Week 3

Marketing Mix – 4P’s

Marketing Plan Elements

SWOT Analysis

©South-Western College Publishing

SSWWOOTT

Things the company does well.Things the company does well.

Things the company does not do well.Things the company does not do well.

Conditions in the external environment that favor strengths.Conditions in the external environment that favor strengths.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Internal

External

Scanning the Marketing Environment

• The process of continually acquiring/interpreting info on the events occurring outside the organization to identify and interpret potential trends.

Scanning the Marketing Environment

Political and Legal Environment of Marketing

Federal Legislation

Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act

Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act

Regulate competitive

environment

Robinson-Patman Act Robinson-Patman ActRegulate pricing

practices

Wheeler-Lea Act Wheeler-Lea ActControl

falseadvertising

Regulatory Agencies

Consumer Product Safety Commission

Consumer Product Safety Commission

Federal Trade Commission

Federal Trade Commission

Food & Drug Administration

Food & Drug Administration

Protects consumer safety in and around their homes

Prevents unfair methods ofcompetition in commerce

Enforces safety regulations for food and drug products

Chapter 5: Developing a Global Vision

Rewards of Global Marketing

Having a global vision means…• Recognizing and reacting to

international marketing opportunities

• Using effective global marketing strategies

• Being aware of threats from foreign competitors

Importance of Global Marketing to the U. S.

• U.S. exports a fifth of industrial production. • One of every 5 jobs in U.S. is supported by

exports.• Every U.S. state has realized net employment

gains directly attributed to foreign trade.• U.S. businesses export over $800 billion in goods.• Exports account for 25 percent of U.S. economic

growth.• U.S. is world’s leading exporter of farm products.• Chemicals, office machinery and computers,

automobiles, aircraft, and electrical and industrial machinery make up almost half of all nonagricultural exports

• About half of U.S. merchandise imports are raw materials, capital goods, and industrial products

The Fear of Trade and Globalization

• Millions of Americans have lost jobs

• Millions fear losing jobs

• Threat of outsourcing if workers do not accept pay cuts

• Vulnerability to operations moving offshore

Benefits of Globalization

• Expands economic freedom

• Spurs competition

• Raises productivity and living standards

• Offers access to foreign capital, global export markets, and advanced technology

• Promotes higher labor and environmental standards

• Acts as a check on government power

Stages of Global Business Development

11

22

44

33

Companies operate in one country and sell into othersCompanies operate in one country and sell into others

Set up foreign subsidiaries to handle salesSet up foreign subsidiaries to handle sales

Virtual operationVirtual operation

Operate an entire line of business in another countryOperate an entire line of business in another country

External Environment Facing

Global Marketers

Natural ResourcesNatural Resources

Demographic MakeupDemographic Makeup

Economic and Technological Development

Economic and Technological Development

CultureCulture

Political StructurePolitical Structure

External Environment Facing Global Marketers

Political Structure and Actions

No private ownershipMinimal individual freedom

Little central governmentMaximum personal freedom

Government policies

Legal ConsiderationsTariff

Quota

Boycott

Exchange Control

Market Grouping

Trade Agreement

A tax levied on goods entering a country

Limit on the amount of a product entering a country

Exclusion of products from a country

Foreign exchange must be sold to a control agency

Common trade alliance

An agreement to stimulateinternational trade

The Uruguay Round made changes inworld trading practices:

Political and Legal Considerations

Entertainment, pharmaceuticals, integrated circuits, and software

Financial, legal, and accounting services

Agriculture

Textiles and apparel

Created a new trade organization: The World Trade Organization

Political and Legal Considerations

CAFTACAFTA NAFTANAFTA European UnionEuropean Union

Agreementsand Organizations

Agreementsand Organizations

Demographic Makeup

Marketing Considerations:

• Population density

• Urban or rural

• Personal income

• Age

Natural Resources

• Petroleum

• Foodstuffs

• Precious metal

• Timber

• Water

Shortages in Natural Resources

Create…

• International dependencies

• Shifts of wealth

• Inflation and recession

• Export opportunities if resources are abundant

• Stimulus for military intervention

Global Marketing Questions

• What are our options in selling abroad?

• How difficult is global marketing?

• What are the potential risks and returns?

Why “Go Global”?

• Earn additional profits• Leverage a unique product or

technological advantage• Possess exclusive market information• Saturated domestic markets• Excess capacity• Utilize “economies of scale”

Risk Levels for Global EntryReturn

Risk

Entering the Global Marketplace

Licensing Legal process allowing use of manufacturing/patents/knowledge

ContractManufacturing

Private-label manufacturing by a foreign country

Joint Venture Domestic firm buys/joins a foreign company to create new entity

Export Sell domestically produced

products to buyers in other countries

Direct Investment Active ownership of a foreign company/manufacturing facility

Export Intermediaries

Buyer for ExportBuyer for Export Assumes all ownership risks and sells globally for its own account.

Assumes all ownership risks and sells globally for its own account.

Export BrokerExport Broker Plays the traditional broker’s role

by bringing buyer and seller together.

Plays the traditional broker’s role by bringing buyer and seller

together.

Export AgentExport Agent Acts like a manufacturer’s agent

for the exporter in the foreignmarket.

Acts like a manufacturer’s agent for the exporter in the foreign

market.

Global Marketing Mix

One ProductOne Message

Product Adaptation

PromotionAdaptation

Product Invention

SameProduct

SameMessage

ChangeMessage

ChangeProduct

Place (Distribution)

• Adequate distribution is necessary for success in global markets– Some countries have complicated

systems– Lack of distribution infrastructure and

cultural differences create problems

• Innovative distribution systems can create competitive advantage

Pricing

• Must consider transportation and insurance costs, taxes, and tariffs

• Determine what customers will spend• Ensure that foreign buyers will

pay price• May need to simplify a product to

lower price• Don’t assume that low-income

countries are willing to accept lower quality

The Impact of the Internet

Chapter 6: Consumer Decision Making

Understanding Consumer Behavior

Consumer behavior

Consumer behavior

consumers make purchase decisions

consumers make purchase decisions

consumers use anddispose of product

consumers use anddispose of product

= HOW

Processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services, also includes factors that influence purchase decisions and the product use.

Consumer Decision-Making Process

Postpurchase Behavior

Postpurchase Behavior

PurchasePurchase

Evaluation of AlternativesEvaluation

of Alternatives

Information SearchInformation Search

Need RecognitionNeed Recognition

Cultural, Social, Individual and Psychological

Factors affect

all steps

Cultural, Social, Individual and Psychological

Factors affect

all steps

Need Recognition

Marketing helps consumers recognize an imbalance between

present status and preferred state.

Present Status

Present Status

Preferred State

Preferred State

InternalStimuli

External

Stimuli

Recognition of Unfulfilled Wants

• When a current product isn’t performing properly

• When the consumer is running out of a product

• When another product seems superior to the one currently used

Information SearchInternal Information Search

Recall information in memory

External Information search

Seek information in outside environment Nonmarketing controlled Marketing controlled

External Information Searches

Need More Information

More Risk Less knowledge

Less product experienceHigh level of interestLack of confidence

Less Risk More knowledge

More product experienceLow level of interest

Confidence in decision

Need Less Information

Evaluation of Alternativesand Purchase

Evoked Set

Purchase!

Analyze product attributesAnalyze product attributes

Rank attributes byimportance

Rank attributes byimportance

Use cutoff criteriaUse cutoff criteria

Consumer Decision-Making Process

CU

LTU

RA

L SO

CIA

L

PSYCHOLOGICAL

INDIVIDUAL

Need Recognition

1 InformationSearch

2 EvaluateAlternatives

3 Purchase 4

Consumer postpurchase evaluation process

Marketers can minimize cognitive dissonance through: Effective Communication Follow-up Guarantees, Warranties Service during and after the sale

Consumer Buying Decisions andConsumer Involvement

More Involvement

LessInvolvement

RoutineResponseBehavior

RoutineResponseBehavior

LimitedDecisionMaking

LimitedDecisionMaking

ExtensiveDecisionMaking

ExtensiveDecisionMaking

Five Factors of Consumer Involvement

1. Level of consumer involvement1. Level of consumer involvement

2. Length of time to make decision2. Length of time to make decision

3. Cost of good or service3. Cost of good or service

4. Degree of information search4. Degree of information search

5. Number of alternatives considered5. Number of alternatives considered

Continuum of Consumer Buying Decisions

Routine Response Behavior

• Little involvement in selection process

• Frequently purchased low cost goods• May stick with one brand• Buy first/evaluate later• Quick decision

Limited Decision Making

• Low levels of involvement• Low to moderate cost goods• Evaluation of a few alternative

brands• Short to moderate time to decide

Extensive Decision Making

• High levels of involvement• High cost goods• Evaluation of many brands• Long time to decide• May experience cognitive dissonance

Factors Determining the Level of Consumer

Involvement

SituationSituation

Social VisibilitySocial Visibility

InterestInterest

Perceived Risk of Negative Consequences

Perceived Risk of Negative Consequences

Previous ExperiencePrevious Experience

Marketing Implications of Involvement

High-involvement purchases require:High-involvement purchases require:

Extensive and informative promotion to target market

Extensive and informative promotion to target market

Low-involvement purchases require:Low-involvement

purchases require:

In-store promotion, eye-catching package design, and good displays.Coupons, cents-off,2-for-1 offers

In-store promotion, eye-catching package design, and good displays.Coupons, cents-off,2-for-1 offers

Factors Influencing Buying Decisions

Social Factors

Individual Factors

Psycho-logical Factors

Cultural Factors

CONSUMERDECISION-

MAKINGPROCESS

BUY /

DON’T BUY

Components of Culture

Sets of values, norms, attitudes, and other meaningful symbols that shape human behavior and the artifacts, or products, of that behavior as they are transmitted from one generation to the next.

• Values• Language• Myths• Customs• Rituals• Laws • Material artifacts

It is…PervasiveFunctionalLearnedDynamic

Value

Enduring belief that a specific mode of conduct is personally or socially preferable to another mode of conduct.

American Values• Success• Materialism• Freedom• Progress• Youth• Capitalism

Subculture

A homogeneous group of people who share elements of the overall culture as well as unique elements of their own group.

Social Class

A group of people in a society who are considered nearly equal in status or community esteem, who regularly socializeamong themselves both formally and informally, and who share behavioral norms.

• Occupation• Income• Education• Wealth• Other variables

1. Indicates which medium to use for advertising

2. Helps determine the best distribution for products

Social Class and Education

Source: U.S. Census, available at http://www.pbs.org/peoplelikeus/resources/stats.html, May 2005.

Social Influences on Consumer Buying Decisions

Identify and understand the social factors that affect consumer buying decisions.

• Reference groups• Opinion leaders• Family members

Reference Groups

Reference Groups

Direct

Indirect

Primary

Secondary

Aspirational

Nonaspirational

Social Factors

Direct IndirectReferenceGroups Primary Secondary Aspirational Nonaspirational

OpinionLeaders

Peopleyou know

Socialization Process

Family

Celebrities

Initiators Decision Makers Consumers

Influencers Purchasers

Relationships among Purchasers and Consumers in the Family

Individual Influences onConsumer Buying Decisions

• Gender• Age • Life cycle• Personality, self-

concept• Lifestyle

• Perception• Motivation• Learning• Beliefs & Attitudes

Marketing Implications of Perception

• Important attributes

• Price

• Brand names

• Quality and reliability

• Threshold level of perception

• Product or repositioning changes

• Foreign consumer perception

• Subliminal perception

Motivation: Maslow’s Hierarchy of Needs

Discussion Wrap Up

• Assignments due next week• Review schedule