Marketing in Today’s Economy

The new age of marketing has been issued in.  People are connecting through social media and business has trended to online.  There is now a power shift to customers where individual consumers and business customers can compare prices or product specifications in a matter of minutes.  Because of the massive increase in product selection, customers are now the driving force behind businesses.  There are vast amounts of information available online that has changed the way we communicate, read the news, and entertain ourselves.  This in turn has lead to audience and media fragmentation.  Changes in media usage and the availability of new media outlets have forced marketers to rethink the way they communicate with potential customers.  As our economy has weakened, buyers have been forced to tighten their belts and look for other ways to lower expenses.  Due to this change of value propositions, situations where customers see goods and services as commodities have relentlessly willed them to turn to the most convenient, least expensive alternative.  Many of these customers face pay cuts or losing their jobs in addition to increased expenses.  These and other economic hardships have forced consumer and business buyers to rethink value propositions and focus on the importance of frugality.  Shifting demand patterns have also caused changes in technology that have shifted customer demand for certain product categories.

Yet, what has changed more than ever is Privacy, Security, and Ethical Concerns.  Our society is much more open than in the past.  These changes have forced marketers to address real concerns about security and privacy, both online and offline.  Unclear Legal Jurisdiction-When a company does business in more than one country, that company often faces a dilemma with respect to differing legal systems.  Another important legal issue involves the collection of sales tax for online transactions.

Basic Marketing Concepts

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.

•  Market-a collection of buyers and sellers.
•  Marketspace-electronic marketplaces unbound by time or space.
• Metamarket-a cluster of closely related goods and services that center around a specific consumption activity.
• Metamediary-provides a single access point where buyers can locate and contact many different sellers in the metamarket; Amazon, Expedia, and Priceline.

What is exchange?

Exchange-the process of obtaining something of value from someone by offering something in return; this usually entails obtaining products for money:
1.     There must be at least two parties to the exchange.
2.     Each party has something of value to offer the other party.
3.     Each party must be capable of communication and delivery.
4.     Each party must be free to accept or reject the exchange.
5.     Each party believes it is desirable to exchange with the other party.

What is a product?

Product-something that can be acquired via exchange to satisfy a need or a want.

• Goods, Services, Ideas, Information, Digital Products, People, Places, Experiences and Events, Real or Financial Property, and Organizations.
• Customers usually seek out exchanges with marketers who offer products that are high in one or more of 5 types of utility:

1. Time Utility-products are available when customers want them; faster transactions.
2. Place Utility-Products are available where customers want them, which is typically wherever the customer happens to be at the moment or where the product needs to be at that moment.
3. Place utility-the closer the better.
4. Possession Utility-the transfer of ownership or title from marketer to customer.  These products are more satisfying because marketers make them easy to acquire.  
5. Projection utility-example with cars.
6. Psychological Utility-deliver positive experiential or psychological attributes that customers find satisfying Psychological utility: sporting events.

Major Marketing Activities and Decisions

All marketing activities have one thing in common: They aim to give customers a reason to buy the organization’s product.

Strategic Planning

• Strategy-outlines the organization’s game plan for success.
• Tactical planning-concerns itself with specific markets or market segments and the development of marketing programs that will fulfill the needs of customers in those markets
• Marketing Plan-provides the outline for how the organization will combine product, pricing, distribution, and promotion decisions to create an offering that customers will find attractive.  Also concerns itself with implementation, control, and refinement of these decisions

Social Responsibility and Ethics

• Social Responsibility-an organization’s obligation to maximize its positive impact on society while minimizing its negative impact.

Research and Analysis
Strategic planning depends heavily on the availability and interpretation of information.   Organization must also have access to three other types of information and analysis:
1.     Internal Analysis-involves the objective review of internal information pertaining to the firm’s current strategy and performance, as well as the current and future availability of resources.
2.     Competitive intelligence-involves analyzing the capabilities, vulnerabilities, and intentions of competing businesses.
3.     Environmental scanning or External Analysis-involves the analysis of economic, political, legal, technological, and cultural events and trends that may affect the future of the organization and its marketing effects
Situation analysis-the overall process of collecting and interpreting internal, competitive, and environmental information

Developing Competitive Advantage-something that the firm does better than its competitors that gives it an edge in serving customers’ needs and/or maintaining mutually satisfying relationships with important shareholders.  They set the tone, or strategic focus, of the entire marketing program.

Marketing Strategy Decisions

• Market Segmentation-divide the total market into smaller, relatively homogeneous groups or segments that share similar needs, wants, or characteristics.
• Target Markets-he or she identifies one or more segments of individuals, businesses, or institutions toward which the firm’s marketing efforts will be directed.

Product Decisions

• Product positioning-involves establishing a mental image, or position, of the product offering relative to competing offerings in the minds of the minds of target buyers.
• Pricing decision: First, price is the only element of the marketing mix that leads to revenue and profit.  Second, price typically has a direct connection with customer demand.  Third, pricing is the easiest element of the marketing program to change.  Finally, pricing is a major quality cue for customers.   One of these reasons that pricing is so interesting is that price represents a major point in marketing strategy where buyer and seller motivations come into conflict.

Distribution and Supply Chain Decisions

The goal of distribution and supply chain management-to get the product to the right place, at the right time, in the right quantities, at the lowest possible cost.  Distribution and supply chain issues are critical for major reasons: product availability and distribution costs.

Promotional Decisions
Integrated Marketing Communication- the coordination of all promotional activities (media advertising, direct mail, personal selling, sales promotion, public relations, packaging, store displays, website design, personnel) to produce a unified, customer-faced message.

Implementation and Control

Marketing implementation-process of executing the marketing strategy is the “how” of marketing planning

Developing and Maintaining Customer Relationships

1. Transactional Marketing-complete a large number of discrete exchanges with individual customers
2. Relationship Marketing-develop and maintain long-term, mutually satisfying arrangements where both buyer and seller focus on the value obtained from the relationship

Taking on the Challenges of Marketing Strategy
One of the greatest frustrations and opportunities in marketing is change-customers change, competitor’s change, and even the marketing organization changes.  One of the most basic shifts involves the increasing demands of customers.  Decline in satisfaction can be attributed to: customers have become much less brand loyal than in previous generations.  Today’s customers are very price sensitive.  Product commoditization pushes margins lower and reduces brand loyalty even further

Strategic Marketing Plan

The Strategic Planning Process
An in-depth analysis of the organization’s internal and external environments-sometimes referred to as a situation analysis
Marketing Plan-a written document that provides the blueprint or outline of the organization’s marketing activities, including the implementation, evaluation, and control of those activities; clearly explains how the organization will achieve its goals and objectives

Organizational Mission Versus Organizational Vision

• Mission/mission statement-seeks to answer the question “What business are we in?”

Elements of the Mission Statement
1.     Who are we?
2.     Who are our customers?
3.     What is our operating philosophy? (basic beliefs, values, ethics, etc)
4.     What are our core competencies or competitive advantages?
5.     What are our responsibilities with respect to being a good steward of our human, financial, and environmental resources?

One portion of the strategic plan that should not be kept confidential, should be included in annual reports and major press releases, framed on the wall in every office, and personally owned by every employee of the organization.  Goals, objectives, strategies, tactics, and budgets are not for public viewing.

Mission Width and Stability
If the mission is too broad, it will be meaningless to those who read and build upon it.  Well-designed mission statement should not stifle and organization’s creativity, it must help keep the firm from moving too far from its core competencies.  Overly narrow mission statements that constrain the vision of the organization can prove just as costly.  The mission should change only when it is no longer in sync with the firm’s capabilities, when competitors drive the firm from certain markets, when new technology changes the delivery of customer benefits, or when the firm identifies a new opportunity that matches its strengths and expertise.

Customer-Focused Mission Statements
Mission statements have become much more customer oriented
Corporate or Business-Unit Strategy
1) Corporate Strategy-central scheme or means of utilizing and integrating resources in the areas of production, finance, research, and development, human resources, and marketing, to carry out the organization’s mission and achieve the desired goals and objectives
2) Business-unit Strategy-determines the nature and future direction of each business unit, including its competitive advantages, the allocation of its resources, and the coordination of the functional business areas (marketing, production, finance, human resources, etc.)
Important consideration for a firm determining its corporate or business-unit strategy is the firm’s capabilities.  When a firm possesses capabilities that allow it to serve customers’ needs better than the competition, it is said to have a competitive, or differential, advantage.  The key issue is the organization’s ability to convince customers that its advantages are superior to those of the competition

Functional Goals and Objectives
Marketing and all their business functions must support the organization’s mission and goals, translating these into objectives with specific quantitative measurements
Marketing objectives: units of measure might include sales volume (in dollars/units), profitability per unit, percentage gain in market share, sales per square feet, average customer purchase, percentage of customers in the firm’s target market who prefer its products, or some other measurable achievement.

Functional Strategy
In marketing strategy, the process focuses on selecting one or more target markets and developing a marketing program that satisfies the needs and wants of members of the target market.
The strategy must:
(1) Fit the needs and purposes of the functional area with respect to meeting its goals and objectives
(2) Be realistic given the organization’s available resources and environment,
(3) Be consistent with the organization’s mission, goals, and objectives.

Implementation

Involves activities that actually execute the functional area strategy.  All functional plans have at least 2 target markets: an external market and an internal market.  In order for a functional strategy to be implemented successfully, the organization must rely on the commitment and knowledge of its employers-its internal target market.

Evaluation and Control
The key to coordination is to ensure that functional areas maintain open lines of communication at all ties.  Evaluation and control occur after a strategy has been implemented.  The implementation of any strategy would be incomplete without an assessment of its success and the creation of control mechanisms to provide and revise the strategy or its implementation.  Evaluation and control serve as the beginning point for the planning process in the next planning cycle.

Chapter 2: Writing a Marketing Plan
The Marketing plan provides a detailed formulation of the actions necessary to carry out the marketing program.  A marketing plan is not the same as a business plan.  Business plans, although they typically contain a marketing plan, encompass other issues such as business organization and ownership, operations, financial strategy, human resources, and risk management.  Can be developed for specific products, brands, target markets, or industries.  Likewise, a marketing plan can focus on a specific element of the marketing program, such as a product development plan, a promotional plan, a distribution plan, or a pricing plan.

Marketing Plan Structure

• Comprehensive-essential to ensure that there are no omissions of important information
• Flexible-must be flexible enough to be modified to fit the unique needs of your situation
• Consistent-may also include the connection of the marketing plan outline to the planning process used at the corporate- or business-unit levels.
• Logical-because the marketing plan must ultimately sell itself to top managers the plan’s outline must flow in a logical manner

I. Executive Summary-A synopsis of the overall marketing plan, with an outline that conveys the main thrust of the marketing strategy and its execution; should also identify the scope and time frame for the plan.  The idea is to give the reader a quick understanding of the breadth of the plan and its time for frame for execution.  It should always be the last element to be written because it is easier to write after the entire marketing plan has been developed.  It may be the only element of the marketing plan read by a large number of people.
a. Synopsis
b. Major aspects of the marketing plan
II. Situational Analysis
a. Analysis of the internal environment-considers issues such as the availability and deployment of human resources, the age and capacity of equipment of technology, the availability of financial resources, and the power and political struggles within the firm’s structure.
b. Analysis of the customer environment-examines the current situation with respect to the needs of the target market, anticipated changes in these needs, and how well the firm’s products presently meet these needs
c. Analysis of the external environment-includes relevant external factors-competitive, economic, social, political/legal, and technological-that can exert considerable direct and indirect pressure on the firm’s marketing activities
III. SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats)-common mistake in SWOT analysis is the failure to separate internal issues from the external issues.  Another common mistake is to list the firm’s strategic alternatives as opportunities.  At the conclusion of the SWOT analysis, the focus of the market
a. Strengths-Internal
b. Weaknesses-Internal
c. Opportunities
d. Threats
e. Analysis of the SWOT matrix
f. Developing competitive advantage
g. Developing a strategic focus
IV. Marketing Goals and Objectives-sets the performance targets that the firm seeks to achieve by giving life to its strategic focus through its marketing strategy.  It also defines the parameters by which the firm will measure actual performance in the evaluation and control phase of the marketing plan.
a. Marketing goals-are broad, simple statements of what will be accomplished through the marketing strategy
b. Marketing objectives-are more specific and essential to planning. Should be stated in quantitative terms to permit reasonably precise measurements.

V. Marketing Strategy: involves selecting and analyzing target markets and creating and maintaining an appropriate marketing program to satisfy the needs of those target markets.

a. Primary and secondary target markets
c. Product Strategy-must be of higher quality that competitive offerings
d. Pricing Strategy-must be consistent with the level of quality (value)
e. Distribution/supply chain strategy-must be as efficient as possible
f. Integrated marketing communication (promotion) strategy-must be more effective in communicating with target customers

VI. Marketing Implementation
Structural issues-the implementation section of the marketing plan describes how the marketing program will be executed
1.    What specific marketing activities will be undertaken?
2.    How will these activities be performed?
3.    When will these activities be performed?
4.    Who is responsible for the completion of these activities?
5.    How will the completion of planned activities be monitored?
6.    How much will these activities cost?
a.     Tactical marketing activities

VII. Evaluation and Control-Marketing control involves establishing performance standards, accessing actual performance by comparing it with these standards, and taking corrective action if necessary to reduce discrepancies between desired and actual performance.
a. Formal controls
b. Informal controls
c. Implementation schedule and timeline
d. Marketing Audits
Estimates of costs, sales, and revenues determine financial projections.
Marketing audit-systematic examination of the firm’s marketing objectives, strategy, and performance.  Can help isolate weaknesses in the marketing plan and recommend actions to help improve performance.

Using the Marketing Plan Structure

1) Plan ahead-writing a comprehensive marketing plan is very time-consuming especially if the plan is under development for the first time.
2) Revise, then revise again-because the revision process always takes more time than expected, it is wise to begin the planning process far in advance of the due date for the plan
3) Be creative-a marketing plan is only as good as the information it contains and the effort and creativity that go into its creation
4) Use common sense and judgment-necessary to sort through all of the information, weed out poor strategies, and develop a sound marketing plan.
5) Think ahead to implementation-you should always be mindful of how the plan will be implemented.
6) Update regularly-once the marketing plan has been developed and implemented; it should be updated regularly with the collection of new data and information.
7) Communicate to others-ability to communicate to colleagues, particularly top managers who look to the marketing plan for an explanation of the marketing strategy, as well as for a justification of needed resources, like the marketing budget.
Research indicates that organizations that develop formal, written strategic marketing plans tend to be more tightly integrated across functional areas, more specialized, and more decentralized in decision-making.

Purposes and Significance of the Marketing Plan
1. Explains both the present and future situations of the organization.  This includes the situation and SWOT analyses and the firm’s past performance.
2. It specifies the expected outcomes (goals and objectives) so that the organization can anticipate its situation at the end of the planning period
3. It describes the specific actions that are to take place so that the responsibility for each action can be assigned and implemented
4. It identifies the resources that will be needed to carry out the planned actions
5. It permits the monitoring of each action and its results so that controls may be implemented.  Feedback from monitoring and control provides information to start the planning cycle again in the next time.  The marketing plan is the means of communicating the strategy to top executives who make critical decisions regarding the productive and efficient allocation of resources

Organizational Aspects of the Marketing Plan
The marketing manager, brand manager, or product manager writes the market plan.  Some develop through committees.  Others hire professional marketing consultants.  Most firms lie at the level of marketing vice president or marketing director.  The plan must be clear and persuasive to win the approval of the decision makers who make the evaluation.

Maintaining Customer Focus and Balance in Strategic Planning
Many firms have changed the focus and content of their strategic planning efforts and marketing plans (1) Renewed emphasis on the customer (2) The advent of balanced strategic planning

Customer-Focused Planning
Having a market or customer orientation meant putting customer’s needs and wants first.  Market-oriented firms are those that successfully generate, disseminate, and respond to market information.  These firms focus on customer analysis, competitor analysis, and integrating the firm’s resources to provide customer value and satisfaction, as well long-term profits.  Where traditional structures are very authoritative, with desicion-making authority emanating from the top of the hierarchy, market-oriented structures decentralize decision making.  Serving customer needs.

Balanced Strategic Planning
The basic tenet of the balanced performance scorecard is that firms can achieve better performance if they align their strategic efforts by approaching strategy from four complementary perspectives: financial, customer, internal process, and learning and growth.  The financial perspective is vital but should be balanced by the other components of the scorecard.  The customer perspective looks at customer satisfaction metrics as a key indicator of firm performance, particularly as the firm moves ahead.  The internal process perspective focuses on the way the business is running by looking at both mission-critical and routine processes that drive day-to-day activity.  The learning and growth perspective focuses on people and includes such vital issues as corporate culture, employee training, communication, and knowledge management.
1. Translate the strategy into operational terms
2. Align the organization to strategy-link different functional areas through common themes, priorities, and objectives.
3. Make strategy everyone’s everyday job-move the strategy from the executive boardroom to the front lines of the organization.
4. Make strategy a continual process-hold regular meetings to re-view strategy performance.
5. Mobilize change through executive leadership-committed energetic leaders who champion the strategy and the balanced scorecard.

One of the major benefits of the balanced scorecard is that it forces organizations to explicitly consider during strategy formulation those factors that are critical to strategy execution.  Good strategy is always developed with an eye toward how it will be implemented

Chapter 3: The Role of Ethics and Social Responsibility in Marketing Strategy

In response to customer demands, along with the threat of increased regulation, more and more firms have incorporated ethics and social responsibility into the strategic marketing planning process.

Dimensions of Social Responsibility
Social Responsibility is a broad concept that relates to an organization’s obligation to maximize its positive impact on society while minimizing its negative impact.  Four dimensions or responsibilities: economic, legal, ethical, and philanthropic.  From an economic perspective, all firms must be responsible to their shareholders, who have a keen interest in stakeholder relationships that influence the reputation of the firm and, of course, earning a return on their investment.  Economic and legal concerns are the most basic levels of social responsibility for good reason: Without them, the firm, the firm may not survive long enough to engage in ethical or philanthropic activities.  Marketing ethics refers to principles and standards that define acceptable marketing conduct as determined by the public, government regulators, private-interest groups, competitors, and the firm itself.  Ethical marketing decisions foster trust, which helps build long-term marketing relationships.  Marketing ethics includes decisions about what is right or wrong in the organizational context of planning and implementing marketing activities in a global business environment to benefit:
(1) Organizational performance,
(2) Individual achievement in a work group
(3) Social acceptance and advancement in the organization
(4) Stakeholders
Thinking of corporate philanthropy as a marketing tool may seem cynical, but it points out the reality that philanthropy can be very good for a firm

Marketing Ethics and Strategy
Marketing ethics includes the principles and standards that guide the behavior of individuals and groups in making marketing decisions.  Corporate reputation, image, and branding are more important than ever and are among the most critical aspects of sustaining relationships with key stakeholders.

The Challenges of Being Ethical and Socially Responsible
Although most consider the value of honesty, respect, and trust to be self-evident and universally acceptable, business decisions involve complex and detailed discussions in which correctness may not be so apparent.  Individuals who have limited business experience often find themselves required to make sudden decisions about product quality, advertising, pricing, sales techniques, hiring practices, privacy, and pollution control.  When personal values are inconsistent with the configuration of values held by the work group, ethical conflict may ensue.

Deceptive Practices in Marketing: Deceptive Communication and Promotion

Research has shown that one out of every advertisement contains misleading information.  Exaggerated claims are those that cannot be sustained, such as when a commercial states that a certain product is superior to any other on the market.  Another deceptive practice that has become more common is greenwashing,-involves misleading a consumer into thinking that a product or service is more environmentally friendly than it actually is.

Regulating Deceptive Marketing Practices

Many firms attempt to regulate themselves in an effort to demonstrate ethical responsibility and to preclude further regulation by federal or state governments.

Organizational Determinants of Marketing Ethics and Social Responsibility

A firm’s culture gives it members meaning and offers direction about how to behave and deal with problems within the firm.  In marketing we think of ethical climate as that part of a corporate culture that relates to an organization’s expectations about appropriate conduct.  When top managers strive to establish an ethical climate based on responsibility and citizenship, they set the tone for ethical decisions.  To meet the public’s escalating demands for ethical marketing, firms need to develop plans and structures for addressing ethical considerations.  The majority of firms that experience ethical or legal problems usually have stated ethics orders and programs.

Codes of Conduct
Most firms begin the process of establishing organizational ethics programs by developing codes of conduct, which are formal statements that describe what an organization expects of its employees.  A code of ethical conduct has to reflect the board of directors’ and senior management’s desire for organizational compliance with the values, rules, and policies that support an ethical climate. Research has found that corporate codes of ethics often have five to seven core values or principles in addition to more-detailed descriptions and examples of appropriate conduct.
(1) Trustworthiness
(2) Respect
(3) Responsibility
(4) Fairness
(5) Caring
(6) Citizenship
These values will not be effective with distribution, training, and the support of top management in making them a part of the corporate culture and the ethical climate.

Marketing Ethics and Leadership
Employees look to the leader as a model of acceptable behavior.  As a result, if a firm is to maintain ethical behavior, top management must model its policies and standards.
Great leaders:
(1) create a common goal or vision for the company;
(2) obtain buy-in, or support, from significant partners;
(3) motivate others to be ethical;
(4) use the resources that are available to them; and
(5) enjoy their jobs and approach them with an almost contagious tenacity, passion, and commitment.
Ethics training can ensure that everyone in the firm:
(1) recognizes situations that might involve ethical decision-making
(2) Understands the values and culture of the firm
(3) Can evaluate the impact of ethical decisions on the firm in the light of its value structure.

Stakeholders, Market Orientation, and Marketing Performance
One of the most powerful arguments for including ethics and social responsibility in the strategic planning process is the evidence of a link between social responsibility, stakeholders, and marketing performance.  An ethical climate calls for organizational members to incorporate the interests of all stakeholders, including customers, in their decisions and actions.  As employees perceive an improvement in the ethical climate of their firm, their commitment to the achievement of high-quality standards also increases.  These employees exhibit effort beyond both expectations and requirements in order to supply quality products in their particular job or area of responsibility.  Employees who work in less ethical climates have less commitment to providing such quality.

Market Orientation
An ethical climate is also conductive to a strong market orientation.  Market orientation-development of an organizational culture that effectively and efficiently promotes the necessary behaviors for the creation of superior value for buyers and thus, continuous superior performance of the firm.  Without a strong ethical climate, a competitive workplace orientation can emerge.

Stakeholder Orientation
The degree to which a firm understands and address stakeholder demands
3 sets of activities:
(1) The organization-wide generation of data about stakeholder groups and assessment of the firm’s effects on these groups
(2) The distribution of this information throughout the firm
(3) The organization responsiveness as a whole to this intelligence
Generating data about stakeholders begins with identifying the stakeholders who are relevant to the firm.  A stakeholder orientation is not complete unless it includes activities that address stakeholder issues.  The responsiveness of the organization to stakeholder intelligence consists of this initiatives that the firms adopts ensure that it abides by or exceeds stakeholder expectations and has a positive impact on stakeholder issues.  To gauge a given firm’s stakeholder orientation, it is necessary to evaluate the extent to which the firm adopts behaviors that typify both the generation and dissemination of stakeholder intelligence and responsiveness to it.

Marketing Performance
A climate of ethics and social responsibility also creates a large measure of trust among a firm’s stakeholders.  The most important contributing factor to gaining trust is the perception that the firm and its employees will not sacrifice their standards of integrity.  Firms that do no develop strategies and programs to incorporate ethics and social responsibility into their organizational cultures will pay the price with potentially poor marketing performance, the potential costs of civil or criminal litigation, and damaging negative publicity when the public discovers questionable activities.

Incorporating Ethics and Social Responsibility
Ethics compliance programs or integrity initiatives.  Such programs establish, communicate, and monitor a firm’s ethical values and legal requirements through codes of conduct, ethics offices, training programs, and audits.  The marketing plan should include distinct elements of ethics and social responsibility as determined by top-level marketing managers.  Marketing strategy and implementation plans should be developed that reflect an understanding of:
(1) The risks associated with ethical and legal misconduct
(2) The ethical and social consequences of strategic choices
(3) The values of organizational members and stakeholders.
A marketing plan that ignores social responsibility or is silent about ethical requirements leaves the guidance of ethical and socially responsible behavior to the work group, which risks ethical breakdowns and damage to the firm.

Chapter 4: Collecting and Analyzing Marketing Information

Conducting a Situation Analysis
Analysis Alone Is Not a Solution.  Situation analysis is a necessary, but insufficient, prerequisite for effective strategic planning.  The purpose of taking things apart is to understand why people, products, or organizations perform the way they do.  Data Are Not the Same As Information.  Data-a collection of number of facts that have the potential to provide information.  Data, however, do not become informative until a person or process transforms or combines them with other data in a manner that makes them useful to decision makers.  The Benefits of Analysis Must Outweigh the Costs.  Conducting a Situation Analysis Is a Challenging Exercise.  The Internal Environment Review of Current Objectives, Strategy, and Performance.   The marketing manager must assess the firm’s current marketing objectives, strategy, and performance.  The marketing manager should also evaluate the performance of the current marketing strategy with respect to sales volume, market share, profitability, and other relevant measures.
Poor or declining performance may be the result of:
(1) Holding on to marketing goals or objectives inconsistent with the current realties of the customer or external environments
(2) A flawed marketing strategy
(3) Poor implementation
(4) Changes in the customer or external environments beyond the control of the firm
Availability of Resources: Marketing manager must review the current and anticipated levels of organizational resources that can be used for marketing purposes

Organizational Culture and Structure
The marketing manager should review current and anticipated cultural and structural issues that could affect marketing activities. One of the most important issues in this review involves the internal culture of the firm.  Internal cultures also include any anticipated changes in key executive positions within the firm.  For most firms, culture and structure are relatively stable issues that do not change dramatically from one year to the next.

The Customer Environment
During this analysis, information should be collected that identifies:
(1) The firm’s current and potential customers
(2) The prevailing needs of current and potential customers
(3) The basic features of the firm’s and competitors’ products perceived by customers as meeting their needs, and
(4) Anticipated changes in customers’ needs

Who Are Our Current and Potential Customers
Demographic characteristics-gender, age, income
Geographic characteristics-where customers live, density of the target market
Psychographic characteristics-attitudes, opinions, interests, etc.

What do Customers Do with Our Products?
Identifying the rate of product consumption (or usage rate), differences between heavy and light users of products, whether customers use complimentary products during consumption, and what customers do with the firm’s products after consumption
Derived Demand-where the demand for one product depends on the demand of another product-the marketer must also examine the consumption and usage of the complimentary product.

Where do customers purchase our products?
The fastest growing form of distribution today is nonstore retailing-which includes vending machines; direct marketing through catalogs, home sales, or infomercials; and electronic merchandising-throught the Internet, interactive television, and video kiosks.

When Do Customers Purchase our products?
The “when” question refers to any situational influences that may cause customer purchasing activity to vary over time
The “when” question also includes more subtle influences that can affect purchasing behavior, such as physical and social surroundings, time perceptions, and the purchase task.

Why (and How) Do Customers Select Our Products?
The “why” question involves identifying the basic need-satisfying benefits provided by the firm’s products.  This question is important because customers may purchase the firm’s products to fulfill needs that the firm never considered.  Barter involves the exchange of goods and services for other goods/services; no money changes hands.

Why Do Potential Customers Not Purchase Our Products?
Noncustomers have a basic need that the firm’s product does not fulfill.  Noncustomers perceive that they have better or lower-priced alternatives, such as competing substitute products.  Competing products actually have better features or benefits than the firm’s product.  The firm’s product does not match noncustomers’ budgets or lifestyles.  Noncustomers have high switching costs. Noncustomers do not know that the firm’s product exists.  Noncustomers have misconceptions about the the firm’s product (weak or poor image).  Poor distribution makes the firm’s product difficult to find.

Solution to get benefit.  Economies of scale and scope.  Movie Rental Business for change in demand shift.  Firm’s resource based view

Resource of the firm should be:
1.     Valuable
2.     Rare
3.     Imperfectly immit
4.     Difficult to transfer to others
To have sustainable competitive advantage: resource seeking and development and adjustable capabilities
Tangible v intangible

Untology?
Espiomology?

AMA (2007) definition of marketing: “Marketing is the activity, set of institutions, and process for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”

Out of four P’s: which is the most significant change: place
Everything used to be a physical place.  There is no boundary now.  Where: everywhere.  Marketspace: computer networks—online.  Where buyers and sellers meet online.  Open 24 hours

Miles and Snow (1980)
1. Prospector-looking for the opportunity, new product launches
2. Defender-cheaper ways to produce product and make technology better, know how to penetrate market, cheap me 2 product, vision
3. Analyzer-combination of two above, Samsung
4. Reactor-similar to defender, fail to penetrate market
Marketing implementation.  Strategy-getting the different jobs done, similar job at different

Best buy and fryes have time utility because you can buy it there and now.  retailers are not cheaper than the internet.  online have price and place utility they bring the stuff to your door.  competitors have sustainable competitive advantage.  pepsi and coke are brand competitors.  product competitors phones and cars, brand competitors are out interest because we see them on a day to day basis

Most common criticisms leveled against SWOT analysis are that 1) it allows firms to create lists without serious consideration of the issues 2) often becomes a sterile academic exercise of classifying data and information.

Major benefits of SWOT analysis
1. Simplicity
Requires no extensive traiing or technical skills to be used successfully.  The analyst needs only a comprehensive understanding of the nature of the company and the industry in which it competes.

2. Lower Costs

Reduce the costs associated with strategic planning.  Many opt ot downsize or eliminate their strategic planning departmens.
flexibility
SWOT analysis can enhance the qulaiyt of an organization’s strategic plannin even without extensive marekting inofrmation systems.  Presence of a comprehensive information system can make repated WWOT analyses run more smoothly and efficiently.

Integration and Synthesis
SWOT analysis gives the anaylys the ability to integrate and synthesize diverse information, both of a qualitative and a quantitative nature.  Can deal with a wide diversity of information sources.  Helps transform information diversity from a weakness of the planning process into one of its major strenghts.

Collaboration
Fosters collaboration and open information exchange between different funcitona areas  By learning what their counterparts do, what they know, what they think, and how they feel, the marketing anaylyst can solvd problesms, fill voids in the analysis, and eliminate potential disaagreemetns before finalization of marketing plan.

Directives for a productive SWOT analysis
Stay focused-separte analysis for each product-market combination is recommended.

Search extensively for Competitors
Product, generic, and total budget competitors.  Potential future competitors also.  Collaborate with Other Functional Areas.  SWOT promotes the shahring of inormation and perspective across deparmtnets.  Allows for more creative and innovative solutoins to marketing problems.  Examine Issues from the Customer’s Perspecitve.  Customer’s beliefs about the firm, its products, and marketing activites are important considerations in Swot.  Views of employess and other key stakeholdrs.  Look for Causes, Not Characteristics.  Rather than simply list cahracteristics of the firm’s internal and external  environments, the analyst must also explore the resources possessed by the firm and/or its competitors that are true causes for the firm’s SWOT.  Separate Internal Issues from External Issues  Marketing options, strategies, or tactics are not a part of the SWOT analysis.  Separate product/market analyses can be combined to examine the issues relevant for the entire strategic business unit, and business unit analyses can be comnbine to create a complete SWOT analysis for the entire organization.  Only time a single SWOT analysis would be appropriate is when an organization has only one product/market combination.  Search extensively for competitors.  The firm must watch for any current or potentiaal direct substitues for its products.  Porduct, generic, and total budge competitors are important as well.  Collaborate with other Functional Areas.  Generates information and perspectives that can be shared across a variety of functional areas in the firm.Look for causes, Not characteristics

Chapter 5: Customers, Segmentation, and Target Marketing

Buyer Behavior in Consumer Markets
Goal of Marketing Strategy: to identify specific customer needs, then design a marketing program that can satisfy those needs.  The behavior of consumers is often irrational and unpredictable.  Ethnography-developing information about families to develop products/services that better fit family lifestyles.  Successful marketing strategy depends on a clear understanding of customers who they are, what they need, what they prefer, and why they buy.

The Consumer Buying Process

1. Need Recognition

• Consumer needs and wants are not the same
• An understanding of consumer wants is essential for market segmentation and the development of the marketing program
• Marketers must create the appropriate stimuli to foster need recognition

2. Information Search

• Consumers trust internal/personal sources of information more than external sources.
• The amount of time, effort, and expense dedicated to the search for information depends on (1) the degree of risk involved in the purchase, (2) the amount of the experience the consumer has with the product category, and (3) the actual cost of the search in terms of time and money
• Consumers narrow their potential choices to an evoked set of suitable alternatives that may meet their needs

3. Evaluation of Alternatives

• Consumers translate their needs in to wants for specific products or brands
• Consumers evaluate products as bundles of attributes that have varying abilities to satisfy their needs
• Marketers must ensure that their product is in the evoked set of potential alternatives
• Marketers must take steps to understand consumers’ choice criteria and the importance they place on specific product attributes

4. Purchase Decisions

• A consumer’s purchase intention and the actual act of buying are distinct concepts.  Several factors may prevent the actual purchase from taking place.
• Marketers must ensure that their product is available and offer solutions that increase possession utility=

5. Postpurchase evaluation

• Postpurchase evaluation is the connection between the buying process and the development of long-term customer relationships
• Marketers must closely follow consumers’ responses (delight, satisfaction, dissatisfaction, cognitive dissonance) to monitor the product’s performance and its ability to meet customers’ expectations

Other stages may include actual consumption behaviors, product uses, and product disposal after consumption.  The buying process depicts the possible range of activities that may occur in making purchase decision.  Buying process involves a parallel sequence of activities associated with finding the most suitable merchant of the product in question.  The choice of a suitable merchant may actually take precedence over the choice of a specific product.  Some merchants become so well-know for certain products that customers just naturally execute for certain products that customers just naturally execute their buying process with that merchant

Need Recognition

the buying process begins when consumers recognize that they have an unmet need.  Occurs when consumers realize that there is a discrepancy between their existing situation and their desired situation (satisfaction of fulfillment).  A need occurs when an individuals current level of satisfaction does not equal their desired level of satisfaction.  A want is a consumer’s desire for a specific products that will satisfy the need.  The firm must always understand the basic needs fulfilled by its products.  This idea is to build on the basic need and conceive potential consumers to want your product because it will fulfill their needs better than any competing product.  Demand occurs only when the consumer’s ability and willingness to purchase a specific product backs up their want for the product.  The marketer must first educate consumers on the need for the product, and then convince consumers to want his products over competing products.

Information Search

Marketing stimuli can prompt consumers to become interested in a product leading to a desire to seek out additional information.  Can be passive or active.  Passive information search-consumer becomes more attentive and receptive to information, such as noticing and paying attention to automobile advertisements if the customer has a want for a specific car brand.  Active information search-purposely seeks additional information, such as by surfing the Internet, asking friends, or visiting dealer showrooms.  Time effort, and expense dedicated to the for information depends on a number of issues:
1. The degree of risk involved in the purchase: Financial risk, social risk, emotional risk, and personal risk
2. Amount of expertise or experience has with the product category.
3. The actual cost of the search in terms of time and money will limit the degree to which
consumers search for information.
Throughout the information search, consumers learn about different products or brands and begin to remove some from further consideration  This list of suitable alternatives is called the evoked set, and it represents the outcome of the information search and the beginning of the next stage of the buying process.

Evaluation of Alternatives
The consumers essentially translates their need into a want for a specific product or brand.  The evaluation of alternatives is the hardest for marketers to understand, measure, or influence.
Consumers evaluate products as bundles of attributes that have varying abilities to satisfy their needs.  Brand Attributes-image, reputation, reliability, product features, esthetics’s attributes(styling, sportiness, roominess, color, and price)
Considerations:

1. The marketer’s products must be in the evoked set of potential alternatives.
2. Vital that marketers take steps to understand consumers’ choice criteria and the importance they place on specific product attributes.

Purchase Decision
Marketers can often reduce or eliminate these problems by reducing the risk of purchase through warranties or guarantees, making the purchase stage as easy as possible, or by finding creative solutions to unexpected problems.  The key issues for marketers during the purchase stage are product availability and possession utility.  The key to availability is convenience.  To increase possession utility the marketer may have to offer financing or layaway for large dollar purchases, delivery and installation of products like appliances or furniture, home delivery of convenience items like pizza or newspapers, or the proper packaging and prompt shipment of items through the mail.

Postpurchase Evaluation

• Delight- the product’s performance greatly exceeds the buyer’s expectations
• Satisfaction- the product’s performance matches the buyer’s expectations
• Dissatisfaction-The product’s performance falls short of the buyer’s expectations.
• Cognitive dissonance-(Postpurchase Doubt) The buyer is unsure of the product’s performance relative to his or her expectations

Consumers are more likely to experience dissatisfaction or cognitive dissonance when the dollar value of the purchase increases, the opportunity costs of rejected alternatives are high, or the purchase decision is emotionally involving.  Firms manage these responses by offering liberal return policies, providing extensive sales support, or reinforcing the wisdom of the consumers purchase decision.  Major influence on the word-of-mouth information.

Factors that Affect the Consumer Buying Process
Variation in the buying process occurs because consumers are different, the products that they buy are different, and the situations in which consumers make purchase decisions are different.  Complexity of the purchase and decision, individual influences, social influences, and situational influences.

Decision-Making Complexity
The complexity of the purchase and decision-making process is the primary reason why the buying process will vary across consumers and with the same consumer in different situations.  Purchase characterized by high personal, social, financial risk, strong emotional involvement, and the lack of experience with the product or purchase situation.  Marketers of highly complex products must recognize that consumers are quite risk averse and need a great deal of information.  Firms that sell less complex products face the challenges of creating a brand image and ensuring that their pare products are easily recognizable.  Marketers issue branding, packaging, advertising, and point-of-purchase displays to solve these problems.

Individual Influences
Age, life cycle, occupation, and socioeconomic status, are fairly easy to understand and incorporate in the marketing strategy.  The individual factors are quite useful for marketers in target market selection, product development, and promotional strategy.  Individual factors such as perceptions, motives, interests, attitudes, opinions, or lifestyles, are much harder to understand because they do not clearly coincide with demographic characteristics like age, gender, or income levels.  These individual factors are also very difficult to change.  Many marketers adapt their products and promotional messages to fit existing attitudes, interest, or lifestyles.

Social Influences
Culture, subculture, social class, reference groups, and family have a profound impact on what, why, and how consumers buy.  Reference groups and opinion leaders also have an important impact on consumers’ buying process.  Reference groups act as a point of comparison and source of product information.  When consumers feel like they lack personal expertise, they seek the advice of of opinion leaders, who they view as being well informed in a particular field of knowledge.  Software manufacturers, release beta (test) versions of their products to opinion leaders before a full-scale launch.  Starts a word-of mouth.

Situational Influences
Hungry consumers who are in a hurry often grab the quickest lunch they can find.  Consumers facing emergency situations have little time to reflect on their product choices and whether they will make the right decision.  Consumers may also devote less time and effort the the buying process if they are uncomfortable Ex: Sit down restaurants

Physical and spacial influences
Ex: Retail atmospherics, retail crowding, store layout and design
Potential influences on buying behavior:  A comfortable atmosphere or ambiance promotes lingering, browsing, and buying.  Crowded stores may cause customers to leave or by less than planned.
Social and Interpersonal Influence
Ex: Shopping in groups, Salespeople, Other customers
Potential Influences on Buying Behavior:  Consumers are more susceptible to the influences of other consumers when shopping in groups.  When rude salespeople can end the buying process.  Obnoxious “other” customers may cause the consumer to leave or be dissatisfied.
Temporal Influence
Ex: Lack of time, emergencies, convenience
Potential Influences on Buying Behavior: Consumers will pay more for products when they are in a hurry or face an emergency.  Lack of time greatly reduces the search for information and the evaluation of alternatives.  Consumers with ample time can seek information and the evaluation of alternatives.  Consumers with ample time can seek information on many different product alternatives.
Purchase task or product usage Influences
Ex: Special occasions, buying for others, buying a gift
Potential Influences on Buying Behavior:  Consumers may buy higher quality products for gifts or special occasions.  The evoked set will differ when consumers are buying for others as opposed to themselves.
Consumer Dispositional Influences
Ex: Stress, Anxiety, Fear, Fatigue, Emotional Involvement, Good/Bad Mood
Potential Influences on Buying behavior:  Consumers suffering from stress or fatigue may not buy at all or they may indulge in certain products to make themselves feel better.  Consumers who are in a bad mood are exceptionally difficult to please.  An increase in fear or anxiety over a purchase may cause consumers to seek additional information and take great pains to make the right decision.

Product choices also change when consumers make the purchase for someone else, such as buying little or children. 812-322-8955

Buyer Behavior in Business Markets
Business markets and consumer markets:
Both contain buyers and sellers who seek to make good purchases and satisfy their personal or organizational objectives.  Include stages associated with need identification, information search, and product evaluation.  Consumers buy products for their personal use or consumption.  Organizational buyers purchase products for use in their operations.

• Commercial Markets-buy raw materials for use in producing finished goods, and they buy facilitating goods and services used in the production of finished goods.
• Reseller Markets-channel intermediaries such as wholesalers, retailers, or brokers that buy finished goods from the producer market and resell them at a profit, channel intermediaries have the responsibility for creating the variety and assortment of products offered to consumers.
• Government markets-include federal, state, county, city, and local governments.  Governments buy a wide range of finished goods.  Most government purchases are for the services provided to citizens.
• Institutional markets-consist of a diverse group of noncommercial organizations such as churches, charities, schools, hospitals, or professional organizations.  These organizations primarily buy finished goods that facilitate their ongoing operations.

Unique Characteristics of Business Markets
Hard and soft costs.  Many business transactions are based on long-term relationships, so trust, reliability, and overall goal attainment are often much more important than the price of the product.

The Buying Center
The group of people responsible for making purchase decisions.  In an organization, the buying center tends to be much more complex and difficult to identify.  3 groups: economic buyers, technical buyers, and users-each of which may have its own agenda and unique needs that affect the buying decision.
Economic buyers- those senior managers with the overall responsibility of achieving the buying firms objectives.  This made economic buyers a greater target for promotional activities.  Technical buyers-employees with the responsibility of buying products to meet needs on an ongoing basis-include purchasing agents and materials.
Users-managers and employees who have the responsibility of using a product purchased by  the firm-comprise the last group of people in the buying center.

Hard and Soft Costs
Hard Costs-include monetary price and associate purchase costs such as shipping and installation.
Soft costs-such as downtime, opportunity costs, and human resource costs associated with the compatibility of systems, in the buying decision.

Reciprocity
Such arrangements can be upfront condition of purchase in purely transaction-based marketing.  Reciprocal buying is less likely to occurs within long-term relationships unless it helps both parties achieve their respective goals.

Mutual Dependence
Consumer-marketer relationships, this level of dependence tends to be low.  Not case in business markets where sole-source or limited-source buying may leave an organization’s operations severely distress then a supplier shuts down or cannot deliver.  Rubbermaid was able to recover somewhat by lavishing its buying partners with exceptional service.

The Business Buying Process

1. Problem Recognition-the recognition of needs can stem form a variety of internal and external sources
2. Develop Product Specifications-define business purchases. Typically done by buying center.
3. Vendor Identification and Qualification-Business buyers must ensure that potential vendors can deliver on needed product specifications within a specified time frame and in the needed quantities.
4. Solicitation of Proposals or Bids-buying firm may request that qualified vendors submit proposals or bids
5. Vendor Selection-best vendor not necessarily the one offering the lowest price.  Issues such as reputation, timeliness of delivery, guarantees, or personal relationships with the members of the buying center are often more important
6. Order processing-processing the order, negotiating credit terms, setting firm delivery dates, and any final technical assistance need to complete the purchase.
7. Vendor Performance Review-Product may successfully fulfill the needed specifications, but the vendor’s performance is poor.  The result of these evaluations will affect future purchase decisions.

Environmental conditions can have a major influence on buyer behavior by increasing the uncertainty, complexity, and risk associated with a purchase.  In situations of rapid environmental change, business buyers may alter their buying plans, postpone purchases, or even cancel purchases until things settle down.  Also effect decisions regarding the recruitment and hiring of employees.  Organizational factors can also influence business buying decisions.  These factors include conditions with the firm internal environment (resources, strategies, policies, objectives), as well of the condition of relationships with business or supply chain partners.  A shift in the firms resources can change buying decisions.  internal changes in information technology.  Interpersonal relationships and individual factors.  Power struggles are not uncommon in business, or Individual factors-certain managerial personal preferences or prejudices.

Market Segmentation
Market Segmentation as the process of dividing the total market for a particular product or product category into relatively homogeneous segments or groups.  To be effective, segmentation should create groups where the members within the group have similar likes, tastes, needs, wants, or preferences, but where groups themselves are dissimilar from each other.  Many firms today take segmentation to the extreme by targeting small niches of a market, or even the smallest of market segments: individuals

Traditional Market Segmentation Approaches
Some organizations actually use more than one type of segmentation, depending on the brand, product, or market in question.

Mass Marketing
Companies aim mass marketing campaigns at the total (whole) market for a particular product.  Undifferentiated approach that assumes that all customers in the market have similar needs an wants that can be reasonably satisfied with a single marketing program.  Marketing Program consists of single product or brand, one price, one promotional program, and one distribution system.  Works best when the needs of an entire market are relatively homogeneous.  Good examples include commodities like oil and agricultural product.  Although mass marketing is advantageous in terms of production efficiency and lower marketing costs, it is inherently risky.  When barriers of trade are low, mass marketing runs the risk of being seen as too generic.  Mass marketing is very risky in global markets.

Differentiated Marketing
1) dividing the total market into groups of customers having relatively common or homogeneous needs
2) attempting to develop a marketing program that appeals to one or more of these groups.  This approach may be necessary when customer needs are similar within a single group, but their needs differ across groups.  Multisegment approach-seek to attract buyers in more than one market segment by offering a variety of products that appeal to different needs.  Multisegment approach is the most widely used segmentation strategy in medium-to large-sized firms.  It is extremely common in packaged goods and grocery products.  One third of the U.S. population is a minority.  Minority populations have a large middle class with strong buying power.  Core values such as family, faith, nationalism, respect for the elderly, and community leaders, and cultural institutions are the dominant features that define minority populations.  Groups work hard to preserve their ethnic values and customs.  Emotional connections to their own ethnic traditions.  Digital communication-affinity for gadgets and respond well/  Or try to promote ethnic individuality.  Market Concentration approach-focus on a single market segment. Main advantage is specialization. also major disadvantage of this.

Niche Marketing
Some companies narrow the market concentration approach even more and focus their marketing efforts on one small, well-defined market segment or niche that has a unique, specific set of needs.  Will typically pay higher prices for products that match their specialized needs.  The key to successful niche marketing is to understand and meet the needs of target customers so completely that the firms substantial share makes the segment highly profitable.

Individualized Segmentation Approaches
By combining demographic data with past and current purchasing behavior, organizations can tweak their marketing programs in ways that allow them to precisely match customers’ needs, wants, and preferences.  Three types of individualized segmentation are one-to-one marketing, mass customization, and permission marketing.

One-to-One marketing
When it creates an entirely unique product or marketing program for each customer in the target segment.  The key to one-to-one marketing is personalization, where every element of the marketing program is customized to meet the specifics of a particular client’s situation.  The key to one-to-one marketing is personalization.  One-to-one marketing has been used less often in consumer markets.  Ex: Amazon profiles assist with the customization of web pages in real time, product suggestions, and reminder e-mails sent to customers.

Mass Customization
Providing unique products and solutions to individual customers on a mass scale.  Along with the Internet, advances in supply chain management-including real time inventory control-have allowed companies to customize products in ways that are both cost-effective and practical.  Occurs in business markets.  System allows employees to requisition goods and services via a customized catalog-unique to the firm-where the buying firm has negotiated the products and prices.  E-procurement systems have allowed firms to save a great deal of money-not only on prices, but also on the costs of placing orders.

Permission Marketing
Customers choose to become part of a firms market segment.  Opt-in email list-permit a firm to send periodic e-mail about goods and services that they have interest in purchasing.  Customers who opt in have already shown interest in the goods and services offered by the firm.  Allows firm to precisely target only those individuals with an interest in their products, thereby eliminating wasted marketing effort and expense.  One-to-one marketing, mass customization, and permission marketing will become even more important in the future because their focus on individual customers makes them critical to the development and maintenance of long-term relationships.  The simple truth is that customers will maintain relationships with firms that best fulfill their needs or solve their problems.  The delivery of the marketing program must be automated to a degree that misses it cost-efficient.  The marketing program must not become so automated that the offerings lacks personalization.  Changing customers choices-not only in terms of product configuration, but also int terms of the entire marketing program.  Customers can choose payment terms, shipping terms, delivery locations, gift wrapping, and whether to opt in e-commerce firms can offer product suggestions on the fly.  Customized point-of-scale information not only increases sales, it also better fulfills customer’s needs and increases the likelihood of establishing long-term customer relationships.

Criteria for Successful Segmentation

• Identifiable and Measurable-characteristics of segment’s number must be easily identifiable.  Allows the firm to measure identifying characteristics, including the segment’s size and purchasing power.
• Substantial-must be large and profitable enough to make it worthwhile for the firm.  The profit potential must be greater than the costs involved in creating a marketing program specifically for the segment.
• Accessible-The segment must be accessible in terms of communication (advertising, mail, telephone) and distribution (channels, merchants, retail outlets, etc.)
• Responsive-Must respond to the firms marketing efforts, including changes to the marketing program over time.  Respond differently than other segments.
• Viable and Sustainable-Meet the basic criteria for exchange, including being ready, willing, and able to conduct business with the firm.  Must also be sustainable over time for serving the needs of the segment.

Identifying Market Segments
ability to identify the characteristics of buyers within those markets.  Variables including demographics, lifestyles, product usage, or firm size, derive from the situation analysis.  Target markets shift in response to changing elements of marketing strategy:
Reducing price to enhance value, increasing price to connote higher quality, adding a new product feature to make the benefits more meaningful, or selling though retail stores instead of direct distribution, to add the convenience of immediate availability  Target market and the marketing program are interdependent, and changes in one typically require changes in the other.

Segmenting Consumer Markets
Goal-isolate individual characteristics that distinguish one or more segments from the total market.  China is the world’s most populous country and is the second-largest economy.  Difficult to market because of the sheer size of the country, its complicated language with multiple dialects, and its relatively low personal incomes compared to western standards.  Prefer tea to soft drinks.  China’s retail market is growing faster than the U.S.market. Trust-mart-China’s top retailer.  Chinese consumers favor local merchants because of their low prices and freshness of foods.  Difficulty in segmenting consumer markets lies in isolating one or more characteristics that closely align with these needs and wants.

Segmentation Variables
Behavioral Segmentation
Variables: product usage, occasions or situations, price sensitivity
Examples: Quality, value, taste, image enhancement, beauty, sportiness, speed, excitement, entertainment, nutrition, and convenience
Heavy, medium, and light users; nonusers; former users; first-time users
Emergencies, celebrations, birthdays, anniversaries, weddings, births, funerals, graduation
Price sensitive, value conscious, status conscious (not price sensitive)

Demographic segmentation
Age: 0-5, 6-12, 13-17, 18-25, 26-34, 35-39, 50-64, 65+
Gender
Income
Occupation
Education
Family Life cycle
Generation
Ethnicity
Religion
Nationality
Social Class

Psychographic segmentaion
Personality
Lifestyle
Motives

Geographical segemtaion
Regional
City/County Size
Popualtion Density

Behavioral Segmentation
The most powerful approach because it uses actual consumer behavior or product usage to make distinctions among market segments.  Most closely associated with consumer needs.  Group consumers based on their extent of product usage-heavy, medium, and light users.  Create market segments based on specific consumer benefits.  Conducting research to identify segments is expensive, time-consuming, and sometimes unclear.  The key to successful behavioral Market Segmentation is to clearly understand the basic needs and benefits sought by different consumer groups.  Then this information can be combined with demographic, psycographic, and geographic segmentation to create complete consumer profiles.

Demographic Segmentation
Divides markets into segments using demographic factors such as gender, age, income, and education.  Widely Available and  relatively easy to measure.  The connection between demographics, needs, and desired product benefits can make demographic segmentation quite easy.  The problem in understanding consumer motives and values is that these variables depend more on what consumers think and feel rather than on who they are.  Delving into consumer thoughts and feelings is the subject of psycho-graphic segmentation.

Psycographic segmentation
Deals with state-of-mind issues such as motives, attitudes, opinions, values, lifestyles, interests, and personality.  Issues are more difficult to measure, and often require primary marketing research to properly determine the makeup and size of various market segments.  Once firm identifies one or more pychographic segments, they can be combined with demographic, geographic, or behavioral segmentation to create fully developed consumer profiles.
VALS Values and lifestyles.  Consumption motives: ideals knowledge and principles, achievement demonstrating success to others, or self-expression (social or physical activity) variety, and risk taking).  Many companies use Vales including new product development, product positioning, brand development, promotional strategy, and media placement.  Psycho graphic segmentation is useful because it transcends purely descriptive characteristics to help explain personal motives, attitudes, emotions, and lifestyles directly connected to buying behavior.

Geographic segmentation
Consumer preferences for certain purchases based on geography are a primary consideration in developing trade areas for retailers such as grocery stores, gas stations, and dry cleaners.  Geodemographic segmentation, or geoclustering, is an approach that looks at neighborhood profiles based on demographic, geographic, and lifestyle segmentation variables.  Geoclustering tools: Claritas’ PRIZM NE Segmentation system, which classifies every neighborhood in the United States into one of 66 different demographic and behavioral clusters.

VALS CONSUMER PROFILES
Innovators
have abundant resources and high self-esteem, successful, sophisticated consumers who hava taste for upscale, innovative, and specialized goods and services.  Concerned about image as an expression of self, but not as an expression of status or power.

Thinkers
well-educated consumers who value order, knowledge, and responsibility.  Conservative consumers who look for practicality, durability, funcitonality, and value.

Achievers
focused and structured around family, a place of worship, and career.  Are conventional, conservative, and respect authority and the status quo.  Very active consumers who desire established, prestigious products and services that demonstrate their success.  Value products that can save them time and effort.

Experiencers
Young, enthusiastic, and impulsive consumers who are motivated by self-expression.  Emphasize variety, excitement, the offbeat, and the risky.  Experiencers enjoy looking good and buying “cool” products.
Example products: Fashion, Entertainment, sports/exercise, outdoor recreation, and social activities

Believers
Are conservative, conventional consumers who hold steadfast beliefs based on traditional values related to family, religion, community and patriotism.  Follow established routines centered on family, community, or organizational membership.  Prefer familiar and well-known American Brands and tend to be very loyal customers.

Strivers
Motivated by achievement, yet they lack the resource to meet all their devices.  Strivers are trendy, fun loving, and concerned with the opinions and approval of others.  See shopping as a social activity and an opportunity to demonstrate their purchasing power up to the limits imposed by their financial situations.

Makers
Motivated by self-expression.  Engaging in many do-it yourself activities such as repairing their own cars, building houses, or growing and canning their own vegetables.  Practical consumers who value self-sufficiency and have the skills to back it up.  Also unimpressed by material possessions, new ideas, or big business.  They live traditional lives and prefer to buy basic items.

Survivors
Narrowly focused lives and have few resources with which to cope.  Primarily concerned with safety, security, and meeting needs rather fulfilling wants.  Survivors are cautious consumers who represent a fairly small market for most products.  Loyal to favorite brands.  Marketers will discover that buying firms have unique and varying characteristics.  In addition to the types of business markets, firms can also segment business buyers with respect to the following.

• Type of organization-different and specific marketing programs, such as product modifications, different distribution and delivery structures, or different selling strategies.
• Organizational characteristics-vary based on their size, geographic location, or product usage.  Large buyers often command price discounts and structural relationships that are appropriate for their volume of purchases.  Buyers in different parts of the country, may have varying product requirements, specifications, or distribution arrangements.
• Benefits sought or buying processes: some business buyers seek only the lowest cost provider, whereas others require extensive product support and service.  Some business buy using online auctions or even highly informal processes.
• Personal and Psychological Characteristics: The personal characteristics of the buyers themselves often play a role in segmentation decisions.  Buyers vary according to risk tolerance, buying influence, job responsibilities, and decision styles.
• Relationship intensity-strength and longevity of the relationship with the firm.  Other members of the selling organization may be involved in business development strategies to seek out new customers.

Target Marketing Strategies
Once firm has completed segmenting a market, it must then evaluate each segment to determine its attractiveness and where it offers opportunities that meet the firms capabilities and resources.  Attractive segments may be dropped for lack of resources, no synergy with the firms mission, overwhelming competition in the segment, an impeding technology shift, or ethical and legal concerns over targeting a particular segment.

• Single Segment Targeting-capabilities are intrinsically tied to the needs of a specific market segment.  This strategy is for true specialists in a particular product category.  Firms fully understand their customers’ needs, preferences, and lifestyles.  Constantly strive to improve quality and customer satisfaction by continuously refining their products to meet changing customer preferences.
• Selective Targeting-Firms that have multiple capabilities in many different product categories.  Advantages include diversification of the firm’s risk and the ability to cherry pick only the most attractive market segment opportunities.  P an G uses selective targeting to offer customers many different products in the family care, household care, and personal care markets.  Success is that the company does not try to be all things to all customers.  Company carefully selects product/market combinations where its capabilities match customers’ needs.
• Mass Marketing Tactics-only the largest firms, which involves the development of multiple marketing programs to serve all customer segments simultaneously.
• Product Specialization-where their expertise in a product category can be leverage across many different market segments.
• Market Specialization-when their intimate knowledge and expertise in one market allows them to offer customized marketing programs that not only deliver needed products but also provide needed solutions to customers’ problems.

Non-customers do not purchase a firms products because they can include unique customer needs, better competing alternatives, high switching costs, lack of product awareness, or the existence of the long-held assumptions about a product.  The key to targeting non-customers lies in understanding the reasons why they do no buy and then finding ways to remove these obstacles.  Removing obstacles to purchase, whether they exist in product design, affordability, distribution convenience, or product awareness, is a major strategic issue in developing an effective marketing program.

Chatper 7 Product Strategy

Strategic decisions to be made in the marketing plan, the design, development, branding, and positioning of the product are perhaps the most critical. Product-something that buyers can acquire via exchange to satisfy a need or a want (food, entertainment, information, people, places, ideas, etc.)  Products are not created and sold as individual elements; rather than products are developed and sold as offerings.  Organization’s product offering is composed of tangible goods, services, ideas, images, or even people.  Due to complexity, we prefer to discuss products as offerings, or the bundle of physical (tangible), service (intangible), and symbolic (perceptual attributes) designed to satisfy customers’ needs and wants.  Organizations strive to enhance the service and symbolic elements.  Focusing primarily on the intangible aspects of a product, not on its tangible or physical elements.  Product Strategy needs to be fully integrated with pricing, distribution, and promotion, as these components of the marketing program add value to the product offering.  Product offerings in and of themselves have little value to customers.  Rather, an offering’s real value comes from its ability to deliver benefits that enhance a customer’s situation or solve a customer’s problems.

The Product Portfolio
Products purchased for personal use and enjoyment are called consumer products, whereas those purchased for resale, to make other products, or for use in a firm’s operations are called business products.  Marketing strategy for consumer convenience products must max availability and ease of purchase-both important distribution considerations.  The strategy associated with consumer shopping products often focuses more on differentiation through image and symbolic attributes-both important branding and promotion issues.  For commodities such as raw materials conformance to exacting product specifications and low acquisition costs are the keys to effective strategy.  Many business products are also characterized by derived demand, where demand of product is derived from the demand for other business or consumer products.  The products sold by a firm can be described with respect to product lines and product mixes.  A product line consists of a group of closely related product items.  Most companies sell a variety of different product lines.  A firms product mix or portfolio is the total group of products offered by the company.

Types of Consumer and Business Products
Consumer products
Convenience Products-inexpensive, routinely purchased products that consumers spend little time and effort in acquiring. Ex: Soft Drinks, Candy and Gum, Gasoline

Shopping Products-products that consumers will spend time and effort to obtain.  Consumers shop different options to compare prices, features, and service. Ex: Dry cleaning, appliances, furniture, clothing, and vacations

Specialty Products-unique, one-of-a-kind products that consumers will spend considerable time, effort, and money to acquire.  Ex: sports memorabilia, antiques, plastic surgery, luxury items

Unsought products-products that consumers are unaware of….

Important decision is the number of product lines to offer, referred to as the width or variety of the product mix.  By offering a wide variety of product lines, the firm can diversify its risk across a portfolio of product offerings.  Assortment-product line depth is an important marketing tool.  Firms can attract a wide range of customers and market segments by offering a deep assortment of products in a specific line

• Economies of scale-offering many different product lines can create economies of scale in production, bulk buying, and promotion.  Many use umbrella theme.
• Package uniformity-customers can locate the firms products more quickly.  Also becomes easier for the firm to coordinate and integrate promotion and distribution.
• Standardization-same component parts
• Sales and Distribution Efficiency-firm offers many different product lines, sales personnel can offer a full range of choices and options to customers.  Channel intermediaries are more accepting of a product line than they are of individual products.
• Equivalent Quality Beliefs-Customers typically expect and believe that all products in a product line are about equal in terms of quality and performance.

The Challenges of Service Products
Products can be intangible services and ideas as well as tangible goods.  All firms develop and implement marketing strategies designed to match their portfolio of intangible products to the needs of target markets.  Intangible services face unique challenges in developing marketing strategy.  Services cannot be stored for future use.  The demand for services is extremely time-and-place dependent because customers must typically be present for service to be delivered.  Due to intangibility of service, it is quite difficult for customers to evaluate a service before they actually purchase and consume it.  Customers can ask friends and family for recommendations.  Some service companies provide satisfaction guarantees to customers.

Unique Characteristics of Services and Resulting Marketing Challenges
Service Characteristics
Intangibility
It is difficult for customers to evaluate quality, especially before purchase and consumption.
It is difficult to convey service characteristics and benefits in promotion.  As a result, the firm is forced to sell a promise.  Many services have few standardized units of measurement.  Therefore, service prices are difficult to set and justify.  Customers cannot take possession of a service.

Simultaneous Production and Consumption
Customers or their possessions must be present during service delivery.
Other customers can affect service outcomes including service quality and customer satisfaction.  Service employees are critical because they must interact wit customers to deliver service.  Converting high-contact services to low-contact services will lower costs but may reduce service quality.  Services are often difficult to distribute.

Perishability
Services cannot be inventoried for later use.  Therefore, unused service capacity is lost overview.  Service demand is very time-and-place sensitive.  As a result, it is difficult to balance supply and demand, especially during periods of off-peak demand.  Heterogeneity
Service quality varies across people, time, and place, making it very difficult to deliver good service consistently.
There are limited opportunities to standardize service delivery.
Many services are customizable by nature.  However, customization can dramatically increase the costs of providing the service.
Client-based relationships
Most services live or die by maintaining a satisfied clientele over the long term.  Generating repeat business is crucial for the service frim’s success.

New Product Development +
Market characteristics and competitive situations will affect the sales potential of new products (GPS units now sold in cars, on phones, etc)
-Some firms base new product introductions on a product/ technological superiority, some minor tweak existing products
-New-to-the world products (discontinuous innovations)- creation of entirely new market; radical thinking by entrepreneur; Ex: Fred Smith’s idea for overnight packaging (UPS)
-New product lines- new offerings to the firm, but in established markets; Dells move to flat screens; not as risky as innovation
-Product line extensions- existing product line with new styles, models, features, and flavors; Budweiser’s introduction of Bud Light Lime; allow company to keep products fresh with minimal costs and risks
-Improvements or revisions of existing products- products that offer improved performance or greater perceived value; “new and improved”; anti-allergen or shampoo plus conditioner
-Repositioning- targeting existing products at new markets or segments; Carnival Cruise effort to attract senior citizens
-Cost reductions- modifying products to offer performance similar to competing products but at a lower price; convert hard cover to paper back
-First two options are most effective and profitable when firm wants to significantly differentiate its product
-Key to success is to create a differential advantage
-Customer perceptions are what matters in many cases
-Process of developing new products:
-Idea generation- ideas can be obtained from customers, employees, research, competitors, and supply chain partners
-screening and evaluation- ideas are screened for match with firms capabilities and ability to meet customers needs and wants
-development- product specifications are set, design is finalized, and initial production begins; full marketing plan is developed in order to acquire the resources and collaboration needed for full scale launch
-test marketing in real or simulated situations to determine performance
-commercialization- launched with complete marketing program

Strategic Issues in Branding Strategies +
-Branding makes the customer buying process more efficient because customers can locate and purchase products more easily
-Manufacturer vs. private-label brands: private label brands (store brands) range from well known products (Gap) to other products (Wal-Mart)
-both types of brands have key advantages- many stores carry both
-Brand loyalty- positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category
-brand recognition- customer knows about a brand and is considering it as an alternative in evoked set; lowest form of brand loyalty
-brand preference- customer prefers one brand to competitive brands and will usually purchase this brand if it is available; customer has brand preference for Diet Coke but if unavailable will accept a substitute
-brand insistence- customer will go out of their way to find the brand and will accept no substitute; will drive far to get product
-Many products categories  had brand loyal customers (especially products put on their bodies)
-Brand equity- the value of a brand; has ties to brand name awareness, brand loyalty, and other attributes; hard to measure but key asset for the firm; brand awareness and loyalty increase customer familiarity with a brand
-Brand alliances- relationships with other firms are among the most important competitive advantages that can be held by an organization; co-branding- leverages the brand equity of multiple brands to create distinct products with distinctive differentiation; ex: Hersheys and Betty Crocker
-brand licensing- contractual agreement where company permits an organization to use its brand on non competing products in exchange for licensing fee
-brand misidentification- Xerox, Band-Aid

Packaging and Labeling +
-color used is vital part of branding, size and shape of label
-packaging is important: protection, storage, convenience
-sometimes change in packaging can create major problem for the brand
-labels- product identification and promotion and contain valuable information

Differentiation Strategies +
-differences among brands can be based on real qualities or psychological qualities
-Product Descriptors
-product features: factual descriptors of the product and its characteristics
-not what get the customer to buy
-Advantages- performance characteristics that communicate how the features make the product behave
-benefits- positive outcomes they acquire from purchased products
-Customer Support services- providing good customer support may be only way to differentiate products
-EX: many bookstores have gone out of business because of Barnes and Noble, ones that stay alive are due to good customer service
-assistance in customer needs, delivery, technical support, training, parking
-Image- overall impression (positive or negative) that customers have of it
-reality is not as important as perception
-can be lost over time

Positioning Strategies +
-Strengthen the Current Position- monitor constantly what target customers want and the extent to which customers perceive the product as satisfying those wants
-ex: firm known for good customer service must continue to invest time/money (Ritz Carlton)
-must constantly raise the bar of customer expectations
-Repositioning- fundamental change in any of the marketing mix elements
-Ex- its not just for breakfast anymore- OJ
-Reposition the competition- put competitors in less favorable light or force competitor to change positioning strategy
-Ex- Coke vs. Pepsi

Chapter 8 Pricing Strategy

Revenue=price times quantity
Prices around the world account for differences in currencies, taxes/tariffs, and consumer demand.  Firms take considerable pains to discover and anticipate the pricing strategies and tactics of other firms.  Pricing is given a great deal of attention because it is given a great deal of attention because it is considered to be the only real means of differentiation in mature markets plagued by commoditization.  Guessing is never a good strategy in marketing; it can be downright deadly when it comes to setting prices.

The Role of Pricing in Marketing Strategy
Pricing is often a major source of confrontation between sellers and buyers.  Sellers obviously want to sell a product for as much as possible, whereas buyers would love to get the products they want for free.

Seller’s Perspective on Pricing
Have  a tendency to inflate prices because they want to receive as much as possible in an exchange with a buyer.  If buyer cannot be found, then the homeowner is guilty of letting sentiment cloud his or her perception of market reality.  Sound pricing strategy should ignore sentimental feelings of worth and instead focus on the market factors that affect the exchange process.  Four key issues: cost, demand, customer value, competitor’s prices.
Cost
direct costs-finished goods/components, materials, supplies, sales commission, transportation
indirect costs-administrative expenses, utilities, rent
Firms make money either through profit margin, high sale volume, or both.
Manufacturers of tangible goods who do not sell a product today can sell that same product tomorrow.  Service firms, like airlines use complex pricing systems in an attempt to squeeze every dollar out of every seat on every plane.  Market demand is also a key issue in a seller’s pricing strategy.  More efficient firms-like low-cost airlines or discount retailers-are able to cover their  costs while simultaneously offering lower prices to customers.  The bottom-line impact o value delivered to the customer is often an issue in setting variable prices.  Setting a price for this product may have little to do with costs, but instead focuses on the value associated with the innovation and intellectual capital of the selling firm.  Finally, organization must be aware of what its competitors charge for the same or comparable products.  Rather than beating competitor’s prices, a better strategy may be to create real or perceived differentiation for the product offering.

The buyer’s perspective on Pricing
Buyers often see prices a being lower than market reality dictates.  Price is about what the buyer will give up in exchange for a product.  Buyers perspective key issues for pricing: perceived value and price sensitivity
Buyers will give up in exchange for a product depends to a great extent on their perceived value of the product.  Some customers have good value with high product quality, whereas others see value as nothing more than a low price.  Value-a  customer’s subjective evaluation of benefits relative to costs to determine the worth of a firm’s product offering relative to costs to determine the Worth of a firms product offering relative to other product offerings.
Perceived value=Customer Benefits/Customer Costs
Customer Benefits-quality, satisfaction, prestige/image, and the solution to a problem.  Customer costs-money, time, effort, and all non-selected alternatives (opportunity costs)
Good pricing strategy also based on understanding of the price elasticity associated with a firms goods and services.  On buyer’s side, price elasticity translates into the unique and varying buying situations that cause buyers to be more or less sensitive to price changes.

A shift in the Balance of Power
Buyers have increase power over sellers when there is a large number of sellers in the market or when there are many substitutes for the product.  Have power when the economy is weak and fewer customers will part with their money.  Sellers have increased power over buyers when certain products are in short supply or in high demand.  Sellers have increased power during good economic times when customers will spend more money.  Buyer’s market prevails mostly.  Exists because of the large number of product choices that are available, increased commodization among competing products and brands, and a general decline in brand loyalty among customers.

The relationship between Price and Revenue
Price cutting can also move excess inventory and generate short-term cash flow.  Any price cut must be offset by an increase in sales volume just to maintain the same level of revenue.
Percent change in Unit Volume=Gross Margin/Gross Margin % +- Price Change % -1.  Video game manufactures, often bundle games and accessories with their system consoles to increase value.  The cost of giving customers these free add-ons is low because the marketer buys them in bulk quantities.  This added expense is almost always less costly than a price cut.  And the increase in value may allow the marketer to charge higher prices for the product bundle.

Key Issues in Pricing Strategy
Firms pricing objectives, supply and demand, and the firm’s cost structure, are critically important in establishing initial prices.  Increases in product quality or the addition of new product features often come with an increase in power.  Pricing is also influenced by distribution, especially the image and reputation of the outlet where the good or service is sole.  Coupons, represent a combination of price and promotion that can stimulate  increased sales in many different product categories.

Pricing objectives
Realistic, measurable, and attainable.  Firms make money on profit margin, volume, or some combination of the two.  Sometimes, firms simply want to maintain their prices in an effort to certain their position relative to the competition.  Status quo.  Decision to maintain prices must be done after a careful analysis of all factors that affect pricing strategy.

Description of Common Pricing objectives
Profit-oriented-designed to maximize price relative to competitors prices, the products perceived value, their firms cost structure, and Princeton efficiency.  Profit objectives are typically based on a target return, rather than simple profit max.

Volume Oriented-Set prices in order to max dollar or unit sales volume.  This objective sacrifices profit margin in favor of high product turnover.

Market Demand-sets prices in accordance with customer expectations and specific buying situations.  This objective is often known as charging what the market will bear

Market Share-Designed to increase or maintain market share regardless of fluctuations in industry sales.  Market share objectives are often used in the maturity state of the product life cycle.

Cash Flow-Designed to match or beat competitors prices.  The goal is to maintain the perception of good value relative to the competition

Prestige-Sets high prices that are consistent with a prestige or high status product.  Prices are set with little regard for the firm’s cost structure or the competition.

Status quo-Maintains current prices in an effort to sustain a position relative to the competition

Supply and Demand
Customer expectations regarding pricing/

The firm’s cost structure
Cost must be factored out of the revenue equation in order to determine proftis, and ultimately the survival of the firm.   Most popular way to asscoatie costs and prices is through breakeven pricing.
Breakeven in units=Total Fixed Costs/Unit Price-Unit Variable Cost
Another way is cost-plus pricing-a strategy that is quite common in retailing
Selling price=Average Unit Cost/1-Markup percent (decimal)
Cost-plus pricing is easy to use, but has a weakness in determining the correct markup percentatge.
Different firms have different cost structures.

Competition and Industry Structure
Firms that use competitivie matching pricing objecives face a constant struggel to monitor and respond to competitor’s price changes.  However, a firm does not alsays have to  match comnpetitor’s prices to compete effectively

• Perfect competitoin-a market containing an unlimited number of sellers and buyers who exchange for homogenious products
• Monopolistic compettion-a market containing manuy sellers an buyers who exchange for relatively heterogenous products.  The heterogenous nature of the products give firms some control over prices.
• Oligopoly-a market containing relatively few sellers who control the supply of a dominant portion of the industry’s product
• Monopoly-a market dominated by a single seller who sells a product with no clos substitutes.

Stage of the Product Life Cycle
Pricing strategy in the introduction starge is criticabl becasuse it sets the standard for pricing changes over time.  Firms mus look inward to find ways to cut costs and maintain profits later in the lfie cycle.  Also, very few firms enjoy the luxury of raising prices during the decline stage.

Pricing Service Products
When buying services, customers have a difficult time determining quality prior to purchase
If service provider sets prices too low, customers will have inaccurate pereceptions and expectation about quality.

• Service quality is hard to detect prior to purchase
• The costs associated with providing the service are difficult to determine
• Customers are unfamiliar with the service process
• Brand names are not well established
• Customers cna perform the service themselves.
• The services has poorly defined units of conusmption
• Advertising wihtin a sercie catergoy is limited
• The totla price of the servie experience is diffeicult to ste beforehand,..

Most services suffer from the challenges associted with determining costs because intangible experse such as labor, insuracne, and overhead must be taken into account.
When services that customers cnad do for themseleves, the firm i scompeting with the customers’w evaluation of his or her time and ability, in addition to other conpeting service providers.
Customres often balk a t the high prices of service providers because they have a limited ability to evaluate the quality or total cost until the service process has been competed.  The heterogeneous nature of these services limits standardixation, therefore, customer knowledge about pricing is limited.
Due to the limted capscity associtatd with most services, service pricing is also a key issue with respect to balancing suply and demand during peak and off-peak demand times.
Yield management allows the service firm to simultaneoulsy control capacity and demnad in order to maximize revenue and capaicuty utilization.  Acccomplished 2 ways:
1) The service firm contrls capacity by limiting the availbale capacity at certain price points
In the off-season, many hotels schedule routine maintenance and remodeling, and reduce trates for conventions in order to fill unused capacity.  Airlines do this by selling a limited number of sears at discount prices three or moer weeks prior to a flight’s departure.
2) The service fimr controls demand through price changes over time and by overbooking capacity.  These activites esnure that service demand will be consistent and that any unused capacity will be minimized.  These practives are common in servcices characterized by high fixed costs and low variable costs, such as airlines, hotels, rental cars, cruises, transportation firms, and hospitals.  Firms will sell some capacity at reduced prices in order to maximize utilization.
Yield management systems are also useful in their ability to segment markets based on price elasticity.  Consultants are less price senstive because their cliinets reimbruser then for expenses.  Many other firms can reach idfferent market segmnts iwth attracti ve off-peak pricing.  Many customers take advantage of the lower prices at theme parks and beach resorts by traveling during the off-season.  Similar situations occur in lower-priced movie matinees and lower prces for lunch items at most restauratns.

Price elasticity of demand
Pricing has intricate connections to issues such as demand, competiton, and customer expectations.
Price elasticity-customer’s responsiveness or sensitivity to changes in price.  The relative impact on the demand for a product given specific increases or decreases in the price charged for that product.
Price elasticity of demand=Percentage Change in Quantity demanded/Percentage Change in Price
Inelastic-number less than 1, price change does not significantly affect the quantity demanded
elastic demand
Price elasticity is not uniform over time and place becuase demand is not uniform over time and place.

Situations that increase price sensitivity
More sensitive to price when they have many idfferent choices or option sfor fulffilling their needs and wants.

• Availability of Product Substitutes-much more sensitive to price differences. Name-brand products
• Higher totalk expenditure-higher total expense, th emore elastic the demand for that product will be
• Noticeable differences-products having heavily promoted prices tend to experience more demand.
• Easy price comparisons-more price sensitive if they can easily comare prices among competing prodcuts.  Industires such as retailing, supermarkets, travel, toys, and books.  Fetchbook.info, customers can find lowest prices on books across 145 different bookstores.

Situations that decrease price sensitivity
customers becom much less sensitive to price when they have few choices or options for fulfillin their needs and wants.  Price elasticity is lower (more inelastic) in these situations:

• Lack of substitutes-baking/cooking ingredients, add-on or replacement parts, one-of-a-kind antiques, collectables or memorabilia, unique sporting events, and specialized vacation destinations
• Real or perceived necessities-food, water, medical care, cigarettes, and prescription drugs, have extremely inelastic demand because customers have real or percieved needs for them.  Some product categories are price inelastic because customers percieve those products as true necessities.
• Complementary products
• Percieved Product Benefits-fine wines, gourmet chocoloates, imported coffee, or trips to a day spa.  Other customes base their entire puchasing patters on buying the best prodcuts in all categoreiess.
• Situational influences-Time pressures or purchase risk increase to the point that an immediate purchase must be made or the availability of product substitutes falls dramatically.  Other influences reslove around purchase risk, typically the social risk in aming a bad decisioin.
• Product differentiation-make the demand for the curve for a product more inelastic.  Product differentiation does not have to be based on real differences in order to make customers less price sensitive.

Pricing Strategies
Most firms have developed a general and consitent approach or general pricng strategy to be used in establishing prices.  The way that members of the target market percieve the price.  Customer psychology and the information processing.

Base Pricing Strategies
A fim’s base pricing strategy establishes the initial price and sets the range of possible price movements throughout the product’s life cycle.  Different approaches to base pricing, market introduction pricing, prestige pricing, value-based pricing (ELDP), competitive matching, and nonprice strategies.

YOU NEED TO FINISH THIS CHAPTER

Chapter 9: Distribution and Supply Chain Management 

Distribution and Supply Chain Concepts
providing time, place, and possession utility for consumer and business buyers. Strong and carrying inventory-key factors in ensuring prodcuts availability for customers

• Marketing Channels-An organized sytem of marketing institutions through which products, resources, information, funds, and/or product ownership flow form the point of production to the final user.  Some channel members or intermediaries physiclaly take possession or title of products (wholesalers, distributors, retailers) whereas others simply facilitate the process (agents, brokers, financail institiutions)
• Physical distribution-Coordinating the flow of information and products among members of the cahnnel to ensure the availabiliyt of products in th eright palces, in the right quantities, at the right times, and in a cost-effecient manner.  Phycial distribution or logistics includes activities such as customer service/order entry, administration, transportation, warehousing (storage and materials handling), inventory carrying, and the systems and equipment necessary for these activities.

This supply chain process is designed to increase invetnory turns and get the right products to the right place at the righ ttime, maintaining th eapporcpriate service and quality standards.

Marketing Channel Functions
The most basic beneift of marekting channels is contact efficiency, where channels reduce the number of contacts necessary to exchange prouces.   Contac efficiecny allows companies to maximixe produ distribution by selling to selct intermediatires.

• Sorting-intermediaries overcome this discrepancy of assortment
• Breaking bulk-intermediaries, retailers particularyly, overcome this discrepancy of quantity.
• Maintaining inventories-intermediaries overcome theis temportal time discrepancy.
• Maintaing convenient locations-intermediaries overcome this temporal (time) discrepancy.
• Maintaining convenient locations-channle must overcome spatial discrepancy by making products available in convenient locations
• Provide services-offer facilitating services and standardizing the exchange process

Channel effectiveness and efficiency
Distribution decisions are being evaluated using two critereia
1)Channel effective?
2) Channel efficient?
Effectiveness invoes meeting the goals abnd objectives of tboth the firm and its customers.  The key effectiveness issues is wheeter the channel provides exceptional time, place, and possession utility.
Exceptional place utility remains elusive for many firms.  Primary reason is expense.
Key issue in channel effectiveness with respect ot possession utiliyt is the ease of the actaul pucrchase process.

Strategic issues in distribution and supply chain management
With traditional channel, eahc channel mmebr has it s main concern how much profuts it maekes, or tht size of its peice of th epie.  In a supplyu chain, the pormary concern i sth eshere of th emarket tht eentire channel caputres.
Any single firm can demand a larger portion of the  profit made form the channels’s activities, but if th echannesl’s share of the marekts shringks then tha fimr will earn less profit.  On the other hand, if the channels’s shaer increases, a firm mayu get a sammller share or maintain a constant shar, yet still earn more profuts.
Key strategic aspects of any suply chain: the structure of the cahnne, channel integration, and the maeasn to build value in the supply chain.

Marketing Channel Structure
Distribution often becomes highly inflexible dute to long-term contracts, sizabel investments, and commitments among channel members.

• Exclusive distribution-usuall 1 to 1 marketing.  level of involvement is less riskier.  It is the most restricitve type of market coverage.  Fimrs using this stargegy give on e merchant or outle the sole right to sell a c poduct within a defined geographinc region.  This cahnel structure is most comonlhy associated with proestige proudcvts, major industreial equipment, or with firms tha attempt to give their producs and exclusiver or prestige image.  Firms that purse exclusive distribution usually targetr a single, well-defined market segement.  Exclusive distribution is a necessity in cases where the manufacture demandsa a significant amount of input regarding the presentation of its products to buyers.
• Selective distribution-give several merchants or outles the right to sell a product in a defined geographic region.  Used in clothing, cosmetics, electronics, and premium pet food.  Allows the manufacturer to have more control over prices product display, and selling techniques.
• Intensive distribution-makes a product available at the maximun number of merchants or outlets in each area to gain as much exposure and as many sales opportunities as possible.  Option of choice for most consumer convenience goods, such as candy, soft drinks, over-the-counter drugs, or cigarettes, and for business office supplies like paper and toner cartidfres.  Manufactures must give a good dgeress of control over pricing and product display.  Direct vehicles of the Internet and showcase store.  Firms that emply a mass marketing approach to segmentation often opt for intensive distribution strategy.

Channel Integration
Through informational, technological, social, and structural linkages, the goal of channel integration is to create a seamless network of collaborating suppliers, vendors, buyers, and customers.

• Connectivity-the informational and technological linkages among firms.  Can access real-time information about the flow in the supply chain network.
• Community-the sense of compatitible goals and objectives among firms in the supply chaine networks.  All firms must be willin gto work together to achieve a commmon mission and vision.
• Collaboration-the recogniton of mutual independence among members ot th esupply chain network.

Creating adn Enhancin g Value in the Supply China
Synergy (the idea that the whole is greater than th eusm of the parts) is th edriving foce bedhind value creation in the supply chain.  By combining and integrating their unique capabilities, channel members can create synergies that enhance communication and sales, imporve after-sale services, incresase the efficeiinty of porduct delivery, add procuts enhancements, or offers solutions rather than indiuvial porudcts.  This type of vale bilidng can be done at any level of the suppply cahin.

Conflict and Collaboration in the Supply Chain
Move form a “win-lose” competitive attitude to a “win-win” collaborative approach in which there is a common realizatoin that all firms in the supply chain must prosper.

The basis of Conflict in the Supply Chain
Each firm in a supply chain has its own mission, goals, objectives, and strategies.  Self-seeing interests behavior is natural in both business and everday life.  Second, the recognitona and acceptance o fmutial interdepndence within th esupply chain goes against our natural self-interest-seeking tendencies.
Conflict also arises in a supply chain because each frm posseses differen resources, skills, and advantages.  Power can be defined as the influence one channel member has over others in the supply chain.

• Legitimate power-firm’s position in the suppply chain.
• Reward power-the ability to help other parties reach theri goals and objecties the curx of reward power.  rewards may come in terms ofhihger volume sales, sales with more favorable margins, or both.  Inidudivaul salespeople at the buyer of th echannel may be rewarded with cash paymntes, merchandise, or vacations to gaim more favorable presentation of a manufafcturer’s or wholesarler’s porducts.  Free goods or services.
• Coercive power-abilit to take positive outcomes away from ohter channel members, or th eability of inflict punishment on ohter channel menbers.  Legislatevie and judicails activons.  A manufacturesr may slow down dleivers or postpone the availiabiliy of some portions of a product ot  a woolersaler or retailer.  A a retailer can decide not to carry a product, not to promote a product, or to give a product unfavorable palcement on its shelves.
• Informaiton power-having and sharing knowlege.  Makes channel membrs more effective and efficietn.  Stems from knowledge concerning sales foresctasts, market trends, competitive inteligence, product uses and usage rates, or other critical pieces of information,  In may supply chains, retailers hold th emost information power
• Referent power-personal relationships and the fact that one party like another.

Firms want to sell a product for as much as possible, porived as few additional services as it can get away with obtain payment in advance, and deliver the proudct at its own convenience.  By contrast, buers want to purchase a proudct for as little as possible, get a larger numbe of additional services both now and in the future, pay montsh o even years later with no interest, and get immediate deliver.  Need for effective development, communication, and utilization of information.

Collaborative Supply Chains
Trust appears at the center.  Other keys include top management commitment and investment.
One of the best and most widesperead collaborative supply chain initiatgvis is category management and ongiong and highly successful initiative by innovative members of food product distribution channels.  Category management is a supplier process of managein categories of products as strategic business units, producing enhanced business results buy focusing on delivering continously enhanced consumer value.

• Customer driven
• Strategically driven
• Multifunctional-finance, logisitcs, quality control, and facilities management.
• Financially based
• Systems dependent
• Focouse on immediate consumer response

Trends in Marketing Channels
The growth of electronic comerce
Created new methods for placing and fillin orders for both busines buyers and conusumers.  Radio frequency identifiaction (RFID), which involves the use of tiny computer chips with radio trasnmission capabiliyt that can be attached to aprouct or its packagin.  The radio signals reflected from the chip can be used to track inventory levels and product spoilage, or prevent theft.  They also can be used for instantaneous checkout of an entire shopping cart of imtes.  Large retailers and pacakged goods manufacturers have funded researach tio develop RFID, which will evetnaully replace bar codeas a means to manage inventory.  Innovations in web-based communiacton technoliges, such as global postions, are also takin rail and trcuk equipment to a new level o fserviec in supply chain integration.  Conusmer demnads for oconvenience, as well as increased pressures on channel members to cut ditribution expenes, have been the primary sparks for the growth in technoliges like e-commerce and RFID.  Faster, better, and cheaper.  Internet has become a critical channel component for both manufactures and reatailers to consider.

Shifting Power in the Channel
The scarcity and popularity of many produts allowed manufactures to dictate stargety thougthouth the supply chain.  Manufactures wer the best soucre oc infrmaton about sales, product trends, and customer preferecnes.  Teh power of manfuctures eroded as UPC barcode technoligy, point-of-sale systems, and invetnory management systesm converged to give retailers control over information at th epoint o f sale.  Today, dscount mass merchandise retailers and catergory-focused retailers (category killers) hold the power in most consumer channels.  First, the sheer size and buying power of these firms allows them to demand price conscessions from manufacturers.  Second, these firms perform their own wholesaling funcionts, thererfore they receive trade dsiscounts traditionally reserved for true wholesaertls.  Third, their contol over retail shelf space allows them to dictate when and where new products will be introduces.  mANUFAFCTURES TYPICALLY MUST PAY HEFTY FEES, CALLED SLOTTING ALLOWANCES.  fiANLLY , THEIR CLOSENESST OT MILLIONS OF CUTOMERS ALLOWS THESE LARGER TRRATIARLS TO GATEHR VALUABLE INOFRMATION AT TH EPOINT OF SALE.

Outsourcing channels
Ousourcing shifing a work activites to businesses outside the firm.  By outsourcing noncore activies, firms can imporve their foucs on what they do best, free resourrse for other purposes, and enhance product differentiation-all of which lead to gerater opportunities to develop and maintain competitve advanteages.  Developing countresi have imporved theri manufacturing capabiliites, infrastructure, and technical abd business skills, making them more attractive regions for gloabal sourcing.  Firms that outsource give  up  ameasure of control over key factors such a sdata security and the qualiyt of servie delivered to customes.  Offshoring is when companies set up their own offshoer operations (called captives) to handle task such as IT, business pricess, or customer servie in foreing countries hwere wage rates are lower.  Information technoloyg is the primary activity outsourced today.  These supporting processes include administargive activites, distribuiton, human resources, financial analysis, call centers, aned even sales and marekting.  when a frim has significant needs and insufficient in-house expertise, the importance of outsourcing will increase.  (39ls) third party logistics porviders has emerged in the United States and Eeurops as retailers look toward outsided experise as a way to reduce costs and make their products more readily available.

The growth of DIrect Distribution and Nonstore Retailing
Customers demands for lower pricea and greater convenience have put pressure on all channle intermediaters to justify their existence.  The cahnnel must evlove into a more direct ofrom or ristk its very survivla.  Nontraditional channles include nostore reatailing, or activities taht occur outside the traditional brickas and morterar of physical stotes.

• Catalog and Direct marketing
• Direct selling-sells through face-to-face contact with sales associates.
• Home shopping networks
• Vending
• Direct Response Advertising-infomercials, a cross between an advertisement, a news program, and a documentary, are alos popular programs for products such as exercise equipment and kitchen appliances.  Distribution activities have also changed as manufactures expand their direct offerings to customers.  In some cases, manufacturers have increased direct distribution by opening their own retail outlets.

The growth of Dual Distribution
Supply chain strategy often requires multiple channels to reach varioius markets.  Multiple channels enable a manufacturer to ofeer tow or more lines of the same merchandise through two or more means, thus incresing slads coverage.  Example Hallmakrs extensive use of dual distribution.  Dual distribution requires considerable resouces to implement as it spresads time, effort, and money across tow or more channles.  Dual distribuion also increases the risk if disintermediation, where customres dela directly with manufacturesa and bypass traditional channel intermediaries.  The use of dual channels can create conflict between the manufacturer and its supply chain members.  This is particularly true when target market segments do not have clear definitions or distinctions for each channel.

Legal and Ethical Issues in Supply Chain
Dual Distribution
Concerns arise when a manufacturer usues its own physical or online stors to dominate independent retailers or to drive them out of business.  To avoid these issues, manufacturers should not undercut the prices that independent retailers can charger with a reasonable margin.  Because most manufacturers do not watn to run a complex retail system, their relationships with retail intermediaries are critical to sucess.

Exclusive Channel Arrangements
Benefit a manufacturer by limiting the distribution of its products in one of two ways.  First, manufacturers can limit distribution by allowing intermediaries to sell their products in restricted geographic territiories.  Second, manufacturers can require that wholesalers, brokers, agents, or retailers not carry or represent products from any competing manufacturer.  Exclusive arrangements give manufacturers control over pricing, distribution, and sales activities.  Such arrangements are useful when brand image or quality control are critical ti the manufacturer’s sucess.  First, the arrangement cannot bloc competitors from 10 percent or more of the overall market.  Second, the sales revenue involved must not be so sixable that compettion could be disrupted.  Finally , the manufacture cannot be much larger (and therefore more intimitdiating) than the intermediary.  Regulators view exclusive arrangements most favorably when consumers and business buyerts have access to simialr proucts form otherr channles or when the exclusivity of a relationship strenghthens the otherwise weak market positon of the manufacturer.

Typing Arrangements
Occur when a firm  conditions the availability of one product (the tying product) on the purchase of a diferrent prodcut (the “tied” product).  Tying arrangements, which are considered to be illegal in certain circumstances, can occur at any level in a marketing channel.  First, the arrangement is more likely to be legal if the tying and tied proudctss are in close relation to each other, required rfor th eporper funcionting of th eother proudct, or part of a total package or solution.  Franchisors can often successfully arguer for tying arrangements when rw material or components are required for market power of the fimr reqinrg th arrangement.  Powerful firms are less likely to be successful in tying becaue it gives them an unfair advantage.  Finally, tying arrangement are illegal if they restarin trade or competition in a meaningful way.

Counterfeid Products
Clothing, Audio, and vido products, and computer software.
The loss of tax revenues has a huge impact on governments, as they can’t collect both direct and indirect taxes on the sale of counterfeit products.  Likewise, counterfiet products leech profits necessary for ongoing product development away from the channel, as well as thousands of jobs at legitimate companies.  Customers also feel the impact of counterfeit products, as their quality almost never lives up to the quality of the original.

Chapter 10: Integrated Marketing Communications

Marketing communications includes conveying and sharing meaning between buyers and sellers, either as individuals and firms, or between indiviuals and fimrs.  Integrated marketn communications refers to the strategic, coordinated use of promotion to create one consistent message across multiple channles to enuser maximum persuasive impact on the fimrs current and potetnial customers.  Imc takes a 360 degree veiw of the customer that considres each eand e ery contact that a customer or potetial customer may have ni his or her relationshiop with the firm.  The key to IMC is consistency and uniformity of message across all elements of promotion.  By coordinating all communicatoin “touch points” firms using IMC oncey an image of truly knowing and caring about their customers that can trabslate into long-term customer relationships.  Likewise, IMC reduces costs and increases efficiency because it can reduce or eliminate redundanceis and waste in the overall promotional program.  Many firms have embraced IMC because mass-media advertising has become more expensive and less predictable than in the past.  IMC helps to inform, persuade, and remind customers about the firm’s products.  We also explore the strategic decisoins to be made with respect advertising, public relations, personal selling and sales management, and sales promotion.

Strategic Issues in Integrated Marketing Communications
Holistic perspective that coordinates not only all promotional elements but alos the IMC program with the rest of the marketing programs (product, price, and supply chain strategy).  For example, the advertising campaign stresses quality, the sales force talks about low price, the supply chain pushes intensive distribution, and the website stresses product innovation, then what is the customer to believe?
Ultimately, the goals and objectives of any promotional campaign culminate in the purchase of goods and servies by the target market.  The classic model for outlining promotional goals and achieving this ultimate outcome is the AIDA model-attention, interest, desire, and action.

• Atttention-the first major goal of any promotional campaign is to attract the attention of potential customers.
• Interest-the firm must spark interest in the product by demonstrating its features, uses, and benefits.
• Desire-Good promotion will stimulate desire by convingcing potential customers of the product’s superiority and its ability to satisfy specific needs.
• Action-promotion must then push them toward the actual purchases.

Mass-communication elements such as advertising and public relations, tend to be used more heavily to stimulate awareness and interest due to their efficiency in reaching large numbers of potential customers.  Along with advertising, sales promotion activities, such as product samples or demonstrations, are vital to stimulating interest in the  product.  Other sales promotional activities such as product displays, coupons, and trial-size pacakaging, are well suited to publishing customers toward the final ac of making a purchase.  When firms use a pull-strategy, they focus their promotional efforts toward stimulating demand among final customers, who then exert pressure on the supply chain to carry the product.  In a push strategy, promotional efforts focus on memberts of the supply chain, such as wholesalers and retailers, to motivate them to spend extra time and effort on selling the product.  This strategy relies heavily on persaonl seling and trade sales promotion to push porudcts through the supply chain toward final customers.  The role and importance of specific promoitaoinl elemnts also vary depending on the nature of the proudcts.  Industrial pridcuts rely more heavily on personal selling; consumer products require greater use of advertising, sales promotion, and public relations.  Early in a product’s lif cycle, even before its introduction, the heavy expenditures on promotional actiivites are often a significant drain on the firms resources.  By the time a product has moved into the maturity phase of its life cycle, the firm can reduce promotional expenditures somewhat, thereby enjoying lower costs and higher profits.

Advertising
key component of promotion and is ually one of th emost visible elemtns of an integrated marketing communications promgram.  Advertising is paid, nonpersonal communication transmitted through media such as television, radio, magazines, newspapers, direct mail, outdoor displays, the Internet, and mobile devices.  Advertising targeted to market segements such as African Americans, gays, Hispanics, and Asian Americans have been an accelerating trend among advertisers.  Targeting potential customers by coordinating the message with their lifestyles is an important strategic consideration.  Diverse hispanic market of Mexican-Amercians, Cuban-Americans, Puerto Ricans, Dominincas, Salvadorans, and more hispanic subcultures.  Advertising can be a cost-efficient element of an IMC program when used to reach a large number of people via television, magazines, outdoor dipslays, or outdoor ads.  Ad Meter Award.  Despite the new opportunities for amateur ad makers, the intial expenses for advertising is generally quite high, which is a majro dreawback of advertisn to gental  However, online advertising provides an opportunity to reach highly specialized markets at a relatively low cost.  Most online ad revenue comes from search advertising, followed by classifieds and banner ads.  The use of rich media advertising, including animations and audio/video combinations, will continue to grow as broadband internet acess becomes more widely available both in the home and vai mobile connections.

Types of Advertising
Adverising promotes all types of products, including goods, services, ideas, issues, people, and anything else that marketers want to communicate to potential customers.

Institutional Advertising
promotes a firm’s image, ideas, and culture, with the goal of creating or maintaining an overall corporate image.  Aimed at various stakeholders, including shareholders, consumer advocacy groups, government regulators, or the public at large, institutional advertising can create a positive view of their organization.  Advocacy advertising often promotes socially approved behavior such as recycling, the responsible use of alcoholic beverages, support for the arts, or the firm’s support for cultural diversity.

Product Advertising
Promotes the image, features, uses, benefits, and attributes of products.  Forms: Pionee advertising stimulates demand for a product category rather than any one specific brand.  The goal is to increase customer interest and awareness in the product category in order to increase the size of the entire market Ex. got milk.  Competitive advertising attempts to stimulate demand for a specific demand for a specific brand by promoting the brands image, features, uses, and benefits.  This is the type of advertising that we see most often in the mdia.  The most successful slogans adn ad campaings are those that are combined with other promotional elements in an integrated marketin effort.  Other types of product advertising include reminder advertising to let customers know that a brand is available and reinforcement advertising to assure current customers that they mad eth right-choice in buying and consuming a certain product.  Sam adams always a good decions campaing.
Comparative advertisng occurs when one firm compares its product with one  or more competitve products on specific features or benefits.  Common in soft drinks, automobiles, computers, and other over-the-counter medicatons.  Can be direct or indirect.

Determining the Advertising Budget
The total amount of money a firm allocates to advertising activities for a specific time period, is difficult to determine because the effects of advertising are difficult to measure.  Determinants include the geographic size of the market, the distribution or density of customers, the types of products advertised, sales volume relative to the competition, and the firm’s own historial advertising budget.  Ways to determine an appropriate advertising budget:

• Percentage of sales approach-most widely used method for determining the advertising budget.  The approach is simple, straighforward, and based on what the firm traditionally spends on advertising.  Flaw of this is its implied assumption that sales create advertising.  Reduced advertising is not the best strategy.
• Objectives and Task Approach-requires that the firm lay ouout its goals for the advertising campaign and then list the tasks required to accomplish specific advertising objectives.  Major drawback is that the level of effort needed to accomplish advertising objectives is difficult to know with certainty.
• Competitive Matching Approach-firms attempting to match major competitor’s advertising expenditures in absolute dollars.  Problem with this approach is that all firms are different, so competitors are likely to have different advertising objectives and different resources to devote to advertising.
• Arbitrary Approach-Intuitiion and personal experience set the advertising budget under this approach.  The arbitrary approach can lead to mistakes in budgeting because it is not necessairly scientific, objective, or logical

Evaluating advertising effectiveness
Some methods include evaluating the achievement of advertising objectives; assessing the effectiveness of advertising copy, illustrations, and layouts; and evaluating the effectiveness of various media.  One of the issues facing social media as an advertising medium is the difficulty associated with tracking the effectiveness of social media advertisement and “fan” sites.
To pretest advertisements, firms often use a panel of acutal or potential buyers who judge one or more aspects of an advertisement.  During an ad campaign, the company typically measures effectiveness by looking at actual customer behavior patterns, such as purchases, responses to toll-free telephone numbers, rate of coupon redemption, page visits to the firm’s website, or even personal communications.
Customer surveys, panels, or experiments may be used to evaluate a campaign based on communication objectives.  Firms will also use performance outcomes such as sales or market share changes to determine campaign effectiveness.

Public Relations
Corporate affairs is a collection of strategic activities aimed at marketin an organization, and its idelas to potetnial stakeholders (consumers, general public, stakeholders, media, government, and so on).  The goal of public relations is to track public attitudes, identify issues that may elicit public concern, and develop programs to create and maintain positvie relationships between a firm and its stakeholders.  Public relations can improve the public’s general awareness of a company and can create specific images such as quality, innovativeness, value, or concern for social issues.

Public relations methods
Firms use a number of public relations methods to convey messages and to create the right attitudes, images, and opinions.  Public relations professionals prepare materials such as brochures, newsletters, annual reports, and news releases that reach and influence desired stakeholders.
Publicity-includes the firm’s activities designed to gain media attention through articles, editorials, or new stories.  By encouraging the media to report on  a firms desired image.

• News (or press) releases-used to draw attention to company event, product, or person affiliated with the firm.
• Feature articles-full-lenght story prepared for a specific purpose or target audience.  Feature articles typically focus on the impications or ecnonomic impact of a firms actions.  They are also very useful when responding to negative events or publicity.
• White papers-more technincal and focus on very specific topics of interest to a firms takehoders.  White papers are similar to feaure articles, hoewer they are more technical and focus on very specific topics of interest to the firms stakeholders.  White papers promoete  a firms stance on important prodcut or market issues and can be useed  to promote the firms own proudcts and soulutions.
• Press Conferences-a meeting with news media called to announce or respond to major events.  Media personnel recieve invitations to a specific location, with written materials, photographs, exhibits, and even products given to them.
• Event sponsorship-local evens-high school, international evens Tour de France
• Product Placement-beverages, computers, clothing, and automobiles.  These firms have a strong interest in placing their products in the hands of movie and television characters that consumers see as enjoying the product or using the product as part of the action.
• Employee Relations-Provide organizational support for employees with respect to their jobs and lives.  Employee relations can encompass many different activities, including internal newsletters, training programs, employee assistance programs, and human resource programs.  The firm has much less control over how the mesage will be delivereed.  Another drawback invloves the risk of spending a great deal of time and deffor itn developing public relaitns messages that fial to attrarct media tttention.

Negative Puablic Relations
Unexpected and often unfavorable public relations resulting from an ehtical or legal inquiry, unsafe products, accidents, or the controversial actions of employees and executives.  Sometimes public relations campaigns themselves cause problems, leading to unintended consequences on the parts of the campaings creators.  The city of Bost underwent a bomb scare after Ted Turner and Turner Broadcasting.
Negative publicity i s critiically important when its effects reduc the dergree of trust that customers have in a sspecifi cindudstry or firm.  Tylenol cyanide-tampering.
Negative stories reveie more attention now thatn in th epast.  To avoid negative publicity, is vital to avoid negative inicidnets and events that can create problems.  Firms can achieve this goal through effecitive ethical and legal compliance programs, safety programs, quality-control procedures, and programs designed to enhance employee integrity.  One of the great public relations lessons learned over time is that firms must expedite new coverage of negative events rather than try to block the news or cover up facts about the incident.

Personal Selling and Sales Management
Personal Selling is paid personal communincation that attemtps to infrom customers about products and persuade them to purchase thoe producrts.  The complexity of these types of contracts requires a long-term, personal relationship between salespeople and companies.  Compared to other types of promotion, personal selling is the most precise from of communication becausse it assures companies that they are in direct contaft wiht an excellent prospect.  The most serious drawback of personal selling is the cost per contact.  Personal selling is also expensive due to the costs associated with recruiting, selecting, training, and motivating salespeople.  Despite the high costs, personal selling plays an increasingly important role in IMC and overall marketing strategy.  These goals typically involve finding prospects, inforrming prospects, persauding prospefcts to buy, and keeping customers satisfied through follow-up service after the sale.  To effectively deliver on these goals, salespeople have to be not only competent in selling skills but also thouroughly trained in technincal product characteristics.  Very few businesses can survive on the proftis generated from purely transactional marekting (one-time purchases).  For this reason, personal selling has evolved to take on elemtns of customer sevice and marketing research.  Every contact with a customer gives the sales force a change to deliver exceptional service and learn more about the customers needs.  Salespeople also have the oppportunity to learn about competing products and the customers reaction toward them.  The importance of building relationships during the sales process.  The frontline knowledge held by the sales force is on e of the most important assests of the firm.  In fact, the knowledge held by the sales force is often an importanst strenght that can be leveraged in develloping marketing strategy.

The sales management process
Generating performance outcomes, the sales force often creates the firms reputation, and the conduct of individual salespeople determines the percieved ethicalness of the entire firm.

Developing Sales Force Objectives
Vital to the overall IMC strategy and must be fully integrated with the objectives and activities of other promotional events.  Salespeople may be needed to find new customers through prospecting-the identification of potentilal customerss most likely to buy the firm’s products.
A different skill st must be developed to provide support, educate consumers, and provide sservice after the sale.  The connection between selling skills ans sales force objectives reinforces the importance of having a fully integrated sales management process.
The technincal aspect of establishing sales force objectives involve desired Sales dollars, sales volume, or market share.  Further, individual sales objectives might be based on order size, the number of sales calls, or the ratio of order to calls.  Ultimately, sales objectives help evaluate and control sales force activities, as well as compensate individual salespeople.
Determining Sales Force Size
The size of the sales force is a function of many variables, including the type of salespeople used, specific sales objectives, and the importance of personal selling within the overall IMC program.  The size of the sales force is important because the firm must find a balance between sales expenses and revenue generation.
Determining the specific objectives and tasks that are required to fufill sales and IMC goals is one approach.  This number can be divided by the average number of sales calls that a salesperson can make in one year to derive an estimate of sales force sixe.  Another method involves marginal analysis, where additional salespeppole join the sales force until the cost of adding an addtiional salesperson equals the potetnial sales that can be gernated bny that salesperson.

Recruting and Training Salespeople
Recruiting the right types of salespeople should be closely tied to personal selling and IMC strategies.  Firms usually recruit potential salespeople from a number of sources including within the firm, competing firms, employment agencies, educational instiutions, and direct-response advertisements placed on the Internet, in magazines, or in newspapers.  The cost of hiring and training salesperson can be expensive.  State Farm Insurance strives for low sales froce turnover by forcing applicants for agent positions to undergo a yearlong series of interviews, tests, and visits with agents before finding out wheter they will be hired.  Formal training methods have moved toward self-directed, online training modules and away from classroom training.  The majority of sales training will be done online or via wireless delivery to handheld devices.  The worldwide online saless training  market is growing mainly because it is much more cost-effective than than traditional training.

Controlling and Evaluating the Sales Force
Controlling and evaluating the sales force require a comparison of sales objectives with actual sales performance.  To effectively evaluate a salesperson, predetrmined performance standards must be in place.  These standards also determine the compensation plan for the sales force.  To improve sales performance , the firm can increase incentives to better motoviate the sales force, provide additional training to salespeople, or perhaps even change the performance standards if they are inconsistent with market failures.

The impact of technology on Personal Selling
The development of integrated supply chains and the procurement of standardized products over the Internet reduced the need for salespeople in many industries.  How can firms use new technology to reduce costs and increase productivity while maintaining personalized, one-to-one client relationship?  One of the keys to using sales technology effectively is to seamlessly integrate it with customer relationship management systems, competitive inteligence activities, and interanbl customer databases.  By automating many repetitive selling tasks, like filling repeat orderes, sales technoloyg cna actuallyy increase sales, productivity, and one-to-one relationships at the same time.  Third-party providers like Salesforce.com-an on demand, web-based provider of integrated CRM and sales automation solutions.  Key to these solutions is integration.  By pushing integrated customer, competitive, and product information toward the salesperson, technology can increase salesperson productiviy and sales revenue by allowing the sales foce to serve customers’ needs more effectively.

Sales Promotion
Sales promotion activites account for th ebulk of promotional speding in many firms.  This is especially true for firms selliong consumer products.  Sales promotij involves activiteis that create buyer incentivs to purchase a product or that add value for the buyer or the trade.  Sales promotion can be targeted towrard consumers, channel intermediaties, or the sales force.  Sales promotion has one universal goal: to induce product trial and purchase.
Most firm use sales promotion i support of advertising, public relations, or personal selling activities rather than as stand-alone promotional element.  Advertising is frequently coordinated with sales promotion activities to provide free product samples, premiums, or value-added incentives.

Sales Promotion in Consumer Markets
Coupons and product sampling are frequently used during new product launches to stimulate interest and trial.  Retailers typically offer sales promotions to stimulate customer traffic or increase sales at specific locations.  Coupons and free product are common examples, as are i n-store product demonstration.
Types of sales promotions to consumers:

• Coupons-reduce the price of a product and encourage customers to try new or established brands.  Coupons can be used to increase sales volume quickly, to attract repeat purchases, or even to introduce new product sizes or models.  To be most effective, coupons need to be accessible, easy to recognize, and easy to use.  For the most part, this requires that coupons be distributed on packaages (the highest redemption rates), through inserts in print advertising, through direct mail, or through in-store displays.  Although copuon cutting (cutting coupons from newspapers or direct mail) was once quit common, the practive declined over the years.  Marketers percieve a bright future for electronic coupons because redemption rates are higher, and because printing and processing costs are lower.
• Rebates-Require much more effort on the consumer’s part to obtain the price reduciton.  Firms have more contol over rebates because they can be luanched and ended very quicly.  Second, a rebate program allows the firm to collect imoprtatn consumer inofmation that can be used bto build cusomer databases.

Samples-Samples stimulate trial of a product, increase volume in the early stages of the product’s life cycle and encourage consumers to actively search fro a product.  Samples can be distributed through the mail, attached to other products, and given out personal selling efforts or in-store displays.  Samples can also be distributed via less direct methods.  Free samples migh be placed in hotel rooms to create consumer awarness of new products.
Loyalt Programs-reward loyal customers who engage in repeat pruchases.  Discover Card, Hallmark Gold Crown Card

• Point-of-Purchase Promotion-displays, counter pieces, display racks, or self-service cartons that are designed to build traffic, advertise a product, or induce impulse prucaes.  In-store product demonstration.  Examples of these demonstrations include fashion shows, food prepartin demonstrations in grocery stores like Whole Foods, and free makeovers in the cosmetics departments departments of departmnet stoores and specialty stores.
• Premiums-are items offered free or at minimum cost as a bonus for purchasing a product.  Premium are good at increasing consumption and presuading consumers to swith bnrnads.
• Contest and Sweepstakes-Consumer contests, games, and sweepstakes encourage potential consumers to compete for prizes to try their luck by submitting their names in a drawing for prizes.  Contest and sweepstakes are good at attracting a  large number of participants and generating widespread interest in a product.  Because they require no skill to enter, sweepstakes are an effective way to increase sales or market share in the short term.
• Direct Mail-includes catalog marketing and other printed material mailed to individual consumers, is a unique category because it incorporates elements of advertising, sales promotion, and distribution into a coordinated effort to induce customers to buy.  The use of direct mail has grown tremendously in recent yeras due to conumer time contraints, relatively low cost, and the advent of sophisticated database management tools

Sales Promotion in Business Markets
Sales promotion in business markets is also know as trade promotion.  By targeting channel intermediates with promotional activities, manufactures hope to push heri products through the channel by increasing sales and encouraging increased effort among their cahnnel partners.

• Trade Allowances-Manufactures offer a number of different trade allowances, or price reductions, to theri channle intermediaries.  Buying allowances are price reductions for purhcasing specified quantities of a product at a single time (the equivalent of a bulk discount).  Related to this is a buy-back allowance where the reduction is proportional to the total amount of product purchased during the time frame of promotional offer.  Finally, a merchnadise allowance is a manufactures agreement to pay intermediaries a specific sum of money in exchange for specific promotional efforts such as special displays or advertising.  The goal of the allowance is to induce intermediaries to perform specific actions.
• Free Merchandise
• Training Assistance-Can offer training to an intermediatry’s employees.  This typically occurs when the products involved are rather complex.
• Coooperative Advertising-a manufacturer agrees to apy a certain amount of an intermidary’s media cost of advertisng the manufacturer’s products.  A very popular sales promotion method among retailers.
• Selling Incentives-Push money and sales contests.  Push money is in the form of additional compensation to encourage outstanding performance within an intermediary’s sales force.  Sales personnel can be recognized for outstanding achievements by receiving money, vacations, computers, or even cars for meeting or exceeding certain sales targetes.

Chapter 11 Marketing Implementation and Control

Strivastawan, Sherva, and Fahey
PPM-Product Develoment Management (Brand mand management, brand extensions, line extensions, ,
SCM-Supply Chain Management, place but less important
CRM-Customer Relationship Management-customer satisfaction
Price
Market

Strategic Issues in Marketing Implementation
Marketing Implementation is critical to the success of any firm because it is responsible for putting the marketing strategy into action.  Implementation refers to the “how” part of the marketing plan.  Some of this misunderstanding stems from the fact that marketing strategies almost always turn out differently than expected.  In fact, all firms have two strategies: their intended strategy and a realized strategy.  Intended marketing strategy is what the firm wants to happen-is is the firm’s planned strategic choices that appear in the marketing plan iteself.  The realized marketing strategy, on the other hand, is the strategy that actually takes palce.

The link between Planning and Implementation
Many of the problems of marketing implementation occur because of its relationship to strategic planning.  The three most common issues in this relationship are interdependency, evolution, and separation.

Interdependency
The content of the marketing plan determines how it will be implemented, it is also true that how the marketing strategy is to be implemented determines the content of the marketing plan.
Employee training programs
Profit sharing
Employee training, as a tool of implementation, can also dictate the content of the firm’s strategy.
Stock optioins

Evolution
Important environmental factors constantly change.  Because planning and implementation are intertwined, each must constantly evolve to fit the other.  Just as strategy often results form trial and erro, so does marketing implementation.  These rapid chagnes require that firms be flexible in both marketing strategy and implementatoin.

Separation
The ineffective implementation of marketing strategy is often a self-generated problem that stesm from the way tha planning and implementation are carried out in most firms.  Believing that frontline managers and employees wil lbe exvited about the marketin strategy and motivated to implemetn iit.  Managers and employees often fail to identify with the firms’ goals and objectives, and thus fail to fully understand the marketing strategy.

The elements of Marketing Implementation
Shared Goals and Values
Shared Goals and values among all employees within the firm are the “glue” of successful implementation because they bind the entire organization together as a single, functioning unit.  Firms such as FedEx, Google, and ESPN, are well-known for their efforts to ensure that employees share and are committed to corporate goals and values.  The primary means of creating shared goals and values is through employee training and socialization programs.  Some experts have argued that creating shared gaols and values is the single most important element of implementation because it stimulates organizational commitment so that employees become more motivated to implement the marketing strategy, achieve the frims goals and objectives, and serve more fully the needs of the frim’s customers.

Marketing Strucuture
Organizing a firm’s marketing activities.  Marketing structures establishes fromal lines of authority, as well as the divisoijn of labor witin the marketing function.  One of the most important decisions that firms make is how to divide and integrate marketing responsibilities.  This decision typically comes down to the question of centralization verus decentralization.  In a centralized marketing structure, the top of the markting hierarchy coordinates and manages all marketing activities and decisions.  The front line of the firm coordinates and manages marketing activities and decisions.
Centralized Structures are very cost-efficient and effective in ensuring standardization within the marketing program.  Walmar or Dell.
Decentralized marketing stuctures have the important advantage of placing marketing decisions closer to the front line, where serving customes is the number one priority.  By decentralizing marekting decisions, frontline managers can be creative and flexible, allowing them to adapt to changing market conditions.  Firms that employ a strategy of customer intimacy, such as Ritz-Carlton or Nordstom.  The righ marketing structure will depend on the specific firm, the nature of its internal and external environments, and ts chosen marekting strategy.

Systems and Processes
Organizational systems and processses are collections of work activitis that absorb a variety of inputs to create information and communication outputs that ensure the consistent day-to-day operation of the firm.  Examples include information systems, strategic planniong, capital budgeting, procurement, order fulfillment, manufacturing, quality control, and performance mesurement.

Resources
Tangible Resources include financial resources, manufacturing capacity, facilities, and equipment.  Although not quite as obvious, intangible resources such as marketing expertise, customer loyalty, brand equity, corporate goodwill, and external relationships/strategic alliances are equally important.
A critical and hones evaluation of available resources during the plannin phase can help ensure that th emarketing strategy and marketing implementaiton are within the realm of possibility.  This makes the communication aspects of the actual marketing plan document critical ot the success of the strategy.

People (Human Resources)
The quality, diversity, and skill of a firm’s human resources can also make or break the implementation of the marketin strategy.  The marketing departmnets of many firms have taken over the human resources function to ensure that employees have a correct match to required marketing activitites.

• Employee Selection and Training-key is to match these employee skils to markeitng tasks.  Generation Y have better traininng, more technological sophistication, and fewer political inclinations than their baby-boomer bosses.
• Employee Evaluation and Compensation-an outcomed-based system evaluates and compensates employees based on measureable, quantitative standards such as sales volume or gross margin.  This type of system is fairly easy to use, requires less supervisoin, and works well when demand is fairly constant, the selling cycle is relatively short, and all efforts directly affect sales or profits.  Conversely, behavior-based systesm evaluate and compensate employees based on subjective, qualitative standares such as effort, motivation, teamwork, and friendliness toward customers.  This type of systems ties directly to customer satisfaction and rewards employees for factors they can control.  However, behavior-based systems are expensive and difficult to manage because of their subjecitve nature and the amount of supervision required.  The important point it to match the employee evaluation and compensation system to the activities that employees must perform in order ti implement the marketing strategy.
• Employee Motivation, Satsifaction, and Commitment-the extent to which employees have the motivation to implement the strategy, their overall feelings of job satisfacion, and te commitment they feel toward the organization and its goals.  For example, one of the major contributors to Google’s success is the strong social culture fostered by the company’s leaders.  Google proveides its employees with things such as paid childcare, onsite laundry service, free transportation, gourmet food, onsite haricuts, and time off for personal activiities.  Through factors such as emploment motivation, satisfaction, and commitment are critical to successful implementation, they are highly dependent on other elements of implementation, especially training, evaluation/compensation systems, and leadership.  Marketing structure and processes can alos have an impact on employee behaviors and attitudes.  The key is to recognize the importance of these factors to successful marketing implementation and to manage them accordingly.

Leadership
Often called the art of managing pepople, includes how managers communicate with employees, as well as how they motivate their people to implement the marketing strategy.  When leaders create an organizational culture characterized by open communication between employees and managers.  Employees are free to discuss their opinions and ideas abou tht marketing strategy and implementation activiites.  This type of leadership also creates a climate where managers and employees have full confidecne and trust in each other.

Approaches to Marketing Implementation
Implementation by Command
the firms top executives develop and select the marketing strategies, which are transmitted to lower levels wher frontline managers and employees implement them.  Implementation by command has two advantages:
1) It makes decision making much easier, and
2) it reduces uncertainty as to what is to be done to implement the marketing strategy.  This approach places less emphais on the feasibiliyt if implementing the marketin strargy.  It also divides the frim mino stetegis and implmenters: executives who devleop the maerkting steatty are often far removed from the targeted customers it is intended to attract.  In some cases, the tensions have becomn so hostile that franchises have flatly refused to implement some corporate strategies, including service guarantees and some specific promotions.

Implementation through Change
The basic goal of implementation through change is to modify the firm in wausy that will ensure the successful implementation of the chosen marketing strategy.
Intergrating Markting purpose is an organizational commitment to motivation, eductaion, and know about themselves through employee satisfaction and customer satisfaction.  Skillfully crafting the organization to fit the requirements of the marketing strategy.  Because many business executives are reluctant to give up even a small protion of their control (as is the case with the next two implementation appraoches), they often favor implementation through change.  Implementation through change still suffers from the separation of planning and implementation.  Can create a situation where the firm becomes stagnant while waiting on the strategy to take hold.

Implementation through consenss
Upper- and lower-level managers work together to evaluate and develop marketing strategies in the consensus approach to implementation.  The underlying premise o this approach is that managers from different areas and levels in the fimr come toghether as a team to brainstorm and develop the strategy.  Pulling different opinions together to ensure the development of the best overall marketing strategy.  Implementation through consensus is more advantageous thatn the first two approaches in that it moves some of the decision-making authority closer to the front line of the firm.  Lower-level managers who participate inthe strategy-formulation process have a unique perspective on the marketing activities necessary to implement the strargy.  These managers are more sensitive to needs and wants of firms customers.  Stronger motivation  and commitment to the strategy  to see that it is properly implemented.  Implemetation  through consensu tends to wrk bes in complex, uncertain, and highly unstable environments.  Implementaion through consensus often retains the barrier between strategists and implementers.  The end result o fthis barrier is that the full potential of the firms human resources is not realized.  Thus effectiveness relies in managers at all levels must communicate openly about strategy on an ongoing, rather than an ocasional, basis.

Implementation as Organizational Culture
Marketing strategy and its implementation become extensions of the firm’s mission, vision, and organizational culture.  All employyees adopt the firms culture so completely that they instinctively know what their role is implementing the marketing strategy.  Extreme form of decentralization is often called empowerement.  Empowering Employees means allowing them to make decsions on  how to best perform their jobs.  Notable firms that incorporate implementation witthin their cultures include ESPN, Google, and General Electric.  The choice of an approach will depend heavily on the firms resources, its current culture, and the managers own personal preferences.

Internal Marketing and Marketing Implementation

Chapter 12: Developing and Maintaing Long-term relationships

The company collects customer information at every point wher eit contacts a customer-sales, loyalty programs, surveys, direct mail advertising, sales promotions (contest and sweepstakes) and affiliate programs wit h flosrists, credit card companies, and airlines, and uses it to crearte customizedd communications and product offerings for each of the customers in the database.  A sophisticate4d segmentation system that analyzes transactional behaviors (recency, frequency, and monetary) and combines it with gift-buying behaviors.
Before a relatioinshiop can be mutually beneficial to both the firm and the customer, it must provide value to both parties.  Creating this value is the goal of customer relationship management, which is a business philosophy aimed at defining and increasing customer value in ways that motivate customer to remain loyal.
Customers
Employees
Supply Chain Partners
External Stakeholders
“acquiring customers to maintaining customers”
Relationship capital- that stems from the value generated by trust, commitment, cooperation, and interdepndence among relationship partners.  Customers must become true believers or sponsors for the company and its products.  In consumer markets, build customer relationship is to increase the firms share of customer rather than its market share.  Abandoingn the old nations of acquiring new customers and increasing transactions to focus on more fully serving the needs of current customers.  Financial services example.  Relationship in product offerings.
80/20:  The ability to track customers in detail can allow the firm to increase sales and loyalty amon the bottome 80  percent of customers.  The goal is rank the proiftabiliy of individual cusomers to express their lifetime value.

Developing Relationships in Business Markets

Goal is to move business buyers through a sequence of stages, where each stage represetnss an increasing level of relationshiop intensity.  Bound to their supply chain partners.  Relationshiop capital: One firam maintains a loyal and committted cusomter, the ogther maintains a loyal and committed suppliers.  Relatiohship developiment in buysiness marekts can be more involving, more compolex, and much riskier than relationships in consumer markets.

• A change in Buyers and Sellers Roles
• An increease in Sole souring
• An increase in global sourcingf
• An increase in Team-based Buying Decisions
• An increase in Productivity through better integration

Quality and Value:  Keys developoing Customer Relationships

How to make infographics:

http://infogr.am/

Innovation Sparkzation

Strategic thinking is defined as the generation and application of business insights on a continual basis to achieve competitve advantage.  New growth comes from new thinking.  Strategic planning is the channeling of the insights generated by strategic thinking into an action plan to achieve goals and objectives.  There are 4 types of strategic thinkers:

1. Beach bums ar managers who don’t contribute insights to the business.
2. Snorkelers are managers who offer tactical solutions to issues, but their solutions don’t have a significant positive impact on the business.
3. Scuba divers are managers who can produce strategic insights for solutions, but they require instruction and assistance to do so.
4. Free divers are managers who, on a regular basis, generate insights that have significant impact on the businesses.

10 strategic thinking skills:

1. Mastering the three criteria of great strategy: acumen, allocation, and action.  Consider your daily activities. How often do you have the opportunity to come up with insights that change the course of your work? What level of effect do those insights have on your business? What type of strategic thinker are you currently—a Beach Bum, a Snorkeler, a Scuba Diver, or a Free Diver? Consider your colleagues in the department. What percentage are Beach Bums? Snorkelers? Scuba Divers? Free Divers? How Deep Can You Dive?   Successful business strategy is about being better than the competition.  You need to have the “right people on the bus.”  Be different from the competition.

2. Insight: generating new ideas about the business.

3. Context: understanding the current situation.  Context is defined as the specific problem in a given business situation.  The circumstances in which an event occurs.  The combination of strengths and weaknesses an organization possesses to balance with opportunities and threats.

4. Competitive Advantage: creating distinct offerings with superior value.  Reduce prices to drive out competition.  Change the customer’s value preferences.  Benchmark competitors and excel at best practices.

5. Value: determining the benefits/costs of the offerings.  Revenue growth, gross margin, and return on capital are forecasting the future.  Customer intimacy, operational excellence, product leadership, operational effectiveness, low-cost leadership, and innovation are all important in considering value.

6. Resource Allocation: deciding where to focus capital, talent, and time. Effective resource allocation will have profitability and productivity.  Profitability is when more resources are invested in the right activities.  Productivity is when fewer resources are invested in the wrong activities.

7. Modeling: visually capturing the essence of business issues.

8. Innovation: creating new value for customers.

9. Purpose: developing mission, vision, and values.

10. Mental Agility: the ability to improvise, adapt, and excel through adversity.

Innovation = Creativity * Risk Taking

Innovation is now the centerpiece of corporate strategies and initiatives.  Teams need to be the backbone of the IDEO method. “Hot project” teams are infused with purpose and personality. To IDEO, teams always beat individuals.  Hot Project Teams should:

• Come from widely divergent disciplines.
• Be empowered to go get whatever is needed.
• Merge fun and project.
• Be as small as three or large as a dozen.
• Have clear, tangible goals (seemingly unreachable),  and serious deadlines.
• Be passionate.

Strategy is not:

1. Aspiration: goals, objectives, or visions.
2. Best practices: trying to be better than instead of different from the competition.
3. Caution: being tentative and restrained, afraid to make trade-offs.

Business strategy is defined as “the intelligent allocation of limited resources through a unique system of activities to outperform the competition in serving customers.”

Principle of Competitive Exclusion: “No two members of the same species can coexist that make their livings in the identiacal way/”

There are two lenses of strategy:

1. Performing different activities from the competition.
2. Performing similar activities in a different way from the competition.

There are levels of competition:

1. Industrial
2. Organizational
3. Individual

Competitive advantage is defined as “an offering of superior value based on differences in capabilities and activities.”

Three Value Disciplines:

1. Product leadership-best total product
2. Operational Excellence-best total cost
3. Customer Intimacy-best total solution

Insight is the product of 2 or more pieces of information combined in a unique way: Context, customers, questions, and models.  There are 4 primary sources of insight that can be mined to further enhance one’s acumen:

1. Context
2. Customers
3. Questions
4. Models

Context is the cirumstances in which an event occurs, a setting.  There are 3 pitfalls of context to avoid in ordert to be successful:

1. Annual Assessment
2. Relative versus Absolute Performance
3. Prescription without Diagnosis

Tools used to gauge the context of the business:

1. Strategy Tune-up Sessions
2. OODA loop
3. Contextual Radar

Customers can verbally provide insight on current offering but not future ones.  Observing customers’ behavior can provide insight into future offerings.

Three effective question techniques to generate insights:

1. Creative Insight Generation Process
2. SCAMPER
3. Innovation Box

A model is a visual description of an idea, theory or system that accounts for its known or inferred properties and may be used for further study of its characteristics.

It is important to use models to generate insights in the four areas of business:

1. Market (PEST Analysis and Five Forces of Competition)
2. Customers (Business Driver Matrix and Value Factor Analysis)
3. Competitors (Competitive Strenghts Assessment and Strategic Group Map)
4. Company (Opportunity Matrix and SWOT alignment)

SCAMPER technique created by Michael Michalko.  Uses an array of though-provoking questions around 7 areas to initiate new ways of strategically thinking.  Changing your perspective often opens up uncharted areas of discovery to you that can lead to innovation.  SCAMPER (Substitute, Combine, Adapt, Magnify/Modify, Put, Eliminate, and Reverse/Rearrange.

Substitute:

• What product features could I substitute?
• Are there other external resources that can replace what I’m using?
• Is there something more cost-effective or environmentally friendly I could use in place of what I’m currently using?
• Is there another source for the raw materials?

Combine:

• What product can I use in combination with it?
• Can I combine this product with a comnplimentary service offering?
• Are there any unusual combinations I haven’t though of?
• Which successful service from other industries can I combine with my offering?

Adapt:

• How can this service evlove into something new?
• What changes could be made to update this product?
• Are there any products in other industries that perform a similar function that I could model this after?
• How have past successful products in this industry adapted to maintain market leadership?

Magnify/Modify

• Which product attributes can be maginified through promotion to increase sales?
• What opportunities can be magnified to capture greater market share?
• How can the service be modified to satisfy additional customer needs?
• Can we mnodify the sales channel to reach more of the target market?
• What features can be changed to make the service appealing to other demographic market segments?

Put (to other uses)

• How else can this product be used?
• Have customers used this product in any innovative ways?
• Are there product line extensions that make sense?
• Where can I reallocate my resources to become more successful?
• Which strategic initiatives have underperformed, and where can I reallocate their resources for greater success?

Eliminate

• What part of the customer purchasing process can I eliminate to make it faster and easier to buy?
• Which reports or paperwork can I eliminate to give the sales force more time to be in the field selling?
• What steps in the service process are not adding value and can be eliminated?
• Which customers are not profitable to service and can be let go through attrition?

Reverse/Rearrange

• How can I rearrange the sales and marketing functions to be more customer friendly?
• What could we do to reverse the sales process—having our customers come to us instead of having our employees go to them?
• Could we use interactive technology to have our customers rearrange the product offering to tailor it to thier individual needs?
• How would reversing the product development process affect the output?

Three categories of resources:

1. Tangible-Physcial assets and financial resources
2. Intangible-Culture, brand, reputation
3. Human-Knowledge, competencies, and skills.

In order for resources to be a key component in successful strategy, four criteria need to be met:

1. Replication difficulty-the resource is challenging for others to copy.
2. Value generation-the resource must lead to superior value for the customer.
3. Sustainibility-the resource is plentiful enough to be used repeatedly.
4. Lack of substitutes-the resource cannot be readily substituted by other resources that perform a similar function.

Focus demands the discipline to allocate resources to specific areas and activities, rather than spread them evenly across the business.  Focus comes from the ability and willingness to make trade-offs.  Strategy is much about what you choose not to do, as it is about what you choose to do.  3 pruning pitfalls when it comes to making trade-offs:

1. Safety-Comfortable Complacency
2. Health-Political Consensus
3. Aesthetics-Unproftibale Growth

A strategy Filter consists of a customized list of criteria that an opportunity, threat, issue, or challenge must meet in order to receive resources.  While a Strategy Filter is a tailored tool, there are four areas to consider in developing one:

1. Purpose-the mission, vision, and values of the group
2. Business design-the business model on which the group operates, including the context, customer focus, offerings, differentiation, and strategy shield.
3. Strategy-the overall direction and focus of the group.
4. Impact-the qualitative and quantitative effects of channeling the resources to the necessary activities.

Managers make 5 common errors in executing strategy:

1. Faulty strategy
2. Unclear resource requirements
3. Poor communication
4. Weak accountability
5. Lack of calibration

The Resource Allocation Calculator is a tool for evalutating whether or not a strategy has sufficient resources for successful implementation.  The StrategyPrint is a two-page business blueprint that serves as a real-time strategic action plan for a business.  The Strategy Tune-up is a periodic (weekly, monthly, quarterly) meeting with key personnel for strategy development and execution to review context of the business.

Remember to use G.O.S.T terms correctly, and not interchangeably.

• Goal: A general target-What, generally, you are trying to achieve.
• Objective: Specific outcome desired-What, specifically, you are trying to achieve.
• Strategy: The resource allocation plan-How, generally to achieve the goals.
• Tactic: The tangible activities/items that carry out the strategies-How, specifically, to achieve the goals.

Strategy Formula=WHAT + HOW + WHO + IMPACT

• WHAT: The activity representing the purpose of the strategy.
• HOW: The general means or method of acomplishing the strategy.
• WHO: The audience the strategy is designed to reach.
• IMPACT: The desired result of developing and exectuing the strategy.

The Activity System Map is a visual representation of an organization’s strategy and the tactics that support it.  It provides a thirty-thousand-foot view of the business by capturing the strategy and tactics, and relationships between the two, on a single page.

Purpose comes in 3 forms: current purpose (mission), future prupose (vision), and guiding purpose (values).

A mission is a clear, concise, and enduring statement of the reasons for an organization’s existence today.

A vision represents future purpose, providing a mental picture of the aspirational existence that an organization is working toward.  Values are the ideals and principles that guide the thoughts and actions of an organization and define its character.  The strategy development process has 5 phases:

1. Discovery-”Research the Dive”
2. Strategic Thinking-”Envision the Dive”
3. Strategic Planning-”Plan the Dive”
4. Strategy Rollout-”Perform the Dive”
5. Strategy Tune-up-”Review the Dive”

The 4 main benefits of a well-designed stategy workshop are:

1. It creates a shared understanding of the business.
2. It generates innovation.
3. It creates prepared minds.
4. It is a vehicle to evaluate a manager’s business acumen.

The 5 steps to preparing a successful strategy workshop include:

1. Determine the intent of the workshop.
2. Identify the participants.
3. Provide a pre-workshop Strategy Survey.
4. Prepare and focus the group with pre-reading.
5. Desing the meeting framework.

ahha.com

trendwatching.com

ABC News (1999), The Deep Dive, ABC News Home Video of Nightline on 2/9/99. 2. IDEO San Francisco (3/29/2001), DePaul Healthcare Innovation and Design Plan 3.

The Art of Innovation: Lessons in Creativity from IDEO, America’s Leading Design Firm. Kelley, Tom. Doubleday, 2001

The Innovation Equation: Building Creativity and Risk Taking in your Organization, Byrd, 2003, Wiley

Weird Ideas that Work: 11½ Practices for Promoting, Managing, and Sustaining Innovation. Sutton, Robert I. 2002. New York: Free

Innovation-what consumer need we are not meeting?

springwise.com

http://www.ideaconnection.com/open-innovation-success/Lego-Success-Built-on-Open-Innovation-00258.html

izigg

mobile marketing trend watching

Mobile Media Agent

understanding 

http://www.insidefacebook.com/2011/09/19/small-business-ad-credit/

SQL, SAS, FTP, Data Mining, Cluster Analysis, Regression

http://www.waterdragoninc.com/Feng%20Shui%202012.html

http://hiloliving.blogspot.com/2011/12/2012-year-of-water-dragon.html

Do you need Marketing Automation?

What is Marketing Automation?

Form

Creating a new form with the form wizard lets you create a customized form in seconds. Forms are used on your website to collect information about visitors. For example, you may use a form on your Contact Us page, or require visitors to complete a form before doing a product test-drive.

Form handlers

allow you to manage the forms yourself and simply post the data to Pardot. This allows you to do any sort of customization that you would like in terms of the forms look and feel and still have Pardot provide the tracking and error.

Salesforce.com Connector

Connectors allow Pardot to sync with third party applications such as a CRM system, paid search platforms, or email marketing solution. Data can be passed back and forth between the two applications allowing a user to manage many formerly disparate marketing channels from within the Pardot interface. As an AppExchange certified solution, Pardot can sync with salesforce.com Professional Edition accounts or higher.

Pardot can hook into your Google AdWords account and track prospects that reach you through paid search. You can tie cost data from AdWords to opportunity data from your CRM to determine your true cost per qualified lead and search engine marketing ROI.

LeadDeck is a desktop application that allows your sales and marketing teams to get real-time alerts of visitor and prospect activity from their desktop. Results refresh every minute and when your visitors take action LeadDeck will pop-up small, unobtrusive notifications that users can click for more information.

Site Search

Pardot can crawl your site map, serve up relevant search results for your visitors, and provide reporting on their queries. Nothing shows a prospect’s intent like his searches on your website. If someone clicks around and finds their way to your pricing information, that is valuable to know, but if the prospect types in “pricing” as his exact search term, that is a much better buying signal. You can create a site search hosted by Pardot, or choose to integrate a third-party search.

Google Analytics

The Google Analytics Connector is designed to simplify the flow of information between Google Analytics, Pardot and your CRM system. The connector will allow those using Google Analytics Keyword Tags in URLs to pass those tags into Pardot. Once the tags are in Pardot, the fields can be synced with a compatible CRM system, allowing you to use the CRM reporting features to run custom analysis on your tags.

Data will be collected from all five of the Google Analytics tags: campaign name, medium, source, content, and term. Optionally, you can enable the connector to create a new Pardot campaign based on your Google Analytics campaign tag. This will automatically generate a new campaign, if there is not already one by that name, for any new prospects coming in from tagged URLs.

bit.ly Connector

Filters allow you to exclude certain types of visits, clicks, or other actions from your campaign results and email notifications. The most common use of this would be to filter out your own company’s IP address to avoid skewing results.

Filters will also hide activities from a filtered prospect’s profile.

Everything associated with the following objects will be filtered:

• Visitors
• Visits
• Visitor Activities
• Visitor Page Views
• Email Clicks

Pardot Implementation Guide

Marketing Automation

*E-mail is unique identifier in Pardot*

all prospects in pardot have a campaign, but they can only have one at a time

Nurture and Quality for sales

I. Dashboard

• Assigned Prospects-assigned to a user
• Tracking code will be cookie-visitor, reverse lookup on IP address
• Visitors-what pages visited, where referral came from, anonymous
• Active Visitors-more than 1 page visited
• Identified VisitorsII.             Marketing

A. Automation

1. Assigning to prospect-Sales rep A assignment
2. Match type Propsect Form Field State is New York

Add reel prospect form contact me now form was completed successfully

1. Actions assign prospect to user Sales Rep s

4. II. Automation Rules-run continually; retroactive compared to segmentation

Always in pause, retroactive

5. Drip Program-nurturing trip, choose time and list; allows correspondence to be sent to the prospects on a specific list at specific intervals based on time or prospect activities.  Use for ongoing marketing campaigns to nurture leads that may not be safe-ready.

Hard/Soft bounces

Filter-IP address/domain

Import-Manual prospecting

Security-New IP address must activate

B. Campaigns-1st touchpoint of AdWords campaign, only associate one campaign for each prospect

C. Content

D. Emails-have been set, scheduled or drafted.  E-mail wizard or template.

E. Forms

F. Landing Pages

G. Paid Search

H. Segmentation

I. Site Search

A. Segmentation-divide database into more managebale chunks

Only segmentation rules/content files; everything else in recycling bin

Lists-If in same list, only will appear in 1, internal, public list has a label, public is on landing page and put on email preference center

CSV Export

Audits-campaign changes, form field changes, drip program changes

Express-default fields, not custom

Export

File-all, longer

1. Label-public for prospect
2. Segmentation Rules-only run once, if you click re-exute rule you can run the segmentation again

C. Tags-Internal organization, organically, more flexible than folders, aid in filtering information in the table, good for everyone that attended the tradeshow

Match-all including and

Match any-or

Name prospect from requesta demo form

Actions-

Profile

CPO-Cost per opportunity

Folders-versatile

Label-Public/Private; what prospect sues, external

Segmentation-not ongoing

Rules: Prospect form field, Job Title is Vice President

Prospet from state is Georgia

Complete Activities

1. Sent autoresponder e-mail
2. Create Whitepapter down salesforce.com

Customer redirects-can’t put on linkedin page

Landing page-general website tracking

Layout type: use a layout template

Stacked

Blocks

personalization

Custom redirect-posting a link that may not be on your resume

Content-pdf, images

Radio-Yes/No

Check-all

Text area

Vales-yes, no, yes is sign me up

1.From field Industry is Marketing

Criteria default Indusry matches

You can only duplicate email lists

e-mails-sent, scheduled or drafted

e-mial template-now or in the future, drip, auto responders, creating new emails to send

suppression list-not sending an email into someone already in your list

Name, campaing associates email internally, email type, multi-part with Graphical editor

Content

Plug in icon of add this-share e-mail

III. Prospects-identified

prospect list

activities

audits

emails

opportunities

salesforce.com campaigns

searches

visits

prospective accounts-synch with salesforce.com

Need to undertand all icions

Form and visitor-prospect name shown

E-mail and visiro-prospect

Active prospects for review-new user, green man incon

Profiel Criteria: CRM system used, industry, location, job titleLists-segmentation

E-mail Preference Center-Prospects choose which list they want to be apart of

My prospects-assigned to you

Starred prospects

Active-haven’t bee to website

Reviewed prospects-internally

Unassigned prospects

Unsubscribed prospects-opted out of e-mail

Jigsaw

Campaing-first touch point with website

1. Activites
2. Audits
3. Emails
4. Opportunities
5. Salesforce.com Campaign
6. Searches
7. Web

Profile

Quality leads by score and user

Score-how engaged with content, activity

Grade-how well fit person visitor—profile Criteria, matches more to change, information; Every prospects starts at D change through matching with thumbs up or thumbs down sign, grade is important in showing a client instead of a student/intern

Updates should be done by salesforce

Audits 60 days

Opportunities-need to sync with salesforce.com

prospect ACCOUNTS-GROUP Prospects, can sync with Salesforce

1. IV.           Reports

1. V.             Administration

Filters

Form Fields

Form field

1. Name
2. From Field Source Default Prospect Field
3. Type Text
4. Address-one
5. Data Format-Text
6. Label-would you like to receive our newsletters

Please complete form below to receive whitepaper

Different options

Use predefined values for options

Custom Field

Import

Layout Templates

Recycle Bin

Security

Users and Groups

Rules

Emails

Forms-standard/submit button

CPC model, quality-click rate and landing page

What completion action do you want when form is submitted

Html code-click on form-put on website

Landing page same as website, administration layout templates

%%content%%

CPO-Cost per…

Site Search Box-helps frame conversation for salesperson, how to market to target market

Administration

Multivariate-measures effectiveness of different landing pages

Paid search-Google Adwords

Active prospects-not assigned to user

Visitors-see the spent

Never active-never been to website

Campaign-Source of where she came into website, good for tradeshows

50-default score

Page view=+1

Form view=+3

Matches increase grade

Google Analytics connector

Form

1. Name
2. Label name-would you like form field
3. 4. Organization
4. 5. To receive

Unsubscribe list on email template

Hard-invalid or email exist no longer exists

http://www.facebook.com/help/?faq=206671706038361