mark midterm notes

8/3/2019 Mark Midterm Notes

1/28

Chapter 1

What is Marketing?What Marketing Is and What It Is Not

Many people think of advertising or selling when first asked to describe what marketing

means. It is important for you to understand that marketing is NOT advertising or selling.

Nor is it just common sense.

In this chapter you will see that marketing is described as an organizational function anda set of processes for creating, communicating, and delivering value to customers and for

managing customer relationships in ways that benefit the organization and its

stakeholders. In essence, this means finding the needs and wants of consumers and

satisfying those needs.

As a marketer, finding these needs and wants is important as it means increased sales foryour organization and increased efficiencies in reaching the customer. For marketing to

occur, four conditions are necessary.

1.two or more parties with unsatisfied needs2.desire and ability to satisfy these needs3.a way for the parties to communicate4.something to exchangeThis might initially sound complicated, but it really is pretty straightforward.

Imagine you need a reliable vehicle to get you to school and the only Toyota dealership

in town has a reliable vehicle they want to sell you. On your way home from school one

day while riding your bicycle you happen to pass by this Toyota dealership which

happens to be advertising low finance rates for students. You decide to stop in and talk tothe salesperson. Lets imagine you have the money to pay for this vehicle and the

dealership is able to sell you the vehicle. You want the vehicle and they want to sell it to

you. Before leaving the dealership, you write a cheque for the full purchase price of thevehicle in exchange for the keys to your new vehicle.

Marketing has occurred.

Not only products are marketed. Every organization markets something whether they areselling goods, services, or ideas. WestJet sells services, the Bay sells products, and

politicians sell ideas.

Diverse Factors Influence Marketing ActivitiesOrganizations are typically made up of many people and groups. Marketing activities, as

can be seen in Figure 1-1, are not only influenced by other departments within theorganization, but by external groups and forces. Of particular interest in this figure are the

five environmental forces that we will look at closer in Chapter 3. These forces influence

an organizations marketing activities, yet are out of the organizations control. One mustkeep a close eye on these factors, as they will strongly influence the marketing plan.


2/28

Figure 1-1: An organizations marketing department relates to many people, groups,

and forces

How Marketing Discovers and Satisfies Consumer Needs

The first objective in marketing is to discover consumer needs and wants. Marketing

research involves:

looking carefully at prospective customers

digging deeply to understand what customers need and want

studying industry trends and existing competitive products

Such research is the first step in helping us discover consumer needs.

Figure 1-2: Marketings first task: discovering consumer needs


3/28

Because organizations, just like individuals, cannot satisfy everyone all of the time, they

must focus their efforts on meeting the needs of specific groups of potential consumers

who represent the target market. It is important to have the target market properlyselected as doing so increases the efficiency in reaching the customer.

For example, if BMW wants to promote its high-end 7 Series vehicles, it might choose to

advertise them in luxury magazines read by those who can afford the 7 Series. BMW will

likely not send out flyers to every household in the city as is often done by grocery stores

promoting potato chips and pop. Buying advertising space in luxury magazines may beexpensive, but not as expensive as sending out flyers to every household.

Once a target market has been selected, steps need to be taken to satisfy its needs. This is

marketings second task.

Figure 1-3: Marketings second task: satisfying consumer needs

The marketing program is largely made up of four elements that marketing managers

have control over (upper right box in figure). You will hear these referred to as the Four

Ps or the marketing mix. They are:

product

price

promotion

place

Of course, finding the right balance of the Four Ps when putting together a marketing

program depends on many things. It is for this reason that marketing managers must also

consider environmental factors.

Environmental factors have nothing to do with the weather, but rather represent the


4/28

uncontrollable factors involving social, economic, technological, competitive, and

regulatory forces.

For example, an environmental force might be a new technology that becomes available

in your industry (or worse, is patented by your primary competitor) that renders yourexisting products obsolete.

The Evolution of Marketing

Figure 1-5: Four different orientations in the history of North American business

In early North American business, goods were scarce so consumers were willing to

accept anything they could get their hands on. The focus from a business point of view

was on producing as much as possible. Over the years, as competition grew and supplywas higher than demand, firms began to hire salespeople to sell their products. In the

mid- to late-1950s a new approach where marketing became a motivating force began to

emerge. This is known as the marketing concept era: Marketing ideas becameincorporated into business operations before a product was designed rather than afterproduction (as had previously been done).

We currently find ourselves in the market orientation era, where efforts are being placed

on continuously monitoring customers needs and competitors capabilities. This

information is being shared across the organization, in large part thanks to the Internet,and is used, ultimately, to create value for the customer while also strengthening

customer relationships.

Ethical and socially responsible behaviours are now also being increasingly encouraged.

We will not get into the details as to why this is good for a business here, but askyourself, in the context of Figure 1-1, if you were a coffee drinker, how you might view

organizations that do or do not support fair trade? Many firms understand that ethical andsocial behaviours appeal to consumers. This fact gives companies an additional incentive

to behave ethically and socially responsible. Other firms also understand this, but put

more effort into making it appear as though they are behaving ethically and sociallyresponsible, than actually doing so.


5/28

Chapter 2

Marketing StrategyLevels of Strategy in Organizations

Figure 2-1: The board of directors oversees the three levels of strategy inorganizations: corporate, business unit, and functional

Chapter 2 describes the three levels of strategy (corporate, business unit, and functional)in organizations. Each of these levels links into marketing in its own unique way.

Strategy in OrganizationsOrganizations need direction and reason for being. Defining what their business is can be

achieved through asking questions such as: What is our business? Who are our

customers? How can we offer more value to our customers?

Many organizations also further define their business by defining their mission throughthe development of a mission statement. The mission statement identifies the

organizations scope. It considers the customer base, the markets the organization may

enter, the products it may help develop, and the technology it has available to them.

The companys mission statement then affects marketing in that it acts as a guide for how

the organization will behave.

Figure 2-2 shows a sample mission statement.

Figure 2-2: Todays visionary organization uses key elements to (1) establish afoundation and (2) set a direction using (3) its strategies that enable it to develop andmarket its offerings successfully


6/28

Values and culture are also very important. Not only must organizations connect with

their employees but with all stakeholders including customers, investors, officers,suppliers, and government. Keeping all of these stakeholders happy, and not offending

them, will help lead to long-term growth for the organization.

For example, imagine an organization that provides bad service to a customer one day

and does not correct the problem when it is brought to their attention. It wont take verylong, through the word-of-mouth from the customer who received the bad service, to

damage the organizations reputation. If the organization regularly provides bad serviceto customers and does not address problems when brought to its attention, it will

ultimately have a negative impact on sales.

Chronic poor service may also compromise the ability of the organization to reach other

kinds of goals, such as:

5. sales revenue6. market share7. customer satisfaction8. social responsibilityMarketing efforts support (or fail to support) the organization in attaining its overall goalsin a variety of areas, not just in sales.

Setting Strategic Direction

Setting strategic direction requires that an organization ask where it currently is andwhere it wants to go. More detailed ways of achieving strategic direction include

performing an environmental scan (the five uncontrollable factors discussed in Ch. 5),

followed by a SWOT analysis of the company.

Before allocating resources to help move an organization to where it wants to go, it needs

to have an understanding of where it currently stands. A business portfolio analysis and amarket-product analysis can help an organization decide on how to allocate resources.

The Boston Consulting Group business portfolio is often used to analyze organizationsstrategic business units.

Figure 2-3: Boston Consulting Group portfolio analysis for Kodak, as it might appear

in 2005


7/28

A market-product analysis helps firms discover alternative ways to expand salesrevenues. It involves consideration of the products and markets.

Consider that for any product there is a current market as well as a potential new market.

For any market, there is a current product and a potential new product. Below is a

market-product analysis for Ben and Jerrys ice cream.

Figure 2-4: Four market-product strategies

The figure shows possible marketing directions for the company.

The Strategic Marketing Process

Figure 2-5: The strategic marketing process


8/28

The figure above gives an overview of the strategic marketing process. Take the time toconsider the following questions about this figure, because doing so will provide youwith a solid framework for much of the material covered in your textbook.

In a nutshell, we can see that the strategic marketing process can be broken down intothree phases: the planning phase, the implementation phase, and the control phase.

This process is used by organizations to allocate its marketing mix resources and

enabling it to reach its target markets.

The end of the planning phase (top box in Figure 2.5) in turn elaborates the marketing

program, the elements of which are shown in Figure 2.7.


9/28

Figure 2-7: Elements of the marketing mix that comprise a cohesive marketingprogram


10/28

Chapter 3

Scanning the Marketing EnvironmentEnvironmental Scanning in the New Millennium

This chapter is quite important as it helps one understand the sort of things that may

affect the marketing of a product, service, or idea. If organizations are going to be puttinga lot of resources behind marketing their product, they want and need to do everything in

their power to ensure success.

However, we sometimes see good products fail because of factors beyond the control of

the organization selling the product. This entire module takes a closer look at the fiveenvironmental forces (see Figure 3-1) that may affect the development and

implementation of a good marketing program.

Figure 3-1: Environmental forces affecting the organization as well as its suppliersand customers


11/28

In Figure 3-2 we see an environmental scan of Canadas marketplace. Ask yourself if the

trends identified by this scan match your observations of the environment around you.

Figure 3-2: An environmental scan of Canadas marketplace

Social ForcesSocial forces include the demographic characteristics of the population and its values.

Changes in these forces can have a very significant impact on marketing strategy.

In Canada, for example, we see that the current trend is towards an older population.

Think of the implications this might have on an organization that makes toys, as well as

for an organization that provides retirement planning services. How will baby boomers orthose from Generation Y react to the marketing programs of these firms?

Figure 3-3: Top ten most populous countries by 2050


12/28

Economic Forces

Economic forces include income, expenditures, and resources affecting the cost of

running a business or household. In recent years in Canada weve seen an increase inincome. Businesses need to consider levels of income for their chosen target markets.

Firms selling high-end luxury products, such as Rolex, will need to consider the

discretionary income of the household when choosing its target market.

Technological ForcesWe are all aware that technology changes rapidly as do prices on these technologies. In

recent years, for example, the price of digital cameras has plummeted. The cost of

communicating with people in different countries has also dropped dramatically. Manyphone companies have been significantly affected by new technologies, such as voice

over Internet protocol (VoIP), which have seriously cut into their long-distance phone

call profits. How are companies to react to changes?

Competitive Forces

Competitive forces show up in different forms. Each company must consider present and

potential competitors when designing its marketing strategy. Sometimes a very good scanof competitive forces will still not be good enough. If a competing company comes up

with a new idea for a product that renders your product obsolete and they happen to

patent it, you may be in serious trouble.

Regulatory ForcesSometimes provincial and federal laws place restrictions on a business with regard to the

conduct of its activities. For example, Canadian federal laws put in place to protect the

environment will very likely affect the oil and gas companies exploiting the tarsands of

northern Alberta.

As consumers, we often dont realize that there is federal legislation in place to protectour interests. Figure 34 lists a few of these.

Figure 34: Major federal legislation designed to protect competition and consumers


13/28

Chapter 5

Consumer Behaviour

The Purchase Decision Process

Understanding what goes through a consumers mind when he or she is in the process of

making a purchase is very important to marketers. Individuals typically go through a five-stage purchase decision process as shown in Figure 5-1.

Figure 5-1: Purchase decision process

Of course, individuals likely will not go through this five-step process when buying apack of gum. They will , however, go through it when they make a larger purchase such

as a house or a car. The text discusses three problem-solving variations based on the level

of consumer involvement. These can be seen in Figure 52.

Figure 52: Comparison of problem-solving variations

Situational InfluencesSituational influences also have an impact on the way consumers buy. Imagine you are

thirsty and it is 8 a.m. and you are on your way to class. What might you buy? Perhaps a

coffee?

Now lets imagine it is 10 p.m. and you are with friends at a bar. Now what might you

buy? A coffee?


14/28

The example given here demonstrates how the purchase situation can affect the purchase

decision process. Your textbook neatly summarizes influences on the consumer decisionprocess in Figure 53. Notice how the orange box in the middle contains the five stages a

consumer goes through in making a decision. All of the influences on this purchase

decision are shown in the blue boxes surrounding the orange box.

Figure 53: Influences on the consumer purchase decision process

Psychological Influences on Consumer Behaviour

You would likely be surprised by the amount of research being done in the area ofpsychology as it relates to marketing. Then again, once you think about it, you begin to

realize that psychology helps marketers understand why and how consumers behave the

way they do. What motivates people, their personality, their perceptions, their values,their beliefs, and so forth all influence how people buy.


15/28

The following psychological factors are of interest to marketers:

9. motivation and personality10. perception11. learning12. values13. lifestyleAn organization that can pinpoint and fully understand these psychological factors intheir potential customers can reach its target markets more effectively and at a lower cost.

This in turn leads to increased profits.

Socio-Cultural Influences on Consumer BehaviourThe following socio-cultural factors are of interest to marketers:

personal influences

reference groups

family

social class

culture and subculture

Socio-cultural influences can also have a very strong impact on how consumers buy. Ask

yourself why highly paid sports celebrities might be paid large sums of money by a fast

food chain to promote its products? It is somewhat ironic that a professional athlete whoneeds to be in top physical shape is promoting food that is low in nutritional value.

Socio-cultural influences are not limited to celebrities, however. It may include family,

friends and other groups. When is the last time you made a purchase based on word-of-mouth? In fact, word-of-mouth is the most powerful information source for consumers

because it involves trustworthy sources of information such as family and friends.


16/28

Chapter 6

Organizational MarketsThe Nature and Size of Organizational Markets

Organizational buyers are divided into three markets: industrial, reseller, and government

markets. With thousands of firms in each of these markets, it is important to understandthe fundamental characteristics of these organizational buyers as well as their buying

behaviour. Many companies prefer to sell only to businesses, rather than directly to

consumers, as it means more revenue per sale for them.

Imagine you have a business selling cookies and you decide to walk through theneighbourhood knocking on every door asking if they might be interested in buying

some. It might take some time to sell a few bags. However, making the sale to a key

person responsible for purchases in a grocery store chain might allow you to sell

thousands of bags in a very short period.

Measuring Domestic and Global Industrial, Reseller, and Government MarketsOf course, research measuring the sizes of the potential organizational markets is veryimportant. Would you prefer to make a pitch to sell your cookies to the personresponsible for a chain of three grocery stores or to the person responsible for a chain of

three thousand stores? How do you find out if there are other organizational markets foryour cookies that you are unaware of? You need to do some research.

You need to enter a system to facilitate researching organizational markets. It is calledthe North American Industry Classification System ( NAICS ). This system designates

industries with a numerical code made up of six digits and provides common industry

definitions for the United States, Canada, and Mexico. Figure 61 shows, as an example,

the NAICS six-digit code for television broadcasting.

Figure 61: NAICS breakdown for information and cultural industries sector: NAICScode 51 (abbreviated)

Organizations are different from consumers in how they make purchases. For example,


17/28

with organizations, purchases are often made more on functionality rather than personal

preference. An example of this might be a firm having to buy a new company vehicle. Itwill likely decide to purchase the one that will give the best value for the dollar.

Consumers, on the other hand, may be driven more by their preference for colour, for

example, and choose a blue car.

Figure 62: Key characteristics of organizational buying behaviour

Charting the Organizational Buying ProcessOrganizational buyers go through what is essentially the same buying decision process as

consumers do. However, there are slight differences. Figure 64 can be used to compare

and contrast the differences between the consumer and organizational buying decision

process.


18/28

Figure 64: Comparing the stages in consumer and organizational purchases

Online Buying In Organizational MarketsIn recent years organizational buying online has devolved dramatically. It is now

estimated that organizational buyers account for about 80% of total worldwide dollarvalue for online transactions. When you consider organizations such as Wal-Mart sharingsales information with its suppliers and automating the purchase process when in-store

stocks run low, you begin to understand how prominent online buying is becoming for

organizations.

For example, a large retail outlet, such as Wal-Mart, may receive the diapers they sell

from a company such as Procter and Gamble. Wal-Marts Enterprise Resource Planning(ERP) system software may detect when in-store supplies of these diapers are running

low. This information may then automatically trigger a new order of diapers from Procter

and Gamble. These types of transactions are why organizational buyers account for the

largest dollar value of online transactions.


19/28

Chapter 8

Marketing ResearchWhat Is Marketing Research?

Executives within an organization use marketing research to help them in their decision-

making process. Research involves:

14. defining a problem or opportunity15. collecting and analyzing information16. generating a list of actions that will lead to an improvement of the

organizations marketing activities

Marketing research can often lead to the creation of a new product or service. For

example, lets imagine that ABC Company sells bathtubs and their sales have hi t a

plateau in recent years. They want to explore new opportunities that may exist in the

marketplace, and so they begin collecting and analyzing information from previous and

potential customers. From this research they find that consumers want higher-end Jacuzziand air tubs in their homes. ABC Company decides to expand their product line and

begin offering these as a new product offering.

Types of Marketing ResearchYour textbook discusses three types of marketing research and explains when each type

should be used: exploratory, descriptive, and causal research. Causal research, forexample, is designed to identify cause-and-effect relationships among variables. For

example, what will forecast sales be if we raised the price of our watches? Properly done

marketing research can reveal some very interesting facts. In the case of raising the price

of a watch, we may find that sales actually increase because the watch now becomes aprestigious item to own.

The Marketing Research ProcessThe four stages of marketing research process typically consist of:

defining the problem

determining the research design

collecting informationanalyzing data

drawing conclusions and preparing a report

Following this generic process can help lead to marketing activities that are beneficial to

both the organization and the consumer.


20/28

Figure 82: Sources of secondary data

Ethical Issues in the Marketing Research Process

Ethical issues arise in marketing research. For example, if organizations studypsychological buying behaviour and develop an understanding of the triggers that make

people buy their product on a whim and then apply this research to increase sales, are

they exploiting the consumer?

There are many differing opinions on ethics in marketing. Some organizations knowingly

make unethical, yet legal (and sometimes illegal), decisions that benefit the shareholders

or executives at the expense of the consumer.

Figure 86: Product and brand drivers: factors that influence sales


21/28

Using Information Technology to Trigger Marketing ActionsNew technologies have enabled the development of automated marketing action on

consumers. For example, imagine that as you walk into a mall a scanner detects your

Bluetooth phone, recognizes who you are, links sales in the mall to your profile history,

and sends coupons and sale notifications directly to you on your phone.

Or imagine through data mining a company has tracked the last 100 sites youve visited.When you visit their website, the company is able to use this information to generate and

present to a list of products that marketing research has shown you will be likely to buy.

The use of information technology to trigger these types of marketing actions is currently

available. Whether it is ethical to use technology in this way is still up for debate.

Figure 87: How marketing researchers and managers use information technology to

turn information into action


22/28

Chapter 9

Identifying Market Segments and TargetsWhy Segment Markets?

Organizations segment of their markets because it increases sales and profits and allows

them to serve customers better. In a nutshell, it allows them to be more efficient withtheir marketing efforts.

Steps in Segmenting and Targeting Markets

Five steps are involved in segmenting and targeting markets. Organizations can follow

these five steps to help them develop their marketing program, which will be used to

reach the target market segments.

The five steps are seen below in Figure 93 and are described in much more detail in the

textbook.

Figure 93: The five key steps in segmenting and targeting markets link market needs

of customers to the organizations marketing program.

The five steps in the blue box in Figure 93 summarize eight pages in the textbook. Pay

special attention to the small, black, italicized text in this chapter of the textbook. Eachone of the five steps is often broken down into further steps.

Chapter 9 also discusses the market-product grid. Remember that we develop a market-

product grid to identify a target market and recommend resulting actions.

Positioning the ProductOrganizations will also want to position their products properly in relation to those of

their competitors. Product positioning refers to the place an offering occupies in

consumers minds on important attributes relative to competitive products. Think of the

Apple iPod versus other MP3 players on the market such as Microsofts Zune.

Organizations will often make use of a perceptual map in helping them position their

product and ultimately lead to increased sales.


23/28

Figure 98 shows how a perceptual map can help a dairy increase milk sales to children

and adults.

Figure 98: Using positioning and perceptual maps to increase milk sales to adults.

In Figure 9-9, we see thatrepositioning a product, such as chocolate milk, can be as simple as changing the

packaging and labelling on the product.

Figure 9-9: The strategy dairies are using to reposition chocolate milk to reachadults: Have adults view chocolate milk both as nutritional and more adult.


24/28

Sales Forecasting Techniques

It is essential for organizations to estimate potential sales when segmenting and selectingtarget markets. This can not only help them achieve the best outcome with each

marketing dollar, but also enables them to schedule production more accurately.

The textbook describes three approaches to developing a sales forecast for an

organization of which the best-known example is linear trend extrapolation.

Figure 910: Linear trend extrapolation of sales revenues of Xerox, made at the startof 2000


25/28

Chapters 11 and 12

Managing Products, Brands, and ServicesThe Product Life Cycle

The product life cycle describes the four stages a new product goes through in the

marketplace. It is important to consider, as the growth rate and profitability of the productwill be different at each stage. Marketing managers can adjust and tweak their marketing

mix strategies based on what stage the product is in.

Figure 111: How stages of the product life cycle relate to a firms marketingobjectives and marketing mix actions


26/28

Branding and Brand Management

What colour would you associate with the brand Coca-Cola? Most people would guessred. How about UPS? Most people would guess brown. Branding, of course, is not just

about colour. Branding is how an organization uses a name, phrase, symbol, design, or

any combination of these to identify its products and help differentiate them from those

of the competition.

Brand management starts with creation of the brand. The pyramid in Figure 114 showsthe four steps in creating brand equity (left), focus area for the marketing program

(middle of the pyramid) and intended outcomes of these activities (right).

Figure 114: Customer-based brand equity pyramid

The textbook goes through the characteristics of a good brand name and the different

types of branding strategies organizations can use. The bottom line is that a good brand

helps forge strong and lasting consumer associations with the product or service being

offered.

Companies will also take different approaches in their branding strategies as can be seen

in the figures below.


27/28

Figure 115: Alternative branding strategies

Packaging and Labelling

Think back to Chapter 9 where we were talking about the positioning of chocolate milk

for kids as well as for adults. One of the ways this was achieved was through packaging

and labelling. See Figure 99 for a reminder of what the packaging and labels looked likefor the different target markets.

You may have heard the saying, You cant judge a book by its cover. In marketing,however, consumers often do judge a book by its cover.

How Consumers Purchase Services

Consumers purchase services differently than they do for products. The primary reason

for this is that services cannot be held or touched and are often difficult to evaluate untilafter they have been purchased and consumed. In fact, services have for unique elements

that are described as the Four Is: intangibility, inconsistency, inseparability, and

inventory.

Students often have difficulty remembering the last one, inventory, and associating it

with services. In the context of services, inventory refers to idle production capacity. Anexample would be an aeroplane flying to Vancouver with only half the seats occupied.

The empty seats represent the inventory carrying costs for this service. The aeroplane

needs to fly whether there are five people on board or one hundred. For a real estate

agency, however, the inventory carrying cost is low, as a house sells when it sells andthere is typically no financial loss if it takes an extra week to sell.


28/28

Figure 121: Inventory-carrying costs of services

In Figure 121, the service is fully offered at the right end of the spectrum, regardless of

how many people are consuming it. If few people (relative to capacity) are actuallyconsuming it, then there is a high inventory carrying cost.

If the service is not being fully offered ( for example, if houses arent being bought orsold with the real estate agency), the inventory carrying cost is relatively low.

Managing the Marketing of Services

As services are unique, we require that additional variables be effectively managed.

Remember that for products, the marketing mix was made up of Four Ps. For services

we have the Eight Ps of services. The additional Four Ps are people, physical evidence,process, and productivity. Look to the textbook for more detail on this, but to get a

general idea of what these last Four Ps represent, think about a trip to Tim Hortons for a

cup of coffee.

17. How friendly and willing to help were thepeople who took yourorder? They are the face to the organization and so their proper treatment by theorganization is essential.

18. Was the restaurant clean, well lit, and nicely decorated? This is thephysical evidence.

19. How well do theyprocess your order? Are all the staff workingtogether and the flow behind the counter efficient?

How is theproductivity? Is the restaurant full of patrons or are there onlytwo people sitting in the restaurant?

mark midterm notes

Documents