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Kotler on
Marketing
The most
important
thing is to
forecast where
customers are
moving, and
be in front of
them.
Chapter Objectives
CASE 1
M
arketing, or
not?
(1)Some conceptual theory about
marketing
(2) 1912, J.E.Hegertg
(3)1931,American Marketing Association,
(A.M.A)。
(4)Market revolution after second word
war
1.1.1 History and Development of Marketing
1.1.2 Introduction of Philip Kotler
菲利普•科特勒
Philip Kotler is one of the
world' leading authorities
on marketing. He is the
distinguished professor
of International Marketing
at the Kellogg School of
Management,
Northwestern University.
菲利普.科特勒(Philip Kotler)
4 Ps:
Product
Price
Place
Promotion
1.1.3 Marketing people are involved in
marketing 10 types of entities:
Goods
Service
Experiences
Events
Persons
Places
Properties
Organizations
Information
ideas
1.1.4 Marketing Task
Ten rules of radical marketing
– The CEO must own the marketing
function.
– Make sure the marketing department starts
small and flat and stays small and flat.
– Get face to face with the people who
matter most – the customers.
– Use market research cautiously.
– Hire only passionate missionaries.
– Love and respect your customers.
– Create a community of consumers.
– Rethink the marketing mix.
– Celebrate common sense.
– Be true to the brand.
w Three stages of marketing practice
– Entrepreneurial Marketing
– Formulated Marketing
– Intrepreneurial Marketing
1.2.1 New Economy
企业 消费者
1.2 New Economy and Definition of Marketing
A Simple Marketing System
简单市场系统
1.2.2 The Scope of Marketing
wMarketing: typically seen as the
task of creating, promoting, and
delivering goods and services to
consumers and businesses.
Demand
States and
Marketing
Tasks
1. Negative
demand
A major part of the market dislikes the
product and may even pay a price to
avoid it—vaccinations, dental work,
vasectomies, and gallbladder
operations, for instance. Employers
have a negative demand for ex-
convicts and alcoholics as employees.
The marketing task is to analyze why
the market dislikes the product and
whether a marketing program
consisting of product redesign, lower
prices, and more positive promotion
can change beliefs and attitudes.
2. No demand Target consumers may be unaware of
or uninterested in the product.
Farmers may not be interested in a
new farming method, and college
students may not be interested in
foreign-language courses. The
marketing task is to find ways to
connect the benefits of the product
with people’s natural needs and
interests.
See text for complete table
1.2.3 The Decisions
Marketers Make
w Consumer Markets
w Business Markets
w Global Markets
w Nonprofit and Governmental
Markets
Marketing Concepts
and Tools
w Defining Marketing
– Marketing
– Marketing management
w Core Marketing Concepts
– Target Markets and Segmentation
Old Economy New Economy
Organize by product units
Focus on profitable transactions
Look primarily at financial
scorecard
Focus on shareholders
Marketing does the marketing
Build brands through advertising
Focus on customer acquisition
No customer satisfaction
measurement
Over promise, under deliver
Organize by customer segments
Focus on customer lifetime value
Look also at marketing scorecard
Focus on stakeholders
Everyone does the marketing
Build brands through behavior
Focus on customer retention and
growth
Measure customer satisfaction
and retention rate
Under promise, over deliver
1.2.4 Definition of Marketing
a. Distinguish from Sales
b. Relations with Promotion
c. And dealing
d. Definition of Marketing
2.1.1 Simple Response Model
2.1.2 Model of Buying Behavior
Buyer’s decision
process
Problem recognition
Information search
Evaluation
Decision
Postpurchase
behavior
Other
stimuli
Economic
Technological
Political
Cultural
Buyer’s
characteristics
Cultural
Social
Personal
Psychological
Buyer’s decisions
Product choice
Brand choice
Dealer choice
Purchase timing
Purchase amount
Marketing
stimuli
Product
Price
Place
Promotion
w Consumer Behavior
w Cultural Factors
– Culture
• Subcultures
• Diversity marketing
• Social class
2.1.3 Influencing Buyer Behavior
Characteristics of Major U.S. Social Classes
See text for complete table
1. Upper
Uppers
(less than
1%)
The social elite who live on inherited wealth. They
give large sums to charity, run the debutante balls,
maintain more than one home, and send their
children to the finest schools. They are a market
for jewelry, antiques, homes, and vacations. They
often buy and dress conservatively. Although small
as a group, they serve as a reference group to the
extent that their consumption decisions are
imitated by the other social classes.
2. Lower
Uppers
(about 2%)
Persons, usually from the middle class, who have
earned high income or wealth through exceptional
ability in the professions or business. They tend to
be active in social and civic affairs and to buy the
symbols of status for themselves and their children.
They include the nouveau riche, whose pattern of
conspicuous consumption is designed to impress
those below them.
Cultural Factors
Culture
Subculture
Social Class
Buyer
Social Factors
Reference
Groups
Roles &
StatusesFamily
w Social Factors
– Reference Groups
• Reference groups
• Membership groups
• Primary groups
• Secondary groups
• Aspirational groups
• Dissociative groups
• Opinion leader
• Secondary groups
• Aspirational groups
• Dissociative groups
• Opinion leader
• Family
– Family of orientation
– Family of procreation
• Roles and Statuses
– Role
– Status
Influencing Buyer Behavior
w Personal Factors
– Age and Stage in the Life Cycle
• Family life cycle
– Occupation and Economic
Circumstances
Influencing Buyer Behavior
Influences on Consumer
Behavior
Personal Influences
Age and Family Life
Cycle Stage Lifestyle
Occupation &
Economic Circumstances
Personality &
Self-Concept
Stages in the Family Life Cycle
See text for complete table
1. Bachelor stage:
Young, single, not
living at home
Few financial burdens. Fashion opinion
leaders. Recreation oriented. Buy: basic
home equipment, furniture, cars, equipment
for the mating game; vacations.
2. Newly married
couples:
Young, no children
Highest purchase rate and highest average
purchase of durables: cars, appliances,
furniture, vacations.
3. Full nest I:
Youngest child under
six
Home purchasing at peak. Liquid assets low.
Interested in new products, advertised
products. Buy: washers, dryers, TV, baby
food, chest rubs and cough medicines,
vitamins, dolls, wagons, sleds, skates.
4. Full nest II:
Youngest child six or
over
Financial position better. Less influenced by
advertising. Buy larger-size packages,
multiple-unit deals. Buy: many foods,
cleaning materials, bicycles, music lessons,
pianos.
– Personality and Self-Concept
• Personality
• Brand personality
– Sincerity
– Excitement
– Competence
– Sophistication
– Ruggedness
• Self-concept
– Person’s actual self-concept
– Ideal self-concept
– Others’ self-concept
Influencing Buyer Behavior
The VALS segmentation system:
An 8-part typology
• Groups with High
Resources
1. Actualizers
2. Fulfilleds
3. Achievers
4. Experiencers
• Groups with Lower
Resources
1. Believers
2. Strivers
3. Makers
4. Strugglers
Psychological Factors
Perception Learning
Beliefs &
Attitudes
Motivation
w Psychological Factors
– Motivation
• Motive
– Freud’s Theory
• Laddering
• Projective techniques
Influencing Buyer Behavior
w Ernest Dichter’s research found:
– Consumers resist prunes because prunes are
wrinkled looking and remind people of old age.
– Men smoke cigars as an adult version of thumb
sucking.
– Women prefer vegetable shortening to animal fats
because the latter arouse a sense of guilt over
killing animals.
– Women don’t trust cake mixes unless they require
adding an egg, because this helps them feel they
are giving “birth.”
Influencing Buyer Behavior
Maslow’s Hierarchy
of Needs
Physical needs
(food, water, shelter)1
Safety needs
(security, protection)2
Social needs
(sense of belonging, love)3
Esteem needs
(self-esteem, recognition)
4
Self-
actualization
(self-development
and realization)
5
– Herzberg’s Theory
• Dissatisfiers
• Satisfiers
Influencing Buyer Behavior
w Perception
– Selective attention
• People are more likely to notice stimuli than
relate to a current need
• People are more likely to notice stimuli than
they anticipate
• People are more likely to notice stimuli whose
deviations are large in relation to the normal
size of the stimuli
– Selective distortion
– Selective retention
Influencing Buyer Behavior
– Learning
• Drive
• Cues
• Discrimination
– Beliefs and Attitudes
• Belief
– Spreading activation
• Attitude
Influencing Buyer Behavior
2.1.4 Four Types of Buying Behavior
Complex
Buying
Behavior
Dissonance-
Reducing Buying
Behavior
Variety-
Seeking
Behavior
Habitual
Buying
Behavior
Significant
differences
between
brands
Few
differences
between
brands
High
Involvement
Low
Involvement
2.2.1 Consumer Buying
Process
Information
search
Evaluation of
alternatives
Purchase
decision
Post purchase
behavior
w How marketers learn about the stages:
– Introspective method
– Retrospective method
– Prospective method
– Prescriptive method
w Understanding by mapping the customer’s
– Consumption system
– Customer activity cycle
– Customer scenario
w Metamarket
w Metamediaries
2.2.2 Stages in the Buying
Decision Process
w Problem recognition
w Information search
– Personal sources
– Commercial sources
– Public sources
– Experiential sources
Stages of the Buying
Decision Process
Five-Stage
Model of the
Consumer
Buying
Process
Successive Sets Involved in Customer Decision Making
2.2.3 Decision Making Sets
Total
Set Aware-
ness
Set
Consid-
eration
Set
Choice
Set Decision
2.2.4 Steps Between Evaluation of
Alternatives and a Purchase Decision
Purchase
decision
Unanticipated
situational
factors
Attitude
of others
Purchase
intention
w Evaluation of Alternatives
– Potential Attributes of interest
• Cameras
• Hotels
• Mouthwash
• Tires
– Brand beliefs
– Brand image
The Buying Decision Process
A Consumer’s Brand Beliefs
about Computers
Computer Attribute
Memory
Capacity
Graphics
Capability
Size and
Weight Price
A 10 8 6 4
B 8 9 8 3
C 6 8 10 5
D 4 3 7 8
– Strategies designed to stimulate interest in a
computer
• Redesign the computer
• Alter beliefs about the brand
• Alter beliefs about competitors’ brands
• Alter the importance weights
• Call attention to neglected attributes
• Shift the buyer’s ideas
The Buying Decision Process
w Purchase Decision
Steps Between Evaluation of
Alternatives and a purchase decision
The Buying Decision Process
– Informediaries
• Consumer Reports
• Zagats
– Unanticipated situational factors
– Perceived risk
– Brand decision
– Vendor decision
– Quantity decision
– Timing decision
– Payment-method decision
The Buying Decision Process
w Postpurchase Behavior
– Postpurchase Satisfaction
• Disappointed
• Satisfied
• Delighted
w Postpurchase Actions
– Postpurchase Use and Disposal
The Buying Decision Process
How Customers Dispose of Products
w Other Models of the Buying Decision
Process
– Health Model
• Stages of Change Model
– Precontemplation
– Contemplation
– Preparation
– Action
– Maintenance
– Customer Activity Cycle Model
• Pre, during and post phases
The Buying Decision Process
Activity cycle for IBM customers in the global
electronic networking capability market space
Value adds for IBM customers in the global electronic
networking capability market space
Review
w Influences on Buying Behavior
w Buyer Decision Making
Kotler on
Marketing
Today you have
to run faster
to stay in
place.
Chapter Objectives
w In this chapter, we focus on two questions:
– What are the key methods for tracking and
identifying opportunities in the
macroenvironment?
– What are the key demographic, economic,
natural, technological, political, and cultural
developments?
Analyzing Needs and Trends in the
Macroenvironment
w Trend
w Fad
wMegatrends
w The substantial speedup of international transportation,
communication, and financial transactions, leading to the
rapid growth of world trade and investment, especially
tripolar trade (North America, Western Europe, Far East)
w The movement of manufacturing capacity and skills to
lower cost countries.
w The rising economic power of several Asian countries in
world markets.
w The rise of trade blocks such as the European Union and
NAFTA signatories.
Identifying and Responding to the Major
Macroenvironment Forces
w The severe debt problems of a number of countries, along
with the increasing fragility of the international financial
system.
w The increasing use of barter to support international
transactions.
w The move toward market economies in formerly socialist
countries along with rapid privatization of publicly owned
companies.
w The rapid dissemination of global lifestyles.
w The gradual opening of major new markets, namely China,
India, eastern Europe, the Arab countries, and Latin
America.
Identifying and Responding to the Major
Macroenvironment Forces
w The increasing tendency of multinationals to transcend
their locational and national characteristics and become
transnational firms.
w The increasing number of cross-border corporate strategic
alliances–for example, MCI and British Telecom, and
Texas Instruments and Hitachi.
w The increasing ethnic and religious conflicts in certain
countries and regions.
w The growth of global brands in autos, food, clothing,
electronics.
Identifying and Responding to the Major
Macroenvironment Forces
Demographic Environment
Worldwide Population Growth
Population Age Mix
Ethnic Markets
Household Patterns
Educational Groups
Geographical Shifts in Population
Shift from Mass Market to Micromarkets
Economic Environment
Income Distribution
Subsistence economies
Raw-material-exporting economies
Industrializing economies
Industrial economies
Savings, Debt, &
Credit Availability
Natural
Environment
Higher Pollution
Levels
Increased Costs
of Energy
Shortage of
Raw Materials
Changing Role
of Government
Accelerating Pace
of Change
Unlimited Opportunities
for Innovation
Increased
Regulation
Issues in the Technological
Environment
Varying
R & D Budgets
Political-
Legal
Environment
Increased
Legislation
Special-
Interest
Groups
Social/Cultural Environment
Views
That Express
Values
Social/Cultural Environment
Review
w Tracking & Identifying Opportunities in
the Macroenvironment
w Demographic, Economic, Natural,
Technological, Political, & Cultural
Developments
Kotler on
Marketing
The most
important
thing is to
forecast where
customers are
moving, and be
in front of them.
w In this chapter, we focus on two questions:
– How do the buyers’ characteristics – cultural,
social, personal, and psychological – influence
buying behavior?
– How does the buyer make purchasing decisions?
Chapter Objectives
Simple Response Model
Model of Buying Behavior
Buyer’s decision
process
Problem recognition
Information search
Evaluation
Decision
Postpurchase
behavior
Other
stimuli
Economic
Technological
Political
Cultural
Buyer’s
characteristics
Cultural
Social
Personal
Psychological
Buyer’s decisions
Product choice
Brand choice
Dealer choice
Purchase timing
Purchase amount
Marketing
stimuli
Product
Price
Place
Promotion
– Consumer Behavior
w Cultural Factors
– Culture
• Subcultures
• Diversity marketing
• Social class
Influencing Buyer Behavior
Table 7.1: Characteristics of Major U.S. Social Classes
See text for complete table
1. Upper Uppers
(less than 1%)
The social elite who live on inherited wealth. They give
large sums to charity, run the debutante balls, maintain
more than one home, and send their children to the finest
schools. They are a market for jewelry, antiques, homes,
and vacations. They often buy and dress conservatively.
Although small as a group, they serve as a reference
group to the extent that their consumption decisions are
imitated by the other social classes.
2. Lower Uppers
(about 2%)
Persons, usually from the middle class, who have earned
high income or wealth through exceptional ability in the
professions or business. They tend to be active in social
and civic affairs and to buy the symbols of status for
themselves and their children. They include the nouveau
riche, whose pattern of conspicuous consumption is
designed to impress those below them.
Culture
Cultural Factors
Subculture
Social Class
Buyer
Social Factors
Reference
Groups
Roles &
StatusesFamily
w Social Factors
– Reference Groups
• Reference groups
• Membership groups
• Primary groups
• Secondary groups
• Aspirational groups
• Dissociative groups
• Opinion leader
Influencing Buyer Behavior
• Secondary groups
• Aspirational groups
• Dissociative groups
• Opinion leader
Influencing Buyer Behavior
• Family
– Family of orientation
– Family of procreation
• Roles and Statuses
– Role
– Status
Influencing Buyer Behavior
w Personal Factors
– Age and Stage in the Life Cycle
• Family life cycle
– Occupation and Economic Circumstances
Influencing Buyer Behavior
Influences on Consumer
Behavior
Personal Influences
Age and Family Life
Cycle Stage
Lifestyle
Occupation &
Economic Circumstances
Personality &
Self-Concept
Table 7.2: Stages in the Family Life Cycle
See text for complete table
1. Bachelor stage:
Young, single, not living
at home
Few financial burdens. Fashion opinion leaders.
Recreation oriented. Buy: basic home equipment,
furniture, cars, equipment for the mating game;
vacations.
2. Newly married couples:
Young, no children
Highest purchase rate and highest average
purchase of durables: cars, appliances, furniture,
vacations.
3. Full nest I:
Youngest child under six
Home purchasing at peak. Liquid assets low.
Interested in new products, advertised products.
Buy: washers, dryers, TV, baby food, chest rubs
and cough medicines, vitamins, dolls, wagons,
sleds, skates.
4. Full nest II:
Youngest child six or over
Financial position better. Less influenced by
advertising. Buy larger-size packages, multiple-
unit deals. Buy: many foods, cleaning materials,
bicycles, music lessons, pianos.
– Personality and Self-Concept
• Personality
• Brand personality
– Sincerity
– Excitement
– Competence
– Sophistication
– Ruggedness
• Self-concept
– Person’s actual self-concept
– Ideal self-concept
– Others’ self-concept
Influencing Buyer Behavior
Figure 7.2: The VALS segmentation system:
An 8-part typology
• Groups with High
Resources
1. Actualizers
2. Fulfilleds
3. Achievers
4. Experiencers
• Groups with Lower
Resources
1. Believers
2. Strivers
3. Makers
4. Strugglers
Psychological Factors
Perception Learning
Beliefs &
Attitudes
Motivation
w Psychological Factors
– Motivation
• Motive
– Freud’s Theory
• Laddering
• Projective techniques
Influencing Buyer Behavior
w Ernest Dichter’s research found:
– Consumers resist prunes because prunes are
wrinkled looking and remind people of old age.
– Men smoke cigars as an adult version of thumb
sucking.
– Women prefer vegetable shortening to animal fats
because the latter arouse a sense of guilt over
killing animals.
– Women don’t trust cake mixes unless they require
adding an egg, because this helps them feel they
are giving “birth.”
Influencing Buyer Behavior
Maslow’s Hierarchy
of Needs
Physical needs
(food, water, shelter)1
Safety needs
(security, protection)2
Social needs
(sense of belonging, love)3
Esteem needs
(self-esteem, recognition)
4
Self-
actualization
(self-development
and realization)
5
– Herzberg’s Theory
• Dissatisfiers
• Satisfiers
Influencing Buyer Behavior
w Perception
– Selective attention
• People are more likely to notice stimuli than
relate to a current need
• People are more likely to notice stimuli than
they anticipate
• People are more likely to notice stimuli whose
deviations are large in relation to the normal
size of the stimuli
– Selective distortion
– Selective retention
Influencing Buyer Behavior
– Learning
• Drive
• Cues
• Discrimination
– Beliefs and Attitudes
• Belief
– Spreading activation
• Attitude
Influencing Buyer Behavior
Four Types of Buying Behavior
Complex
Buying
Behavior
Dissonance-
Reducing Buying
Behavior
Variety-
Seeking
Behavior
Habitual
Buying
Behavior
Significant
differences
between
brands
Few
differences
between
brands
High
Involvement
Low
Involvement
Consumer Buying
Process
Information
search
Evaluation of
alternatives
Purchase
decision
Postpurchase
behavior
w How marketers learn about the stages:
– Introspective method
– Retrospective method
– Prospective method
– Prescriptive method
w Understanding by mapping the customer’s
– Consumption system
– Customer activity cycle
– Customer scenario
w Metamarket
w Metamediaries
Stages in the Buying
Decision Process
w Problem recognition
w Information search
– Personal sources
– Commercial sources
– Public sources
– Experiential sources
Stages of the Buying
Decision Process
Figure 7.4:
Five-Stage
Model of the
Consumer
Buying
Process
Figure 7.5: Successive Sets Involved in Customer Decision
Making
Total
Set
Decision Making Sets
Aware-
ness
Set
Consid-
eration
Set
Choice
Set Decision
Steps Between Evaluation of Alternatives
and a Purchase Decision
Purchase
decision
Unanticipated
situational
factors
Attitude
of others
Purchase
intention
w Evaluation of Alternatives
– Potential Attributes of interest
• Cameras
• Hotels
• Mouthwash
• Tires
– Brand beliefs
– Brand image
The Buying Decision Process
Table 7.4: A Consumer’s Brand Beliefs
about Computers
Computer Attribute
Memory
Capacity
Graphics
Capability
Size and
Weight Price
A 10 8 6 4
B 8 9 8 3
C 6 8 10 5
D 4 3 7 8
• Strategies designed to stimulate interest in a
computer
– Redesign the computer
– Alter beliefs about the brand
– Alter beliefs about competitors’ brands
– Alter the importance weights
– Call attention to neglected attributes
– Shift the buyer’s ideas
The Buying Decision Process
w Purchase Decision
Figure 7.6: Steps Between Evaluation of
Alternatives and a purchase decision
The Buying Decision Process
– Informediaries
• Consumer Reports
• Zagats
– Unanticipated situational factors
– Perceived risk
– Brand decision
– Vendor decision
– Quantity decision
– Timing decision
– Payment-method decision
The Buying Decision Process
w Postpurchase Behavior
– Postpurchase Satisfaction
• Disappointed
• Satisfied
• Delighted
w Postpurchase Actions
– Postpurchase Use and Disposal
The Buying Decision Process
Figure 7.7: How Customers Dispose of Products
w Other Models of the Buying Decision
Process
– Health Model
• Stages of Change Model
– Precontemplation
– Contemplation
– Preparation
– Action
– Maintenance
– Customer Activity Cycle Model
• Pre, during and post phases
The Buying Decision Process
Figure 7.8:
Activity cycle for
IBM customers in
the global
electronic
networking
capability market
space
Figure 7.9:
Value adds for
IBM customers
in the global
electronic
networking
capability
market space
Review
w Influences on Buying Behavior
w Buyer Decision Making
Kotler on
Marketing
It is more important
to do what is
strategically right
than what is
immediately
profitable.
Chapter Objectives
w In this chapter, we examine the
following questions:
– How is strategic planning carried out at the
corporate and division levels?
– How is planning carried out at the business
unit level?
– What are the major steps in the marketing
process?
– How is planning carried out at the product
level?
– What does a marketing plan include?
Chapter Objectives
wMarket Segmentation
w Levels and Patterns of Market Segmentation
w Segmenting Consumer Markets
w Segmenting Business Markets
wMarket Targeting
w Summary
Strategic Planning: Three Key Areas and Four
Organization Levels
w Strategic marketing plan
w Tactical marketing plan
wMarketing plan
Market-Oriented Strategic
Planning
Objectives
Skills
Resources
Opportunities
Market-Oriented Strategic
Planning
Objectives
Skills
Resources
Opportunities
Profit
and
Growth
Corporate Headquarters
Planning
w Define the corporate mission
w Establish strategic business units (SBUs)
w Assign resources to SBUs
w Plan new business, downsize older
businesses
Strategic-Planning, Implementation,
and Control Process
Measuring
results
Diagnosing
results
Taking
corrective
action
Corporate
planning
Division
planning
Business
planning
Product
planning
Organizing
Implementing
Good Mission Statements:
Limited number of goals
Stress major policies & values
Define competitive scopes
The Boston Consulting Group’s
Growth-Share Matrix
M
ar
ke
t G
ro
w
th
R
at
e
3 ?
Question marks
?
??
2
1
Cash cow
6
Dogs
8
7
Relative Market Share
Stars
5
4
Market Attractiveness: Competitive-
Position Portfolio Classification
Relief
valve
Flexible
diaphragms
Fuel
pumps
Aerospace
fittings
Clutches
Hydraulic
pumps
Joints
The Strategic-Planning Gap
Desired
sales
Integrative growth
Intensive growth
Current
portfolio
Three Intensive Growth Strategies: Ansoff’s
Product/Market Expansion Grid
4. Diversification2. Market
development
New
markets
1. Market
penetration
Existing
markets
Existing
products
3. Product
development
New
products
1
4
2
3
Opportunity Matrix
1. Company develops a more
powerful lighting system
2. Company develops a device
for measuring the energy
efficiency of any lighting
system
3. Company develops a device
for measuring illumination
level
4. Company develops a software
program to teach lighting
fundamentals to TV studio
personnel
Threat Matrix
1. Competitor develops a
superior lighting system
2. Major prolonged
economic depression
3. Higher costs
4. Legislation to reduce
number of TV studio
licenses
1
4
2
3
The McKinsey 7-S Framework
Skills
Shared
values
Staff
Style
Strategy
Structure
Systems
Sell the product
The Value-Delivery Process
Make the product
ProcureDesign
product Make Price Sell Advertise/
promote Distribute Service
Choose the Value Provide the Value Communicate the Value
(a) Traditional physical process sequence
(b) Value creation & delivery sequence
Strategic marketing Tactical marketing
The Marketing Plan
Competitors
Marketing
intermediaries
PublicsSuppliers
Factors Influencing Company
Marketing Strategy
Mark
eti
ng
inf
or
mati
on
sy
ste
m
Marketing
planning
system
Marketing
organization
system Mar
ke
tin
g
or
ga
niz
ati
on
an
d
im
ple
men
tat
ion
Product
Promotion
Place PriceTarget
customers
Table 4.1: Product-Oriented versus Market-Oriented
Definitions of a Business
Company Product Definition Market Definition
Missouri-Pacific
Railroad
We run a railroad We are a people-and-
goods mover
Xerox We make copying
equipment
We help improve office
productivity
Standard Oil We sell gasoline We supply energy
Columbia Pictures We make movies We market entertainment
Encyclopaedia We sell encyclopedias We distribute Information
Carrier We make air conditioners
and furnaces
We provide climate control
in the home
Table 4-2: Factors underlying Market Attractiveness and Competitive Position in
GE Multifactor Portfolio Model: Hydraulic-Pumps Market
Market
Attractiveness
Overall market size
Annual market growth rate
Historical profit margin
Competitive intensity
Technological requirements
Inflationary vulnerability
Energy requirements
Environmental impact
Social-political-legal
Weight
0.20
0.20
0.15
0.15
0.15
0.05
0.05
0.05
Must be
acceptable
1.0
Rating =
(1-5)
4
5
4
2
4
3
2
3
Value
0.80
1.
0.60
0.30
0.60
0.15
0.10
0.15
3.70
Business
Strength
Market share
Share growth
Product quality
Brand reputation
Distribution network
0.10
0.15
0.10
0.10
0.05
4
2
4
5
4
0.40
0.30
0.40
0.50
0.20
See text for complete table
Product Planning: The Nature and
Contents of a Marketing Plan
w Contents of the Marketing Plan
– Executive Summary
– Current Marketing Situation
– Opportunity and issue analysis
– Objectives
– Marketing strategy
– Action programs
– Financial projections
– Implementation controls
w Sample Marketing Plan: Sonic Personal
Digital Assistant
– Current Marketing Situation
– Opportunity and Issue Analysis
– Objectives
– Action Programs
– Financial Projections
Product Planning: The Nature and
Contents of a Marketing Plan
– Implementation Controls
– Marketing Strategy
• Positioning
• Product Management
• Pricing
• Distribution
• Marketing Communications
• Marketing Research
Product Planning: The Nature and
Contents of a Marketing Plan
Learning Objectives
w To understand the objectives and usefulness of
market segmentation
w To know the approaches to market segmentation
using different segmentation criteria to define target
groups
w To learn the ways of selecting target markets
Target Marketing
Target marketing requires marketers to take three major
steps:
– Identify and profile distinct groups of buyers who differ in
their needs and preferences (market segmentation).
– Select one or more market segments to enter (market
targeting).
– For each target segment, establish and communicate the key
distinctive benefit(s) of the company’s market offering
(market positioning).
Market Segmentation
... is the process of subdividing a market
into distinct subsets of customers
that behave in the same way or have similar
needs
Significance of market
segmentation
w Analyze and identify the market opportunities
w Develop the market for the middle-small
enterprises
w Utilize the resource effectively to improve the
competency
wMeet the needs effectively
Market Segmentation Procedure
w Needs-based market segmentation approach
wMarket partitioning
– Brand-dominant hierarchy
– Nation-dominant hierarchy
Description
1. Needs-Based
Segmentation
Group customers into segments based on similar
needs and benefits sought by customer in solving a
particular consumption problem.
2. Segment Identification For each needs-based segment, determine which
demographics, lifestyles, and usage behaviors make
the segment distinct and identifiable (actionable).
3. Segment
Attractiveness
Using predetermined segment attractiveness criteria
(such as market growth, competitive intensity, and
market access), determine the overall attractiveness
of each segment.
4. Segment Profitability Determine segment profitability.
5. Segment Positioning For each segment, create a “value proposition” and
product-price positioning strategy based on that
segment’s unique customer needs and characteristics.
Table : Steps in Segmentation Process
Levels and Patterns of Market
Segmentation
w Effective Segmentation
– Measurable
– Substantial
– Accessible
– Differentiable
– Actionable
Criteria for
Market Segmentation
wGeographic segmentation
wDemographic segmentation
w Psychographic segmentation
wBehaviour segmentation
wBenefit segmentation
Table 2: Major Segmentation Variables for
Consumer Markets
Geographic
Region Pacific, Mountain, West North Central, West
South Central, East North Central, East South
Central, South Atlantic, Middle Atlantic, New
England
City or metro
size
Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-
100,000; 100,000-250,000; 250,000-500,000;
500,000-1,000,000; 1,000,000-4,000,000; 4,000,000
or over
Density Urban, suburban, rural
Climate Northern southern
Table 2: Major Segmentation Variables for Consumer Markets
Demographic
Age
Family size
Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+
1-2, 3-4, 5+
Gender
Income
Occupation
Education
Male,female
Under$10000;$10000-$30000;$30000-
$50000;$50000 and over
Farmers, Students, Managers, Officials
Grade school or less, high school graduate,
college graduate
Religion
Nationality
Family life cycle
Catholic, Protestant, Jewish, Muslim, other
North American, South American,British, Japan
Segmenting Consumer and
Business Markets
w Bases for Segmenting Consumer Markets
– Geographic Segmentation
– Demographic Segmentation
– Psychographic Segmentation
Psychographic Segmentation
w ... is based on attitudes, values and lifestyle
w ... is measured through extensive item
batteries which cover activities, interests
and opinions (AIO-studies)
w lifestyle surveys,
– the Values and Life Styles (VALS) by SRI
International
Psychographic Profiles of
Porsche’s American Customers
Category % of all owners
Top Guns 27% Driven and ambitious; care about power and control;
expect to be noticed
Elitists 24%
Old money; a car—even an expensive one—is just a car,
not an extension of one’s personality
Proud Patrons 23% Ownership is what counts; a car is a trophy,
a reward for working hard; being noticed doesn’t matter
Bon Vivants 17% Cosmopolitan jet setters and thrill seekers;
car heightens excitement
Fantasists 9% Car represents a form of escape;
don’t care about impressing others;
may even feel guilty about owning car
Description
Source: ALEX III Taylor, „Porsche Slices up its Buyers“, Fortune, 16 January 1995, p. 24
Backer Spielvogel & Bates’ Global
Scan (BSB Global Scan )
w ... encompasses 18 countries, mostly in the Triad
w The researchers studied
– consumer attitudes & values,
– media viewership/readership,
– buying patterns,
– product use.
w 5 global psychographic segments represent 95%
of the adult populations in the countries surveyed.
The Target Groups of
BSB’s Global Scan
D’arcy Massius Benton & Bowles’
Euroconsumer Study
w ... focuses on Europe
w ... identified four lifestyle groups:
– Successful idealists
– Affluent materialists
– Comfortable belongers
– Disaffected survivors
Behaviour and Benefit
Segmentation
w Behaviour segmentation
Focus on whether & how much people buy or use a
product;
• usage rates: heavy , medium, light users, nonusers
• user status: potential users, nonusers, ex-users, regulars,
first timers & users of competitors’ products
w Benefit segmentation
Today, consumers basic needs are fulfilled. Therefore,
consumers seek additional value from purchase decisions
Table 3: Major Segmentation Variables for Business
Markets
Demographic
1. Industry: Which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: What geographical areas should we serve?
Operating Variables
4. Technology: What customer technologies should we focus
on?
5. User or nonuser status: Should we serve heavy users,
medium users, light users, or nonusers?
6. Customer capabilities: Should we serve customers needing
many or few services?
Purchasing Approaches
7. Purchasing-function organization: Should we serve
companies with highly centralized or decentralized
purchasing organizations?
8. Power structure: Should we serve companies that are
engineering dominated, financially dominated, and so on?
Segmenting Consumer and
Business Markets
– Business buyers seek different benefit
bundles based on their stage in
the purchase decision process.
1. First-time prospects
2. Novices
3. Sophisticates
Segmenting Consumer and
Business Markets
– Rangan, Moriarty, and Swartz studied a
mature commodity market, steel stamping,
and found four business segments
1. Program buyers
2. Relationship buyers
3. Transaction buyers
4. Bargain hunters
Segmenting Consumer and
Business Markets
– Rackman and Vincentis proposed a
segmentation scheme that classifies business
buyers into three groups
• Price-oriented customers
(transactional selling)
• Solution-oriented customers
(consultative selling)
• Strategic-value customers
(enterprise selling)
Targeting
After markets have been segmented, targeting
aims at evaluating and comparing the indentified
segments in order to select one or more as
prospect(s) with the highest potential.
Criteria for Targeting
qCurrent size of the segment & growth
potential
qPotential competition
qCompatibility & feasibility
Selecting a
Target Market Strategy
w standardized marketing
– mass marketing, the same marketing mix for a
broad market of potential buyers
w concentrated marketing
– targeted at a single segment of the global
market
w differentiated marketing
– 2 or more different segments
Summary
w Corporate and division strategic planing
w Business unit planning
w The marketing process
w Product level planning
w The marketing plan
Summary
w segmentation aims at identifying similarities
and differences of potential customers.
w targeting: The market segments are evaluated
and compared and an appropriate targeting
strategy is developed.
Lecture One:
Differentiation and Product
Life-Cycle Strategy
Kotler on Marketing
★ Watch the product life
cycle; but more important,
watch the market life cycle.
Objectives
w In this Lecture, we focus on the
following questions:
◆ What are the major differentiation attributes
available to firms?
◆ How many stages in the product life-cycle,
and what factors determine the division?
◆ What marketing strategies are appropriate at
each stage of the product life-cycle?
What is STP?
☆ Marketing Management——Philip. Kotler
w Segmenting —— determining the segmental variables and the segmental
markets
w Targeting —— evaluating each market segment’s attractiveness and select
one or more segments to enter.
w Positioning —— delivering a central idea about a company or an offering
to the target market
w The role of STP—— Product differentiating
■ Differentiating
Strategy
What is the Differentiation?
wDifferentiation—the process of adding a
set of meaningful and valued differences
to distinguish the company's offering from
competitors' offerings.
Differentiation criteria:
• Important
• Distinctive
• Superior
• Preemptive
• Affordable
• Profitable
Case: Sony Company
w As soon as Sony develops a new product, it
might assemble up to three teams to view the
new product as if it were a competitor's
◆ the first team thinks of minor improvements;
◆ the second team thinks of major improvements;
◆ the third team thinks of ways to make the
product obsolete.
Exceed customer expectations with a
three-step process
w Defining the customer value model
w Building the customer value hierarchy
● Basic
● Expected
● Desired
● Unanticipated
w Deciding on the customer value package
Boston Consulting Group (BCG)
wThe BCG
Competitiv
e
Advantage
Matrix
Differentiating Tools
w Product Differentiation
w Services Differentiation
w Personnel Differentiation
w Channel Differentiation
w Image Differentiation
Table 5-1: Differentiation Variables
Product Services Personnel Channel Image
Form Ordering ease Competence Coverage Symbols
Features Delivery Courtesy Expertise Media
Performance Installation Credibility Performance Atmosphere
Conformance Customer
Training Reliability Events
Durability Customer
consulting Responsiveness
Reliability Maintenance
and repair Communication
Reparability Miscellaneous
Style
Design
Product Differentiation
w Form
w Features
w Performance
w Conformance
w Durability
w Reliability
w Reparability
w Style
w Design
Case
w1. McDonald's add a number of
Play Lands at the restaurants in
U.S. and Mexico to cater to the
young.
w2. The Nongfu Garden (农夫果
园)
Services Differentiation
w Ordering ease
w Delivery
w Installation
w Customer training
w Customer consulting
w Maintenance and repair
w Miscellaneous
Cases
w1. Canon Company
w2. Hair Electric Co.
Personnel Differentiation
w Competence (IBM——profession)
w Courtesy (McDonald )
w Credibility
w Reliability
w Responsiveness
w Communication (Disney——upbeat)
Channel Differentiation
w Coverage
w Expertise
w Performance
e.g. Dell & Avon
Image Differentiation
w Identity
w Image
◆ Symbols, Colors, Slogans, Special Attributes
◆ Physical plant
◆ Events and Sponsorship
◆ Using Multiple Image-Building Techniques
■ Product Life-Cycle
Marketing Strategies
The Meanings of PLC
1. Products have a limited life.
2. Product sales pass through distance stages,
each posing different challenges,
opportunities, and problems to the seller.
3. Profits rise and fall at different stages of the
product life cycle.
4. Products require different marketing,
financial, manufacturing, purchasing, and
human resource strategies in each life-cycle
stage
The Stages of PLC
w Introduction Stage
w Growth Stage
wMaturity Stage
w Decline Stage
The General Shape of PLC
Figure 5-1:Sales and Profit life cycles
Sales
Profits
Sales and profits($)
Development Introduction Growth Maturity Decline
Figure 5-2: Alternate Patterns of Product Life-
Cycle
Three Special Categories of PLC
Figure 5-3: Style, Fashion, and Fad Life Cycles
Marketing strategies:
Introduction stage
w Profits:negative or low
w Prices: high
w Costs: high
◆ Reasons:
1. Informing potential consumers
2. Inducing product trial
3. Securing distribution in retail outlets
wThe Pioneer Advantage
First-mover advantages
◆ Those products that came out six months late but on
budget earned an average of 33% less profit in the first
five years
◆ Products that came out on time but 50% over budget
cut their profits by only 4%.
e.g. Amazon. com; Campbell, Coca-Cola, Xerox
wThe Competitive Cycle
◆ sole supplier,
◆ competitive penetration
◆ share stability
◆ commodity competition
◆ withdrawal
Marketing strategies:
Growth stage
wMarketing Strategies:
◆ Improve product quality and add new product features and improved
styling
◆ Add new models and flanker products
◆ Enter new market segments
◆ Increase distribution coverage and enter new distribution channels
◆ Shift from product-awareness advertising to product-preference
advertising
◆ Lower prices to attract next layer of price-sensitive buyers
Case:
w Starbucks Coffee
◆ Flank defenses strategy
1. Trying to push out innovative non-coffee-
related products, such as Tiazzi and ice
cream
2. Selling its premium beans in supermarket
3. Getting into the restaurant business
Marketing Strategies:
Maturity Stage
w Three phases in maturity stage:
◆Growth phase: the sales growth rate starts to decline
◆Stable phase: sales flatten on a per capita basis
◆Decaying phase: the absolute level of sales starts to
decline
Marketing Strategies:
Maturity Stage
w Market Modification
Volume = number of brand users × usage rate per user
◆ Expand number of brand users by:
1. Converting nonusers
2. Entering new market segments
3. Winning competitors’ customers
◆ Convince current users to increase usage by:
1. Using the product on more occasions
2. Using more of the product on each occasion
3. Using the product in new ways
Marketing Strategies:
Maturity Stage
w Product Modification
◆ Quality improvement
Becoming “stronger”, “bigger” and “better”
◆ Feature improvement.
Adding the new features such as size, weight,
materials, additives and accessories to expand the
product's versatility, safety or convenience.
Case: The Failure of the New Coke
w Battered by competition from the sweeter Pepsi-Cola,
Coca-Cola decided in 1985 to replace its old formula
with a sweeter variation, dubbed the New Coke. Coca-
Cola spent $4 million on market research. Blind taste
tests showed that Coke drinkers preferred the new,
sweeter formula, but the launch of New Coke provoked a
national uproar. Market researchers had measured the
taste but had failed to measure the emotional attachment
consumers had to Coca-Cola. There were angry letters,
formal protests, and even lawsuit threats, to force the
retention of "The Real Thing." Ten weeks later, the
company withdrew New Coke and reintroduced its
century-old formula as "Classic Coke," giving the old
formula even stronger status in the marketplace.
Marketing Strategies:
Maturity Stage
wMarketing-Mix Modification
◆ Prices
◆ Distribution
◆ Advertising
◆ Sales promotion
◆ Personal selling
◆ Services
Marketing strategies:
Decline stage
◆ Increase firm’s investment (to dominate the market
and strengthen its competitive position)
◆ Maintain the firm’s investment level until the
uncertainties about the industry are resolved.
◆ Decrease the firm’s investment level selectively by
dropping unprofitable customer groups, while
simultaneously strengthening the firm’s investment in
lucrative niches
◆ Harvesting (“milking”) the firm’s investment to
recover cash quickly
◆ Divesting the business quickly by disposing of its
assets as advantageously as possible
Critique to PLC:
w Life-cycle patterns are too variable in shape and
duration.
w PLC pattern seldom tell what stage the product is
in
w PLC pattern may be the result of marketing
strategies rather than an inevitable course that
sales must follow
Lecture Two
New-Product Development Strategy
Objectives
w In this chapter, we focus on the following
questions:
◆What are the reasons leading to failure in
developing new products?
◆What organizational structures are used to
manage new-product development?
◆What are the main stages in developing new
products, and how can they be managed better?
Six categories of new products:
1. New-to-the-world products
2. New product lines
3. Additions to existing product lines
4. Improvements and revisions of existing
products
5. Repositioning
6. Cost reductions
The Reasons of Development Failure
w 1. A high-level executive pushes a favorite idea
through in spite of negative research findings.
w 2. The idea is good, but the market size is
overestimated.
w 3. The product is not well designed
w 4. The product is incorrectly positioned in the
market, not advertised effectively, or overpriced.
w 5. The product fails to gain sufficient
distribution
coverage or support.
w 6. Development costs are higher than expected.
w 7. Competitors fight back harder than expected
Organizational Arrangements
w New-product deployment requires specific
criteria – one company established the following
acceptance criteria:
◆The product can be introduced within five years
◆The product has a market potential of at least $50
million and a 15 percent growth rate.
◆The product would provide at least 30 percent return
on sales and 40 percent on investment.
◆The product would achieve technical or market
leadership.
Organizational Arrangements
w Budgeting For New Product
Development
Case: 3M’s approach:
◆ 15% rule
◆ Each promising idea gets an “executive champion”
◆ Expect some failures
◆ Golden Step awards handed out each year
Table 5-2: Finding One Successful New Product
(Starting with 64 New Ideas)
Stage
Number of
Ideas Pass Ratio
Cost per
Product Idea Total Cost
1. Idea screening 64 1:4 $ 1,000 $ 64,000
2. Concept testing 16 1:2 20,000 320,000
3. Product development 8 1:2 200,000 1,600,000
4. Test marketing 4 1:2 500,000 2,000,000
5. National launch 2 1:2 5,000,000 10,000,000
$5,721,000 $13,984,000
The New-Product Development
Process (1)
w Ideal generation:
◆ Interacting with others
→ customers
→ scientists
→ competitors
→ employees
→ channel members,
→ top management
The New-Product Development
Process (1)
◆ Creativity technologies(How to stimulate
the creativity in a group)
● Forced relationships
● Morphological analysis
● Reverse assumption analysis
● New contexts
● Mind-mapping
The New-Product Development
Process (2)
w Idea screening
◆ Does the product meet a need?
◆ Would it offer superior value?
◆ Can it be distinctively advertised?
◆ Does the company have the necessary
know- how and capital?
◆ Will the new product deliver the expected
sales volume, sales growth, and profit?
Case: Idea screening of Lego
w Lego Group does not accept a new
product idea unless it satisfies these
questions:
◆ Does the proposed product have the Lego look?
◆ Will children learn while having fun?
◆ Will parents approve?
◆ Does the product maintain high quality
standards?
◆ Does it stimulate creativity?"
The New-Product Development
Process (3)
w Concept to strategy
◆ Concept development
Product idea
Product concept
w Figure 5-4
Product and
Brand
Positioning
The New-Product Development
Process (3)
◆ Concept Testing
The approaches to test:
1. creating physical prototypes ( Tradition )
2. virtual reality programs ( CAD )
3. customer-driven engineering ( Internet )
The New-Product Development
Process (4)
wMarketing Strategy Development
◆ Part 1 describes:
● the target market's size, structure, and behavior;
●the planned product positioning;
●the sales, market share, and profit goals sought
in
the first few years.
The New-Product Development
Process (4)
◆ Part 2 outlines:
● the planned price
● distribution strategy,
● marketing budget for the first year;
The New-Product Development
Process (4)
◆ Part 3 describes:
● sales , profit and goals in the long run
● marketing-mix strategy over time.
The New-Product Development
Process (5)
w Business Analysis
◆Estimating Total Sales
◆Estimating Cost and Profits
● Break-even analysis
● Risk analysis
The New-Product Development
Process (6)
wProduct Development
◆Quality Function Development (QFD)
◆Customer attributes (CAs)
◆Engineering attributes (EAs)
The New-Product Development
Process (7)
wTest Marketing
◆Consumer-goods market testing (from
the least to the most costly):
1. Sales-Wave Research
2. Simulated Test Marketing
3. Controlled Test Marketing
The New-Product Development
Process (7)
4. Test Markets
●How many test cities?
● Which cities?
● Length of test?
● What information?
● What action to take?
◆ Business-Goods Market Testing
The New-Product Development
Process (8)
wCommercialization
◆ When (time)
First entry
Parallel entry
Later entry
◆ Where (Geographic Strategy)
◆ To Whom (Target-Market Prospects)
◆ How (Introductory Market Strategy)
The best way to hold
customers is to
constantly figure out
how to give them
more for less.
Kotler on
Marketing
Chapter Objectives
w In this chapter, we focus on the following
questions:
– What are the characteristics of products?
– How can a company build and manage its
product mix and product lines?
– How can a company make better brand
decisions?
– How can packaging and labeling be used as
marketing tools?
The Product and the Product
Mix
– Product
• Physical goods
• Services
• Experiences
• Events
• Persons
• Places
• Properties
• Organizations
• Information
• Ideas
Figure 14.1: Components
of the Market Offering
The Product and the Product
Mix
w Product levels
– Customer value
hierarchy
– Core benefit
– Basic product
– Expected product
– Augmented product
Figure 14.2: Five
Product Levels
The Product and the Product
Mix
– Consumption system
– Potential product
w Product hierarchy
– Need family
– Product family
– Product class
– Product line
– Product type
– Item
The Product and the Product
Mix
– Product system
– Product mix
w Product classifications
– Durability and Tangibility
Classification:
• Nondurable goods
• Durable goods
• Services
The Product and the Product
Mix
– Consumer-Goods Classification:
• Convenience goods
– Staples
– Impulse goods
– Emergency goods
• Shopping goods
– Homogeneous
shopping goods
– Heterogeneous
shopping goods
• Specialty goods
• Unsought goods
The Product and the Product
Mix
– Industrial-Goods Classification
• Materials and parts
– Farm products
– Natural products
– Manufactured
materials and parts
– Component materials
– Component parts
• Capital items
– Installations
– Equipment
The Product and the Product
Mix
– Supplies and business services
• Maintenance and
repair items
• Operating supplies
• Maintenance and
repair services
• Business advisory
services
The Product and the Product
Mix
w Product mix (Product
assortment)
– Product mix has a certain:
• Width
• Length
• Depth
• Consistency
Table 14.1: Product-Mix Width and Product-Line Length for
Proctor& Gamble Products
PRODUCT-
LINE
LENGTH
Product-Mix Width
Detergents Toothpaste
Disposable
Bar Soap Diapers
Paper
Tissue
Ivory
Snow
(1930)
Dreft
(1933)
Tide
(1946)
Cheer
(1950)
Gleem (1952)
Crest (1955)
Ivory
(1879)
Kirk’s
(1885)
Lava
(1893)
Camay
(1926)
Pampers
(1961)
Luvs
(1976)
Charmin
(1928)
Puffs
(1960)
Banner
(1982)
Summit
(1992)
See text for complete table
The Product and the Product
Mix
w Product-line decisions
– Product-line analysis
• Sales and Profits
– Four types of
product classes:
• Core product
• Staples
• Specialties
• Convenience items
The Product and the Product
Mix
– Market profile
Figure 14.4:
Product Map
for a
Paper-Product
Line
The Product and the Product
Mix
w Product-line length
– Line Stretching
• Downmarket Stretch
– The company may notice strong growth opportunities as mass
retailers attract a growing number of shoppers
– The company may wish to tie up lower-end competitors who
might otherwise try to move upmarket
– The company may find that the middle market is stagnating or
declining
• Upmarket Stretch
• Two-Way Stretch
The Product and the Product
Mix
– Line Filling
• Just-noticeable
difference
– Line Modernization,
featuring, and
pruning
The Product and the Product
Mix
w Commonly used research approaches
to determine brand meaning:
– Word associations
– Personifying the
brand
– Laddering up the
brand essence
• Brand essence
• Laddering up
The Product and the Product
Mix
w Building Brand Identity
– Brand bonding
• Brands are not built by advertising
but by the brand experience
• Everyone in the company lives the brand
• Three ways to carry on internal branding –
Employees must
– Understand
– Desire, and
– Deliver on the brand promise
w Building Brands in the new economy
– Heidi and Don Schultz urge companies to:
• Clarify the corporation’s basic values and build the corporate brand.
• Use brand managers to carry out the tactical work.
• Develop a more comprehensive brand-building plan.
• Define the brand’s basic essence to be delivered wherever it is sold.
• Use the brand-value proposition as the key driver of the company’s
strategy, operations, services, and product development.
• Measure their brand-building effectiveness, not by the old measures of
awareness, recognition, and recall, but by a more comprehensive set of
measures including customer-perceived value, customer satisfaction,
customer share of wallet, customer retention, and customer advocacy.
The Product and the Product
Mix
The Product and the Product
Mix
w Brand Equity
– Brand awareness
– Brand acceptability
– Brand preference
• Aaker’s five levels of customer attitude:
– The customer will change brands, especially for
price reasons. No brand loyalty.
– Customer is satisfied. No reason to change brands.
– Customer is satisfied and would incur cost by
changing brand.
– Customer values the brand and sees it as a friend.
– Customer is devoted to the brand.
Brand Equity
No Brand Loyalty
(customer will change)
Satisfied Customer
(no reason to change)
Satisfied & Switching Cost
Values the Brand
(brand as friend)
Devoted
to Brand
An Overview of
Branding Decisions
Branding
Decision
•Brand
•No brand
Brand-
Sponsor
Decision
•Manu-
facturer
brand
•Distribu-
tor
(private)
brand
•Licensed
brand
Brand-
Name
Decision
•Individual
brand
names
•Blanket
family
name
•Separate
family
names
•Company-
individual
names
Brand-
Repositioning
Decision
•Reposi-
tioning
•No
reposi-
tioning
Brand-
Strategy
Decision
•Line
extension
•Brand
extension
•Multi-
brands
•New
brands
•Cobrands
Brand Strategies
Brand
Extension
New
B
ra
nd
N
am
e
Product Category
Line
Extension
Existing
Existing
MultibrandsNew New
Brands
Good Brand Names:
Suggest
Product
Benefits
Distinctive
Lack Poor
Foreign
Language
Meanings
Suggest
Product
Qualities
Easy to:
Pronounce
Recognize
Remember
The Product and the Product
Mix
– Value of Brand Equity
• Brand valuation
• Competitive advantages of high brand equity:
– The company will have more leverage in bargaining with
distributors and retailers because customers expect them to
carry the brand.
– The company can charge a higher price than its competitors
because the brand has higher perceived quality.
– The company can more easily launch extensions because the
brand name carries high credibility.
– The brand offers some defense against price competition.
– Managing Brand Equity
w Branding Challenges
– Branding Decision: To Brand or Not to Brand?
The Product and the Product Mix
The Product and the Product
Mix
– Branding gives the seller several advantages:
• Brand name makes it easier for the seller to process
orders and track down problems
• Seller’s brand name and trademark provide legal
protection of unique product features
• Branding gives the seller the opportunity to attract a
loyal and profitable set of customers.
• Branding helps the seller segment markets.
• Strong brands help build corporate image, making it
easier to launch new brands and gain acceptance by
distributors and consumers.
The Product and the Product
Mix
– Brand-Sponsor Decisions
• Manufacturer brand
• Distributor brand
• Licensed brand name
• Slotting fee
• Brand ladder
• Brand parity
The Product and the Product
Mix
– Brand-Name Decision
• Four available strategies:
– Individual names
– Blanket family names
– Separate family names for all products
– Corporate name combined with
individual product names
The Product and the Product
Mix
– Desirable qualities for a brand name
• It should suggest something about the product’s
benefits
• It should suggest the product or service category
• It should suggest concrete, “high imagery”
qualities
• It should be easy to spell, pronounce, recognize,
and remember
• It should be distinctive
• It should not carry poor meanings in other
countries and languages
The Product and the Product
Mix
– Brand building tools
• Public relations and
press releases
• Sponsorships
• Clubs and consumer
communities
• Factory visits
• Trade shows
• Event marketing
The Product and the Product
Mix
– Brand Strategy Decision
– Functional brand
– Image brand
– Experimental
brands
• Line Extensions
– Branded variants
• Brand extensions
– Brand dilution
The Product and the Product
Mix
• Multibrands, New Brands, and
Co-Brands
– Multibrand
• Flanker Bands
– Co-branding (Dual branding)
• Ingredient co-branding
• Same-company co-branding
• Joint venture co-branding
• Multisponsor co-branding
The Product and the Product
Mix
– Brand Asset Management
– Brand Auditing and Repositioning
• Brand report card
The Product and the Product
Mix
w Packaging and Labeling
– Packaging
– Package
• Primary Package
• Secondary Package
• Shipping Package
– Factors which have contributed to the growing use of
packaging as a marketing tool
• Self-Service
• Consumer affluence
• Company and brand image
• Innovation opportunity
The Product and the Product
Mix
– Labeling
• Functions
– Identification
– Grading
– Description
• Consumerists have lobbied for:
– Open dating
– Unit pricing
– Grade labeling
– Percentage labeling
Product Mix
C
on
si
st
en
cy
Two-Way Product-Line Stretch: Marriott
Hotels
Quality
Economy SuperiorStandard Good
High
Above
average
Average
Low Fairfield Inn
(Vacationers)
Courtyard
(Salespeople)
Marriott
(Middle
managers)
Marriott
Marquis
(Top
executives)
What is a Brand?
Labels
Sell value,
not price.
Kotler on
Marketing
Chapter Objectives
w In this chapter, we focus on three questions:
– How should a price be set on a product or service
for the first time?
– How should the price be adapted to meet varying
circumstances and opportunities?
– When should the company initiate a price change,
and how should it respond to a competitor’s price
change?
Figure 16.1: Nine Price-Quality Strategies
Figure 16.2: Price Should Align with Value
Setting the Price
w Step 1: Selecting the pricing objective
• Survival
• Maximize current profits
• Maximize their market share
– Market-penetration pricing
• Best when:
– Market is highly price-sensitive, and a low price
stimulates market growth,
– Production and distribution costs fall within accumulated
production experience, and
– Low price discourages actual and potential competition
Setting the Price
w Step 2: Determining Demand
– Price sensitivity
– Total Cost of Ownership (TCO)
Setting the Price
– Tom Nagle offers this list of factors associated
with lower price sensitivity
• The product is more distinctive
• Buyers are less aware of substitutes
• Buyers cannot easily compare the quality of substitutes
• The expenditure is a smaller part of the buyer’s total income
• The expenditure is small compared to the total cost of the end product
• Part of the cost is borne by another party
• The product is used in conjunction with assets previously bought
• The product is assumed to have more quality, prestige, or
exclusiveness
• Buyers cannot store the product
Setting the Price
– Estimating Demand Curves
– Price Elasticity of Demand
• Inelastic
• Elastic
• Price indifference band
Setting the Price
w Step 3: Estimating Cost
– Types of Cost and Levels of Production
• Fixed costs (overhead)
• Variable cost
• Total cost
• Average cost
– Accumulated Production
• Experience curve (Learning curve)
Setting the Price
– Differentiated Marketing Offers
• Activity-based cost (ABC) accounting
– Target costing
w Step 4: Analyzing Competitors’
Cost, Prices, and Offers
Setting the Price
w Step 5: Selecting a Pricing Method
– Markup Pricing
Unit Cost =
variable cost + (fixed cost/unit sales)
– Markup price
Markup price=
unit cost/ (1 – desired return on sales)
– Target-Return Pricing
Target-return price =
unit cost + (desired return X investment capital)/unit sales
– Break-even volume
Break-even volume = fixed cost / (price – variable cost)
– Perceived-Value Pricing
• Perceived value
• Price buyers
• Value buyers
• Loyal buyers
• Value-in-use price
Figure 16.8: Break-Even Chart for
Determining Target-Return Price and Break-
Even Volume
Setting the Price
Setting the Price
– Value Pricing
• Everyday low pricing (EDLP)
• High-low pricing
– Going-Rate Pricing
– Auction-Type Pricing
• English auctions (ascending bids)
• Dutch auctions (descending bids)
• Sealed-bid auctions
– Group Pricing
Table 16.1: Effect of Different Bids
on Expected Profit
Company’s
Bid
Company’s
Profit
Probability of
Getting
Award with
This Bid
(Assumed)
Expected
Profit
$ 9,500 $ 100 0.81 $ 81
10,000 600 0.36 216
10,500 1,100 0.09 99
11,000 1,600 0.01 16
Setting the Price
w Step 6: Selecting the Final Price
– Psychological Pricing
• Reference price
– Gain-and-Risk-Sharing Pricing
– Influence of the Other Marketing Elements
• Brands with average relative quality but high relative
advertising budgets charged premium prices
• Brands with high relative quality and high relative
advertising budgets obtained the highest prices
• The positive relationship between high advertising
budgets and high prices held most strongly in the later
stages of the product life cycle for market leaders
Setting the Price
• Brands with average relative quality but high relative
advertising budgets charged premium prices
• Brands with high relative quality and high relative
advertising budgets obtained the highest prices
• The positive relationship between high advertising
budgets and high prices held most strongly in the later
stages of the product life cycle for market leaders
– Company Pricing Policies
– Impact of Price on Other Parties
Adapting the Price
w Geographical Pricing (Cash, Countertrade,
Barter)
• Countertrade
• Barter
• Compensation deal
• Buyback arrangement
• Offset
– Price Discounts and Allowances
Table 16.2: Price Discounts and Allowances
Cash Discount: A price reduction to buyers who pay bills
promptly. A typical example is “2/10, net 30,”
which means that payment is due within 30
days and that the buyer can deduct 2 percent
by paying the bill within 10 days.
Quantity Discount: A price reduction to those who buy large
volumes. A typical example is “$10 per unit for
less than 100 units; $9 per unit for 100 or more
units.” Quantity discounts must be offered
equally to all customers and must not exceed
the cost savings to the seller. They can be
offered on each order placed or on the number
of units ordered over a given period.
See text for complete table
Adapting the Price
w Promotional Pricing
– Loss-leader pricing
– Special-event pricing
– Cash rebates
– Low-interest financing
– Longer payment terms
– Warranties and service contracts
– Psychological discounting
Adapting the Price
w Discriminatory Pricing
– Customer segment pricing
– Product-form pricing
– Image pricing
– Channel pricing
– Location pricing
– Time pricing
• Yield pricing
Adapting the Price
w Product-mix pricing
– Product-Line Pricing
– Optional-Feature Pricing
– Captive-Product Pricing
• Captive products
– Two-Part Pricing
– By-Product Pricing
– Product-Bundling Pricing
• Pure bundling
• Mixed bundling
Initiating and Responding to
Price Changes
w Initiating Price Cuts
– Drive to dominate the market
through lower costs
– Low quality trap
– Fragile-market-share trap
– Shallow-pockets trap
Table 16.3: Marketing-Mix Alternatives
Strategic Options Reasoning Consequences
1. Maintain price and
perceived quality.
Engage in selective
customer pruning.
Firm has higher
customer loyalty. It is
willing to lose poorer
customers to
competitors.
Smaller market share.
Lowered profitability.
2. Raise price and
perceived quality.
3. Maintain price and
raise perceived
quality.
Raise price to cover
rising costs. Improve
quality to justify higher
prices.
It is cheaper to maintain
price and raise
perceived quality.
Smaller market share.
Maintained profitability.
Smaller market share.
Short-term decline in
profitability. Long-term
increase in profitability.
See text for complete table
Table 16.4: Profits Before and After a Price Increase
Before After
Price $ 10 $10.10 (a 1 percent price increase)
Units sold 100 100
Revenue $1000 $1010
Costs -970 -970
Profit $ 30 $ 40 (a 33 1/3 percent profit increase)
Initiating and Responding to Price Changes
Initiating and Responding to
Price Changes
w Initiating Price Increases
– Cost inflation
– Anticipatory pricing
– Overdemand
– Delayed quotation pricing
– Escalator clauses
– Unbundling
– Reduction of discounts
Initiating and Responding to
Price Changes
• Possible responses to higher costs or overhead without
raising prices include:
– Shrinking the amount of product instead of raising the price
– Substituting less expensive materials or ingredients
– Reducing or removing product features
– Removing or reducing product services, such as installation or
free delivery
– Using less expensive packaging material or larger package sizes
– Reducing the number of sizes and models offered
– Creating new economy brands
Initiating and Responding to
Price Changes
w Reactions to Price Changes
– Customer Reactions
– Competitor Reactions
w Responding to Competitors’ Price Changes
• Maintain price
• Maintain price and add value
• Reduce price
• Increase price and improve quality
• Launch a low-price fighter line
Establish channels for
different target markets
and aim for efficiency,
control, and
adaptability.
Kotler on
Marketing
w In this chapter, we focus on the following channel
questions from the viewpoint of the manufacturers:
– What is the value network and marketing
channel system?
– What work is performed by marketing channels?
– What decisions do companies face in designing,
managing, evaluating, and modifying their
channels?
– What trends are taking place in channel
dynamics?
– How can channel conflict be managed?
Chapter Objectives
What is a Value Network and
Marketing-Channel System?
• Value Network
• Marketing channel
How a Distributor Reduces the
Number of Channel Transactions
Store
Distribution Channel Functions
Ordering
Payments
CommunicationTransfer
Negotiation
FinancingRisk Taking
Physical
Distribution
Information
Consumer Marketing Channels
Wholesaler Jobber Retailer Consumer
Consumer
Retailer Consumer
Manufacturer
0-level channel
Wholesaler Retailer Consumer Mfg
2-level channel
Mfg
3-level channel
1-level channel
Manufacturer
Industrial
distributors
M
an
uf
ac
tu
re
r
C
on
su
m
er
Manufacturer’s
representative
Manufacturer’s
sales branch
Industrial Marketing Channels
Break-Even Cost Chart
Channel Management Decisions
Selecting
FE
ED
B
A
C
K
Motivating
Training
Evaluating
Types of Vertical Marketing Systems
Corporate
Common Ownership at Different
Levels of the Channel
Contractual
Contractual Agreement Among
Channel Members
Administered
Leadership is Assumed by One or
a Few Dominant Members
Conventional Distribution Channel vs.
Vertical Marketing Systems
Manufacturer
Retailer
Consumer
Manufacturer
Consumer
Retailer
Wholesaler
W
ho
le
sa
le
r
What is a Value Network and
Marketing-Channel System?
w “Go-to-market” or hybrid channels
– IBM’s sales force sells to large accounts, outbound
telemarketing sells to medium-sized accounts, direct mail sells
to small accounts, retailers sell to still smaller accounts, and the
Internet to sell specialty items
– Charles Schwab enables its customers to do transactions in
branch offices, over the phone, or via the Internet
– Staples markets through traditional retail, direct-response
Internet site, virtual malls, and 30,000 linked affiliated sites
What is a Value Network and
Marketing-Channel System?
• Channel integration characteristics:
– Ability to order a product online, and
pick it up at a convenient retail location
– Ability to return an online-ordered
product to a nearby store
– Right to receive discounts based on
total of online and off-line purchases
What Work is Performed by
Marketing Channels?
• Many producers lack the financial resources to
carry out direct marketing
• In some cases direct marketing
simply is not feasible
• Producers who do establish their own channels
can often earn a greater return by increasing
their investment in their main business.
Figure 17.1:
How a
Distributor
Effects an
Economy of
Effort
What Work is Performed by
Marketing Channels?
w Channel Functions and Flows
– Key functions include:
• Gather information about potential and current
customers, competitors, and others
• Develop and disseminate persuasive
communications to stimulate purchasing
• Reach agreements on price and other terms so
that transfer of ownership or possession can be
effected
• Place orders with manufacturers
What Work is Performed by
Marketing Channels?
• Acquire funds to finance inventories at different
levels in the marketing channel
• Assume risk connected with
carrying out channel work
• Provide for the successive storage
and movement of physical products
• Provide for buyers’ payment of their bills through
banks and other financial institutions
• Oversee actual transfer of ownership from one
organization or person to another
Figure 17.2: Five Marketing Flows in the Marketing Channel
for Forklift Trucks
What Work is Performed by
Marketing Channels?
– Forward flow
– Backward flow
What Work is Performed by
Marketing Channels?
w Channel levels
– Zero-level channel (a.k.a. direct-marketing
channel)
– One-level channel
– Two-level channel
– Three-level channel
– Reverse-flow channel
w Service Sector Channels
w Information Highway Channels
Channel-Design Decisions
• Push strategy
• Pull strategy
– Designing a channel system
involves four steps:
• Analyzing customer needs
• Establishing channel objectives
• Identifying major channel alternatives
• Evaluating major channel alternatives
Channel-Design Decisions
w Analyze Customers’ Desired
Service Output Levels
– Lot size
– Waiting time
– Spatial convenience
– Product variety
– Service backup
Channel-Design Decisions
w Establish Objectives and Constraints
w Identify Major Channel Alternatives
– Types of Intermediaries
– Number of Intermediaries
• Exclusive distribution
– Exclusive dealing
• Selective distribution
• Intensive distribution
Channel-Design Decisions
– Terms and Responsibilities of
Channel Members
• Price policy
• Conditions of sale
• Distributors’ territorial rights
w Evaluate the Major Alternatives
– Economic Criteria
Figure 17.4: The Value-Adds versus Costs of Different Channels
Figure 17.5:
Break-even Cost
Chart
Channel-Design Decisions
• Channel advantage
– Control and Adaptive Criteria
Channel-Management Decisions
w Selecting Channel Members
w Training Channel Members
wMotivating Channel Members
– Producers can use:
• Coercive power
• Reward power
• Legitimate power
• Expert power
• Referent power
Channel-Management Decisions
• Distribution programming
– Distributor-relations planning
w Evaluating Channel Members
wModifying Channel Arrangements
Channel Dynamics
w Vertical Marketing Systems
• Conventional marketing channel
• Vertical marketing systems (VMS)
– Corporate and Administered VMS
• Corporate VMS
• Administered VMS
Channel Dynamics
– Contractual VMS
• Wholesaler-sponsored voluntary chains
• Retailer cooperatives
• Franchise organizations
– Manufacturer-sponsored retailer franchise
– Manufacturer-sponsored wholesaler franchise
– Service-firm-sponsored retailer franchise
Channel Dynamics
– The New Competition in Retailing
w Horizontal Marketing Systems
wMultichannel Marketing Systems
Channel Dynamics
– Roles of Individual Firms
• Insiders
• Strivers
• Complementers
• Transients
• Outside innovators
Channel Dynamics
w Conflict, Cooperation, and Competition
– Types of Conflict and Competition
• Vertical channel conflict
• Horizontal channel conflict
• Multichannel conflict
– Causes of Channel Conflict
• Goal incompatibility
• Unclear roles and rights
– Differences in perception
Channel Dynamics
– By adding new channels, a company faces the
possibility of channel conflict which
may include:
• Conflict between the national account
managers and field sales force
• Conflict between the field sales
force and the telemarketers
• Conflict between the field sales
force and the dealers
Channel Dynamics
wManaging Channel Conflict
• Diplomacy
• Mediation
• Arbitration
w Legal and Ethical Issues
in Channel Distribution
• Exclusive distribution
• Exclusive dealing
• Tying agreements
The best advertising
is done by satisfied
customers.
Kotler on
Marketing
Chapter Objectives
w In this chapter, we focus on the following
questions:
– What steps are involved in developing an
advertising program?
– What explains the growing use of sales
promotion, and how are sales-promotion
decisions made?
– How can companies exploit the potential of
public relations and publicity?
– How can companies use integrated direct
marketing for competitive advantage?
– How can companies do effective e-marketing?
Major Decisions in Advertising
Objectives Setting
Budget Decisions
Message Decisions Media Decisions
Campaign Evaluation
Informative Advertising
Build Primary Demand
Persuasive Advertising
Build Selective Demand
Comparison Advertising
Compares One Brand to Another
Reminder Advertising
Keeps Consumers Thinking
About a Product.
Advertising Objectives
w Specific Communication Task
w Accomplished with a Specific Target Audience
w During a Specific Period of Time
Figure 20.1:
The Five Ms of
Advertising
Developing and Managing
an Advertising Program
w Setting the Advertising Objectives
– Advertising goal (Objective)
Advertising Budget Factors
Profiles of Major Media Types
Newspapers
Advantages: Flexibility, timeliness; good local market coverage;
broad acceptance, high believability
Limitations: Short life; poor reproduction quality; small
pass-along audience
Television
Advantages: Combines sight, sound, motion; high attention;
high reach; appealing to senses
Limitations: High absolute costs; high clutter; fleeting exposure;
less audience selectivity
Direct Mail
Advantages: Audience selectivity; flexibility, no ad compe-
tition within same medium; allows personalization
Limitations: Relative high cost; “junk mail” image
Radio
Advantages: Mass use; high geographic and demographic
selectivity; low cost
Limitations: Audio only; fleeting exposure; lower attention;
nonstandardized rates; fragmented audiences
Magazines
Advantages: High geographic and demographic selectivity;
credibility and prestige; high-quality reproduction;
long life; good pass-along readership
Limitations: Long ad purchase lead time; waste circulation;
no guarantee of position
Outdoor
Advantages: Flexibility; high repeat exposure; low cost;
low message competition
Limitations: Little audience selectivity; creative limitations
Profiles of Major Media Types
Classification of
Advertising Timing Patterns
Month
Number of
messages
per month
Concen-
trated
(1) (2) (3)
Level Rising Falling Alternating
(4)
Continuous
(8)(7)(6)(5)
(9)
Inter-
mittent
(10) (11) (12)(9)
Simplified Rating Sheet for Ads
0 20 40 60 80 100
(Attention) How well does the ad catch
the reader’s attention? __20
(Read-through) How well does the
ad lead the reader to read further? __20
(Cognitive) How clear is the
central message or benefit? __20
(Affective) How effective is
the particular appeal? __20
(Behavior) How well does the
ad suggest follow-through action? __20
Advertising Strategy
Message Execution
Typical
Message
Execution
Styles
Testimonial
Evidence Slice of Life
Scientific
Evidence
Lifestyle
Technical
Expertise
Fantasy
Musical
Personality
Symbol
Mood or
Image
Turning the “Big Idea” Into an Actual Ad to Capture
the Target Market’s Attention and Interest.
Advertising Evaluation
Advertising Program Evaluation
Communication Effects
Is the Ad Communicating Well?
Sales Effects
Is the Ad Increasing Sales?
Why the increase in Sales Promotion?
w Growing retailer power
w Declining brand loyalty
w Increased promotional sensitivity
w Brand proliferation
w Fragmentation of consumer market
w Short-term focus
w Increased managerial accountability
w Competition
w Clutter
Channels of Sales Promotions
Push
Push
Pull
Consumer Promotion
Consumer-Promotion
Objectives
Consumer-Promotion Tools
Point-of-Purchase
Displays
Premiums
Price Packs
Cash Refunds
Coupons
Samples
Patronage
Rewards
Games
Sweepstakes
Contests
Advertising
Specialties
Patronage
e ards
Entice Consumers to
Try a New Product
Lure Customers Away
From Competitors’ Products
Get Consumers to “Load Up’
on a Mature Product
Hold & Reward Loyal
Customers
Consumer Relationship
Building
“Deal Proneness,”
Liechtenstein, Burton, &
Netemeyer, Journal of
Retailing, Summer 1997
w Examination of “deal proneness”
among consumers in a supermarket
setting
w Surveys & Grocery Receipts used
w Eight types of deals:
– Cent-off, One-free, Gift, Display,
Rebate, Contest, Sale, & Coupon
“Deal Proneness,”
Liechtenstein, Burton,
& Netemeyer
Cluster analysis yielded two interpretable
results:
X 49% are “deal prone,” 51% not
X 24% High “Deal prone,” 50%
intermediate, 26% deal insensitive
w “Deal-proneness” a generalized
construct - (crosses type of promotion)
w Younger & Less educated more likely to
be deal prone
Trade-Promotion Objectives
Trade-Promotion Tools
Specialty
Advertising
ItemsContests
Free Goods
Buy-Back
Guarantees
Allowances
Price-Offs
Patronage
Rewards
Push Money
Discounts
Premiums
Displays
Persuade Retailers or
Wholesalers to Carry a Brand
Give a Brand Shelf Space
Promote a Brand in
Advertising
Push a Brand to Consumers
Trade Promotions
Business-Promotion
Objectives Business-Promotion
ToolsGenerate Business Leads
Stimulate Purchases
Reward Customers
Motivate Salespeople
Conventions
Trade Shows
Sales Contests
Business-to-Business Promotion
Major Public Relations Tools
Special
EventsWritten
Materials
Corporate
Identity
Materials
Speeches
News
Audiovisual
Materials
Public
Service
Activities
Web Site
Developing and Managing an
Advertising Program
– Advertising objectives at different stages in
Hierarchy of Effects
• Informative advertising
• Persuasive advertising
• Reminder advertising
• Reinforcement advertising
– Brand equity
Developing and Managing an
Advertising Program
w Deciding on the Advertising Budget
– Five factors to consider when setting the
advertising budget:
• Stage in the product life cycle
• Market share and consumer base
• Competition and clutter
• Advertising frequency
• Product substitutability
Developing and Managing an
Advertising Program
w Choosing the Advertising Message
– Message generation
– Message evaluation
and selection
• Twedt rates messages on:
– Desirability
– Exclusiveness
– Believability
• Creative brief
– Positioning statement
– Message execution
• Rational positioning
• Emotional positioning
– Social responsibility
review
Deciding on Media and
Measuring Effectiveness
w Deciding on Reach, Frequency, and Impact
– Media selection
– How many exposures, E*, will produce
audience awareness A* depends on the
exposures’:
• Reach (R)
• Frequency (F)
• Impact (I)
Figure 20.2: Relationship Among Trial, Awareness, and the
Exposure Function
Deciding on Media and
Measuring Effectiveness
– Total Number of Exposures (E)
E = R x F
where R = reach, F = frequency
Known as Gross Rating Points (GRP)
– Weighted Number of Exposures (WE)
WE = R x F x I
where R = reach, F = frequency,
I = average impact
Deciding on Media and
Measuring Effectiveness
w Choosing Among Major Media Types
Table 20.1: Profiles of Media Types
Medium Advantages Limitations
Newspapers Flexibility; timeliness; good
local market coverage; broad
acceptance; high believability
Short life; poor
reproduction quality;
small “passalong”
audience
Television Combines sight, sound, and
motion; appealing to the
senses; high attention; high
reach
High absolute cost; high
clutter; fleeting exposure;
less audience selectivity
Direct mail Audience selectivity;
flexibility; no ad competition
within the same medium;
personalization
Relatively high cost;
“junk mail” image
See text for complete table
Deciding on Media and
Measuring Effectiveness
– Media planners consider:
• Target-audience media habits
• Product characteristics
• Message characteristics
• Cost
w New Media
– Advertorials
– Infomercials
Deciding on Media and
Measuring Effectiveness
w Allocating the Budget
w Audience size measures:
– Circulation
– Audience
– Effective audience
– Effective ad-exposed audience
Figure 20.3:
Classification of
Advertising Timing
Patterns
Deciding on Media and
Measuring Effectiveness
w Deciding on Media Timing
– Carryover
– Habitual
behavior
Deciding on Media and
Measuring Effectiveness
• Buyer turnover
• Purchase frequency
• Forgetting rate
– Continuity
– Concentration
– Flighting
– Pulsing
w Deciding on Geographical Allocation
• Areas of dominant influence (ADIs) or designated
marketing areas (DMAs)
Deciding on Media and
Measuring Effectiveness
w Evaluating Advertising Effectiveness
– Communication-Effect Research
• Copy testing
• Consumer feedback method
– Example questions:
• What is the main message you get from this ad?
• What do you think they want you to know, believe, or
do? How likely is it that this ad will influence you to
undertake the implied action?
• What works well in the ad and what works poorly?
• How does the ad make you feel?
• Where is the best place to reach you with this message?
Table 20.2: Advertising Research Techniques
For Print Ads. Starch and Gallup & Robinson, Inc. are two widely
used print pretesting services. Test ads are placed in magazines,
which are then circulated to consumers. These consumers are
contacted later and interviewed. Recall and recognition tests are
used to determine advertising effectiveness.
For Broadcast Ads. In-home tests: A videotape is taken into the
homes of target consumers, who then view the commercials.
Trailer test: In a trailer in a shopping center, shoppers are shown the
products and given an opportunity to select a series of brands.
They then view commercials and are given coupons to be used in
the shopping center. Redemption rates indicate commercials’
influence on purchase behavior.
See text for complete table
Deciding on Media and
Measuring Effectiveness
• Portfolio test
• Laboratory test
Figure 20.4:
Formula for
Measuring
Sales Impact of
Advertising
Deciding on Media and
Measuring Effectiveness
w Sales-Effect Research
– Share of advertising expenditures
– Share of voice
– Share of consumers’ minds and hearts
– Share of market
– Historical approach
– Experimental design
Sales Promotion
– Promotion offers incentive to buy
– Consumer promotion
– Trade promotion
– Sales-force promotion
w Purpose of Sales Promotion
Sales Promotion
wMajor Decisions in Sales Promotion
– Establishing Objectives
– Selecting Consumer-Promotion Tools
• Manufacturer promotions
• Retailer promotions
Table 20.3: Major Consumer-Promotion Tools
Samples: Offer of a free amount of a product or service delivered door
to door, sent in the mail, picked up in a store, attached to another
product, or featured in an advertising offer.
Coupons: Certificates entitling the bearer to a stated saving on the
purchase of a specific product: mailed, enclosed in other products or
attached to them, or inserted in magazines and newspaper ads.
Cash Refund Offers (rebates): Provide a price reduction after purchase
rather than at the retail shop: consumer sends a specified “proof of
purchase” to the manufacturer who “refunds” part of the purchase
price by mail.
Price Packs (cents-off deals): Offers to consumers of savings off the
regular price of a product, flagged on the label or package. A
reduced-price pack is a single package sold at a reduced price (such
as two for the price of one). A banded pack is two related products
banded together (such as a toothbrush and toothpaste).
See text for complete table
Table 20.4: Major Trade-Promotion Tools
Price-Off(off-invoice or off-list): A straight discount off the list price on
each case purchased during a stated time period.
Allowance: An amount offered in return for the retailer’s agreeing to
feature the manufacturer’s products in some way. An advertising
allowance compensates retailers for advertising the manufacturer’s
product. A display allowance compensates them for carrying a special
product display.
Free Goods: Offers of extra cases of merchandise to intermediaries who
buy a certain quantity or who feature a certain flavor or size.
Source: For more information, see Betsy Spethman, “Trade Promotion Redefined,” Brandweek,
March 13, 1995, pp. 25-32.
Sales Promotion
– Selecting Trade-Promotion Tools
Table 20.5: Major Business-and Sales-Force-Promotion Tools
Trade Shows and Conventions: Industry associations organize annual
trade shows and conventions. Business marketers may spend as much
as 35 percent of their annual promotion budget on trade shows. Over
5,600 trade shows take place every year, drawing approximately 80
million attendees. Trade show attendance can range from a few
thousand people to over 70,000 for large shows held by the restaurant
or hotel-motel industries. Participating vendors expect several benefits,
including generating new sales leads, maintaining customer contacts,
introducing new products, meeting new customers, selling more to
present customers, and educating customers with publications, videos,
and other audiovisual materials.
Sales Contests: A sales contest aims at inducing the sales force or
dealers to increase their sales results over a stated period, with prizes
(money, trips, gifts, or points) going to those who succeed.See text for complete table
Sales Promotion
– Selecting Business-and
Sales-Force-Promotion Tools
Sales Promotion
– Developing the Program
• Incentive Considerations
– Size of incentive
– Conditions for participation
– Duration of promotion
– Distribution vehicle
– Presenting, Implementing, Controlling,
and Evaluating the Program
– Lead time
– Sell-in time
Public Relations
– Public
– Public Relations
– Public Relations Department
Functions Include:
• Press relations
• Product publicity
• Corporate communication
• Lobbying
• Counseling
Public Relations
wMarketing Public Relations (MPR)
– Publicity vs. MPR
– MPR assists in the following tasks:
• Assisting in the launch of new products
• Assisting in repositioning a mature product
• Building interest in a product category
• Influencing specific target groups
• Defending products that have
encountered public problems
• Building the corporate image in a way
that reflects favorably on its products
Table 20.6: Major Tools in Marketing PR
Publications: Companies rely extensively on published materials to
reach and influence their target markets. These include annual reports,
brochures, articles, company newsletters and magazines, and
audiovisual materials.
Events: Companies can draw attention to new products or other
company activities by arranging special events like news conferences,
seminars, outings, trade shows, exhibits, contests and competitions,
and anniversaries that will reach the target publics.
Sponsorships: Companies can promote their brands and corporate
name by sponsoring sport and cultural events and highly regarded
causes.
News: One of the major tasks of PR professionals is to find or create
favorable news about the company, its products, and its people, and
get the media to accept press releases and attend press conferences.See text for complete table
Public Relations
wMajor Decisions in Marketing PR
Public Relations
– Establishing the Marketing Objectives
• MPR can:
– Build awareness
– Build creditability
– Hold down promotional cost
Public Relations
• Thomas L. Harris offers the following suggestions:
– Build marketplace excitement before media advertising
breaks
– Build a core customer base
– Build a one-to-one relationship with consumers
– Turn satisfied customers into advocates
– Influence the influentials
– Choosing Messages and Vehicles
• Event Creation
– Implementing the Plan and Evaluating Results
Direct Marketing
– Direct-Order Marketing
– Customer Relationship Marketing
w The Growth of Direct Marketing
– Market Demassification
w The Benefits of Direct Marketing
w Integrated Direct Marketing
Direct Marketing
wMajor Channels for Direct Marketing
– Face-To-Face Selling
– Direct Mail
• New Forms of Mail Delivery
– Fax mail
– E-mail
– Voice mail
Direct Marketing
• Direct marketing has passed through a number of
stages:
– Carpet bombing
– Database marketing
– Interactive marketing
– Real-time personalized marketing
– Lifetime value marketing
– Constructing a Direct-Mail Campaign
• Objectives
• Target Markets and Prospects
• Offer Elements
• Testing Elements
• Measuring Campaign Success: Lifetime Value
Direct Marketing
w Catalog Marketing
– Telemarketing and M-Commerce
• Inbound telemarketing
• Outbound telemarketing
• Four types of telemarketing:
– Telesales
– Telecoverage
– Teleprospecting
– Customer service and technical support
Direct Marketing
– Other Media for Direct-Response Marketing
• Direct-response advertising
• At-home shopping channels
• Videotext and interactive TV
w Kiosk Marketing
Direct Marketing
w E-Marketing
– Permission Marketing
• Levels of Permission Marketing:
– No permission level
– Low permission level
– Medium permission level
– High permission level
– Transaction level
– E-Marketing Guidelines
• Give the customer a reason to respond
• Personalize the content of your e-mails
• Offer something the customer could not get via direct mail
• Make it easy for the customer to “unsubscribe”