marketing management
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M A R K E T I N G MANAGEMENT
2011 Fall
- Part I -
Assoc. Prof. Dr. Şebnem Burnaz
Understanding Marketing Concept and Marketing Management
”The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.” Peter Drucker
Overview
What is marketing? Why is marketing important? What is the scope of marketing? What are some fundamental
marketing concepts? What are the tasks necessary for
successful marketing management?
What is Marketing?
All of the above, plus much more!
Selling?
Advertising?
Making products available in stores?
“Identifying and meeting human and
social needs”
“Meeting needs profitably”
“Generating customer value at a profit”
“Managing profitable customer relationships by delivering superior value to customers”
Marketing…is about…
What is Marketing? No single correct definition or approach Common subject matters:
The ability to satisfy customers, The identification of favorable marketing
opportunities, The need to create an edge over competitors, The capacity to make profits to enable a
viable future for the organization, The use of resources to maximize a business’
market position, The aim to increase market share mainly in
target markets…
What is Marketing?
Build profitable relationshi
ps and create
customer delight
Build profitable relationshi
ps and create
customer delight
Capture value from customers to create profits and customer quality
Capture value from customers to create profits and customer quality
Create value for customers and build customer
relationships
Capture value from customers in return
Design a customer-
driven marketing strategy
Design a customer-
driven marketing strategy
Construct a marketing program
that delivers superior
value
Construct a marketing program
that delivers superior
value
Understand the
marketplace and
customer needs&wan
ts
Understand the
marketplace and
customer needs&wan
ts
Marketing as a Process
What Is Marketing?
Marketing is an organizational function and a 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
The ________ is the United States’ 24th largest advertiser with an annual budget of more than $1 billion.1. Procter & Gamble Company2. Boeing Company3. U.S. Government4.Levi Strauss & Co.
Core Concepts of Marketing
Needs, wants, and demands
Productsand services
Value and satisfaction
Exchange, and relationships
Markets
Core Concepts of Marketing
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction Exchange and
relationships Markets
Need State of felt deprivation Basic human
requirements e.g. needs food
Wants Needs directed to
specific objects The form of needs as
shaped by culture and the individual
e.g. wants a BigMac Demands
Wants which are backed by buying power
Core Concepts of Marketing
Needs, wants, and demands
Marketing offers: products, services, experiences…
Value and satisfaction Exchange and
relationships Markets
Marketing offering Combination of
products, services, information or experiences offered to a market that satisfy a need or want.
Offer may include services, activities, people, places, information or ideas.
Marketing myopia is focusing only on existing offers and losing sight of underlying consumer needs.
Market offerings are not limited to physical products: UNCF markets the
idea that “A mind is terrible thing to waste”.
ProductsAnything that can be Offered to a Market to Satisfy a Need or Want
EventsEvents PlacesPlaces PersonsPersons
ExperiencesExperiences InformationInformationPropertiesProperties
Core Concepts of MarketingWhat is Marketed?
ServicesActivities or Benefits Offered for Sale That Are EssentiallyIntangible and Don’t Result in the Ownership of Anything
OrganizationsOrganizations IdeasIdeas
Core Concepts of Marketing
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction Exchange and
relationships Markets
Value Customers form
expectations regarding value
Value: the customer’s estimate of
the product’s overall capacity to satisfy his or her needs.
the satisfaction of customer requirements at the lowest possible cost
ğ Satisfaction
Value - Satisfaction
Customer benefitsAnything desired by the
customer that is received in an exchange
Customer costsAnything a customer gives
up in an exchange for benefits
Monetary price of the benefit
Search costs (time and effort) to locate the product
Risks associated with the exchange
Customer satisfactionThe feeling that a product has met or exceeded the customer’s expectations
What is the benefit of a satisfied customer to the company?
Core Concepts of Marketing
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction Exchange and
relationships Markets
Exchange The act of obtaining a
desired object from someone by offering something in return
The response may be more than simply buying or trading products and services
One exchange is not the goal, relationships with several exchanges are the goal
Relationships are built through delivering value and satisfaction Marketing network ğ
consists of the company and all its supporting stakeholders
Relationship Marketing
Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their businesses.
Managing Relationships: Customers
Customer Relationship Management (CRM)
Using information about customers to create marketing strategies that develop and sustain desirable customer relationships
Identifying buying-behavior patterns of customers
Using behavioral information to focus on the most profitable customers
Managing Customer Relationships
Relationship Building BlocksCustomer perceived
value• The difference
between total customer value and total customer cost
Customer satisfaction
• The extent to which a product’s perceived performance matches a buyer’s expectations
• AIM ğ to increase CLV (consumer lifetime value)!
• to gain a greater proportion of an existing customer’s purchases over a long period
Core Concepts of Marketing
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction Exchange and
relationships Markets
Market Set of actual and
potential buyers of a product
These buyers share a particular need or want that can be satisfied through exchange relshps
Marketing means managing markets to bring about profitable customer relshps
A Simple Marketing System
Marketing defined as...
Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.
Simply put: Marketing ğ the delivery of
customer satisfaction at a profit.
“Good marketing is no accident, but a result of careful planning and execution…But marketing excellence is rare and difficult to achieve. Marketing is both an ‘art’ and a ‘science’ –there is constant tension between the formulated side of marketing and the creative side ”
More Definitions of Marketing (cont.)
From the societal perspective; some marketers describe marketing as the creation and delivery of a standart of living.
From the managerial perspective; marketing (management) is the process of planning and executing the conception, pricing, promotion and distribution of goods and services to create exchanges that satisfy individual and organizational goals.
What Is Marketing Management?
Marketing management is the art and science of choosing target markets and building profitable relationships by getting, keeping, and growing customers through creating, delivering, and communicating
superior customer value
This definition must include answers to 2 questions:
What customers will we serve? How can we best serve these customers?
Marketing Management
Marketing management involves ğ managing demand ğ involves managing customer relationships Marketers aim to influence the level, timing
and composition of demand to meet organizational goals.
Marketing management is concerned not only with finding and increasing demand, but also with changing or even reducing it in
some cases
Marketing management: Customer management & Demand
management
ğ Choosing a Value Proposition
The value proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs
Marketing Management
Production ConceptProduction Concept
Product ConceptProduct Concept
Selling ConceptSelling Concept
Marketing ConceptMarketing Concept
Consumers prefer products that are widely available and inexpensive
Consumers favor products that offer the most quality, performance,
or innovative features
Consumers will buy products only ifthe company aggressively
promotes/sells these products
Focuses on needs/ wants of target markets & delivering value
better than competitors
Company Orientations towards the Marketplace
Focuses on delivering the desired satisfaction more effectively and efficiently than
competitors in a way that preserves or enhances the well-being of both consumer
and society
Societal MarketingConcept
Societal MarketingConcept
Marketing Concept
Achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do
4 pillars of modern marketing :1. Target market2. Customer needs3. Integrated marketing4. Profitability through customer
satisfaction
Market Integratedmarketing
Profits throughcustomer
satisfactionCustomer
needs
(b) The marketing concept
Factory Existingproducts
Selling andpromotion
Profits throughsales volume
Startingpoint Focus Means Ends
(a) The selling concept
Marketing and Sales Concepts Contrasted
Marketing Concept
1) Target market ğ homogenous group of customers to whom the company wishes to appeal
2) Customer needs Consumers may not be fully conscious of their
needs / it may not be easy to articulate these needs OR they may use words that require some interpretation
Customer-oriented thinking ğ to define customer needs from the customer’s point of view
Sales revenue ğ New customers + Repeat customers
“Customer Retention” vs. “Customer Attraction” Customer value and customer satisfaction ğ
building blocks of customer relationship management
Marketing Concept
3) Integrated Marketing ğ Various marketing functions must work together for customer satisfaction (coordination of marketing mix elements: 4Ps)
Marketing Mix ğ controllable variables the company puts together to satisfy its target market(s). Product
Place (Distribution)
Promotion
Pricing
Goods, services, or ideas that satisfy customer needs
The ready, convenient, and timely availability of products
Decisions and actions that establish pricing objectives and policies and set product prices
Activities that inform customers about the organization and its products
Marketing Concept - The 4 Ps
Marketing Concept - The 4 Ps ğ The 4 Cs
MarketingMix
Product
PricePromotion
Place
CustomerSolution
CustomerCost Communication
Convenience
Marketing Concept
Integrated Marketing ğ Marketing must be well coordinated with other departments in the company;
all departments have to work together to satisfy customers’ needs and wants
“Marketing is too important to be left to the marketing department.”
David Packard, Hewlett-Packard
“Marketing is too important to be left to the marketing department.”
David Packard, Hewlett-Packard
Marketing Concept
4) Profitability through customer satisfaction
To achieve profits as a result of creating superior customer value
Selling – Marketing...
“There will always be need for some selling. But the aim of marketing is to make selling
unnecessary. The aim of marketing is to know and understand the
customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”
Peter Drucker
Societal Marketing Concept
Company’s negative effects on society
Conflict between consumer wants and long-term social welfare
The company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests
Societal Marketing Concept
Company(Profits)
Consumers(Want Satisfaction)
Society(Human Welfare)
Societal Marketing
Concept
Evolution of Marketing Thought
How marketing has become “marketing” as we understand it and apply its practices today?
Evolution of Marketing Thought Production Era (1850s-1920s)
Industrial revolution; mass production Few products and little competition
Sales Era (1920s-1950s) The focus was on personal selling and advertising Sales seen as the major means for increasing profits
Mktg Era (1950s-present) Customer orientation replaced the “hard sell” of the
sales-led era Determination of the needs and wants of customers
before introducing products or services
Relationship Marketing Era: 1990s- Marketing era has recently shifted from being
“transaction-based” ğ to focusing on “relationships” Both attracting and “retaining” customers
Evolution of Marketing Thought: New Era(s) in Marketing (The Millenium)
..from Relationship Marketing to... Network marketing E-marketing Community marketing Buzz marketing Digital marketing Mobile marketing ... ... ...
Holistic Marketing Concept New marketing… A need to think about how to operate and
compete in a new marketing environment Holistic marketing ğ based on the
development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies
Premise: “everything matters” with marketing!
Holistic Marketing
The New Four Ps
Processes
People
Programs
Performance
Marketing Management Tasks
Develop market strategies and plans
Capture marketing insights Connect with customers Build strong brands Shape market offerings Deliver value Communicate value Create long-term growth
Shifts in Marketing Management
from marketing does the marketing ğ to… everyone does the marketing
from organizing by product units ğ to… organizing by customer segments
from making everything ğ to… buying more goods and services from outside
from using many suppliers ğ to… working with fewer suppliers in a ‘partnership’
from relying on old market positions ğ to… uncovering new ones
from emphasizing tangible assets ğ to… emphasizing intangible assets
Shifts in Marketing Management
from building brands through advertising ğ to… building brands through integrated communications
from organizing by product units ğ to… organizing by customer segments
from attracting customers through stores and salespeople ğ to...making products available online
from trying to sell everyone ğ to... be the best firm serving well-defined target markets
from focusing on profitable transactions ğ to… focusing on customer lifetime value
from focusing on shareholders ğ to… focusing on stakeholders
Marketing Management Tasks
Developing marketing strategies and plans
Capturing marketing insights
Connecting with customers
Building strong brands
Shaping the market offerings
Delivering value
Communicating value
Creating long-term growth
Strategic Marketing Planning
“The company without a strategy is willing to try anything.”
Michael Porter
Major Questions
How does marketing affect customer value?
How is strategic planning carried out at different levels of the organization?
What is the role of marketing in the overall strategic direction of the company?
What does a marketing plan include?
Phases of Value Creation and Delivery
Choosing the value
Providing the value
Communicating the value
What is the Value Chain?
The value chain is a tool to create more customer value because every firm is a synthesis of primary and support activities performed to design, produce, market, deliver, and support its product.
Core Business Processes
Market-sensing process New-offering realization process Customer acquisition process Customer relationship
management process Fulfillment management process
Characteristics of Core Competencies
A source of competitive advantage Applications in a wide variety of
markets Difficult to imitate
Maximizing Core Competencies
(Re)define the business concept (Re)shaping the business scope (Re)positioning the company’s
brand identity
What is Holistic Marketing?
Holistic marketing sees itself as integrating the value exploration, value creation, and value delivery
activities with the purpose of building long-term, mutually
satisfying relationships and co-prosperity among key
stakeholders.
Questions to Address in Holistic Marketing
What value opportunities are available?
How can we create new value offerings efficiently?
How can we delivery the new offerings efficiently?
Strategic Planning
Strategic Planning ğ Managerial process of developing and maintaining a match between the organization’s resources and the market opportunities.
The aim ğ to shape and reshape company’s businesses and products in order to reach to targeted profits and growth.
The Strategic Planning, Implementation, and Control Processes
Steps in Strategic Planning
Planning, marketing,and other functionalstrategies
Planning, marketing,and other functionalstrategies
Corporate LevelBusiness unit,
product,and market
level
1) Defining the corporate mission2) Setting objectives and goals3) Designing business portfolio
Determining SBUsAssigning resources to
SBUs4) Assessing growth opportunities
Defining the Corporate Mission
A mission statement ğ a statement of the organization’s purpose -- what it wants to accomplish in the larger environment
A clear mission statement ğ acts as “invisible hand” that guides employees to work toward realizing the organization’s goals
“Mission statement ğ to be guided by a “vision”—an almost “impossible dream” that provides a direction for the company for the next 10 to 20 years
Defining the Corporate Mission
What is our business? Who is the customer? What is the value to the customer? What will our business be? What should our business be?
Good Mission Statements
Focus on a limited number of goals Stress major policies and values Define major competitive spheres Take a long-term view Short, memorable, meaningful
What is our business:Product Orientation vs. Market Orientation
Company Product Market
Disney We run theme parks We create fantasies—a place where dreams come true
Xerox We make copying equipment
We improve office productivity
Columbia Pictures
We make movies We entertain people
Amazon.com We sell books, videos, CDs, toys, consumer electronics and other products online
We make the Internet buying experience fast, easy, and enjoyable— we’re the place where you can find and discover anything you want to buy online
Nike We sell athletic shoes and apparel
We bring inspiration and innovation to every athlete* in the world (*if you have a body, you are an athlete)
Company Goals and Objectives
Mission ğ hierarchy of objectives
“We will provide branded products and services of superior quality and value that improve the lives of the world's consumers, now and for generations to come.
As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.”
Identify key businesses (SBUs) that make up the company
Assess the attractiveness of its various SBUs
Decide how much support each SBU deserves
Business Portfolio Analysis
The Boston Consulting Group’s Growth-Share Matrix
20%-18%-16%-14%-12%-10%- 8%- 6%- 4%- 2%- 0
Mar
ket
Gro
wth
Rat
e
3 ?Question marks
? ??2
1
Cash cow
6
Dogs
8
710x 4x 2x 1.5x 1x
Relative Market Share.5x .4x .3x .2x .1x
Stars
5
4
Question Marks
• High growth, low share • Build into Stars or phase out • Require cash to hold market share
Question Marks
• High growth, low share • Build into Stars or phase out • Require cash to hold market share
Stars
• High growth & share• Profit potential • May need heavy investment to grow
Cash Cows
• Low growth, high share• Established, successful SBU’s• Produce cash
Cash Cows
• Low growth, high share• Established, successful SBU’s• Produce cash
Dogs
• Low growth & share • Low profit potential
Dogs
• Low growth & share • Low profit potential
Relative Market ShareHigh Low
Mark
et
Gro
wth
Rate
Low
H
igh
Boston Consulting Group Approach
?
Boston Consulting Group Approach and Strategies
After the classification of SBUs ğ determine what role each will play in the future Build ğ to invest more in the SBU in order to
build its share Hold ğ to invest enough just to hold at the
current level Harvest ğto increase the SBU’s short-term
cash flow Divest ğ to sell or to liquidate the business
The SBU Life Cycle
SBUs have a life cycle in general:a) Question marksb) Starsc) Cash cowsd) Dogs
Examine not only the business’ current positions, but also its moving positions.
Can be Difficult, Time-Consuming, & Costly to ImplementCan be Difficult, Time-Consuming, & Costly to Implement
Difficult to Define SBU’s & Measure Market Share/ GrowthDifficult to Define SBU’s & Measure Market Share/ Growth
Focus on Current Businesses, But Not future PlanningFocus on Current Businesses, But Not future Planning
Can Lead to Unwise Expansion or DiversificationCan Lead to Unwise Expansion or Diversification
Problems With Matrix Approaches
Sal
es
1050Time (years)
The Strategic-Planning Gap
Desiredsales
Desiredsales
Integrative growth
Intensive growth
CurrentPortfolio sales
CurrentPortfolio sales
Strategic-planning
gap
Diversification growth
Planning New Business, Downsizing Older Businesses
GROWTH STRATEGIES – 3 alternatives :
1. Intensive Growth 2. Integrative Growth3. Diversification Growth
Growth Strategies: Ansoff’s Product/Market Expansion Grid
4. Diversification2. Marketdevelopment
Newmarkets
1. Marketpenetration
Existingmarkets
Existingproducts
3. Productdevelopment
Newproducts
Downsizing
Some reasons that a company might want to abandon products or markets: The market environment might change (making
some of the company’s product or markets less profitable – e.g. economic recession)
The company may have grown too fast or entered areas where it lacks experience
Some of the company’s products or business units age and die.
Marketing’s Key Role in Strategic Planning
Provide a guiding philosophy Identify attractive opportunities Design effective strategies Build strong value chains Form superior value delivery
networks
The Business Unit Strategic Planning
The Business Unit Strategic Planning
Business Mission ğ each SBU needs to define its specific mission within the broader company mission
External Environment Analysis ğ to build a MIS to monitor:
Key external macroenvironment forces Significant microenvironment actors Trends and important developments ğ to
identify the associated opportunities and threats
The Business Unit Strategic Planning
Internal Environment Analysis ğ Each business needs to evaluate its internal strengths and weaknesses periodically
“Checklist for Performing Strengths/Weaknesses Analysis”
Management or an outside consultant ğ reviews the business’s marketing, financial, manufacturing and organizational competencies and rates each factor as strength or weakness
SWOT ANALYSIS
The Business Unit Strategic Planning /
Example of a Checklistı PERFORMANCE IMPORTANCE
Main 2nd Moderate 2nd Main High Medium LowStrength Strength Weakness Weakness
MARKETINGFirm's reputationMarket shareProduct/service qualityPricingDistributionPromotionSales forceR&D / InnovationGeographical location
FINANCEHigh profitabilityLow cost of capitalCash flowFinancial stability
PRODUCTIONScale economiesCapacity of meeting demandTalented productive powerTimely productionTechnical competence
ORGANIZATIONSkillful managersLoyal employeesEntrepreneurship orientationFlexibility degreeRapid adaptation
Marketing Analysis – SWOT Analysis
SWOT Analysis
Market Opportunity Analysis (MOA)
Can the benefits involved in the opportunity be articulated convincingly to a defined target market?
Can the target market be located and reached with cost-effective media and trade channels?
Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits?
Market Opportunity Analysis (MOA)
Can the company deliver the benefits better than any actual or potential competitors?
Will the financial rate of return meet or exceed the company’s required threshold for investment?
1
4
2
3
High
Low
High Low
Att
ract
iven
ess
Success Probability Opportunities
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.Economic depression
3.Higher costs4.Legislation to
reduce number of TV studio licenses
1
4
2
3
High
Low
High Low
Ser
iou
snes
s
Probability of Occurrence Threats
Goal Formulation (Goals ğ objectives that are specific with respect to magnitude and time) Turning objectives ğ into measurable goals ğ
facilitates management planning, implementation and control
The Business Unit Strategic Planning
The Business Unit Strategic Planning: Strategy Formulation
Overall Cost Leadership
Differentiation
FocusMichael Porter
The Marketing Process
Analyzing marketing opportunities
Researching and selecting target markets
Designing marketing strategies Planning marketing programs Organizing, implementing,
controlling the marketing effort
Managing the Marketing Effort
The Marketing Process
Finding opportunities : the company must analyze its market & mktg
environment company strengths &
weaknesses current and possible
mktg actions Avoiding threats Understanding strengths Analyzing weaknesses
• Analysis• Planning• Implementation• Control
Managing the Marketing Effort
Marketing Functions
Marketing planning ğ involves deciding on marketing strategies that will help the company reach its strategic objectives
Managing the Marketing Effort
Marketing Functions
• Analysis• Planning• Implementation• Control
What is a Marketing Plan?
A marketing plan is the central instrument for
directing and coordinating the marketing effort.
It operates at a strategic and tactical level.
Levels of a Marketing Plan
Strategic Target
marketing decisions
Value proposition
Analysis of marketing opportunities
Tactical Product
features Promotion Merchandising Pricing Sales channels Service
Marketing plan
Executive summary
Marketing situation
Threats and
opportunities
Objective and issues
Marketing strategy
Action programs
Budgets Controls
The application of marketing resources to achieve marketing objectives
The process that turns mktg plans into mktg actions to accomplish strategic mktg objectives
Successful implementation depends on how well the company blends its people, organizational structure, decision and reward system, and company culture into a cohesive action plan that supports its strategies
Managing the Marketing Effort
Marketing Functions
• Analysis• Planning• Implementation• Control
Managing the Marketing Effort
Functional organization
Geographic organization
Product management organization
Market or customer management
Marketing Department Organization
Measurement and evaluation of the results of marketing strategies
Checking for differences between goals and performance
Taking of corrective action as needed
Managing the Marketing Effort
Marketing Functions
• Analysis• Planning• Implementation• Control
Measuring Marketing Plan Performance
Sales analysis Market share analysis Marketing expense-to-sales ratio Financial analysis
Managing the Marketing Effort
Return on marketing investment (Marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment.
provides a measurement of the profits generated by investments in marketing activities.
Marketing Planning
Develop StrategicPlans
Develop
MarketingPlans
Marketing Planning
Develop StrategicPlans
Develop
MarketingPlans
MarketingImplementation
Carry OutThe
Plans
MarketingImplementation
Carry OutThe
Plans
Marketing Analysis of Company’s SituationMarketing Analysis of Company’s Situation
Control
MeasureResults
EvaluateResults
TakeCorrective
Action
Managing the Marketing Effort
Marketing Environment
The Marketing Environment
Marketing Environment ğthe actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers. Microenvironment actors - forces
close to the company that affect its ability to serve its customers.
Macroenvironment forces - larger societal forces that affect all the microenvironment.
Profitable CustomerRelshps.
Product
Place Price
Promotion
Mar
ketin
g
Im
plem
enta
tion
Marketing
Planning
Marketing
Control
Mar
ketin
g
Analysis
Competitors
MarketingIntermediaries
PublicsSuppliers
Demographic-Economic
Environment
Technological-Natural
Environment
Political-Legal
Environment
Social-Cultural
Environment
The Marketing Environment
The Microenvironment
Competitiors
Publics
Customer Markets
Intermediarie
s
Supp
liers
Company
Internal Environment
The Microenvironment: Company’s Internal Environment
Functional areas inside a company that have an impact on the marketing department’s plans
Top management ğ responsible for setting company’s mission, objectives, broad strategies and policies
Marketing managers; make decisions within the parameters
established by top management must also work closely with other
company departments
The Microenvironment: Suppliers
Firms and individuals providing resources to the company and its competitors to produce goods and services.
Important link in the company’s overall customer “value delivery system” to watch supply availability to monitor price trends of key inputs
The Microenvironment: Intermediaries
Firms that help the company to promote, sell, and distribute its goods to final buyers Resellers Physical distribution firms Marketing service agencies Financial intermediaries
The Microenvironment:Customer Markets
Consumer markets ğ Individuals & households that buy goods & services for personal consumption
Business markets ğ Buy goods & services for further processing in their production process
Resellers markets ğ Buy goods & services in order to resell them at a profit
Government markets ğ Buy goods & services in order to produce public services or transfer them to those that need them
International markets ğ Buyers of all types in foreign countries
The Microenvironment:Competitors
Every company faces a wide range of competitors.
A company must secure a strategic advantage over competitors to be successful in the marketplace.
No single competitive strategy is best for all companies
The Microenvironment:Publics
Any group that has actual or potential interest in or impact on an organization’s ability to achieve its objectives. Financial publics (banks, stockholders) Media publics (newsp.,magazines, radio&TV) Government publics Citizen-action publics (consumer org.,
environmental groups Local publics General publics Internal publics
The Macroenvironment
Demographic Economic Natural Technological Political-Legal Social-Cultural
Demographic Environment
Worldwide Population GrowthWorldwide Population Growth
Age Structure of the PopulationAge Structure of the Population
Household PatternsHousehold Patterns
Educational GroupsEducational Groups
Geographical Shifts in PopulationGeographical Shifts in Population
Shift from Mass Market to MicromarketsShift from Mass Market to Micromarkets
Ethnic MarketsEthnic Markets
EconomicDevelopment
EconomicDevelopment
Changes in IncomeChanges in Income
Changing ConsumerSpending Patterns
Changing ConsumerSpending Patterns
KeyEconomic
Concerns forMarketers
KeyEconomic
Concerns forMarketers
Economic Environment
Economic EnvironmentIncome DistributionIncome Distribution
Subsistence economies ğ The vast majority of people engage in simple agriculture, consume most of their output and barter the rest for simple goods and services.
Subsistence economies ğ The vast majority of people engage in simple agriculture, consume most of their output and barter the rest for simple goods and services.
Raw-material-exporting economies ğ are rich in one or more natural resources but poor in other respects. Much of their revenue comes from exporting these resources.
Raw-material-exporting economies ğ are rich in one or more natural resources but poor in other respects. Much of their revenue comes from exporting these resources.
Industrializing economies ğ Manufacturing accounts for 10 to 20% of gross domestic product. Industrialization creates a new rich class and a small but growing middle class, both demanding new types of goods.
Industrializing economies ğ Manufacturing accounts for 10 to 20% of gross domestic product. Industrialization creates a new rich class and a small but growing middle class, both demanding new types of goods.
Industrial economies ğ are major exporters of manufactured goods and investment funds. They buy manufactured goods from one another & export themto other types of economies in exchange for raw materials & semi-finished goods.
Industrial economies ğ are major exporters of manufactured goods and investment funds. They buy manufactured goods from one another & export themto other types of economies in exchange for raw materials & semi-finished goods.
Savings, Debt, & Credit AvailabilitySavings, Debt, & Credit Availability
Natural Environment
Factors Affecting
the Natural
Environment
Shortages of Raw Materials
Increased Pollution
Changing Role of
Governments
Increased Energy Costs
Accelerating Paceof Change
Accelerating Paceof Change
Unlimited Opportunitiesfor Innovation
Unlimited Opportunitiesfor Innovation
IncreasedRegulation
IncreasedRegulation
Issues in the TechnologicalEnvironment
Issues in the TechnologicalEnvironment
VaryingR & D Budgets
VaryingR & D Budgets
Technological Environment
LegislationRegulating Business
LegislationRegulating Business
Includes laws, government agencies, etc. that influence & limit organizations/individuals in a given society
Includes laws, government agencies, etc. that influence & limit organizations/individuals in a given society
Growth of Special- Interest Groups
Growth of Special- Interest Groups
Legal Environment
Social/Cultural Environment
People’s View of Organizations
People’s View of Organizations
People’s View of Nature
People’s View of Nature
People’s View of Themselves
People’s View of Themselves
People’s View of Society
People’s View of Society
People’s View ofthe Universe
People’s View ofthe Universe
People’s View of Others
People’s View of Others
Cultural Valuesof a
Society
Cultural Valuesof a
Society
Understanding Markets through
Marketing Information Systems
Marketing is becoming a battle based more on information than on sales power
Major Questions
What are the components of a modern marketing information system?
What are useful internal records? What makes up a marketing
intelligence system? How can companies accurately
measure and forecast demand?
Companies need information about their marketing environment, competition, customer needs
Reasons for the need for real-time market information
Global marketing Buyer needs & wants Price competition vs. nonprice competition
Companies with superior information; choose its markets better develop better offerings execute better marketing planning
Importance of Market InformationImportance of Market Information
The Marketing Information System
A marketing information system (MkIS) consists of people, equipment, and procedures
to gather, sort, analyze, evaluate, and distribute
needed, timely, and accurate info. to marketing decision makers.
The MkIS helps managers to: 1.Assess information needs,2.Develop needed information,3.Distribute information.
The Marketing Information System
Useful questions to determine information needs of marketing managers
What decisions do you regularly make? What information do you need to make
these decisions? What information do you regularly get? What studies do you periodically request? What information would you want that you
are not getting now? What are the four most helpful
improvements that could be made in the present marketing information system?
Internal DataInternal DataComputerized Collection of Information
from Data Sources (i.e. accounting) within the Company.
Computerized Collection of Information from Data Sources (i.e. accounting)
within the Company.
MarketingResearchMarketingResearch
Design, Collection, Analysis, and Reporting of Data about a Specific
Marketing Situation Facing the Organization.
Design, Collection, Analysis, and Reporting of Data about a Specific
Marketing Situation Facing the Organization.
MarketingIntelligenceMarketing
IntelligenceCollection and Analysis of Publicly
Available Information about Competitors and the Marketing Environment
Collection and Analysis of Publicly Available Information about Competitors
and the Marketing Environment
Functions of a MkIS: Developing Information
Information Needed by Managers Can be Obtained From:
Internal Record System
Consists of computerized collections of info. obtained from data sources within the company (internal data);
Includes reports on orders, sales, prices, costs, inventory levels, receivables, payables, etc. “opportunities” and “problems” can be
determined by analyzing these information Can usually be accessed more quickly and
cheaply May be incomplete or data may be in the
wrong form.
Internal Record System
The order-to-payment cycle Sales representatives, dealers, and customers
send orders to the firm The sales department prepares invoices, transmits
copies to various departments, and back-orders out-of-stock items
Shipped items generate shipping and billing documents that go to various departments.
Sales Information Systems Marketing managers need timely and accurate
reports on current sales.
Marketing Intelligence System
A set of procedures and sources used by managers to obtain everyday information about developments in the marketing environment
Competitive info. gathering sources: Company sales representatives Suppliers, resellers, customers (“mystery
shoppers”) Annual reports, speeches, press releases, and
advertisements Business publications, web pages Trade show exhibits Outside companies (e.g. mktg research
company)
Sources of Competitive Information
Independent customer goods and service review forums
Distributor or sales agent feedback sites Combination sites offering customer
reviews and expert opinions Customer complaint sites Public blogs
Steps to Quality Marketing Intelligence
Train sales force to scan for new developments
Motivate channel members to share intelligence
Hire external experts to collect intelligence
Network externally Utilize a customer advisory panel Utilize government data sources Purchase information
Additional Information Forecasting and Demand Measurement
Which market to measure? Potential market Available market Target market Penetrated market
A Vocabulary for Demand Measurement
Market Demand
Market Forecast
Market Potential
Company Demand
Company Sales Forecast
Company Sales Potential
Demand Measurement
Market demand—the total volume for a product that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program.
Market potential—the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment.
Market Demand Functions
Company Demand and Sales Forecast
Company demand—the company’s estimated share of market demand at alternative levels of company marketing effort in a given time period.
Company sales forecast—the expected level of company sales based on a chosen marketing plan and an assumed marketing environment.
Estimating Current Demand
Total market potential—the maximum number of sales that might be available to all of the industry’s firms during a given period, under a given level of industry marketing effort and environmental conditions.
Area market potential—the market potential of a specific location: Market buildup method Multiple-factor method
Estimating Current Demand: Total Market Potential
Calculations Multiple potential
number of buyers by average quantity each purchases times price
Chain-ratio method
Estimating Current Demand: Area Market Potential
Market-Buildup
Estimating Current Demand: Area Market Potential
Multiple-Factor Index
Sales Forecasting Techniques
Time Series Methods Naive
Forecasting Trend Analysis
Linear trends Non-linear
trends Seasonal
adjustments Moving
Averages Exponential
Smoothing
Correlational Methods Simple
regression Multiple
regression Judgemental
Methods Jury of
Executive Opinion
Sales Force Composite
Marketing Research System
Marketing research ğ the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing an organization.
Market research ğ research into a particular market ! just one component of mktg research
Examples of research
• Quantitative Research: Seeks to quantify the data and typically applies some form of statistical analysis. It is based on large number of representative sample Data collection is structured Recommend a final course of action
• Qualitative Research: The main objective is to gain qualitative understanding of the underlying reasons & motives.
It is based on large number of representative sample Sample consists of small number of nonrepresentative
cases. Data collection is unstructured Data analysis is nonstatistical It is possible to develop an initial understanding
Types of research
Types of Marketing Research Firms
Syndicated
Custom
Specialty-line
The Marketing Research Process
Defining the problem and
research objectives
Defining the problem and
research objectives
Developing theresearch plan
Developing theresearch plan
Implementingthe research
plan: collecting the data
Implementingthe research
plan: collecting the data
Implementingthe research
plan: analyzing the data
Implementingthe research
plan: analyzing the data
Interpreting and reporting the findings
Interpreting and reporting the findings
Step 1: Defining the Problem & Research Objectives
Example: ABC Airlines Case ABC Airlines is constantly looking for new
ways to serve the needs of air travelers:
One manager came up with the idea of offering phone service to passengers.
The other managers got excited about this idea and agreed that it should be researched further.
The marketing manager volunteered to do some preliminary research
The marketing manager then asked the company’s research manager to find out how air travelers would respond to this new service.
Defining the Problem & Research Objectives Example: ABC Airlines Case (cont.)
Research Problem ? “to find out everything about air travelers’ need” – too broad! “to find out if enough passengers aboard a B-747 flying
between East Coast and West Coast would be willing to pay $ 25” to make a phone call so that the company would break even on the cost of offering this service” – too narrow!
Research Problem is finally defined as: “Will offering an in-flight phone service create enough incremental preference and profit for ABC Airlines to justify its cost against other possible investments that the company might make?”
Defining the Problem & Research Objectives Example: ABC Airlines Case (cont.)
Research Objectives: What are the main reasons that airline
passengers might place phone calls while flying?
What kinds of passengers would be the most likely to make phone calls?
How many passengers are likely to make phone calls, given different price levels?
How many extra customers might choose this company because of this new service?
How important will phone service be relative to other factors? (such as flight schedules, food quality, baggage handling, etc.)
Defining the Problem & Research Objectives
ExploratoryResearch
DescriptiveResearch
CausalResearch
• Test cause- and-effect relationships.
• Tests hypotheses about cause- and-effect relationships.
• Test cause- and-effect relationships.
• Tests hypotheses about cause- and-effect relationships.
• Sheds light on problem - suggest solutions or new ideas.
• Gathers preliminary information that will help define the problem
and suggest hypotheses
• Sheds light on problem - suggest solutions or new ideas.
• Gathers preliminary information that will help define the problem
and suggest hypotheses
• Ascertain magnitudes• Describes things as market
potential for a product or the demographics and consumers’
attitudes.
• Ascertain magnitudes• Describes things as market
potential for a product or the demographics and consumers’
attitudes.
Step 2: Developing the Research Plan
Data Sources
ContactMethods
ResearchInstruments
SamplingPlan
Research Approach
Data that were collected for another purpose, and already exist somewhere
(+)Obtained more quikcly / at lower cost
(-)Might not be usable data.
Developing the Research Plan:Data Sources
both must be:
Relevant
Accurate
Current
Impartial
Data gathered for a specific purpose or for a specific research project
A classification of marketing research data
Developing the Research Plan Secondary Data Collection
Internal Sources Company profit-loss statements, balance
sheets, sales figures, sales-call reports, invoices, inventory records, and prior research reports.
Government Publications Statistical Abstract County and City Data Book Industrial Outlook Marketing Information Guide
Periodicals and Books Business Periodicals Index Standard and Poor’s Industry
On-Line Databases (e.g. Lexis-Nexis, Compuserve, Dialog)
Applications of Secondary Data
Demand Estimation Monitoring the environment Segmentation and Targeting
Sources of Secondary Data (examples)
ESOMAR website - www.esomar.org founded in 1948 4,400 members in 100 countries mission : "ESOMAR is the world organisation for enabling
better research into markets, consumers and societies." the aim is to promote the value of market and opinion
research in illuminating real issues and bringing about effective decision-making.
creates and manages a comprehensive programme of industry-specific and thematic conferences, publications and communications
www.arastirmacilar.org in Turkey (TÜAD – Türkiye Araştırmacılar Derneği)
Other useful sources: AMA website – www.marketingpower.com AMS website – www.ams-web.org www.trendwatching.com
Research Approaches
ObservationObservation
Focus GroupFocus Group
SurveySurvey
ExperimentationExperimentation
Ethnographic research
Ethnographic research
In-depth InterviewIn-depth Interview
Projective techniquesProjective techniques
Developing the Research Plan: Contact Methods
Mail Telephone Personal (arranged or intercept interviews)
Individual or group interviewing CAPI and CATI
On-line (Internet research) the data are not representative of a target
population people in the target market who do not use the
Internet or who don’t want to answer a questionnaire can bias the results.
Pros and Cons of Online Research
Advantages Inexpensive Fast Accuracy of data Versatility
Disadvantages Small samples Skewed samples Technological problems Inconsistencies
Developing the Research Plan: Sampling Plan
Sample -representative segment of the
population How should thesample be
chosen?(Sampl.procedure)
Who is to be surveyed?(Sampling
Unit)
How many should besurveyed?
(Sample size)
Developing the Research Plan: Research Instruments
Technological devices Galvanometers Tachistoscope Eye cameras Audiometers GPS
Questionnaires What questions to
ask? Form of each
question? Closed-end Open-end Wording? Ordering?
Questionnaire Do’s and Don’ts
Ensure questions are free of bias
Make questions simple
Make questions specific
Avoid jargon Avoid sophisticated
words Avoid ambiguous
words
Avoid negatives Avoid hypotheticals Avoid words that could
be misheard Use response bands Use mutually
exclusive categories Allow for “other” in
fixed response questions
Additional Information:Question Types - Dichotomous
In arranging this trip, did you contact ABC Airlines?
Yes No
Question Types – Multiple Choice
With whom are you traveling on this trip?
No one
Spouse
Spouse and children
Children only
Business associates/friends/relatives
An organized tour group
Question Types – Likert Scale
Indicate your level of agreement with the following statement: Small airlines generally give better service than large ones.
Strongly disagree
Disagree
Neither agree nor disagree
Agree
Strongly agree
Question Types – Semantic Differential
ABC Airlines
Large ………………………………...…….Small
Experienced………………….….Inexperienced
Modern……………………….…..Old-fashioned
Question Types – Importance Scale
Airline food service is _____ to me.
Extremely important
Very important
Somewhat important
Not very important
Not at all important
Question Types – Rating Scale
ABC Airlines’ food service is _____.
Excellent
Very good
Good
Fair
Poor
Question Types – Intention to Buy Scale
How likely are you to purchase tickets on ABC Airlines if in-flight Internet access were available?
Definitely buy
Probably buy
Not sure
Probably not buy
Definitely not buy
Qualitative Techniques
Word AssociationWord Association
Sentence completionSentence completion
Third person techniqueThird person technique
Brand PersonificationBrand Personification
LadderingLaddering
VisualizationVisualization
Characteristics of Good Marketing Research
Scientific method Research creativity Multiple methods Interdependence Value and cost of information Healthy skepticism Ethical marketing
Analyzing Marketing Information
Information gathered in internal databases and through marketing intelligence and marketing research ğ may require more analysis
Managers may need help in applying the info. to their mktg problems and decisions
Marketing decision support sysytems (MDSS) ğ “coordinated collection of data, systems, tools and techniques with supporting software and hardware, by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action”
marketing and sales software programs decision models
Interpreting and Reporting Findings
Researcher should present important findings that are useful in the major decisions faced by management.
Step 1. Interpret the Findings
Step 2. Draw Conclusions
Step 3. Report to Management
Appendices--
Marketing metrics are the set of measures that helps marketers
quantify, compare, and interpret marketing performance.
Marketing Metrics
External Awareness Market share Relative price Number of
complaints Customer
satisfaction Distribution Total number of
customers Loyalty
Internal Awareness of goals Commitment to
goals Active support Resource adequacy Staffing levels Desire to learn Willingness to
change Freedom to fail Autonomy
Marketing-Mix Modeling
Marketing-mix models analyze data from a variety of sources, such as retailer scanner data,
company shipment data, pricing, media, and promotion spending
data, to understand more precisely the effects of specific
marketing activities.
Marketing Measurement Pathway
Marketing Dashboard
Example of some Customer-Performance Scorecard Measures
% of new customers to average # % of lost customers to average # % of win-back customers to average # % of customers in various levels of
satisfaction % of customers who would repurchase % of target market members with brand recall % of customers who say brand is most
preferred
Analyzing Consumer Markets and
Buyer Behavior
“The most important ingredient in the success of an organization is a satisfied customer”
Consumer Buying Behavior
The central question for marketers :
“How do consumers respond to various marketing efforts the company might use?”
Model of Buyer Behavior
Marketing and Other Stimuli
MarketingProductPricePlacePromotionOtherEconomicTechnologicalPoliticalCultural
Buyer’s Black Box
Buyer CharacteristicsCulturalSocialPersonalPsychological
Buyer Decision ProcessProblem recognitionInformation searchEvaluationDecisionPostpurchase behavior
Buyer Responses
Product ChoiceBrand ChoiceDealer Choice
Purchase TimingPurchase Amount
Factors Influencing Consumer Behavior
Social
• Referencegroups
• Family
• Rolesand
status
Social
• Referencegroups
• Family
• Rolesand
status
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Psycho-logical
• Motivation• Perception• Learning
• Beliefs andattitudes
Psycho-logical
• Motivation• Perception• Learning
• Beliefs andattitudes
BUYERBUYER
• Culture
• Sub-culture
• Socialclass
• Culture
• Sub-culture
• Socialclass
Cultural
Factors Influencing Consumer Behavior:Cultural
• Culture Forms a person’s wants and
behavior
• Subculture Groups with shared value systems
• Social Class Society’s divisions who share values, interests and behaviors
• Culture
• Subculture
• Social class
• Culture
• Subculture
• Social class
Cultural
Factors Influencing Consumer Behavior:Cultural
• SubcultureGroups with shared value systems
• Culture
• Subculture
• Social class
• Culture
• Subculture
• Social class
Culturale.g. Hispanic subculture in the US
Factors Influencing Consumer Behavior:Cultural
• CultureForms a person’s wants and behavior
• SubcultureGroups with shared value systems
• Social ClassSociety’s divisions who share values, interests and behaviors
• Culture
• Subculture
• Social class
• Culture
• Subculture
• Social class
Cultural
Factors Influencing Consumer Behavior:Cultural
• Social ClassSociety’s divisions who share values,
interests and behaviors
• Culture
• Subculture
• Social class
• Culture
• Subculture
• Social class
Cultural
Measured by a combination of occupation, income, education, wealth, and other variables
Turkey ğ introduced first by PIAR SES analyses (www.arastirmacilar
.org)
Factors Influencing Consumer Behavior: Social
• Reference Groups• Membership• Aspirational
• Opinion Leaders• Buzz marketing
• Family• Many influencers• Buyers vs. users
• Roles and Status
Social
• Referencegroups
• Family
• Roles & status
Social
• Referencegroups
• Family
• Roles & status
Factors Influencing Consumer Behavior: Social (cont.)
• Ref. Groups : have a direct or indirect influence on the person’s attitudes or behavior
• Membership Groups ğ groups to which a person belongs • primary groups• secondary groups
• Aspirational Groups ğ groups to which a person would like to belong
Social
• Referencegroups
• Family
• Roles & status
Social
• Referencegroups
• Family
• Roles & status
Factors Influencing Consumer Behavior: Social (cont.)
• Opinion Leader person within a reference group who exert influence on others
• Also called influentials or leading adopters
• offers advice or information about a specific product or product category,
• can be found in all social classes
Social
• Referencegroups
• Family
• Roles & status
Social
• Referencegroups
• Family
• Roles & status
Online Social Networks / online communities where people socialize or exchange information and opinions blogs, social networking
sites (facebook), virtual worlds (second life)
Groups and Social Networks
Factors Influencing Consumer Behavior: Social (cont.)
• The most important consumer-buying organization in the society
• Roles and relative influence of family members in buying decisions • Buying roles vary in different
countries and social classes• Buying roles change with
evolving life-styles• joint decision making • women arising as active buyers• increasing role of children
Social
• Referencegroups
• Family
• Roles & status
Social
• Referencegroups
• Family
• Roles & status
Factors Influencing Consumer Behavior: Social (cont.)
• The person’s position in each group ğ can be defined in terms of both role and status:
• A Role ğ consists of the activities that a person is expected to perform according to the people around him• Each role ğ carries a status
• A Status ğ is the general esteem given a role by society
Social
• Referencegroups
• Family
• Roles & status
Social
• Referencegroups
• Family
• Roles & status
Factors Influencing Consumer Behavior: Personal
• Family Life Cycle ğ stages throughout which families pass as they mature over time
1. bachelor stage2. newly married couples, no children3. full nest 1; youngest child under 64. full nest 2; youngest child 6 or over5. full nest 3; older married couples with
dependent children6. empty nest 1; older married couples
no children with them7. empty nest 1; older married couples
no children at home; retired8. solitary survivor, working9. solitary survivor, retired
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Stages in 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.
Factors Influencing Consumer Behavior: Personal (cont.)
• Consumption patterns often shaped by:
• occupation & • economic
circumstances:
• spendable income,• savings and assets,• debts,• attitudes towards spending &
saving.
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Factors Influencing Consumer Behavior: Personal (cont.)
• Consumption patterns often shaped by:
• occupation & • economic
circumstances:
• spendable income,• savings and assets,• debts,• attitudes towards spending &
saving.
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Factors Influencing Consumer Behavior: Personal (cont.)
• Lifestyle ğ a person’s pattern of living as expressed in his activities, interests and opinions• Psychographics ğ technique of
measuring lifestyles and developing lifestyle classifications
• Major dimensions measured are:• Activities (work, hobbies, social
events, entertainment, shopping, sports,vacation)
• Interests (family, home, job, recreation, fashion, food, media, achievements)
• Opinions (themselves, social issues, politics, business, economics, products, future)
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
The VALS segmentation system:
An 8-part typology
AIOs and Lifestyle Dimensions
Excerpts from AIO Inventory
Instructions: Please read each statement and place an “x” in the box that best indicates how strongly you “agree” or “disagree” with the statement.
I feel that my life is moving faster and faster, sometimes just too fast.
If I could consider the “pluses” and “minuses,” technology has been good for me.
I find that I have to pull myself away from e-mail.
Given my lifestyle, I have more of a shortage of time than money.
I like the benefits of the Internet, but I often don’t have the time to take advantage of them.
[1] [2] [3] [4][5] [6] [7]
[1] [2] [3] [4][5] [6] [7]
[1] [2] [3][4] [5] [6]
[7][1] [2] [3][4] [5] [6]
[7][1] [2] [3]
[4] [5][6] [7]
Agree Completely
Disagree Completely
Factors Influencing Consumer Behavior: Personal (cont.)
• Personality ğ a person’s unique characteristics that lead to relatively consistent and lasting responses to the environment• Brand personality ğ specific mix of
human traits that may be attributable to a particular brand
• Self-concept ğ the self image or general picture that people have of themselves• Person’s actual self-concept ğ how she
views herself• Ideal self-concept ğ how she would like to
view herself• Others’ self-concept ğ how she thinks
others see her
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Personal• Age andlife-cycle
• Occupation• Economic
situation• Lifestyle
• Personalityand
self-concept
Factors Influencing Consumer Behavior: Psychological
• Freud’s Theory : Psychological forces shaping people’s behavior ğ largely unconscious• A person cannot understand fully
his/her own motivations• Motivation research ğ looks for hidden
and subconscious motivation• in-depth interviews / laddering• projective techniques (i.e. word
association, sentence completion, picture interpretation, role playing)
• Maslow’s Theory : Maslow ordered needs based on how pressing they are to the consumer
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
226
Psychological FactorsMotivation A motive is a need that is
sufficiently pressing to direct the person to seek satisfaction
Motivation research is based on Freud. Looks for hidden and subconscious motivation
Maslow ordered needs based on how pressing they are to the consumer
• 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.”
Factors Influencing Consumer Behavior: Psychological(cont)
Maslow’s Hierarchy of Needs
Factors Influencing Consumer Behavior: Psychological(cont)
• Perception ğ process by which people select, organize and interpret information to form a meaningful picture of the world
1.Selective attention ğ tendency of people to eliminate most of the information to which they are exposed
2.Selective distortion ğ to interpret information in a way that will support what they already believe
3.Selective retention ğ to retain only part of the information to which they are exposed
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Factors Influencing Consumer Behavior: Psychological(cont)
• Learning ğ changes in a person’s behavior, arising from experience
• Learning occurs through the interplay of: drives, stimuli, cues, responses and reinforcement
• A drive: strong internal stimulus that calls for action
• Cues: minor stimuli that determine when, where and how the person responds
• If the experience is rewarding ğ the response will be positively reinforced
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Factors Influencing Consumer Behavior: Psychological(cont)
• Through doing and learning ğ people acquire beliefs and attitudes ğ have influence on buying behavior
• A Belief ğ descriptive thought that a person holds about something
• An Attitude ğ a person’s consistently favorable or unfavorable evaluations, feelings and tendencies toward an object or idea
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Factors Influencing Consumer Behavior: Psychological(cont)
• Through doing and learning ğ people acquire beliefs and attitudes ğ have influence on buying behavior
• A Belief ğ descriptive thought that a person holds about something
• An Attitude ğ a person’s consistently favorable or unfavorable evaluations, feelings and tendencies toward an object or idea
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
Psychological• Motivation
• Perception
• Learning
• Beliefs &attitudes
The Buying Decision Process
• Marketers have to identify:
• Who makes the buying decision• The types of buying decisions• The steps in the buying process
Buying Roles – Who makes the buying decision
• Initiator ğ who first gives the idea of buying the product or service
• Influencer ğ whose view or advice influences the decision
• Decider ğ who decide on any component of buying decision
• Buyer ğ who makes the actual purchase
• User ğ who uses the product or sevice purchased
HighInvolvement
Significantdifferences
betweenbrands
Fewdifferences
betweenbrands
LowInvolvement
Types of Buying Behavior
ComplexBuying
Behavior
Variety-SeekingBehavior
Dissonance-Reducing Buying
Behavior
HabitualBuying
Behavior
Stages of the Buying Decision Process
PostpurchaseBehavior
PurchaseDecision
InformationSearch
Problem Recognition
Evaluationof Alternatives
The Buyer Decision ProcessStage 1. Problem Recognition
State where the buyer’s needs are fulfilled and the buyer is satisfied.
Needs Arising from: Internal Stimuli (hunger) or External Stimuli (friends)
Buyer
recognizes
a problem or
a need
• Family, friends, neighbors• Most effective source of information• Advertising, salespeople• Receives most information from these sources
• Mass Media• Consumer-rating groups
• Handling the product• Examining the product• Using the product
Personal Sources Personal Sources
Commercial SourcesCommercial Sources
Public SourcesPublic Sources
Experiential SourcesExperiential Sources
The Buyer Decision ProcessStage 2. Information Search
The Buyer Decision Process
Successive Sets Involved in Customer Decision Making
Consumer May Use Careful Calculations & Logical ThinkingConsumer May Use Careful
Calculations & Logical Thinking
Consumers May Buy on Impulse and Rely on Intuition
Consumers May Buy on Impulse and Rely on Intuition
Consumers May Make Buying Decisionson Their Own.
Consumers May Make Buying Decisionson Their Own.
Consumers May Make Buying DecisionsOnly After Consulting Others.
Consumers May Make Buying DecisionsOnly After Consulting Others.
Marketers must study buyers to find out how they evaluate brand alternatives
The Buyer Decision ProcessStage 3. Evaluation of Alternatives
Consumer Evaluation Process
• The consumer is trying to satisfy a need• The consumer is looking for certain benefits from
the product solution• The consumer sees each product as a “bundle of
attributes”• The attributes of interest to buyers vary by product
• Consumers differ as to which product attributes they see as most relevant and the importance they attach to each attribute
Consumer Evaluation Process (cont.)
• The consumer develops “a set of brand beliefs” about where each brand stands on each attribute (see table, next page)
• The set of beliefs about a brand make up “brand image”
• The consumer arrives at attitudes (judgments /preferences) toward different brands through an attribute evaluation procedure.
Example: A Consumer’s Brand Beliefs about Computers
Attribute
Computer
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
Computer A: 0.4(10)+0.3(8)+0.2(6)+0.1(4) = 8.0
Choice will be made based on the “highest perceived value”
Consumer Evaluation Process (cont.)
• Strategies designed to influence buyer decisions:
• Redesign the product – real positioning• Alter beliefs about the brand – psychological
positioning• Alter beliefs about competitors’ brands – competitive
positioning• Alter the importance weights• Call attention to neglected attributes• Shift the buyer’s ideas
The Buyer Decision ProcessStage 4. Purchase Decision
The Buyer Decision ProcessStage 5. Postpurchase Behavior
Satisfied Customer!
Consumer’s Expectations of Product’s Performance ---
Product’s Perceived Performance.
Dissatisfied Customer
247
Buyer Decision Process for New Products
New Products Good, service or idea that is perceived
by customers as new. Stages in the Adoption Process
Marketers should help consumers move through these stages.
Awareness: Consumer is aware of
product, but lacks information.
Awareness: Consumer is aware of
product, but lacks information.
Interest: Consumer seeks Information about new product.
Interest: Consumer seeks Information about new product.
Evaluation: Consumer considerstrying new product.
Evaluation: Consumer considerstrying new product.
Trial: Consumer tries new product on a small scale.
Adoption: Consumer decides to make regular
use of product.
Stages in the Adoption Process
249
Buyer Decision Process for New Products
Individual Differences in Innovativeness:
Consumers can be classified into five adopter categories, each of which behaves differently toward new products
250
Adopter CategoriesP
erc
en
tag
e o
f A
dop
ters
Time of AdoptionEarly Late
Inn
ovato
rs
Early Adopters
Early Majority
2.5%
13.5%
34% 34%
16%
Laggards
Late Majority
Buyer Decision Process for New Products
Product Characteristics influencing the adoption rate:
Relative Advantage ğ Is the innovation superior to existing products?
Compatibility ğ Does the innovation fit the values and experience of the target market?
Complexity ğ Is the innovation difficult to understand or use?
Divisibility ğ Can the innovation be used on a trial basis?
Communicability ğ Can results be easily observed or described to others?
Buyer Decision Process for New Products
International Consumer Behavior
Values, attitudes and behaviors differ greatly in other countries.
Physical differences exist which require changes in the marketing mix.
Customs vary from country to country. Marketers must decide the degree to which
they will adapt their marketing efforts.
Analyzing Business Markets and Business
Buyer Behavior
Many businesses are wisely turning their suppliers and distributors into “valued partners”.
Business Markets
Business Market ğ all the organizations that buy goods and services to use in the production of other products and services that are sold/rented or supplied to others. Business buying ğ decision making process by
which business buyers establish the need for purchased products and services and identify, evaluate and choose among alternative brands and suppliers
Contain fewer, but larger buyers
Contain fewer, but larger buyers
Customers are more geographically concentrated
Customers are more geographically concentrated
Buyer demand is derived from final consumer demand
Buyer demand is derived from final consumer demand
Demand is often more inelastic
Characteristics of Business Markets
Marketing Structure and Demand
Business buying
involves a more
professional purchasing
effort.
Characteristics of Business Markets
Business purchases
involve more buyers
Nature of the Buying Unit and the Decision Process
In business buying,
multiple sales calls
are required.
Business buyers
usually face more
complex buying
decisions.
Characteristics of Business Markets
Business buying
process is more
formalized.
Types of Decisions and the Decision Process
In business buying,
buyers and sellers work
more closely together.
Model of Business Buyer Behavior
The Environment
MarketingStimuli:• Product• Price• Place• Promotion
Other Stimuli:• Economic• Technological• Political• Cultural• Competitive
The Buying Organization
The buying center
Buying decision process
(Interpersonal and individual influences)
(Organizational Influences)
Buyer Responses
Product or service choice
Supplier Choice
Order Quantities
Delivery terms and times
Service terms
Payment
New Task BuyingNew Task Buying
Invo
lved
Dec
isio
n
Mak
ing Modified RebuyModified Rebuy
Major Types of Buying Situations
Straight RebuyStraight Rebuy
UnexpectedSituational
Factors
UnexpectedSituational
Factors
Participants in the Business Buying Process
Decision making unit of
a buying organization
is called
Buying Center
Influencers
Initiators
Deciders
BuyersGatekeepers
Roles Include
Approvers
Users
Major Influences on Business Buying Behavior
Problem Recognition
General Need DescriptionGeneral Need Description
Product Specification-Product value analysis-
Product Specification-Product value analysis-
Supplier SearchSupplier Search
Proposal SolicitationProposal Solicitation
Supplier Selection*Supplier Selection*
Order Routine SpecificationOrder Routine Specification
Performance ReviewPerformance Review
Stages of Business Buying Process
*Example -- Supplier Analysis
R a t i n g S c a l e
Attributes ImportanceWeights
Poor(1)
Fair(2)
Good(3)
Excellent(4)
Price .30 x
Supplier reputation
.20 x
Product reliability .30 x
Service reliability .10 x
Supplier flexibility .10 x
Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5
Buygrid Framework Major Stages (Buyphases) of Business Buying Process in Relation to Major Buying Situations (Buyclasses)
Buyclasses
New Modified Straight
Task Rebuy Rebuy
1. Problem recognition
Yes Maybe No
2. General need description
Yes Maybe No
3. Product specification
Yes Yes Yes
Buyphases
4. Supplier search Yes Maybe No
5. Proposal solicitation
Yes Maybe No
6. Supplier selection Yes Maybe No
7. Order-routine specification
Yes Maybe No
8. Performance review
Yes Yes Yes
Dealing with Competition
Poor firms ignore their competitors; Average firms copy their competitors;
Winning firms lead their competitors.
Competitive Forces 5 Forces Determining Attractiveness of a Market/Market Segment
Threat of:1. intense segment
rivalry
2. new entrants
3. substitute products
4. buyers’ growing bargaining power
5. suppliers’ growing bargaining power
Threat of New Entrants
New entrants mean downward pressure on prices and reduced profitability
Barriers to entry determines the extent of threat of new industry entrants
Barriers to Entry
Economies of Scale Decline in per-unit product costs as the absolute
volume of production per period increases
Product differentiation The extent of a product’s perceived uniqueness
Capital requirements Required investment for manufacturing, R&D,
advertising, field sales and service, etc.
Switching costs Costs related to making a change in suppliers or
products
Barriers to Entry (cont.) Distribution channels
Are there current distribution channels available with capacity
Government policy Are there regulations in place that restrict
competitive entry?
Cost advantages Access to raw materials, large pool of low-cost labor,
favorable locations, and government subsidies
Competitor response How will the market react in anticipation of increased
competition within a given market
Threat of Substitute Products
Availability of substitute products places limits on the prices market leaders can charge
High prices induce buyers to switch to the substitute
Bargaining Power of Buyers
Buyers seek to pay the lowest possible price
Buyers have leverage over suppliers when They purchase in large quantities (enhances
supplier dependence on buyer) Suppliers’ products are commodities Product represents significant portion of buyer’s
costs Buyer is willing and able to achieve backward
integration
Bargaining Power of Buyers (cont.)
“We do not quibble or argue with anyone’s right to sing what they
want, to print what they want, and say what they want.
But we reserve the right to sell what we want.”
Wal-Mart’s response to the accusation of using its financial power to dictate what is appropriate music and art
Bargaining Power of Suppliers
When suppliers have leverage, they can raise prices high enough to affect the profitability of their customers
Leverage accrues when; Suppliers are large and few in number Supplier’s products are critical inputs, are highly
differentiated, or carry switching costs Few substitutes exist Suppliers are willing and able to sell product
themselves
Rivalry among Competitors
Refers to all actions taken by firms in the industry to improve their positions and gain advantage over each other
Price competition Advertising battles Product positioning Differentiation
Identifying Competitors
Company’s actual and potential competitors
A company is more likely to be hurt by emerging competitors or new technologies
“Competitor myopia” ğ a focus on current competitors rather than latent ones
Competition from both “industry” and “marketing” point of views
Identifying Competitors: Industry Concept of Competition
An Industry ğ group of firms that offer a product or class of products that are close substitutes for each other
Industries are classified according to: Number of sellers - Degree of differentiaiton, Presence or absence of entry, mobility, and
exit barriers, Cost Structure, Degree of Vertical Integration, Degree of Globalization
Industry Concept of Competition (cont.)
Types of industry structure:
Pure monopoly ğ only one firm provides a product in a certain area or country
Oligopoly ğ a small number of large firms produce products that range from highly differentiated to standardized pure oligopoly -- the same commodity
Monopolistic competition ğ many competitors able to differentiate their offers
Pure competition ğ offering the same product (no basis for differentiation; prices will be similar)
Industry Concept of Competition (cont.)
Major entry barriers: high capital requirements economies of scale, patents and licensing
requirements, scarce locations, raw materials, or
distributors
Major exit barriers: legal or moral obligations to
customers/employees, government restrictions, emotional barriers
Identifying Competitors: Market Concept of Competition
The industry approach ğ looking at companies making the same product
The market approach ğ looking at companies that satisfy the same customer need gives the opportunity to define a broader
set of actual and potential competitors & enables the company to make long run strategic planning
The key to identify competitors ğ to link industry and market concepts of competition
Market Concept of CompetitionCompetitor Map – Eastman Kodak
Analyzing Competitors
CompetitorActions
Objectives
Strengths &Weaknesses
ReactionPatterns
Strategies
High
LowHigh
Low
Qu
alit
y
Vertical Integration
Analyzing Competitors:Strategic Groups in a Major Appliance Industry
Group A• Narrow line• Lower mfg. cost• Very high service• High price
Group D• Broad line• Medium mfg. cost• Low service• Low price
Group C• Moderate line• Medium mfg. cost• Medium service• Medium price
Group B• Full line• Low mfg. cost• Good service• Medium price
Analyzing Competitors:Competitor’s Expansion Plans
Analyzing Competitors:Strenghts & Weaknesses
Collecting information on each competitor’s business: data on sales, mkt share, profit margin, ROI, new investments, capacity utilization, etc.
By using the info. gathered ğ the company will decide whom to attack in the marketplace
Analyzing Competitors
3 variables to monitor when analyzing competitors:
Market share ğ competitor’s share of the target market
Mind share ğ the percentage of customers who named the competitor in responding to the statement “Name the first company that comes to mind in this industry.”
Heart share ğ the percentage of customers who named the competitor in responding to the statement “Name the first company from which you would prefer to buy the product.”
Designing Competitive Intelligence System
1. Setting Up the System2. Collecting the Data
Salesforce, marketing channels, suppliers, MR firms, trade assoc.
Observing competitors Published data Online services
3. Evaluating and Analyzing the Data4. Disseminating Information and
Responding
Selecting Competitors Major Steps in Customer Value Analysis
Identify the major attributes customers value Assess the quantitative importance of the
different attributes Assess the company’s and competitors’
performance on the different customer values against their rated importance
Examine how customers rate the company’s performance against a specific major competitor on an attribute-by-attribute basis
Monitor customer values over time
Designing Competitive Strategies: Hypothetical Market Structure & Strategies
40%
Marketleader
30%
Marketchallenger
20%
Marketfollower
Expand MarketDefend Market Share
Expand Market Share
Attack leaderStatus quo
Imitate
10%
Marketnicher
Specialize
1. Expanding the Total Market New Users
Market-penetration strategy New-market segment strategy Geographical-expansion strategy
New Uses More Usage
2. Defending Market Share
3. Expanding Market Share
Market-Leader Strategies
Market-Leader Strategies:Defense Strategies
Market-Leader Strategies:Expanding Market Share
Market-Challenger Strategies
Defining the Strategic Objective and Opponent(s) It can attack the market leader It can attack firms of its own size that are not
doing the job and are underfinanced It can attack small local and regional firms
Choosing a General Attack Strategy
Market-Challenger Strategies: Attack Strategies
Specific Attack Strategies
Price-discount Lower price goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion
Market-Follower Strategies
Product imitation Product imitation vs. product innovation
4 broad strategies: Counterfeiter Cloner Imitator Adapter
Market-Nicher Strategies
End-user specialist Value-added reseller
Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist
Product or product-line specialist
Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist
Nicher Specialist Roles:
Balance to be “market-driven”!
CompetitionCustomer
+ Fighter orientation+ Constant Alert+ Exploit weaknesses- Too Reactive
+ Identify opp.+ Long-run profit+ Emerging needs & groups