Chapter 7 Analyzing business markets

What 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 isinelastic (not much affected by price changes)- fluctuating demand → the demand for business goods and services tends to bemore 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 andmodified-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 purchasedecision 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 informationfrom 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 everythingsolution-oriented customers → (consultative selling), they want low prices but will respond to arguments about lower total cost or more

dependable supply or servicegold-standard customers → (quality selling), they want the best performancein terms of product quality, assistance, reliable delivery, and so onstrategic-value customers → (enterprise selling), they want a fairly permanent sole-supplier relationship with your company

The purchasing/procurement process• Purchasing orientations→Three company purchasing orientations:- buying orientation → the purchaser’s focus is short term and tactical- procurement orientation → buyers simultaneously seek quality improvements andcost reductions- supply chain management orientation → purchasing’s role is further broadened tobecome 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 riskleverage 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 riskbottleneck products → these products have low value and cost to the customer but they involve some risk

• Purchasing organization and administration

Marketers 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 substantialmarket growthinformation asymmetry between partners was such that a partnership wouldgenerate more profits than if the partner attempted to invade the

other firm’s areaat least one partner had high barriers to entry that would prevent the other partner from entering the businessdependence asymmetry existed such that one partner was more able to control or influence the other’s conductone partner benefited from economies of scale related to the relationship

→ Eight different categories of classified buyer-supplier relationships:basic buying and sellingbare bonescontractual transactioncustomer supplycooperative systemscollaborativemutually adaptivecustomer is king

• Business relationships: risks and opportunism

Institutional 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 targets

Target 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:

innovatorsthinkersachieversexperiencers

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

• 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 roles→ behavioral variables

occasionsbenefitsuser statususage ratebuyer-readiness stageloyalty statusattitude

→ the conversion model

Bases for segmenting business markets• Marketing to small businesses• Sequential segmentation

Market 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 concentrationSupersegment: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 plansMega 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 schemesMarket 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 targets

Chapter 9 Creating brand equity

What is brand equity?→ Brand:A product or service that adds dimensions that differentiate it in some wayfrom 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 marketer’s vision of what the brand must be and do for consumers• Brand equity models→ brand 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 brand’s 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 brandequity 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 elements

Brand 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 suggestiveof 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 prospecthas with the brand, the product category, or the market that relates to themarketer’s 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 associations

Measuring 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 equity→ Brand 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 strategyBranding 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 elementsBrand extension:When a firm uses an established brand to introduce a new productSub-brand:When a new brand is combined with an existing brand, the brand extension can also be called soParent 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 soLine 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 brandCategory extension:The parent brand is used to enter a different product category from that currently served by the parent brandBrand line:Consists of all products sold under a particular brandBrand mix:Is the set of all brand lines that a particular seller makes available to buyersBranded variants:Specific brand lines supplied to specific retailers or distribution channelsLicensed 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 extensions→ Advantages of brand extensionsTwo 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 portfolios

Reasons 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 distributionBrand 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 positioning

Developing and communicating a positioning strategy» Positioning:Is the act of designing the company’s 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 extentwith 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 membershipThere are three main ways to convey a brand’s category membership:- announcing category benefits → to reassure consumers that a brand will deliveron 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 brandname 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 andimportant2. distinctions → target consumers must find the POD distinctive and superior3. believability → target consumers must find the POD believable and credible

There 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 believing3. sustainability → is the positioning pre-emptive, defensible, and difficult to attack?

• Creating POPs and PODs→ Present separately→ Leverage equity of another entity→ Redefine the relationship

Differentiation strategies• product differentiation• personnel differentiation• channel differentiation• image differentiation

Product life-cycle marketing strategies• Product life clyclesThe 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 improvement3. maturity → a slowdown in sales growth because the product has achievedacceptance by most potential buyers. Profits stabilize or decline

because of increased competition4. decline → sales show a downward drift and profits erode

• Style, fashion, and fad life cycles

We 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 stageThe 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 modificationVolume = number of brand users x usage rate per user→ product modification→ marketing program modificationProduct managers might try to stimulate sales by modifying other marketing program elements, theyshould 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 promotion should the company step up sales promotion?- personal selling should the number or quality of salespeople be increased?- services can the company speed up delivery?• Marketing strategies: decline stageFive strategies are available to the firm, some examples:

- increasing the firm’s investment- divesting the business quickly by disposing of its assets as advantageously as possible

• The product life-cycle concept: critique

Market evolution→ emergence→ growth→ maturity→ decline

Chapter 11 Dealing with competition

Competitive forcesThere 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 segment’s attractiveness varies with the height of its entry and exit barriersThreat 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 powerThreat of suppliers’ growing bargaining power → a segment is unattractive if thecompany’s 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 differentiationThe 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 monopoly2. oligopoly3. monopolistic competition4. 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 competitor’s share of the target market2. share of mind → the percentage of customers who named the competitor inresponding 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 competitors

Competitive Strategies for Market leaders• Expanding 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 erectoutposts 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 marketdiversification. → Contraction defense:Large companies sometimes recognize that they can no longer defend all of their territory• Expending market share

Other competitive strategies• Market-challenger strategies→ Defining the strategic objective and opponent(s)→ Choosing a general attack strategy

- Frontal attack → the attacker matches its opponent’s 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 enemy’s territory through a “blitz”- Bypass attack → bypassing the enemy and attacking easier markets to broaden one’s 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 leader’s product and package and sells it on the black market or through disreputable dealerscloner → emulates the leader’s products, name, and packaging, with slightvariationsimitator → copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing or

locationadapter → takes the leader’s products and adapts or improves them

• Market-nicher strategies

Balancing customer and competitor orientations• competitor-centered companies• customer-centered companies

Chapter 12 Setting product strategy

Product 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 clothing3. 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 manufacturer’s 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 product’s primary characteristics operate- conformance quality → is the degree to which all the produced units areidentical and meet the promised specifications- durability → a measure of the product’s 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 product’s 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 inits planned location- customer training → refers to training the customer’s employees to use the vendor’s 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 hierarchyThe 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 effectiveness3. Product class → a group of products within the product family recognized as having a certain functional coherence. Also known as

product category4. 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 product6. Item (also called stockkeeping unit or product variant) → a distinct unit withina 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 stepsoptional-feature pricing → many companies offer optional products, features, and services along with their main productcaptive-product pricing → captive products are necessary to the use of otherproductstwo-part pricing → consists of a fixed fee plus a variable usage feeby-product pricing → the production of certain goods (meats, petroleum products) often results in by-productsproduct-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 formaterials, 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 productVarious 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 services

The 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 goodsuch as soap, toothpaste, or salt. No services accompany the product2. tangible good with accompanying services → the offering consists of a tangible good accompanied by one or more services3. hybrid → the offering consists of equal parts of goods and services4. major service with accompanying minor goods and services → the offering consists of a major service along with additional services of

supporting goods5. 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 lines2. people → personnel should be busy. There should be a sufficient number of employees to manage the workload3. 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 service6. 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 procedures2. standardize the service-performance process throughout the organization3. monitor customer satisfaction

→ perishability

Marketing Strategies for service firms• A shifting customer relationship• Holistic marketing for services

Managing service qualities• Customer expectationsThere 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 perception2. gap between management perception and service-quality specifications3. gap between service-quality specifications and service delivery4. gap between service delivery and external communications5. 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 andaccurately2. responsiveness → the willingness to help customers and to provide prompt service3. assurance → the knowledge and courtesy of employees and their abilityto convey trust and confidence4. empathy → the provision of caring, individualized attention to customers5. 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 product’s purchase cost plus the discounted cost of maintenance and repair less the discounted salvage value• Postsale service strategy

Chapter 14 Developing pricing strategies and programs

Understanding pricing• How companies price• Consumer psychology and pricing→ Reference prices:Pricing information a consumer retains in memory which is used to interpretand 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 firm’s 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 associatedwith 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 curvesMost 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 productionExperience 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 activitiesby 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 product’s 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 company’s 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 salesHigh-low pricing:The retailer charges higher prices on an everyday basis but then runsfrequent promotions in which prices are temporarily lowered below theEDLP level

- going-rate pricing → the firm bases its price largely on competitor’s 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 parties

Pricing 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 onother 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 pricing

Price discrimination:Occurs when a company sells a product or service at two or more prices thatdo 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 competitor’s price changes

Chapter 15 Designing and managing value networks and channels

Marketing channels and value networksMarketing 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 firmPush strategy:Involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end usersPull 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 fallinto one of four categories:

1. Habitual shoppers → purchase from the same places in the same manner over time2. High value deal seekers → know their needs and “channel surf” a great deal before buying at the lowest possible price3. Variety-loving shoppers → gather information in many channels, take advantage of high-touch services, and then buy in their favorite

channel, regardless of price4. 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 marketperspective and working backwardValue network:A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings

The role of marketing channelsWhy 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 channels

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

Channel-design decisions• Analyzing customer’s 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 occasion2. Waiting and delivery time → the average time customers of that channel wait for receipt of the goods3. Spatial convenience → the degree to which the marketing channel makes iteasy for customers to purchase the product4. Product variety → the assortment breadth provided by the marketing channel5. 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 resellersSelective distribution:Involves the use of more than a few but less than all of the intermediarieswho are willing to carry a particular productIntensive 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 criteria

Channel-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 intermediariesmust 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 chainsof 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 productionfranchise 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 architecture

Distribution 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 competitionChannel conflict:Is generated when one channel member’s actions prevent the channel from achieving its goalChannel 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 relationsTying 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 company’s business» E-commerce:Means that the company or site offers to transact or facilitate the sellingof 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 logistics

Retailing» 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 serviceRetailers can position themselves as offering one of four levels of service:

Self-service → is the cornerstone of all discount operationsSelf-selection → customers find their own goods, although they can ask for assistanceLimited service → These retailers carry more shopping goods, and customers need more information and assistanceFull 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:Bloomingdale’s → stores that feature a broad product assortment and high value addedTiffany → stores that feature a narrow product assortment and high value addedSunglass Hut → stores that feature a narrow line and low value addedWal-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 shoppingAutomatic 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 product’s 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 retailing

Private 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 decisionsFour 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 communications

The 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 sponsorSales promotion → a variety of short-term incentives to encourage trial orpurchase of a product or serviceEvents and experiences → company-sponsored activities and programs designedto create daily or special brand-related interactionsPublic relations and publicity → a variety of programs designed to promote or protect a company’s image or its individual productsDirect marketing → use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue form

specific customers and prospectsPersonal 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 systemsSelective 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 responses

Developing effective communications:• Identify the target audienceImage: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 purchaseBrand attitude → evaluation of the brand with respect to its perceived ability to meet a currently relevant needBrand 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 negativefeelings 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 budgetFour 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 timesAmplified expressiveness → advertising provides opportunities for dramatizing the company and its products through the artful use of

print, sound, and colorImpersonality → 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 productIncentive → they incorporate some concession, inducement, or contributionthat gives value to the consumerInvitation → 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 adsAbility to catch buyers off guard → public relations can reach prospects who prefer to avoid salespeople and advertisementsDramatization → 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 involvedInvolving → given their live, real-time quality, consumers can find events and experiences more actively engagingImplicit → 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 individualUp-to-date → a message can be prepared very quicklyInteractive → the message can be changed depending on the person’s response

→ Personal sellingPersonal selling is the most effective tool at later stages of the buying process, particularly in buildingup 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 other’s 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 company’s brandEnthusiasm building → sales reps can build dealer enthusiasm by dramatizing planned advertising and sales promotion backupMissionary selling → sales reps can sign up more dealersKey account management → sales reps can take responsibility for growing business with the most important accounts

→ Buyer-readiness stage→ Product 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 relations

Developing and managing an advertising program» Advertising:Any paid form of nonpersonal presentation and promotion of ideas, goods, orservices 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, andpurchase 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 trialMarket 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 andhigh advertising spending, a brand must advertise more heavily to be

heardAdvertising frequency → the number of repetitions needed to put across the brand’s message to consumers had an important impact on the

advertising budgetProduct 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 advertiser’s 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 impactMedia 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 brandequity→ 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 research

Sales 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 nameTo create or reinforce consumer perceptions of key brand image associationsTo enhance corporate image dimensionsTo create experience and evoke feelingsTo express commitment to the community or on social issuesTo entertain key clients or reward key employeesTo 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 company’s ability to achieve its objectives.» Public relations (PR):Involves a variety of programs designed to promote or protect a company’s image or its individual products» PR perform the following five functions:

Press relations → presenting news and information about the organization inthe most positive lightProduct publicity → sponsoring efforts to publicize specific productsCorporate communications → promoting understanding of the organization through internal and external communicationsLobbying → dealing with legislators and government officials to promote or defeat legislation and regulationCounseling → 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 selling

Direct 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 acustomer 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 advertisingAt-home shopping channelsVideotext and interactive TV

→ Kiosk marketing

Interactive 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 consumer’s 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 guidelines

Designing 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 sellingtangible products or intangiblesSolution vendor → a salesperson whose expertise is in the solving of a customer’s problem, often with a system of the company’s products and

services→ Sales force objectives and strategyContractual 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 salesperson’s 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 representatives→ Sources 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 offerings

Challenges in new-product development» Six categories of new products:

New-to-the-world products → new products that create an entirely new marketNew product lines → new products that allow a company to enter an established market for the firs timeAdditions 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

productsRepositions → existing products that are targeted to new markets or market segmentsCost reductions → new products that provide similar performance at lower cost

» 4 principles to guide its new-product development:1. Work with potential customers2. Let employees choose projects3. Give employees “dabble” time → all research associates 10 percent of their work hours developing their own ideas4. 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 testingResearchers 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 needfor 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 product’s attributes• Marketing strategy• Business 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 sequentialactivities that must take place to launch the product

The consumer-adoption process» Adoption:Is an individual’s 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 itInterest → the consumer is stimulated to seek information about the innovationEvaluation → the consumer considers whether to try the innovationTrial → the consumer tries the innovation to improve his or her estimate of its valueAdoption → 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 another’s attitude or purchase probability.→ Characteristics of the innovation→ Organizations’ readiness to adopt innovations

Chapter 21 Tapping to global markets

Competing 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 markets

Deciding 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 investment

Deciding on the marketing program» Four cultural dimensions that can differentiate countries:

Individualism vs. collectivismHigh vs. low power distanceMasculine vs. feminineWeak 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 country’s 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 everywhereSet a market-based price in each countrySet 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.» Arm’s-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