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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Marketing Research
& Product Strategy
6
PowerPoint Presentation by
Ian Anderson, Algonquin College
Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Looking Ahead
After studying this chapter, you should be able to:
1. Describe small business marketing.
2. Discuss the nature of the marketing research process.
3. Explain the term market and methods of forecasting sales.
4. Identify the components of a formal marketing plan.
5. Define customer relationship management (CRM) and explain its importance to a small firm.
6. Discuss the significance of providing extraordinary customer service.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Looking Ahead
After studying this chapter, you should be able to:
7. Illustrate how technology, such as the Internet, can improve customer relationships.
8. Identify the key characteristics of consumer behaviour.
9. Explain product strategy and related concepts.
10. Describe the components of a firm’s total product offering.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
What is Small Business Marketing?
• Marketing
Activities directing the flow of goods and services from
producer to consumer or user.
• Small business marketing consists of those
business activities that relate directly to:
Identifying a target market
Determining target market potential
Preparing, communicating, and delivering a bundle of
satisfaction to the target market
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Essential Marketing Activities
• Market Analysis
An evaluation process that encompasses market
segmentation, marketing research, and sales
forecasting
• Marketing Mix
The combination of product,
pricing, promotion, and
distribution activities.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Marketing Philosophies Make a
Difference
• Consumer-Oriented
All marketing efforts begin and end with the customer; focus is on the consumer’s needs— this philosophy is the most consistent with long-term success of the firm
Production-Oriented
Emphasizes development of the product and production efficiencies over other activities
• Sales-Oriented
Favours product sales over production efficiencies and customer preferences
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Market Opportunity Assessment
• Industry analysis
• Competitive Analysis
• Market segmentation
• Customer market research:
– primary & secondary
• Estimating the opportunity based on a sales
forecast
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Creation of the Marketing Mix
• A Market Opportunity Assessment leads to
the creation of:
• The marketing mix
– Product strategy
– Pricing strategy
– Promotion strategy
– Distribution strategy
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The Nature of Marketing Research
• Steps In the Marketing Research Process
1. Identifying the informational need
Why do we need to know this?
2. Searching for secondary data
Who has researched this topic already?
3. Collecting primary data
Who do we ask and what do we ask them?
4. Interpreting the data
Got the information, now what does it mean? …continued
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
The Nature of Marketing Research
• Marketing Research
The gathering, processing, reporting, and interpreting of
market information
• Secondary Data
Market information that has been previously compiled by
others
May be internal or external
• Primary Data
New market information that is gathered by the firm
conducting the research
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Methods for Collecting Primary Data
• Observational
Methods
In person
Video
• Focus Groups
• Test Marketing
• Questioning
Methods
Surveys • Mail, Email, Web
• Telephone
Personal interviews
Experiments
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Ingredients of a Market
Ingredient 1
Customers:
People or
businesses
Ingredient 2
Purchasing
power:
Money/credit
Ingredient 3
Unsatisfied
needs
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Estimating Market Potential
• The Sales Forecast
A prediction of how much (in units and/or dollars) of a
product or service will be purchased within a market during a
specified period of time
Must be based on specific target market segments
An essential component of a business plan that:
• Assesses the new venture’s feasibility.
• Assists in planning for product
scheduling, setting inventory
levels, and personnel decisions
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Segmentation Variables
• Divide total market into segments
• Benefit variables Benefits consumers look for in products/services
• Geographic variables Location, size, composition, etc.
• Demographic variables Age, sex, education, income, occupation, etc.
• Psychographic variables How people think and behave (i.e. lifestyle trends)
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Figure 6-3
Dimensions of Forecasting Difficulty
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
The Forecasting Process:
Two Dimensions of Forecasting
• The Starting Point
Breakdown (top down)
Buildup process (bottom up)
• Calculate market size
• Calculate potential market share
– Production or retail capacity
– Competitive data
• Develop sales forecast
• Adjust to reflect competitive advantage
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
The Formal Marketing Plan
• Market Analysis
Customer profile
• A description of potential customers in a target market
Sales forecasts
• ―most likely,‖ ―pessimistic,‖ and ―optimistic‖
• The Competition
Identify industry leader(s)
Clarify industry key success factors (competitive factors)
Research individual competitors (strengths, weaknesses)
Analyze potential for success (Porter’s Five Forces) …continued
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
The Marketing Plan
• Marketing Strategy
Total product/service plan
• Decisions affecting the total product
Distribution plan
• Decisions regarding product delivery to customers
Pricing plan
• Setting an acceptable value on the product
Promotional plan
• Communicating information to the target market
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Customer Relationship Management
(CRM)
• CRM is a company-wide business strategy
designed to optimize profitability and customer
satisfaction by focusing on highly defined and
precise customer groups
• Modern CRM focuses on:
– Customers instead of products
– Changes in company processes, systems and culture
– All channels and media involved in the marketing effort
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Customer Relationship Management
(CRM)
• CRM programs focus on keeping existing
customers happy
• Economic benefits of CRM: – Acquisition costs for new customers are huge
– Long-time customers spend more money than new ones
– Happy customers refer their friends and colleagues
– Order-processing costs are higher for new customers
– Old customers will pay more for products
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Successful CRM Program
Exhibit 6-6
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Components of Customer Satisfaction
1. The most basic elements of the product/service
that customers expect all competitors to deliver.
2. General support services, such as customer
assistance.
3. A recovery process for counteracting bad
experiences.
4. Extraordinary services that excel in meeting
customers’ preferences and make the product or
service seem customized. 6-22
Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Ways to Provide Extraordinary
Service
• Naming Names
Greet customers by name.
• Custom Care
Know what your customers’ want.
• Keeping in Touch
Communicate frequently with
your customers.
• Boo-Boo Research
Ask lost customers why they went elsewhere.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Evaluating Customer Service
• Customer service problems are the main source of customer complaints.
• Popular approaches to creating customer service strategies: Providing an exceptional experience
Respond promptly to customers’ requests and concerns
Listen to customers and respond accordingly
Stand behind products/services
Treat customers as family members and stay in their hearts and minds
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Using Technology to Support CRM
• CRM software programs are designed to
help companies gather all customer contact
information into a single data management
program
– Interpersonal contact
– Emails, letters, faxes
– Phone calls
– Internet communication – FAQ, live chats
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Simplified Model of
Consumer Behaviour
Exhibit 6-8
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Stage 1 in
Consumer Decision Making
• Problem Recognition
The current state or a change in current state is not the ideal state of affairs due to:
• Change in financial status
• Change in household characteristics
• Normal depletion of a resource
• Product or service performance
• Past decisions
• Availability of products
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Stage 2 in
Consumer Decision Making
• Information Search and Evaluation
Evaluation criteria
• The features of a product or service that customers use
to compare brands.
Evoked set
• A group of brands that a customer
is both aware of and willing to
consider as a solution to a
purchase problem.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Stages 3 & 4 in
Consumer Decision Making
• Purchase decision
Deciding how and where to make the purchase decision:
• Store versus nonstore (catalogue, TV, and the Internet)
• Post-purchase evaluation
Cognitive dissonance
• The anxiety that occurs when a customer has second thoughts immediately following a purchase.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Purchase "This is the one
I want."
Post-Purchase
Dissonance
"Did I buy the
right one?"
Usage "I found another
use for…”
Product
Disposal "Can I trade this in?"
Positive
Evaluation
“It works great."
Negative
Evaluation “Doesn't work well."
Consumer
Complaints "I'm calling
the store."
No Repurchase
Repurchase
Post-Purchase Activities of Consumers
Exhibit 6-9
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Psychological Factors
Needs
• Physiological, social, psychological, and spiritual.
• Consumers’ needs are rarely completely satisfied.
• A service or product can satisfy more than one need.
Perceptions
• The individual processes that give meaning to the stimuli
confronting consumers.
• Perceptual categorization – grouping things together
– Brand loyalty (a perceptual barrier) makes it difficult
for competing brands to reach the loyal consumer.
…continued
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Psychological Factors
Motivations • Goal-directed forces that organize and give direction to the
tension caused by unsatisfied needs.
• Provide the behavioural impetus for consumers to act to fulfill a need.
• Marketing is motivation and does not create needs.
Attitudes • An enduring opinion based on knowledge, feeling, and
behavioural tendency.
…continued
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Sociological Factors
Culture
• Behavioural pattern and values that characterize
a group of consumers in a target market.
Social class
• Societal divisions that have different
levels of social prestige.
Reference groups
• Groups that an individual allows to influence his or her
behaviour.
Opinion leaders
• A group leader who plays a key communications role.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Product Strategy
• Product Strategy
The way the product component of the marketing mix is
used to achieve a firm’s objectives.
Product item
• The lowest common denominator in the product mix—the
individual item
Product line
• The sum of the related individual product items
Product mix consistency
• The similarity of product lines in a product mix
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Service Marketing versus Goods Marketing
Characteristics Pure Services
Marketing
Pure Goods
Marketing
Tangibility
Production/
Consumption
Standardization
Perishability
Intangible
goods
Occur at the
same time
Less
standardization
Greater
perishability
Tangible
goods
Occur at
different times
More
standardization
Less
perishability
Hybrid
Services/
Goods
Marketing
Exhibit 6-11
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Product Strategy
• One product / one market
• One product /multiple markets
• Modified product / one market
• Modified product / multiple markets
• Multiple products / one market
• Multiple products / multiple markets
Product strategy
alternatives:
• Convincing nonusers to become customers
• Persuading current customers to use more
• Alerting customers to new uses for the product
Growth tactics:
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Business Analysis
Product’s
relationship to
existing line
Costs of
Development and
Introduction
Available
Personnel and
Facilities
Competition and
Market
acceptance
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Building the Total Product Offering
• Branding A verbal and/or symbolic means of identifying a product.
• Rules for Naming a Product: Select a name that is easy to pronounce and remember.
Choose a descriptive name.
Use a name that can have legal protection.
Select a name with promotional properties.
Select a name that can be used on several product lines of a similar nature.
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Protecting a Product Offering
• Trademark
An identifying feature used to distinguish a
manufacturer’s product
• Service Mark
A legal term indicating the
exclusive right to use a
brand to identify a service.
Vinnie’s
Villa™
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Packaging, Labelling, and Warranties
• Packaging Colour, design, and protection for the product.
• Labelling Shows the brand and informs the consumer.
• Warranties A promise that the product will perform at a certain level or
meet certain standards.
• Implied and written warranties
• Policy considerations: Cost, service capability, competitive practices, customer perceptions, legal implications
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Chapter 6 Copyright © 2010 by Nelson Education Ltd.
Business Marketing
• Shorter distribution channels
• Greater emphasis on personal selling
– Buyer-seller relationship is closer
• Greater reliance on promotion such as tradeshows
• Greater Web integration with key business clients
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