequent promotions in which prices are temporarily lowered below the EDLP level

going-rate pricing the firm bases its price largely on competitors prices

auction-type pricing sales on electronic marketplaces

Step 6: Selecting the final price

Impact of other marketing activities Company pricing policies

Gain-and-risk-sharing pricing

Impact of price on other partiesPricing methods narrow the range from which the company must select its final price. In selecting that price, the company must consider additional factors, including the impact of other marketing activities, company pricing policies, gain-and-risk-sharing pricing, and the impact of price on other parties.

Adapting the price

Geographical Pricing (cash, counter trade, barter)

Counter trade:The practice that many buyers want to offer other items in payment

Price discounts and allowances

Promotional pricing

Differentiated pricingPrice discrimination:Occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs

Initiating and responding to price changes

Initiating price cuts Initiating price increases

Reactions to price changes

Customer reactions

Competitor reactions

Responding to competitors price changes

Chapter 15 Designing and managing value networks and channelsMarketing channels and value networks

Marketing channels:Are sets of interdependent organizations involved in the process of making a product or service available for use or consumption

The importance of channelsMarketing channel system:Is the particular set of marketing channels employed by a firm

Push strategy:Involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end users

Pull strategy:Involves the manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it

Channel developmentHybrid channels:Use of multiple channels of distribution to reach customers in a defined market

Different consumers have different needs during the purchase process. In many markets, buyers fall into one of four categories:

1. Habitual shoppers purchase from the same places in the same manner over time

2. High value deal seekers know their needs and channel surf a great deal before buying at the lowest possible price

3. Variety-loving shoppers gather information in many channels, take advantage of high-touch services, and then buy in their favorite channel, regardless of price

4. High-involvement shoppers gather information in all channels, make their purchase in a low-cost channel, but take advantage of customer support from a high-touch channel

Value networksDemand chain planning:The process of designing the supply chain based on adopting a target market perspective and working backward

Value network:A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings

The role of marketing channels

Why would a producer delegate some of the selling job to intermediaries? Delegation means relinquishing some control over how and to whom the products are sold. Producers do gain several advantages by using intermediaries: Many producers lack the financial resources to carry out direct marketing

Producers who do establish their own channels can often earn a greater return by increasing investment in their main business In some cases direct marketing simply is not feasible

Channel functions and flows Channel levels Zero-level channel / Direct-marketing channel:Consists of a manufacturer selling directly to the final customer

Service sector channelsDesigning a marketing channel system involves analyzing customer needs, establishing channel objectives, identifying major channel alternatives, and evaluating major channel alternatives.

Channel-design decisions

Analyzing customers desired service output levelsIn designing the marketing channel, the marketer must understand the service output levels desired by target customers. Channels produce five service outputs:

1. Lot size the number of units the channel permits a typical customer to purchase on one occasion

2. Waiting and delivery time the average time customers of that channel wait for receipt of the goods

3. Spatial convenience the degree to which the marketing channel makes it easy for customers to purchase the product

4. Product variety the assortment breadth provided by the marketing channel

5. Service backup the add-on services (credit, delivery, installation, repairs) provided by the channel

Establishing objectives and constraints Identifying major channel alternatives

Types of intermediaries (bemiddelaars) Number of intermediariesExclusive distribution:Severely limiting the number of intermediaries, in order to maintain control over the service level and outputs offered by resellers

Selective distribution:Involves the use of more than a few but less than all of the intermediaries who are willing to carry a particular product

Intensive distribution:Consists of the manufacturer placing the goods or services in as many outlets as possible

Terms and responsibilities of channel members Evaluating the major alternatives Economic criteriaChannel advantage:When a company successfully switches its customers to lower-cost channels, while assuming no loss of sales or deterioration in service quality.

Control and adaptive criteriaChannel-management decisions

selecting channel members

training channel members

motivating channel members

evaluating channel members

modifying channel members

After a company has chosen a channel alternative, individual intermediaries must be selected, trained, motivated, and evaluated. Channel arrangements must be modified over time. Channel power:The ability to alter channel members behavior so that they take actions they would not have taken otherwise

Channel integration and systems

Vertical marketing systemsConventional marketing channel:Comprises an independent producer, wholesaler(s), and retailer(s)

Vertical marketing system (VMS):Comprises the producer, wholesaler(s), and retailer(s) acting as a unified system

Corporate VMS Administered VMSDistribution programming:Building a planned, professionally managed, vertical marketing system that meets the needs of both manufacturer and distributors

Contractual VMSContractual VMSs now constitute one of the most significant developments in the economy. They are of three types:

Wholesaler-sponsored voluntary chains wholesalers organize voluntary chains of independent retailers to help them compete with large chain organizations

Retailer cooperatives retailers take the initiative and organize a new business entity to carry on wholesaling and possibly some production

franchise organizations a channel member called a franchisor might link several successive stages in the production-distribution process

The new competition in retailing Horizontal marketing systemsHorizontal marketing system:Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity

Multichannel marketing systemMultichannel marketing:Occurs when a single firm uses two or more marketing channels to reach one or more customer segments

Planning channel architectureDistribution channels do not stand still. New wholesaling and retailing institutions emerge, and new channel systems evolve. We will look at the recent growth of vertical, horizontal, and multichannel marketing systems.

Conflict, cooperation, and competition

Channel conflict:Is generated when one channel members actions prevent the channel from achieving its goal

Channel coordination:Occurs when channel members are brought together to advance the goals of the channel, as opposed to their own potentially incompatible goals

Types of conflict and competition Causes of channel conflict Managing channel conflict

Legal and ethical issues in channel relations

Tying agreements:Agreement in which producers of strong brands sell their products to dealers only if dealers purchase related products or services, such as other products in the brand line.E-Commerce marketing practices

E-business:Describes the use of electronic means and platforms to conduct a companys business

E-commerce:Means that the company or site offers to transact or facilitate the selling of products and services online.

E-purchasing:Means companies decide to purchase goods, services, and information from various online suppliers E-marketing:Describes company efforts to inform buyers, communicate, promote, and sell its products and services over the Internet

Pure-click:Companies which have launched a Web site without any previous existence as a firm

Brick-and-click:Existing companies that have added an online site for information and/or e-commerce

Pure-click companies the dot-com bubble

business-to-business e-commerce

Brick-and-click companies

Chapter 16 Managing, retailing, wholesaling, and logisticsRetailing

Retailing:Includes all the activities involved in selling goods or services directly to final consumers for personal, nonbusiness use

Retailer / Retail store:Is any business enterprise whose sales volume comes primarily from retailing

Types of retailers Levels of service

Retailers can position themselves as offering one of four levels of service:

Self-service is the cornerstone of all discount operations

Self-selection customers find their own goods, although they can ask for assistance

Limited service These retailers carry more shopping goods, and customers need more information and assistance

Full service salespeople are ready to assist in every phase of the locate-compare-select process

By combining these different service levels with different assortment breadths, we can distinguish the four broad positioning strategies available to retailers:

Bloomingdales stores that feature a broad product assortment and high value added

Tiffany stores that feature a narrow product assortment and high value added

Sunglass Hut stores that feature a narrow line and low value added

Wal-Mart stores that feature a broad line and low value added

Nonstore retailing falls into four major categories:

Direct sellingDirect marketing has roots in direct-mail and catalog marketing; it includes telemarketing, television direct-response marketing, and electronic shopping

Automatic vending is used for a variety of merchandise, including impulse goods like cigarettes, soft drinks etc.

Buying service is a storeless retailer serving a specific clientele who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership

Corporate retailing:Corporately owned retailing outlets that achieve economies of scale, greater purchasing power, wider brand recognition, and better-trained employees.

New models for succes Marketing decisions: target market

product assortment

procurement

Direct product profitability (DPP):Used by stores to measure a products handling costs from the time it reaches the warehouse until a customer buys it in the retail store.

services and store atmosphere

store activities and experiences

price decision

communication decision

location decision

Trends in retailingPrivate labels

Private label brand:Is one retailers and wholesalers develop

House brands The private label threat

Wholesaling

Wholesaling:Includes all the activities involved in selling goods or services to those who buy for resale or business use

The growth and types of wholesaling Wholesaler marketing decisions: target market

product assortment and services

price decision

promotion decision

place decision Trends in wholesaling

Market logistics

Supply chain management (SCM):Procuring the right inputs (raw materials, components, and capital equipment); converting them efficiently into finished products; and dispatching them to the final destinations.

Market logistics:Involves planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit

Integrated logistics systems (ILS):Materials management, material flow systems, and physical distribution, abetted by information technology (IT)

Market-logistics objectives Market-logistics decisions

Four major decisions must be made with regard to market logistics:

order processing

warehousing

inventory

transportation

Containerization:Consists of putting the goods in boxes or trailers that are easy to transfer between two transportation modes

Organizational lessonsChapter 17 Designing and managing integrated marketing communicationsThe role of marketing communications

Marketing communication:Are the means by which firms attempt to inform, persuade, and remind consumers about the products and brands that they sell.

Marketing communications and brand equityThe marketing communication mix consists of six major modes of communication:

Advertising any paid form of no personal presentation and promotion of ideas, goods, or services by an identified sponsor

Sales promotion a variety of short-term incentives to encourage trial or purchase of a product or service

Events and experiences company-sponsored activities and programs designed to create daily or special brand-related interactions

Public relations and publicity a variety of programs designed to promote or protect a companys image or its individual products

Direct marketing use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue form specific customers and prospects

Personal selling face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders

The communications process models Macromodel of the communication process:Selective attention the mental process of screening out certain stimuli while noticing others

Selective distortion receivers will hear what fits into their belief systems

Selective retention people will retain in long-term memory only a small fraction of the messages that reach them

Note that these processes bay be operating during communication

Micromodel of consumer responsesDeveloping effective communications: Identify the target audience

Image:The set of beliefs, ideas and impressions a person holds regarding an object

Determine the communication objectivesCommunications objectives can be set at any level of the hierarchy-of-effects model. There are four objectives identified:

Category need establishing a product or service category as necessary to remove or satisfy a perceived discrepancy between a current motivational state and a desired emotional state

Brand awareness ability to identify the brand within the category, in sufficient detail to make a purchase

Brand attitude evaluation of the brand with respect to its perceived ability to meet a currently relevant need

Brand purchase intention self-instructions to purchase the brand or to take purchase-related action

Design the communications Message strategy

Creative strategy

informational appeals

transformational appeals

Message source

Principle of congruity:Implies that communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience.

Select the communication channels Personal communication channels:Involve two or more persons communicating directly face-to-face, person-to-audience, over the telephone, or through e-mail Nonpersonal communications channels Integration of communications channels

Establish the total market communications budget

Four common methods how companies decide on the promotion budget:

affordable method (what a company thinks that they can afford)

percentage-of-sales method

competitive-parity method (some companies set their promotion budget to achieve share-of-voice parity with competitors)

objective-and-task method

Objective-and-task method:

1. Establish the market share goal2. Determine the percentage of the market that should be reached by advertising3. Determine the percentage of aware prospects that should be persuaded to try the brand4. Determine the number of advertising impressions per 1 percent trial rate5. Determine the number of gross rating points that would have to be purchased6. Determine the necessary advertising budget on the basis of average cost of buying a gross rating point

Deciding on the marketing communications mix

Characteristics of the marketing communications mix: AdvertisingQualities of advertising:

Pervasiveness advertising permits the seller to repeat a message many times

Amplified expressiveness advertising provides opportunities for dramatizing the company and its products through the artful use of print, sound, and color

Impersonality the audience does not feel obligated to pay attention or respond to advertising

Sales promotionCommunication they gain attention and may lead the consumer to the product

Incentive they incorporate some concession, inducement, or contribution that gives value to the consumer

Invitation they include a distinct invitation to engage in the transaction now

Public relations and publicityThe appeal of public relations and publicity is based on three distinctive qualities:

High credibility news stories and features are more authentic and credible to readers than ads

Ability to catch buyers off guard public relations can reach prospects who prefer to avoid salespeople and advertisements

Dramatization public relations has the potential for dramatizing a company or product

Events and experiencesThree advantages to events and experiences:

Relevant a well-chosen event or experience can be seen as highly relevant as the consumer gets personally involved

Involving given their live, real-time quality, consumers can find events and experiences more actively engaging

Implicit events are more of an indirect soft-sell

Direct marketingThe many forms of direct marketing share three distinctive characteristics. Direct marketing is:

Customized the message can be prepared to appeal to the addressed individual

Up-to-date a message can be prepared very quickly

Interactive the message can be changed depending on the persons response

Personal selling

Personal selling is the most effective tool at later stages of the buying process, particularly in building up buyer preference, conviction, and action. Personal selling has three distinctive qualities:

Personal interaction personal selling involves an immediate and interactive relationship between two or more persons. Each party is able to observe the others reactions

Cultivation personal selling permits all kinds of relationships to spring up, ranging form a matter-of-fact selling relationship to a deep personal friendship

Response personal selling makes the buyer feel under some obligation for having listened to the sales talk

Factors in setting the marketing communications mix Type of product marketAn effectively trained company sales force can make four important contributions:

Increased stock position sales reps can persuade dealers to take more stock and devote more shelf space to the companys brand

Enthusiasm building sales reps can build dealer enthusiasm by dramatizing planned advertising and sales promotion backup

Missionary selling sales reps can sign up more dealers

Key account management sales reps can take responsibility for growing business with the most important accounts

Buyer-readiness stageProduct life-cycle stage

Measuring communication results

Managing the integrated marketing communications process

Integrated marketing communications (IMC):A concept of marketing communications planning that recognizes the added value of a comprehensive plan

Coordinating media Implementing IMC

Chapter 18 Managing mass communications: advertising, sales promotions, events, and public relationsDeveloping and managing an advertising program

Advertising:Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor

Setting the objectives Advertising goal (or objective):Is a specific communications task and achievement level to be accomplished with a specific audience in a specific period of time

4 advertising goals:

Informative advertising aims to create brand awareness and knowledge of new products or new features of existing products Persuasive advertising aims to create liking, preference, conviction, and purchase of a product or service Reminder advertising aims to stimulate repeat purchase of products and services Reinforcement advertising aims to convince current purchasers that they made the right choice

Deciding on the advertising budgetFive specific factors to consider when setting the advertising budget::

Stage in the product life circle new products typically receive large advertising budgets to build awareness and to gain consumer trial

Market share and consumer base high-market-share brands usually require less advertising expenditure as a percentage of sales to maintain shareCompetition and clutter in a market with a large number of competitors and high advertising spending, a brand must advertise more heavily to be heard

Advertising frequency the number of repetitions needed to put across the brands message to consumers had an important impact on the advertising budget

Product substitutability brands in less-well-differentiated or commodity-like product classes require heavy advertising to establish a different image

Developing the advertising campaign

Message generation and evaluation

Creative development and execution television ads

print ads

radio ads

Social-responsibility review

To develop a message strategy, advertisers go through three steps: message generation and evaluation, creative development and execution, and social-responsibility review.

After choosing the message, the advertisers next task is to choose media to carry it. The steps here are deciding on desired reach, frequency, and impact; choosing among major media types; selecting specific media vehicles; deciding on media timing; and deciding on geographical media allocation. Then the results of these decisions need to be evaluated.

Deciding on media and measuring effectiveness Deciding on reach, frequency, and impact

Media selection:Is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience Choosing among major media types Alternative advertising options Place advertising:Is a broadly defined category that captures many different alternative advertising forms

Billboards Public spaces

Product placementBranded entertainment:Using sports, music, arts, or other entertainment activities to build brand equity

Point-or-purchase (P-O-P):The location where a purchase is made, typically thought of in terms of a retail setting

Evaluating alternative media Selecting specific vehicles

Deciding on media timing and allocation

Evaluating advertising effectiveness

Communication-effect research:Seeks to determine whether an add is communication effectively.

Sales-effect researchSales promotion

Sales promotion:A key ingredient in marketing campaigns, consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade

Objectives Advertising versus promotion

Major decisions

Establishing objectives

Selecting consumer promotion tools

Selecting trade promotion tools

Selecting business and sales force promotion tools

Developing the program

Pretesting, implementing, controlling, and evaluating the program

In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results.Events and experiences

Events objectivesMarketers report a number of reasons why they sponsor events:

To identify with a particular target market or life style

To increase awareness of company or product name

To create or reinforce consumer perceptions of key brand image associations

To enhance corporate image dimensions

To create experience and evoke feelings

To express commitment to the community or on social issues

To entertain key clients or reward key employees

To permit merchandising or promotional opportunities Major decisions

Choosing event opportunities

Designing sponsorship programs

Measuring sponsorship activities

Developing successful sponsored events involves choosing the appropriate events; designing the optimal sponsorship program for the event; and measuring the effects of sponsorship

Public relations

Public:Is any group that has an actual or potential interest in or impact on a companys ability to achieve its objectives.

Public relations (PR):Involves a variety of programs designed to promote or protect a companys image or its individual products

PR perform the following five functions:Press relations presenting news and information about the organization in the most positive light

Product publicity sponsoring efforts to publicize specific products

Corporate communications promoting understanding of the organization through internal and external communications

Lobbying dealing with legislators and government officials to promote or defeat legislation and regulation

Counseling advising management about public issues and company positions and image during good times and bad

Marketing public relations

Marketing public relations (MPR):Publicity and other activities that build corporate or product image to facilitate marketing goals

Publicity:The task of securing editorial space in print and broadcast media to promote or hype a product, service, idea, place, person, or organization.

Major decisions in marketing PR Establishing objectives

Choosing messages and vehicles

Implementing the plan and evaluating results

Chapter 19 Managing personal communications: direct marketing and personal sellingDirect marketing

Direct marketing:Is the use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen.

Direct-order marketing:Marketing in which direct marketers seek a measurable response, typically a customer order

The benefits of direct marketing Direct mail

Objectives

Target markets and prospects

Opper elements

Testing elements

Measuring campaign success: lifetime value

Catalog marketing

Telemarketing:

Is the use of the telephone and call centers to attract prospects, sell to existing customers, and provide service by taking orders and answering questions.

Other media for direct-response marketing TelevisionTelevision is used by direct marketers in several ways:

Direct-response advertising

At-home shopping channels

Videotext and interactive TV

Kiosk marketingInteractive marketing

The benefits of interactive marketing

Designing an attractive web site

Placing ads and promotion online

Banner ads:Are small, rectangular boxes containing text and perhaps a picture

Sponsorships:Are best placed in well-targeted sites where they can offer relevant information or service.

Microsite:Is a limited area on the Web managed and paid for by an external advertiser/company

Interstitials:Are advertisements, often with video or animation, that pop up between changes on a Web site.

Search-related ads:Ads in which search terms are used as a proxy for the consumers consumption interests and relevant links to product or service offerings are listed along side the search results.

Content-target advertising:Links ads not to keywords but to the content of Web pages

Alliances and affiliate programs:When one Internet company works with another one, they end up advertising each other

E-marketing guidelinesDesigning the sales forceThe term sales representative covers a broad range of six positions, ranging from the least to the most creative types of selling:

DelivererOrder takerMissionary a salesperson who is not expected or permitted to take an order but whose major task is to build goodwill or to educate the actual or potential userTechnicianDemand creator a salesperson who relies on creative methods for selling tangible products or intangiblesSolution vendor a salesperson whose expertise is in the solving of a customers problem, often with a system of the companys products and services Sales force objectives and strategy

Contractual sales force:Consists of manufacturers reps, sales agents, and brokers, who are paid a commission based on sales

Sales force structure

Sales force size

Sales force compensation

Managing the sales force: Recruiting and selecting representatives

Training and supervising sales representatives

Sales rep productivity Norms for prospect calls

Using sales time efficiently Motivating sales representativesMost marketers believe that the higher the salespersons motivation, the greater the effort and the resulting performance, rewards, and satisfaction and thus further motivation. Two assumptions:

Sales managers must be able to convince salespeople that they can sell more by working harder or by being trained to work smarter

Sales managers must be able to convince salespeople that the rewards for better performance are worth the extra effort

Evaluating sales representativesSources of information

Formal evaluation

Principles of personal selling

The six stepsMost trainers agree that selling is a six-step process:

Prospecting and qualifying

Preapproach

Presentation and demonstration

Overcoming objections

Closing

Follow-up and maintenance Negotiation

Relationship marketing

Chapter 20 Introducing new market offeringsChallenges in new-product development

Six categories of new products:

New-to-the-world products new products that create an entirely new market

New product lines new products that allow a company to enter an established market for the firs time

Additions to existing product lines new products that supplement established product lines (package sizes, flavors)

Improvements and revisions of existing products new products that provide improved performance or greater perceived value and replace existing products

Repositions existing products that are targeted to new markets or market segments

Cost reductions new products that provide similar performance at lower cost

4 principles to guide its new-product development:1. Work with potential customers

2. Let employees choose projects

3. Give employees dabble time all research associates 10 percent of their work hours developing their own ideas

4. Know when to let go sometimes dead ends in one area can spark an innovation in another

Organizational arrangements

Budgeting for new-product development

Organizing new-product development

Venture team: Is a cross-functional group charged with developing a specific product or business

Managing the development process: ideas

Idea generation Interacting with others

Creativity techniques

Idea screening

Managing the development process: concept to strategy

Concept development and testing

Concept development

Concept testing

Researchers measure product dimensions by having consumers respond to the following questions:

Communicability and believability Are the benefits clear to you and believable?

Need level Do you seek this product solving a problem or filling a need for you?

Gap level Do other products currently meet this need and satisfy you?

Perceived value Is the price reasonable in relation to the value?

Purchase intention Would you buy the products?

User targets, purchase occasions, purchasing frequency Who would use this product, and when and how often will the product be used?

Conjoint analysis:A method for deriving the utility values that consumers attach to varying levels of a products attributes

Marketing strategyBusiness analysis

Estimating total sales

Estimating costs and profits

Breakeven analysis:Management estimates how many units of the product the company would have to sell to break even with the given price and cost structure.

Risk analysis:A method by which possible rates of returns and their probabilities are calculated by obtaining estimates for uncertain variables affecting profitability

Managing the development process: development to commercialization Product development

Physical prototypes

Customer tests

Market testing

Consumer-goods market testingFour major methods of consumer-goods market testing, form the least to the most costly:

sales-wave research

simulated test marketing

controlled test marketing

test markets Business-goods market testing

Commercialization

when (timing)

where (geographic structure)

to whom (target-market prospects)

how (introductory market strategy)Critical path scheduling (CPS):Calls for developing a master chart showing the simultaneous and sequential activities that must take place to launch the product

The consumer-adoption process Adoption:Is an individuals decision to become a regular user of a product.

Stages in the adoption process Innovation:Is any good, service, or idea that is perceived by someone as new.

Innovation diffusion process:The spread of a new idea from its source of invention or creation to its ultimate users or adopters

Adopters of new products have been observed to move through five stages:

Awareness the consumer becomes aware of the innovation but lacks information about it

Interest the consumer is stimulated to seek information about the innovation

Evaluation the consumer considers whether to try the innovation

Trial the consumer tries the innovation to improve his or her estimate of its value

Adoption the consumer decides to make full and regular use of the innovation

Factors influencing the adoption process Readiness to try new products and personal influence

Personal influence:Is the effect one person has on anothers attitude or purchase probability. Characteristics of the innovation

Organizations readiness to adopt innovations

Chapter 21 Tapping to global marketsCompeting on a global basis

Global industry:Is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions

Global firm:Is a firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors

Deciding which market to enter How many markets to enter

Developed versus developing markets

Regional free trade zones

The European union

Nafta

Mercosul

Apec

Evaluating potential marketsDeciding how to enter the market

Indirect and direct exportA company can carry on direct exporting in several ways:

- Domestic-based export department or division

- Overseas sales branch or subsidiary

- Traveling export sales representatives

- Foreign-based distributors or agents

Using a global web strategy

Licensing

Joint ventures Joint venture: A company in which multiple investors share ownership and control

Direct investmentDeciding on the marketing program

Four cultural dimensions that can differentiate countries:

Individualism vs. collectivism

High vs. low power distance

Masculine vs. feminine

Weak vs. strong uncertainty avoidance

Product

Straight extension: Means introduction the product in the foreign market without any change

Product adaptation: Involves altering the product to meet local conditions or preferences

Product invention: Consist of creating something new

Backward invention: Is reintroducing earlier product forms that are well adapted to a foreign countrys needs

Forward invention: Is creating a new product to meet a need in another country

Communications Communication adaptation: A process in which companies can run the same marketing communications programs as used in

the home market or change them for each local market

Dual adaptation: Adapting both the product and the communications to the local market

Price

Price escalation: An increase in the price of a product due to added costs of selling it in different countries

Transfer price: The price a company charges another unit in the company for goods it ships to foreign subsidiaries

Because the cost escalation varies from country to country, the question is how to set the prices in

different countries. Companies have three choices:

Set a uniform price everywhere

Set a market-based price in each country

Set a cost-based price in each country Dumping: Occurs when a company changes either less than its costs or less than it charges in its home

market, in order to enter or win a market.

Arms-length price: The price charged by other competitors for the same or a similar product

Gray market: Consists of branded products diverted from normal or authorized distributions channels in the

country or product origin or across international borders.

distribution channels

Country-of-origin effects

Building country images

Consumer perceptions of country of origin

Deciding on the marketing organization Export department

International division

Global organizationThree organizational strategies:

- A global strategy treats the world as single market

- A multinational strategy treats the world as a portfolio of national opportunities

- A glocal strategy standardizes certain core elements and localizes other elements