Marketing Summary

Week 1 (1, 2, 3, 4, 20 till pg. 601)

1. Defining Marketing for the 21st Century

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

Note: A marketer is someone who seeks a response, a purchase, a vote, a donation from another party, called the prospect.

There are 8 demand states that are possible:1) Negative demand - Consumers dislike the product and may even pay to avoid it.2) Nonexistent demand - Consumers may be unaware of or uninterested in the product.3) Latent demand - Consumers may share a strong need that cannot be satisfied by an existing product. 4) Declining demand - Consumers begin to buy the product less frequently or not at all.5) Irregular demand - Consumer purchases vary on seasonal, monthly, weekly, daily, or even hourly basis.6) Full demand - Consumers are adequately buying all products put into the marketplace.7) Overfall demand - More consumers would like to buy the product than can be satisfied.8) Unwholesome demand - Consumers may be attracted to products that have undesirable social consequences. In all of the above marketers need to determine a plan of action to shift demand to a more desired state.

Marketplace is physical, such as a store you shop in. Marketspace is digital, as when you shop on the Internet. Metamarket describe a cluster of complementary products and services closely related in the minds of consumers, but spread across a diverse set of industries. (Ex. Automobile metamarket where there are cars, insurances, websites, mechanics etc.).

There are five types of needs for customers:1) Stated needs the customer wants an expensive car2) Real needs the customer wants a car whose operating cost, not initial price, is low.3) Unstated needs the customer expects good service from the dealer4) Delight needs the customer would like the dealer to include an onboard GPS navigation system.5) Secret needs the customer wants friends to see him or her as a savvy consumer.Offerings & Brands: Value proposition is a set of benefits that satisfy the needs that are addressed by the companies towards the customers. (ex. Apple is telling me that I might need a more HD screen and I need it).

In the new marketing environment societal forces have created new marketing behaviors, opportunities, and challenges: Network information technology Globalization Deregulation (less laws in order for more competition) Privatization (increases efficiency) Heightened competition Industry convergence Retail transformation Disintermediation (eBay, Yahoo etc. have created disintermediation in the delivery of products services) Consumer buying power Consumer information Consumer participation Consumer resistance (less brand loyalty)

Marketing Management Philosophies The Production Concept consumers prefer products that are widely available and inexpensive. >> production and distribution efficiency is important The Product Concept consumers prefer products offering the most quality, performance, or innovative features. >> continuous product improvement is important The Selling Concept consumers and businesses, if left alone, wont buy enough of the organizations product. >> transactions, not relations focus The Marketing Concept the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your target markets. >> customer focus, understanding needs and wants is important The Holistic Marketing Concept everything matters in marketing >> requires a broad. Integrated perspective.

Relationship marketing it aims to build mutually satisfying long-term relationships with customers, employees, marketing partners, and members of the financial community in order to earn and retain their business. >> Marketing network is the ultimate relationship where the relationships between the organization the key constituents is mint.Internal Marketing is an element of holistic marketing, and its task is to ensure that everyone in the organization embraces appropriate marketing principles.

2. Developing Marketing Strategies and Plans

The Value Chain

The firms success also depends on how well the company coordinates departmental activities to conduct core business processes. These processes include: The market-sensing process. All the activities in gathering and acting upon information about the market The new-offering realization process. All the activities in researching, developing and launching new high quality offerings quickly and with budget. The customer acquisitions process. All the activities in building deeper understanding, relationships, and offerings to individual customers The fulfillment management process. All the activities in receiving and approving orders, shipping the goods on time, and collecting payment.

A core competency has three characteristics: (1) it is a source of competitive advantage and makes a significant contribution to perceived customer benefits. (2) it has applications in a wide variety of markets. (3) it is difficult for competitors to imitate

Corporate and Division Strategic Planning

The four planning activities that all companies take are:1) Defining the corporate missionOrganization develop mission statements to share with managers, employees, and customers. A clear, thoughtful mission statement provides a shared sense of purpose, direction, and opportunity. Ex. Googles mission >> To organize the worlds information and make it universally accessible and useful.2) Establishing strategic business unitsA business can define itself in terms of three dimensions: customer groups, customer needs, and technology. A strategic business unit has thee characteristics: (1) it is a single business, or a collection of related businesses, that can be planned separately from the rest of the company (2) it has its own set of competitors (3) it has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit.

3) Assigning resources to each strategic business unitThe GE/McKinsey Matrix classifies each strategic business unit by the extent of its competitive advantage and the attractiveness of its industry. The BCG's Growth-Share Matrix uses relative market share and annual rate of market growth as criteria to make investment decisions (dogs, cash cows, question mark and stars)4) Assess growth opportunitiesIntensive growth where the first course of action is to review the opportunities for existing businesses. Integrative growth where a business can increase sales and profits through backward, forward, or horizontal integration within its industry. Diversification growth where the goal is to add attractive, unrelated businesses.

Scenario analysis - it develops plausible representations of a firm's possible future using assumptions about forces driving the market and different uncertainties.

Business Unit Strategic PlanningEach business needs to have a business mission.

1) SWOT Analysis: External Environment (Opportunity & Threat)There are two main sources of market opportunities: (1) to offer something that is in short supply (2) supply an existing product or service in a new superior way

Above is an example applicable for the TV lighting equipment, of what the opportunities and threats are externally.

1) SWOT Analysis: Internal Environment (Strengths & Weaknesses)Each business needs to evaluate its internal strengths and weaknesses.

2) Goal formulation - Once a company has performed a SWOT analysis it then needs to develop specific goals.Most business units pursue a mix of objectives, including profitability, sales growth, market share improvement etc. The business unit sets these objectives and then manages by objectives (MBO) >> four criteria need to be met in order for the MBO to work: They must be arranged hierarchically, from most to least important. Objectives should be quantitative whenever possible. Goals should be realistic Objectives must be consistent

3) Strategy FormulationGoals indicate what a business unit wants to achieve; strategy is a game plan for getting there.

Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking: Overall cost leadership Differentiation Focus >> focus on narrow segments and pursues either cost or differentiation leadership

Many strategic alliances take the form of marketing alliances. These fall into four major categories (examples on pg. 73): Product or service alliances - One company licenses another to produce its product, or two companies jointly market their complementary products or a new product. Promotional alliances - One company agrees to carry a promotion for another company's product or service. Logistics alliances - One company offers logistical services (the way you coordinate products from one place to another) for another company's product. Pricing collaborations - One or more companies join in a special pricing collaboration.

4) Program Formulation & Implementation5) Feedback & Control

Product PlanningA marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach the marketing objective. Planning is a continuous process to respond to rapidly changing market conditions.

A marketing plan usually contains the following sections: Executive summary and table of contents Situation analysis Marketing strategy Financial projections Implementation controls

3. Collecting Information & Forecasting DemandComponents of a Modern Marketing Information SystemA marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.

a) Internal RecordsTo spot important and potential problems, marketing managers rely on internal reports of order, sales, prices, costs, inventory levels, receivables, and payables The Order-to-Payment Cycle: orders are sent to the firm, sales departments prepare invoices etc., items can then be shipped Sales Information Systems - Marketing managers need timely and accurate reports on current sales. Databases, Data Warehousing and Data Mining - mining is when analysts find fresh insights in customer trends, neglected customer segments etc.

b) Marketing IntelligenceA marketing intelligence system is a set of procedures and sources that managers use to obtain everyday information about developments in the marketing environment. There are five main ways marketers can research competitors' product strengths and weaknesses online:1) Independent customer goods and service review forums2) Distributor or sales agent feedback sites3) Combo sites offering customer reviews and expert opinions4) Customer complaint sites5) Public blogs

c) Analyzing the MicroenvironmentFad: products which are unpredictable, short-lived, and without social, economic, and political significanceTrend: product which has a direction or sequence of events with momentum and durabilityMegatrend: a large social, economic, political, and technological change that is slow to form and once in place, influences us for years to come or even decades

Cohorts - groups of individuals born during the same time period who travel trough life together.

Consumerist movement organized citizens and government to strengthen the rights and powers of buyers in relationship to sellers.

Forecasting & Demand Measurement

There are many productive ways to break down the market: Potential market is the set of consumers with a sufficient level of interest in a market offer. They need to have enough income and access to the product. Available market is the set of consumers who have interest, income, and access to a particular offer. For some products (alcohol) there are restrictions so there is qualified available market the set of consumers who have interest, income, access, and qualifications for the market offer. Target market is the part of the qualified available market the company decides to pursue. Penetrated market is the set of consumers who are buying the companys product.A Vocabulary for Demand Measurement Marker demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Market-penetration index >> A low index indicates substantial growth potential for all the firms. A high index suggests it will be expensive to attract the few remaining prospects. Share-penetration index >> If this index is low, the company can greatly expand its share. A firm should calculate the share-penetration increases from removing each factor, to see which investments produce the greatest improvement. Product-penetration percentage >> the percentage of ownership or use of a product or service in a population. Companies assume that the lower the product-penetration percentage, the higher the market potential, although this also assumes everyone will eventually be in the market for every product. Market-buildup method >> identifying all the potential buyers in each market and estimating their potential purchases.

4. Conducting Marketing ResearchMarketing insights provide diagnostic information about how and why we observe certain effects in the marketplace, and what that means to marketers.

Marketing research firms fall into three categories:- Syndicated-service research firms These firms gather consumer and trade information, which they sell for a fee. - Custom marketing research firms These firms are hired to carry out specific projects. They design the study and report the findings.- Specialty-line marketing research firms These firms provide specialized research services. The best example is the field-service firm, which sells field-interviewing services to other firms.

The Marketing Research Process

Step 1: Define the Problem & the Research ObjectivesThe problem needs to be specific so that only useful information can be collected. Some research is exploratory, some research is descriptive, and some research is causal (its purpose is to test a cause and effect relationship).

Step 2: Develop the Research PlanSecondary or primary data (questionnaires) can be collected. Observational Research Approach: Researchers can gather fresh data by observing the relevant actors and settings unobtrusively as they shop or consume products. Ethnographic research is a particular observational research approach that uses concepts and tools from anthropology and other social science disciplines to provide deep understanding. Focus Group Research Approach: gathering of 6 to 10 people carefully selected by researchers based on certain demographic, psychographic, or other similarities. Survey Research Approach Behavioral Research Approach: Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Marketers can learn much by analyzing statements they offer to market researchers. Experimental Research Approach: This is the most scientifically valid research type. Qualitative Research Approach: word association (ask subjects what words come to mind when they hear the brands name), projective techniques (give people an incomplete stimulus and ask people to complete it), visualization (requires people to create a collage from magazine photos or drawings to depict their perceptions), brand personification (ask subjects what kind of person they think of when the brand is mentioned, laddering (a series of increasingly specific why questions)

After deciding on the research approach and instruments, the marketing researcher must design a sampling plan. This calls for three decisions: Sampling unit: Whom should we survey? Sample size: How many people should we survey? Sampling procedure: How should we choose the respondents?

Step 3: Collect the InformationStep 4: Analyze the InformationStep 5: Present the FindingsStep 6: Make the Decision

Measuring Marketing ProductivityMarketing metrics the set of measures that helps them quantify, compare, and interpret their marketing performance.

As input to the marketing dashboard, companies should include two key market-based scorecards that reflect performance and provide possible early warning signals: Customer-performance scorecard which records how well the company is doing year after year on customer-based measures Stakeholder-performance scorecard, which tracks the satisfaction of various constituencies who have a critical interest in and impact on the companys performance: employees, suppliers, banks, distributors, retailers, and stockholders.

20. Introducing New Market Offerings (till. Pg. 601)

Interacting with the following can generate new ideas: Customers (surveys, brand community, brainstorm sessions etc.) Employees (monetary, allow off time, holiday etc.) Scientists, engineers, channel members, top management (open innovation, crowdsourcing ideas) Study competitors

Week 2 (5, 8, 12, 13)

5. Creating Long-term Loyalty Relationships

Marketers must connect with customers informing, engaging, and maybe even energizing them in the process of marketing.

Building Customer Value, Satisfaction, and LoyaltyCustomers expect firms to listen and respond to their satisfactions.

Customer-perceived value (CPV) it is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives.Total customer benefit is the perceived monetary bundle of product, services, personnel, and image benefits customers expectTotal customer cost is the perceived bundle of costs customers expect to incur including monetary, time, energy and psychological costs.

Value proposition consists of the whole cluster of benefits the company promises to deliver.Value delivery system includes all the experiences the customer will have on the way to obtaining using the offering.

Satisfaction can be measured through periodic surveys, customer loss rate (contact those who have stopped buying), and hire mystery shoppers (pose as potential buyers and report on strong and weak points experienced in buying the products).

Note: recruiting new customers is more costly than keeping current one

PCV analysis:Step 1: identify major attributes/benefits that customers value Step 2: customers asked to rate/rank importance of these benefitsStep 3: map companys and competitors performanceStep 4: repeat this analysis regularlyThe higher the CPV, the more likely the customer will be satisfied.

To recover an unhappy customer the next procedures can be taken: Set up a 24-7 hotline (phone, email or fax), to receive and act on customer complaints. Contact the complaining customer as quickly as possible. Accept responsibility for the customers disappointment; dont blame the customer. Use customer service people who are empathic. Resolve the complaint swiftly and to the customers satisfaction.

Maximizing Customer Lifetime ValueCustomer profitability analysis (CPA) is best conducted with the tools of an accounting technique called activity-based costing (ABC). ABC tries to identify the real costs associated with serving each customer.Customer lifetime value (CLV) describes the net present value of the stream of future profits expected over the customers lifetime purchases.

Cultivating Customer RelationshipsCustomer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer touch points to maximize loyalty. This can be done through: personalizing marketing (Nike ID), customer reviews and recommendations, frequency programs (buy 5 get 1 free), club membership, and customer empowerment.

Defection (customer churn) is the loss of customers/clients.In order to reduce defection rate, the company must:- Define and measure retention rate (renewal rate is a good measure)- Distinguish the causes of customer attrition and identify those that can be managed better.- Compare the lost customers lifetime value to the costs of reducing the defection rate.

Customer Databases & Database MarketingCustomer database is an organized collection of comprehensive information about individual customers or prospects. Database marketing is the process of building, maintaining, and using customer databases and other databases (products, suppliers, resellers) to contact and build customer relationships.Databases can be used in 5 ways:1) To identify prospects 2) To decide which customers should receive a particular offer3) To deepen customer loyalty4) To reactivate customer purchases5) To avoid serious customer mistakes (ex. banks need to use a specific information about a specific person)

8. Identifying Market Segments & Targets

Market Segmentation1. Geographic Segmentation 2. Demographic Segmentationa) Age and Life-Cycle stages are important. Life Stage defines a persons major concern, such as going through a divorce, buying a new home etc. Gender is also important as well as income.

b) Generation is another important factor which demographic segmentation can be based upon. Millennial (Gen Y) are born between 1979 & 1994. They can be reached through: Online buzz Student ambassadors (firms getting involved in university research etc.) Unconventional sports Cool events Computer games Videos Street teams (groups handing out t-shirts, tags at teen targeted events)Baby boomers are born between 1946 and 1964.Silent generation >> born between 1925 and 1945.

c) Race and CultureThis also includes lesbian, gay, bi, and trans people.

3. Psychographic SegmentationPsychographics is the science of using psychology and demographics to better understand consumers.

The four groups with higher resources are: Innovators Successful, sophisticated active people with high self-esteem. Purchases often reflect cultivated tastes for relative upscale, niche-oriented products and services. Thinkers Mature, satisfied, and reflective people motivated by ideals and value order, knowledge. They seek durability, functionality, and value in products. Achievers Successful, goal oriented people who focus on career and family. Prefer premium products that demonstrate success to their peers. Experiencers Young, enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of on income on fashion, entertainment, and socializing.

The four groups with lower resources are: Believers Conservative, conventional, and traditional people with concrete beliefs. They prefer familiar brands. Strivers Trendy and fun loving people who are resource-constrained. They favor stylish products that emulate the purchases of those with greater material wealth. Makers Practical, down to earth, self-sufficient people who like to work with their hands. They seek US-made products with a practical or functional purpose. Survivors Elderly, passive people concerned about change and loyal to their favorite brands.

4. Behavioral SegmentationIn behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product.

Categories: Enthusiast Image Seeker (pay more to make sure they get the better) Savvy Shoppers (Cheap people) Traditionalist Satisfied Slippers (they buy what they kept buying, whatever) Overwhelmed (find these products confusing)

Marketers usually envision four groups based on brand loyalty status: Hard-core loyals Split loyals (loyal to 2 or 3 brands) Shifting loyals Switchers

Market TargetingTo be useful, market segments must rate favorably on five key criteria: Measurable size, purchasing power, and characteristics Substantial 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.Supersegment is a set of segments sharing some exploitable similarity.

12. Setting Product Strategy

Product Characteristics & ClassificationsEach level below adds more customer value, and the five constitute a customer-vale hierarchy: Core benefit: the service or benefit the customer is really buying Basic product: must turn the benefit into an actual product Expected product: a set of attributes and conditions buyers normally expect when they purchase this product. Augmented product: it exceeds the customer expectations Potential product: encompasses all the possible augmentations and transformations the product or offering might undergo in the future.

Products fall into three groups according to durability and tangibility:1) Nondurable goods are tangible goods normally consumed in one or a few uses. Strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference.2) Durable goods are tangible goods that normally survive uses. Normally require more personal selling and service, command a higher margin, and require more seller guarantees. 3) Services are intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility, and adaptivity.

Product & Services Differentiation Durability Reliability Reparability Style Ordering Ease Delivery Installation Customer Training Customer Consulting Maintenance & Repair

Product & Brand RelationshipsA product system is a group of diverse but related items that function in a compatible manner.

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 family2) 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.5) Product type A group of items within a product line that share one of several possible forms of the product.6) Item A group of items within a product line that share on of several possible forms of the product. (ex. term life insurance)

Line stretching >> lengthening the product line beyond the current range. Down-Market Stretch: A company positioned in the middle market may want to introduce a lower-priced line. (This can be done by using parent brand name, sub-brand, different brand) Up-Market Stretch: companies may wish to center the high end of the market to achieve more growth, realize higher margins, or simply position themselves as full-line manufacturers. Two-Way Stretch: Companies serving the middle market might stretch their line in both directions.

Product mix pricing the firm searches for a set of prices that maximizes profits on the total mix.Two-part pricing consisting of a fixed fee plus a variable usage fee.

Co-branding two or more well-known brands are combined into a joint product or marketed together in some fashion.Ingredient branding creates brand equity for materials, components, or parts that are necessarily contained within other branded products. (ex. Dolby noise reduction technology, GORE-TEX water-resistant fibers etc.).

Packaging, Labeling, Warranties, and GuaranteesVarious factors contribute to the growing use of packaging as a marketing tool: Self-service many stores are self-serving so packages need to describe the products features, create consumer confidence Consumer affluence Rising affluence means consumers are willing to pay a little more for the convenience, appearance, dependability, and prestige of better packages. Company and brand image Packages contribute to instant recognition of the company or brand. Innovation opportunity Unique or innovative packaging such as resalable spouts can bring big benefits to consumers and profits to producers.

13. Designing & Managing ServicesThe Nature of ServicesA service is any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything.

The service component can be minor or a major part of the total offering. We distinguish five categories of offerings:1. Pure tangible good2. Tangible good with accompanying services 3. Hybrid an offering like a restaurant meal, of equal parts goods and services.4. Major service with accompanying minor goods and services like air travel, with additional services or supporting goods5. Pure service

The next four distinctive service characteristics greatly affect the design of marketing programs:1. Intangibility suppose a bank wants to position itself as the fast: bank. It could make this positioning strategy tangible through place, people. Equipment, communication material, symbols, and price.2. Inseparability services are produced and consumed simultaneously, unlike tangible products (first made, distributed, sold, then consumed).3. Variability services are highly variable from good to bad. To increase quality control firms can: invest in good hiring and training procedures, standardize the service-performance process through the organization, and monitor customer satisfaction.4. Perishability demand and supple can be variable. To produce a better demand: Differential pricing Nonpeak demand McDonalds pusher breakfast service, hotels promote minivacation weekends. Complementary services Reservation servicesTo produce a better supply Part-time employees can serve peak demand Peak-time efficiency Increased customer participation Shared services Facilitates for future expansion (ex. a theme park buys terrain around)

Achieving Excellence in Services MarketingMarketing excellence with services requires excellence in three broad areas: External marketing describes the normal work of preparing, pricing, distributing, and promoting the service to customers. Internal marketing describes training and motivating employees to serve customers well. Interactive marketing describes the employees skill in serving the client.

Managing Service QualityThe service quality model highlights the main requirements for delivering high service quality. It identifies five gaps that cause unsuccessful delivery:1. Gap between consumer expectation and management perception2. Gap between management perception and service-quality specification (managers might correctly perceive customers wants but not set a performance standard.3. Gap between service-quality specifications and service delivery4. Gap between service delivery and external communications (the ads need to transmit something representative)5. Gap between perceived service and expected service (this gap occurs when the consumer misperceives the service quality)

Managing Product-Support ServicesCustomers have had three specific worries about product service: They worry about reliability and failure frequency They worry about downtime (the sellers ability to fix the machine quickly or at least provide a loaner) They worry about out-of-pocket costs

Life-cycle cost is the products purchase cost plus the discounted cost of maintenance and repair less the discounted salvage value.

Week 3 (14, 15, 16, 22)

14. Developing Pricing Strategies & Programs

Understanding PricingFor some years now, the Internet has been changing how buyers and sellers interact. Here is a short list of how the Internet allows sellers to discriminate between buyers, and buyers to discriminate between sellers.Buyers can: Get instant price comparisons from thousands of vendors Name their price and have it met Get products freeSellers can: Monitor customer behavior and tailor offers to individuals Give certain customers access to special pricesBuyers and sellers can: Negotiate prices in online auctions and exchanges or even in person

Companies do their pricing in a variety of ways. In small companies, the boss often sets prices. In large companies, division and product line managers do. Even here top management sets general pricing objectives and policies and often approves lower managements proposals.

Consumers use reference prices, which is comparing an observed price to an internal reference price they remember or an external frame of reference such as a posted regular retail price.When information about true quality is available, prices becomes a less significant indicator of quality. When this information is not available, price acts as a signal of quality.

Customers see an item prices at 299 as being in the 200 rather than the 300 range; they tend to process their prices left-to-right rather than by rounding.

Setting the Price

Step 1: Selecting the Pricing ObjectiveThe company first decides where it wants to position its market offering. Five major objectives are: survival, maximum current profit, maximum market share, maximum market skimming (products start at high prices and slowly drop over time, this is due to companies unveiling new technologies), and product-quality leadership.

Step 2: Determining DemandMost companies attempt to measure their demand curves using several different methods. Surveys Price experiments Statistical analysis

Step 3: Estimating CostsThere are: fixed costs (overhead), variable costs, total costs, and average costs.The experience curve/learning curve decline the average cost with accumulated production experience.

Target costing is a system under which a company plans in advance for the price points, product costs, and margins that it wants to achieve for a new product.

Step 4: Analyzing Competitors Costs, Prices, and Offers

Step 5: Selecting a Pricing Method Markup pricing (adding a standard markup to the products cost)Unit cost/(1-desired return on sales) Target-Return Pricing (the firm determines the price that yields its target rate of return on investment; public utilities often use this method) Perceived-value Pricing (perceived value is made up of a host of inputs, such as the buyers image of the product performance, the channel deliverables, the warranty quality, customer support, and softer attributes such as the suppliers reputation, trustworthiness, and esteem Value Pricing (charging customers a fairly low price for a high-quality offering) Going-rate pricing (the firm bases its price largely on competitors prices- in oligopolistic companies such as steel, paper, or fertilizer, all firms normally charge the same price) Auction-Type Pricing

Step 6: Selecting the Final Price

Adapting the PriceCompanies usually do not set a single price but rather develop a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels, delivery frequency, guarantees, service contracts, and other factors.

Many buyers want to offer other items in payment, a practice known as countertrade. Countertrade can take several forms: Barter (the buyer and the seller directly exchange goods, with no money and no third party involved) Compensation deal (the seller receives some percentage of the payment in cash and the rest in products) Buyback arrangement (the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment) Offset (the seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period)

Companies can use several pricing techniques to stimulate early purchase: loss-leader pricing (drop the price on well known brands to stimulate additional store traffic) Special event pricing Special customer pricing Cash rebats Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting

Initiating and Responding to Price ChangesA price-cutting strategy can lead to other possible traps: Low-quality trap-consumers assume quality is low Fragile-market-share trap-a low price buys market share but not market loyalty Shallow-pockets trap-higher priced competitors match the lower prices but have longer staying power because of deeper cash reserves. Price-war trap-Competitors respond by lowering their prices even more triggering a price war

15. Designing & Managing Integrated Marketing Channels

Marketing Channels and Value NetworksA marketing channel system is the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces.

Push strategy uses the manufacturers sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. This is applicable when there is low brand loyalty.Pull strategy the manufacturer uses advertising, promotion and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it. This is applicable when there is high brand loyalty.

Hybrid channels or multichannel marketing occurs when a single firm uses two or more marketing channels to reach customer segments.

The Role of Marketing ChannelsStorage and movement, title, and communications constitute a forward flow of activity from the company to the customer; other functions such as ordering and payment constitute a backward flow from customers to the company.

A zero-channel (direct marketing channel) consists of a manufacturer selling directly to the final customer.

consumer marketing channels

Channel-Design DecisionsChannels produce five service outputs: Lot Size-The number of units the channel permits a typical customer to purchase on one occasion Waiting and delivery time-The average time customers wait for receipt of goods. Spatial convenience-The degree to which the marketing channel makes it easy for customers to purchase the product. Product variety-the assortment provided by the marketing channel. Service backup-Add-on services provided by the channel.

Exclusive distribution means severely limiting the number of intermediaries.Selective distribution relies on only some of the intermediaries willing to carry a particular product.Intensive distribution places the goods or services in as many outlets as possible.

Channel power is the ability to alter channel members behavior so they take actions they would not have taken otherwise. Manufacturers can draw on the following types of power to elicit cooperation: Coercive power a manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. Reward power the manufacturer offers intermediaries an extra benefit for performing specific acts or functions. Legitimate power the manufacturer requests a behavior that is warranted under the contract. Expert power The manufacturer has special knowledge the intermediaries value. Referent power The manufacturer is so highly respected that intermediaries are proud to be associated with it.

Channel Integration and SystemsA conventional marketing channel consists of an independent producer, whole seller(s), and retailer(s). Each is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole.

A vertical marketing system (VMS), by contrast, includes the producer, wholesaler(s), and retailer(s) acting as a unified system.

Horizontal marketing system, in which two or more unrelated companies put together resources or program to exploit an emerging marketing opportunity.

An integrated marketing channel system is one in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels.

Conflict, Cooperation, and Competition Channel coordination occurs when channel members are brought together to advance the goals of the channel.

Types of channel conflicts: Horizontal channel conflict occurs between channel members at the same level. Vertical channel conflict occurs between different levels of the channel. Multichannel conflict exists when the manufacturer has established two or more channels that sell to the same market.

Causes of Chanel conflict: Goal incompatibility Unclear goals and rights Differences in perception Intermediaries dependence on the manufacturer

Channel conflicts can be managed through: Strategic Justification Dual compensation Superordinate goals channel members can come to an agreement on the fundamental or superordinate goal they are jointly seeking Employee exchange Joint memberships Co-option effort by one organization to win the support of the leaders of another by including them in advisory councils, boards of directors, and the like. Diplomacy, mediation, and arbitration Legal recourse file a lawsuit this is last resource that should be used

E-commerce uses a Web site to transact or facilitate the sale of products and services online.M-Commerce uses Web sites through telephones.

Pure-click firms that had launched a website without any previous existence as a firmBrick-and-click existing companies that have added an online site for information or e-commerce

16. Managing Retailing, Wholesaling, and Logistics

RetailingRetailing includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use.

Store retailers position themselves as offering one of four levels of service:1. Self-service2. Self-selection customers find their own goods, although they can ask for assistance3. Limited service these retailers carry more shopping goods and services such as credit and merchandise-return privileges. Customers need more information and assistance4. Full serviceNonstore retailing falls in four major categories:1. Direct selling door-to-door or at home sales parties2. Direct marketing it includes telemarketing, television direct-response marketing, and electronic shopping.3. Automatic vending offers a variety of merchandise, including impulse goods such as soft drinks, coffee, candy, newspapers, magazines, and other products such as hotdogs. 4. Buying service store less retailer serving a specific clientele

Stores are using direct product profitability (DPP) to measure a products handling costs (receiving, moving to storage, paperwork, selecting, checking, loading, and space cost) from the time it reaches the warehouse until a customer buys it in the retail store.

Retailers must decide on the service mix to offer customers: Prepurchase services include accepting telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion shows, and trade-ins. Postpurchase services include shipping and delivery, gift-wrapping, adjustments and returns, alterations and tailoring, installations, and engraving. Ancillary services include general information, check cashing, parking, restaurants, repairs, interior decorating, credit, rest rooms, and baby-attendant service.

WholesalingWholesaling includes all the activities in selling goods or services to those who buy for resale or business use.

In general, wholesalers are more efficient in performing one or more of the following functions:Selling and promoting, buying and assortment building, bulk breaking, warehousing, transportation, financing, risk bearing, market information, and management services and counseling.Market LogisticsSupply chain management (SCM) starts before physical distribution and means strategically procuring the right inputs, converting them efficiently into finished products, and dispatching them to the final destination.

Market logistics includes 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.

Each possible market-logistics system will lead to the following cost:

M + T + FW + VW + SM total market-logistics cost of proposed systemT total freight cost of proposed systemFW total fixed warehouse cost of proposed systemVW total variable warehouse costs of proposed systemS total cost of lost sales due to average delivery delay under proposed system

22. Managing a Holistic Marketing Organization for the Long Run

Internal MarketingInternal marketing requires that everyone in the organization accept the concepts and goals of marketing and engage in choosing, providing, and communicating customer value.

Many companies realize theyre not yet really market and customer driven they are product and sales driven. Transforming into a true market-driven company requires: Developing a company wide passion for customers Organizing around customer segments instead of products Understanding customers through qualitative and quantitative research

Socially Responsible MarketingMarketing needs to be socially responsible. This can be done by having: Legal behavior Ethical behavior Social responsibility behavior Sustainability the ability to meet humanitys needs without harming future generations

A successful cause-marketing program can improve social welfare, create differentiated brand positioning, build strong consumer bonds Specifically, from a branding point of view, cause marketing can (1) build brand awareness, (2) enhance brand image, (3) establish brand credibility, (4) evoke brand feelings, (5) create a sense of brand community, and (6) elicit brand engagement.

Social marketing by non-profit or government organizations furthers a cause, such as say no to drugs or exercise more and eat better.

A marketing audit is a comprehensive, systematic, independent, and periodic examination of a companys or business units marketing environment, objectives, strategies, and activities, with a view to determining problem areas and opportunities and recommending a plan of action to improve the companys marketing performance. Market audits four characteristics:1. Comprehensive the marketing audit covers all the major marketing activities of a business, not just a few trouble spots as in a functional audit.2. Systematic 3. Independent4. Periodic

Week 5 (9, 10, 11)

9. Creating Brand EquityBranding is endowing products and services with the power of a brand.Brand equity is added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands.

Customer-based brand equity is thus the differential effect brand knowledge has on consumer response to the marketing of that brand.

According to BrandAsset Valuator, there are four key components of brand equity: Energized differentiation measures the degree to which a brand is seen as different from others, and its perceived momentum and leadership. Relevance Esteem Knowledge how aware and familiar consumers are with the brand.

Creating significant brand equity requires reaching the top of the brand pyramid.

Brand salience is how often and how easily customers think of the brand under various purchase or consumption situations.Brand resonance describes the relationship customers have with the brand and the extent to which they feel theyre in sync with it.

Building Brand EquityThere 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 (a person, place, or thing)Brand elements are devices, which can be trademarked, that identify and differentiate the brand.

There are six criteria for choosing brand elements: memorable, meaningful, likable, transferable, adaptable, and protectable.

Internal branding consists of activities and processes that help inform and inspire employees about brands. When employees care about and believe in the brand, theyre motivated to work harder and feel greater loyalty to the firm. Some important principles for internal branding are: Choose the right moment Link internal and external marketing Bring the brand alive for employees

Measuring Brand EquityThe brand value chain is a structured approach to assessing the sources and outcomes of brand equity and the way marketing activities create brand value.

Devising a Branding StrategyA firms branding strategy (brand architecture) reflects the number and nature of both common and distinctive brand elements. Deciding how to brand new products is especially critical. A firm has three main choices:1. It can develop new brand elements for the new product2. It can apply some of its existing brand elements3. It can use a combination of new and existing brand elements

A company can choose one of the three brand names: Individual or separate family brand names Corporate umbrella or company brand name Sub-brand name (Kelloggs corn flakes, Kelloggs rice)

Brand dilution occurs when consumers no longer associate a brand with a specific or highly similar set of products and start thinking less of the brand.

10. Crafting the Brand PositioningDeveloping and Establishing a Brand PositioningThe competitive frame of reference defines which other brands a brand competes with and therefore which brands should be the focus of competitive analysis.Points-of-difference (PODs) are attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand.Points-of-parity (POPs) on the other hand, are attribute or benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands. For example, Starbucks could define very distinct sets of competitors, suggesting different possible POPs and PODs as a result:- Quick-serve restaurants and convenience shops (McDonalds and Dunkin Donuts)- Supermarket brands for home consumption (Folgers and NESCAFE)- Local cafesA brand mantra is an articulation of the heart and soul of the brand and is closely related to other branding concepts like brand essence and core brand promise. Here are three key criteria for a brand mantra:- Communicate- Simplify- InspireDifferentiation StrategiesThese are a few market offering with which companies can differentiate themselves: Employee differentiation Channel differentiation Image differentiation Services differentiationIn general, the firm should monitor three variables when analyzing potential threats posed by competitors: Share of market Share of mind if the company is on the consumers mind Share of heartFor small businesses the specific branding guidelines can be applied: Creatively conduct low-cost marketing research Focus on building one or two strong brands based on one or two key associations Employ a well-integrated set of brand elements Create buzz and a loyal brand community Leverage as many secondary associations as possible

11. Competitive DynamicsCompetitive Strategies for Market Leaders

Companies need to practice uncertainty management. Proactive firms: Are ready to take risks and make investments Have a vision of the future and of investing in it Have the capabilities to innovate Are flexible and no bureaucratic Have many managers who think proactively

Speed of response can make an important difference to profit. A dominant firm can use the six defense strategies summarized below: Position Defense occupying the most desirable market space in consumers minds, making the brand almost impregnable Flank Defense the market leader should erect outposts to protect a weak front or support a possible counterattack. Preemptive Defense A more aggressive maneuver is to attack first, perhaps guerrilla action across the market hitting on competitor here, another there and keeping everyone off balance. Counteroffensive Defense In a counteroffensive, the market leader can meet the attacker frontally and hit its flank, or launch a princer movement so it will have to pull back to defend itself. Mobile Defense In a mobile defense, the leader stretches its domain over new territories through market broadening and market diversification. Contraction Defense Sometimes large companies can no longer defend all their territory. They give up weaker markets and reassign resources to stronger ones.

Other Competitive StrategiesA market challenger must first define its strategic objective, usually to increase market share. The challenger must decide whom to attack: It can attack the market leader high risk but high payoff It can attack firms its own size that are not doing the job and are underfinanced It can attack small local and regional firmsGiven clear opponents and objectives, what attack options are available? We can distinguish five: Frontal Attack the attacker matches its opponents product, advertising, price, and distribution. Flank Attack identifying shifts that are causing gaps to develop, then rushing to fill the gaps. Encirclement Attack capture a wide slice of territory by launching a grand offensive on several fronts. Bypass Attack bypassing the enemy altogether to attack easier markets instead offers three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies. Guerrilla Attacks guerrilla attacks consist of small, intermittent attacks, conventional and unconventional, to harass the opponent and eventually secure permanent footholds.

The follower must define a growth path, but one that does not invite competitive retaliation. We distinguish four broad strategies: Counterfeiter Cloner emulates the leaders products, name, and packaging, with slight variations. Imitator copies some things from the leader but differentiate on packaging, advertising, pricing, or location. The leader doesnt mind as long as the imitator doesnt attack aggressively. Adapter takes the leaders products and adapts or improves them.

Product Life-Cycle Marketing StrategiesTo say a product has a life cycle is to assert four things: Products have a limited life Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller. Profits rise and fall at different stages of the product life cycle. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.

Week 6 (17, 18, 19)

17. Designing and Managing Integrated Marketing Communications

The Role of Marketing CommunicationsMarketing communications are the means by which firms attempt to inform, persuade, and remind consumers-directly or indirectly, about the products and brands they sell.

The marketing communication mix consists of eight major modes of communication: Advertising Sales promotion Events and experiences Public relations and publicity Direct marketing Interactive marketing Word-of-mouth marketing Personal selling

Developing Effective CommunicationsThere are eight steps in developing effective communications:1) Identify Target Audience potential buyers of the companys products, current users, deciders, or influencers, and individuals, groups2) Determine Objectives Category Need Brand Awareness Brand Attitude Brand Purchase Intention3) Design CommunicationsAn informational appeal elaborates on product or service attributes or expressed, as well as on its content.A transformational appeal elaborates on a nonproduct-related benefit or image.

4) Select ChannelsPersonal communications channels let two or more persons communicate face-to-face or person-to-audience through a phone, surface mail, or e-mail.

5) Establish Budget6) Decide on Media Mix7) Measure Results8) Manage integrated Marketing Communications

Deciding on the Marketing Communications MixEach communication tool has its own unique characteristics and costs: Advertising: pervasiveness, amplified expressiveness, control. Sales Promotion: ability to be attention-getting, incentive, invitation Public Relations & Publicity: High credibility, ability to reach hard-to-find buyer, dramatization. Events & Experiences: relevant, engaging, implicit Direct & Interactive Marketing: customized, up-to-date, interactive Word-of-mouth marketing: influential, personal, timely Personal Selling: personal interaction, cultivation, response

An Effectively trained company sales force can make four important contributions: Increase stock position Build enthusiasm Conduct missionary selling Manage key accounts

18. Managing Mass CommunicationsDeveloping and Managing an Advertising Program

An advertising objective is a specific communications task and achievement level to be accomplished with a specific audience in a specific period of time.

Here are five specific factors to consider when setting the advertising budget: Stage in the product life cycle Market share and consumer base Competition and clutter Advertising frequency Product substitutability

Deciding on Media and Measuring EffectivenessMedia selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience.

The effect of exposures on audience awareness depends on the exposures reach, frequency, and impact.

When launching a new product, the advertiser must choose among: Continuity means exposure appear evenly throughout a given period. Concentration calls for spending all the advertising dollars in a single period. Flighting calls for advertising during a period, followed by a period with no advertising, followed by a second period of advertising activity. Pulsing is continuous advertising at low-weight levels, reinforced periodically by waves of heavier activity.

Events & ExperiencesMarketers report a number of reasons to sponsor events: To identify with a particular target market or lifestyle To increase salience of company or product name To create or reinforce perceptions of key brand image association To enhance corporate image To create experiences 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 opportunitiesSupply-side methods approximate the amount of time or space devoted to media coverage of an event, for example, the number of seconds the brand is clearly visible on a television screen or the column inches of press clippings that mention it.Demand-side method identifies the effect sponsorship has on consumers brand knowledge.

Public RelationsPublic relations include a variety of programs to promote or protect a companys image or individual products. The best PR departments counsel top management to adopt positive programs and eliminate questionably practices so negative publicity doesnt arise in the first place. They perform the following five functions: Press relations Product publicity Corporate communications Lobbying Counseling

Marketing public relations goes beyond simple publicity and plays an important role in the following tasks: Launching new products Repositioning a mature product Building interest in a product category Influencing specific target groups Defending products that have encountered public problems Building the corporate image in a way that reflects favorably on its products

19. Managing Personal Communications

Direct MarketingDirect marketing is the use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen.Most direct marketers apply the REM (recency, frequency, monetary amount) formula to select customers according to how much time has passed since their last purchase, how many times they have purchased, and how much they spent since becoming a customer.

Designing the Sales Force

The term sales representative covers six positions, ranging from the least tot the most creative types of selling: Deliverer a salesperson whose major task is the delivery of a product Order taker Missionary a salesperson not permitted to take an order but expected rather to build goodwill or educate the actual or potential user Technician Demand creator Solution vendorA direct sales force consists of full or part-time paid employees who work exclusively for the company.A contractual sales force consists of manufacturers reps, sales agents, and brokers, who earn a commission based on sales.

Principles of Personal SellingReps are taught the SPIN method to build long-term relationships, with questions such as: Selling questions ask about facts or explore buyers present situation Problem questions deal with problems, difficulties, and dissatisfactions the buyer is experiencing ex: What parts of the system create errors? Implication questions ask about the consequences or effects of a buyers problems, difficulties, or dissatisfactions. Ex: how does this problem affect your peoples productivity? Need-payoff questions ask about the value or usefulness of a proposed solution ex: how much would you save if our company could help reduce errors by 80%?