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Chapter One What is marketing and how does it differ from sales, advertising, and promotion?

Marketing is one of the most misunderstood and confusing terms used in business. How would you define it? Think about what you believe marketing is and write your definition down now:

Marketing is: _________________________________________________

_____________________________________________________________ .

Save this definition to compare it to other definitions of marketing we cover later on.

Why is the term marketing surrounded by confusion?

First, the word marketing means very different things to different people in different industries. For example, a coal producer in Kentucky just needs to understand what price the local buyer will be paying for the product and s/he can then plan to market (or just sell) the coal produced to the local buyer. Second, think about how much different the above situation is from another case in which marketing must be done. Let s say that you are a product-marketing engineer at Agilent Technologies and your Product Marketing Manager has informed you that you will be responsible for marketing a new product that has been conceptualized by engineers in the Research and Development (R&D) Department. Finally, assume a good friend of yours has invented a new way for people to wash their car. She has asked you to market her product for her. In all three of these situations, the product has already been conceptualized and produced. It won t help the individual marketer at all to consider how the market will react to the product. In situation one, the coal miner must simply extract the coal from the ground and deliver it to a local coal broker for sale. In situation two, the product manager at Agilent must first figure out what the new product will be good for and who might want to buy it. Finally, in situation three, your friend has already invented the product; it just remains for you to figure out who the people are who wash their own car and how to reach them. In all three situations, the marketer is faced with coming up with a way to sell what has already been produced. This definition of marketing, unfortunately, is how most people would define marketing, that is, Marketing is how an organization or individual sells products or services. Thus in this definition, marketing is relegated to finding and exploiting a market of buyers for the product or service.

But is that how marketing practitioners and people who teach marketing define it? Let s review some alternate definitions of marketing from the business literature.

The American Marketing Association s definition. The American Marketing Association is the leading organization in the U.S. representing the academic side of marketing. The organization is comprised of and primarily impacted by people who teach marketing at the college level. In 1948, the AMA defined marketing as follows:

The performance of business activities directed toward, and incident to, the flow of goods and services from producer to consumer or user. (AMA, 1948).

Note that the definition above focuses on the DISTRIBUTION aspect of marketing and doesn t really include the Four P s : Product, price, promotion, place (distribution).

In 1985, the AMA definition had changed to the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. (AMA 1985)

Compare these two definitions: How are they similar and how do they differ? Why do you think the AMA made the change in the definition of marketing?

Now, compare the above discussion to YOUR definition of marketing. How do the definitions differ from yours? How are they similar?

Speaking of confusion, type in the key word marketing into your favorite search engine on the Internet and see what you find.

The Seven Steps in the Marketing Process

It is natural that people in different situations define marketing differently. However, we will approach the definition of marketing by first learning about the seven steps in the process of marketing. While this process is not always followed, it is important that any student of marketing

understand what steps must be taken to be successful in a marketing effort. The marketing process can be described in the following seven steps:

A.

Understand the market wants/needs of interest

B. Based on relative size and needs of the market, select certain segments of the market that are of the most interest to you and your organization C. Thoroughly describe these segments based on their individual needs D. Create a product or service that will meet the specific needs identified E. Communicate the concept of the product or service to the targeted customer in a way that makes sense to the customer F. Deliver the product or service to the targeted customer in a way that will be convenient to the customer G. Solicit feedback from the customer about how your product or service could be improved to meet the customers needs even better

This process is applicable to most situations encountered by those wanting to market a product or service. The process of marketing can be divided into upstream and downstream activities. That is, steps A through C are all upstream activities that should be performed before a product actually exists. Surely, there are many readers who will say, Wait, this won t work for me, I am like those people who you described at first, I already HAVE a product to sell, I just need to find somebody to BUY IT! As marketers, we understand that many sellers don t have the option or input to create a new product or service. However, this e-book is designed for people who want to do marketing the right way. If you must pick up the process after steps A, B, and C have already been performed, realize that some steps have already been done, and you should check to see if they have been done correctly.

Also note that marketing research plays an integral role in each of these stages. That is, the organization that is truly focused on customer needs must be driven by an active research effort.

Definition of marketing we will use in this book

Based on the seven-step approach to marketing, we will define marketing as:

The conceptualization and profitable delivery of customer satisfaction the first part of this definition (conceptualization) would be covered in steps A through C in the marketing process above and the final aspect delivery would be represented by steps D, E, F, and G. Of course, in order to deliver customer satisfaction, one must do customer research, thus step G will provide feedback into the continuation of the seven-step marketing process over time.

Upstream and Downstream Marketing Activities in the Marketing Process

What marketing activities are performed and how they are performed will have a lot to do with how many choices you have in managing the steps of the marketing process and the focus of the organization s marketing effort. The organization will view the marketing function s responsibilities based on the history of the organization and its orientation to doing business. For example, there are several different orientations that organizations use to doing business or serving their customers. Usually, the firm does not specifically state this orientation. For example, if a firm defined its product policy as research leading to creation of the most sophisticated, highest quality products and services in the world (for example, see http://www.schering-plough.com/) then it has decided to use a Product or Production Orientation. That is, the organization has decided for itself what customers want (sophisticated, highest quality products) and has ignored the first three steps in the marketing process we described above.

You are a consumer; do you think all customers want the most sophisticated, highest quality products and services? Do you as a consumer always seek out the most sophisticated, highest quality products and services?

Another approach or orientation to managing the marketing function can be called Sales (or Promotion) orientation . In this approach, the primary function of marketing is seen as personal selling and advertising, and marketing s primary job in the organization is to sell, sell, sell. In this approach, steps A through C of the marketing process are largely ignored and marketing resources are instead placed on generating more sales.

There is an approach to marketing called the Customer as Monarch (also known as the Marketing Concept approach). Although this philosophy has been applied under different names for centuries, it is still a good contemporary guide to managing marketing activities. It can be described by the slogans we do it all for you, have it your way a former Burger King slogan, or just by the simple saying which perhaps you have already heard, find a need and fill it . The Marketing Concept would rephrase this saying a bit, and be represented by an approach of find a need, and fill it profitably and more effectively than the competition, Yes, this is a demanding task, but we exist in

an extremely competitive world. Note that this competition includes organizations in both the forprofit sector and the not-for-profit sector, with the latter being as competitive as the former.

The Customer as Monarch and the Marketing Concept are related to the Seven Step Marketing Process

The marketing concept can be thought of as having four parts as follows:

Part I Understand and meet customer needs - said another way, provide satisfying products and services to your target customers Part II Meet organizational goals this is applicable for both for-profit and not-for-profit organizations. For-profit organizations should have goals other than profit, a for-profit goal being make a fifteen percent return on investment . A longer-term goal that is ultimately tied to profits but immediately is tied to customer satisfaction might be: Be a recognized leader in customer satisfaction in our industry. Not-for-profit organizations have goals for non-financial performance such as provide thirty hours of client services per week consistent with our organizational mission. Part III Integrate marketing activities this part can be the most complex, but also the most critical. That is, when the organization has agreed on a marketing strategy, it must execute the strategy in an efficient and effective way. For example, fifty-percent-off coupons appearing in the Sunday newspaper will not reach the goal of inducing new product trial if the product is not available in stores due to a problem with product distribution or if sale catalogs are printed by a central office without coordination with local business outlets, there will be regular inventory understocks or overstocks. Part IV Satisfy customers better than the competition - As indicated above, EVERY ORGANIZATION has competition. If there are not similar product solutions that provide similar benefits available then there will be competing uses for expenditure of the customer s income.

Like the Seven Step Marketing Process, the Marketing Concept serves as a guide for applying organizational resources directed at marketing. When an organization adopts the Customer as Monarch approach, we describe the organization as being market oriented or customer oriented. Thus, we have reviewed three ways in which an organization may be oriented to doing business: Product oriented, Sales (Promotion) oriented, or Market oriented. We will discuss each of these three concepts more as we progress through this course.

Chapter One Exercises:

1. Summarize on a one-page report what you find after you get on the Internet and search the keyword marketing. Organize your answer according to the different categories you find in your search. 2. In a one-page essay, compare the different definitions of marketing discussed including your own definition. Has your definition of marketing changed? If so, how? 3. Identify an organization that you believe is fulfilling each step in the marketing concept. In your analysis, go step by step to better explain your answer. 4. Identify an organization that you believe is not fulfilling each step in the marketing concept. In your analysis, go step by step to better explain your answer. 5. Write a job description for a manager of the marketing function (that is, what would be his/her major responsibilities) in the following orientations: production orientation, sales orientation, market (customer) orientation. 6. In a one-paragraph answer, explain how you believe the personal selling effort should be related to marketing in a modern organization. 7. Given what you have learned in Chapter One, explain the difference between the terms marketing and promotion. 8. On the Internet, examine the following website: http://acnielsen.com/ Describe in a one-page report what you find. How would this information be helpful for a marketing person?

Chapter One Glossary

Marketing - The conceptualization and profitable delivery of customer satisfaction . Upstream marketing activities understanding, selecting, describing target markets, and creating a product or service to meet the needs of those target markets. Downstream marketing activities communicating a product or service concept to the chosen target market and providing customer satisfaction in the process by delivering that product or service. Customer as Monarch, or marketing concept a philosophy of doing business in which the organization places utmost importance on delivering customer satisfaction, meeting organizational goals, and outperforming the competition while integrating all marketing activities. Chapter Two What is Marketing Management and what do product managers and marketing managers do?

For example. Thus it is often said that management is responsible for conceptualizing strategies.The Meaning of the terms Marketing Manager and Marketing Management Traditionally if a person had the title of manager. In high technology industries. and goals can very quickly develop into a miasma of terms and confusion. the marketing director may be responsible for all marketing activities in the firm. For example. Thus. While this terminology has changed over the years. the Vice-President of Marketing may perform the same functions. As the reader can see. Management-by-Objectives programs in which a supervisor will formulate strategies and other employees will choose the method of reaching those objectives is an example of this relationship in action. as an individual contributor I might have the responsibility of performing certain work (for example. to reach our product . the organization might decide to be the leader in product quality as judged by customer surveys of our organization and our five leading competitors. but not be responsible for the activities of anyone other than myself. as an objective. one high-tech firm might use the title of Product Manager-Digital Systems to describe the job of the person who is responsible for digital versus analog customer solutions. This brings up still another consideration. We will define the term strategy as a method used to reach an objective. Many words in the vocabulary of business management were taken from the field of military science. we will use the following definitions. a marketing manager is someone who is responsible for directing expenditures of marketing funds. a discussion of strategy. objectives. What is marketing management? We will use the following definition of marketing management: Marketing Management is the process allocating the resources of the organization toward marketing activities. it meant that s/he had the responsibility to help guide the activities of at least a few employees. the word manager is often replaced with Director to indicate that a person has primary responsibility for a certain organizational function. Related to the term management is the term strategy. For example. For example. We will discuss how different firms organize the marketing function in a later chapter. First. Second. and other employees are responsible for implementing those strategies. we will use the term objective to refer to a broad-based design of where the organization would like to be at some point in the future. the word strategy has been used in the military for many decades to indicate a long-term commitment of resources toward accomplishing a certain goal. Thus. In some organizations. For example. writing marketing literature for the firm s products). The use of titles varies across industries of types of organizations. At other firms. Sometimes the product manager s responsibility is defined in terms of the product s/he is overseeing and sometimes the responsibility is defined in terms of a specific technology. we still consider someone who has the title of manager to be responsible for overseeing the allocation of resources for the organization. the term marketing manager would be used to describe the same thing. The term Product Manager is often used in high technology industries to assign responsibility to a specific individual or group for the successful supervision of all marketing activities related to a specific product or service. For example. we will consider goals and objectives to be identical terms.

Monitoring and Correction may be considered two stages because after plans are put into action. One at the top. there are also upstream marketing activities that are related to the marketing mix. Third. Correction is the stage in which we take action to return our plan to the desired state based on feedback obtained in the monitoring stage. Thus. In summary. First. environmental scanning is the process of studying and making sense of all the things that might impact the firm s operation that are external to the firm. In marketing. Price. there is a two-tiered nature to strategy. the four P s may mistakenly be limited to downstream marketing activities only and as Chapter One indicates. First. strategy is a specific action used to implement these plans. it is the overall orientation an organization chooses to allocate its resources. It is the transition from expected reality to existing reality. the marketing management cycle is composed of planning. we may adjust our planning outcomes. If this does not make sense to you. and second. and correcting. Use strategy as a keyword search on the internet and see what you find. we often use the four P s to designate the areas of control a marketing manager has at his/her command. Promotion. legislation and regulation. implementing. Monitoring is the process of tracking plans and identifying how plans related to changes that take place during program operation when more information is acquired. strategy will have two meanings. Both present and developing trends in each of these areas must be identified and monitored. The planning stage also includes creating documents that outline the organization s intended response to these environmental (external) variables. . Planning is the process of examining and understanding the surroundings within which the organization functions. Thus. Thus. our organization might decide to enroll in a total quality program offered by most large consulting firms. monitoring. The four P s represents a convenient way to summarize the main factors involved in any marketing strategy.quality objective. and one below helping to implement objectives. Implementation is the process of putting plans that have been made into action. We use the use the letters PIMC as a device to remember the stages. and Place. If we find that return to the planned state is not practicable. The four P s as you probably already know are: Product. This would include studying and gaining an understanding of such things as: competition. social and cultural trends. as a broad guide to preferred action. seen in a contemporary sense. The Marketing Management Cycle The planning cycle is composed of four basic steps. For example. and technology. one must continually monitor performance and make adjustments to the plan based on the feedback gathered through these monitoring activities. Second. please go back and review the terms used in Chapter One. However.

do an on-site activities audit that models patterns of daily life for the family. thus based on the Five W s and H Technique (Who. and then offer suggestions about how the family can be better organized and more efficient in its use of time. she decided that there was a real need in the marketplace for a not-for-profit educational institution to pass along all of the knowledge families have about how to manage their household activities more effectively. After attending a seminar on creativity and innovation. After conducting several informal focus groups. Where. Representatives of the firm meet with families. Answers to questions: . and How) she composed the following questions: What will the customer satisfaction entail. question them to understand how the family operates at present. she decided to start this business because she realized that her family and most other families she observed lived in a state of chaos. the owner realized that she must get organized herself. After she came up with the idea. What. that is. what are the needs I am trying to meet? Who will receive customer satisfaction? Why will my organization deliver this particular customer satisfaction? Who will deliver customer satisfaction? Where will I deliver customer satisfaction? When will I deliver customer satisfaction? How will I deliver customer satisfaction? The owner then modeled the marketing management cycle as follows: Planning: First answer the seven questions I have formulated.An example of the marketing management cycle in action: Let s Get It Together Family Organization Services The organizational mission of this service firm is: We provide families with means to improve their peace of mind and quality of life. Let s Get It Together is owned and operated by a mother of three children. When. Why.

Second. you can see that some of the planning has been done. Question # 6: When will I deliver customer satisfaction? Answer: Customer satisfaction will start with the first seminar and continue through a continuing association with Let s get it together. Question # 3: Why will my organization deliver customer satisfaction? Answer: First. creation of the service . and the answers above. through a small staff of highly trained and ethical individuals. that is. Question # 4: Who will deliver customer satisfaction? Answer: Let s get it together. what are the needs I am trying to meet? Answer: Provide easy-to-follow guidance on improving family organization Question # 2: Who will receive customer satisfaction? Answer: Families who perceive a need for being better organized. What remains is to identify specific actions that must take place to ensure success such as identifying the characteristics of the best candidates for our service. if preferred. Question # 7: How will I deliver customer satisfaction? Answer: Through a personal and caring approach with my clients involving seminars and continuing personal contacts If you review the seven questions.Question # 1: What will the customer satisfaction entail. will provide this service to families Question # 5: Where will I deliver customer satisfaction? Answer: The service will be provided through small introductory seminars and through meetings in the homes of the families. there are ways to fulfill that need that are not being provided to families. there is a already perceived need to be better organized.

we may change that approach after initial seminars are offered (monitoring and correction) and move our seminars to more centrally located sites such as hotels and churches. A marketing plan is a document that describes the activities in which the organization intends to engage in a coming time period. While there are many different approaches to preparing a marketing plan.) and details of the logistics by which the service will be promoted and provided. We have obtained a list of community centers. usually one-year. These businesses often make use of creativity techniques. We should mention that many businesses are moving their long term planning periods to ten years and beyond in order to better prepare for the future. However. Those who do the plan are accountable for the plan s implementation. attempting to outline what changes may occur in their respective environments and how the organization should respond to those changes. . However. thus we must identify likely places to offer these seminars. etc. initially. The Marketing Plan To formulate effective marketing programs an organization needs to create and follow a marketing plan. A brief example of one aspect of this organization s marketing planning is: We will provide seminars that last one-half day to families who perceive the need for help in organizing their activities. and will offer our seminars there. usually one-year (short term) or five-year (long-term). the following conditions should exist: 1. where space is provided free-of-charge for such activities.materials (seminar materials. there are often situations in which an organization will have a medium-term marketing plan (two to five years) and a long-term marketing plan that covers plans for a five-year period or greater. The Business Plan The business plan is an overall blueprint for the anticipated activities for the organization over a coming time period.

While the outline above is simplified. thus. analysis outlining the strengths and weaknesses (internal to the organization) of the organization and the opportunities and threats (external to the organization) that the organization faces. Marketing objectives for the coming period (objectives should be SUMAC or specific. 4.T. it touches on the critical areas for a marketing plan. The marketing plan is created in the context of the organization s overall business plan. measurable. It is important to point out. 3. 5. The PIMC serves as a good guide for on-going implementation of the marketing plan.O. with a description of each event) This outline should be combined with the PIMC model described earlier in the chapter. the organization is more likely to be able to successfully create and implement its marketing plan. Market grid of markets and customers Product/service positioning strategy V. Description of market/customer types and products/services that will provide satisfaction to those markets and customers a.2. IV. This same group is committed to the plan s success. However. People in the organization share a similar orientation to the marketing function. however. attainable. the organization continued to run . An example for the marketing plan outline is as follows: I. S. that a plan is only as good as its implementation. after the consultant assisted the firm in creating a plan. Executive summary (a one-page to two-page overview of the contents of the plan) II. Vision for the marketing plan (a paragraph that briefly describes the aspirations for the coming time period and the theme of the plan) III. That is.W. Description of marketing programs with timeline (a calendar of major marketing events planned. one small organization hired a consultant to help the organization create a marketing plan. Management is committed to the plan s success and is willing to expend the necessary resources for its successful implementation. understandable. If these five conditions are met. it is usually better to have a poor plan and good implementation than a great plan that never gets implemented. and consistent) VI. b.

Summarize in a one-page report what you find after you get on the on the Internet and search the keyword management. make observations on Let s Get It Together Family Organization Services. Explain how the information you found compares to what you read in chapter two. 9. 1. implementation. if any. 4. How does it compare to the description you gave in answer to question six in chapter one? 8. thus. 3. 5. and correction) to model the actions necessary for a ten year old to set up a lemonade stand. education. explore the definition of marketing management in that industry by interviewing someone who works in that industry. do you believe this service will appeal? Describe this segment of families using factors like family income. identifying activities conducted in each step in the PIMC cycle. Limit your marketing plan to two pages using keywords to describe your plan. Thus.their business as usual and. Access the Internet and write a one-page report regarding what you find when you do a search using the term marketing management. Chapter Two Exercises 1. monitoring. Call your local grocery or supermarket and ask to interview the store manager. 7. the plan did not really change how this small organization approached doing business with its customers. If you have an industry of interest. Apply the PIMC planning cycle (planning. Write a job description for a marketing manager of the marketing function. And how his/her job relates to marketing management. . Search the Internet for the term Product manager and write a one-page summary of your findings. 2. To what segment. etc. 6. including the benefits families can expect from participation and your estimate of demand for this new service. Organize your answer according to the different categories you find in your search. Use the marketing plan outline in the chapter to prepare a marketing plan for the lemonade stand. Write a one-page essay on your analysis. lifestyle. In a one page essay. Schedule an interview and in the interview ask the manager how s/he would define marketing management. the organization ultimately failed and went out of business.

that is. and marketing. Business plan a document that describes the anticipated activities of the organization across its primary functions. Understanding the Marketplace and Different Customer Segments The main goal of market segmentation (dividing the market into different portions based on differences in customers) is to better understand the needs of our customers thus we need a structured approach to attain this goal.the process allocating the resources of the organization toward marketing activities Marketing Management Cycle the various steps adopted by the organization in its attempt to prepare for the future and manage the present. the Customer Rules. often the first assignment for the marketing function is to gather and analyze information about customers. usually one-year. and Correction. Therefore.Chapter Two Glossary Marketing management . A simple seven-step approach follows: Step One: Identify the type of market with which you will be dealing . it only remains for the organization to focus on researching and understanding its customers and then delivering products and services to the customer that will not only meet the customer s needs.a document that describes the activities leading to customer satisfaction the organization anticipates intends to engage in a coming time period. PIMC Planning. Marketing plan . you have already learned that the main purpose of modern marketing is to serve customers. research and development. Monitoring. Marketing manager the person responsible for overseeing the allocation of resources to marketing activities. Today. but satisfy the customer in a way that will keep the customer coming back to our organization to do business with us. operations management. Chapter Three How do we identify and understand markets? As a student of marketing. that usually means first attempting to understand the structure of the marketplace. Examples of these primary functions would be accounting and finance. If the organization really believes in this philosophy. Implementation. These steps are applied by the organization during the marketing management cycle.

if we examine the market for toothpaste. that is. we can identify four types of markets. Normally. four-door station wagons. For example. that if you choose one segment. and business strategy. Step One: Identify the type of market with which you will be dealing Types of Markets Market segmentation is an approach by which we identify. define. what wants or needs do you intend to satisfy? Step Three: Select dimensions with which to segment the market Step Four: Based on the selected dimensions. the automobile market is comprised of many segments including passenger cars. Notice. The first step to market segmentation is understanding and defining the market with which you are working. pickup trucks. for example. sports utility vehicles. convertibles. For example.). etc.Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. and many others. we might first look at the type of market we are looking at. in marketing. passenger cars. . Two-door sports sedans. vans. market. identify the segments in the market under study Step Five: Evaluate whether the segment in which you are interested effective segmentation meets the four criteria for Step Six: Create a profile of the customer identified including purchasing behavior expectations Step Seven: Combine the segmentation analysis with other analyses related to the product. and understand different submarkets for products and services. there are many segments within that segment (for example.

we can then begin to identify segments within that market.). 4.). price. Thus age is often an important criterion in what satisfies a particular consumer. government markets Local. etc. what wants or needs do you intend to satisfy? . hospitals. state. Many people in their early years choose cars on the basis of styling. and federal governments taken together constitute for the largest demand for goods and services in the U. 2. and see). For example. that is. For example. However. the age of an organization does not usually significantly impact its particular demand for products and services. special needs (smokers toothpaste.S. we realize that there are many segments identified in that market already: health (that is. 3. and other similar organizations. etc. fluoride. institutional markets these markets include universities. For example. For example. consider passenger cars. the exceptions to this statement only serve to prove the rule. For example. we frequently use age as a way to understand and segment consumer markets because age often accounts for significant differences in the wants and needs of consumers. you buy a lawnmower at Wal-Mart to mow your own yard). age is rarely used to identify differences between organizations because usually. Note that there are several different dimensions for segmenting markets. of course. As in many cases in marketing. breath freshener. a hospital cafeteria must purchase food and other supplies to run its operation. Different types of markets often require a separate basis for market segmentation. feel. if we are analyzing the consumer market for toothpaste. Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. and so forth). After identifying the type of market. For example. Note that each of these types of markets has demand for both goods (tangible products that we can touch. tartar control. the last category we mentioned special needs includes both a lifestyle segment smokers. Compaq computer buys many of its microprocessors from Intel Corporation and your local dentist must obtain supplies and materials to provide his/her services to patients. and. For example. We will address this issue later in the chapter.1. Seniors may choose their car based primarily on brand name and safety issues. consumer markets people who buy for their own. and an age segment children. kids toothpaste. your local police department must buy patrol cars. acceleration. organizational markets organizations buy goods and services for use in the operation of their businesses or for resale. attractiveness (whitening. sensitive gums. economy. personal non-business use (for example. feel and see) and services (intangible products that we cannot touch.

For an additional example.demo means people. So. What would you do if you were marketing manager of a company that has vacuum cleaner bags as its sole product when more and more vacuums are bagless? The implications for product design will be discussed in a later chapter. people buy vacuum cleaners to attain their personal goal of having a clean. sanitary carpet. and graphics means some representation of thereof. consider a small gift shop. demographic dimensions . while another organization may choose to distribute its products through a traditional retail outlet because the segment chosen prefers to touch and feel the product. These dimensions are: a. personal non-business use. For example. Therefore. demographics consists of all those characteristics of people that are used to describe the . When deciding on how to distribute a product. Dimensions for Segmenting Consumer Markets As discussed earlier. thus segmentation dimensions for this type of market focus on the characteristics of the buyer. Notice that the store s owner might change from an inventory similar to her competitors to a differentiated set of product choices aimed at meeting her customers purchasing goals of quality and uniqueness. people and organizations usually purchase benefits: not products or product features. one organization may choose the internet based on its customers desire for efficiency in buying and familiarity with the world-wide web. people in consumer markets buy for their own. market segmentation analysis requires a clear definition of the benefits customers are expecting to receive through purchase. Four dimensions are traditionally used to segment consumer markets. Thus. the product would be distributed through a physical location within which the customer could compare alternatives. Step Three: Select dimensions with which to segment the market The dimensions used to segment the different types of markets will be organized according to type of market because the dimensions used for segmentation vary substantially. The form of the product doesn t matter as much as the product s ability to provide those benefits. the primary benefits sought in this shop were finding a good gift idea with a sense of security against giving an inappropriate gift. If a market research study indicated that customers of the shop preferred a lot of assistance in the product choice process because over three-fourths of the products purchased in the store were purchased as gifts.As we will discuss in following chapters.

psychographics refers to the characteristics of peoples spirits and minds. For example. Given this situation. the demand for snow skis is higher in the mountainous states in the U. psychographic dimensions . b.S. For example. geographic dimensions this dimension. many products are sold in multiple packages such as six-packs because customers expect to consume multiple units in relatively short periods of time. and other such attributes. Dimensions for Segmenting Organizational Markets Customers in organizational markets buy products either to use in the operation of their business or to resell to other organizations. c. different segmentation strategies are required based on the intended use of products bought by organizational customers.html. than it is in the plains states.S. These codes are useful for segmentation because all industrial activities are given a code in the U. but Walmart also buys cleaning products to sell to their customers. d. gender. relates to where people live. behavioristic (or intended use) this dimension relates to benefits sought and expected use by the customer. life style. Check out the website at http://www. intended use of products bought expected benefits to be provided by products purchased size of organization SIC (or NAIC) code* of organization s or organization s products Other characteristics of organization or specific industry *Standard Industrial Classification or North American Industry Classification System codes are numbers derived from the core business in which the organizations are engaged. c.gov/epcd/www/naics.size and composition of the population including age.psycho from Greek means spirit or mind so while demographics deals with the statistical characteristics of the market segment. amount of income. This scheme has been widened to include Canada and Mexico subsequent to the NAFTA agreement. level of education. d. Walmart must purchase cleaning products to keep Walmart Stores clean and attractive. and motivation. e. for example. psychographics is usually broken down into personality. Bases often used include: a. . For example. not surprisingly. b.census.

measurable (we can estimate how many people or organizations are in the segment) accessible (we can reach the segment through available means) compatible (the segment is consistent with the overall goals of the organization) 4. listing each criterion above followed by an explanation about how this characteristic will be present in the target market. substantial (the segment is large enough to justify our develop of products or services just for that segment) These four dimensions are helpful for understanding any market structure. segments then must be identified in the market under study. 2. if we are trying to analyze the market for personal computers. Identify the different segments in that market and list the four factors above. For example. the segments must be: 1.Step Four: Based on the selected dimensions. 3. itself. However. we must first understand the market. PDA (personal digital assistant). try using this information to analyze a market with which you are familiar. we might choose to identify the following segments: desktop. and the concerns for each factor as it relates to the product or service you picked. an approach to segmenting markets. behavioristic (intended use). Step Five: Evaluate whether the segment in which you are interested meets the four criteria for effective segmentation To be useful. Step Six: Create a profile of the customer identified including predictions of expected purchasing behavior As one might expect. there is a large body of literature related to buying behavior in marketing because marketing focuses on the buyer and his/her characteristics. segment the market for shampoo or soup. While we will cover parts of this . For example. because portability and computing power are two important benefits sought by different pc users. laptop. identify the segments in the market under study After dimensions have been selected to use in defining the segments. Which of the four dimensions did we use to create those segments? Primarily. For example.

if one researches. If we look closer at this definition we can see that a marketing strategy is: A Marketing Mix Product or service Price AIMED AT a Target Market Distribution (Place) Promotion We will use this definition throughout our study of marketing principles and you will soon become comfortable thinking in these terms. We will discuss this issue further in the following chapter. While this definition is a use of the lower level of the term strategy. marketers overestimate the importance of purchases to consumers. Example of seven-step segmentation process . Understanding the significance of the purchase for the target customer Very often. This circumstance often results in a heavy emphasis on customer decision-making when in fact the customer may only react on a very shallow psychological plane to products offered and the purchase decision is in reality almost an afterthought. Naturally. However.literature the reader should realize that there are hundreds of thousands. we believe that the definition is appropriate for beginning students in marketing. one is intimately involved with the product often virtually every working hour. it is important for marketers to attempt to model the expected buyer behavior involved for their product. if not millions of pages published in this area. Of course. manufactures. Usually when we attempt to model the buying process of our target customer. this process differs considerably across different types of markets as well as across different types of customers. and distributes a product to consumers. Marketing Strategy We will define marketing strategy as a marketing mix aimed at a specific target market.

identify the segments in the market under study Demographic household income over $80. that is. whether or not you decide to drop one later on in the process) Step Four: Based on the selected dimensions.Let s Get It Together Family Organization Services Step One: Identify the type of market with which you will be dealing The consumer market Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. both parents work. also see Demographic.000. at least one parent is college educated. too complicated. Behavioristic (a note to the reader: segmentation doesn t always requires the use of all four of these factors in creating a profile. Geographic. two children or more in household suburban location in medium to large city Geographic every geographic region of the U. too together . Psychographic. but we suggest you always use each dimension in your analysis. above Psychographic busy or hectic lifestyle as described by people in segment little quality time Behavioristic family perceives life is too hurried. has families who fit our profile.S. what wants or needs do you intend to satisfy? We seek to enhance family life for parents and children alike by providing practical tools to improve organization in family life Step Three: Select dimensions with which to segment the market Demographic.

Organizational research will continue while we conceptualize and offer our first seminars to keep track of changes in the social environment of our chosen geographic markets. the segment is compatible with our organization and other products/services Substantive our research and projections indicate that there are millions of households in our target market.(Please note: Our marketing research studies indicated these facts and allowed us to formulate our customer profile) Step Five: Evaluate whether the segment in which you are interested effective segmentation meets the four criteria for Measurable we were able to assess this segment and understand by using only the census data published by the U. Compatible our organizational mission is aimed at serving this segment. Bureau of the Census (Website is http://www. we know that purchase behavior is a high involvement transaction for our target families. Step Seven: Combine the segmentation analysis with other analyses related to the product and market While we believe our concept has a lot of promise. so. we are starting our service in one city and expanding the service over the coming years. healthcare professionals. We will also maintain a research effort with all people contacted in relation to our concept including families who participate. we must continue to flesh it out and do research. However. yes.census. Therefore. and community leaders. .gov/ ) Accessible we can easily identify and communicate with households in profile. Also. selecting specific households that may want our service is much more difficult. Step Six: Create a profile of the customer identified including purchasing behavior predictions See Step Four above.S.

explore the markets and types of customers served by that industry. correction) to a club to which you belong. Apply the seven-step process of market segmentation to a new product idea that you conceive listing your activities and comments in each step in the process. 3. 9. the local utility company may be owned by government. Apply the PIMC planning model (planning. geographics. describe a market segment with which you are familiar.Chapter Three Exercises 1. Identify each step clearly. In this exercise. Summarize in a one-page report what you find after you get on the internet and search the keyword market segmentation. They lead a relatively frugal lifestyle and seek economy and quality in their purchases. Check out the website of American Demographics Magazine at http://www.) 6. monitoring. Prepare a one-page report on your findings. list each of the four dimensions and describe the segment with those dimensions. in the middle-income category. Write a job description for a manager of the marketing function. psychographics. Do an internet search on each of the four dimensions of market segmenting consumer markets (demographics. Organize your answer according to the different categories you find in your search. Read an article and write a one-page summary of the article and its relevance to marketing. in your opinion. and behavioristics) to compare your findings to the material in your Principles of Marketing e-book.com/. implementation. 2. 8. the market segment that Saturn Automobiles has worked towards pleasing is men and women with a college education.americandemographics. Go to your local grocery store or supermarket and visit a specific product section. Using the four dimensions of segmentation for consumer markets. (For example. and personal care products are three good areas. 4. If you have an industry of interest. so as a customer it will be considered a government market. Breakfast cereal. evaluation. 5. How does it compare to the description you wrote in answer to question six in chapter one? Chapter Three Glossary . Pick a product category that is of interest to you. 7. Observe the products offered and identify product categories that are based on different consumer segments. but there are many others. bread. For example.

life-style. for example.a marketing mix designed for and aimed at a specific target market Chapter Four . age/income/gender/ethnicity and level of education psychographic dimensions grouping potential customers on psychological factors including personality. and motivation for purchases behavioristic (or intended use) dimension used for market segmentation. Consumer Decision-Making . We use the term a few because in marketing.market segmentation . Consumer Buying Behavior Researchers in marketing have studied most areas of consumer behavior including the impact of everything from music to lighting on how people behave and how they consume products. Why do you suppose this it true? Of course. you already know the answer: Marketers believe the Customer Rules thus we know our primary responsibility to the organization is to gain an intimate knowledge of our customers: what satisfies them and makes them happy and what benefits they are seeking in the marketplace.Why do we study buying behavior in Marketing and what have we learned? In Chapter Three we explored the different types of markets and the process of dividing those markets into smalls portions called market segments. this dimension relates to benefits sought and expected use by the customer marketing strategy . This is not surprising considering the fact that we live in a consumption-driven culture.dividing the market into different portions based on differences in customers demographic dimensions grouping potential customers on objective factors. In this chapter we examine a few basic concepts related to buying behavior. We will focus on the basic constructs accepted today in the study of buying behavior. more has been written about buying behavior than in any other area.

if a college student buys a new CD player for his car or a new sports-coat. Involvement can be defined as the personal importance and social significance of the purchase. we often don t go through all of the steps. and new houses (all three of these would be high involvement) and while we frequently buy low involvement products (coffee. The consumer thinks about options she may have to remedy her situation (internal search). her car has had major mechanical problems for the last two months.Most studies of the decision-making process in marketing have used an adaptation of the scientific method. soft drinks. mechanistic process above. . because many products we buy fit into that area. Involvement is often classified as high or low . We would add medium to the categories. For example. Alternative identification and evaluation she has some ideas about what alternatives she has and how to approach them. TV. Post purchase evaluation the consumer experiences her choice and determines if she is happy with it. And then she seeks external sources of information such as friends. chewing gum) we also buy many more durable products that can be considered medium involvement. learning this approach is worthwhile for you so that you will have a general framework to understand your purchasing behavior and the purchasing behavior of others for purposes of marketing research. As a student. She now must compare and contrast the options she has. Choice and purchase based on this process of consideration the consumer now purchases the most attractive option she has identified. laser surgery for vision correction. there are exceptions to the rather rigid. Information search internal and external. Feedback learning for future consumption behavior the consumer remembers how she feels about her purchase and makes note of it for future reference (internal search). For example. and the internet. Of course. This decision-making process is as follows: Problem recognition the consumer recognizes a problem. both of these would probably be considered medium involvement because they are in the medium price range as far as his budget is concerned and there is some level of risk surrounding the purchase. newspapers. This fact sometimes has to do with involvement . For example. First. The importance can be a function of how much the product or service costs and whether there are any social risks involved. we rarely buy new cars.

although. She also buys some makeup and fragrance. dancing. and. thus situational effects strongly impacted this person s buying behavior. Sometimes adults buy what our family bought and sometimes they won t touch what my family liked . For example. of course. This has been shown to be true in durable goods such as cars and appliances. reference groups are collections of other people who strongly affect what we buy and how we go about buying it. Usually. a female college student is preparing to go out with her friends for the evening. she wore jeans and a ragged sweatshirt. most importantly. the situation strongly impacts what are willing and able to do as far as buying behavior. as well as. a shopping trip is directed not to a specific. For example. a person s family background can impact his or her buying behavior throughout life in many ways. Often. The family is not only the most important reference group for children. She and her buds have decided to go to a club where there will be music. feel no responsibility to follow the rules thus we may engage in unorthodox buying behavior that defies classification. Situational effects are all of the circumstances surrounding our purchases that may strongly impact our decision-making process.There is also another important consideration called situational effects. go to Walmart and observe customers there. Again. think a situation in which you engaged in an impulse purchase. Just last night in the midst of studying for an exam when the same student went out with her friends for pizza at a local pizza parlor. We. planned purchase but just to see what available so while the cognitive perspective on shopping is useful. as consumers. we consider the following three as the most important overall. you won t be able to tell which is which. You will see all types of people buying all kinds of things: some of those purchases will be planned and some will be unplanned. For example. Why was there such a difference in her dress and preparation? The social nature of the two evenings was very different. there is also a lot of buying behavior that defies understanding. An impulse purchase is an unplanned purchase in which we just decide to buy the product with very little prior consideration. we just try to find a battery wherever we can and as soon as we can to solve our problem. What do you think is the most influential reference group for most people? If you guessed family you are absolutely right. The family is a membership . Reference Groups First. young men. The student decides to go to Dillard s and buy a new blouse and a pair of new dressy slacks in preparation for the night out. Group/Social Variables that impact Buying Behavior While there are many different impacts on consumer buying behavior that have to do with groups. nondurable goods like laundry detergent and shampoo. We have all had a battery go out in our car and most of us don t think of shopping for a battery until our present battery goes dead.

Incumbent in these changes in ethnicity are changes in Culture for the U. Today the ethnic composition of the U. Marines recruits people based on the attractiveness of being A U.S. Groups you would like to be a member of but are not. Thus. As our country developed in the eighteenth. If we look at the great blues music tradition of the U. is still changing. .S. the U. Ethnicity .gov/population/cen2000/c2kbr01-2.pdf. We see a subculture of music.betagammasigma. some will be groups you would like to be a member of but are not (for example. are called Aspirant Reference Groups.S. This person would belong to an associative reference group but not be a member of an aspirant reference group because in our example the fan does not really expect to be able to join the Rockies team in any official capacity. the business student honor society (http://www. introduced by the music of African-Americans and adopted by large segments of the white population. Many adopt the appearance of their aspirant or associative groups by engaging in consumption behavior to express their personal sentiment.reference group whereas other reference groups may be nonmembership reference groups.Culture/Sub culture The ethnic landscape of the U. The U. We define culture as the totality of artifacts and behaviors handed down from one generation to the next. the Proud. For example. Marine.org/) and other groups you would not like to be a member of: perhaps an example would be the winning lottery ticket losers club. Beta Gamma Sigma.S.S. An excellent overview of this important material can be found on the internet at http://www. is changing rapidly to accommodate many new ideas and ways of doing things.S. different subcultures intermingle their ideas and art forms in a ethnically diverse society. has changed constantly over the last few thousand years and that process continues. one may buy a Colorado Rockies Hat and wear in public because s/he is a fan of that particular baseball team.census. the Few. If you consider the reference groups available to you. and twentieth centuries. This brings another factor into consideration. Historically dominated by the thoughts and mores of a Western European tradition. Native Americans continually shifted geographic habitat due to weather and other human adversaries. groups to which you don t really expect membership. but still want to be somehow related to are called Associative Reference Groups and groups in which you would not seek membership are termed Disassociative Reference Groups. nineteenth. A subculture can be any segment of society that hands down its own beliefs across an extended period of time.S. different ethnic groups joined the growing population.

We will expand our discussion of attitude formation in the chapter on marketing communications. it is internally contradictory.Individual/Psychological Variables that Impact Buying Behavior Learning We. The MAM orientation to measuring attitudes is a . Many people are aware of this threat presently. population in response the Mad Cow and foot and mouth disease outbreaks in the United Kingdom (check out this website:(: http://www. Attitude There are probably more studies of attitude in the marketing literature than any other individual variable affecting consumer buying behavior. today most people do not perceive significant risks in consuming hamburger meat. Attitude formation can follow several different patterns. for a high involvement product. most consumers will probably first think about a product (cognitive stage). an attitude is simply how we feel about something. If you are apathetic about a certain product or issue. we sometimes obtain knowledge that does impact our consumption patterns for some time. that may be changing quietly across our U. We learn constantly about products and services available and adjust our consumption patterns to what we learn.org/). The most common attitude model applied in business is the belief/importance weight model also called the multiattribute attitude model (MAM). Marketers cannot assess such learning easily.S. if s/he likes the product. The stages may differ in the order they occur. learning is an important concept in consumer buying behavior. you would be well advised to continually gather information on and be aware of this trend as consumers become more aware of this threat to health. That is. a consumer normally goes through three stages when forming an attitude. purchase it (behavioral stage). as human beings are constantly learning about our environment and a portion of this learning is related to what we consume and when and how we consume it. For example. However. however. An attitude can be defined predisposition to respond to stimuli. and it would not take much to drive them away from consuming beef and hamburger meat in all forms. However. In plain English. Attitudes are usually comprised of three parts: cognitive. and behavioral. develop a feeling towards that product (evaluative stage) and then. Therefore. If you were a marketing manager for a food company. you don t really have an attitude related to it. Neutral attitude is an oxymoron. For example. you must remain aware and track changes occurring in the environment. Although as a marketing person you can t assess it. evaluative. Learning can be defined as changes in attitudes or behavior based on experience. we can use a simple approach to understand how people form an attitude towards a product or service.mad-cow.

talked to his friends. Quality = 10. service. or idea E = evaluation of attribute i I = importance of attribute i A brief example will be offered to explain this approach. He has visited several dealerships. Economy = 10. He has prepared the following list of products and his evaluation of each product across four attributes (cost. and acceleration): Saturn Ford Contour Pontiac Grand Am Cost Economy Quality Acceleration 5 7 8 4 7 5 7 5 7 4 6 8 Mike s importance weights are as follows: Cost = 40. Let us say that Mike has just graduated from college and is preparing to buy a new car. and read product reviews on the internet (external search). Acceleration = 40 ( Mike used the constant sum scale for his importance weights and the weights add up to onehundred) What is Mike s attitude toward the brands he is considering? . The MAM can be expressed in formula as follows: A = Ei*Ii Where: A = an attitude toward a product. quality. economy.simple but effective way to understand how people feel about products and services.

and soon to be graduate. it may have gained your attention because you liked the music in the ad. you are not dealing with subliminal perception. you find yourself humming the musical theme Life tastes good later in the day. Several popular writers have made considerable money on books they published warning consumers that You are being manipulated and you don t even know it. you were present by the TV to be exposed to the ad.com/articles/0397/sublim. Humans normally go through several stages in the process of perceiving meaning. attached meaning. Perception Perception can be defined as the way we experience life. For example. That is. and finally.com/ ). this is really an exciting conspiracy theory that persists in media study. While. you may see a red bottle of CocaCola and decide you are seeing Santa Claus. and retention. These stages include exposure. you as a college student. should be in possession of the facts.Solution Saturn 5*40 + 7*10 + 8*10 + 4*40 Attitude toward (Saturn) = ? Ford Contour 7*40 + 5*10 + 7*10 + 5*40 = Attitude toward Ford = ? Pontiac 7*40 + 4*10 + 6*10 + 8*40 = Attitude toward Pontiac = ? This approach to assessing attitudes is easy and can be a helpful tool for marketers attempting to understand how to improve their product offerings. Third. Marketers have been interested in perception because they are constantly trying to communicate product and service ideas to their target markets and they need to understand how that information will be received and understood. Much has been written about subliminal perception over the years. Second. However. you attached meaning to the ad. or an advertisement about a product. That is. check out the following website for research on the matter of subliminal perception before you make up your own mind: (http://www. These inputs can be new words.parascope. a new song. Research indicates that while subliminal perception exists. first. You may see a TV ad for Coca Cola (check it out at: http://www.htm. subliminal perception is not efficient at all.) . recognizing the product and the musical theme. attention. perception is how we attach meaning to all of the inputs that we are exposed to in daily living. Subliminal perception means literally below the level of consciousness thus if you can identify symbols or words in an ad.cocacola. if exposed to subliminal stimuli.

but some of the populace will perceive a health risk (physical risk) because they have heard that aspirin is dangerous.org/ ) Organizational Buying Behavior Organizational Decision-Making . a threat to one s self-esteem d.com/search?p=hoaxes&n=25 http://hoaxbusters. You can see that marketers want to understand not only how they can use risk to make their products more appealing for purchase (for example. b. in the consumer buying behavior area. one can see how companies live in fear of hoaxes that will cause consumers to avoid the company s products (check out these websites to see some present hoaxes in our society. you are familiar with each type of risk as a consumer. Also. (http://search. Risk Risk. In marketing. There are several types of risk that have been identified in research.yahoo. can be defined as the potential negative consequence of a certain action including buying or using a certain product or service.Perception remains an important construct in marketing because the study of perception can give information to marketing communications professionals about when and how people receive and make sense of information. Psychological risk threats associated with some psychological construct. Physiological risk . Social risk a threat to one s social standing or social comfort Surely. we usually use the term perceived risk because the person or persons we are trying to understand determine the amount of risk. We will cover four kinds of risk: a.ciac. for example. we can advertise that there is no risk associated with taking aspirin for a headache. home security systems). That is.associated with threats to one s health Financial risk risk associated with the loss of economic wealth or financial security c.

we would suggest adding a stage to the consumer decisionmaking process covered earlier in this chapter. and don t necessarily justify separate treatment. though s/he may or may not have any impact on what is purchased. Thus. organizational purchase decisions are frequently made by a group of individuals. One might argue that families are similar and we would agree. Organizations often solicit bids from an approved bidder list or publish specifications related to the product they are seeking to obtain. the group decision-making approach is consistent across most organizations whereas families may be less oriented to this form of decision-making at least for many decisions. Most families don t consider any structured approach to their decision-making as a group and many organizations find it necessary to codify many details about how purchase decisions shall be made. but s/he will still have an impact on the purchase decision. Again.Organizations often make decisions in a very similar fashion to consumers. marketers must strive to understand how organizations in their chosen markets reach the buying decision. are called the buying center. However. In fact. Government agencies are legend for incredibly complex buying approaches. First. Second. These people. taken as a group. there has been substantial disagreement about whether the differences in consumer decision-making and organizational decision-making are adequate to justify separate models of decision-making for the two. We agree that the differences are small. e) decider this person is responsible for the final determination of what will be purchased. b) user this person will be responsible for operating the product that is bought or consuming the service that is purchased. A list of the roles usually existing in the buying center might include: a) initiator this person first recognizes the need for the product or service and may or may not have a say in the purchase decision. First. In considering the organizational purchase process we would recommend that the student remember two differences between consumer decision-making and organizational decisionmaking related to purchasing. However. this person may or may not have a say in what is purchased. the decision-making process for organizations is certainly more formalized. c) influencer this person s role may be only tangential to product use. we do want to point out a couple of important differences that exist in a fairly universal way. there has been considerable research on the roles assumed by people who impact the buying decision. . Second. d) buyer this person is responsible for obtaining the product.

and organizational culture also are important considerations in organizational buying as well as consumer decisionmaking. organizational relationships and organizational culture. perception. Many organizations that aggressively advertise such programs haven t really .You should become familiar with these roles and be able to understand how they would be expressed in a group-buying scenario. Individual/Psychological Variables that Impact Organizational Buying Behavior While there has been a limited amount of research regarding these variables. the amount of research in this area is relatively small. Sadly. Customer Relationship Management (CRM) This area of organizational marketing is one of the most vibrant. Group/Social Variables that impact Organizational Buying Behavior While there are group variables that affect organizational buying behavior. such programs often are not really directed at customer satisfaction and relationship building but only represent something else to advertise that may increase sales. Certainly. While this catch phrase has gained added space in trade magazines and academic journals. may have a strong impact on what is ultimately purchased. There are some studies on perceived risk that indicate risk is an important personal consideration for industrial buyers as supported by the saying No one have ever been fired for buying from IBM. this initiative is often lost in promotion without creation of a service delivery system to ensure that customers are treated as number one. attitudes. Other individual/psychological variables including learning. some companies will see this as another opportunity to be sales driven and use the concept as a way to promote their customer care programs. for example. intriguing areas in today s marketing landscape. There is still a lot to be learned in this area. You should also be able to explain why a marketer would be interested in who plays what role. While many marketers have realized for years that the key to long-term success is at least in part customer knowledge and customer care. the average businessto-business marketer doesn t really have easy access to much knowledge in this area. However.

Make comments on each stage of the process. Give an example of a low involvement. Otherwise. 6. Learning always changes behavior. Write a one-page essay on your thoughts about how you would classify your behavior and orientation to products you buy? 2. Agree or disagree and explain. 4. due to a broken radiator hose. Can you think of situational effects that would make the purchase of a new sports-coat a high involvement purchase? Explain. Chapter Four Exercises 1. Identify the principal type of risk involved in each of the following: . and a high involvement purchase you have made recently. 7. 9. many businesses in organizational markets have realized the importance of relationship building and have made this a priority in their business planning activities. it is not learning and not important to marketers. Use the consumer decision-making process to describe a recent purchase you made. a medium involvement. Explain how situational effects might impact a person s decision-making in each of the following examples: a) Mark has a job interview on Friday and is wondering what to wear b) Janie is driving across Utah to visit her parents and.done the research and made the commitment necessary to make the programs successful in the long term. Describe how your decision-making behavior was different for each purchase. 3. her car overheats on the interstate. c) The Marvin family is headed to Texas to visit relatives and wants to stop at a restaurant for lunch. 5. 8. d) You have a first date tonight with a person to whom you are very attracted and are thinking about where to buy dinner. Identify and fully describe one of each of the types of reference groups discussed in this chapter. Compare and contrast consumer-buying behavior and organizational behavior. However.

Adam buys a new mini-compact car and is not sure about what his friends will say. Glenn misses a marketing exam and fails to contact anyone beforehand.the processes people employ to obtain and use various products and services. Chapter Four Glossary consumer behavior .the totality of artifacts and behaviors handed down from one generation to the next learning changes in behavior based on experience perception the manner in which we experience our environment attitude the magnitude of either positive or negative feelings about something risk the potential negative consequence of a certain action including buying or using a certain product or service buying center the group of individuals who play a role in the process of acquisition of goods and services for the organization Customer relationship management the overall process of establishing and sustaining positive interactions with the organization s various stakeholders Chapter Five How companies manage marketing research The meaning of marketing research . Jamie invests her tip income every week in a local .making the approach that a consumer employs in arriving at a purchase decision consumer involvement .com company.a) b) c) d) e) Janet undergoes a lab test for a health problem. Jerri decides to take a vacation and plans a trip to Africa.collections of other people who strongly affect what we buy and how we go about buying it culture .the personal importance and social significance of the purchase reference groups . consumer decision .

One marketing research project may entail questioning thousands of people by use of a survey instrument while another project may only involve meeting with a few present customers for breakfast. Note that the outcome of marketing research is enhanced decision-making about needs and wants in the marketplace and how to meet those needs and wants. We will define marketing research as all techniques used to provide information that assists the firm in all of its decision-making processes relevant to customers or clients. The marketing research department is responsible for providing this understanding. As we have discussed a length. but it is not. This results in a lack of fresh thinking and innovative approaches. It is very likely that anyone reading this book has been a respondent in some kind of marketing research study. becomes separated from the R&D function and those in the organization responsible for new product conceptualization. marketing research is pervasive. there is presently no . it is aimed at giving the marketing research function the breadth and depth of latitude that it needs to operate effectively. This may sound simple. As the internet continues to develop there will be a trend towards more investment in marketing research. and it is often difficult for the customer to express what those benefits are. marketing research should never be seen as a separate entity isolated from the rest of the marketing function or from the other functional areas of the firm. ironically. marketing research departments often lose what creativity they had and begin to focus on a known set of techniques with which marketing research personnel are comfortable. Types of marketing research Marketing research approaches are varied. but data analysis and presentation to management about customers and other issues. There are many different types of marketing research projects that require various types of knowledge and academic background.Today. Often very creative techniques are needed to truly understand what the customer is seeking and how to deliver that solution on a profitable basis. Also note that marketing research is responsible for not only data gathering about customers. Approaches to conducting marketing research range from quantitative to qualitative in nature. It is unlikely that many readers of this text will ultimately have marketing research as their primary employment so we have presented marketing research in a non-technical manner. a marketing orientation requires that the organization study and understand what will bring its customers satisfaction. This will be caused by the increasing isolation of the individual in our society and the corresponding need to access more information through impersonal versus personal methods. Quantitative marketing research is composed of sophisticated techniques that require substantial competence in descriptive statistics while qualitative marketing research may require a broad knowledge of psychology (the study of individual behavior). However. and social psychology (the study of individual behavior in a group). Unfortunately. The marketing research function also. While this definition is very broad. If this happens. sociology (the study of group behavior). Customers seek benefits.

customer-1st. who are not well trained or educated in the discipline and do not have sufficient experience. Qualitative Marketing Research Qualitative research is less involved with numbers and usually provides a closer touch with the subjects in the research project. there are many unqualified individuals and organizations that sell marketing research services. A common use of the observational method is watching children play with prototypes of toys to understand which toy will be most popular.bmiltd.com/. The reasons for this are that qualitative research is usually less expensive and faster to perform than quantitative marketing research. Quantitative Marketing Research Types of quantitative marketing research include surveys. is growing much faster in popularity.required accreditation for a person to perform marketing research. A moderator leads the discussion and helps keep discussion lively and focused around the research questions. The Marketing Research Process . Mechanical observation is also used at retail stores to count the number of customers (sometimes with a simple turnstile) and in other public areas. parks for example.com/cgi-bin/nwscape/shoppers/welcome. The moderator creates or is furnished with a discussion guide that outlines the areas to be explored in the focus group. thus. Observational studies involve watching respondents while they are engaged in some activity.com/). to name only a few. also called mystery shoppers. audience measurement for different types of media. http://www.nwscape. http://www. the quantitative approach has given way to qualitative marketing research in many cases.) Secret shoppers. and store audits. Although marketing texts usually devote considerable attention to these approaches. particularly qualitative marketing research. Types of qualitative research include focus groups and observational studies. qualitative research. at present. are often used to help obtain a real customer s assessment of a store s service quality (Check out the following websites: (http://www. Thus. Focus groups gather a small number of respondents together to discuss topics yielded by the research questions.

a marketing research project is a waste of resources. d. c. results on which we can make reliable decisions. we need to start with identifying the problem or opportunity. the researcher(s). Although there are exceptions. We say this because too often the findings of a well-executed study are rejected . create a research design Meet with client(s) When beginning a marketing research project. and others involved in the project. We recommend a process that includes these steps: a. Another meeting is usually required to define the problem or opportunity clearly enough to create research questions. e. b. we must follow a consistent process. this will often require a personal meeting with all of those involved in establishing the project including the client. meet with client(s) jointly explore problem or opportunity to be researched create research questions d. c.In order to obtain useful results. that is. The initial meeting is often not sufficient to establish the problem or opportunity to be researched. Establish a research project Conduct the research project Analyze the findings of the research project Summarize and Present the findings of the research project Assess the findings of the research project Establish a research project This step will usually involve four steps: a. based on the research questions. If a client or company manager already has the answer (has already essentially decided on what the findings of the project will be). It is imperative that this initial meeting be approached with an open mind and no preconceived notions about the answer. b.

For example. A research question is a statement of what queries the project will seek to answer. It is important to realize that divergent thinking will play an important role at this point of the research process. likely causes identified in client meetings included aggressive efforts by a new competitor. For example. this does not mean that the question will be useful for our study. This is a symptom. if one says that sales are down in the southeast region. Often. the researcher will be able to formulate research questions. clients often bring a symptom into consideration as the problem. Thus. Questions also need to be valid. Formulating dependable survey questions is a highly technical and demanding process that requires extensive training and experience. if we ask several people the same question and get very similar results. The reason we break meeting with clients into a separate step is because there will often be several meetings. including the problems and a likely solution to the problem.because it found the wrong answer. several survey questions will usually be required to address one research question. Clients will often have lots of ideas about the project. we can say the question is reliable. after meeting with the client. the researcher may decide not to take the research project because the client is not ready to pursue the project. In our example. Create research questions After the researcher and client have agreed on problem or opportunity definition. Validity is the ability of a question to measure what it purports to measure. the research questions may be stated for the southeast region study as: Research question 1 what is the impact of our competitors on our sales? Research question 2 what demographic changes have taken place recently? Research question 3 have there been changes in perception of our product? Note that the research question is rarely synonymous with a survey question that is. This stage is a data gathering stage for the researcher. this is the stage that the researcher must avoid seeking closure and keep an open mind about how to characterize the problem or opportunity under consideration. Reliability is the ability of a certain question to gain consistent responses over asking the same questions several times. . We have no way of estimating how often this happens. demographic shifts in the population. Survey questions should be both reliable and valid. not the problem. The problem is the cause of the drop in sales in the southeast so the researcher must search upstream in time and events from the sales decline. However. but we can say it happens often. and the possibility that our product is outdated in the eyes of the marketplace. However. That is.

Professionaly librarians are highly trained and are usually happy to be of assistance. which is rare. we can collect the data our self to address the research questions. The internet contains huge amounts of secondary data and free. For example. the research design was changed to include a series of focus groups. in one case. Research designs can be qualitative or quantitative or include both types of research in larger projects. the data collected are called primary data. a question must measure what the researcher claims it measures. Male models interview all females entering the store. The mail survey was deleted from the research plan. When we do. this data is called secondary data. assume we are attempting to ascertain peoples attitudes toward Dillard s Department Store. to be reliable a question need only produce consistent answers and to be valid. Marketing researchers should always explore sources of secondary data before they decide to collect primary data. often clients must choose only one or two of the most compelling research questions to address using either a quantitative approach or a qualitative approach. and a mall intercept survey.For example. When we use data for decision-making based data that has been collected by someone else to address different research questions. both qualitative and quantitative approaches should be used to answer the research questions. published data can be obtained free with the help of professional library personnel. The results of the survey indicate that Ninety percent of those surveyed find the Dillard s shopping experience either Extremely enjoyable or Very enjoyable. Primary and Secondary data Collecting data can be done in two ways. Create a research design The research design is the approach we use to answer the research questions. The company had already created a survey form to be sent out though mail. Often the client will have already decided on a research design without considering what the appropriate one would be. Answers appear at the end of the chapter. When the budget will allow it. Alternatively. After some consideration of research questions. A meeting was held between the candy company and a marketing research company. a small candy manufacturer had decided it needed to research the market. In . and female models interview all males entering the store. Were the findings of this survey reliable? Were they valid? Remember. We have male and female models interview customers as they enter the store. First.

(see the following website: (http://dir. in a probability sample we can generalize our results to the other students on campus (the population of interest). A census is taken when we attempt to collect data from all possible respondents in a specified population.com/) and the Dow Jones Company (http://www. once we agree that we need to gather data from a limited number of organizations or individuals. For example. probability samples are much more complex and expensive to gather. Thus. for example. we must determine how they are to be chosen for the sampling process. every ten years. Sampling and Selection of the Sample Often marketing research studies require that data be collected through the process of sampling. if we draw a sample of students at a university to determine their attitudes toward raising tuition in order to build a parking garage on campus. the U. On the other hand. For example. fifty females. Types of nonprobability samples are judgment samples (the interviewer as asked to apply his/her own opinion as to what respondents fit the profile of people to be interviewed). That is. and fifty males). probability samples provide more powerful prediction abilities. quota samples (the interviewer is given clear direction regarding how many people of what type to interview. Two such firms are Standard and Poors (http://www. However. However.com/). and convenience samples (the interviewer selects people to . If we just meet students on campus and do interviews. secondary data research often begins with the examination of the NAIC (formerly SIC) codes relevant to the companies of interest in the study. Results derived from probability samples can be applied to the remainder of the population of organizations or people in the population of interest. These are only two of many organizations that provide such services. Results derived from nonprobability samples cannot be applied to the remainder of the population of interest. Many private reporting organizations provide information about industrial organizations based on the NAIC. Census Bureau attempts to count every person in the U. this would be a nonprobability sample and would not necessarily produce results that would predict how most students and others on campus feel about the parking garage.S. sampling is collecting data from only a portion of all possible respondents in the population of interest.standardpoor. if we collect a nonprobability sample.S.yahoo.organizational marketing.com/Reference/Standards/North_American_Industry_Classification_System__NAI CS_/).dowjones. Note this has to do with HOW the sample is selected. the responses gained only apply to the students we questioned in that sample. There are two types of sampling: probability sampling and nonprobability sampling.

offers a free statistical package on the internet at his website: http://openstat. In the same spirit as this ebook. SPSS.htm) or a similar statistical package is often used to perform the analysis necessary for this step.) A simple probability sample is one in which each subject in the population of interest has an equal and known probability of being included in our sample. parametric. i. . one for which we can apply basic descriptive statistical techniques as taught in business statistics courses (for example.interview based on the easiest ones to interview).ats. The statement of the research design should be sufficiently complete to allow a qualified. sometimes. The statement of the research design should provide guidance to the researcher about how the data should be organized and classified.e.homestead. etc. Analyze the findings of the research project This stage is comprised of organizing the data gathered and carefully ascertaining what the data indicate. (statistical package for the social sciences websites http://www.com. classifies and analyzes the data. http://www. There is often some pressure on the researcher to find the right answer as we indicated above. the researcher must remain objectiveas s/he records. formerly a professor at Iowa State University. However. Professor Bill Miller. as in the case of samples there is not even a guarantee of that! Conduct the research project The research design should provide good guidance for performing the research. As you already know.. but for the sake of integrity. Especially for quantitative studies. when we decide to draw a probability sample.spss. statistical software is often used to facilitate activities in this stage of the project.com/. independent researcher to execute the research study by following the statement of research questions and research design. that is. Can you think of a way to draw a sample of students at your university or organization that would have these two characteristics? Selection of nonprobability samples only requires that the people interviewed are in the population of interest and. One can see that the selection process for nonprobability samples is usually unsophisticated and straightforward.edu/at/software/stat/sas/sas. SAS.ucla. The researcher must be careful to be organized and remain objective during this stage. normal distributions. research projects can be quantitative or qualitative in nature or even involve both kinds of research approaches. z scores.

Conducting research projects in countries other than the U. marketing research may be limited or culturally unacceptable. flexibility or to what extent is the interviewer able to adjust his/her questions to the respondent . A. Many of the major advertising agencies also conduct major consumer and organizational research (see http://www. First.com/. for example). They know how the use of jargon is often used to obfuscate the facts and this may indicate a lack of preparation on the part of the presenter. often requires different research methods and may entail a total revamping of the research design. face-to-face surveys (personal interviews). this is particularly important when presenting a report to clients who are highly intelligent and educated.html. When summarizing and presenting a research project. In other countries. Many companies in the U.jwtworld. However.com/innovation/launch.Summarize and Present the findings of the research project After the data are analyzed. There are three primary kinds of surveys: mail surveys.S. For example.S. and a growing category. The temptation for the researcher is often to rely too heavily on statistics and this can very rapidly lose the attention and interest of the client. as well. The Marketing Research Industry There is a broad range of marketing research services available throughout the world. and http://www. the best guide is to keep it simple and accessible to the reader of the report. provide marketing research services and data.S. Ironically. Nielsen (http://acnielsen. which presently are quite similar to mail surveys in terms of advantages and disadvantages.com/) is one of the largest. if not the largest organization in the U. telephone surveys.S. surveys remain popular. Use of such terms as a two sigma range only succeeds in confusing the client and very often over-emphasis on jargon can alienate the client.C. We often categorize the different types of surveys on the three dimensions. Brief discussion of types of surveys While focus groups and other qualitative procedures are gaining popularity. specializing in marketing research. tend to be the most researched population in the world.saatchi-saatchi. we in the U. the researcher must draw conclusions from the findings and present the findings in a comprehensible manner. internet surveys.

html. Marketing research projects. As time goes on.depending on circumstances. not on demographic criteria but on criteria related to their employment. Using technology to record learning from marketing research projects Too often.wizard. particularly the mall-intercept interview format in which interviewers are asked to solicit respondents from the general population of people who visit shopping malls. that is. These approaches will remain popular into the foreseeable future although such intercepts are a nonprobability method of gathering data. if well designed and executed. what proportion of those whom we contact will ultimately participate in our study. However. Telephone surveys are still popular but are becoming more difficult to execute due to growing telemarketing techniques that many consumers attempt to avoid. telephone surveys will become more challenging to conduct. And finally.isc. As more and more consumers block their phone lines from solicitation. Firms engaged in organizational marketing can make use of this same concept by implementing trade show intercepts. Trade show intercepts are similar to mall intercepts in practice except that these interviews are conducting during a trade show and respondents are first qualified. surveys that utilize the internet as a medium for gathering data will increase. we also look at response rate. Surveys can be easily adapted and completed on the internet making the data collection process relatively simple.hot-topics. more specialized. Face-to-face surveys are still very popular. However.org/ds/new-survey. that is.com/tellus. but may provide the lowest cost per completed survey. telemarketers often adopt a foot in the door approach by which they first claim to be doing a marketing research study in order to gain a segue into a sales presentation over the telephone. As adoption of the internet as a method of communication continues. That is.com/wwpr. knowledge gained from a marketing research study is lost as soon as the project is presented and a decision is made based on the study. http://home. An exception would be when the study involves those who are intimately related to internet operation and use such as Webmasters. Second. how much will it cost us to acquire each response to our survey. A few interesting websites that maintain data on surveys done regarding internet use are: http://www. cost. at present it is difficult to verify the background of respondents and this reduces the attractiveness of the internet for data collection aimed at gaining attitudes toward products and services. this depends on the research questions and how straightforward the survey questions are. Mail surveys are usually the least flexible. websites that keep track of internet usage. cannot technically be generalized to the overall population of interest.htm). and thus. there will be many.html and http://www. Leading companies . should be stored and made readily available for use in the future.

The information manager who enters the current environment with expectations that his fellow workers will avidly adopt and use the company intranet. However. as the reader already knows. and describe why each is important in performing marketing research.often catalog research projects on their intranet so that future decision makers will have past marketing results available. this does not necessarily mean that other people in that organization will actually read and make use of those study results. Write a one-page summary of what you found. reviewing all posted materials for the sole reason of learning more about the environment should probably adjust her or his expectations. it is often much more expensive NOT to perform. to be realistic. Therefore. However. Write up the results of the focus group explaining what you learned from the focus group. Focus groups are a growing technique used in qualitative marketing research. This practice enhances organizational learning substantially. Write a one-page summary of what you found. making note of the more interesting websites you visited in the process. Although performing marketing research is expensive. If a study does not have the potential to improve decision-making. What problems did you have in the process? Do you believe this method is useful for gaining useful information for decision-making about customers? Compare and contrast reliability and validity. Discuss this statement and explain what the person who made the statement may mean. Lessons can be learned by reviewing past research that was flawed. The survey can ask . Discuss this sentence and explain what the speaker means. Based on a problem/opportunity statement. Apply the marketing research process described in the chapter to outline how you would assess the reaction of consumers to a new chocolate bar. meet students on campus and ask them to participate in your survey) by creating a brief survey form (one-page. there is more information in our contemporary environment available than humanly possible to read and understand. Perform a college intercept survey (that is. Do a search on the internet using the term international marketing research. marketing information managers must accept the fact that most organizational learning that takes place will probably occur through information catching rather than information seeking. create a discussion guide and perform a focus group with some of your fellow students. it should not be performed. five or so questions). Compare and contrast quantitative marketing research and qualitative marketing research. Chapter Five Exercises Do a search on the internet using the term marketing research. making note of the more interesting websites you located.

about anything from campus life to favorite recreational activities of students. attitudes towards shopping at Dillard s were not being measured in the study. if we say the question measure peoples attitudes towards our product. does it measure attitudes towards our product and not attitudes toward the interviewer. Why? Because. Search the internet using the keywords mystery shoppers and secret shoppers Check out the website http://www. given the research design. Describe how you believe this marketing research company derives revenue for its business? Describe who you believe would be the organization s customers. or store in which our product is sold? probability sample data gathered in a way that makes findings in the data applicable to the remainder of the population of organizations or people in the population of interest nonprobability sample data gathered in a way that fails to make findings in the data applicable to the remainder of the population of organizations or people in the population of interest secondary data information collected by someone other than the researcher to address different research questions primary data information gathered by the researcher to address specific questions of interest to that researcher focus group a qualitative data gathering technique in which a small number of people are brought together to discuss a series of questions of interest . we were measuring attitudes towards the interviewers. Unfortunately. Chapter Five Glossary marketing research the process of obtaining information with which to improve marketing decision making marketing research process the series of steps followed in order to ensure the validity and reliability of information gathering processes research question . if we ask several people the same question. Summarize your results and write up a brief overview of your survey experience.marketscore.a statement of what general areas of inquiry the project will seek to answer research design the plan formulated to answer the research questions questions reliability the ability of a question to produce consistent responses of separate trials that is. Note on Dillard s Survey : The survey conducted at Dillard s was highly reliable but not valid. do they tend to respond in a similar manner? question validity the extent to which the question measure what is purported to measure that is. most all participants will enjoy shopping at Dillard s and respond accordingly! However.com/.

In this chapter we will discuss the following areas related to managing new product development (NPD): Ø Ø Ø Ø the ideal climate for NPD the NPD process pitfalls in the NPD the role of product positioning in NPD The ideal climate for NPD There are several characteristics that help describe an ideal climate for the new product development process. Goal clarity the objectives of the task are jointly understood Resources adequate economic and non-economic support for the task . created and commercialized. Distribution. intended and unintended. Price. In this chapter. advertising and personal sales presentations). While the process is similar for consumer marketers and organizational marketers. We will define product as all things the buyer receives in an exchange. Our emphasis in this chapter will be the product or service that the organization markets and how products are envisioned. we will review the process of product development and how companies manage that process. bad and good. Products include all things the buyer receives including the physical attributes (a new car) and the intangible attributes (a warranty and a financing contract).Chapter Six How do companies decide what products and services to market? In this chapter we begin a series of chapters on the components of the marketing mix: Product. b. there are significant differences in how different companies approach this function. concept development) and downstream activities (for example. and Promotion. It is sometimes helpful to list the main (sometimes called salient ) attributes for purposes of performing both upstream activities (for example. a. A list of these characteristics follows.

c. d. e.

Encouragement sincere emotional support for the task Freedom the ability to explore whatever directions of inquiry that are needed Integrity management does what it says it will do

Stages in a typical new product development process (NPD)

The NPD is basically an exercise in idea management. Thus, the process proceeds from stage to stage. However, frequently a new product team may skip around stages when playing with a new product idea.

idea generation conceptualize a list of new product ideas idea assessment evaluate the ideas based on a previously created list of criteria. In this stage ideas that are judged not to meet the criteria are removed from consideration. concept testing the idea is assessed through discussion with potential customers or users. Or, representatives of the organization explore the product idea and assess its overall potential (No physical product yet exists). idea choice one or more ideas are selected for initial investment idea prototype development an initial working model of the product is created for testing and evaluation final version development a model of the final version of the product is created commercialization the product is put into production and the distribution of the new product to customers begins

Each stage should feedback information into the previous stages and this information should be organized and retained for future use.

Idea generation

The idea generation stage is the first stage in the NPD. However, in an organization with a healthy environment for creative thinking, new ideas abound, and only rarely is it necessary to have a formal meeting to generate ideas. New ideas flow from every day activities within the organization.

Ideally, idea generation should be fun and naturally occurring. This is why a formal meeting for idea generation should be somewhat of an oxymoron in healthy, creative organizations. There are many creative problem-solving (CPS) techniques that provide extra stimulation for generating ideas for new products and services. The Couger Center for the Study of Creativity and Innovation has applied over thirty CPS techniques in organizations with success. CPS approaches fall along a continuum from intuitive to analytical. For example, a commonly used analytical CPS technique is the 5 W s and H technique. Rudyard Kipling even wrote a poem about this technique. The wishful thinking technique is a more intuitive CPS approach. The appendix to this chapter describes how to use each of these two techniques.

Idea assessment

Most organizations have extensive guidelines concerning the criteria for new product ideas. Some typical criteria are: potential estimated demand for the product, cost/revenue expectations, fit with the organization s business and marketing strategy (you may want to go back and review compatibility in the discussion of requirements for effective segmentation in Chapter Three.) Many product ideas may not match with the firm s current product line and there should be guidance about what to do if this happens. Some organizations broker or sell new product ideas that don t entail serving current or planned future customer segments.

Creative ideas are judged on two criteria: Novelty and Value (or utility). We have found that business firms primarily put more importance on the expected economic returns (value) of a new idea than whether the idea is particularly novel or new. However, in a context of the arts, this emphasis is usually reversed. That is, in the arts, judges often look to novelty first and value later. This point brings about an underlying problem in judging new ideas. Novelty can usually be judged fairly early on, whereas, value is sometimes difficult to assess for some time.

In order to have a steady flow of new ideas, organizations must establish a clear understanding with personnel responsible for new product development how these two dimensions will be assessed.

Concept testing

In this stage, employees play with the idea and have fun considering its potential. The rationale underlying concept testing is that organizations are much wiser to explore the idea thoroughly before actually building a physical prototype. Often the Five W s and H technique,

described in Chapter Eleven, can be helpful in fleshing out the new product idea. If customers are involved in this stage, projective techniques can often be used to illicit the opinions of customers about new product ideas without asking the customers directly.

We have mentioned two types of thinking: convergent and divergent. Convergent thinking is the type of thinking with which most people in the U.S. culture are most familiar. In this approach to thinking the mind or minds of those involved follows a linear process of reasoning ultimately arriving at a point of conclusion. Divergent thinking is quite different in that it requires the participant or participants to play with ideas going off in unexpected directions. DeBono is well known for coining the term lateral thinking which is a type of divergent thinking (see: http://www.edwdebono.com/ and review DeBono s Six Hats Method ).

Note that when involved in the ideal approach to creative thinking, people feel they have time to play with ideas and forget about hard work or the expected conclusion. This fact might trouble some managers, but the endeavor is usually well worth the time expended. Particularly, in the U.S. we constantly and incorrectly equate hard work with no fun and something to be feared or dreaded.

The NPD process should begin with divergent thinking and then apply convergent thinking with a careful recording of all new ideas as the process proceeds.

Unfortunately, in the U.S. culture, people who are expert idea destroyers are often rewarded informally and formally in many organizations. That is, in our culture there is often more reward for observing what is wrong with an idea, rather than stating what right about it. Many great ideas with considerable positive potential are rejected every day in organizations, not because the idea isn t any good, but because people in the organization are more oriented to idea destruction than idea construction

Idea Choice

During this stage, the organization decides where its resources are best invested. A multiattribute model similar to the one we discussed in chapter three is often used to make such decisions. The major criteria for choice are listed and an importance weight is assigned to each attribute. Then competing ideas are assessed on this basis. Obviously, this process requires a healthy climate for creativity and innovation within which employees can let go of personal ownership of ideas and judge the ideas on an objective basis.

Idea prototype development

During this stage working models of the new product are created to assess the feasibility of mass production of the product. We should note that the same activity could be engaged with services. In fact, it is easier with services, usually, than with tangible products. For example, if I restaurant is in the process of developing new menu items, it can prepare different variations of the items and let the restaurant staff sample the items. In some cases a restaurant may maintain a panel of expert tasters comprised of current customers to assist in determining which new dishes to put on the menu.

Final version development

Because learning takes place in each stage of NPD, a final version of the product is created to assess whether or not to take the product into the full commercialization stage. For example, in our restaurant example above, one can see that a trial run of preparing dishes from supply to delivery and sampling should take place to identify possible bottlenecks and problems in the process before an item is adopted for inclusion in the menu.

In the case of physical products, this stage is usually worthwhile to identify possible problems but also to assess whether the organization should make a commitment to full commercialization.

As the reader is no doubt aware, companies often adopt a test marketing approach, which in many ways is the same of final version development except that test marketing entails a trial run of the total marketing mix (note the following website that performs new product tests for clients via the internet: http://www.product-testing.com/).

Commercialization

After the organization has refined its production and distribution systems, it only remains to enter the commercialization stage. This stage usually is implemented in small increments in order to further refine all systems involved in marketing the new product or service. A notable exception is when a firm seeks full-scale commercialization as soon as possible with its product or service.

Examples of this strategy include new products for the cinema and products that are low in uniqueness and thus will be copied quickly by competitors if initially successful.

Common pitfalls in the NPD Process

Various pitfalls can occur during the process of new product development. An easy way to identify these barriers to new product development is to apply a CPS technique called the problem reversal technique and reverse the characteristics of an ideal climate described earlier considering the outcome of any of these characteristics being absent in the organization. The following list may help explain how an absence of these characteristics can discourage new product development.

a. Lack of Goal clarity the objectives of the task are not jointly understood, so people in the process are confused and disagree about what they are expected to accomplish b. Lack of Resources there is inadequate economic and non-economic support for the task so that the NPD process is doomed from its beginning c. Lack of Encouragement management does not provide sincere emotional support for the task thus employees on the NPD team feel unconnected and neglected by management feeling that no one values their activity d. Lack of Freedom absence of the ability to explore whatever directions of inquiry are needed. Members of the NPD team constantly feel restricted in considering novel approaches to problem solving because they may be seen by others as not relevant and too playful e. Lack of Integrity management repeatedly fails to follow through on promises made, thus leaving members of the NPD team frustrated and neglected this if often the cause of total shutdown of creativity of the NPD team

Several roles are commonly adopted on new product development teams. Unfortunately some of these roles are counterproductive and should be purposely deleted from the process. Although there are many different possible roles in the idea generation stage of the NPD, we will identify and discuss a few of the most common roles:

Positive roles: enhance new idea generation and product development

Willie, the wild idea man lots of ideas, likes to have fun, gets bored easily with details

Inga, the analytical constantly asks questions such as exactly what do that? , How would that work? Edith, the encourager may often say Yeah, that is a great idea!

you mean by

Pam, the peacemaker unconsciously reduces conflict by focusing on ideas, not people Otto, the observer says very little but is engaged in the process and has many ideas which must be actively drawn out by others

Negative Roles: discourage new idea generation and product development

Doubtful David fearful, always hesitant to approve of a new idea Serious Sandra has trouble with Willie s glee and Inga s constant questions, constantly says, Okay, let s get to work and stop playing around Patty the parent similar to Sandra but feels compelled to take the group in hand and manage it believes she is responsible Nasty Nick - never approves of anyone s ideas but his own. Always has a snide comment about other peoples ideas, often offered as humor War Story Wally always has a story about how we did it back then

Of course, all of the positive roles are nice to have on a NPD team. However, Doubtful David, Patty the Parent, and Knowing Nick have no legitimate place on an idea generation or even NPD team. The roles of David and Wally can be tolerated if other team members can cope with them.

These roles or roles similar to them tend to be present on most new product teams and can either facilitate the process or retard it.

Organizing for New Product Development

Just as everyone in the organization is responsible for customer satisfaction, everyone in the organization should be responsible for new product ideas. The task of conceptualizing ideas about new products should not be reserved for the few people who are members of the NPD teams.

Mercedes-Benz. vitamin enriched versus all natural (is this segmentation based on lifestyle? ).Primary success in managing the NPD Process has been realized through the use of Cross-functional Teams. These groups are comprised of people with different educational backgrounds and different organizational areas. a traditional benefit sought with new cars is personal safety. Whether you realize it or not. For example. some cereals may encourage overall regularity like bran cereals. think about breakfast cereals. as well as. Do a keyword search internet using product positioning and perceptual mapping. Then. For example. still another segment. One new product design team in the car industry sought out and hired as a consultant. and more challenging to conduct at the same time. you already have a rich understanding of product positioning through your everyday activities as a consumer. if someone says luxurious and expensive. Breakfast cereals are available in many different types: sugar-added/no sugar added (is this segmentation based on benefits sought? ). a retired U. non-related areas. The role of product positioning in NPD Product positioning can be defined as the image of a product in the mind of the target customer in relation to competing products and other products of the same company. marketing. if someone says Mercedes-Benz you might think luxurious and expensive. Air Force officer who had spent his career in aircraft escape systems to stimulate the team s ideas about new features in car safety. Lexus. Thus product positioning is a critical part of understanding how to focus the new idea generation process. you might respond by saying BMW. For example. We often think in terms of new benefits we can provide customers or new ways of providing those benefits. and finance. which make them more productive. manufacturing. or Cadillac. For example. it also introduces the potential for a rich cauldron for the creation of ideas.S. engineering. and finally. (Be sure to put your keyword in quotation marks to avoid references to other. Lack of ideas versus lack of climate for creativity: Is lack of ideas a sign of lack of ability of employees or a lack of willingness on the part of employees? Organizations with a paucity of new product ideas should not assume that their employees are just not creative. We have conducted studies on many different organizations and employees indicate . Thus. you. NPD teams have members from most organizational functions including design. Examining the relative positions of products in the marketplace can be of great assistance in new product idea generation. and should be able to use positioning concepts as a way to understand where your product should fit in in the marketplace. While this approach introduces the potential for more chaotic group meetings. at Daimler-Chrysler/US. as a marketing student should be aware of segmentation approaches.

Chapter Six Glossary new product development process the stages people in the organization go through in order to create and market new products or services product all things a buyer receives in an exchange. as a consumer. 4. Be sure to try to focus your description on new benefits not new features. Create a skit to perform in your class that demonstrates the idea generation process and the ten roles in the process described in the chapter. Go to your favorite drugstore and outline the product positions that are used either for toothpaste or shampoo. 3. Do an internet search on the term idea generation and prepare a one-page summary of your findings. Use the Five W s and H technique to flesh out your answer. Describe the segment to which this new product or service will appeal and what additional benefits will accrue to these potential customers. 6. Describe the different benefits customers are seeking in each different position. 2. intended and unintended . You. good and bad. Chapter Six Exercises 1. see new products everyday. Choose a new product and describe what new additional benefits it purports to provide to consumers that its competitors do not. Have you ever been in a situation at work or in a university organization in which you were attempting to identify new ideas that were creative? Use the dimensions of an ideal creative environment to identify which dimension existed in your situation and which ones did not. Explain how a market segment relates to a product position 9. 5. 7. the keyword idea generation and describe your findings in a one-page report. 8.that the larger problem for them personally is not new ideas. Conceptualize a new product or new service for which you think there is a need. Do an internet search on the term new product development and prepare a one-page summary of your findings. but the fact that they don t believe their new ideas will be adopted or even seriously considered by management.

and others product positioning . a. c. All of this to say. Market-Driven Decision Making Maintaining Balance Between R&D and Marketing Managing in a Fast-Paced Environment Market-Driven Decision Making Many areas of high technology have a past based on the premise of build it and they will come. including exploration. Finance. Manufacturing. usually the more one knows about any industry. it is technology-intensive. However.the image of a product in the mind of the target customer in relation to competing products and other products of the same company Chapter Seven Specific Challenges of Marketing High Technology The meaning of High Tech Although marketing high technology operates on the same basic principles. First. On the other hand. in reality. high technology can apply to most industries.cross-functional teams product development teams that include representatives from all or most the functional areas in the organization including R&D. although in some fields. that industry applies very sophisticated know-how in many areas. such as integrated circuit creation and manufacture. a new product must provide additional user benefits. many would say that the computer industry is very hi-tech while. Marketing. but usually in specific areas. one might think of the bituminous coal industry as being very low-tech. or high-tech. or the same benefits in a more effective . the easier it is to identify the areas of that industry that are technology-intensive. given its impact on contemporary lives. a product was created for which there was demand based on its technical features. In order to understand the forces are work. let us review what we have said about new products. Thus. Meaning that the orientation was initially to engineering. as an industry can today be considered a commodity. it is worthwhile to explore high technology as a separate area. and ultimately. extraction and analysis. b. computers. We will use the term high technology to mean sophisticated knowledge associated with some general field of endeavor. For example. The only reason technical features ever are needed is that they are able to provide additional benefits sought by a group of customers.

way. However. For example. However. Thus. Therefore. whereas. strive to understand various technologies. whereas. this is the exception rather than the rule. itself. you might say no thank you. most people know that a turbocharger on a car indicates added acceleration. this link must exist in order to guide the allocation of resources among competing organizational needs. Therefore. and when in doubt. not on the new way of doing things. Thus. can be called technology driven because the focus is on the various technologies that comprise the firm s Core Competencies (or basic abilities in production and operations). based on the customer s perception. if someone offered you a solar-powered razor. Sometimes the benefits of a feature become so well-recognized that we talk in terms of the feature. For example. not features. and you are more likely to really understand customers needs. their success was based on the additional benefits people received. The difficulty often encountered is that a search for knowledge solely for the sake of knowledge (basic research) is rarely sufficient in a for-profit business venture. based on your perception that there are no additional benefits to be realized by using the product. a link between the focus of activities of R&D departments and certain benefits sought by customers must ultimately be recognized. if someone offered you a solar-powered palm-top device. a pharmaceutical firm might have organic chemists and microbiologists in its R&D department. A firm that thinks in terms of features and organizes accordingly. . they gain this knowledge based on the prospective ability of these technologies to provide benefits to their chosen customers. you might consider based on the added benefit that you would never have to change batteries in the device. while many new product ideas in the realm of technology-intensive products and services have seen success. always look for additional benefits. a characteristic of the R&D function is that employees in that function often are very bright people who strive to add to what is known in their area of expertise. Maintaining Balance Between R&D and Marketing Competent and focused Research and Development is the life s blood of any high technology organization. Firms that are market-driven. These core competencies then often drive the firm s efforts. These benefits may be specific as in a faster way to do analysis or general as in easier to use. For example. we recognize the benefits of the feature instantly with out reference to the benefits the feature will provide. it is preferable to think in terms of benefits. However. The Research and Development (R&D) function is comprised of individuals who are highly educated and skilled in areas relevant to the technologies applied to develop the organization s core competencies. not the needs of customers in the marketplace. therefore. a firm manufacturing sophisticated test and measurement products may have personnel trained in electrical engineering and computer science in their R&D department. itself.

Marketing can provide the link between the R&D department s knowledge of technology and how that knowledge can be translated into delivering additional benefits to customers.) Managing in the Fast-Paced Environment of High Technology While marketing can add value high technology environments. Some indicators that a high-tech firm is sales-driven are: v v v v The top executive for marketing has the title: Vice-President of Sales and Marketing The marketing department has no marketing research personnel assigned to it Sales personnel have little or no input into what products are developed Sales personnel are paid primarily on a commission structure with little incentive to develop long-term customer relationships Some indicators that a high-tech firm is technology-driven are: . thus including certain features may not provide the benefits the customer is seeking. Also. Another shortcoming of the next-bench syndrome is that engineers and scientists often think in terms of features.nasa. it is imperative that there is a clear understanding of the role of marketing.html that helps in this process of translating benefits into features. it can lead to investment in products and services that are not commercially viable. There is a concept called quality function deployment (see the following website for a relevant article: http://akao. so that when the engineer has a need in the area of testing and measurement. the interface between the marketing and R&D departments needs to be clearly defined.larc. they tend to be either sales-driven or technology-driven. The next-bench syndrome will only be a dependable guide to product development in high technology when the target customer is literally a clone of the employee in the R&D department. Marketing personnel are trained to uncover what benefits (as translated into features) that customers are seeking. s/he is a perfect model for what a customer will need. This rarely happens because most firms in high technology industries are not market-driven. While this concept is certainly applicable in some cases. The next bench syndrome is a well-known approach to creating test and measurement products that argues a test engineer in R&D also has the exact needs of his/her customers.gov/dfc/qfd. not benefits.

most frequently customers are seeking how their job can be accomplished more efficiently and more effectively. this simply means that you must have a sound understanding of what marketing is in the ideal world.v Marketing has little or no input regarding what products are developed v There are no formal programs for marketing research other than visits to present customers by R&D personnel v No sophisticated technologies are used to uncover present and potential customers needs v Marketing s primary role is seen as either sell what we make or find prospects to buy what we make While there are many exceptions. For a student of principles of marketing. but. it is the proper answer for success). The temptation is often to position the product in terms of features. However. Chapter Seven Exercises Does high technology mean the same thing to you as it did before you read this chapter? Write your answer in a one-page essay. you may be responsible for introducing marketing principles into an organization yourself. There are exceptions as discussed above. we believe that most organizations operating in high technology areas are characterized by either a sales orientation or a technology orientation. . What is the role of the Research and Development Department? Do a search on the internet on the term Research and Development and summarize your findings in a one-page report. Often the reason it is difficult to position a high technology product offering is that the product really doesn t provide any additional benefits to its target customers. This is particularly important if the user is not an influencer as described in Chapter Three. Product positioning for High Technology In no area is it more important to position products than in technology-intensive environments. because some day. it is usually more feasible to position along the lines of benefits sought because that language translates instantly to how the customer is thinking. While the saying build a better mousetrap and the world will beat a path to your door holds some truth.

Read the article on Quality Function Deployment cited earlier in this chapter and write a two-page report on how the material covered in this article would apply to marketing. by itself. Price can. Describe the responsibilities of the marketing department in a sales. check out the websites of marketers of prestige items and observe how the price variable is used to indicate quality). For example. Jewelry Store. what would you think of buying an engagement ring at Bob s Really Good. Agree or disagree with the following statement giving the reasoning behind your answer: Technology sells. (http://www.sophisticated knowledge associated with some general field of endeavor Market-Driven Decision Making an approach to choice that is based on identified desires for benefits among specified customer groups Quality Function Deployment a concept that attempts to translate customer benefits sought into product features Next Bench Syndrome the assumption that a designer or engineer will have identical needs of his/her customers thus.bmw. or for that matter.driven organization in a high technology industry sector. using price as a surrogate cue (or substitute indicator) for quality. at a yard sale. Chapter Seven Glossary High technology . the engineer is in the best position to know what products to design and build Chapter Eight How is the pricing decision made? The price variable in the marketing mix is a critical element.shtml). communicate much about a product or service. Interview a manager in a high technology sector and discuss the meaning of marketing with him or her. For example. Most consumers link price with quality and there are many organizations that carefully reinforce the quality of their product. .Describe the responsibilities of the marketing department in a technology driven organization versus a market-driven organization. Check out BMW s website and watch on of the movies there.com/bmwe/index. But Cheap.

many people find that the air supplied by the great outdoors is not sufficient in oxygen. e. but didn t worry about having to purify the water. d. c. Demand (or revenue) To justify commanding a positive price in the marketplace. we don t consider air to breathe as being a commodity we must buy. Thus. b. and consider that commodity is a candidate for a product in the future (fresh air and open space. Of course. We have seen above where many products traditionally considered as free. there must be some demand for a product or service. Native Americans had to locate close to a water supply. Of course. for example). they must buy air that is rich in oxygen by renting oxygen tanks to enhance their respiratory systems. Hence. and a price to pay. Consider the amount of demand today for ice boxes (products for keeping perishable food cool). we often see . the nature of demand changes constantly for goods and services. These factors are as follows: a. Supply (or cost) Demand (or revenue) Perceptions in the marketplace Competition and Competitors pricing strategies Government Regulation Company s desired pricing position Supply (or cost) If there is an abundant supply of a product or service. time can change most everything. people consumed very little bottled water throughout most of the United States. Today. Thus. f. demand for bottled water is growing rapidly. the organization must consider several factors. thus. For example. particularly how we perceive certain goods and services as candidates for commercial products. think about the things you consume that you presently don t pay for. These products were heavily demanded before the advent of the electric refrigerator.When the pricing decision is made. Just a few years ago. that is only because there is a plentiful supply. it may not be a candidate for being approached as a product or service for sale. have given way to other identical or similar products for which there is now a strong consumer demand. So. in Colorado.

this discussion should have already made the reader aware of the importance of understanding whether by custom of the marketplace. However. there is already a normative price for a product or service above which a price may be considering unfair or price-gouging. A positive price simply describes how much something costs whereas a normative price describes what something should cost based on an individual s or a group s opinion. consider the recent higher prices for gasoline and the various protests put forth by individuals and groups that the gasoline prices were too high and not right. eight track audiotapes were popular for a few years in the late 1960 s and early 1970 s until a newer technology in the form of cassette tapes was introduced and vinyl records of recorded music have largely given way to the Compact Disk (CD) as the preferred medium. Setting price can be a time-consuming process and we will discuss setting price later in this chapter. a branch of government often sets normative prices. For example. how many times have you heard that. particularly in the case where there is only one supplier (a monopoly).that demand for a product can decrease or even disappear if substitute products are introduced that are perceived as being superior in their ability to provide the benefits being sought. For example. water. and electricity. In the U.S. the positive price was so high for selected drugs used to treat AIDS that some groups protested that the normative price was simply too high gaining societal support and eventual price decreases from the manufacturers of these pharmaceuticals. Usually there are consumer expectations that help guide the normative price. my water bill is too high! This interaction between positive price and normative price is an ongoing phenomenon and of particular interest to marketers who attempt to create and sustain customer satisfaction. Will the internet and MP3 technology eclipse CD technology eventually? Perceptions in the marketplace Perceptions in the marketplace can set both a positive price and a normative price in the marketplace. Competition and Competitors pricing strategies . These protest essentially were observing that gasoline had reach a price that was above the normative price for most people.. s/he can usually control the positive price. For example. For example. However. Also. Normative prices do not have to be specific. While the marketer does not usually have control over the normative price. most states have a public utilities commission or board that is responsible for overseeing the pricing practices of firms that provide the populace with utility service for natural gas. there are notable exceptions to this rule.

most of this regulation.S. First.. before starting a business. In fact. function in an environment that is highly regulated. the granddaddy of them all in regulation. although this may not always be the case. one must obtain various licenses directed at everything from local government taxation and zoning laws. the firm may not have a choice about what level price to seek. we find that most of that regulation was brought about by pressure on congress exerted by businesses that were competing with other businesses. the Federal Government which regulates all interstate commerce based on constitutional power and has major regulatory responsibility for the health and welfare of employees. Government Regulation Most firms in the U. Second. and finally. This type of competitive structure is called an oligopoly (few sellers). the capitalistic system is unable in its present form to halt abuses to the environment by organizations and thus. competition can have several impacts on the pricing decision. So. However. while onerous. For example. the next time you hear businesses cry Get the government off our backs realize the . This body of law still allows various environmental abuses such as the Summitville Mind disaster in the state of Colorado.In the U. the firm may compete in an industry or market in which although products are physically similar. if the firm is the only seller of a product considered essential to public welfare. a firm may function in an industry in which there is an established price leader that perennially sets a price that other firms follow. This type of environment is called a monopoly (one seller). This competitive model is called monopolistic competition and is applicable for most everyday consumer purchases as well as business-to-business purchases in the U. sellers are able to draw differences in perception of such things as quality and prestige among products.S. is needed. Fourth. Only a small portion of these laws were passed to address the protection of consumers. (pure competition). Third. if the firm functions in a market where there are many competitors offering similar products.S. to state government consumer protection laws. if we explore the primary legislation that impacts pricing. the firm may have to function in a heavily regulated environment.

In this case. for example). As we reviewed earlier in this chapter. In pricing livestock. see (http://www. whether high/prestige or low/value and attempt to guide its constituencies (customers. In this case. supplies. it should determine its pricing position.dollargeneral. for example. the rancher then has to decide whether to seek another auction or liquidate his/her herd.businesses are really saying get the government off my back but make sure the government protects me from unfair practices by my competition. the pricing decision is reduced to answering the question: Can I accept the price being offered at the local auction? If the answer to this question is no. However. For example. while others have a low price position (Wal-Mart.com/) will want to position itself quite differently than a marketer of exclusive products similar to Rolex watches (see http://www. and others) to the conclusion the company desires. some companies have a high price/exclusive/prestige position (check out the website for Rolls-Royce automobiles (http://www.html) or Rolex Wristwatches.rollsroyce.com/). Cost and Demand Oriented Pricing Models . the rancher will be forced to accept whatever price his/her cattle bring at the auction. Company s desired pricing position Based on a company s business and marketing strategy. usually the pricing decision is much more complicated and should involve a careful consideration of all five factors listed above. general public. a local store that sells everything for a dollar (for example. The Pricing Decision As pointed out above. A cattle rancher may take his or her cattle to the local auction house once a year to thin his/her herd of older cows and young calves.rolex. the initial pricing decision can be time-consuming although there are exceptions. A company should choose its own price position.uk/rollsroyce/index. the pricing decision is impacted by many different factors. the pricing decision can be quite simple.co. Thus. employees.

demand. That is. based on demand and what others will similar skills can expect to receive in a free market. is the basis for setting price based on demand in Microeconomics. internal rate of return pricing usually begins with cost determination and then computes different projected levels of return on investment for future time periods.000 dollars for a new kind of testing device. Thus. Thus. Why not just use cost-pricing always? While the approach is simple and has the advantage of guaranteeing some profit margin. this approach is straightforward theoretically. While. this approach requires a time consuming analysis and it not as simple as just setting the price based on cost. this approach uses cost to the seller to determine a selling price. based on the benefits they would derive from it. How are these prices for athletic talent determined? Usually. theoretically. the general lesson we learn from the approach is an important one. if a seller focuses only on cost to set a price. or foregoing considerable profits. Pricing models based on demand Witness salaries paid to professional athletes. the approach ignores the most important factor in pricing. this at least gives the seller some guidance in setting price. if an analysis of demand indicates that buyers. for years a keystone or key-stoning pricing policy has been used by many retailers to set price. For example. Of course. . Pricing models based on cost Probably the oldest model used.We may use cost or demand as a basis for setting pricing. However. However. for example. s/he might be either setting price so high there will be no demand. Prices can also set using demand for the product or service as a guide. we first assess buyers perception of how much they would expect to pay for a product or service based on the utility (or usefulness) they would expect to derive from product or service and combine these individual utility functions to create a demand curve for the product in question. it often defies practical application. would expect to pay $30. by using solely a cost-based approach the seller my miss opportunities for additional profit or set a price too high to realize adequate sales to even cover cost. Many other models used cost as a pricing basis. the price based on a demand-oriented model. This approach simply doubles the cost and arrives at the selling price. can be based on the expected utility (benefits) that customers in the marketplace expect to receive from acquiring our product as compared to other available products. this orientation is applied in microeconomic theory by creating demand curves based a summation of individual utility functions for buyers in the marketplace. Traditionally. This approach is known as the expected price approach and. For example. This pricing method was adopted by General Motors early in the company s history and was applied for decades with their products.

if a professional athlete has a remarkable season of performance. when asked they indicate that they would pay normally anticipate paying $500 or less for the product. This pricing approach assumes that the product or service faces a market structure characterized by monopolistic competition. in order to create and sustain such a market position. if consumer testers try out a new. There may also be a customary price for a product or service. The customary price is a price level that consumers are used to paying based history or normal expectations. if demand is very high there are times when we can virtually ignore cost structures. can you think of a situation in which raising prices will result in more of the product or service being demanded? It is imperative that the marketer have a clear understanding of how quantity will respond to price changes.For example. liquor. For example. revolutionary vacuum cleaner. For example. there may be an expected price. s/he can sometimes demand an incredibly high salary based on his/her performance the previous season. Thus. Many product categories this factor to set price. although the seller cost structure would mean losing money at a price of less than $500. the organization must commit to a long-term strategy Understanding Price Elasticity of Demand Price elasticity of demand is a method used in microeconomics to understand how quantity demanded moves in conjunction with price changes. if prices are raised. The expected price is a price that consumers would anticipate being reasonable for the benefits derived from using the product. what happens to quantity demanded? We would usually argue that quantity demanded goes down. Of course. wristwatches. In some cases. prospective buyers perceive a difference in products based on the distinction or reputation of particular brands. For example. However. That is. and automobiles all have a prestige segment created through the perception of exclusivity an distinction. a basic understanding of price elasticity of demand is called for. Price elasticity of demand can be computed by applying a simple formula for e the elasticity of demand as shown below: Price elasticity formula in words: . Thus. Prestige pricing is often applied by organizations that attempt to create a sense of exclusivity for their product or service.

Price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. we characterize demand as inelastic demand. When e is greater than one. where. elasticity is termed elastic demand. We will present examples at the conclusion of this chapter. to less than a negative one. When we have an elasticity coefficient equal to one. Setting Price The firm must arrive at a price that will provide it with sufficient profitability while being palatable to the marketplace. When e is less than one. the ultimate price is related to all five factors that we discussed above. A very simple way to look at setting price is to consider the markup. and MU = percentage markup. Price elasticity formula in symbols: e = % q/ % p Where: e = elasticity of demand q = quantity demanded p = price The elasticity coefficient of elasticity. Markup can be computed on cost or selling price. demand is said to be unitary demand. e. C = cost. SP = selling price. Of course. We would use the same simple formula for each approach to computing selling price: Selling price equals Cost plus Markup or SP = C + M. Using Markup on cost to determine selling price . has a domain from greater than a positive one.

However.4SP. . So the equation now reads SP = 14 divided by .4 (or forty percent of cost) to determine the selling price of items in her gift shop (for example. we simply multiply the cost by the percentage of markup.4SP. now markup itself becomes an unknown.6 or $23. That is. that is.6SP. and the markup is . we first determine the markup and then add it to the cost to find the selling price. we find that.6SP is equal to simply SP). Now our equation reads . Please note. Selling price can also be determined as a markup based on a percentage of selling price as described in our discussion of key stoning above.4($14) or $14 + $5. In this case.4SP minus .60. while our formula is identical to the computation using cost as a basis for markup (SP = C + MU). Therefore. That is. Using Markup on selling price to determine selling price Some students ask How can I determine markup based on selling price if I don t know the selling price! Good question! We simply define the markup on the selling price in algebraic terms. That is. if a children s book costs the owner $14. .6SP = $14 further.In this approach to setting price. the solution to our problem would be SP = C + MU. .33 into our formula to check your answer. once you understand this approach you will be able to remember it. we apply the same simple formula. On the left side of the equation. SP = C + . if we use the same gift shop and price structure as our example above. SP = $14 + .33. the cost is $14.4SP equals . On the least side of the equation.4 of the selling price rather than the price. Recalling that we can simplify the equation .4 from both sides. let us assume that the owner of a small gift shop desires to gain an average forty percent markup based on a percentage of cost on a of the products she sells in her shop. or SP = C + . But please don t despair. She will use the formula. her selling price will be SP = $14 + . grouping the terms with SP together to solve the equation.6. That is.6 . initially. substitute the selling price of $23. Now. $14 + .6SP = $14. Thus selling price is equal to $14 divided by . SP minus . that this approach may not make as much sense to you initially if you are not comfortable with basic algebra. we subtract . as well. This approach is not as intuitive and applies simple algebra to first define and then determine the selling price.6SP divided by . Now.4SP =. On the right side of the equation.4SP or the selling price is equal to $14 plus . Solving for the selling price under this approach. now we must draw on simple algebra and define the selling price as the unknown and the markup as a function of the selling price. Substituting in the formula: SP = C + MU. or .6SP (Remembering that SP is understood to be 1SP.60 = $19. now the markup is determined as a percentage of selling price rather than a percentage of cost. For example. 1SP minus .6 by dividing both sides by .4SP equals $14.4 times the selling price. we would find the following. remove the .

asp.) Explore the website for Walmart and comment on Wal-Mart s approach to price (http://www. Agree or disagree with this statement and explain your answer. (http://www. Why would BMW go to such expense to produce these movies? What is the price the viewer of the movie pays? Remember. Create a product positioning map (four cell matrix) for wristwatches. and describe how this company attempts to create a high price. Explore the website of Cartier. College tuition is a price just like any other. (Cartie ) (http://www. Inc.com/). Explore the website of the Shane Company and describe this company s orientation to pricing and prestige (http://www. high quality (prestige) position in the marketplace. Chapter Eight Exercises Check out BMW s website described in above in Chapter Eight (and watch one of the movies there ( ambush or the hire ). Chapter Eight Glossary .com/) and write a paragraph observing differences between the Cartier and the Timex sites.walmart. Go to a local supermarket and a local department store and write a half-page report that observes differences in how prices are displayed at each store.This simple approach to using selling price as a basis for markup is used by many retailers and if one ever wants to market a product to retailers (or wholesalers. price does not have to be economic in nature. Summarize your product positioning map and what you learned by doing this positioning map in a two-page report. Why do different companies have different approaches to pricing? Use the websites above to support your answer. Inc.shanecompany.timex. Explain your answer in a one-paragraph summary. for that matter) one should understand this approach to arriving at selling price. Be sure to describe the positioning of each company s products after viewing their respective websites.cartier.com/weddings/wedding_planner.com). Use the dimensions of price and prestige. Explore the website of Timex.

procedures used to arrive at a product s or a service s price using the demand structure in the marketplace.Positive price the present cost or marked price of a product Normative price a price that is considered fair by an individual or group Company s desired pricing position an organization should reach its own conclusion based environmental factors. the development of the market for e-books may change this situation. However. e-mail). .principlesofmarketing. Time utility can be defined as having the product available when the customer would prefer to acquire it and place utility is having the product available where the customer would prefer to acquire it. it does not provide sufficient time utility. it is generally faster to buy a book from a local retailer than to obtain the same book through the internet. for many products. Organizations typically use a large number of strategies to get their goods and services to target customers rather than only one. While the internet can provide the ultimate in time utility for some products or services (for example. Critical to understanding and managing distribution are the concepts of time and place utility. Buying a book over the internet still requires that the book be delivered to the buyer before consumption of the product . Price elasticity of demand the relative change in demand that occurs in response to a relative change in price Prestige pricing the process of setting a price based on the perceived exclusivity or reputation of the company name or brand name of the product or service Chapter Nine How do producers get their products and services to their target customers? This area of the marketing mix is usually called distribution simply because its main concern is to distribute goods and services to the target customers. Cost-oriented pricing procedures used to arrive at a product s or a service s price using the organization s cost of producing the product or service. For example. The action on the part of the reader is to gain ability to log on to the internet and go to our website (http://www. this e-book is delivered to the user instantly anytime the user desires to access it. Demand-oriented pricing . Therefore.com). where it should set price and communicate that position to its constituencies.

we would strive to make the product available to customers on an around-theclock basis. Although traditionally services have been delivered through a direct marketing channel or directly from the seller to the buyer. thus these firms focus on the most advanced way of doing things whether the customer is seeking this solution or not. bonds. Salesoriented organizations focus on promotion and personal selling and are not typically concerned with the ideal product solution that the customer is seeking. The strategy is typically adopted by many organizations that have not done sufficient research to understand the specific characteristics their target customer and how the customer would generally prefer to obtain the product or service in question. As the practice of direct deposit and other electronic forms of banking grow. We use the terms goods to refer to tangible products (those that can be seen and touched. Thus. there will less and less need for personal interactions between financial institutions and their customers. Today. many people manage their investments through the internet and never work face-to-face with another human being. For example. and thus is created in relation to when and how customers would prefer to buy a product or service. Previously. as technology develops. particularly small firms due to the cost. investment decisions (in stocks. those that cannot be seen or touched during the process of providing the service. it is not necessary for customers of banks to meet face-to-face with bank representatives. emergency medical care for people and their pets might constitute such a . All of the organizations above often adopt these respective orientations because they have insufficient knowledge of customers or concern for customers to engage in a focused distribution strategy. since the introduction of the Automatic Teller Machine (ATM). many services are now be delivered directly to the customer. For example. at the right time and right place. these services required personal contact between seller and buyer. Financial services offered by banks are similar in that. because some segments of customers will still feel it necessary to visit personally with the bank s representations.A marketer may adopt a broadcast strategy in which products are sent out to customers in as wide a manner as possible. organizations that are production-oriented concentrate primarily on manufacturing their products efficiently (with the underlying assumption that there will be a demand for the product). to the right customer. This strategy is usually not efficient or effective for most firms. For example. the organization seeks to deliver the right product with the right service. Focused Distribution Strategy Five Rights don t make a Wrong A focused distribution strategy is driven by customers needs. For example. for example a new pair shoes) and the term services to refer to intangible products (for example a visit to the dentist). or other investment options) historically required a face-to-face meeting between the investor and his investment advisor. if we market a product that customers would prefer to buy any time of day or night and any day of the week. Technology oriented firms assume that customers are seeking the most advanced technology. This is not to the say that there will no longer be a need for bricks and mortar banks.

S. Organizational purchases are often more planned and driven by predefined specifications. the alternatives fall into two basic options: (1) direct distribution and (2) the use a one or more marketing intermediaries. because the distribution function ( Place ) tends to be the least flexible component of the four P s in the marketing mix. for example. few do. a portion of their sales come from those who are buying for businesses or institutions. whereas consumer purchases include a larger portion of unplanned purchases. For many marketers. the idea of being open to serve customers virtually all of the time is not a viable strategy. Many firms advertise that they have this commitment. have grown to expect that some types of stores will always be open and thus many leading market-oriented organizations have responded to that expectation and many others have not. personal non-business use. Options for focused distribution in the consumer market Earlier.. there are usually many options available to create and effectively manage distribution. Over the last few decades people in the U. Again. We say. . This has to be a strategic or long-lived commitment with adequate resources devoted to accomplish the task. This distribution strategy requires that the firm commit to learning about and caring about its customers. while distribution options usually exist. Options for focused distribution In the U. Note that many Wal-Mart stores adopted this approach to ensure that Wal-Mart products are available whenever customers might seek them and that Walgreen drugstores have adopted the same strategy. thus. frequently some creativity is required to identify and weave these options together into an effective system that provides high satisfaction levels to customers. Thus.S. we defined a consumer as someone who buys for their own. Although there are literally dozens of different alternatives for distributing products and services to consumers. This definition clearly identifies most shoppers at K-Mart as consumers. if we consider Sam s Club and other similar organizations. usually.product (service). not all customers for most products have the same wants and needs. but in reality. However. Of course. five rights don t make a wrong thus the only viable way to know what the target market wants is to understand them well enough to answer the five rights. the demand for all products and services does not occur on this basis. the buying behavior of consumers and those representing organizations differ considerably. Why does this matter? As indicated in an earlier chapter.

if you operated a fishing fleet in Alaska. . Examples of direct distribution include Mary Kay cosmetics (website: http://www.travelocity. be an organization that has as its primary concern and abilities. A notable exception is the delivery of travel services in which at least some component of the service (finding an appropriate flight and booking it) is sometimes delivered via a marketing intermediary (travel agent). Thus. because most services are distributed directly from the producer of the service to the consumer of the service. there are different firms engaged in the different endeavors it requires to produce and deliver the product to the consumer s door. Motel 6 delivers its services directly to customers via an individual or company that has agreed to certain guidelines articulated in a franchising agreement. For tangible goods (products).marykay.goodyeartires. However. Although. your primary concern and abilities would be related to operating a fleet of boats. The service component plays the major role in each of these businesses which is not surprising.com/about/employ/open/retail-06. However. Travelocity (http://www. and locating and catching fish. as more and more people locate and book travel arrangements through internet providers (for example. Clearly.cheaptickets.. there is becoming less demand for personal contact with travel agencies except in case of more complicated travel plans and travel plans for inexperienced travelers. This website will be of interest to most women in business if only in its educational attributes regarding organizational mission and culture. in most industries. are distributed through marketing intermediaries such as wholesalers and manufacturers representatives. Mary Kay operates on a direct distribution system that depends on the performance of a large network Mary Kay Consultants who are independent contractors to Mary Kay. This workforce is close to a million women who operate as independent business organizations. a wise person would spend his/her time focusing on this aspect of the business.com) and Cheaptickets (http://www.motel6. no doubt. For example.html) operates a network of over 750 company-owned retail outlets in the U. thus company has chosen to own and operate its own retail stores and thus engage in direct distribution. Whereas.com/) and Motel Six (website: http://www. the processing of the fish brought into port every day. this is not the case and most products in the U.S. and processing. Given the above examples.S. it might not have the resources to peform both activities.com/). Goodyear Tire Stores (http://www.Direct distribution is an approach in which the producer also manages distributing the product to the consumer.com/). one might believe that most large companies choose to deliver goods to their customers through direct distribution. there would. Why are producers who use direct distribution in the minority? Because there are many marketing intermediaries (called middlemen in the past) that provide better service and are much better equipped to provide distribution services than the producer. as a fishing operation one organization could do both fishing.

S. providing consumers with more place and time utility.In the grocery industry.com) provide everything from training classes in merchandising to recipes for new dishes to their customers. A manufacturers representative is an independent organization that represents a group of different producers. to buy our cantaloupes. the above discussion should help you conclude that while marketing intermediaries are not always use. The above example would represent a distribution channel in which both wholesalers and retailers are needed as marketing intermediaries. As the reader can see. is the option that includes the use of marketing intermediaries. in this case. companies like Sysco (http://www. and the retailer who grades the melons and places them for display in his/her grocery store. The key to the value of a marketing intermediary is that the marketing intermediary provides services with which we as consumers cannot do without. we have performed a service usually reserved for a marketing intermediary. So. as well as distributed products from producers to retail grocers. Options for focused distribution in the organizational market Although there are instances in which the distribution channel to provide satisfaction to an organizational market is identical to the distribution that will provide maximum satisfaction to a consumer market such as Sam s Club in the U. if we are willing to drive to Rocky Ford. realize that the reason you are able to buy exotic products from all around the world depends largely on the services of marketing intermediaries.. as consumers desire to purchase.sysco. They don t necessarily make distribution more expensive but they do often make it much better. a . For example. at least in title. these two types of markets usually make use of different kinds of marketing intermediaries. there probably will be at least two intermediaries involved.fleming. Note that a retailer is technically a marketing intermediary. there are many different options to distribution. of which there are many different kinds. In fact. For example. technically the retailer IS a middleman! In summary. manufacturers representatives are used widely in organizational markets than they are in consumer markets. The only time when a marketing intermediary is not needed is when we as consumers are willing to perform some of the services that the marketing intermediary performs. For example. so that when a retailer advertises s/he cuts out the middleman. Colorado. that provide essential services which usually add value to products that we. the next time you go to the grocery.com/) and the Fleming companies (http://www. it is unlikely that claim is true because. but the main option other than the direct channel. The manufacturers representative will usually have as clients several different producers that manufacture products used in the same industry or application. the transportation company that moves the melons from Rocky Ford to your home town.

(http://search. First.com/search?p=manufacturers%27+representatives&n=25). thus. For consumer products. However. and specialty goods. Examine the following URL address to find the websites of different categories of manufacturers representatives. That is. We will describe four of these types of consumer products: Unsought goods. minimal amount of time expended under . Situational effects are also important to consider. the firms are often hidden from consumers since most are located in industrial districts within cities. While you might say: I only eat the pizza baked by my favorite local pizza place: Rubino s Pizza.yahoo. but how most consumers buy pizza. It is helpful to consider three characteristics when attempting to place a product or service in one of these categories.manufacturers representative in the building materials industry might work for several different producers of structural materials for building homes. because these directly impact how much time you are willing to spend on the making the purchase. Industrial distributors are marketing intermediaries that service organizations by providing them with products and services in a convenient manner. pizza would be classified as a convenience good because most consumers buy it in that manner.wwid. convenience goods. alone. We would observe the effort put into the purchase including how much time is spent on the purchase and how often the product is purchased. when most people buy pizza. We also consider the price and the personal significance of the purchase. Different types of products in consumer markets It is helpful to study the type of behavior in which consumers engage to better understand their wants and needs when it comes to product or service delivery. Therefore.com/.S. There are literally tens of thousands of these firms in the U. you should realize that the pertinent question is not how you personally buy pizza. the purchase decision if not a high involvement purchase surrounded by considerable perceived risk. researchers have identified several different types of products based on consumer behavior. shopping goods. See the following website for an example of an industrial distributor: http://www. we define a convenience good as a product or service that is purchased with: 1. we must realize that we classify goods and services on what behavior we would expect from most consumers. including time pressure and occasion of the purchase because each of these factors affect the personal significance of the purchase.

com/ . Unsought goods are those products that consumers will not normally buy during regular shopping activities. Marketers of unsought goods choose intriguing appeals. the good is unsought in normal shopping activities. a consumer may want to compare several different brands and stores before she decides on which CD player to buy.com/). For example. such as life insurance also fit into this category.sci-corp. thus. time and place utility are extremely important because the most available supplier of the product may be the one that is chosen solely on location of the supplier (for example. . gasoline for your lawnmower). Intangible goods. when buying a new CD player for her car. Rolex wristwatches http://www. While we all have need for these products and services. The added time the consumer is willing to spend will vary directly with the cost of the new product and the personal significance (perceived risk or situational impacts) of the purchase. Specialty goods are products that we purchase for which we have a definite preference for the supplier. thus we in one way or another avoid buying certain products and services during our normal shopping activities.com/) or a long-standing involvement with the product (for example. One can see that with convenience goods. For example. not a special occasion or of particular personal significance) and that is 3. normal consumption conditions (for example. either of personal risk (for example. if you own an automobile. look at http://www.2.bluebell. purchased frequently. assuaging grief of family members) or financial risk (dramatizing the consequences of financial loss). they are not necessarily pleasurable to consider buying.rolex. For example.northwesternmutual.com/kkcollect.prudential. usually based on perceived risk. Thus with shopping goods the consumer will usually compare different brands and suppliers before s/he makes a purchase decision. This preference may be based on prestige of the supplier (for example.com and http://www. Most of us only buy a battery when we believe our present battery most be replaced. Krispy Kreme Donuts: http://www.com/ ). Shopping goods are those products that are purchased less frequently for which the average consumer is willing to spend some extra time in the shopping process. the family doesn t usually decide to spend a nice spring day shopping for burial plots and funeral services. think back to the last time you bought a battery for your car.html also http://www.krispykreme. (for example. http://www.

trees that have been cut into boards in a lumber mill. a hand drill used by a tent manufacturer. Accessory equipment products that are used to facilitate and maintain basic production and operations of the firm. for example. v. ii. Process materials products that have undergone some change in form utility. iii. Raw materials . Examples would include oil and grease for maintaining major equipment. thus the intended use is to promote the gift shop and increase its sales. researchers have classified products. for example. vii. Business services intangible portions of the company s basic processes that enhance and protect its operations for example security services and cleaning services Chapter Nine Exercises . For example. spark plugs or windshield wipers in a new automobile. but to use in the conduct of its business. a local gift shop may need to buy a new neon sign for its window to draw the attention of passers-by. Component parts products do not undergo any change in form utility and appear in the final product in identical form. not to resell. iv. For example. The following are brief descriptions of the different types of good and services in organizational markets: i. jet planes for a commercial airline carrier or ovens for a bakery.Different types of products in organizational markets In organizational marketing. Supplies these products are similar to convenience goods in the consumer products typology in that they are of minor cost and are consumed frequently. Thus the types of organizational products we identify are based on what purpose the organization has for the product or service being acquired. not on behavior observed among organizational buyers and decision makers. for example. Major equipment products for which the basic processes of the organization depend. The gift shop is buying the neon sign.products that are in their natural form like salmon from the sea or coal from the earth. vi. but on the intended use of the product or service.

and write a one-page report on what you find there.html). Do you agree? Why or why not? Visit the Mary Kay website and write a one-page essay summarizing what you found there (http://www. Give two examples of other similar company success stories you find on the web and describe them in a one-page essay.marykay.com/kkcollect. Visit the Sysco Website and write a one-page essay on what you found there (http://www. Why are consumers not more familiar with this type of organization? Is a premium sound system in a new car a component part or accessory equipment to an organizational marketer? Explain why most consumers would answer accessory equipment. Search the internet with the keyword industrial distributors and write a one-page summary on what you found. Give examples in which a personal computer would be major equipment for one organization and accessory equipment for another. Why are Rolex watches only distributed through selected jewelry stores and not K-Mart? In a onepage report describe how does this example identifies one of the common reasons for distributing a product through only a few outlets. Chapter Nine Glossary . List three different products that belong in each category of consumer products and explain why you think most consumers would classify them this way.com/).com/). What are marketing intermediaries and why do most business people believe it is imperative in our economy to have marketing intermediaries? Are retailers (organizations that sell primarily to people who buy for their own. marketing intermediaries? Explain. personal nonbusiness use).sysco.krispykreme. although that is incorrect. Why do are there different approaches for classifying consumer products and organizational products? Can you think of products that can fit into either area? Explain. Many futurists expect present trends toward more time and place utility to continue. Explain how drive-through windows for fast-food restaurants relate to place and time utility.Read the history of Krispy Kreme donuts on the Krispy Kreme website (http://www.

Chapter Ten What are the options for promoting products and services? We have already discussed the importance of performing upstream marketing activities prior to performing downstream marketing activities. clear objectives about what the program aims to accomplish. Marketing intermediary an independent organization that assists producers in delivering their products and services to their customers Manufacturers representative a type of marketing intermediary that serves several noncompeting producers of complementary products by accessing and maintaining relationships with a wide variety of customers in business-to -business markets Industrial distributor a type of marketing intermediary in business-to-business that services organizations by providing them with products and services usually in a specific product category such as electrical or plumbing supplies. fourth. a description of the benefits to be delivered to that target audience third. Direct distribution an approach used by some organizations in which the organization itself is responsible for delivering its products and services to the customer. 3. Often as a result of inadequate knowledge about customer needs and wants and characteristics Focused strategy a distribution strategy based on delivering the product or service based on performance of upstream marketing activities to determine the five rights of the organization s product or service. Promotion takes place in the intermediate and later stages of marketing planning because promotion requires: 1. a strategy to be employed to communicate with that target audience and accomplish the objectives. first a definition of the target audience second. .Broadcast strategy a distribution strategy based on delivering the product or service to customers on as a wide a basis as possible. and 4. 2.

the role of promotion has been identified as to inform. While these stages are always necessary. When you think of target markets.This process may seem backwards to some who would expect to make the media decision first.com/). Thus. Definition of the target audience Traditionally. if our target market is more interested in minimizing technological risk in their purchase. That is. Thus.S. the target audience for consumer products is usually defined in terms of demographic. often one or the other has taken place prior to the creation of a promotion program. People age and change over time. As we discussed in Chapter Three. However. persuade. geographic. so informational advertising may not be necessary (http://www. Once we have clearly defined the target market. For example. the notion of empathy with the target market becomes critical. culture are aware of and understand the benefits of Coca-Cola and where to find the product. we might choose to provide a thirty-day money back guarantee. most consumers in the U. and remind. new Coca-Cola ads while persuading and reminding a portion of the target market.com/). psychographic.cocacola. Coca-Cola is committed to constant advertising. therefore. History shows that market leaders can quickly lose their competitive position if they don t constantly keep their name in front of their target market. a market-driven firm realizes that is must perform the first three steps prior to media choice. So. target markets do the same thing. realize that they are always changing. it will show in our attempts to communicate with them. If we don t really understand our customers well. However. Description of benefits to be delivered to the target market It is imperative to understand what benefits (not product features) the target market will receive by buying our product or service and this description should be crafted in words that communicate these benefits to members of the target market. although most consumers are aware of the product in over two hundred countries (see http://www. if our target market first seeks the minimization of financial risk in their purchase. Whereas. Coca-Cola must continually work hard to keep its name in front of consumers and remind them that the product is available and that it will provide the consumer with certain benefits. it would first attempt to perform number four above. and behavioristic attributes. . Reminder advertising is often placed by market leaders to support other promotional campaigns that are in progress. This is particularly true with today s media saturation and intense competition. also continually inform a certain part of the target market who due to age or culture are not aware of the product yet. if an organization is sales-driven. For example.cocacola. we create marketing programs to communication with members of the target market.

That is. knowledge (of certain attributes or benefits) or preference. The Promotion Mix . Hence. strategy can refer to an overall game plan or orientation to the promotion program. the word strategy is used in several different ways in promotion management. We recommend that when the reader uses the word strategy. a company might discover through research that their target customers seek reliability above all other attributes thus the organization might adopt a strategy of emphasis on reliability. However. This leaves no doubt regarding the word s meaning. we caution promotion managers to avoid an approach that is too rigid and quells the creative process. On the other hand. setting objectives sometimes destroys creativity associated with the promotion program. First. Communication objectives can be driven by measures such as product awareness.we might choose to decrease this perceived risk by providing a twelve-month technology trade-up program or adopting promotion comprised of user testimonials dealing with the product. Strategy to be employed to communicate with the target audience Just as in planning. an organization might adopt a direct mail strategy if it finds that direct mail would be the best way to reach its customers. use of the word strategy has no guidelines and can confuse the issue. Each of these measures can be used to assess how effective promotional efforts have been in attaining their objectives. the reader provide an explanation regarding how the strategy would be implemented. Clear objectives about what the program aims to accomplish Setting objectives for promotion programs is a critical part of achieving success. in practice. while we strongly recommend formulating objectives that will guide the promotion program. Objectives for promotion programs can be either sales-oriented objectives or communicationoriented objectives. we can either identify specific targets we wish to meet in terms of increased sales or specific targets we want to attain in terms of communicating with the target audience for the program. For example. Thus.

was asked by her parents to manage the gift shop so that her parents could retire. This practice is call integrated promotion management or integrated marketing communications. When creating a promotion program we attempt to meld the four elements together in a cogent way so that each element supports the other and provides the target audience with a consistent message over time. Marie accepted .Traditionally. or other characteristic of the article printed. Marie s Gift Shop is a small store in downtown Manitou Springs. whereas. a strategy to be employed to communicate with that target audience For example. there are four steps to creating successful promotion programs: 1) 2) 3) 4) a definition of the target audience a description of the benefits to be delivered to that target audience clear objectives about what the program aims to accomplish. after earning a college degree with a major in marketing. Colorado. Marie s parents opened the shop and named it for their newborn daughter in 1968 and the shop has operated continuously since then. Marie. The promotion mix includes the following components: a) b) Advertising paying for space in a medium such as a newspaper or trade journal Personal Selling a face to face contact with a customer c) Sales Promotion any program that provides additional incentive for the customer to make a purchase d) Publicity obtaining space in a medium such as a newspaper in which we do not have to pay for the space based on the newsworthiness. For organizations marketing convenience goods in consumer markets. Creating Successful Promotion Programs As dicussed above. personal selling traditionally comprises the largest expenditure for organizational markets. advertising usually accounts for the largest proportion of the promotion mix. we employ a promotion mix to effectively budget and distribute funds for promotion.

Having worked in the shop part-time for many years. Marie defined her target audience as Present customers with a ZIP code in the Manitou Springs city limits and ZIP codes contiguous to the Manitou Springs ZIP codes. Marie also realized that she should begin to keep a Customer Information System that would enable her to communicate regularly with her present customer. We will discuss this promotion program in more detail in a later chapter. The study also indicated that most of the customers purchased gifts for immediate family and friends for traditional gift-giving occasions including birthdays. weddings. Over sixty percent responded affirmatively to this question indicating that one of their main buying motives was to support local businesses and that the customer enjoyed visiting with members of the Ruohonen family. Marie s decided to adopt this approach as a long-term strategy and committed to this strategy for a three year period. after the marketing research study. most customers were already familiar with Marie s Gift Shop before buying from the shop. Two of the research questions for this study were (1) Who are our present customers and (2) why do they buy from us? The marketing research study found the answers to these questions were that over seventy percent of the current customers were from the Manitou Springs area and had been customers of Marie s Gift Shop for over two years. Therefore. Marie believed that most her customers were from the local Manitou Springs area although a significant proportion of customers in the summer were tourists. thus. c. She commissioned a small marketing research study with her former university to explore her customer base.this challenge although she had two small children and was a single mother. . Marie realized any funds spent for promotion must yield results in the form of increased sales. experience personalized service from a familiar source support local merchants like the Ruohonen family obtain a unique gift After a meeting with a local marketing communications firm. these benefits were used as a guide for creating a promotion strategy for Marie s Gift Shop. The first step for Marie was to determine who the target audience for any promotion would be. adoption of a promotion strategy should not usually be seen as short-term. Thus. Another of the questions in Marie s study was Why do you make purchases from Marie s Gift Shop? One of the responses to this question on the survey was I am familiar with the Ruohonen family. the three primary benefits customers were seeking were determined to be: a. b. and Christmas. Thus.

It is easy to feel sympathy for someone who is only twenty-one years old but dying of cancer.jhtml) to see commercials that for the most part are over thirty years old. advertising is sometimes very important to us as individuals. we often use advertising as a way to identify right and wrong behaviors: both fundamental and minor behaviors in society. Advertising is the easiest but absolutely. However. was viewed well over one million advertisements and that figure is probably very low if we consider all commercial messages to which we are exposed in the U. it is much more challenging to understand how that person must feel.) See the appendix to this chapter: An easy guide to audience measurement. If you do an internet search on the word. usually placed in a mass medium. Empathy is simply being able to understand another person s feelings are reactions to events in his or her environment.S. That is.S. For example.com/ and click on the index and go to the retromercials section found in Tvland (http://www. some ads give us cues about what is cool and what is not cool in everyday behaviors. Some researchers estimate that by the age of eighteen the average person in the U. more expensive alternative for marketing communications.nickatnight. note how the motion .com/TVL. The tobacco industry continues to advertise heavily through alternative means that avoid regulations of the Federal Trade Commission (FTC).adage. advertising can be defined as communicating with target audiences through paid. most of us consider ourselves experts in advertising because we have seen so many ads. However. For example. while continuing to advertise a product proven hazardous the health of its users. to be truly expert. Can you identify how cool behavior and uncool behavior have changed in the last few decades? Also.adage.com/news_and_features/special_reports/) to get some perspective on how TV advertising has changed and developed over the last several decades.Overview of Advertising As indicated above. For example. advertising may possibly provide the lowest cost per contact.com/ and also check out a history of advertising at (http://www. What are the implications of this staggering statistic? First. usually audiences are measured by using a figure known at CPM or cost per thousand (the M denotes use of the Roman numeral designation for one thousand. you might want to access Advertising Age Magazine online at http://www. the initial outlay for an advertising campaign may be the most expensive option for promotion. you will find many different references and categories presented there. This example demonstrates how fundamentally unimportant most advertising is to the average person. However. Why? First. You might want to access http://www. advertising .tvland. However. non-personal messages. one must understand and develop the attribute of empathy. thus easily avoiding the law.

In many organizational markets. due in some cases to the efforts of new car manufacturers. As Peter Drucker. are sales driven and not market driven.htm Also.productivity. However. Why does this sound so unrealistic to many of us? Because.picture industry continues to accept money to feature its products in films. Traditionally in personal selling. has said: (true) . this follow-up stage is called post-sales support and is one of the most effective methods for keeping customers. Why? I think they see personal selling as a low status. the remaining firms that are solely sales-driven will eventually disappear from the economic landscape.ftc.htm Overview of Personal Selling Personal selling is the worst nightmare most of my marketing students have about a career in marketing. This approach. organizations follow a process from the time preceding customer contact to the time following the sale. although. it is no surprise that many consumers are dissatisfied with the product and services they buy. it only remains for the marketer to explain how this solution will provide the benefits sought. New and used car sales are examples of product categories that used the churning method for decades. used historically with many consumer products is called churning and is adopted by sales driven firms. including some follow-up activity. as competition forces organizations to be more customer-oriented. we rarely experience a solution that is so well researched or a seller who values the customer this much.gov/os/comments/tobaccocomments2/siegelmichaelmdmph. so that their primary concern is not customer satisfaction but selling the customer what the company has available to sell. However. Therefore.S. ( review: http://www.net/Company Profile. a career in personal selling can yield a most rewarding professional life if a person can develop a strong self-esteem and truly believes in what s/he is selling. almost any career in personal selling is going have many disappointments if one defines a customer not saying yes instantly as a disappointment. As mentioned earlier in the text. the reader might want to review the website of a company that has as its core business the placement of products in various media vehicles. Investing in retaining current customers is much more cost-efficient than ignoring current customers in search of new customers. low paid career full of disappointments and lack of personal freedom. Review the following article found at: http://www. Drucker refers to the fact that if a marketer does his or her job and understands and delivers a product or service solution that the customer is truly seeking. marketing involves almost no selling. Mr. most companies in the U. New car manufacturers are recognizing that their long-term success depends on building and nurturing a . a leading writer in marketing and management. as consumers. this practice is becoming less popular. In one way the students are correct. and the customer is then willing and eager to buy.

family. Thus. as we learn more about exactly what benefits our customers are seeking. this process is made much easier because the customer profile created early on in product or service development has already given clear definition to our target customers. Today this commitment is still rare. For more information on personal selling and sales management consult the two topics at the following website: . Thus. As we gather more information about what customers we can better satisfy. This requires on-going customer research and an honest commitment to customers in all production and services systems that are responsible for delivering customer satisfaction. While this approach to modeling the process if helpful.com/index. The delivery system of the organization must strive to maintain flexibility throughout the personal selling process and be capable of adjusting the product solution to meet needs of customers as the organization gains better resolution about what those needs are exactly. Most traditional models of the selling process have the process culminate in a presentation and then proceed to a feedback stage that occurs after a presentation and purchase. and narrows over time to more specific customers who are first identified as qualified prospects. it denies the required dynamic nature of customer relationships and often is too inflexible to be of maximum use. or organization that is likely to be seeking the benefits we seek to provide and has the ability to obtain those benefits by entering into a relationship with our organization. we must remember that if an organization is truly marketing oriented. However.diverse customer base. That is. we continually use this information as feedback to more precisely align our solution with the benefits sought by our target market. For example. that is. Many firms view the personal selling process as a sales funnel. must be forthcoming very quickly if the restaurant is to be successful. check out the My Saturn section on the Saturn website. After identifying qualified prospects. While this response is not as easy with tangible products. organizations marketing such goods must always aspire to solicit this kind of feedback and respond to it as quickly as possible. A qualified prospect can be defined as an individual. especially high technology products. Check out the website for Saturn automobiles (http://www.jhtml) to observe the efforts put forth by this company to be truly customer-oriented. while the sales funnel begins with a profile of our target customer and the benefits that s/he wants. the number of prospects decreases as we proceed through the sales process. it remains to contact these prospects and consult with them about our chosen solution to their product needs in terms of the benefits they are seeking which we aspire to provide. locating and identifying qualified prospects becomes a primary function of the marketing or sales effort. a response to feedback from customers in a restaurant that this place it too smoky. the process begins with many different possible customers. For example. but in the future it will be essential.saturnbp. we must continually adjust our product or service offering to better provide those benefits.

special offers. one will find almost countless coupons included by advertisers to encourage customers to buy. Colorado (http://www. In organizational markets. see http://search. catch-all category including coupons. a new feature is placed because it ostensibly will be of interest to the readers of the publication.com/search?p=international+trade+shows&n=25 ).com/comdex/) or some other theme (for example. and see if you can find an article included in the newspaper that you believe was published without a charge to the advertiser based on its interest to readers. For example. sales promotion ends up being a large.Overview of Sales Promotion Because we define sales promotion as any added incentive designed to inform.com/mri/. if one reviews the local Sunday paper. That is. The challenge with publicity is preparing an article that is newsworthy and of interest to the readers of a publication.com /) publishes an article on a new car every week.org. see http://www.html). There are also public service announcements that often attain similar objectives. and international expositions that usually share a common theme such as an industry (for example. This article is usually published without a charge to the manufacturer of the car because the editors of the Gazette believe that readers will find the article . the Gazette in Colorado Springs.isp.publicity. it is an industry sponsored web presence. only a very small percentage of these coupons are ever even seen let alone exchanged by consumers. You might also want to check out this website that operates in the United Kingdom (http://www. For example. However. Check out this website for an example of a firm that does publicity exclusively: http://www. companies often spend large amounts of money on trade shows which are regional. and many other promotional activities.uk/welcome.key3media.yahoo. persuade or remind a certain portion of the target market. customer sweepstakes. Obtain a copy of a local newspaper.gazette. These activities are used both in consumer markets and organizational markets although the methods often differ. Overview of Publicity Publicity differs from advertising in that the advertiser does not pay for the space in the medium or publication with publicity. national.

The same may be true of articles containing restaurant and movie reviews. employees. the organization may be communicating with its customers. The main requirement of obtaining publicity in most media is that the article placed should be newsworthy and credible and of special interest to viewers or readers. Formulating an Integrated Marketing Communications Plan The primary challenge in promotion management is the integration of all activities directed at communicating with one s various audiences so that the organization presents a consistent understandable image to those groups. and suppliers used the same logo and letterhead. Marie wanted to make sure that all communications with customers. For example. The students agreed that they wanted to open a restaurant together. We will describe Marie s chosen MARCOM program at length later on.newsworthy and of special interest. and the general public in several different contexts. and the consistency of local ownership would be critical to maintain her chosen organizational image. recently a group of MBA students at a university decided to enter into a business venture together. We say audiences because at any given time. After different parts of the organization agree upon what image the organization seeks to attain. For example. When asked who their target market would be the students responded Well. the availability of unique products. in the example of Marie s Gift Shop described above. For example. All components of the promotion mix then have some underlying concept to reinforce. it is essential to know who the target customer is and what benefits s/he is seeking. . Two students had recently left military service and two others had received a departure bonus from a high technology firm. It is imperative that the organization create and reinforce a clear image in the marketplace. employees. there is usually a temptation to ignore this requirement and attempt to be all things to all people. competitors. suppliers. Marie also realized that an emphasis on personal service. Thus. only that these efforts will have agreed upon guidelines so that all of the different groups with which the organization communicates are given a consistent image of the organization. an integrated marketing communications (MARCOM) program can be established and implemented. This is not to say that there will not be creativity in individual marketing communications efforts. all communications should be centrally produced and managed. A Note on Positioning As we have indicated. Several students in the group had managed to save some funds through various means.

everyone who eats. Visit the Nick at Night website described in your chapter and view two retromercials on that site. Obviously. why. when. . this definition of a target market is too broad and provides insufficient guidance about the Five W s and H (who.org/marketscope/databank/QuarterlyClassified-new. Ask the manager about his/her promotion mix and what components are in it and how they are managed.com/). Use the keyword Professional selling to search the internet. Obtain three magazine ads. (http://www. and how) of the whole concept of the business. what. It would be difficult to position a restaurant to simultaneously meet all of these needs well. Write a one-page essay describing the results of your interview. one that primarily is designed to inform. Agree or disagree with the following statement and explain your answer using materials found in Chapter Ten. Describe what your reaction was when you learned of the amount. the needs of those who are searching for a fast lunch will differ significantly from those who aspire to relax and talk over their lunch. Go to the following website and obtain an estimate on how much was spent on classified ads in newspapers between 1995 and 2000.naa. For example. then no one is your customer.htm) The Federal Trade Commission s 1999 report on advertising for tobacco products is available on the web (Federal Trade Commission Cigarette Report for 1999 ).nfsa. Obtain a magazine advertisement for which you think the target market is clearly defined and comment on what you believe are the characteristics of that target market. Also. Chapter Nine Exercises Visit a Saturn dealership and another new car dealership and write a one-page summary of your experiences paying particular attention to sales-driven versus customer-driven behavior on the part of the salesperson or salespersons you met. Go to a grocery store and interview the manager there. and one that reminds. The students needed to more clearly define the concept of the restaurant and precisely who they were expecting to serve in the business. Read this report and write a one-page essay on your personal reactions. If everyone is your customer. one that tries to persuade. note the following website in your essay (http://www. where. Write a one-page essay on how you believe advertising has changed since your chosen retromercial aired. Write a one-page essay on your findings.

Thus the Reach is 50 (that is 50% of the target market will see the ad. Why? 2. In our example. the frequency or average number of exposures for the target market will be five. fifty percent of the people in the target market will be exposed to the ad at least one or more times. The market for this product is estimated to be around 20 million people who are particularly concerned about the presence of germs on their hands during food preparation. During the company s initial advertising campaign. Three effective exposures usually requires much greater than three total exposures. and Action). some people subscribe to the three-hit theory. That is. The campaign will be targeted to this market throughout the holiday season of 2000. half of the people (10 million people) in this target market will be exposed to the ad during the three-month life of the campaign. GRP s or gross rating points-the GRP level is a rule of thumb used by media personnel to assess the relative strength of the campaign. That is. 1. Frequency the average number of exposures to advertisements received by all prospects who were reached during the given time period. Interest. The product is to be introduced through a television ad campaign beginning October 2000 and running through December 2000.Chapter Ten Glossary MK 300 Appendix Chapter Ten An easy guide to audience measurement Overview of basic terms used in audience measurement Radio and TV audience measurement Situation description: A consumer packaged goods company runs a campaign on television for a new soap product Germ Buster Hand SoapÒ. Desire. Thus.) Concerning reach. your campaign reached 10 million prospects or half the target market. GRP s yield a comparison of different options for reach and frequency through examining the relative exposure . it takes three effective exposures to move the prospect through the hierarchy of effects. Reach the percentage of target prospects exposed to one or more ads for a brand during some stated period. the GRP s would be 250. In the preceding example. (Attention. Suppose that media research indicates that the 5 million people in the target market will be exposed to this ad six times while 5 million people will be exposed four times during the campaign.

Remember that you are spreading the amount of dollars over different communication objectives. For example. Of course. I think not. which would you prefer to emphasize in a campaign: reach or frequency? On the other hand. need to decide which is more important for our situation. does that mean have you necessarily increased the communication and learning that has taken place with the target market? However. you are the marketer with the MASTER OF BUSINESS ADMINISTRATION DEGREE! Measures of television audiences and their relationships to each other Coverage (number of TV households in signal range of TV station or network) i i i i i i . are the benefits the product delivers relatively easy to understand? If so. However. is an exposure more powerful if it occurs previous to the food preparation period versus after the food preparation period) it has been applied traditionally in TV and radio advertising. That is. Funds are always limited and you will asked to make decisions of this sort that trade off resources and people in your organization expect to be able to trust your answers. you need to analyze and think about what is needed to convey your message. After all. if you emphasize reach over frequency that means that more people will receive fewer exposures. the measure is helpful for comparing competing media schedules.schedule of different campaign options (their relative bang for the buck. This debate finds little agreement. while your GRP s have increased with ten second spots. In our example above. ad agencies and media representatives are glad to have you spend more money always. if product benefits are difficult to convey would your answer be different? J Think about different schedules and how they impact your communication potential. Can t do it all! For example. That is. Compare this to emphasizing frequency over reach so that fewer people will receive more exposures. reach or frequency. There is the growing question of effectiveness. is it more important for a larger proportion of the target market to be exposed at least once. ) While this measure has obvious shortcomings (that is. we can run ten second spots or sixty second spots and end up with the same GRP s (an exposure is an exposure) but do they have the same selling power. except to say the more is better. That is. or is it more important for prospects to be exposed to our message several times.

had the following viewership: Coverage this local cable channel can provide a coverage of 2 million households HUT for the 12 midnight to 1 a. or network Rating Percentage of coverage tuned to a particular program. time slot.60 = . .000 households or three percent of the total coverage. Audience Share (percentage of HUT tuned to a particular program. the program reached 60.03 Thus the percentage of total coverage tuned to this particular program was .03 or said another way. station or network) HUT X Audience share = Rating Brief example A recent infomercial for Suzanne Somers Depression Cure aired on the local cable TV station in Out There.m.05 X . the percentage of coverage with TV sets turned on is one out of twenty or five percent or . Kansas.i i t t HUT (homes using TV) Percentage of coverage with sets turned on station.05 Audience Share during that time slot the percentage of homes using TV that is tuned to this cable channel is sixty percent Rating the rating for this infomercial would be .

com/products/SMRBDOC. people use the term creative as a noun to describe the portion of an advertisement that comprises the artwork that translates the appeal or basic selling proposition of the ad and how the appeal will be conveyed to the target market. individual and group creativity plays a critical role in all phases of marketing practice.com/. creativity is used to describe how individuals or teams can identify and implement new product ideas. Most of these mentions of creativity would be found in one of three areas: advertising.smart-mktg. Simmons Study of Media and Markets (http://www. In advertising. There are many other resources for assessing markets and audience measurement that are easily accessed on the internet and you might want to see what you can find in your own search. Thus. The examples above all miss the primary role of creativity in marketing. Also. Definitions of Creativity . In personal selling. or new product development. creativity is usually applied in a context of creative selling with no particular specific reference to the literature of creativity or what creativity really means. http://www. http://acnielsen.Interesting websites to review: A. That is. For example.com/ and Arbritron Ratings.htm. we compare the cost of reaching one thousand viewers across different stations. for example. In new product development.C. If we used the basic CPM formula (cost of one unit of time)/number of households reached). personal selling. Newspaper and magazine audience measurement The Basic CPM formula is used to compare different media options. Susan and Bryan will be responsible for doing the creative. you might try American Demographics magazine to explore more information about audience characteristics at http://www.html). For example. and also. we Chapter Eleven Creativity and Marketing If one explored the research in Marketing. s/he would find many references to creativity. Nielsen and Company.com/home/home. We will define creativity as identifying and describing new ideas that are novel and useful.demographics.arbitron.

A third group of definitions believes that. The first group of definitions suggests that. This is especially applicable in an era where the marketing information management function is participating fundamentally in pursuing a distinctive competitive advantage for the organization. and press (work climate). A primary reason is that certain preconditions must be met and certain organizational components marshaled to help individuals and teams become creative. to be truly creative. The Application of Creativity: The 4-P s Model The 4-Ps model provides a good structure for understanding creativity and its application in marketing. The model s simplicity allows for the individual measurement and assessment of each component as well as evaluation of . From these various definitions.An examination of the literature of other disciplines reveals dozens of definitions of creativity. but creativity techniques may help identify new sources or new ways to consult those sources once they are identified. The Couger Center for the Study of Creativity has applied the 4-Ps model of creativity in many different contexts and found it to be a good guide for understanding creativity. This has implications for marketing and a firm s ability to be more market-oriented. part of the task is to formulate the problem itself. a solution must have value. We will later discuss conditions for creative environments that can enable such imaginatively gifted recombination. product. Included are those situations in which the problem or opportunity as initially posed was vague and not well defined. three themes emerge that seem to be beneficial to the study of marketing and creativity. The 4-Ps model of creativity provides the basis for the remainder of this chapter and addresses the application of structure and techniques for facilitating creativity in marketing. The objectives of newness and imaginatively gifted recombination are meaningless if they do not provide value-added results. an innovation must demonstrate radical newness. process. to be creative. This group of researchers concludes that a creative solution does not necessarily require new components but can simply integrate existing knowledge in a more valuable way. Thus. Conditions of Creativity Individuals and teams that are otherwise regarded as equally competent do not perform equally. This definition has implications for upstream marketing activities including target customer needs assessment and competitive benchmarking studies. A second group of definitions supposes creativity is the imaginatively gifted recombination of known elements into something new . The model represents creativity as a dynamic phenomenon comprised of four highly interactive components: person. we may already know that tracking customers requires a continuous data collection effort. For example.

In the remainder of this chapter. are provided processes to facilitate creativity. The Second P: The Creative Process Considerable research has focused almost exclusively on the creative process through which people can enhance their creative abilities and creative results. It is important to consider both intrinsic and extrinsic motivation. Management can also provide motivation for employees to become more creative. Most people are inclined to believe that creativity is inherited and that we either possess it or we don t. Intrinsic motivation comes from the anticipated satisfaction of generating a creative idea and putting it into effect. as well as the organization as a whole. we provide description and directions for using two of these CPS techniques. While the space devoted to creativity in this e-book is limited. Through encouraging the use of proven creativity techniques. The First P: The Creative Person Numerous fallacies exist regarding creativity in people. The Third P: The Created Product An analysis of creativity can also start with the end product. by identifying the characteristics necessary for objects to be classified as creative. Marketing management can provide extrinsic motivation by rewards. The Five W s and H technique and the Wishful Thinking technique are described in an appendix to this chapter. Nevertheless. Another strength of the model is that it can be applied to a specific functional organization. and are supported . Marketing management can stimulate creativity in employees by reinforcing the fact that all individuals are innately creative. Five major studies of creativity overwhelmingly show significant positive results when creative abilities are deliberately nurtured. marketing managers can help employees restore the natural curiosity and originality that they exhibited as preschoolers. each of the four Ps is described and discussed in relation to marketing management and marketing research practice. such as a marketing department or marketing research department. Few of us perceive ourselves to be creative. such as recognition and financial incentives. Research demonstrates that creativity is present in everyone and is normally distributed. possibly because many highly publicized research efforts have been focused on the study of creativity in geniuses and highly accomplished professionals. most people utilize less and less of their native creative ability as they mature. and can also facilitate a creative climate (discussed later) in which employees more easily obtain the intrinsic satisfaction of creatively accomplishing a task or project. There are many creative problem-solving techniques that have been shown to be helpful in marketing. with a precipitous 4th grade slump . Nationwide studies of American school children reveal progressively lower scores on creativity tests as they move through the school system.the interaction of the components. Others believe that if people are informed about their native creativity capabilities.

through a positive climate for creativity, it is logical to assume that creative products and services will result. Nevertheless, it is helpful for employees to have ways to measure their creativity results. However, a framework should be developed for measurement of creativity in marketing activities. Marketing management could then translate in specific terms how creativity would be recognized, judged and rewarded. We discuss measuring the creative content of ideas in the marketing context below.

The Fourth P: Press (the Environment for Creative Work) Press is a term from the field of education that refers to the relationship between human beings and their environment. The importance of the work environment for encouraging/discouraging creativity is well supported in creativity research. Optimum results do not occur unless an organization has a positive climate for creativity. There has been considerable research on the ways that work environments influence creativity. The climate for creativity comprises those factors that stimulate or retard creative behavior. Studies indicate that organization s can create a set of norms that encourage creative thinking. These norms would include universal tolerance for new ideas, and universal organizational intolerance of cynicism and sarcasm. People should be rewarded for identifying what is good about a new idea before they are allowed to be critical of the new idea. Organizations that systematically positively recognize those who find faults in new ideas will find their pool of new ideas drying up quickly since there is only negative reward for offering one s new ideas to the organization. Burnside, in researched published in 1988, found five characteristics of a work environment that encourages creative thinking. Those five dimensions are as follows: 1.

Goal clarity - a clearly understood objective for the creative work Resources - the necessary financial and non-financial support

Freedom - the latitude to explore whatever directions of inquiry seem appropriate

Encouragement - genuine and expressed support from management and co-workers

**Congruity - the match between what management says and what management does

**Suspended judgment maintaining an open marketplace for ideas in which the potential strengths of new ideas are always identified before their potential weaknesses

(**we have added these two last dimensions to the list based on our own research experience)

In marketing, attention to these six dimensions will help ensure a healthy environment for creativity that will continue the production of many fresh ideas.

Chapter Eleven Exercises

Has your definition of creativity changed as a result of reading this chapter? Explain. Form a small group and address a question assigned to you using one of the CPS techniques described below. Appoint a member of the group to keep notes of the events when your group starts problem solving. Describe a moment in your life in which you believe you were most creative, including a description of the 4 P s of creativity in your life at the time. Why are those who constantly kill creative ideas by inappropriate joking or other behaviors so dangerous to the creative effort in an organization? Explain. Use the six dimensions of a healthy creative climate to describe how you would establish an ideal climate for creativity at your workplace. How much change would have to take place? Explain. Review the material below on Personal Creativity Zones (PCZ s) and describe your own PCZ.

Appendix I: Description of Two CPS techniques: Steps in using the Five W s and H Technique a. b. c. identify the who, what, when, where, why, and how of the situation under consideration draw up a list of responses to each dimension use this list as a way to identify creative responses to the problem or opportunity

note: this technique is more analytical in nature because it provides a good checklist to make sure most areas are covered. While the technique is valuable to outline an area that needs to be explored, another more intuitive technique is often helpful to use to generate new ideas after this technique is applied initially

Steps in using the Wishful Thinking Technique a. suspend reality (a challenge in itself!)

b. identify the perfect solution that is, what would be the best solution to a situation if anything were possible. c. now, work back from the perfect solution introducing reality a little at a time, being careful to challenge each part of an idea considered impossible

Note: this technique is more intuitive in nature because it provides a good tool to challenge traditional knowledge that may be no longer applicable or relevant, the technique is valuable because it starts with solutions rather than problems. Plus, this technique is FUN!J

Appendix II: How to identify your Personal Creativity Zone (PCZ) Finding your Personal Creativity Zone Frequently Asked Questions (or FAQ S)

FAQ 1. What is a personal creativity zone (PCZ)? FAQ 2. How can I identify my PCZ? FAQ 3. Does one PCZ work for all of the problems and opportunities I want to analyze and find solutions/answers to? FAQ 4. Will my PCZ be identical to the PCZ s of my friends and coworkers? FAQ 5. Will my PCZ include others?

Answers to FAQ S about Personal Creativity Zones

1. Your personal creativity zone includes all conditions, environmental and personal, that help you reach your maximum creative potential 2. While sometimes there are similarities, you must find your own PCZ through analysis and reflection. For example, identify the most creative time of your life, or a situation where you were most creative, and write down the conditions that surrounded that time of optimal personal creativity. 3. It is unlikely that you will have the same PCZ for all decisions you face. For example, deciding whether to marry a certain person may call for a different PCZ than identifying what courses will be most likely to lead you to the right college degree and career. 4. Probably not. At any rate, you must do the work to identify a personal creativity zone of your own. It is likely that some of the characteristics of your PCZ will match the PCZ of others. 5. Research in creativity has shown that very often the optimal number of members on a creative team is the dyad (two). So constantly search for the person who stimulates your creativity. 6. Remember, creativity may be work but it is also supposed to be fun, so look forward to enjoying your approach to being creative.

Chapter Twelve What is the international market and why is it important?

As a consumer you regularly buy products manufactured in other countries. The U.S. usually has a negative balance of trade, meaning that as a country we import more products than we export (for example, see the following website and review our annual trade deficits for the last ten years): (http://www.kiplingerforecasts.com/kbftables/usecon/trade/trade_balance_annual.html).

What is the impact of this trade deficit? Experts disagree as to whether this deficit creates real problems for the U.S. economy or not. Critics argue that buying so many imported goods hurts the market for U.S. jobs, while others believe that this open competition forces U.S. businesses to learn how to compete effectively in global markets. A full discussion of this issue is beyond the material in this course. However, you should have a clear understanding and appreciation for the arguments expressed surrounding this issue. If you do your own search on the keywords U.S. balance of trade and trade deficits you will find many different viewpoints on this topic.

Our point is that, as a consumer you buy products manufactured in other countries almost daily. You are, no doubt, familiar with the fact that Nestles is a foreign company and that they recently merged with a U.S. company, Purina. (see http://www.nestle.com/all_about/index.html for an article outlining the merger) and that many products you buy are manufactured in China (see

http://www.census.gov/foreign-trade/balance/c5700.html for recent government data on the U.S. trade balance with China).

However, you may not be familiar with Fiskars, based in Finland (http://www.fiskars.com/) or that your Doc Marten s were probably under a brnad name owned by a company based in U.K. (http://www.drmartens.com/flash/).

International marketing is the rule today, rather than the exception. Since NAFTA (North American Free Trade Agreement) was instituted, the U.S., Mexico, and Canada are moving towards an open market without trade barriers (search with keyword NAFTA to find further information), and the European Union (http://userpage.chemie.fu-berlin.de/adressen/eu.html) has tried to reach this goal for several years.

Thus any student of marketing should have some understanding of global trade agreements, particularly, NAFTA, the European Union, and the General Agreement on Taxes and Tariffs, also known as GATT (http://gatt.org/). As global competition for the production and marketing of goods and services intensifies, these trade agreements will become more controversial.

Choosing a strategy for international marketing

If an organization determines that it has the interest and capability to market its products internationally, the organization must then choose among several options. Traditionally, the following four options have been identified:

Export/import marketing intermediary hiring an agent to represent your organization Trading company enrolling for the services of a specialized company that will represent your organization in international markets Joint venture partnering with a foreign company that has its home office in the country of interest Wholly owned subsidiary going to the expense and risk of opening your own offices in the foreign country of interest

However, today with the worldwide web s communication capabilities, many of these categories have become obsolete because different kinds of organizations are filling the vacuum that previously

existed in knowledge and information about foreign markets. The internet has changed the landscape of world trade, particularly where small businesses are concerned.

Export/import Marketing intermediary

The export/import marketing intermediary is usually an independent business that has a special knowledge of the export and import business. Such organizations often have knowledge relevant to doing business in a certain part of the world. For example, see (http://www.ita.doc.gov/) for free information on international trade.

Trading Companies

Check out the internet site http://www.alibaba.com/ to find more information on trading companies and how they do business.

Joint Venture

Because of the historical abuses of imperialism (or situations wherein industrialized countries exploited smaller, less developed countries), many countries require that a foreign organization have at least fifty-percent of its ownership held by citizens of its own country. For an example of how one multinational company manages its international marketing efforts see the website of Xerox Corporation at http://biz.yahoo.com/p/x/xrx.html. You will note the Xerox, like many large organizations uses several different approaches to market its products in different regions of the world. Also, check out the Coca-Cola website to see how that company manages its international activities (http://www.cocacola.com/).

Explore different the websites of different companies to observe how those companies are managing their efforts at international marketing. For example, review (http://www.jpoststore.com/product417.html, note that Jarden means Jordan as in the Jordan River in the middle east*), http://www.spa-saariselka.com/EngIndex.html, and http://www.arabia.com/ remember to click on English on these websites.

How would you approach marketing to these different areas of the world? The first step in any kind of marketing endeavor is to understand what satisfies the customer, and the first step in

understanding is listening, an attribute that we in the U.S. do not often exhibit. In some cultures in the world, there is nothing wrong or uncomfortable with silence. However, being silent is not an attribute of most subcultures in the U.S. thus business people from the U.S. often talk rather than listen to people from other countries. This seems simple, but as an exercise, try to be in a group of people and not say a word for at least thirty seconds. Sound easy? Try it.

Understanding other cultures requires an effort at empathy. That is, one must try to understand what it is like to stand in another s shoes. While this is intellectually easy to understand, it is challenging to actually do. For example, how does an Amazonian Indian see his or her world?

Chapter Twelve Exercises

Examine the Nokia website (http://www.nokia.com/main.html) and make observations on differences you find in this site and the Motorola website (http://www.motorola.com/home/). Do you believe the differences you identified are due to the different countries within which the two organizations function? Explain thoroughly. Compare the websites of Oras, Oy (http://www.oras.com/) and Moen (http://www.moen.com). Can you identify country-oriented differences in these two companies? If so, list and discuss each difference you find. Discuss the following statement: As the worldwide web develops, it will minimize differences in the way different countries do business and will homogenize the environment of business. Review the word international marketing on the internet and summarize your findings in a onepage report. Based on the opening vignette that discussed the Nestle Company s recent acquisition of Purina Feeds, make three predictions on other natural consolidations between other U.S. firms and foreign firms that you believe may take place in the future. Examine the website for Diamler/Chrysler Corporation (http://www.daimlerchrysler.com/). Find an article on the internet that discusses whether this merger will be successful, including your own thoughts on the merger in a one-page essay. What challenges, if any, do you believe exist for this merger based on cultural differences? Find an interesting website of a foreign company that you believe does a good job of describing the company s products and makes them of interest to a reader from the U.S. Write a one-page essay on an article you find discussing the disagreement between Ford Motor Company and Firestone Tires.

Agree or disagree with the following statement and give reasoning for your position: the problems between Firestone Corporation (http://www.firestone.com/) and Ford Motor Company (http://www.ford.com/servlet/ecmcs/ford/index.jsp) were primarily because the companies are owned and operated by people in different countries with different cultures. Describe the meaning of the term balance of payments and explain why it is important for a student of marketing to understand this concept. Check the website below and describe how this website is related to marketing. That is, who is the customer and who is the marketer and what is being marketed? http://www.thehungersite.com/ Author s Note

This Principles of Marketing e-text is my first effort at writing a textbook. I have tried to gather and record the areas of marketing that meet two goals. First, I have included the information that is most likely to be used by a typical marketing student. Second, I have written about principles of marketing that are true principles, that is, that are less likely to change fundamentally in the foreseeable future. In choosing material to cover, I have tried to consider the fact that most people who learn this material do not have their primary professional responsibility in marketing. Therefore, I have attempted to focus on material that will be most helpful to those who will not work primarily in the marketing area. If you learn this material and are not a marketing person at least it will help you work more effectively with those who are in marketing and improve your ability to be a better consumer.

I hope you enjoy your experience with this e-book. As with any project, I will be trying to continuously change this book to meet the needs of its users, so please let me know of any suggestions, recommendations you may have particularly as they apply to your ability to learn and apply the material presented.

Lexis F. Higgins, Ph.D.

lexishiggins@yahoo.com

Principles of marketing: An applied, collaborative learning approach

Table of Contents

Chapter One What is marketing and how does it differ from sales, advertising, and promotion? Chapter Two What is Marketing Management and what do product managers and marketing managers do? Chapter Three How do we identify and understand markets? Chapter Four - Why do we study buying behavior in Marketing and what have we learned? Chapter Five How companies manage marketing research Chapter Six How do companies decide what products and services to market? Chapter Seven Specific Challenges of Marketing High Technology

Chapter Eight How is the pricing decision made? Chapter Nine How do producers get their products and services to their target customers? Chapter Ten What are the options for promoting products and services? Chapter Eleven Creativity and Marketing Chapter Twelve What is the international market and why is it important?

Chapter One What is marketing and how does it differ from sales, advertising, and promotion?

Marketing is one of the most misunderstood and confusing terms used in business. How would you define it? Think about what you believe marketing is and write your definition down now:

Marketing is: _________________________________________________

_____________________________________________________________ .

Save this definition to compare it to other definitions of marketing we cover later on.

Why is the term marketing surrounded by confusion?

First, the word marketing means very different things to different people in different industries. For example, a coal producer in Kentucky just needs to understand what price the local buyer will be paying for the product and s/he can then plan to market (or just sell) the coal produced to the local buyer. Second, think about how much different the above situation is from another case in which marketing must be done. Let s say that you are a product-marketing engineer at Agilent Technologies and your Product Marketing Manager has informed you that you will be responsible for marketing a new product that has been conceptualized by engineers in the Research and Development (R&D) Department. Finally, assume a good friend of yours who has invented a new way for people to wash their car. She has asked you to market her product for her. In all three of these situations, the product has already been conceptualized and produced. It won t help the individual marketer at all to consider how the market will react to the product. In situation one, the coal miner must just extract the coal from the ground and deliver it to a local coal broker for sale. In situation two, the product manager at Agilent must first figure out what the new product will be good for and who might want to buy it. Finally, in situation three, your friend has already invented the product; it just remains for you to figure out who the people are who wash their own car and how to reach them. In all three situations, the marketer is faced with coming up with a way to sell what has already been produced. This definition of marketing, unfortunately, is how most people would define marketing, that is, Marketing is how an organization or individual sells its product or service. Thus in this definition, marketing is relegated to finding and exploiting a market of buyers for the product or service.

But is that how marketing practitioners and people who teach marketing define it? Let s review some alternate definitions of marketing from the business literature.

The American Marketing Association s definition. The American Marketing Association (AMA) is the leading organization in the U.S. representing the academic side of marketing. The organization is comprised of and primarily impacted by people who teach marketing at the college level. In 1948, the AMA defined marketing as follows:

The performance of business activities directed toward, and incident to, the flow of goods and services from producer to consumer or user. (AMA, 1948).

Note that the definition above focuses on the DISTRIBUTION aspect of marketing and doesn t really include the Four P s : Product, price, promotion, place (distribution).

Based on relative size and needs of the market. and services to create exchanges that satisfy individual and organizational objectives. it is important that any student of marketing understand what steps must be taken to be successful in a marketing effort. select certain segments of the market that are of the most interest to you and your organization C. Understand the market wants/needs of interest B. pricing. The Seven Steps in the Marketing Process It is natural that people in different situations define marketing differently. goods. (AMA 1985) Compare these two definitions: How are they similar and how do they differ? Why do you think the AMA made the change in the definition of marketing? Now. the AMA definition was changed to the process of planning and executing the conception.In 1985. How do the definitions differ from yours? How are they similar? Speaking of confusion. Communicate the concept of the product or service to the targeted customer in a way that makes sense to the customer F. and distribution of ideas. Thoroughly describe these segments based on their individual needs Create a product or service that will meet the specific needs identified E. promotion. Deliver the product or service to the targeted customer in a way that will be convenient to the customer . type in the key word marketing into your favorite search engine on the internet and see what you find. The marketing process can be described in the following seven steps: A. D. However. compare the above discussion to YOUR definition of marketing. While this process is not always followed. we will approach the definition of marketing by first learning about the seven steps in the process of marketing.

G. I already HAVE a product to sell. and C have already been performed. Wait. Definition of marketing we will use in this book Based on the seven-step approach to marketing. if a firm defined its product policy as research leading to creation of the most sophisticated. B. this won t work for me. steps A through D are all upstream activities that should be performed before a product actually exists. the firm does not specifically state this orientation. and you should check to see if they have been done correctly. F. in order to deliver customer satisfaction. The process of marketing can be divided into upstream and downstream activities. there are several different orientations that organizations use to approach doing business or serving their customers. Upstream and Downstream Marketing Activities in the Marketing Process What marketing activities are performed and how they are performed will have a lot to do with how many choices you have in managing the steps marketing process and the focus of the organization s marketing effort. For example. For example. highest quality products . The organization will view the marketing function s responsibilities based on the history of the organization and its orientation to doing business. this e-book is designed for people who want to do marketing the right way. Usually. Solicit feedback from the customer about how your product or service could be improved to meet the customers needs even better This process is applicable to most situations encountered by those wanting to market a product or service. I am like those people who you described at first. That is. However. Also note that marketing research plays an integral role in each of these stages. I just need to find somebody to BUY IT! As marketers. and G. thus step G will provide feedback into the continuation of the seven-step marketing process over time. the organization that is truly focused on customer needs must be driven by an active research effort. realize that some steps have already been done. Of course. That is. one must do customer research. Surely. there are many readers who will say. we will define marketing as: The conceptualization and delivery of customer satisfaction the first part of this definition would be covered in steps A through D in the marketing process above and the final aspect delivery would be represented by steps E. we understand that many sellers don t have the option or input to create a new product or service. If you must pick up the process after steps A.

Yes. In this approach. steps A through C of the marketing process are largely ignored and marketing resources are instead placed on generating more sales. The Customer as Monarch and the Marketing Concept are related to the Seven Step Marketing Process The marketing concept can be thought of as having four parts as follows: . but in these times. It can be described by the slogans we do it all for you. highest quality products and services? Write your answer to this question in the following line: . sell. As a consumer. In this approach.and services in the world then it has decided to use a Product or Production Orientation. Another approach or orientation to managing the marketing function can be called Sales (or Promotion) orientation . sell. it is still a good guide to managing marketing activities. That is. and be represented by an approach of find a need. find a need and fill it . marketing is seen as serving the same function as with personal selling and advertising. the organization has decided for itself what customers want (sophisticated. with the latter being as competitive as the former. and marketing s primary job in the organization is to sell. have it your way a former Burger King slogan. do all customers want the most sophisticated. this is a demanding task. highest quality products and services? Do you as a consumer always seek out the most sophisticated. we exist in an extremely competitive world. There is an approach to marketing called the Customer as Monarch (or Marketing) Concept and while it has been around under different names for many decades.. highest quality products) and has ignored the first three steps in the marketing process we described above. or just by the simple saying which perhaps you have already heard. The Marketing Concept would rephrase this saying a bit. Note that this competition includes organizations in both the for-profit sector and the notfor-profit sector. and fill it profitably and more effectively than the competition.

a for-profit goal being make a fifteen percent return on investment . If there are not similar product solutions that provide similar benefits available then there will be competing uses for expenditure of the customer s income. go step by step to better explain your answer. 2. fifty-percent-off coupons appearing in the Sunday newspaper will not reach the goal of inducing new product trial if the product is not available in stores due to a problem with product distribution and if sale catalogs are printed by a central office without coordination with local business outlets. but also the most critical. 4. A indicated above. it must execute the strategy in an efficient and effective way. Organize your answer according to the different categories you find in your search. said another way. Part IV Satisfy customers better than the competition. when the organization has agreed on a marketing strategy. EVERY ORGANIZATION has competition. Identify an organization that you believe is not fulfilling each step in the marketing concept. In your analysis. provide satisfying products and services to your target customers Part II Meet organizational goals this is applicable for both for-profit and not-for-profit organizations. go step by step to better explain your answer. Not-for-profit organizations have goals non-financial performance such as provide thirty hours of client services per week consistent with our organizational mission. For example. Has your definition of marketing changed? If so. Summarize on a one-page report what you find after you get on the internet and search the keyword marketing. In a one-page essay. how? 3. Identify an organization that you believe is fulfilling each step in the marketing concept. the Marketing Concept serves as a guide for applying organizational resources directed at marketing. Chapter One Exercises: 1. compare the different definitions of marketing discussed including your own definition. Like the Seven Step Marketing Process. A longer-term goal that is ultimately tied to profits but immediately is tied to customer satisfaction might be: Be a recognized leader in customer satisfaction in our industry. That is. there will be regular inventory understocks or overstocks. Part III Integrate marketing activities this part can be the most complex. In your analysis. For-profit organizations should have goals other than profit. .Part I Understand and meet customers needs.

The conceptualization and delivery of customer satisfaction Upstream marketing activities understanding. but not be responsible for the activities of anyone other than myself. or marketing concept a philosophy of doing business in which the organization places utmost importance on delivering customer satisfaction. 7. Chapter Two What is Marketing Management and what do product managers and marketing managers do? The Meaning of the terms Marketing Manager and Marketing Management Traditionally if a person had the title of manager. While this terminology has changed over the years. For example. meeting organizational goals. writing marketing literature for the firm s products). sales orientation. as an individual contributor I might have the responsibility of performing certain work (for example. In high . Write a job description for a manager of the marketing function (that is. In a one-paragraph answer. it meant that s/he had responsibility for helping guide the activities of at least some number of employees. and outperforming the competition while integrating all marketing activities. Given what you have learned in Chapter One. selecting. explain how you believe the personal selling effort should be related to marketing in a modern organization. and creating a product or service to meet the needs of those target markets Downstream marketing activities communicating a product or service concept to the chosen target market and providing customer satisfaction in the process by delivering that product or service Customer as Monarch. 6. market (customer) orientation. describing target markets.5. what would be his/her duties and major responsibilities) in the following orientations: production orientation. Chapter One Glossary Marketing . explain the difference between the terms marketing and promotion. we still consider someone who has the title of manager to be responsible for overseeing the allocation of resources for the organization.

One at the top. This brings up still another consideration. For example. First. it is the overall orientation an organization choosing to allocate its resources. We will define the term strategy as a method used to reach an objective. The term Product Manager is often used in high technology industries to assign responsibility to a specific individual or group for the successful supervision of all marketing activities related to a specific product or service. the term marketing manager would be used to describe the same thing. as a broad guide to preferred action.technology industries. a discussion of strategy. At other firms. strategy will have two meanings. The use of titles varies across industries and size of organizations. Related to the term management is the term strategy. the marketing director may be responsible for all marketing activities in the firm. Thus. objectives. In some organizations. one high-tech firm might use the title of Product Manager-Digital Systems to describe the job of the person who is responsible for digital versus analog customer solutions. Thus. Use strategy as a keyword search on the internet and see what you find. As the reader can see. Thus. we will consider goals and objectives to be identical terms. Thus. What is marketing management? We will use the following definition of marketing management: Marketing management is the process allocating the resources of the organization toward marketing activities. For example. there is a two-tiered nature to strategy. We will discuss how different firms organize the marketing function in a later chapter. to reach our product quality objective. and second. our organization might decide to enroll in a total quality program offered by most large consulting firms. we will use the following definitions. strategy is a specific action used to implement plans. For example. and goals can very quickly develop into a miasma of terms and confusion. For example. the VicePresident of Marketing may perform the same functions. the organization might decide to be the leader in product quality as judged by customer surveys of our organization and our five leading competitors. First. a marketing manager is someone who is responsible for directing expenditures of marketing funds. Second. Thus it is often said that management is responsible for conceptualizing strategies. . The time-honored Management-by-Objectives programs in which a supervisor will formulate strategies and other employees will choose the method of reaching those objectives is an example of this relationship in action. and one below helping to implement objectives. we will use the term objective to refer to a broad-based design of where the organization would like to be at some point in the future. the word manager is often replaced with Director to indicate that a person has primary responsibility for a certain organizational function. Many words in the vocabulary of business management were taken from the field of military science. as an objective. Sometimes the product manager s responsibility is defined in terms of the product s/he is overseeing and sometimes the responsibility is defined in terms of a specific technology. For example. the word strategy has been used in the military for many decades to indicate a long-term commitment of resources toward accomplishing a certain goal. and other employees are responsible for implementing those strategies.

Promotion. Correction is the stage in which we take action to return our plan to the desired state based on feedback obtained in the monitoring stage. If this does not make sense to you. we often use the four P s to designate the areas of control a marketing manager has at his/her command. The four P s represents a convenient way to summarize the main factors involved in any marketing strategy. implementing. Both present and developing trends in each of these areas must be identified and monitored. If we find that return to the planned state is not practicable. environmental scanning is the process of studying and making sense of all the things that might impact the firm s operation that are external to the firm. question them to . It is the transition from expected reality to existing reality. Second. Third. Planning is the process of examining and understanding the surroundings within which the organization functions. For example. seen in a contemporary sense. First. Monitoring and Correction may be considered two stages because after plans are put into action. monitoring. and Place. and technology. the four P s may mistakenly be limited to downstream marketing activities only and as Chapter One indicates. Monitoring is the process of tracking plans and identifying how plans map to changes that take place during program operation when more information is acquired. and correcting. An example of the marketing management cycle in action: Let s Get It Together Family Organization Services The organizational mission of this service firm is: We provide families with means to improve their peace of mind and quality of life. Representatives of the firm meet with families. In summary. legislation and regulation. Implementation is the process of putting plans that have been made into action. we may adjust our planning outcomes. This would include studying and gaining an understanding of such things as: competition. please go back and review the terms used in Chapter One. social and cultural trends. Thus. The four P s as you probably already know are: Product. the marketing management cycle composed of planning. there are also upstream marketing activities that are related to the marketing mix. We use the use the term PIMC as a device to remember the stages. one must continually monitor performance and make adjustments to the plan based on the feedback gathered through these monitoring activities. The Marketing Management Cycle The planning cycle is composed of five basic steps. Price. However.In marketing.

do an on-site activities audit that models patterns of daily life for the family. After conducting several informal focus groups. Answers to questions: Question # 1: What will the customer satisfaction entail.understand how the family operates at present. she decided that there was a real need in the marketplace for a not-for-profit educational institution to pass along all of the knowledge families have about how to manage their household activities more effectively. thus based on the Five W s and H Technique (Who. that is. When. Why. that is. Let s Get It Together is owned and operated by a mother of three children. the owner realized that she must get organized herself. and How) she composed the following questions: What will the customer satisfaction entail. she decided to start this business because she realized that her family and most other families she observed lived in a state of chaos. and then offer suggestions about how the family can be better organized and more efficient in its use of time. what are the needs I am trying to meet? Who will receive customer satisfaction? Why will my organization deliver this particular customer satisfaction? Who will deliver customer satisfaction? Where will I deliver customer satisfaction? When will I deliver customer satisfaction? How will I deliver customer satisfaction? The owner then modeled the marketing management cycle as follows: Planning: First answer the seven questions I have formulated. Where. After she came up with the idea. After attending a seminar on creativity and innovation. what are the needs I am trying to meet? Answer: Provide easy-to-follow guidance on improving family organization . What.

creation of the service materials (seminar materials. etc.Question # 2: Who will receive customer satisfaction? Answer: Families who perceive a need for being better organized. A brief example of one aspect of this organization s marketing planning is: .) and details of the logistics by which the service will be promoted and provided. Question # 7: How will I deliver customer satisfaction? Answer: Through a personal and caring approach with my clients involving seminars and continuing personal contacts If you review the seven questions. Question # 4: Who will deliver customer satisfaction? Answer: Let s get it together. if preferred. there are ways to fulfill that need that are not being provided to families. through a small staff of highly trained and ethical individuals. Second. there is a already perceived need to be better organized. Question # 3: Why will my organization deliver customer satisfaction? Answer: First. you can see that some of the planning has been done. and the answers above. Question # 6: When will I deliver customer satisfaction? Answer: Customer satisfaction will start with the first seminar and continue through a continuing association with Let s get it together. What remains is to identify specific actions that must take place to ensure success such as identifying the characteristics of the best candidates for our service. will provide this service to families Question # 5: Where will I deliver customer satisfaction? Answer: The service will be provided through small introductory seminars and through meetings in the homes of the families.

the following conditions should exist: 1. initially. there are often situations in which an organization will have a medium-term marketing plan (two to five years) and a long-term marketing plan that covers plans for a five-year period or greater. and will offer our seminars there. thus we must identify likely places to offer these seminars. we may change that approach after initial seminars are offered (monitoring and correction) and move our seminars to more centrally located sites such as hotels and churches.We will provide seminars that last one-half day to families who perceive the need for help in organizing their activities. These businesses often make use of creativity techniques to attempt to outline what changes may occur in their respective environments and how the organization should respond to those changes. usually one-year (short term) or five-year (long-term). While there are many different approaches to preparing a marketing plan. usually one-year. We have obtained a list of community centers. The Marketing Plan To formulate effective marketing programs an organization needs to create and follow a marketing plan. where space is provided free-of-charge for such activities. 5. However. the marketing plan is created in the context of the organization s overall business plan people in the organization share a similar orientation to the marketing function . those who do the plan are responsible or accountable for the plan s implementation this same group is committed to the plan s success 3. A marketing plan is a document that describes the activities in which the organization intends to engage in a coming time period. However. management is committed to the plan s success and is willing to expend the necessary resources for its implementation 4. 2. The Business Plan The business plan is an overall blueprint for the anticipated activities for the organization over a coming time period. We should mention that many businesses are moving their long term planning periods to ten years and beyond in order to better prepare for the future.

While the outline above is simplified. SWOT analysis outlining the strengths and weaknesses (internal to the organization) of the organization and the opportunities and threats (external to the organization) that the organization faces. The PIMC serves as a good guide for on-going implementation of the marketing plan. An example for the marketing is as follows: I. however. Description of marketing programs with timeline (a calendar of major marketing events planned. it touches on the critical areas for a marketing plan. And how his/her job relates to marketing management. measurable. that a plan is only as good as its implementation. Chapter Two Exercises 8. it is usually better to have a poor plan and good implementation than a great plan that never gets implemented. Vision for the marketing plan (a paragraph that briefly describes the aspirations for the coming time period and the theme of the plan) III. Description of market/customer types and products/services that will provide satisfaction to those markets and customers a. thus. Market grid of markets and customers Product/service positioning strategy V. Call your local grocery or supermarket and ask to interview the store manager. IV. understandable. with a description of each event) This outline should be combined with the PIMC model described earlier in the chapter. b. Executive summary (a one-page to two-page overview of the contents of the plan) II. Schedule an interview and in the interview ask the manager how s/he would define marketing management. attainable.If these five conditions are met. Marketing objectives for the coming period (objectives should be SUMAC or specific. . and consistent) VI. It is important to point out. the organization is much more likely to be able to successfully create and implement its marketing plan.

Write a job description for a marketing manager of the marketing function. monitoring. if any. the Customer Rules. To what segment.a document that describes the activities leading to customer satisfaction the organization anticipates intends to engage in a coming time period. Chapter Three How do we identify and understand markets? As a student of marketing. explore the definition of marketing management in that industry by interviewing someone who works in that industry. Write a one-page essay on your analysis. 11. usually one-year. identifying activities conducted in each step in the PIMC cycle. including the benefits families can expect from participation and your estimate of demand for this new service.9. Limit your marketing plan to two pages using keywords to describe your plan. 10. In a one page essay. If you have an industry of interest. you have already learned that the main purpose of modern marketing is to serve customers. Search the internet for the term Product manager and write a one-page summary of your findings. that is. implementation. etc. 12. lifestyle. and correction) to model the actions necessary for a ten year old to set up a lemonade stand. 13. If the organization really believes in this philosophy. Apply the PIMC planning cycle (planning. Chapter Two Glossary Marketing management . it only remains for the organization to focus on researching and understanding its customers and then delivering products and services to the customer that will not only meet the customer s . Use the marketing plan outline in the chapter to prepare a marketing plan for the lemonade stand. education.the process allocating the resources of the organization toward marketing activities Marketing plan . How does it compare to the description you gave in answer to question six in chapter one? 14. make observations on Let s Get It Together Family Organization Services. do you believe this service will appeal? Describe this segment of families using factors like family income.

needs. that is. A simple seven-step approach follows: Step One: Identify the type of market with which you will be dealing Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. that usually means first attempting to understand the structure of the marketplace. identify the segments in the market under study Step Five: Evaluate whether the segment in which you are interested effective segmentation meets the four criteria for Step Six: Create a profile of the customer identified including purchasing behavior expectations Step Seven: Combine the segmentation analysis with other analyses related to the product. Today. and business strategy. Understanding the Marketplace and Different Customer Segments The main goal of market segmentation (dividing the market into different portions based on differences in customers) is to better understand the needs of our customers thus we need a structured approach to attain this goal. Therefore. market. often the first assignment for the marketing function is to gather and analyze information about customers. Step One: Identify the type of market with which you will be dealing . what wants or needs do you intend to satisfy? Step Three: Select dimensions with which to segment the market Step Four: Based on the selected dimensions. but satisfy the customer in a way that will keep the customer coming back to our organization to do business with us.

For example. Different types of markets often require a separate basis for market segmentation. vans. your local police department must buy patrol cars. we might first look at the type of market we are looking at.S. tartar control. special needs (smokers toothpaste. 4. Notice. government markets Local. if we examine the market for toothpaste. Normally. For example. etc. attractiveness (whitening. sports utility vehicles. we frequently use age as a way to understand and segment consumer markets because age often . if we are analyzing the consumer market for toothpaste. consumer markets people who buy for their own. fluoride. For example. in marketing. the automobile market is comprised of many segments including passenger cars. there are many segments within that segment (for example.). you buy a lawnmower at Wal-Mart to mow your own yard). convertibles. institutional markets these markets include universities. 2. and understand different submarkets for products and services. passenger cars.). Note that each of these types of markets has demand for both goods (tangible products that we can touch. etc. the last category we mentioned special needs includes both a lifestyle segment smokers. Note that there are several different dimensions for segmenting markets. Two-door sports sedans. and many others. that if you choose one segment. feel. sensitive gums. state. After identifying the type of market. hospitals. and federal governments taken together constitute for the largest demand for goods and services in the U. For example. a hospital cafeteria must purchase food and other supplies to run its operation. and see). For example. We will address this issue later in the chapter. for example. personal non-business use (for example. and an age segment children. we can then begin to identify segments within that market. The first step to market segmentation is understanding and defining the market with which you are working. 1. organizational markets organizations buy goods and services for use in the operation of their businesses or for resale. and other similar organizations. we can identify four types of markets. we realize that there are many segments identified in that market already: health (that is. Compaq computer buys many of its microprocessors from Intel Corporation and your local dentist must obtain supplies and materials to provide his/her services to patients. For example. breath freshener. etc. feel and see) and services (intangible products that we cannot touch. four-door station wagons.Types of Markets Market segmentation is an approach by which we identify. pickup trucks. 3. define.). kids toothpaste. and so forth). For example. For example.

Step Three: Select dimensions with which to segment the market . Thus. and. The form of the product doesn t matter as much as the product s ability to provide those benefits. people buy vacuum cleaners to attain their personal goal of having a clean. For example. Many people in their early years choose cars on the basis of styling. consider a small gift shop. one organization may choose the internet based on its customers desire for efficiency in buying and familiarity with the world-wide web. Thus age is often an important criterion in what satisfies a particular consumer. the age of an organization does not usually significantly impact its particular demand for products and services. age is rarely used to identify differences between organizations because usually. of course. Therefore. the primary benefits sought in this shop were finding a good gift idea with a sense of security against giving an inappropriate gift. acceleration. people and organizations usually purchase benefits: not products or product features. sanitary carpet. For example.accounts for significant differences in the wants and needs of consumers. Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. If a market research study indicated that customers of the shop preferred a lot of assistance in the product choice process because over three-fourths of the products purchased in the store were purchased as gifts. what wants or needs do you intend to satisfy? As we will discuss in following chapters. that is. consider passenger cars. For an additional example. market segmentation analysis requires a clear definition of the benefits customers are expecting to receive through purchase. Seniors may choose their car based primarily on brand name and safety issues. As in many cases in marketing. However. the exceptions to this statement only serve to prove the rule. What would you do if you were marketing manager of a company that has vacuum cleaner bags as its sole product when more and more vacuums are bagless? The implications for product design will be discussed in a later chapter. When deciding on how to distribute a product. while another organization may choose to distribute its products through a traditional retail outlet because the segment chosen prefers to touch and feel the product. the product would be distributed through a physical location within which the customer could compare alternatives. Notice that the store s owner might change from an inventory similar to her competitors to a differentiated set of product choices aimed at meeting her customers purchasing goals of quality and uniqueness. economy. price.

Walmart must purchase cleaning products to keep Walmart Stores clean and attractive. and other such attributes. demographic dimensions . amount of income. behavioristic (or intended use) this dimension relates to benefits sought and expected use by the customer.psycho from Greek means spirit or mind so while demographics deals with the statistical characteristics of the market segment. For example. many products are sold in multiple packages such as six-packs because customers expect to consume multiple units in relatively short periods of time. demographics consists of all those characteristics of people that are used to describe the size and composition of the population including age. intended use of products bought expected benefits to be provided by products purchased . thus segmentation dimensions for this type of market focus on the characteristics of the buyer. For example.demo means people. gender. b.The dimensions used to segment the different types of markets will be organized according to type of market because the dimensions used for segmentation vary substantially. Four dimensions are traditionally used to segment consumer markets. but Walmart also buys cleaning products to sell to their customers. b.S. for example. and graphics means some representation of thereof. relates to where people live. different segmentation strategies are required based on the intended use of products bought by organizational customers. d. life style. and motivation. psychographic dimensions . not surprisingly. Bases often used include: a. Dimensions for Segmenting Consumer Markets As discussed earlier. For example. So. than it is in the plains states. These dimensions are: a. the demand for snow skis is higher in the mountainous states in the U. Dimensions for Segmenting Organizational Markets Customers in organizational markets buy products either to use in the operation of their business or to resell to other organizations. c. Given this situation. psychographics is usually broken down into personality. psychographics refers to the characteristics of peoples spirits and minds. level of education. personal non-business use. people in consumer markets buy for their own. geographic dimensions this dimension.

For example. behavioristic (intended use).gov/epcd/www/naics. These codes are useful for segmentation because all industrial activities are given a code in the U. Check out the website at http://www. PDA (personal digital assistant).census. because portability and computing power are two important benefits sought by different pc users. d. Step Four: Based on the selected dimensions. the segments must be: 1.c. Step Five: Evaluate whether the segment in which you are interested meets the four criteria for effective segmentation To be useful. measurable (we can estimate how many people or organizations are in the segment) accessible (we can reach the segment through available means) compatible (the segment is consistent with the overall goals of the organization) 4. 2. size of organization SIC (or NAIC) code* of organization s or organization s products Other characteristics of organization or specific industry *Standard Industrial Classification or North American Industry Classification System codes are numbers derived from the core business in which the organizations are engaged. an approach to segmenting markets. we might choose to identify the following segments: desktop. 3.S. e. Which of the four dimensions did we use to create those segments? Primarily. segments then must be identified in the market under study. substantial (the segment is large enough to justify our develop of products or services just for that segment) .html. This scheme has been widened to include Canada and Mexico subsequent to the NAFTA agreement. if we are trying to analyze the market for personal computers. laptop. identify the segments in the market under study After dimensions have been selected to use in defining the segments.

However. While we will cover parts of this literature the reader should realize that there are hundreds of thousands. itself. there is a large body of literature related to buying behavior in marketing because marketing focuses on the buyer and his/her characteristics. manufactures. However. if one researches. it is important for marketers to attempt to model the expected buyer behavior involved for their product. While this definition is a use of the lower level of the term strategy. Identify the different segments in that market and list the four factors above. Understanding the significance of the purchase for the target customer Very often. if not millions of pages published in this area. and distributes a product to consumers. segment the market for shampoo or soup. We will discuss this issue further in the following chapter. and the concerns for each factor as it relates to the product or service you picked. Step Six: Create a profile of the customer identified including predictions of expected purchasing behavior As one might expect. For example. Of course. listing each criterion above followed by an explanation about how this characteristic will be present in the target market. marketers overestimate the importance of purchases to consumers. we must first understand the market. one is intimately involved with the product often virtually every working hour. This circumstance often results in a heavy emphasis on customer decision-making when in fact the customer may only react on a very shallow psychological plane to products offered and the purchase decision is in reality almost an afterthought. If we look closer at this definition we can see that a marketing strategy is: . Naturally.These four dimensions are helpful for understanding any market structure. For example. Usually when we attempt to model the buying process of our target customer. Marketing Strategy We will define marketing strategy as a marketing mix aimed at a specific target market. this process differs considerably across different types of markets as well as across different types of customers. we believe that the definition is appropriate for beginning students in marketing. try using this information to analyze a market with which you are familiar.

that is. Example of seven-step segmentation process Let s Get It Together Family Organization Services Step One: Identify the type of market with which you will be dealing The consumer market Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. Psychographic.A Marketing Mix Product or service Price AIMED AT a Target Market Distribution (Place) Promotion We will use this definition throughout our study of marketing principles and you will soon become comfortable thinking in these terms. whether or not you decide to drop one later on in the process) . Behavioristic (a note to the reader: segmentation doesn t always requires the use of all four of these factors in creating a profile. but we suggest you always use each dimension in your analysis. what wants or needs do you intend to satisfy? We seek to enhance family life for parents and children alike by providing practical tools to improve organization in family life Step Three: Select dimensions with which to segment the market Demographic. Geographic.

too together (Please note: Our marketing research studies indicated these facts and allowed us to formulate our customer profile) Step Five: Evaluate whether the segment in which you are interested effective segmentation meets the four criteria for Measurable we were able to assess this segment and understand by using only the census data published by the U. However. Step Six: Create a profile of the customer identified including purchasing behavior predictions See Step Four above.S. also see Demographic. two children or more in household suburban location in medium to large city Geographic every geographic region of the U. Compatible our organizational mission is aimed at serving this segment.S. we know that purchase behavior is a high . at least one parent is college educated. Bureau of the Census (Website is http://www. identify the segments in the market under study Demographic household income over $80. Therefore. both parents work. too complicated. has families who fit our profile. above Psychographic busy or hectic lifestyle as described by people in segment little quality time Behavioristic family perceives life is too hurried.000. so. we are starting our service in one city and expanding the service over the coming years. selecting specific households that may want our service is much more difficult. yes.gov/ ) Accessible we can easily identify and communicate with households in profile. the segment is compatible with our organization and other products/services Substantive our research and projections indicate that there are millions of households in our target market.census.Step Four: Based on the selected dimensions. Also.

Organize your answer according to the different categories you find in your search. the market segment that Saturn Automobiles has worked towards pleasing is men and women with a college education. describe a market segment with which you are familiar. Using the four dimensions of segmentation for consumer markets.involvement transaction for our target families. . we must continue to flesh it out and do research. They lead a relatively frugal lifestyle and seek economy and quality in their purchases. in your opinion. Prepare a one-page report on your findings. We will also maintain a research effort with all people contacted in relation to our concept including families who participate. Observe the products offered and identify product categories that are based on different consumer segments. and community leaders. but there are many others. Step Seven: Combine the segmentation analysis with other analyses related to the product and market While we believe our concept has a lot of promise. 17.com/. bread. and personal care products are three good areas. In this exercise. 18. in the middle-income category. For example.americandemographics. list each of the four dimensions and describe the segment with those dimensions. Summarize in a one-page report what you find after you get on the internet and search the keyword market segmentation. Breakfast cereal. Go to your local grocery store or supermarket and visit a specific product section. Check out the website of American Demographics Magazine at http://www. Pick a product category that is of interest to you. 16. Chapter Three Exercises 15. Organizational research will continue while we conceptualize and offer our first seminars to keep track of changes in the social environment of our chosen geographic markets. Read an article and write a one-page summary of the article and its relevance to marketing. healthcare professionals.

Apply the PIMC planning model (planning.) 20. 23. the local utility company may be owned by government. Apply the seven-step process of market segmentation to a new product idea that you conceive listing your activities and comments in each step in the process. If you have an industry of interest. evaluation. 22. this dimension relates to benefits sought and expected use by the customer marketing strategy . (For example. and behavioristics) to compare your findings to the material in your Principles of Marketing e-book.a marketing mix designed for and aimed at a specific target market . correction) to a club to which you belong. Identify each step clearly.19. 21. explore the markets and types of customers served by that industry. Do an internet search on each of the four dimensions of market segmenting consumer markets (demographics. geographics. life-style. Write a job description for a manager of the marketing function. psychographics. so as a customer it will be considered a government market. How does it compare to the description you wrote in answer to question six in chapter one? Chapter Three Glossary market segmentation . age/income/gender/ethnicity and level of education psychographic dimensions grouping potential customers on psychological factors including personality. and motivation for purchases behavioristic (or intended use) dimension used for market segmentation. monitoring. for example. implementation.dividing the market into different portions based on differences in customers demographic dimensions grouping potential customers on objective factors.

you already know the answer: Marketers believe the Customer Rules thus we know our primary responsibility to the organization is to gain an intimate knowledge of our customers: what satisfies them and makes them happy and what benefits they are seeking in the marketplace. Information search internal and external. And then she seeks external sources of information such as friends. newspapers. and the internet. TV. Why do you suppose this it true? Of course. We will focus on the basic constructs accepted today in the study of buying behavior.Why do we study buying behavior in Marketing and what have we learned? In Chapter Three we explored the different types of markets and the process of dividing those markets into smalls portions called market segments. In this chapter we examine a few basic concepts related to buying behavior. She now must compare and contrast the options she has. Post purchase evaluation the consumer experiences her choice and determines if she is happy with it. This is not surprising considering the fact that we live in a consumption-driven culture. Consumer Decision-Making Most studies of the decision-making process in marketing have used an adaptation of the scientific method. her car has had major mechanical problems for the last two months. Alternative identification and evaluation she has some ideas about what alternatives she has and how to approach them. This decision-making process is as follows: Problem recognition the consumer recognizes a problem. . We use the term a few because in marketing. The consumer thinks about options she may have to remedy her situation (internal search).Chapter Four . more has been written about buying behavior than in any other area. For example. Choice and purchase based on this process of consideration the consumer now purchases the most attractive option she has identified. Consumer Buying Behavior Researchers in marketing have studied most areas of consumer behavior including the impact of everything from music to lighting on how people behave and how they consume products.

you won t be able to tell which is which. Again. mechanistic process above. For example. There is also another important consideration called situational effects. a shopping trip is directed not to a specific. Of course. For example. she wore jeans and a ragged sweatshirt. We have all had a battery go out in our car and most of us don t think of shopping for a battery until our present battery goes dead. Often.Feedback learning for future consumption behavior the consumer remembers how she feels about her purchase and makes note of it for future reference (internal search). She also buys some makeup and fragrance. This fact sometimes has to do with involvement . Just last night in the midst of studying for an exam when the same student went out with her friends for pizza at a local pizza parlor. planned purchase but just to see what available so . First. dancing. thus situational effects strongly impacted this person s buying behavior. We would add medium to the categories. She and her buds have decided to go to a club where there will be music. laser surgery for vision correction. Involvement can be defined as the personal importance and social significance of the purchase. learning this approach is worthwhile for you so that you will have a general framework to understand your purchasing behavior and the purchasing behavior of others for purposes of marketing research. we often don t go through all of the steps. because many products we buy fit into that area. and new houses (all three of these would be high involvement) and while we frequently buy low involvement products (coffee. For example. and. both of these would probably be considered medium involvement because they are in the medium price range as far as his budget is concerned and there is some level of risk surrounding the purchase. there are exceptions to the rather rigid. if a college student buys a new CD player for his car or a new sports-coat. a female college student is preparing to go out with her friends for the evening. the situation strongly impacts what are willing and able to do as far as buying behavior. as consumers. The importance can be a function of how much the product or service costs and whether there are any social risks involved. of course. soft drinks. Usually. You will see all types of people buying all kinds of things: some of those purchases will be planned and some will be unplanned. Why was there such a difference in her dress and preparation? The social nature of the two evenings was very different. young men. we just try to find a battery wherever we can and as soon as we can to solve our problem. most importantly. chewing gum) we also buy many more durable products that can be considered medium involvement. we rarely buy new cars. Situational effects are all of the circumstances surrounding our purchases that may strongly impact our decision-making process. The student decides to go to Dillard s and buy a new blouse and a pair of new dressy slacks in preparation for the night out. although. Involvement is often classified as high or low . feel no responsibility to follow the rules thus we may engage in unorthodox buying behavior that defies classification. We. For example. As a student. go to Walmart and observe customers there.

Groups you would like to be a member of but are not. as well as. we consider the following three as the most important overall. Reference Groups First. there is also a lot of buying behavior that defies understanding. some will be groups you would like to be a member of but are not (for example. the Proud.S. one may buy a Colorado Rockies Hat and wear in public because s/he is a fan of that particular baseball team. This has been shown to be true in durable goods such as cars and appliances. For example.S. the Few. This brings another factor into consideration. but still want to be somehow related to are called Associative Reference Groups and groups in which you would not seek membership are termed Disassociative Reference Groups. are called Aspirant Reference Groups. The family is a membership reference group whereas other reference groups may be nonmembership reference groups. reference groups are collections of other people who strongly affect what we buy and how we go about buying it. Sometimes adults buy what our family bought and sometimes they won t touch what my family liked . For example. What do you think is the most influential reference group for most people? If you guessed family you are absolutely right. Marines recruits people based on the attractiveness of being A U. Marine. Group/Social Variables that impact Buying Behavior While there are many different impacts on consumer buying behavior that have to do with groups. This person would belong to an associative reference group but not be a member of an aspirant reference group because in . The U. An impulse purchase is an unplanned purchase in which we just decide to buy the product with very little prior consideration. Beta Gamma Sigma. groups to which you don t really expect membership. the business student honor society (http://www. nondurable goods like laundry detergent and shampoo. If you consider the reference groups available to you.while the cognitive perspective on shopping is useful. think a situation in which you engaged in an impulse purchase. Many adopt the appearance of their aspirant or associative groups by engaging in consumption behavior to express their personal sentiment.org/) and other groups you would not like to be a member of: perhaps an example would be the winning lottery ticket losers club. a person s family background can impact his or her buying behavior throughout life in many ways. The family is not only the most important reference group for children.betagammasigma.

S.S. is changing rapidly to accommodate many new ideas and ways of doing things. However. Therefore.org/).S. today most people do not perceive significant risks in consuming hamburger meat. Learning can be defined as changes in attitudes or behavior based on experience. different ethnic groups joined the growing population.census.our example the fan does not really expect to be able to join the Rockies team in any official capacity. we sometimes obtain knowledge that does impact our consumption patterns for some time. population in response the Mad Cow and foot and mouth disease outbreaks in the United Kingdom (check out this website:(: http://www. nineteenth. different subcultures intermingle their ideas and art forms in a ethnically diverse society. you must remain aware and track changes occurring in the environment.mad-cow. the U.S. Individual/Psychological Variables that Impact Buying Behavior Learning We. We see a subculture of music. Marketers cannot assess such learning easily. Ethnicity . as human beings are constantly learning about our environment and a portion of this learning is related to what we consume and when and how we consume it.S. however. is still changing. learning is an important concept in consumer buying behavior. that may be changing quietly across our U. Historically dominated by the thoughts and mores of a Western European tradition. and it would not take much to drive them away from consuming beef and hamburger meat in all forms. Today the ethnic composition of the U. Although as a marketing person you can t assess it.S. introduced by the music of African-Americans and adopted by large segments of the white population. If . For example. Thus.pdf. We learn constantly about products and services available and adjust our consumption patterns to what we learn. Incumbent in these changes in ethnicity are changes in Culture for the U.gov/population/cen2000/c2kbr01-2. If we look at the great blues music tradition of the U. Many people are aware of this threat presently. An excellent overview of this important material can be found on the internet at http://www. We define culture as the totality of artifacts and behaviors handed down from one generation to the next. As our country developed in the eighteenth.Culture/Sub culture The ethnic landscape of the U. A subculture can be any segment of society that hands down its own beliefs across an extended period of time. and twentieth centuries. has changed constantly over the last few thousand years and that process continues. Native Americans continually shifted geographic habitat due to weather and other human adversaries.

you were a marketing manager for a food company. The MAM orientation to measuring attitudes is a simple but effective way to understand how people feel about products and services. economy. we can use a simple approach to understand how people form an attitude towards a product or service. it is internally contradictory. evaluative. purchase it (behavioral stage). an attitude is simply how we feel about something. Attitude There are probably more studies of attitude in the marketing literature than any other individual variable affecting consumer buying behavior. He has visited several dealerships. The most common attitude model applied in business is the belief/importance weight model also called the multiattribute attitude model (MAM). quality. However. The stages may differ in the order they occur. For example. Attitudes are usually comprised of three parts: cognitive. We will expand our discussion of attitude formation in the chapter on marketing communications. Attitude formation can follow several different patterns. develop a feeling towards that product (evaluative stage) and then. you would be well advised to continually gather information on and be aware of this trend as consumers become more aware of this threat to health. The MAM can be expressed in formula as follows: A = Ei*Ii Where: A = an attitude toward a product. If you are apathetic about a certain product or issue. talked to his friends. and behavioral. a consumer normally goes through three stages when forming an attitude. He has prepared the following list of products and his evaluation of each product across four attributes (cost. you don t really have an attitude related to it. Let us say that Mike has just graduated from college and is preparing to buy a new car. and acceleration): . and read product reviews on the internet (external search). That is. Neutral attitude is an oxymoron. if s/he likes the product. most consumers will probably first think about a product (cognitive stage). service. In plain English. or idea E = evaluation of attribute i I = importance of attribute i A brief example will be offered to explain this approach. for a high involvement product. An attitude can be defined predisposition to respond to stimuli.

perception is how we attach meaning to all of the inputs that we are exposed to in daily living. These inputs can be new words. Acceleration = 40 ( Mike used the constant sum scale for his importance weights and the weights add up to onehundred) What is Mike s attitude toward the brands he is considering? Solution Saturn 5*40 + 7*10 + 8*10 + 4*40 Attitude toward (Saturn) = ? Ford Contour 7*40 + 5*10 + 7*10 + 5*40 = Attitude toward Ford = ? Pontiac 7*40 + 4*10 + 6*10 + 8*40 = Attitude toward Pontiac = ? This approach to assessing attitudes is easy and can be a helpful tool for marketers attempting to understand how to improve their product offerings.Saturn Ford Contour Pontiac Grand Am Cost Economy Quality Acceleration 5 7 8 4 5 7 7 4 7 6 8 5 Mike s importance weights are as follows: Cost = 40. or an advertisement about a product. Perception Perception can be defined as the way we experience life. Quality = 10. Marketers have been interested in perception because they are constantly trying to communicate product and service ideas to their target markets and they need to understand how that information will be received and understood. Humans . That is. a new song. Economy = 10.

you are not dealing with subliminal perception. we can advertise that there is no risk associated with taking aspirin for a headache. can be defined as the potential negative consequence of a certain action including buying or using a certain product or service. this is really an exciting conspiracy theory that persists in media study. you were present by the TV to be exposed to the ad. Risk Risk. Third. That is. Second. For example.normally go through several stages in the process of perceiving meaning. Research indicates that while subliminal perception exists. attached meaning. attention. if exposed to subliminal stimuli. Physiological risk . While.cocacola. check out the following website for research on the matter of subliminal perception before you make up your own mind: (http://www. you find yourself humming the musical theme Life tastes good later in the day.) Perception remains an important construct in marketing because the study of perception can give information to marketing communications professionals about when and how people receive and make sense of information. we usually use the term perceived risk because the person or persons we are trying to understand determine the amount of risk. However. You may see a TV ad for Coca Cola (check it out at: http://www. That is. Subliminal perception means literally below the level of consciousness thus if you can identify symbols or words in an ad. Much has been written about subliminal perception over the years.associated with threats to one s health Financial risk risk associated with the loss of economic wealth or financial security . Several popular writers have made considerable money on books they published warning consumers that You are being manipulated and you don t even know it. and soon to be graduate. it may have gained your attention because you liked the music in the ad. and finally. In marketing. recognizing the product and the musical theme. These stages include exposure.com/ ). you as a college student. and retention. subliminal perception is not efficient at all. in the consumer buying behavior area. you may see a red bottle of CocaCola and decide you are seeing Santa Claus. should be in possession of the facts. but some of the populace will perceive a health risk (physical risk) because they have heard that aspirin is dangerous. you attached meaning to the ad.htm.parascope.com/articles/0397/sublim. There are several types of risk that have been identified in research. We will cover four kinds of risk: a. first. b.

In fact.c. First.yahoo. Also.org/ ) Organizational Buying Behavior Organizational Decision-Making Organizations often make decisions in a very similar fashion to consumers. we would suggest adding a stage to the consumer decisionmaking process covered earlier in this chapter. we do want to point out a couple of important differences that exist in a fairly universal way.ciac. Second. Social risk a threat to one s social standing or social comfort Surely. a threat to one s self-esteem d. organizational purchase decisions are frequently made by a group of individuals. However. Second. the group decision-making approach is consistent across most organizations whereas families may be less oriented to this form of decision-making at least for many decisions. First. You can see that marketers want to understand not only how they can use risk to make their products more appealing for purchase (for example.com/search?p=hoaxes&n=25 http://hoaxbusters. (http://search. there has been substantial disagreement about whether the differences in consumer decision-making and organizational decision-making are adequate to justify separate models of decision-making for the two. In considering the organizational purchase process we would recommend that the student remember two differences between consumer decision-making and organizational decisionmaking related to purchasing. Thus. We agree that the differences are small. marketers must strive to understand how organizations in their chosen markets reach the buying decision. However. one can see how companies live in fear of hoaxes that will cause consumers to avoid the company s products (check out these websites to see some present hoaxes in our society. Organizations often solicit bids from an approved bidder list or publish specifications related to the product they are seeking to obtain. Psychological risk threats associated with some psychological construct. for example. there . you are familiar with each type of risk as a consumer. Most families don t consider any structured approach to their decision-making as a group and many organizations find it necessary to codify many details about how purchase decisions shall be made. home security systems). and don t necessarily justify separate treatment. Government agencies are legend for incredibly complex buying approaches. the decision-making process for organizations is certainly more formalized. One might argue that families are similar and we would agree.

taken as a group. These people. b) user this person will be responsible for operating the product that is bought or consuming the service that is purchased. organizational relationships and organizational culture. this person may or may not have a say in what is purchased. Individual/Psychological Variables that Impact Organizational Buying Behavior While there has been a limited amount of research regarding these variables. You should also be able to explain why a marketer would be interested in who plays what role.has been considerable research on the roles assumed by people who impact the buying decision. e) decider this person is responsible for the final determination of what will be purchased. are called the buying center. d) buyer this person is responsible for obtaining the product. There are some studies on perceived risk that indicate risk is an important personal consideration for industrial buyers as supported by the saying No one have ever been fired for buying from IBM. A list of the roles usually existing in the buying center might include: a) initiator this person first recognizes the need for the product or service and may or may not have a say in the purchase decision. though s/he may or may not have any impact on what is purchased. the amount of research in this area is relatively small. c) influencer this person s role may be only tangential to product use. may have a strong impact on what is ultimately purchased. Group/Social Variables that impact Organizational Buying Behavior While there are group variables that affect organizational buying behavior. Certainly. for example. You should become familiar with these roles and be able to understand how they would be expressed in a group-buying scenario. the average businessto-business marketer doesn t really have easy access to much knowledge in this area. . but s/he will still have an impact on the purchase decision. Again.

some companies will see this as another opportunity to be sales driven and use the concept as a way to promote their customer care programs. such programs often are not really directed at customer satisfaction and relationship building but only represent something else to advertise that may increase sales. 27. Customer Relationship Management (CRM) This area of organizational marketing is one of the most vibrant. Many organizations that aggressively advertise such programs haven t really done the research and made the commitment necessary to make the programs successful in the long term. However. There is still a lot to be learned in this area. Use the consumer decision-making process to describe a recent purchase you made. this initiative is often lost in promotion without creation of a service delivery system to ensure that customers are treated as number one. intriguing areas in today s marketing landscape. Make comments on each stage of the process. Sadly. 26. 28. Identify and fully describe one of each of the types of reference groups discussed in this chapter. Can you think of situational effects that would make the purchase of a new sports-coat a high involvement purchase? Explain. many businesses in organizational markets have realized the importance of relationship building and have made this a priority in their business planning activities. Describe how your decision-making behavior was different for each purchase. Write a one-page essay on your thoughts about how you would classify your behavior and orientation to products you buy? 25. attitudes. Give an example of a low involvement. However. While this catch phrase has gained added space in trade magazines and academic journals. and a high involvement purchase you have made recently.Other individual/psychological variables including learning. perception. a medium involvement. Chapter Four Exercises 24. . While many marketers have realized for years that the key to long-term success is at least in part customer knowledge and customer care. and organizational culture also are important considerations in organizational buying as well as consumer decisionmaking.

Identify the principal type of risk involved in each of the following: a) b) c) d) e) Janet undergoes a lab test for a health problem. 30. Explain how situational effects might impact a person s decision-making in each of the following examples: a) Mark has a job interview on Friday and is wondering what to wear b) Janie is driving across Utah to visit her parents and.com company. consumer decision . 32. 31. Jerri decides to take a vacation and plans a trip to Africa. it is not learning and not important to marketers.collections of other people who strongly affect what we buy and how we go about buying it culture . Jamie invests her tip income every week in a local . Chapter Four Glossary consumer behavior . Glenn misses a marketing exam and fails to contact anyone beforehand. Agree or disagree and explain. due to a broken radiator hose. her car overheats on the interstate. Otherwise. Learning always changes behavior.the personal importance and social significance of the purchase reference groups . d) You have a first date tonight with a person to whom you are very attracted and are thinking about where to buy dinner. Compare and contrast consumer-buying behavior and organizational behavior. c) The Marvin family is headed to Texas to visit relatives and wants to stop at a restaurant for lunch.29.the processes people employ to obtain and use various products and services.making the approach that a consumer employs in arriving at a purchase decision consumer involvement .the totality of artifacts and behaviors handed down from one generation to the next . Adam buys a new mini-compact car and is not sure about what his friends will say.

marketing research departments often lose what creativity they had and begin to . marketing research should never be seen as a separate entity isolated from the rest of the marketing function or from the other functional areas of the firm. Often very creative techniques are needed to truly understand what the customer is seeking and how to deliver that solution on a profitable basis. The marketing research department is responsible for providing this understanding.learning changes in behavior based on experience perception the manner in which we experience our environment attitude the magnitude of either positive or negative feelings about something risk the potential negative consequence of a certain action including buying or using a certain product or service buying center the group of individuals who play a role in the process of acquisition of goods and services for the organization Customer relationship management the overall process of establishing and sustaining positive interactions with the organization s various stakeholders Chapter Five How companies manage marketing research The meaning of marketing research Today. However. but it is not. a marketing orientation requires that the organization study and understand what will bring its customers satisfaction. and it is often difficult for the customer to express what those benefits are. As we have discussed a length. Customers seek benefits. marketing research is pervasive. It is unlikely that many readers of this text will ultimately have marketing research as their primary employment so we have presented marketing research in a non-technical manner. If this happens. This will be caused by the increasing isolation of the individual in our society and the corresponding need to access more information through impersonal versus personal methods. It is very likely that anyone reading this book has been a respondent in some kind of marketing research study. As the internet continues to develop there will be a trend towards more investment in marketing research. This may sound simple.

and social psychology (the study of individual behavior in a group). Types of marketing research Marketing research approaches are varied. is growing much faster in popularity. thus. Quantitative Marketing Research Types of quantitative marketing research include surveys. Approaches to conducting marketing research range from quantitative to qualitative in nature. We will define marketing research as all techniques used to provide information that assists the firm in all of its decision-making processes relevant to customers or clients. but data analysis and presentation to management about customers and other issues.focus on a known set of techniques with which marketing research personnel are comfortable. One marketing research project may entail questioning thousands of people by use of a survey instrument while another project may only involve meeting with a few present customers for breakfast. particularly qualitative marketing research. and store audits. This results in a lack of fresh thinking and innovative approaches. becomes separated from the R&D function and those in the organization responsible for new product conceptualization. qualitative research. The marketing research function also. the quantitative approach has given way to qualitative marketing research in many cases. who are not well trained or educated in the discipline and do not have sufficient experience. The reasons for this are that qualitative research is usually less expensive and faster to perform than quantitative marketing research. Also note that marketing research is responsible for not only data gathering about customers. at present. Although marketing texts usually devote considerable attention to these approaches. sociology (the study of group behavior). it is aimed at giving the marketing research function the breadth and depth of latitude that it needs to operate effectively. Thus. ironically. . to name only a few. audience measurement for different types of media. there is presently no required accreditation for a person to perform marketing research. Note that the outcome of marketing research is enhanced decision-making about needs and wants in the marketplace and how to meet those needs and wants. While this definition is very broad. there are many unqualified individuals and organizations that sell marketing research services. Unfortunately. There are many different types of marketing research projects that require various types of knowledge and academic background. Quantitative marketing research is composed of sophisticated techniques that require substantial competence in descriptive statistics while qualitative marketing research may require a broad knowledge of psychology (the study of individual behavior).

A moderator leads the discussion and helps keep discussion lively and focused around the research questions.com/). e. b. We recommend a process that includes these steps: a.Qualitative Marketing Research Qualitative research is less involved with numbers and usually provides a closer touch with the subjects in the research project. results on which we can make reliable decisions. also called mystery shoppers. c.com/. Focus groups gather a small number of respondents together to discuss topics yielded by the research questions. are often used to help obtain a real customer s assessment of a store s service quality (Check out the following websites: (http://www. Mechanical observation is also used at retail stores to count the number of customers (sometimes with a simple turnstile) and in other public areas. we must follow a consistent process.bmiltd. Establish a research project Conduct the research project Analyze the findings of the research project Summarize and Present the findings of the research project Assess the findings of the research project Establish a research project This step will usually involve four steps: . A common use of the observational method is watching children play with prototypes of toys to understand which toy will be most popular.com/cgi-bin/nwscape/shoppers/welcome. The moderator creates or is furnished with a discussion guide that outlines the areas to be explored in the focus group.customer-1st. http://www. d. The Marketing Research Process In order to obtain useful results. parks for example. Types of qualitative research include focus groups and observational studies. Observational studies involve watching respondents while they are engaged in some activity.) Secret shoppers. that is.nwscape. http://www.

the researcher may decide not to take the research project because the client is not ready to pursue the project. this is the stage that the researcher must avoid seeking closure and keep an open mind about how to characterize the problem or opportunity under consideration. and others involved in the project. We have no way of estimating how often this happens. b. a marketing research project is a waste of resources. but we can say it happens often. Often. clients often bring a symptom into consideration as the problem. c. The initial meeting is often not sufficient to establish the problem or opportunity to be researched. Another meeting is usually required to define the problem or opportunity clearly enough to create research questions. after meeting with the client. not the problem. Create research questions . This stage is a data gathering stage for the researcher. The problem is the cause of the drop in sales in the southeast so the researcher must search upstream in time and events from the sales decline. meet with client(s) jointly explore problem or opportunity to be researched create research questions d. If a client or company manager already has the answer (has already essentially decided on what the findings of the project will be). This is a symptom. The reason we break meeting with clients into a separate step is because there will often be several meetings.a. For example. That is. the researcher(s). this will often require a personal meeting with all of those involved in establishing the project including the client. It is important to realize that divergent thinking will play an important role at this point of the research process. we need to start with identifying the problem or opportunity. We say this because too often the findings of a well-executed study are rejected because it found the wrong answer. It is imperative that this initial meeting be approached with an open mind and no preconceived notions about the answer. Clients will often have lots of ideas about the project. Although there are exceptions. including the problems and a likely solution to the problem. However. create a research design Meet with client(s) When beginning a marketing research project. if one says that sales are down in the southeast region. based on the research questions.

After the researcher and client have agreed on problem or opportunity definition. and the possibility that our product is outdated in the eyes of the marketplace. A research question is a statement of what queries the project will seek to answer. Were the findings of this survey reliable? Were they valid? Remember. The results of the survey indicate that Ninety percent of those surveyed find the Dillard s shopping experience either Extremely enjoyable or Very enjoyable. several survey questions will usually be required to address one research question. However. Formulating dependable survey questions is a highly technical and demanding process that requires extensive training and experience. Create a research design The research design is the approach we use to answer the research questions. and female models interview all males entering the store. For example. to be reliable a question need only produce consistent answers and to be valid. a question must measure what the researcher claims it measures. Reliability is the ability of a certain question to gain consistent responses over asking the same questions several times. We have male and female models interview customers as they enter the store. the research questions may be stated for the southeast region study as: Research question 1 what is the impact of our competitors on our sales? Research question 2 what demographic changes have taken place recently? Research question 3 have there been changes in perception of our product? Note that the research question is rarely synonymous with a survey question that is. demographic shifts in the population. assume we are attempting to ascertain peoples attitudes toward Dillard s Department Store. Validity is the ability of a question to measure what it purports to measure. Thus. if we ask several people the same question and get very similar results. Answers appear at the end of the chapter. For example. in one case. In our example. For example. Often the client will have already decided on a research design without considering what the appropriate one would be. this does not mean that the question will be useful for our study. the researcher will be able to formulate research questions. Survey questions should be both reliable and valid. we can say the question is reliable. Male models interview all females entering the store. Questions also need to be valid. likely causes identified in client meetings included aggressive efforts by a new competitor. a small candy manufacturer had decided it needed to research the .

Many private reporting organizations provide information about industrial organizations based on the NAIC.dowjones. secondary data research often begins with the examination of the NAIC (formerly SIC) codes relevant to the companies of interest in the study. which is rare. The internet contains huge amounts of secondary data and free. Primary and Secondary data Collecting data can be done in two ways. Marketing researchers should always explore sources of secondary data before they decide to collect primary data.S. On the other hand. After some consideration of research questions. Research designs can be qualitative or quantitative or include both types of research in larger projects.S. These are only two of many organizations that provide such services. The company had already created a survey form to be sent out though mail. When the budget will allow it. In organizational marketing. When we do.com/Reference/Standards/North_American_Industry_Classification_System__NAI CS_/). both qualitative and quantitative approaches should be used to answer the research questions. every ten years.com/) and the Dow Jones Company (http://www.market. For example. The mail survey was deleted from the research plan.com/). Two such firms are Standard and Poors (http://www. the research design was changed to include a series of focus groups. this data is called secondary data. A census is taken when we attempt to collect data from all possible respondents in a specified population. published data can be obtained free with the help of professional library personnel. Alternatively.yahoo. Sampling and Selection of the Sample Often marketing research studies require that data be collected through the process of sampling. (see the following website: (http://dir. the U. Census Bureau attempts to count every person in the U. we can collect the data our self to address the research questions.standardpoor. the data collected are called primary data. often clients must choose only one or two of the most compelling research questions to address using either a quantitative approach or a qualitative approach. A meeting was held between the candy company and a marketing research company. and a mall intercept survey. First. Professionaly librarians are highly trained and are usually happy to be of assistance. When we use data for decision-making based data that has been collected by someone else to address different research questions. sampling is collecting data from only a portion of all possible .

i.e. probability samples are much more complex and expensive to gather. one for which we can apply basic descriptive statistical techniques as taught in business statistics courses (for example. However. Can you think of a way to draw a sample of students at your university or organization that would have these two characteristics? Selection of nonprobability samples only requires that the people interviewed are in the population of interest and. If we just meet students on campus and do interviews. if we collect a nonprobability sample. and convenience samples (the interviewer selects people to interview based on the easiest ones to interview). if we draw a sample of students at a university to determine their attitudes toward raising tuition in order to build a parking garage on campus. that is. the responses gained only apply to the students we questioned in that sample. Note this has to do with HOW the sample is selected. normal distributions. For example. sometimes. for example. fifty females. parametric. probability samples provide more powerful prediction abilities. One can see that the selection process for nonprobability samples is usually unsophisticated and straightforward. as in the case of samples there is not even a guarantee of that! Conduct the research project . quota samples (the interviewer is given clear direction regarding how many people of what type to interview. That is. However. There are two types of sampling: probability sampling and nonprobability sampling. in a probability sample we can generalize our results to the other students on campus (the population of interest). this would be a nonprobability sample and would not necessarily produce results that would predict how most students and others on campus feel about the parking garage. when we decide to draw a probability sample.) A simple probability sample is one in which each subject in the population of interest has an equal and known probability of being included in our sample. z scores. Types of nonprobability samples are judgment samples (the interviewer as asked to apply his/her own opinion as to what respondents fit the profile of people to be interviewed). we must determine how they are to be chosen for the sampling process. However.respondents in the population of interest.. Results derived from probability samples can be applied to the remainder of the population of organizations or people in the population of interest. Thus. and fifty males). etc. once we agree that we need to gather data from a limited number of organizations or individuals. Results derived from nonprobability samples cannot be applied to the remainder of the population of interest.

but for the sake of integrity.ucla. statistical software is often used to facilitate activities in this stage of the project. When summarizing and presenting a research project. formerly a professor at Iowa State University.edu/at/software/stat/sas/sas. the best guide is to keep it simple and accessible to the reader of the report.The research design should provide good guidance for performing the research. independent researcher to execute the research study by following the statement of research questions and research design. (statistical package for the social sciences websites http://www. this is particularly important when presenting a report to clients who are highly intelligent and educated. Professor Bill Miller. They know how the use of jargon is often used to obfuscate the facts and this may indicate a lack of preparation on the part of the presenter. Ironically. SPSS. The researcher must be careful to be organized and remain objective during this stage. the researcher must remain objectiveas s/he records. offers a free statistical package on the internet at his website: http://openstat.com.com/. http://www. Especially for quantitative studies.ats. The statement of the research design should be sufficiently complete to allow a qualified. The Marketing Research Industry . In the same spirit as this ebook. SAS. There is often some pressure on the researcher to find the right answer as we indicated above. research projects can be quantitative or qualitative in nature or even involve both kinds of research approaches. The statement of the research design should provide guidance to the researcher about how the data should be organized and classified. Use of such terms as a two sigma range only succeeds in confusing the client and very often over-emphasis on jargon can alienate the client. classifies and analyzes the data. Summarize and Present the findings of the research project After the data are analyzed. the researcher must draw conclusions from the findings and present the findings in a comprehensible manner.htm) or a similar statistical package is often used to perform the analysis necessary for this step.spss. The temptation for the researcher is often to rely too heavily on statistics and this can very rapidly lose the attention and interest of the client. Analyze the findings of the research project This stage is comprised of organizing the data gathered and carefully ascertaining what the data indicate.homestead. As you already know.

We often categorize the different types of surveys on the three dimensions. provide marketing research services and data. That is.S. for example).com/.html. what proportion of those whom we contact will ultimately participate in our study. how much will it cost us to acquire each response to our survey. specializing in marketing research. Many companies in the U. which presently are quite similar to mail surveys in terms of advantages and disadvantages.There is a broad range of marketing research services available throughout the world. For example. Nielsen (http://acnielsen. and thus. Firms engaged in organizational marketing can make use of this same concept by implementing trade show intercepts. often requires different research methods and may entail a total revamping of the research design. tend to be the most researched population in the world. However. telemarketers often adopt a foot in the door approach by which they first claim to be doing a marketing research study in order to gain a segue into a sales presentation over the telephone. as well. surveys remain popular.com/innovation/launch. but may provide the lowest cost per completed survey. face-to-face surveys (personal interviews). Mail surveys are usually the least flexible. internet surveys. Trade show intercepts are similar to mall intercepts in practice except that these interviews are conducting during a trade show and respondents are first qualified. telephone surveys.com/) is one of the largest. if not the largest organization in the U. particularly the mall-intercept interview format in which interviewers are asked to solicit respondents from the general population of people who visit shopping malls. flexibility or to what extent is the interviewer able to adjust his/her questions to the respondent depending on circumstances. and a growing category. we in the U. However. not on demographic criteria but on criteria related to their employment.S. Brief discussion of types of surveys While focus groups and other qualitative procedures are gaining popularity. that is. First. and http://www. marketing research may be limited or culturally unacceptable. Second. As . In other countries.S.jwtworld.saatchi-saatchi. Conducting research projects in countries other than the U. this depends on the research questions and how straightforward the survey questions are. cost. And finally. These approaches will remain popular into the foreseeable future although such intercepts are a nonprobability method of gathering data.S. we also look at response rate. that is. cannot technically be generalized to the overall population of interest. A. Telephone surveys are still popular but are becoming more difficult to execute due to growing telemarketing techniques that many consumers attempt to avoid. Face-to-face surveys are still very popular. There are three primary kinds of surveys: mail surveys.C. Many of the major advertising agencies also conduct major consumer and organizational research (see http://www.

reviewing all posted materials for the sole reason of learning more about the environment should probably adjust her or his expectations. http://home. surveys that utilize the internet as a medium for gathering data will increase.org/ds/new-survey. marketing information managers must accept the fact that most organizational learning that takes place will probably occur through information catching rather than information seeking. at present it is difficult to verify the background of respondents and this reduces the attractiveness of the internet for data collection aimed at gaining attitudes toward products and services. if well designed and executed. should be stored and made readily available for use in the future.isc.htm). websites that keep track of internet usage. However. Leading companies often catalog research projects on their intranet so that future decision makers will have past marketing results available. Lessons can be learned by reviewing past research that was flawed. to be realistic. more specialized. Therefore. However.hot-topics.more and more consumers block their phone lines from solicitation.html and http://www. knowledge gained from a marketing research study is lost as soon as the project is presented and a decision is made based on the study. there will be many. The information manager who enters the current environment with expectations that his fellow workers will avidly adopt and use the company intranet.wizard. telephone surveys will become more challenging to conduct. Surveys can be easily adapted and completed on the internet making the data collection process relatively simple. However. this does not necessarily mean that other people in that organization will actually read and make use of those study results. Using technology to record learning from marketing research projects Too often. Marketing research projects. A few interesting websites that maintain data on surveys done regarding internet use are: http://www. As time goes on. As adoption of the internet as a method of communication continues. Chapter Five Exercises .com/tellus. as the reader already knows. An exception would be when the study involves those who are intimately related to internet operation and use such as Webmasters. there is more information in our contemporary environment available than humanly possible to read and understand.com/wwpr.html. This practice enhances organizational learning substantially.

marketscore. Describe how you believe this marketing research company derives revenue for its business? Describe who you believe would be the organization s customers. Perform a college intercept survey (that is. attitudes towards shopping at Dillard s were not being measured in the study. we were measuring attitudes towards the interviewers.com/. Note on Dillard s Survey : The survey conducted at Dillard s was highly reliable but not valid. Why? Because. If a study does not have the potential to improve decision-making. Write a one-page summary of what you found. Do a search on the internet using the term international marketing research. and describe why each is important in performing marketing research. it should not be performed. five or so questions). Although performing marketing research is expensive. Summarize your results and write up a brief overview of your survey experience. create a discussion guide and perform a focus group with some of your fellow students. meet students on campus and ask them to participate in your survey) by creating a brief survey form (one-page. given the research design. The survey can ask about anything from campus life to favorite recreational activities of students. most all participants will enjoy shopping at Dillard s and respond accordingly! However. Apply the marketing research process described in the chapter to outline how you would assess the reaction of consumers to a new chocolate bar.Do a search on the internet using the term marketing research. Discuss this sentence and explain what the speaker means. Chapter Five Glossary marketing research the process of obtaining information with which to improve marketing decision making . Compare and contrast quantitative marketing research and qualitative marketing research. making note of the more interesting websites you located. Search the internet using the keywords mystery shoppers and secret shoppers Check out the website http://www. Write a one-page summary of what you found. Unfortunately. Discuss this statement and explain what the person who made the statement may mean. it is often much more expensive NOT to perform. making note of the more interesting websites you visited in the process. Focus groups are a growing technique used in qualitative marketing research. Based on a problem/opportunity statement. Write up the results of the focus group explaining what you learned from the focus group. What problems did you have in the process? Do you believe this method is useful for gaining useful information for decision-making about customers? Compare and contrast reliability and validity.

we will review the process of product development and how companies manage that process. In this chapter. do they tend to respond in a similar manner? question validity the extent to which the question measure what is purported to measure that is. if we ask several people the same question.a statement of what general areas of inquiry the project will seek to answer research design the plan formulated to answer the research questions questions reliability the ability of a question to produce consistent responses of separate trials that is. created and commercialized. there are significant differences in how different companies approach this function. does it measure attitudes towards our product and not attitudes toward the interviewer. Distribution. . While the process is similar for consumer marketers and organizational marketers.marketing research process the series of steps followed in order to ensure the validity and reliability of information gathering processes research question . or store in which our product is sold? probability sample data gathered in a way that makes findings in the data applicable to the remainder of the population of organizations or people in the population of interest nonprobability sample data gathered in a way that fails to make findings in the data applicable to the remainder of the population of organizations or people in the population of interest secondary data information collected by someone other than the researcher to address different research questions primary data information gathered by the researcher to address specific questions of interest to that researcher focus group a qualitative data gathering technique in which a small number of people are brought together to discuss a series of questions of interest Chapter Six How do companies decide what products and services to market? In this chapter we begin a series of chapters on the components of the marketing mix: Product. and Promotion. Our emphasis in this chapter will be the product or service that the organization markets and how products are envisioned. if we say the question measure peoples attitudes towards our product. Price.

A list of these characteristics follows. a. Integrity management does what it says it will do Stages in a typical new product development process (NPD) The NPD is basically an exercise in idea management. Goal clarity the objectives of the task are jointly understood b. Freedom the ability to explore whatever directions of inquiry that are needed e. However. advertising and personal sales presentations). concept development) and downstream activities (for example. Thus. It is sometimes helpful to list the main (sometimes called salient ) attributes for purposes of performing both upstream activities (for example. intended and unintended. Products include all things the buyer receives including the physical attributes (a new car) and the intangible attributes (a warranty and a financing contract). . frequently a new product team may skip around stages when playing with a new product idea. In this chapter we will discuss the following areas related to managing new product development (NPD): Ø Ø Ø Ø the ideal climate for NPD the NPD process pitfalls in the NPD the role of product positioning in NPD The ideal climate for NPD There are several characteristics that help describe an ideal climate for the new product development process. Resources adequate economic and non-economic support for the task c.We will define product as all things the buyer receives in an exchange. bad and good. the process proceeds from stage to stage. Encouragement sincere emotional support for the task d.

new ideas abound. There are many creative problem-solving (CPS) techniques that provide extra stimulation for generating ideas for new products and services. However. representatives of the organization explore the product idea and assess its overall potential (No physical product yet exists).idea generation conceptualize a list of new product ideas idea assessment evaluate the ideas based on a previously created list of criteria. Rudyard Kipling even wrote a poem about this technique. Ideally. The Couger Center for the Study of Creativity and Innovation has applied over thirty CPS techniques in organizations with success. a commonly used analytical CPS technique is the 5 W s and H technique. idea generation should be fun and naturally occurring. The wishful thinking technique is a more intuitive CPS approach. and only rarely is it necessary to have a formal meeting to generate ideas. Idea generation The idea generation stage is the first stage in the NPD. CPS approaches fall along a continuum from intuitive to analytical. concept testing the idea is assessed through discussion with potential customers or users. idea choice one or more ideas are selected for initial investment idea prototype development an initial working model of the product is created for testing and evaluation final version development a model of the final version of the product is created commercialization the product is put into production and the distribution of the new product to customers begins Each stage should feedback information into the previous stages and this information should be organized and retained for future use. This is why a formal meeting for idea generation should be somewhat of an oxymoron in healthy. creative organizations. For example. in an organization with a healthy environment for creative thinking. Idea assessment . New ideas flow from every day activities within the organization. In this stage ideas that are judged not to meet the criteria are removed from consideration. Or. The appendix to this chapter describes how to use each of these two techniques.

This point brings about an underlying problem in judging new ideas. in the arts. In order to have a steady flow of new ideas. In this approach to thinking the mind or minds of those involved follows a linear process of reasoning ultimately arriving at a point of conclusion. Convergent thinking is the type of thinking with which most people in the U.S. in a context of the arts.) Many product ideas may not match with the firm s current product line and there should be guidance about what to do if this happens. . We have mentioned two types of thinking: convergent and divergent. value is sometimes difficult to assess for some time. Often the Five W s and H technique. Novelty can usually be judged fairly early on. fit with the organization s business and marketing strategy (you may want to go back and review compatibility in the discussion of requirements for effective segmentation in Chapter Three. projective techniques can often be used to illicit the opinions of customers about new product ideas without asking the customers directly. culture are most familiar. Creative ideas are judged on two criteria: Novelty and Value (or utility). DeBono is well known for coining the term lateral thinking which is a type of divergent thinking (see: http://www. The rationale underlying concept testing is that organizations are much wiser to explore the idea thoroughly before actually building a physical prototype.edwdebono.Most organizations have extensive guidelines concerning the criteria for new product ideas. Some organizations broker or sell new product ideas that don t entail serving current or planned future customer segments. can be helpful in fleshing out the new product idea. organizations must establish a clear understanding with personnel responsible for new product development how these two dimensions will be assessed. Divergent thinking is quite different in that it requires the participant or participants to play with ideas going off in unexpected directions. We have found that business firms primarily put more importance on the expected economic returns (value) of a new idea than whether the idea is particularly novel or new. employees play with the idea and have fun considering its potential. Concept testing In this stage. judges often look to novelty first and value later. That is. If customers are involved in this stage. However.com/ and review DeBono s Six Hats Method ). whereas. described in Chapter Eleven. cost/revenue expectations. Some typical criteria are: potential estimated demand for the product. this emphasis is usually reversed.

In some cases a restaurant may maintain a panel of expert tasters comprised of current customers to assist in determining which new dishes to put on the menu. For example.Note that when involved in the ideal approach to creative thinking. Idea prototype development During this stage working models of the new product are created to assess the feasibility of mass production of the product. We should note that the same activity could be engaged with services. usually. Unfortunately.S. Then competing ideas are assessed on this basis. Many great ideas with considerable positive potential are rejected every day in organizations. not because the idea isn t any good. people who are expert idea destroyers are often rewarded informally and formally in many organizations. culture. The NPD process should begin with divergent thinking and then apply convergent thinking with a careful recording of all new ideas as the process proceeds. The major criteria for choice are listed and an importance weight is assigned to each attribute. In fact. in the U. but because people in the organization are more oriented to idea destruction than idea construction Idea Choice During this stage. it can prepare different variations of the items and let the restaurant staff sample the items. That is. than with tangible products. Particularly. but the endeavor is usually well worth the time expended. this process requires a healthy climate for creativity and innovation within which employees can let go of personal ownership of ideas and judge the ideas on an objective basis. if I restaurant is in the process of developing new menu items. in the U. rather than stating what right about it. in our culture there is often more reward for observing what is wrong with an idea. people feel they have time to play with ideas and forget about hard work or the expected conclusion. we constantly and incorrectly equate hard work with no fun and something to be feared or dreaded. This fact might trouble some managers. A multiattribute model similar to the one we discussed in chapter three is often used to make such decisions. Obviously. the organization decides where its resources are best invested. it is easier with services. Final version development .S.

.product-testing. For example. Commercialization After the organization has refined its production and distribution systems. In the case of physical products. As the reader is no doubt aware.Because learning takes place in each stage of NPD.com/). An easy way to identify these barriers to new product development is to apply a CPS technique called the problem reversal technique and reverse the characteristics of an ideal climate described earlier considering the outcome of any of these characteristics being absent in the organization. this stage is usually worthwhile to identify possible problems but also to assess whether the organization should make a commitment to full commercialization. Examples of this strategy include new products for the cinema and products that are low in uniqueness and thus will be copied quickly by competitors if initially successful. which in many ways is the same of final version development except that test marketing entails a trial run of the total marketing mix (note the following website that performs new product tests for clients via the internet: http://www. a final version of the product is created to assess whether or not to take the product into the full commercialization stage. in our restaurant example above. one can see that a trial run of preparing dishes from supply to delivery and sampling should take place to identify possible bottlenecks and problems in the process before an item is adopted for inclusion in the menu. Common pitfalls in the NPD Process Various pitfalls can occur during the process of new product development. A notable exception is when a firm seeks full-scale commercialization as soon as possible with its product or service. This stage usually is implemented in small increments in order to further refine all systems involved in marketing the new product or service. companies often adopt a test marketing approach. The following list may help explain how an absence of these characteristics can discourage new product development. it only remains to enter the commercialization stage.

not people Otto. likes to have fun. Members of the NPD team constantly feel restricted in considering novel approaches to problem solving because they may be seen by others as not relevant and too playful e. the analytical constantly asks questions such as exactly what do that? . Lack of Resources there is inadequate economic and non-economic support for the task so that the NPD process is doomed from its beginning c. the encourager may often say Yeah. Lack of Encouragement management does not provide sincere emotional support for the task thus employees on the NPD team feel unconnected and neglected by management feeling that no one values their activity d. always hesitant to approve of a new idea . the peacemaker unconsciously reduces conflict by focusing on ideas. Lack of Freedom absence of the ability to explore whatever directions of inquiry are needed.a. Lack of Integrity management repeatedly fails to follow through on promises made. Although there are many different possible roles in the idea generation stage of the NPD. Unfortunately some of these roles are counterproductive and should be purposely deleted from the process. the wild idea man lots of ideas. so people in the process are confused and disagree about what they are expected to accomplish b. gets bored easily with details Inga. we will identify and discuss a few of the most common roles: Positive roles: enhance new idea generation and product development Willie. How would that work? Edith. Lack of Goal clarity the objectives of the task are not jointly understood. that is a great idea! Pam. thus leaving members of the NPD team frustrated and neglected this if often the cause of total shutdown of creativity of the NPD team Several roles are commonly adopted on new product development teams. the observer says very little but is engaged in the process and has many ideas which must be actively drawn out by others you mean by Negative Roles: discourage new idea generation and product development Doubtful David fearful.

which make them more productive. often offered as humor War Story Wally always has a story about how we did it back then Of course. The role of product positioning in NPD Product positioning can be defined as the image of a product in the mind of the target customer in relation to competing products and other products of the same company. Okay.Serious Sandra has trouble with Willie s glee and Inga s constant questions. The roles of David and Wally can be tolerated if other team members can cope with them. it also introduces the potential for a rich cauldron for the creation of ideas. manufacturing. These groups are comprised of people with different educational backgrounds and different organizational areas. These roles or roles similar to them tend to be present on most new product teams and can either facilitate the process or retard it. Doubtful David. For example. While this approach introduces the potential for more chaotic group meetings. NPD teams have members from most organizational functions including design. at Daimler-Chrysler/US. Primary success in managing the NPD Process has been realized through the use of Cross-functional Teams. if someone says Mercedes-Benz you might think luxurious and expensive. everyone in the organization should be responsible for new product ideas. Organizing for New Product Development Just as everyone in the organization is responsible for customer satisfaction. and more challenging to conduct at the same time. all of the positive roles are nice to have on a NPD team. engineering.never approves of anyone s ideas but his own. Patty the Parent. However. Then. The task of conceptualizing ideas about new products should not be reserved for the few people who are members of the NPD teams. constantly says. For example. marketing. and finance. Always has a snide comment about other peoples ideas. if someone says luxurious . let s get to work and stop playing around Patty the parent similar to Sandra but feels compelled to take the group in hand and manage it believes she is responsible Nasty Nick . and Knowing Nick have no legitimate place on an idea generation or even NPD team.

and finally. For example. Lexus. think about breakfast cereals. you might respond by saying BMW. some cereals may encourage overall regularity like bran cereals. For example. you. Breakfast cereals are available in many different types: sugar-added/no sugar added (is this segmentation based on benefits sought? ). Lack of ideas versus lack of climate for creativity: Is lack of ideas a sign of lack of ability of employees or a lack of willingness on the part of employees? Organizations with a paucity of new product ideas should not assume that their employees are just not creative. Do a keyword search internet using product positioning and perceptual mapping. Mercedes-Benz. a retired U. as well as. Whether you realize it or not. you already have a rich understanding of product positioning through your everyday activities as a consumer. non-related areas.S. Do an internet search on the term idea generation and prepare a one-page summary of your findings. still another segment. Have you ever been in a situation at work or in a university organization in which you were attempting to identify new ideas that were creative? Use the dimensions of an ideal creative environment to identify which dimension existed in your situation and which ones did not. and should be able to use positioning concepts as a way to understand where your product should fit in in the marketplace. Air Force officer who had spent his career in aircraft escape systems to stimulate the team s ideas about new features in car safety. We have conducted studies on many different organizations and employees indicate that the larger problem for them personally is not new ideas. Thus. but the fact that they don t believe their new ideas will be adopted or even seriously considered by management. a traditional benefit sought with new cars is personal safety. Do an internet search on the term new product development and prepare a one-page summary of your findings. as a marketing student should be aware of segmentation approaches. Chapter Six Exercises 1. Examining the relative positions of products in the marketplace can be of great assistance in new product idea generation. (Be sure to put your keyword in quotation marks to avoid references to other.and expensive. or Cadillac. vitamin enriched versus all natural (is this segmentation based on lifestyle? ). Thus product positioning is a critical part of understanding how to focus the new idea generation process. . We often think in terms of new benefits we can provide customers or new ways of providing those benefits. One new product design team in the car industry sought out and hired as a consultant. 2. 3.

the keyword idea generation and describe your findings in a one-page report. Use the Five W s and H technique to flesh out your answer. intended and unintended cross-functional teams product development teams that include representatives from all or most the functional areas in the organization including R&D. Finance. Chapter Six Glossary new product development process the stages people in the organization go through in order to create and market new products or services product all things a buyer receives in an exchange. see new products everyday. given its impact on contemporary lives. Explain how a market segment relates to a product position 9. it is worthwhile to explore high technology as a separate area. Choose a new product and describe what new additional benefits it purports to provide to consumers that its competitors do not. Go to your favorite drugstore and outline the product positions that are used either for toothpaste or shampoo. Describe the different benefits customers are seeking in each different position. Create a skit to perform in your class that demonstrates the idea generation process and the ten roles in the process described in the chapter.the image of a product in the mind of the target customer in relation to competing products and other products of the same company Chapter Seven Specific Challenges of Marketing High Technology The meaning of High Tech Although marketing high technology operates on the same basic principles. Conceptualize a new product or new service for which you think there is a need. 6. 7. Marketing. Be sure to try to focus your description on new benefits not new features. as a consumer. 8. We will use the term high technology to mean sophisticated knowledge associated with some general field of . good and bad. 5. Describe the segment to which this new product or service will appeal and what additional benefits will accrue to these potential customers. Manufacturing. and others product positioning .4. You.

Thus. based on the customer s perception. or high-tech. Thus. high technology can apply to most industries. such as integrated circuit creation and manufacture. including exploration. Sometimes the benefits of a feature become so well-recognized that we talk in terms of the feature. that industry applies very sophisticated know-how in many areas. and you are more likely to really understand customers needs. . if someone offered you a solar-powered palm-top device. and ultimately. Meaning that the orientation was initially to engineering.endeavor. c. the easier it is to identify the areas of that industry that are technology-intensive. their success was based on the additional benefits people received. b. but usually in specific areas. The only reason technical features ever are needed is that they are able to provide additional benefits sought by a group of customers. although in some fields. while many new product ideas in the realm of technology-intensive products and services have seen success. For example. itself. if someone offered you a solar-powered razor. However. Market-Driven Decision Making Maintaining Balance Between R&D and Marketing Managing in a Fast-Paced Environment Market-Driven Decision Making Many areas of high technology have a past based on the premise of build it and they will come. most people know that a turbocharger on a car indicates added acceleration. First. therefore. many would say that the computer industry is very hi-tech while. For example. let us review what we have said about new products. in reality. Therefore. a product was created for which there was demand based on its technical features. this is the exception rather than the rule. a new product must provide additional user benefits. All of this to say. based on your perception that there are no additional benefits to be realized by using the product. not features. itself. and when in doubt. you might say no thank you. always look for additional benefits. it is preferable to think in terms of benefits. not on the new way of doing things. one might think of the bituminous coal industry as being very low-tech. whereas. we recognize the benefits of the feature instantly with out reference to the benefits the feature will provide. or the same benefits in a more effective way. a. extraction and analysis. you might consider based on the added benefit that you would never have to change batteries in the device. In order to understand the forces are work. computers. usually the more one knows about any industry. it is technology-intensive. However. as an industry can today be considered a commodity. On the other hand. For example.

However. a characteristic of the R&D function is that employees in that function often are very bright people who strive to add to what is known in their area of expertise. Maintaining Balance Between R&D and Marketing Competent and focused Research and Development is the life s blood of any high technology organization. These benefits may be specific as in a faster way to do analysis or general as in easier to use. The next bench syndrome is a well-known approach to creating test and measurement products that argues a test engineer in R&D also has the exact needs of his/her customers. they gain this knowledge based on the prospective ability of these technologies to provide benefits to their chosen customers. thus including certain features may not provide the benefits the customer is seeking. The difficulty often encountered is that a search for knowledge solely for the sake of knowledge (basic research) is rarely sufficient in a for-profit business venture. Therefore. so that when the engineer has a need in the area of testing and measurement. a link between the focus of activities of R&D departments and certain benefits sought by customers must ultimately be recognized. this link must exist in order to guide the allocation of resources among competing organizational needs. Firms that are market-driven.A firm that thinks in terms of features and organizes accordingly. However. Another shortcoming of the next-bench syndrome is that engineers and scientists often think in terms of features. Marketing can provide the link between the R&D department s knowledge of technology and how that knowledge can be translated into delivering additional benefits to customers. strive to understand various technologies. whereas. While this concept is certainly applicable in some cases. can be called technology driven because the focus is on the various technologies that comprise the firm s Core Competencies (or basic abilities in production and operations). For example. Thus. The next-bench syndrome will only be a dependable guide to product development in high technology when the target customer is literally a clone of the employee in the R&D department. a pharmaceutical firm might have organic chemists and microbiologists in its R&D department. a firm manufacturing sophisticated test and measurement products may have personnel trained in electrical engineering and computer science in their R&D department. not benefits. The Research and Development (R&D) function is comprised of individuals who are highly educated and skilled in areas relevant to the technologies applied to develop the organization s core competencies. These core competencies then often drive the firm s efforts. s/he is a perfect model for what a customer will need. not the needs of customers in the marketplace. . it can lead to investment in products and services that are not commercially viable.

For a student of principles of marketing. This rarely happens because most firms in high technology industries are not market-driven.Marketing personnel are trained to uncover what benefits (as translated into features) that customers are seeking. the interface between the marketing and R&D departments needs to be clearly defined. we believe that most organizations operating in high technology areas are characterized by either a sales orientation or a technology orientation. they tend to be either sales-driven or technology-driven. . There is a concept called quality function deployment (see the following website for a relevant article: http://akao. Some indicators that a high-tech firm is sales-driven are: v v v v The top executive for marketing has the title: Vice-President of Sales and Marketing The marketing department has no marketing research personnel assigned to it Sales personnel have little or no input into what products are developed Sales personnel are paid primarily on a commission structure with little incentive to develop long-term customer relationships Some indicators that a high-tech firm is technology-driven are: v Marketing has little or no input regarding what products are developed v There are no formal programs for marketing research other than visits to present customers by R&D personnel v No sophisticated technologies are used to uncover present and potential customers needs v Marketing s primary role is seen as either sell what we make or find prospects to buy what we make While there are many exceptions. you may be responsible for introducing marketing principles into an organization yourself. this simply means that you must have a sound understanding of what marketing is in the ideal world.nasa.larc.html that helps in this process of translating benefits into features. because some day. Also.gov/dfc/qfd.) Managing in the Fast-Paced Environment of High Technology While marketing can add value high technology environments. it is imperative that there is a clear understanding of the role of marketing.

it is the proper answer for success). The temptation is often to position the product in terms of features. Agree or disagree with the following statement giving the reasoning behind your answer: Technology sells. Chapter Seven Exercises Does high technology mean the same thing to you as it did before you read this chapter? Write your answer in a one-page essay. While the saying build a better mousetrap and the world will beat a path to your door holds some truth. Describe the responsibilities of the marketing department in a technology driven organization versus a market-driven organization.Product positioning for High Technology In no area is it more important to position products than in technology-intensive environments. but. What is the role of the Research and Development Department? Do a search on the internet on the term Research and Development and summarize your findings in a one-page report. However. This is particularly important if the user is not an influencer as described in Chapter Three.driven organization in a high technology industry sector. Read the article on Quality Function Deployment cited earlier in this chapter and write a two-page report on how the material covered in this article would apply to marketing. it is usually more feasible to position along the lines of benefits sought because that language translates instantly to how the customer is thinking. Describe the responsibilities of the marketing department in a sales. Often the reason it is difficult to position a high technology product offering is that the product really doesn t provide any additional benefits to its target customers. Chapter Seven Glossary . most frequently customers are seeking how their job can be accomplished more efficiently and more effectively. Interview a manager in a high technology sector and discuss the meaning of marketing with him or her. There are exceptions as discussed above.

b. using price as a surrogate cue (or substitute indicator) for quality. Jewelry Store. These factors are as follows: a. But Cheap. When the pricing decision is made. Most consumers link price with quality and there are many organizations that carefully reinforce the quality of their product. For example. or for that matter. check out the websites of marketers of prestige items and observe how the price variable is used to indicate quality). Check out BMW s website and watch on of the movies there. the engineer is in the best position to know what products to design and build Chapter Eight How is the pricing decision made? The price variable in the marketing mix is a critical element.bmw. (http://www.sophisticated knowledge associated with some general field of endeavor Market-Driven Decision Making an approach to choice that is based on identified desires for benefits among specified customer groups Quality Function Deployment a concept that attempts to translate customer benefits sought into product features Next Bench Syndrome the assumption that a designer or engineer will have identical needs of his/her customers thus.com/bmwe/index. the organization must consider several factors. Supply (or cost) Demand (or revenue) Perceptions in the marketplace Competition and Competitors pricing strategies . c. what would you think of buying an engagement ring at Bob s Really Good. at a yard sale. d.shtml). communicate much about a product or service. by itself. For example. Price can.High technology .

Will the internet and MP3 technology eclipse CD technology eventually? Perceptions in the marketplace . in Colorado. it may not be a candidate for being approached as a product or service for sale. but didn t worry about having to purify the water. demand for bottled water is growing rapidly. people consumed very little bottled water throughout most of the United States. Thus. Government Regulation Company s desired pricing position Supply (or cost) If there is an abundant supply of a product or service. For example. they must buy air that is rich in oxygen by renting oxygen tanks to enhance their respiratory systems. We have seen above where many products traditionally considered as free. many people find that the air supplied by the great outdoors is not sufficient in oxygen. and a price to pay. Consider the amount of demand today for ice boxes (products for keeping perishable food cool). there must be some demand for a product or service. particularly how we perceive certain goods and services as candidates for commercial products. Thus. we don t consider air to breathe as being a commodity we must buy. f. Today. the nature of demand changes constantly for goods and services. Hence. For example. have given way to other identical or similar products for which there is now a strong consumer demand. These products were heavily demanded before the advent of the electric refrigerator. So. Of course. Native Americans had to locate close to a water supply. time can change most everything. and consider that commodity is a candidate for a product in the future (fresh air and open space. that is only because there is a plentiful supply. we often see that demand for a product can decrease or even disappear if substitute products are introduced that are perceived as being superior in their ability to provide the benefits being sought. think about the things you consume that you presently don t pay for. Demand (or revenue) To justify commanding a positive price in the marketplace. thus. eight track audiotapes were popular for a few years in the late 1960 s and early 1970 s until a newer technology in the form of cassette tapes was introduced and vinyl records of recorded music have largely given way to the Compact Disk (CD) as the preferred medium. Of course. Just a few years ago.e. for example).

there is already a normative price for a product or service above which a price may be considering unfair or price-gouging. However. Normative prices do not have to be specific. my water bill is too high! This interaction between positive price and normative price is an ongoing phenomenon and of particular interest to marketers who attempt to create and sustain customer satisfaction.Perceptions in the marketplace can set both a positive price and a normative price in the marketplace. However. Also. First. the firm may have to function in a heavily regulated environment.. . water. While the marketer does not usually have control over the normative price. most states have a public utilities commission or board that is responsible for overseeing the pricing practices of firms that provide the populace with utility service for natural gas. a branch of government often sets normative prices. For example. For example. Competition and Competitors pricing strategies In the U. Setting price can be a time-consuming process and we will discuss setting price later in this chapter. particularly in the case where there is only one supplier (a monopoly). In the U. s/he can usually control the positive price. consider the recent higher prices for gasoline and the various protests put forth by individuals and groups that the gasoline prices were too high and not right. This type of environment is called a monopoly (one seller). the positive price was so high for selected drugs used to treat AIDS that some groups protested that the normative price was simply too high gaining societal support and eventual price decreases from the manufacturers of these pharmaceuticals. how many times have you heard that.S. competition can have several impacts on the pricing decision. Usually there are consumer expectations that help guide the normative price. A positive price simply describes how much something costs whereas a normative price describes what something should cost based on an individual s or a group s opinion. and electricity. this discussion should have already made the reader aware of the importance of understanding whether by custom of the marketplace. there are notable exceptions to this rule. These protest essentially were observing that gasoline had reach a price that was above the normative price for most people. For example.. if the firm is the only seller of a product considered essential to public welfare.S.

However. although this may not always be the case. most of this regulation. the capitalistic system is unable in its present form to halt abuses to the environment by organizations and thus. the granddaddy of them all in regulation. Third. This type of competitive structure is called an oligopoly (few sellers).rollsroyce.S. a firm may function in an industry in which there is an established price leader that perennially sets a price that other firms follow. the next time you hear businesses cry Get the government off our backs realize the businesses are really saying get the government off my back but make sure the government protects me from unfair practices by my competition. if the firm functions in a market where there are many competitors offering similar products. one must obtain various licenses directed at everything from local government taxation and zoning laws. sellers are able to draw differences in perception of such things as quality and prestige among products. Company s desired pricing position Based on a company s business and marketing strategy. it should determine its pricing position. function in an environment that is highly regulated. Only a small portion of these laws were passed to address the protection of consumers. Government Regulation Most firms in the U. Fourth.S. while onerous. the firm may compete in an industry or market in which although products are physically similar. the firm may not have a choice about what level price to seek. (pure competition). we find that most of that regulation was brought about by pressure on congress exerted by businesses that were competing with other businesses. the Federal Government which regulates all interstate commerce based on constitutional power and has major regulatory responsibility for the health and welfare of employees. This competitive model is called monopolistic competition and is applicable for most everyday consumer purchases as well as business-to-business purchases in the U.Second. if we explore the primary legislation that impacts pricing. In fact.co. is needed. before starting a business. As we reviewed earlier in this chapter. and finally.uk/rolls- . So. For example. some companies have a high price/exclusive/prestige position (check out the website for Rolls-Royce automobiles (http://www. to state government consumer protection laws. This body of law still allows various environmental abuses such as the Summitville Mind disaster in the state of Colorado.

dollargeneral. While. In pricing livestock. we first assess buyers perception of how much they would expect to pay for a product or service based on the utility (or usefulness) they would expect to derive from product or service and combine these individual utility functions to create a demand curve for the product in question. For example. A company should choose its own price position. the general lesson we learn from the approach is an important one. In this case. The Pricing Decision As pointed out above. general public. the pricing decision can be quite simple.com/). the rancher will be forced to accept whatever price his/her cattle bring at the auction. can be based on the expected utility (benefits) that customers in the marketplace expect to receive from acquiring our product as compared to other available products. the pricing decision is reduced to answering the question: Can I accept the price being offered at the local auction? If the answer to this question is no. That is.com/) will want to position itself quite differently than a marketer of exclusive products similar to Rolex watches (see http://www. Traditionally. a local store that sells everything for a dollar (for example. the initial pricing decision can be time-consuming although there are exceptions. this approach is straightforward theoretically.royce/index. employees.html) or Rolex Wristwatches. Cost and Demand Oriented Pricing Models We may use cost or demand as a basis for setting pricing. for example. for example). see (http://www. the price based on a demand-oriented model. the pricing decision is impacted by many different factors. Thus. usually the pricing decision is much more complicated and should involve a careful consideration of all five factors listed above.rolex. whether high/prestige or low/value and attempt to guide its constituencies (customers. In this case. while others have a low price position (Wal-Mart. supplies. Thus. . and others) to the conclusion the company desires. However. this orientation is applied in microeconomic theory by creating demand curves based a summation of individual utility functions for buyers in the marketplace. it often defies practical application. the rancher then has to decide whether to seek another auction or liquidate his/her herd. However. A cattle rancher may take his or her cattle to the local auction house once a year to thin his/her herd of older cows and young calves.

there may be an expected price. based on the benefits they would derive from it. For example. this at least gives the seller some guidance in setting price. based on demand and what others will similar skills can expect to receive in a free market. Thus. demand. revolutionary vacuum cleaner. This approach is known as the expected price approach and. by using solely a cost-based approach the seller my miss opportunities for additional profit or set a price too high to realize adequate sales to even cover cost. when asked they indicate that they would pay normally . if demand is very high there are times when we can virtually ignore cost structures. internal rate of return pricing usually begins with cost determination and then computes different projected levels of return on investment for future time periods. For example. Why not just use cost-pricing always? While the approach is simple and has the advantage of guaranteeing some profit margin. For example. if a seller focuses only on cost to set a price. for years a keystone or key-stoning pricing policy has been used by many retailers to set price. if a professional athlete has a remarkable season of performance. This approach simply doubles the cost and arrives at the selling price. In some cases. would expect to pay $30. this approach requires a time consuming analysis and it not as simple as just setting the price based on cost. this approach uses cost to the seller to determine a selling price. This pricing method was adopted by General Motors early in the company s history and was applied for decades with their products. s/he can sometimes demand an incredibly high salary based on his/her performance the previous season. Prices can also set using demand for the product or service as a guide. The customary price is a price level that consumers are used to paying based history or normal expectations. s/he might be either setting price so high there will be no demand. if an analysis of demand indicates that buyers. for example. However. or foregoing considerable profits. Pricing models based on demand Witness salaries paid to professional athletes. For example.Pricing models based on cost Probably the oldest model used. Of course. How are these prices for athletic talent determined? Usually. For example. The expected price is a price that consumers would anticipate being reasonable for the benefits derived from using the product. Many other models used cost as a pricing basis. is the basis for setting price based on demand in Microeconomics.000 dollars for a new kind of testing device. theoretically. the approach ignores the most important factor in pricing. if consumer testers try out a new. There may also be a customary price for a product or service.

anticipate paying $500 or less for the product. Price elasticity of demand can be computed by applying a simple formula for e the elasticity of demand as shown below: Price elasticity formula in words: Price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. For example. Price elasticity formula in symbols: e = % q/ % p . Thus. Thus. prospective buyers perceive a difference in products based on the distinction or reputation of particular brands. Prestige pricing is often applied by organizations that attempt to create a sense of exclusivity for their product or service. That is. a basic understanding of price elasticity of demand is called for. This pricing approach assumes that the product or service faces a market structure characterized by monopolistic competition. However. although the seller cost structure would mean losing money at a price of less than $500. wristwatches. can you think of a situation in which raising prices will result in more of the product or service being demanded? It is imperative that the marketer have a clear understanding of how quantity will respond to price changes. the organization must commit to a long-term strategy Understanding Price Elasticity of Demand Price elasticity of demand is a method used in microeconomics to understand how quantity demanded moves in conjunction with price changes. what happens to quantity demanded? We would usually argue that quantity demanded goes down. Many product categories this factor to set price. if prices are raised. liquor. in order to create and sustain such a market position. Of course. and automobiles all have a prestige segment created through the perception of exclusivity an distinction.

That is.Where: e = elasticity of demand q = quantity demanded p = price The elasticity coefficient of elasticity. has a domain from greater than a positive one. We will present examples at the conclusion of this chapter. the ultimate price is related to all five factors that we discussed above. and MU = percentage markup. where. we simply multiply the cost by the percentage of markup.4 (or forty percent of cost) to determine the selling price of items in her gift shop (for example. For example.60. elasticity is termed elastic demand. She will use the formula. We would use the same simple formula for each approach to computing selling price: Selling price equals Cost plus Markup or SP = C + M. Of course.4($14) or $14 + $5. Using Markup on cost to determine selling price In this approach to setting price. C = cost. e. When e is less than one. her selling price will be SP = $14 + . When e is greater than one. A very simple way to look at setting price is to consider the markup. demand is said to be unitary demand. Using Markup on selling price to determine selling price . we first determine the markup and then add it to the cost to find the selling price.60 = $19. Markup can be computed on cost or selling price. we characterize demand as inelastic demand. Setting Price The firm must arrive at a price that will provide it with sufficient profitability while being palatable to the marketplace. to less than a negative one. SP = selling price. SP = C + . let us assume that the owner of a small gift shop desires to gain an average forty percent markup based on a percentage of cost on a of the products she sells in her shop. When we have an elasticity coefficient equal to one. if a children s book costs the owner $14.

we would find the following. Why would BMW go to such expense to produce these movies? What is the . This approach is not as intuitive and applies simple algebra to first define and then determine the selling price. On the least side of the equation.4SP minus . SP = $14 + . the cost is $14. we find that. Recalling that we can simplify the equation .4SP =. the solution to our problem would be SP = C + MU.33. . That is. or SP = C + . or . Chapter Eight Exercises Check out BMW s website described in above in Chapter Eight (and watch one of the movies there ( ambush or the hire ). we subtract .6 by dividing both sides by . Please note. that is. SP minus . Solving for the selling price under this approach. now the markup is determined as a percentage of selling price rather than a percentage of cost. we apply the same simple formula. as well. once you understand this approach you will be able to remember it.6SP. grouping the terms with SP together to solve the equation.6 or $23. On the right side of the equation. Now our equation reads .6 .33 into our formula to check your answer.6.4 from both sides. This simple approach to using selling price as a basis for markup is used by many retailers and if one ever wants to market a product to retailers (or wholesalers. Substituting in the formula: SP = C + MU.6SP is equal to simply SP).4SP. remove the . Now. Therefore.4 times the selling price.6SP (Remembering that SP is understood to be 1SP.6SP = $14. now markup itself becomes an unknown. In this case. Now. $14 + .4SP or the selling price is equal to $14 plus . Selling price can also be determined as a markup based on a percentage of selling price as described in our discussion of key stoning above. However. for that matter) one should understand this approach to arriving at selling price.4SP equals .Some students ask How can I determine markup based on selling price if I don t know the selling price! Good question! We simply define the markup on the selling price in algebraic terms. That is. if we use the same gift shop and price structure as our example above.6SP = $14 further. and the markup is .4SP equals $14. That is.4SP. that this approach may not make as much sense to you initially if you are not comfortable with basic algebra. initially.6SP divided by . On the left side of the equation. 1SP minus .4 of the selling price rather than the price. now we must draw on simple algebra and define the selling price as the unknown and the markup as a function of the selling price. So the equation now reads SP = 14 divided by . Thus selling price is equal to $14 divided by . substitute the selling price of $23. . while our formula is identical to the computation using cost as a basis for markup (SP = C + MU). But please don t despair.

Agree or disagree with this statement and explain your answer.com). Summarize your product positioning map and what you learned by doing this positioning map in a two-page report.shanecompany. Go to a local supermarket and a local department store and write a half-page report that observes differences in how prices are displayed at each store. Cost-oriented pricing procedures used to arrive at a product s or a service s price using the organization s cost of producing the product or service. College tuition is a price just like any other.com/) and write a paragraph observing differences between the Cartier and the Timex sites. price does not have to be economic in nature.price the viewer of the movie pays? Remember. Use the dimensions of price and prestige. Inc. Inc. Chapter Eight Glossary Positive price the present cost or marked price of a product Normative price a price that is considered fair by an individual or group Company s desired pricing position an organization should reach its own conclusion based environmental factors.com/). Why do different companies have different approaches to pricing? Use the websites above to support your answer. high quality (prestige) position in the marketplace. Explain your answer in a one-paragraph summary. Be sure to describe the positioning of each company s products after viewing their respective websites.com/weddings/wedding_planner.) Explore the website for Walmart and comment on Wal-Mart s approach to price (http://www. Create a product positioning map (four cell matrix) for wristwatches. (Cartie ) (http://www.cartier. and describe how this company attempts to create a high price. (http://www. Explore the website of the Shane Company and describe this company s orientation to pricing and prestige (http://www.walmart.asp. where it should set price and communicate that position to its constituencies. .timex. Explore the website of Timex. Explore the website of Cartier.

Organizations typically use a large number of strategies to get their goods and services to target customers rather than only one.principlesofmarketing.procedures used to arrive at a product s or a service s price using the demand structure in the marketplace. This strategy is usually not efficient or effective for most firms. Salesoriented organizations focus on promotion and personal selling and are not typically concerned with . For example. The strategy is typically adopted by many organizations that have not done sufficient research to understand the specific characteristics their target customer and how the customer would generally prefer to obtain the product or service in question. this e-book is delivered to the user instantly anytime the user desires to access it. Critical to understanding and managing distribution are the concepts of time and place utility. A marketer may adopt a broadcast strategy in which products are sent out to customers in as wide a manner as possible.Demand-oriented pricing . Therefore. Price elasticity of demand the relative change in demand that occurs in response to a relative change in price Prestige pricing the process of setting a price based on the perceived exclusivity or reputation of the company name or brand name of the product or service Chapter Nine How do producers get their products and services to their target customers? This area of the marketing mix is usually called distribution simply because its main concern is to distribute goods and services to the target customers. For example. Buying a book over the internet still requires that the book be delivered to the buyer before consumption of the product .com). particularly small firms due to the cost. the development of the market for e-books may change this situation. for many products. The action on the part of the reader is to gain ability to log on to the internet and go to our website (http://www. it does not provide sufficient time utility. it is generally faster to buy a book from a local retailer than to obtain the same book through the internet. e-mail). However. While the internet can provide the ultimate in time utility for some products or services (for example. organizations that are production-oriented concentrate primarily on manufacturing their products efficiently (with the underlying assumption that there will be a demand for the product). Time utility can be defined as having the product available when the customer would prefer to acquire it and place utility is having the product available where the customer would prefer to acquire it.

For example. emergency medical care for people and their pets might constitute such a product (service). the idea of being open to serve customers virtually all of the time is not a viable strategy. the organization seeks to deliver the right product with the right service. if we market a product that customers would prefer to buy any time of day or night and any day of the week. Note that many Wal-Mart stores adopted this approach to ensure that Wal-Mart products are available whenever customers might seek them and that Walgreen drugstores have adopted the same strategy. many services are now be delivered directly to the customer. thus these firms focus on the most advanced way of doing things whether the customer is seeking this solution or not. or other investment options) historically required a face-to-face meeting between the investor and his investment advisor. Over the last few decades people in the U. at the right time and right place. Financial services offered by banks are similar in that. As the practice of direct deposit and other electronic forms of banking grow. and thus is created in relation to when and how customers would prefer to buy a product or service. Thus. Focused Distribution Strategy Five Rights don t make a Wrong A focused distribution strategy is driven by customers needs. we would strive to make the product available to customers on an around-theclock basis. many people manage their investments through the internet and never work face-to-face with another human being.S. thus. those that cannot be seen or touched during the process of providing the service. For many marketers. Although traditionally services have been delivered through a direct marketing channel or directly from the seller to the buyer. Today. This is not to the say that there will no longer be a need for bricks and mortar banks. bonds. for example a new pair shoes) and the term services to refer to intangible products (for example a visit to the dentist). five rights don t make a wrong thus the only viable way to know what the target market wants is to understand them well enough to answer the five rights. Of course. For example. Technology oriented firms assume that customers are seeking the most advanced technology. there will less and less need for personal interactions between financial institutions and their customers. to the right customer. Previously. Again. the demand for all products and services does not occur on this basis.the ideal product solution that the customer is seeking. have grown to expect that some types of stores will always be open and thus many leading market-oriented organizations have responded to that expectation and many others have not. it is not necessary for customers of banks to meet face-to-face with bank representatives. because some segments of customers will still feel it necessary to visit personally with the bank s representations. . not all customers for most products have the same wants and needs. since the introduction of the Automatic Teller Machine (ATM). these services required personal contact between seller and buyer. All of the organizations above often adopt these respective orientations because they have insufficient knowledge of customers or concern for customers to engage in a focused distribution strategy. investment decisions (in stocks. For example. as technology develops. We use the terms goods to refer to tangible products (those that can be seen and touched.

a portion of their sales come from those who are buying for businesses or institutions. This website will be of interest to most women in business if only in its educational attributes regarding organizational mission and culture. Although there are literally dozens of different alternatives for distributing products and services to consumers. if we consider Sam s Club and other similar organizations. Thus. Why does this matter? As indicated in an earlier chapter. Many firms advertise that they have this commitment. Mary Kay operates on a direct distribution system that depends on the performance of a large network Mary Kay Consultants who are independent contractors to Mary Kay. However. the buying behavior of consumers and those representing organizations differ considerably. personal non-business use. This definition clearly identifies most shoppers at K-Mart as consumers.motel6.com/) and Motel Six (website: http://www. whereas consumer purchases include a larger portion of unplanned purchases. frequently some creativity is required to identify and weave these options together into an effective system that provides high satisfaction levels to customers. usually.This distribution strategy requires that the firm commit to learning about and caring about its customers.S. Options for focused distribution in the consumer market Earlier. Direct distribution is an approach in which the producer also manages distributing the product to the consumer. the alternatives fall into two basic options: (1) direct distribution and (2) the use a one or more marketing intermediaries. This workforce is close to a million women who operate as independent business organizations.marykay. because the distribution function ( Place ) tends to be the least flexible component of the four P s in the marketing mix.. Options for focused distribution In the U. . Examples of direct distribution include Mary Kay cosmetics (website: http://www. few do. This has to be a strategic or long-lived commitment with adequate resources devoted to accomplish the task. while distribution options usually exist. Organizational purchases are often more planned and driven by predefined specifications. for example. We say.com/). there are usually many options available to create and effectively manage distribution. but in reality. we defined a consumer as someone who buys for their own.

fleming. Note that a retailer is technically a marketing . as more and more people locate and book travel arrangements through internet providers (for example. Clearly. your primary concern and abilities would be related to operating a fleet of boats. one might believe that most large companies choose to deliver goods to their customers through direct distribution. A notable exception is the delivery of travel services in which at least some component of the service (finding an appropriate flight and booking it) is sometimes delivered via a marketing intermediary (travel agent). there would. Thus. For tangible goods (products). this is not the case and most products in the U. Travelocity (http://www. as a fishing operation one organization could do both fishing.com/). Whereas. it might not have the resources to peform both activities. companies like Sysco (http://www. The service component plays the major role in each of these businesses which is not surprising.html) operates a network of over 750 company-owned retail outlets in the U.goodyeartires. thus company has chosen to own and operate its own retail stores and thus engage in direct distribution. Although. no doubt. Goodyear Tire Stores (http://www. Why are producers who use direct distribution in the minority? Because there are many marketing intermediaries (called middlemen in the past) that provide better service and are much better equipped to provide distribution services than the producer. are distributed through marketing intermediaries such as wholesalers and manufacturers representatives. and locating and catching fish.com/about/employ/open/retail-06.Motel 6 delivers its services directly to customers via an individual or company that has agreed to certain guidelines articulated in a franchising agreement.travelocity.com/) and the Fleming companies (http://www. The above example would represent a distribution channel in which both wholesalers and retailers are needed as marketing intermediaries. and processing. For example. there is becoming less demand for personal contact with travel agencies except in case of more complicated travel plans and travel plans for inexperienced travelers.cheaptickets. Given the above examples. in most industries.S. However.S.com) and Cheaptickets (http://www. be an organization that has as its primary concern and abilities. as well as distributed products from producers to retail grocers.com) provide everything from training classes in merchandising to recipes for new dishes to their customers. because most services are distributed directly from the producer of the service to the consumer of the service.sysco. the processing of the fish brought into port every day. However. there are different firms engaged in the different endeavors it requires to produce and deliver the product to the consumer s door. a wise person would spend his/her time focusing on this aspect of the business. In the grocery industry.. if you operated a fishing fleet in Alaska.

a manufacturers representative in the building materials industry might work for several different producers of structural materials for building homes. the transportation company that moves the melons from Rocky Ford to your home town. realize that the reason you are able to buy exotic products from all around the world depends largely on the services of marketing intermediaries. Options for focused distribution in the organizational market Although there are instances in which the distribution channel to provide satisfaction to an organizational market is identical to the distribution that will provide maximum satisfaction to a consumer market such as Sam s Club in the U. but the main option other than the direct channel. For example. So. there probably will be at least two intermediaries involved. in this case.. manufacturers representatives are used widely in organizational markets than they are in consumer markets. is the option that includes the use of marketing intermediaries. In fact. the above discussion should help you conclude that while marketing intermediaries are not always use. to buy our cantaloupes. As the reader can see.com/search?p=manufacturers%27+representatives&n=25). if we are willing to drive to Rocky Ford. of which there are many different kinds. They don t necessarily make distribution more expensive but they do often make it much better. the next time you go to the grocery. (http://search. there are many different options to distribution. we have performed a service usually reserved for a marketing intermediary. The key to the value of a marketing intermediary is that the marketing intermediary provides services with which we as consumers cannot do without. these two types of markets usually make use of different kinds of marketing intermediaries. For example. at least in title. A manufacturers representative is an independent organization that represents a group of different producers. The only time when a marketing intermediary is not needed is when we as consumers are willing to perform some of the services that the marketing intermediary performs. and the retailer who grades the melons and places them for display in his/her grocery store. as consumers desire to purchase. technically the retailer IS a middleman! In summary. The manufacturers representative will usually have as clients several different producers that manufacture products used in the same industry or application. that provide essential services which usually add value to products that we.yahoo. providing consumers with more place and time utility. it is unlikely that claim is true because. Colorado. . so that when a retailer advertises s/he cuts out the middleman. Examine the following URL address to find the websites of different categories of manufacturers representatives.S.intermediary. For example.

We would observe the effort put into the purchase including how much time is spent on the purchase and how often the product is purchased. when most people buy pizza. Different types of products in consumer markets It is helpful to study the type of behavior in which consumers engage to better understand their wants and needs when it comes to product or service delivery. but how most consumers buy pizza. researchers have identified several different types of products based on consumer behavior. shopping goods. the firms are often hidden from consumers since most are located in industrial districts within cities. including time pressure and occasion of the purchase because each of these factors affect the personal significance of the purchase. pizza would be classified as a convenience good because most consumers buy it in that manner.wwid.S. For consumer products. That is. because these directly impact how much time you are willing to spend on the making the purchase. alone. It is helpful to consider three characteristics when attempting to place a product or service in one of these categories. We will describe four of these types of consumer products: Unsought goods. However. There are literally tens of thousands of these firms in the U. convenience goods. First.Industrial distributors are marketing intermediaries that service organizations by providing them with products and services in a convenient manner. purchased frequently. thus. We also consider the price and the personal significance of the purchase. we define a convenience good as a product or service that is purchased with: 1. and specialty goods. normal consumption conditions (for example. Situational effects are also important to consider. See the following website for an example of an industrial distributor: http://www. not a special occasion or of particular personal significance) and that is 3.com/. . you should realize that the pertinent question is not how you personally buy pizza. the purchase decision if not a high involvement purchase surrounded by considerable perceived risk. we must realize that we classify goods and services on what behavior we would expect from most consumers. minimal amount of time expended under 2. Therefore. While you might say: I only eat the pizza baked by my favorite local pizza place: Rubino s Pizza.

krispykreme. Specialty goods are products that we purchase for which we have a definite preference for the supplier.prudential. Most of us only buy a battery when we believe our present battery most be replaced. Marketers of unsought goods choose intriguing appeals.com and http://www. For example. gasoline for your lawnmower). the good is unsought in normal shopping activities.com/) or a long-standing involvement with the product (for example. they are not necessarily pleasurable to consider buying. such as life insurance also fit into this category. thus. Unsought goods are those products that consumers will not normally buy during regular shopping activities. think back to the last time you bought a battery for your car.sci-corp. This preference may be based on prestige of the supplier (for example. The added time the consumer is willing to spend will vary directly with the cost of the new product and the personal significance (perceived risk or situational impacts) of the purchase. Rolex wristwatches http://www.com/ ). While we all have need for these products and services. Krispy Kreme Donuts: http://www. if you own an automobile. For example.com/kkcollect. not on behavior observed among organizational buyers and decision makers.com/ . Thus with shopping goods the consumer will usually compare different brands and suppliers before s/he makes a purchase decision. usually based on perceived risk. Thus . assuaging grief of family members) or financial risk (dramatizing the consequences of financial loss).One can see that with convenience goods.rolex. For example. but on the intended use of the product or service. Shopping goods are those products that are purchased less frequently for which the average consumer is willing to spend some extra time in the shopping process. a consumer may want to compare several different brands and stores before she decides on which CD player to buy.com/). time and place utility are extremely important because the most available supplier of the product may be the one that is chosen solely on location of the supplier (for example. when buying a new CD player for her car. thus we in one way or another avoid buying certain products and services during our normal shopping activities. researchers have classified products. either of personal risk (for example.bluebell. Intangible goods. look at http://www.html also http://www. http://www. the family doesn t usually decide to spend a nice spring day shopping for burial plots and funeral services. (for example. Different types of products in organizational markets In organizational marketing.northwesternmutual.

and write a one-page report on what you find there. not to resell. Examples would include oil and grease for maintaining major equipment. The gift shop is buying the neon sign.com/kkcollect. for example.krispykreme. spark plugs or windshield wipers in a new automobile. For example. The following are brief descriptions of the different types of good and services in organizational markets: i. thus the intended use is to promote the gift shop and increase its sales. for example. Give two examples of other similar company success stories you find on the web and describe them in a one-page essay. jet planes for a commercial airline carrier or ovens for a bakery. a hand drill used by a tent manufacturer. v. Accessory equipment products that are used to facilitate and maintain basic production and operations of the firm. iii. Component parts products do not undergo any change in form utility and appear in the final product in identical form. ii. but to use in the conduct of its business. Business services intangible portions of the company s basic processes that enhance and protect its operations for example security services and cleaning services Chapter Nine Exercises Read the history of Krispy Kreme donuts on the Krispy Kreme website (http://www. Process materials products that have undergone some change in form utility.html). trees that have been cut into boards in a lumber mill. .the types of organizational products we identify are based on what purpose the organization has for the product or service being acquired. Supplies these products are similar to convenience goods in the consumer products typology in that they are of minor cost and are consumed frequently. for example. For example. iv. Raw materials . Major equipment products for which the basic processes of the organization depend. vi. a local gift shop may need to buy a new neon sign for its window to draw the attention of passers-by. vii.products that are in their natural form like salmon from the sea or coal from the earth.

Chapter Nine Glossary Broadcast strategy a distribution strategy based on delivering the product or service to customers on as a wide a basis as possible. List three different products that belong in each category of consumer products and explain why you think most consumers would classify them this way. Give examples in which a personal computer would be major equipment for one organization and accessory equipment for another. Explain how drive-through windows for fast-food restaurants relate to place and time utility. Search the internet with the keyword industrial distributors and write a one-page summary on what you found.marykay. marketing intermediaries? Explain. Many futurists expect present trends toward more time and place utility to continue.Why are Rolex watches only distributed through selected jewelry stores and not K-Mart? In a onepage report describe how does this example identifies one of the common reasons for distributing a product through only a few outlets.sysco. Why are consumers not more familiar with this type of organization? Is a premium sound system in a new car a component part or accessory equipment to an organizational marketer? Explain why most consumers would answer accessory equipment.com/). What are marketing intermediaries and why do most business people believe it is imperative in our economy to have marketing intermediaries? Are retailers (organizations that sell primarily to people who buy for their own. although that is incorrect. Why do are there different approaches for classifying consumer products and organizational products? Can you think of products that can fit into either area? Explain.com/). Do you agree? Why or why not? Visit the Mary Kay website and write a one-page essay summarizing what you found there (http://www. personal nonbusiness use). Visit the Sysco Website and write a one-page essay on what you found there (http://www. Often as a result of inadequate knowledge about customer needs and wants and characteristics .

first a definition of the target audience second. Promotion takes place in the intermediate and later stages of marketing planning because promotion requires: 1. fourth. and 4. Marketing intermediary an independent organization that assists producers in delivering their products and services to their customers Manufacturers representative a type of marketing intermediary that serves several noncompeting producers of complementary products by accessing and maintaining relationships with a wide variety of customers in business-to -business markets Industrial distributor a type of marketing intermediary in business-to-business that services organizations by providing them with products and services usually in a specific product category such as electrical or plumbing supplies. a strategy to be employed to communicate with that target audience and accomplish the objectives.Focused strategy a distribution strategy based on delivering the product or service based on performance of upstream marketing activities to determine the five rights of the organization s product or service. a description of the benefits to be delivered to that target audience third. . Direct distribution an approach used by some organizations in which the organization itself is responsible for delivering its products and services to the customer. 2. clear objectives about what the program aims to accomplish. Chapter Ten What are the options for promoting products and services? We have already discussed the importance of performing upstream marketing activities prior to performing downstream marketing activities. 3.

com/). For example. So. culture are aware of and understand the benefits of Coca-Cola and where to find the product. For example. This is particularly true with today s media saturation and intense competition. While these stages are always necessary. although most consumers are aware of the product in over two hundred countries (see http://www. realize that they are always changing. and behavioristic attributes. target markets do the same thing. Coca-Cola is committed to constant advertising. so informational advertising may not be necessary (http://www. If we don t really understand our customers well.com/).cocacola. Whereas.cocacola. also continually inform a certain part of the target market who due to age or culture are not aware of the product yet. often one or the other has taken place prior to the creation of a promotion program. . the target audience for consumer products is usually defined in terms of demographic. However. if our target market is more interested in minimizing technological risk in their purchase.This process may seem backwards to some who would expect to make the media decision first. Description of benefits to be delivered to the target market It is imperative to understand what benefits (not product features) the target market will receive by buying our product or service and this description should be crafted in words that communicate these benefits to members of the target market. the notion of empathy with the target market becomes critical. it will show in our attempts to communicate with them. Once we have clearly defined the target market. Definition of the target audience Traditionally. That is. However. Coca-Cola must continually work hard to keep its name in front of consumers and remind them that the product is available and that it will provide the consumer with certain benefits. Thus. most consumers in the U. People age and change over time. Thus. When you think of target markets. if our target market first seeks the minimization of financial risk in their purchase. persuade. if an organization is sales-driven. new Coca-Cola ads while persuading and reminding a portion of the target market. As we discussed in Chapter Three. a market-driven firm realizes that is must perform the first three steps prior to media choice. we create marketing programs to communication with members of the target market. Reminder advertising is often placed by market leaders to support other promotional campaigns that are in progress. History shows that market leaders can quickly lose their competitive position if they don t constantly keep their name in front of their target market. geographic.S. psychographic. the role of promotion has been identified as to inform. and remind. therefore. we might choose to provide a thirty-day money back guarantee. it would first attempt to perform number four above.

we might choose to decrease this perceived risk by providing a twelve-month technology trade-up program or adopting promotion comprised of user testimonials dealing with the product. setting objectives sometimes destroys creativity associated with the promotion program. That is. the reader provide an explanation regarding how the strategy would be implemented. First. Communication objectives can be driven by measures such as product awareness. use of the word strategy has no guidelines and can confuse the issue. knowledge (of certain attributes or benefits) or preference. a company might discover through research that their target customers seek reliability above all other attributes thus the organization might adopt a strategy of emphasis on reliability. we can either identify specific targets we wish to meet in terms of increased sales or specific targets we want to attain in terms of communicating with the target audience for the program. we caution promotion managers to avoid an approach that is too rigid and quells the creative process. strategy can refer to an overall game plan or orientation to the promotion program. However. Hence. Strategy to be employed to communicate with the target audience Just as in planning. Clear objectives about what the program aims to accomplish Setting objectives for promotion programs is a critical part of achieving success. Objectives for promotion programs can be either sales-oriented objectives or communicationoriented objectives. the word strategy is used in several different ways in promotion management. The Promotion Mix . This leaves no doubt regarding the word s meaning. On the other hand. Each of these measures can be used to assess how effective promotional efforts have been in attaining their objectives. in practice. We recommend that when the reader uses the word strategy. For example. while we strongly recommend formulating objectives that will guide the promotion program. Thus. an organization might adopt a direct mail strategy if it finds that direct mail would be the best way to reach its customers.

This practice is call integrated promotion management or integrated marketing communications. Colorado. Marie. after earning a college degree with a major in marketing.Traditionally. The promotion mix includes the following components: a) b) Advertising paying for space in a medium such as a newspaper or trade journal Personal Selling a face to face contact with a customer c) Sales Promotion any program that provides additional incentive for the customer to make a purchase d) Publicity obtaining space in a medium such as a newspaper in which we do not have to pay for the space based on the newsworthiness. Marie accepted . there are four steps to creating successful promotion programs: 1) 2) 3) 4) a definition of the target audience a description of the benefits to be delivered to that target audience clear objectives about what the program aims to accomplish. whereas. For organizations marketing convenience goods in consumer markets. When creating a promotion program we attempt to meld the four elements together in a cogent way so that each element supports the other and provides the target audience with a consistent message over time. Creating Successful Promotion Programs As dicussed above. Marie s Gift Shop is a small store in downtown Manitou Springs. Marie s parents opened the shop and named it for their newborn daughter in 1968 and the shop has operated continuously since then. advertising usually accounts for the largest proportion of the promotion mix. was asked by her parents to manage the gift shop so that her parents could retire. personal selling traditionally comprises the largest expenditure for organizational markets. or other characteristic of the article printed. we employ a promotion mix to effectively budget and distribute funds for promotion. a strategy to be employed to communicate with that target audience For example.

She commissioned a small marketing research study with her former university to explore her customer base. the three primary benefits customers were seeking were determined to be: a. experience personalized service from a familiar source support local merchants like the Ruohonen family obtain a unique gift After a meeting with a local marketing communications firm. b. weddings. most customers were already familiar with Marie s Gift Shop before buying from the shop. Another of the questions in Marie s study was Why do you make purchases from Marie s Gift Shop? One of the responses to this question on the survey was I am familiar with the Ruohonen family. Marie also realized that she should begin to keep a Customer Information System that would enable her to communicate regularly with her present customer. and Christmas. c. Thus. We will discuss this promotion program in more detail in a later chapter. adoption of a promotion strategy should not usually be seen as short-term. The study also indicated that most of the customers purchased gifts for immediate family and friends for traditional gift-giving occasions including birthdays. Over sixty percent responded affirmatively to this question indicating that one of their main buying motives was to support local businesses and that the customer enjoyed visiting with members of the Ruohonen family. after the marketing research study. Marie realized any funds spent for promotion must yield results in the form of increased sales. Marie believed that most her customers were from the local Manitou Springs area although a significant proportion of customers in the summer were tourists. Marie s decided to adopt this approach as a long-term strategy and committed to this strategy for a three year period. Having worked in the shop part-time for many years. The first step for Marie was to determine who the target audience for any promotion would be. Therefore. thus. Marie defined her target audience as Present customers with a ZIP code in the Manitou Springs city limits and ZIP codes contiguous to the Manitou Springs ZIP codes. Two of the research questions for this study were (1) Who are our present customers and (2) why do they buy from us? The marketing research study found the answers to these questions were that over seventy percent of the current customers were from the Manitou Springs area and had been customers of Marie s Gift Shop for over two years. . these benefits were used as a guide for creating a promotion strategy for Marie s Gift Shop.this challenge although she had two small children and was a single mother. Thus.

S. the initial outlay for an advertising campaign may be the most expensive option for promotion. However. advertising . If you do an internet search on the word. usually audiences are measured by using a figure known at CPM or cost per thousand (the M denotes use of the Roman numeral designation for one thousand. Can you identify how cool behavior and uncool behavior have changed in the last few decades? Also. advertising may possibly provide the lowest cost per contact.com/TVL.) See the appendix to this chapter: An easy guide to audience measurement. advertising is sometimes very important to us as individuals. This example demonstrates how fundamentally unimportant most advertising is to the average person. For example. It is easy to feel sympathy for someone who is only twenty-one years old but dying of cancer. note how the motion .adage. Some researchers estimate that by the age of eighteen the average person in the U. non-personal messages.Overview of Advertising As indicated above.nickatnight.com/ and also check out a history of advertising at (http://www. However. most of us consider ourselves experts in advertising because we have seen so many ads. while continuing to advertise a product proven hazardous the health of its users. some ads give us cues about what is cool and what is not cool in everyday behaviors. Why? First.S. However. That is. Advertising is the easiest but absolutely. Empathy is simply being able to understand another person s feelings are reactions to events in his or her environment.tvland. you might want to access Advertising Age Magazine online at http://www. thus easily avoiding the law.com/news_and_features/special_reports/) to get some perspective on how TV advertising has changed and developed over the last several decades. For example. we often use advertising as a way to identify right and wrong behaviors: both fundamental and minor behaviors in society. one must understand and develop the attribute of empathy.jhtml) to see commercials that for the most part are over thirty years old. more expensive alternative for marketing communications. usually placed in a mass medium. However. You might want to access http://www.com/ and click on the index and go to the retromercials section found in Tvland (http://www. For example. it is much more challenging to understand how that person must feel. advertising can be defined as communicating with target audiences through paid. you will find many different references and categories presented there.adage. The tobacco industry continues to advertise heavily through alternative means that avoid regulations of the Federal Trade Commission (FTC). What are the implications of this staggering statistic? First. to be truly expert. was viewed well over one million advertisements and that figure is probably very low if we consider all commercial messages to which we are exposed in the U.

Review the following article found at: http://www. Mr.productivity. used historically with many consumer products is called churning and is adopted by sales driven firms. almost any career in personal selling is going have many disappointments if one defines a customer not saying yes instantly as a disappointment. as competition forces organizations to be more customer-oriented. due in some cases to the efforts of new car manufacturers. ( review: http://www. However. In many organizational markets. organizations follow a process from the time preceding customer contact to the time following the sale. it only remains for the marketer to explain how this solution will provide the benefits sought. New car manufacturers are recognizing that their long-term success depends on building and nurturing a . the remaining firms that are solely sales-driven will eventually disappear from the economic landscape.net/Company Profile. Traditionally in personal selling. has said: (true) . including some follow-up activity. However. low paid career full of disappointments and lack of personal freedom. the reader might want to review the website of a company that has as its core business the placement of products in various media vehicles. are sales driven and not market driven.htm Overview of Personal Selling Personal selling is the worst nightmare most of my marketing students have about a career in marketing.htm Also. New and used car sales are examples of product categories that used the churning method for decades. Why? I think they see personal selling as a low status. this practice is becoming less popular. a leading writer in marketing and management. Why does this sound so unrealistic to many of us? Because. we rarely experience a solution that is so well researched or a seller who values the customer this much. a career in personal selling can yield a most rewarding professional life if a person can develop a strong self-esteem and truly believes in what s/he is selling. As mentioned earlier in the text. most companies in the U.ftc. it is no surprise that many consumers are dissatisfied with the product and services they buy. this follow-up stage is called post-sales support and is one of the most effective methods for keeping customers. In one way the students are correct.gov/os/comments/tobaccocomments2/siegelmichaelmdmph.picture industry continues to accept money to feature its products in films. As Peter Drucker. although. Drucker refers to the fact that if a marketer does his or her job and understands and delivers a product or service solution that the customer is truly seeking. This approach. Therefore.S. Investing in retaining current customers is much more cost-efficient than ignoring current customers in search of new customers. so that their primary concern is not customer satisfaction but selling the customer what the company has available to sell. as consumers. and the customer is then willing and eager to buy. marketing involves almost no selling.

Check out the website for Saturn automobiles (http://www.com/index. it remains to contact these prospects and consult with them about our chosen solution to their product needs in terms of the benefits they are seeking which we aspire to provide. As we gather more information about what customers we can better satisfy. For more information on personal selling and sales management consult the two topics at the following website: . a response to feedback from customers in a restaurant that this place it too smoky.saturnbp. we must continually adjust our product or service offering to better provide those benefits. or organization that is likely to be seeking the benefits we seek to provide and has the ability to obtain those benefits by entering into a relationship with our organization. For example. organizations marketing such goods must always aspire to solicit this kind of feedback and respond to it as quickly as possible. the process begins with many different possible customers. the number of prospects decreases as we proceed through the sales process. Today this commitment is still rare. The delivery system of the organization must strive to maintain flexibility throughout the personal selling process and be capable of adjusting the product solution to meet needs of customers as the organization gains better resolution about what those needs are exactly. Most traditional models of the selling process have the process culminate in a presentation and then proceed to a feedback stage that occurs after a presentation and purchase. especially high technology products. Thus. That is. While this response is not as easy with tangible products. Thus. we continually use this information as feedback to more precisely align our solution with the benefits sought by our target market. family. but in the future it will be essential. that is.jhtml) to observe the efforts put forth by this company to be truly customer-oriented. check out the My Saturn section on the Saturn website. However. as we learn more about exactly what benefits our customers are seeking. and narrows over time to more specific customers who are first identified as qualified prospects. this process is made much easier because the customer profile created early on in product or service development has already given clear definition to our target customers. Many firms view the personal selling process as a sales funnel. A qualified prospect can be defined as an individual. while the sales funnel begins with a profile of our target customer and the benefits that s/he wants. locating and identifying qualified prospects becomes a primary function of the marketing or sales effort. While this approach to modeling the process if helpful. For example. we must remember that if an organization is truly marketing oriented. After identifying qualified prospects. must be forthcoming very quickly if the restaurant is to be successful. This requires on-going customer research and an honest commitment to customers in all production and services systems that are responsible for delivering customer satisfaction. it denies the required dynamic nature of customer relationships and often is too inflexible to be of maximum use.diverse customer base.

Obtain a copy of a local newspaper. There are also public service announcements that often attain similar objectives. see http://search.org. if one reviews the local Sunday paper. only a very small percentage of these coupons are ever even seen let alone exchanged by consumers. special offers. it is an industry sponsored web presence.gazette.isp. companies often spend large amounts of money on trade shows which are regional. sales promotion ends up being a large. and see if you can find an article included in the newspaper that you believe was published without a charge to the advertiser based on its interest to readers.key3media.com/mri/. customer sweepstakes. For example. The challenge with publicity is preparing an article that is newsworthy and of interest to the readers of a publication. see http://www. Colorado (http://www.com/search?p=international+trade+shows&n=25 ). This article is usually published without a charge to the manufacturer of the car because the editors of the Gazette believe that readers will find the article . You might also want to check out this website that operates in the United Kingdom (http://www. and international expositions that usually share a common theme such as an industry (for example.publicity. In organizational markets. a new feature is placed because it ostensibly will be of interest to the readers of the publication.Overview of Sales Promotion Because we define sales promotion as any added incentive designed to inform. national. and many other promotional activities. Check out this website for an example of a firm that does publicity exclusively: http://www.html). catch-all category including coupons. one will find almost countless coupons included by advertisers to encourage customers to buy. These activities are used both in consumer markets and organizational markets although the methods often differ. That is.com/comdex/) or some other theme (for example. For example. the Gazette in Colorado Springs. persuade or remind a certain portion of the target market. However.com /) publishes an article on a new car every week. Overview of Publicity Publicity differs from advertising in that the advertiser does not pay for the space in the medium or publication with publicity.yahoo.uk/welcome.

competitors. For example. an integrated marketing communications (MARCOM) program can be established and implemented. there is usually a temptation to ignore this requirement and attempt to be all things to all people. All components of the promotion mix then have some underlying concept to reinforce. employees. Marie wanted to make sure that all communications with customers. A Note on Positioning As we have indicated. This is not to say that there will not be creativity in individual marketing communications efforts. all communications should be centrally produced and managed. When asked who their target market would be the students responded Well. Several students in the group had managed to save some funds through various means. The same may be true of articles containing restaurant and movie reviews. We will describe Marie s chosen MARCOM program at length later on. Marie also realized that an emphasis on personal service. suppliers. and the consistency of local ownership would be critical to maintain her chosen organizational image. in the example of Marie s Gift Shop described above. only that these efforts will have agreed upon guidelines so that all of the different groups with which the organization communicates are given a consistent image of the organization. Formulating an Integrated Marketing Communications Plan The primary challenge in promotion management is the integration of all activities directed at communicating with one s various audiences so that the organization presents a consistent understandable image to those groups. The students agreed that they wanted to open a restaurant together. The main requirement of obtaining publicity in most media is that the article placed should be newsworthy and credible and of special interest to viewers or readers. We say audiences because at any given time. For example. the organization may be communicating with its customers. For example. Two students had recently left military service and two others had received a departure bonus from a high technology firm. . recently a group of MBA students at a university decided to enter into a business venture together. Thus. the availability of unique products. and the general public in several different contexts. and suppliers used the same logo and letterhead.newsworthy and of special interest. employees. It is imperative that the organization create and reinforce a clear image in the marketplace. After different parts of the organization agree upon what image the organization seeks to attain. it is essential to know who the target customer is and what benefits s/he is seeking.

Go to a grocery store and interview the manager there. Obviously. the needs of those who are searching for a fast lunch will differ significantly from those who aspire to relax and talk over their lunch. Describe what your reaction was when you learned of the amount. If everyone is your customer. note the following website in your essay (http://www.naa. For example. Ask the manager about his/her promotion mix and what components are in it and how they are managed.nfsa. and one that reminds. Also. Visit the Nick at Night website described in your chapter and view two retromercials on that site. what. where. . then no one is your customer. and how) of the whole concept of the business. (http://www. It would be difficult to position a restaurant to simultaneously meet all of these needs well. Go to the following website and obtain an estimate on how much was spent on classified ads in newspapers between 1995 and 2000. Use the keyword Professional selling to search the internet. Obtain three magazine ads. this definition of a target market is too broad and provides insufficient guidance about the Five W s and H (who.org/marketscope/databank/QuarterlyClassified-new.com/). Write a one-page essay on your findings. The students needed to more clearly define the concept of the restaurant and precisely who they were expecting to serve in the business. one that primarily is designed to inform. Write a one-page essay describing the results of your interview. why. when. Chapter Nine Exercises Visit a Saturn dealership and another new car dealership and write a one-page summary of your experiences paying particular attention to sales-driven versus customer-driven behavior on the part of the salesperson or salespersons you met.htm) The Federal Trade Commission s 1999 report on advertising for tobacco products is available on the web (Federal Trade Commission Cigarette Report for 1999 ). Write a one-page essay on how you believe advertising has changed since your chosen retromercial aired. Agree or disagree with the following statement and explain your answer using materials found in Chapter Ten. one that tries to persuade. Obtain a magazine advertisement for which you think the target market is clearly defined and comment on what you believe are the characteristics of that target market.everyone who eats. Read this report and write a one-page essay on your personal reactions.

In the preceding example. the frequency or average number of exposures for the target market will be five. Desire. Three effective exposures usually requires much greater than three total exposures. your campaign reached 10 million prospects or half the target market. The campaign will be targeted to this market throughout the holiday season of 2000. half of the people (10 million people) in this target market will be exposed to the ad during the three-month life of the campaign. GRP s or gross rating points-the GRP level is a rule of thumb used by media personnel to assess the relative strength of the campaign. During the company s initial advertising campaign.) Concerning reach. and Action). some people subscribe to the three-hit theory. Why? 2. In our example. Interest. the GRP s would be 250. The market for this product is estimated to be around 20 million people who are particularly concerned about the presence of germs on their hands during food preparation. 1. Suppose that media research indicates that the 5 million people in the target market will be exposed to this ad six times while 5 million people will be exposed four times during the campaign. (Attention. Frequency the average number of exposures to advertisements received by all prospects who were reached during the given time period.Chapter Ten Glossary MK 300 Appendix Chapter Ten An easy guide to audience measurement Overview of basic terms used in audience measurement Radio and TV audience measurement Situation description: A consumer packaged goods company runs a campaign on television for a new soap product Germ Buster Hand SoapÒ. That is. it takes three effective exposures to move the prospect through the hierarchy of effects. The product is to be introduced through a television ad campaign beginning October 2000 and running through December 2000. Reach the percentage of target prospects exposed to one or more ads for a brand during some stated period. fifty percent of the people in the target market will be exposed to the ad at least one or more times. Thus. Thus the Reach is 50 (that is 50% of the target market will see the ad. GRP s yield a comparison of different options for reach and frequency through examining the relative exposure . That is.

schedule of different campaign options (their relative bang for the buck. you are the marketer with the MASTER OF BUSINESS ADMINISTRATION DEGREE! Measures of television audiences and their relationships to each other Coverage (number of TV households in signal range of TV station or network) i i i i i i . Can t do it all! For example. or is it more important for prospects to be exposed to our message several times. ) While this measure has obvious shortcomings (that is. I think not. After all. That is. need to decide which is more important for our situation. except to say the more is better. reach or frequency. For example. the measure is helpful for comparing competing media schedules. That is. is it more important for a larger proportion of the target market to be exposed at least once. Compare this to emphasizing frequency over reach so that fewer people will receive more exposures. This debate finds little agreement. That is. However. does that mean have you necessarily increased the communication and learning that has taken place with the target market? However. Of course. we can run ten second spots or sixty second spots and end up with the same GRP s (an exposure is an exposure) but do they have the same selling power. There is the growing question of effectiveness. are the benefits the product delivers relatively easy to understand? If so. In our example above. you need to analyze and think about what is needed to convey your message. is an exposure more powerful if it occurs previous to the food preparation period versus after the food preparation period) it has been applied traditionally in TV and radio advertising. while your GRP s have increased with ten second spots. if you emphasize reach over frequency that means that more people will receive fewer exposures. if product benefits are difficult to convey would your answer be different? J Think about different schedules and how they impact your communication potential. Remember that you are spreading the amount of dollars over different communication objectives. which would you prefer to emphasize in a campaign: reach or frequency? On the other hand. ad agencies and media representatives are glad to have you spend more money always. Funds are always limited and you will asked to make decisions of this sort that trade off resources and people in your organization expect to be able to trust your answers.

the percentage of coverage with TV sets turned on is one out of twenty or five percent or . time slot. the program reached 60. .05 X . Kansas.03 or said another way.03 Thus the percentage of total coverage tuned to this particular program was .05 Audience Share during that time slot the percentage of homes using TV that is tuned to this cable channel is sixty percent Rating the rating for this infomercial would be .m.60 = .i i t t HUT (homes using TV) Percentage of coverage with sets turned on station. Audience Share (percentage of HUT tuned to a particular program. or network Rating Percentage of coverage tuned to a particular program. station or network) HUT X Audience share = Rating Brief example A recent infomercial for Suzanne Somers Depression Cure aired on the local cable TV station in Out There. had the following viewership: Coverage this local cable channel can provide a coverage of 2 million households HUT for the 12 midnight to 1 a.000 households or three percent of the total coverage.

Simmons Study of Media and Markets (http://www. creativity is used to describe how individuals or teams can identify and implement new product ideas. For example. Newspaper and magazine audience measurement The Basic CPM formula is used to compare different media options. for example. There are many other resources for assessing markets and audience measurement that are easily accessed on the internet and you might want to see what you can find in your own search.smart-mktg. http://acnielsen.html).com/ and Arbritron Ratings. or new product development.Interesting websites to review: A. We will define creativity as identifying and describing new ideas that . Also.arbitron. Most of these mentions of creativity would be found in one of three areas: advertising. s/he would find many references to creativity. you might try American Demographics magazine to explore more information about audience characteristics at http://www. If we used the basic CPM formula (cost of one unit of time)/number of households reached). Nielsen and Company. http://www. creativity is usually applied in a context of creative selling with no particular specific reference to the literature of creativity or what creativity really means. In advertising. Susan and Bryan will be responsible for doing the creative.demographics. we compare the cost of reaching one thousand viewers across different stations.C. The examples above all miss the primary role of creativity in marketing. people use the term creative as a noun to describe the portion of an advertisement that comprises the artwork that translates the appeal or basic selling proposition of the ad and how the appeal will be conveyed to the target market. In new product development. personal selling.com/home/home.com/. we Chapter Eleven Creativity and Marketing If one explored the research in Marketing. and also. For example. In personal selling.htm. That is.com/products/SMRBDOC.

The objectives of newness and imaginatively gifted recombination are meaningless if they do not provide value-added results. For example. Included are those situations in which the problem or opportunity as initially posed was vague and not well defined. to be truly creative. A primary reason is that certain preconditions must be met and certain organizational components marshaled to help individuals and teams become creative. three themes emerge that seem to be beneficial to the study of marketing and creativity. The Couger Center for the Study of Creativity has applied the 4-Ps model of creativity in many different contexts and found it to be a good guide for understanding creativity. The 4-Ps model of creativity provides the basis for the remainder of this chapter and addresses the application of structure and techniques for facilitating creativity in marketing. to be creative. . but creativity techniques may help identify new sources or new ways to consult those sources once they are identified.are novel and useful. This group of researchers concludes that a creative solution does not necessarily require new components but can simply integrate existing knowledge in a more valuable way. an innovation must demonstrate radical newness. A third group of definitions believes that. This definition has implications for upstream marketing activities including target customer needs assessment and competitive benchmarking studies. We will later discuss conditions for creative environments that can enable such imaginatively gifted recombination. part of the task is to formulate the problem itself. Conditions of Creativity Individuals and teams that are otherwise regarded as equally competent do not perform equally. This has implications for marketing and a firm s ability to be more market-oriented. Thus. The first group of definitions suggests that. we may already know that tracking customers requires a continuous data collection effort. From these various definitions. This is especially applicable in an era where the marketing information management function is participating fundamentally in pursuing a distinctive competitive advantage for the organization. Thus. A second group of definitions supposes creativity is the imaginatively gifted recombination of known elements into something new . marketing practice. individual and group creativity plays a critical role in all phases of Definitions of Creativity An examination of the literature of other disciplines reveals dozens of definitions of creativity. a solution must have value.

The Application of Creativity: The 4-P s Model

The 4-Ps model provides a good structure for understanding creativity and its application in marketing. The model represents creativity as a dynamic phenomenon comprised of four highly interactive components: person, process, product, and press (work climate). The model s simplicity allows for the individual measurement and assessment of each component as well as evaluation of the interaction of the components. Another strength of the model is that it can be applied to a specific functional organization, such as a marketing department or marketing research department, as well as the organization as a whole. In the remainder of this chapter, each of the four Ps is described and discussed in relation to marketing management and marketing research practice.

The First P: The Creative Person Numerous fallacies exist regarding creativity in people. Few of us perceive ourselves to be creative, possibly because many highly publicized research efforts have been focused on the study of creativity in geniuses and highly accomplished professionals. Most people are inclined to believe that creativity is inherited and that we either possess it or we don t. Research demonstrates that creativity is present in everyone and is normally distributed. Nevertheless, most people utilize less and less of their native creative ability as they mature. Nationwide studies of American school children reveal progressively lower scores on creativity tests as they move through the school system, with a precipitous 4th grade slump . Marketing management can stimulate creativity in employees by reinforcing the fact that all individuals are innately creative. Through encouraging the use of proven creativity techniques, marketing managers can help employees restore the natural curiosity and originality that they exhibited as preschoolers. Management can also provide motivation for employees to become more creative. It is important to consider both intrinsic and extrinsic motivation. Intrinsic motivation comes from the anticipated satisfaction of generating a creative idea and putting it into effect. Marketing management can provide extrinsic motivation by rewards, such as recognition and financial incentives, and can also facilitate a creative climate (discussed later) in which employees more easily obtain the intrinsic satisfaction of creatively accomplishing a task or project.

The Second P: The Creative Process Considerable research has focused almost exclusively on the creative process through which people can enhance their creative abilities and creative results. Five major studies of creativity overwhelmingly show significant positive results when creative abilities are deliberately nurtured. There are many creative problem-solving techniques that have been shown to be helpful in marketing. While the space devoted to creativity in this e-book is limited, we provide description and directions for using two of these CPS techniques. The Five W s and H technique and the Wishful Thinking technique are described in an appendix to this chapter.

The Third P: The Created Product An analysis of creativity can also start with the end product, by identifying the characteristics necessary for objects to be classified as creative. Others believe that if people are informed about their native creativity capabilities, are provided processes to facilitate creativity, and are supported through a positive climate for creativity, it is logical to assume that creative products and services will result. Nevertheless, it is helpful for employees to have ways to measure their creativity results. However, a framework should be developed for measurement of creativity in marketing activities. Marketing management could then translate in specific terms how creativity would be recognized, judged and rewarded. We discuss measuring the creative content of ideas in the marketing context below.

The Fourth P: Press (the Environment for Creative Work) Press is a term from the field of education that refers to the relationship between human beings and their environment. The importance of the work environment for encouraging/discouraging creativity is well supported in creativity research. Optimum results do not occur unless an organization has a positive climate for creativity. There has been considerable research on the ways that work environments influence creativity. The climate for creativity comprises those factors that stimulate or retard creative behavior. Studies indicate that organization s can create a set of norms that encourage creative thinking. These norms would include universal tolerance for new ideas, and universal organizational intolerance of cynicism and sarcasm. People should be rewarded for identifying what is good about a new idea before they are allowed to be critical of the new idea. Organizations that systematically positively recognize those who find faults in new ideas will find their pool of new ideas drying up quickly since there is only negative reward for offering one s new ideas to the organization. Burnside, in researched published in 1988, found five characteristics of a work environment that encourages creative thinking. Those five dimensions are as follows: 1.

Goal clarity - a clearly understood objective for the creative work Resources - the necessary financial and non-financial support

Freedom - the latitude to explore whatever directions of inquiry seem appropriate

Encouragement - genuine and expressed support from management and co-workers

**Congruity - the match between what management says and what management does

**Suspended judgment maintaining an open marketplace for ideas in which the potential strengths of new ideas are always identified before their potential weaknesses

(**we have added these two last dimensions to the list based on our own research experience)

In marketing, attention to these six dimensions will help ensure a healthy environment for creativity that will continue the production of many fresh ideas.

Chapter Eleven Exercises

Has your definition of creativity changed as a result of reading this chapter? Explain. Form a small group and address a question assigned to you using one of the CPS techniques described below. Appoint a member of the group to keep notes of the events when your group starts problem solving. Describe a moment in your life in which you believe you were most creative, including a description of the 4 P s of creativity in your life at the time. Why are those who constantly kill creative ideas by inappropriate joking or other behaviors so dangerous to the creative effort in an organization? Explain. Use the six dimensions of a healthy creative climate to describe how you would establish an ideal climate for creativity at your workplace. How much change would have to take place? Explain. Review the material below on Personal Creativity Zones (PCZ s) and describe your own PCZ.

Appendix I: Description of Two CPS techniques: Steps in using the Five W s and H Technique

a. b. c.

identify the who, what, when, where, why, and how of the situation under consideration draw up a list of responses to each dimension use this list as a way to identify creative responses to the problem or opportunity

note: this technique is more analytical in nature because it provides a good checklist to make sure most areas are covered. While the technique is valuable to outline an area that needs to be explored, another more intuitive technique is often helpful to use to generate new ideas after this technique is applied initially

Steps in using the Wishful Thinking Technique a. suspend reality (a challenge in itself!)

b. identify the perfect solution that is, what would be the best solution to a situation if anything were possible. c. now, work back from the perfect solution introducing reality a little at a time, being careful to challenge each part of an idea considered impossible

Note: this technique is more intuitive in nature because it provides a good tool to challenge traditional knowledge that may be no longer applicable or relevant, the technique is valuable because it starts with solutions rather than problems. Plus, this technique is FUN!J

Appendix II: How to identify your Personal Creativity Zone (PCZ) Finding your Personal Creativity Zone Frequently Asked Questions (or FAQ S)

FAQ 1. What is a personal creativity zone (PCZ)? FAQ 2. How can I identify my PCZ? FAQ 3. Does one PCZ work for all of the problems and opportunities I want to analyze and find solutions/answers to? FAQ 4. Will my PCZ be identical to the PCZ s of my friends and coworkers? FAQ 5. Will my PCZ include others?

Answers to FAQ S about Personal Creativity Zones

1. Your personal creativity zone includes all conditions, environmental and personal, that help you reach your maximum creative potential 2. While sometimes there are similarities, you must find your own PCZ through analysis and reflection. For example, identify the most creative time of your life, or a situation where you were most creative, and write down the conditions that surrounded that time of optimal personal creativity. 3. It is unlikely that you will have the same PCZ for all decisions you face. For example, deciding whether to marry a certain person may call for a different PCZ than identifying what courses will be most likely to lead you to the right college degree and career. 4. Probably not. At any rate, you must do the work to identify a personal creativity zone of your own. It is likely that some of the characteristics of your PCZ will match the PCZ of others. 5. Research in creativity has shown that very often the optimal number of members on a creative team is the dyad (two). So constantly search for the person who stimulates your creativity. 6. Remember, creativity may be work but it is also supposed to be fun, so look forward to enjoying your approach to being creative.

Chapter Twelve What is the international market and why is it important?

As a consumer you regularly buy products manufactured in other countries. The U.S. usually has a negative balance of trade, meaning that as a country we import more products than we export (for example, see the following website and review our annual trade deficits for the last ten years): (http://www.kiplingerforecasts.com/kbftables/usecon/trade/trade_balance_annual.html).

What is the impact of this trade deficit? Experts disagree as to whether this deficit creates real problems for the U.S. economy or not. Critics argue that buying so many imported goods hurts the market for U.S. jobs, while others believe that this open competition forces U.S. businesses to learn how to compete effectively in global markets. A full discussion of this issue is beyond the material in

this course. However, you should have a clear understanding and appreciation for the arguments expressed surrounding this issue. If you do your own search on the keywords U.S. balance of trade and trade deficits you will find many different viewpoints on this topic.

Our point is that, as a consumer you buy products manufactured in other countries almost daily. You are, no doubt, familiar with the fact that Nestles is a foreign company and that they recently merged with a U.S. company, Purina. (see http://www.nestle.com/all_about/index.html for an article outlining the merger) and that many products you buy are manufactured in China (see http://www.census.gov/foreign-trade/balance/c5700.html for recent government data on the U.S. trade balance with China).

However, you may not be familiar with Fiskars, based in Finland (http://www.fiskars.com/) or that your Doc Marten s were probably under a brand name owned by a company based in U.K. (http://www.drmartens.com/flash/).

International marketing is the rule today, rather than the exception. Since NAFTA (North American Free Trade Agreement) was instituted, the U.S., Mexico, and Canada are moving towards an open market without trade barriers (search with keyword NAFTA to find further information), and the European Union (http://userpage.chemie.fu-berlin.de/adressen/eu.html) has tried to reach this goal for several years.

Thus any student of marketing should have some understanding of global trade agreements, particularly, NAFTA, the European Union, and the General Agreement on Taxes and Tariffs, also known as GATT (http://gatt.org/). As global competition for the production and marketing of goods and services intensifies, these trade agreements will become more controversial.

Choosing a strategy for international marketing

If an organization determines that it has the interest and capability to market its products internationally, the organization must then choose among several options. Traditionally, the following four options have been identified:

Export/import marketing intermediary hiring an agent to represent your organization Trading company enrolling for the services of a specialized company that will represent your organization in international markets

Joint Venture Because of the historical abuses of imperialism (or situations wherein industrialized countries exploited smaller. like many large organizations uses several different approaches to market its products in different regions of the world. You will note the Xerox. Export/import Marketing intermediary The export/import marketing intermediary is usually an independent business that has a special knowledge of the export and import business. Author s Note .gov/) for free information on international trade.com/ to find more information on trading companies and how they do business. Such organizations often have knowledge relevant to doing business in a certain part of the world. Also.yahoo.doc. The internet has changed the landscape of world trade.ita. particularly where small businesses are concerned.cocacola. For example. see (http://www. check out the Coca-Cola website to see how that company manages its international activities (http://www. many of these categories have become obsolete because different kinds of organizations are filling the vacuum that previously existed in knowledge and information about foreign markets.com/). For an example of how one multinational company manages its international marketing efforts see the website of Xerox Corporation at http://biz. today with the worldwide web s communication capabilities. many countries require that a foreign organization have at least fifty-percent of its ownership held by citizens of its own country.html. Trading Companies Check out the internet site http://www.com/p/x/xrx.alibaba. less developed countries).Joint venture partnering with a foreign company that has its home office in the country of interest Wholly owned subsidiary going to the expense and risk of opening your own offices in the foreign country of interest However.

com Principles of marketing: An applied. and promotion? Chapter Two What is Marketing Management and what do product managers and marketing managers do? Chapter Three How do we identify and understand markets? Chapter Four . lexishiggins@yahoo. I have tried to gather and record the areas of marketing that meet two goals. recommendations you may have particularly as they apply to your ability to learn and apply the material presented.This Principles of Marketing e-text is my first effort at writing a textbook. Therefore. collaborative learning approach Table of Contents Chapter One What is marketing and how does it differ from sales. In choosing material to cover. I have included the information that is most likely to be used by a typical marketing student. I have attempted to focus on material that will be most helpful to those who will not work primarily in the marketing area. I will be trying to continuously change this book to meet the needs of its users. I hope you enjoy your experience with this e-book. Lexis F. As with any project. that are less likely to change fundamentally in the foreseeable future.Why do we study buying behavior in Marketing and what have we learned? Chapter Five How companies manage marketing research Chapter Six How do companies decide what products and services to market? Chapter Seven Specific Challenges of Marketing High Technology . Higgins. I have tried to consider the fact that most people who learn this material do not have their primary professional responsibility in marketing. I have written about principles of marketing that are true principles. so please let me know of any suggestions. If you learn this material and are not a marketing person at least it will help you work more effectively with those who are in marketing and improve your ability to be a better consumer. Ph. First. advertising.D. that is. Second.

How would you define it? Think about what you believe marketing is and write your definition down now: Marketing is: _________________________________________________ _____________________________________________________________ .Chapter Eight How is the pricing decision made? Chapter Nine How do producers get their products and services to their target customers? Chapter Ten What are the options for promoting products and services? Chapter Eleven Creativity and Marketing Chapter Twelve What is the international market and why is it important? Chapter One What is marketing and how does it differ from sales. Save this definition to compare it to other definitions of marketing we cover later on. assume a good friend of yours who has invented a new way for people to wash their car. the word marketing means very different things to different people in different industries. In situation one. It won t help the individual marketer at all to consider how the market will react to the product. think about how much different the above situation is from another case in which marketing must be done. a coal producer in Kentucky just needs to understand what price the local buyer will be paying for the product and s/he can then plan to market (or just sell) the coal produced to the local buyer. She has asked you to market her product for her. Let s say that you are a product-marketing engineer at Agilent Technologies and your Product Marketing Manager has informed you that you will be responsible for marketing a new product that has been conceptualized by engineers in the Research and Development (R&D) Department. the product has already been conceptualized and produced. Finally. In all three of these situations. the product manager at Agilent must first figure out what the new product will be . the coal miner must just extract the coal from the ground and deliver it to a local coal broker for sale. and promotion? Marketing is one of the most misunderstood and confusing terms used in business. Why is the term marketing surrounded by confusion? First. advertising. In situation two. Second. For example.

it just remains for you to figure out who the people are who wash their own car and how to reach them. How do the definitions differ from yours? How are they similar? . But is that how marketing practitioners and people who teach marketing define it? Let s review some alternate definitions of marketing from the business literature. pricing. promotion. goods. your friend has already invented the product. In 1948. place (distribution). the marketer is faced with coming up with a way to sell what has already been produced. in situation three. and incident to. Finally. Marketing is how an organization or individual sells its product or service. promotion. In 1985. is how most people would define marketing. compare the above discussion to YOUR definition of marketing.good for and who might want to buy it. The organization is comprised of and primarily impacted by people who teach marketing at the college level. and services to create exchanges that satisfy individual and organizational objectives. unfortunately. The American Marketing Association (AMA) is the leading organization in the U. price. In all three situations. that is. the AMA definition was changed to the process of planning and executing the conception. representing the academic side of marketing. the AMA defined marketing as follows: The performance of business activities directed toward. (AMA 1985) Compare these two definitions: How are they similar and how do they differ? Why do you think the AMA made the change in the definition of marketing? Now. 1948). (AMA. Thus in this definition.S. and distribution of ideas. This definition of marketing. marketing is relegated to finding and exploiting a market of buyers for the product or service. Note that the definition above focuses on the DISTRIBUTION aspect of marketing and doesn t really include the Four P s : Product. the flow of goods and services from producer to consumer or user. The American Marketing Association s definition.

. I am like those people who you described at first. If you must pick up the process after steps A. type in the key word marketing into your favorite search engine on the internet and see what you find. this won t work for me. select certain segments of the market that are of the most interest to you and your organization C. Wait. we understand that many sellers don t have the option or input to create a new product or service. and C have already been performed. B.Speaking of confusion. this e-book is designed for people who want to do marketing the right way. Solicit feedback from the customer about how your product or service could be improved to meet the customers needs even better This process is applicable to most situations encountered by those wanting to market a product or service. we will approach the definition of marketing by first learning about the seven steps in the process of marketing. However. Communicate the concept of the product or service to the targeted customer in a way that makes sense to the customer F. it is important that any student of marketing understand what steps must be taken to be successful in a marketing effort. The Seven Steps in the Marketing Process It is natural that people in different situations define marketing differently. I already HAVE a product to sell. there are many readers who will say. The marketing process can be described in the following seven steps: A. Based on relative size and needs of the market. The process of marketing can be divided into upstream and downstream activities. steps A through D are all upstream activities that should be performed before a product actually exists. Deliver the product or service to the targeted customer in a way that will be convenient to the customer G. Surely. D. and you should check to see if they have been done correctly. However. That is. While this process is not always followed. realize that some steps have already been done. I just need to find somebody to BUY IT! As marketers. Understand the market wants/needs of interest B. Thoroughly describe these segments based on their individual needs Create a product or service that will meet the specific needs identified E.

That is. highest quality products) and has ignored the first three steps in the marketing process we described above. Upstream and Downstream Marketing Activities in the Marketing Process What marketing activities are performed and how they are performed will have a lot to do with how many choices you have in managing the steps marketing process and the focus of the organization s marketing effort. highest quality products and services? Do you as a consumer always seek out the most sophisticated. highest quality products and services? Write your answer to this question in the following line: . in order to deliver customer satisfaction. there are several different orientations that organizations use to approach doing business or serving their customers. highest quality products and services in the world then it has decided to use a Product or Production Orientation. and G. . do all customers want the most sophisticated. F.. That is. the organization that is truly focused on customer needs must be driven by an active research effort. we will define marketing as: The conceptualization and delivery of customer satisfaction the first part of this definition would be covered in steps A through D in the marketing process above and the final aspect delivery would be represented by steps E.Also note that marketing research plays an integral role in each of these stages. the firm does not specifically state this orientation. For example. Usually. As a consumer. one must do customer research. the organization has decided for itself what customers want (sophisticated. The organization will view the marketing function s responsibilities based on the history of the organization and its orientation to doing business. Definition of marketing we will use in this book Based on the seven-step approach to marketing. if a firm defined its product policy as research leading to creation of the most sophisticated. Of course. thus step G will provide feedback into the continuation of the seven-step marketing process over time. For example.

For example. For-profit organizations should have goals other than profit. this is a demanding task. A longer-term goal that is ultimately tied to profits but immediately is tied to customer satisfaction might be: Be a recognized leader in customer satisfaction in our industry. sell. Not-for-profit organizations have goals non-financial performance such as provide thirty hours of client services per week consistent with our organizational mission. There is an approach to marketing called the Customer as Monarch (or Marketing) Concept and while it has been around under different names for many decades. and fill it profitably and more effectively than the competition. with the latter being as competitive as the former. find a need and fill it . and marketing s primary job in the organization is to sell. when the organization has agreed on a marketing strategy.Another approach or orientation to managing the marketing function can be called Sales (or Promotion) orientation . fifty-percent-off coupons appearing in the Sunday newspaper will not reach the goal of inducing new product trial if the product is not available in stores due to a problem with product distribution and if sale catalogs are printed by a central . In this approach. but in these times. or just by the simple saying which perhaps you have already heard. have it your way a former Burger King slogan. provide satisfying products and services to your target customers Part II Meet organizational goals this is applicable for both for-profit and not-for-profit organizations. In this approach. Yes. sell. The Marketing Concept would rephrase this saying a bit. but also the most critical. marketing is seen as serving the same function as with personal selling and advertising. and be represented by an approach of find a need. Note that this competition includes organizations in both the for-profit sector and the notfor-profit sector. said another way. a for-profit goal being make a fifteen percent return on investment . Part III Integrate marketing activities this part can be the most complex. we exist in an extremely competitive world. it must execute the strategy in an efficient and effective way. It can be described by the slogans we do it all for you. it is still a good guide to managing marketing activities. The Customer as Monarch and the Marketing Concept are related to the Seven Step Marketing Process The marketing concept can be thought of as having four parts as follows: Part I Understand and meet customers needs. steps A through C of the marketing process are largely ignored and marketing resources are instead placed on generating more sales. That is.

Chapter One Exercises: 1. 6. In your analysis.office without coordination with local business outlets. Summarize on a one-page report what you find after you get on the internet and search the keyword marketing. Organize your answer according to the different categories you find in your search. A indicated above.The conceptualization and delivery of customer satisfaction . Like the Seven Step Marketing Process. what would be his/her duties and major responsibilities) in the following orientations: production orientation. Has your definition of marketing changed? If so. Chapter One Glossary Marketing . Part IV Satisfy customers better than the competition. the Marketing Concept serves as a guide for applying organizational resources directed at marketing. 7. market (customer) orientation. how? 3. go step by step to better explain your answer. EVERY ORGANIZATION has competition. 4. Write a job description for a manager of the marketing function (that is. there will be regular inventory understocks or overstocks. sales orientation. 2. If there are not similar product solutions that provide similar benefits available then there will be competing uses for expenditure of the customer s income. go step by step to better explain your answer. explain the difference between the terms marketing and promotion. 5. In a one-paragraph answer. In your analysis. Given what you have learned in Chapter One. Identify an organization that you believe is not fulfilling each step in the marketing concept. explain how you believe the personal selling effort should be related to marketing in a modern organization. Identify an organization that you believe is fulfilling each step in the marketing concept. In a one-page essay. compare the different definitions of marketing discussed including your own definition.

While this terminology has changed over the years. we still consider someone who has the title of manager to be responsible for overseeing the allocation of resources for the organization. This brings up still another consideration. In high technology industries. describing target markets. the marketing director may be responsible for all marketing activities in the firm. In some organizations. writing marketing literature for the firm s products). meeting organizational goals. The use of titles varies across industries and size of organizations. it meant that s/he had responsibility for helping guide the activities of at least some number of employees. the VicePresident of Marketing may perform the same functions. as an individual contributor I might have the responsibility of performing certain work (for example.Upstream marketing activities understanding. Sometimes the product manager s responsibility is defined in terms of the product s/he is overseeing and sometimes the responsibility is defined in terms of a specific technology. but not be responsible for the activities of anyone other than myself. selecting. one high-tech firm might use the title of Product Manager-Digital Systems to describe the job of the person who is responsible for digital versus analog customer solutions. For example. The term Product Manager is often used in high technology industries to assign responsibility to a specific individual or group for the successful supervision of all marketing activities related to a specific product or service. What is marketing management? . We will discuss how different firms organize the marketing function in a later chapter. Chapter Two What is Marketing Management and what do product managers and marketing managers do? The Meaning of the terms Marketing Manager and Marketing Management Traditionally if a person had the title of manager. and creating a product or service to meet the needs of those target markets Downstream marketing activities communicating a product or service concept to the chosen target market and providing customer satisfaction in the process by delivering that product or service Customer as Monarch. and outperforming the competition while integrating all marketing activities. At other firms. the term marketing manager would be used to describe the same thing. or marketing concept a philosophy of doing business in which the organization places utmost importance on delivering customer satisfaction. the word manager is often replaced with Director to indicate that a person has primary responsibility for a certain organizational function. For example. For example.

the word strategy has been used in the military for many decades to indicate a long-term commitment of resources toward accomplishing a certain goal. Planning is the process of examining and understanding the surroundings within which the organization functions. As the reader can see. Thus. strategy will have two meanings. and one below helping to implement objectives. One at the top. and other employees are responsible for implementing those strategies. we will use the term objective to refer to a broad-based design of where the organization would like to be at some point in the future. the four P s may mistakenly be limited to downstream marketing activities only and as Chapter One indicates. Thus. The four P s as you probably already know are: Product. First. social and cultural trends. For example. strategy is a specific action used to implement plans. Thus. In marketing.We will use the following definition of marketing management: Marketing management is the process allocating the resources of the organization toward marketing activities. For example. and second. we will use the following definitions. Second. First. our organization might decide to enroll in a total quality program offered by most large consulting firms. For example. and Place. and goals can very quickly develop into a miasma of terms and confusion. This would include studying and gaining an understanding of such things as: competition. legislation and regulation. there is a two-tiered nature to strategy. Related to the term management is the term strategy. environmental scanning is the process of studying and making sense of all the things that might impact the firm s operation that are external to the firm. The Marketing Management Cycle The planning cycle is composed of five basic steps. Many words in the vocabulary of business management were taken from the field of military science. Use strategy as a keyword search on the internet and see what you find. as an objective. We will define the term strategy as a method used to reach an objective. there are also upstream marketing activities that are related to the marketing mix. For example. we will consider goals and objectives to be identical terms. The time-honored Management-by-Objectives programs in which a supervisor will formulate strategies and other employees will choose the method of reaching those objectives is an example of this relationship in action. a discussion of strategy. a marketing manager is someone who is responsible for directing expenditures of marketing funds. we often use the four P s to designate the areas of control a marketing manager has at his/her command. please go back and review the terms used in Chapter One. The four P s represents a convenient way to summarize the main factors involved in any marketing strategy. . seen in a contemporary sense. However. Thus. First. Promotion. to reach our product quality objective. as a broad guide to preferred action. it is the overall orientation an organization choosing to allocate its resources. the organization might decide to be the leader in product quality as judged by customer surveys of our organization and our five leading competitors. objectives. Thus it is often said that management is responsible for conceptualizing strategies. Price. If this does not make sense to you.

and correcting.and technology. question them to understand how the family operates at present. Representatives of the firm meet with families. monitoring. Let s Get It Together is owned and operated by a mother of three children. If we find that return to the planned state is not practicable. what are the needs I am trying to meet? Who will receive customer satisfaction? . When. Monitoring is the process of tracking plans and identifying how plans map to changes that take place during program operation when more information is acquired. implementing. thus based on the Five W s and H Technique (Who. What. she decided to start this business because she realized that her family and most other families she observed lived in a state of chaos. After conducting several informal focus groups. Where. one must continually monitor performance and make adjustments to the plan based on the feedback gathered through these monitoring activities. Second. We use the use the term PIMC as a device to remember the stages. Thus. Monitoring and Correction may be considered two stages because after plans are put into action. After attending a seminar on creativity and innovation. we may adjust our planning outcomes. and then offer suggestions about how the family can be better organized and more efficient in its use of time. Third. the owner realized that she must get organized herself. that is. and How) she composed the following questions: What will the customer satisfaction entail. In summary. Both present and developing trends in each of these areas must be identified and monitored. do an on-site activities audit that models patterns of daily life for the family. she decided that there was a real need in the marketplace for a not-for-profit educational institution to pass along all of the knowledge families have about how to manage their household activities more effectively. It is the transition from expected reality to existing reality. Correction is the stage in which we take action to return our plan to the desired state based on feedback obtained in the monitoring stage. An example of the marketing management cycle in action: Let s Get It Together Family Organization Services The organizational mission of this service firm is: We provide families with means to improve their peace of mind and quality of life. Implementation is the process of putting plans that have been made into action. Why. After she came up with the idea. the marketing management cycle composed of planning.

Second. that is. Question # 4: Who will deliver customer satisfaction? Answer: Let s get it together. there is a already perceived need to be better organized. there are ways to fulfill that need that are not being provided to families. Answers to questions: Question # 1: What will the customer satisfaction entail. what are the needs I am trying to meet? Answer: Provide easy-to-follow guidance on improving family organization Question # 2: Who will receive customer satisfaction? Answer: Families who perceive a need for being better organized.Why will my organization deliver this particular customer satisfaction? Who will deliver customer satisfaction? Where will I deliver customer satisfaction? When will I deliver customer satisfaction? How will I deliver customer satisfaction? The owner then modeled the marketing management cycle as follows: Planning: First answer the seven questions I have formulated. will provide this service to families Question # 5: Where will I deliver customer satisfaction? . Question # 3: Why will my organization deliver customer satisfaction? Answer: First. through a small staff of highly trained and ethical individuals.

you can see that some of the planning has been done. and the answers above. A brief example of one aspect of this organization s marketing planning is: We will provide seminars that last one-half day to families who perceive the need for help in organizing their activities. Question # 6: When will I deliver customer satisfaction? Answer: Customer satisfaction will start with the first seminar and continue through a continuing association with Let s get it together. Question # 7: How will I deliver customer satisfaction? Answer: Through a personal and caring approach with my clients involving seminars and continuing personal contacts If you review the seven questions. thus we must identify likely places to offer these seminars.Answer: The service will be provided through small introductory seminars and through meetings in the homes of the families. We have obtained a list of community centers. usually one-year (short term) or five-year (long-term). However. etc. What remains is to identify specific actions that must take place to ensure success such as identifying the characteristics of the best candidates for our service. . initially. where space is provided free-of-charge for such activities. and will offer our seminars there. These businesses often make use of creativity techniques to attempt to outline what changes may occur in their respective environments and how the organization should respond to those changes. We should mention that many businesses are moving their long term planning periods to ten years and beyond in order to better prepare for the future. we may change that approach after initial seminars are offered (monitoring and correction) and move our seminars to more centrally located sites such as hotels and churches. creation of the service materials (seminar materials.) and details of the logistics by which the service will be promoted and provided. The Business Plan The business plan is an overall blueprint for the anticipated activities for the organization over a coming time period. if preferred.

the following conditions should exist: 1. Vision for the marketing plan (a paragraph that briefly describes the aspirations for the coming time period and the theme of the plan) III. However. the organization is much more likely to be able to successfully create and implement its marketing plan. there are often situations in which an organization will have a medium-term marketing plan (two to five years) and a long-term marketing plan that covers plans for a five-year period or greater.The Marketing Plan To formulate effective marketing programs an organization needs to create and follow a marketing plan. SWOT analysis outlining the strengths and weaknesses (internal to the organization) of the organization and the opportunities and threats (external to the organization) that the organization faces. the marketing plan is created in the context of the organization s overall business plan people in the organization share a similar orientation to the marketing function If these five conditions are met. 2. Executive summary (a one-page to two-page overview of the contents of the plan) II. 5. Description of market/customer types and products/services that will provide satisfaction to those markets and customers a. An example for the marketing is as follows: I. IV. management is committed to the plan s success and is willing to expend the necessary resources for its implementation 4. Market grid of markets and customers . usually one-year. A marketing plan is a document that describes the activities in which the organization intends to engage in a coming time period. While there are many different approaches to preparing a marketing plan. those who do the plan are responsible or accountable for the plan s implementation this same group is committed to the plan s success 3.

10. How does it compare to the description you gave in answer to question six in chapter one? 14. 11. implementation. Limit your marketing plan to two pages using keywords to describe your plan. it is usually better to have a poor plan and good implementation than a great plan that never gets implemented. If you have an industry of interest. Call your local grocery or supermarket and ask to interview the store manager. . In a one page essay. 12. including the benefits families can expect from participation and your estimate of demand for this new service. that a plan is only as good as its implementation. Use the marketing plan outline in the chapter to prepare a marketing plan for the lemonade stand.b. Schedule an interview and in the interview ask the manager how s/he would define marketing management. And how his/her job relates to marketing management. Marketing objectives for the coming period (objectives should be SUMAC or specific. make observations on Let s Get It Together Family Organization Services. The PIMC serves as a good guide for on-going implementation of the marketing plan. and consistent) VI. if any. Apply the PIMC planning cycle (planning. Search the internet for the term Product manager and write a one-page summary of your findings. Chapter Two Exercises 8. education. explore the definition of marketing management in that industry by interviewing someone who works in that industry. measurable. with a description of each event) This outline should be combined with the PIMC model described earlier in the chapter. Product/service positioning strategy V. attainable. and correction) to model the actions necessary for a ten year old to set up a lemonade stand. monitoring. however. lifestyle. understandable. thus. identifying activities conducted in each step in the PIMC cycle. 13. do you believe this service will appeal? Describe this segment of families using factors like family income. Write a one-page essay on your analysis. To what segment. it touches on the critical areas for a marketing plan. It is important to point out. Write a job description for a marketing manager of the marketing function. 9. Description of marketing programs with timeline (a calendar of major marketing events planned. While the outline above is simplified. etc.

the Customer Rules.the process allocating the resources of the organization toward marketing activities Marketing plan . that is. Chapter Three How do we identify and understand markets? As a student of marketing. it only remains for the organization to focus on researching and understanding its customers and then delivering products and services to the customer that will not only meet the customer s needs. what wants or needs do you intend to satisfy? . If the organization really believes in this philosophy. Understanding the Marketplace and Different Customer Segments The main goal of market segmentation (dividing the market into different portions based on differences in customers) is to better understand the needs of our customers thus we need a structured approach to attain this goal. that is. often the first assignment for the marketing function is to gather and analyze information about customers. Today. that usually means first attempting to understand the structure of the marketplace. but satisfy the customer in a way that will keep the customer coming back to our organization to do business with us.Chapter Two Glossary Marketing management . Therefore. A simple seven-step approach follows: Step One: Identify the type of market with which you will be dealing Step Two: Analyze the areas of satisfaction you are attempting to provide to this market.a document that describes the activities leading to customer satisfaction the organization anticipates intends to engage in a coming time period. you have already learned that the main purpose of modern marketing is to serve customers. usually one-year.

convertibles.). For example. market. sports utility vehicles. etc. Normally. for example. vans. you buy a lawnmower at Wal-Mart to mow your own yard). For example. we might first look at the type of market we are looking at. the automobile market is comprised of many segments including passenger cars. define. four-door station wagons. The first step to market segmentation is understanding and defining the market with which you are working. 1. Notice. in marketing. and understand different submarkets for products and services. 2.Step Three: Select dimensions with which to segment the market Step Four: Based on the selected dimensions. and business strategy. if we examine the market for toothpaste. Two-door sports sedans. personal non-business use (for example. pickup trucks. we can identify four types of markets. consumer markets people who buy for their own. identify the segments in the market under study Step Five: Evaluate whether the segment in which you are interested effective segmentation meets the four criteria for Step Six: Create a profile of the customer identified including purchasing behavior expectations Step Seven: Combine the segmentation analysis with other analyses related to the product. organizational markets organizations buy goods and services for use in the operation of their businesses or for resale. that if you choose one segment. and many others. For example. Compaq computer buys many of its microprocessors from . there are many segments within that segment (for example. Step One: Identify the type of market with which you will be dealing Types of Markets Market segmentation is an approach by which we identify. passenger cars.

Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. that is. tartar control. feel. age is rarely used to identify differences between organizations because usually. For example.Intel Corporation and your local dentist must obtain supplies and materials to provide his/her services to patients. sanitary carpet. For example. Note that there are several different dimensions for segmenting markets. We will address this issue later in the chapter. Therefore. For example. fluoride. and so forth). Thus age is often an important criterion in what satisfies a particular consumer. special needs (smokers toothpaste. As in many cases in marketing. the last category we mentioned special needs includes both a lifestyle segment smokers. For example.). market segmentation analysis requires a clear definition of the benefits customers are expecting to receive through purchase. What would you do if you . For example. Many people in their early years choose cars on the basis of styling. your local police department must buy patrol cars. Different types of markets often require a separate basis for market segmentation. state. what wants or needs do you intend to satisfy? As we will discuss in following chapters. 4. kids toothpaste. etc. people and organizations usually purchase benefits: not products or product features. economy. For example. people buy vacuum cleaners to attain their personal goal of having a clean.). of course. feel and see) and services (intangible products that we cannot touch. we realize that there are many segments identified in that market already: health (that is. government markets Local. hospitals. and. breath freshener. acceleration. and an age segment children. For example. the exceptions to this statement only serve to prove the rule. and other similar organizations. attractiveness (whitening. the age of an organization does not usually significantly impact its particular demand for products and services. and see). 3. etc. Seniors may choose their car based primarily on brand name and safety issues. institutional markets these markets include universities. The form of the product doesn t matter as much as the product s ability to provide those benefits.S. a hospital cafeteria must purchase food and other supplies to run its operation. we can then begin to identify segments within that market. Note that each of these types of markets has demand for both goods (tangible products that we can touch. if we are analyzing the consumer market for toothpaste. we frequently use age as a way to understand and segment consumer markets because age often accounts for significant differences in the wants and needs of consumers. However. price. sensitive gums. After identifying the type of market. consider passenger cars. and federal governments taken together constitute for the largest demand for goods and services in the U.

psycho from Greek means spirit or mind so while demographics deals with the statistical characteristics of the market segment. level of education. Dimensions for Segmenting Consumer Markets As discussed earlier. Thus. consider a small gift shop. psychographics refers to the . thus segmentation dimensions for this type of market focus on the characteristics of the buyer. For an additional example. while another organization may choose to distribute its products through a traditional retail outlet because the segment chosen prefers to touch and feel the product. gender. demographics consists of all those characteristics of people that are used to describe the size and composition of the population including age. So. and other such attributes. If a market research study indicated that customers of the shop preferred a lot of assistance in the product choice process because over three-fourths of the products purchased in the store were purchased as gifts. amount of income. people in consumer markets buy for their own. the primary benefits sought in this shop were finding a good gift idea with a sense of security against giving an inappropriate gift.were marketing manager of a company that has vacuum cleaner bags as its sole product when more and more vacuums are bagless? The implications for product design will be discussed in a later chapter.demo means people. Notice that the store s owner might change from an inventory similar to her competitors to a differentiated set of product choices aimed at meeting her customers purchasing goals of quality and uniqueness. personal non-business use. Four dimensions are traditionally used to segment consumer markets. psychographic dimensions . and graphics means some representation of thereof. Step Three: Select dimensions with which to segment the market The dimensions used to segment the different types of markets will be organized according to type of market because the dimensions used for segmentation vary substantially. the product would be distributed through a physical location within which the customer could compare alternatives. b. When deciding on how to distribute a product. These dimensions are: a. one organization may choose the internet based on its customers desire for efficiency in buying and familiarity with the world-wide web. demographic dimensions .

Walmart must purchase cleaning products to keep Walmart Stores clean and attractive. Dimensions for Segmenting Organizational Markets Customers in organizational markets buy products either to use in the operation of their business or to resell to other organizations. but Walmart also buys cleaning products to sell to their customers. Bases often used include: a. and motivation. e. For example.gov/epcd/www/naics. behavioristic (or intended use) this dimension relates to benefits sought and expected use by the customer. many products are sold in multiple packages such as six-packs because customers expect to consume multiple units in relatively short periods of time. This scheme has been widened to include Canada and Mexico subsequent to the NAFTA agreement. identify the segments in the market under study .census. b.S. intended use of products bought expected benefits to be provided by products purchased size of organization SIC (or NAIC) code* of organization s or organization s products Other characteristics of organization or specific industry *Standard Industrial Classification or North American Industry Classification System codes are numbers derived from the core business in which the organizations are engaged. than it is in the plains states. life style.html. Given this situation.characteristics of peoples spirits and minds. psychographics is usually broken down into personality. d. c. relates to where people live. the demand for snow skis is higher in the mountainous states in the U. different segmentation strategies are required based on the intended use of products bought by organizational customers. For example. not surprisingly. for example.S. Step Four: Based on the selected dimensions. These codes are useful for segmentation because all industrial activities are given a code in the U. For example. c. d. Check out the website at http://www. geographic dimensions this dimension.

Step Five: Evaluate whether the segment in which you are interested meets the four criteria for effective segmentation To be useful. the segments must be: 1. measurable (we can estimate how many people or organizations are in the segment) accessible (we can reach the segment through available means) compatible (the segment is consistent with the overall goals of the organization) 4. an approach to segmenting markets. behavioristic (intended use). Identify the different segments in that market and list the four factors above. While we will cover parts of this literature the reader should realize that there are hundreds of thousands. if not millions of pages published in this area. try using this information to analyze a market with which you are familiar. segment the market for shampoo or soup. itself. substantial (the segment is large enough to justify our develop of products or services just for that segment) These four dimensions are helpful for understanding any market structure. Step Six: Create a profile of the customer identified including predictions of expected purchasing behavior As one might expect. listing each criterion above followed by an explanation about how this characteristic will be present in the target market. PDA (personal digital assistant). and the concerns for each factor as it relates to the product or service you picked. if we are trying to analyze the market for personal computers. because portability and computing power are two important benefits sought by different pc users. Which of the four dimensions did we use to create those segments? Primarily.After dimensions have been selected to use in defining the segments. we might choose to identify the following segments: desktop. For example. For example. . we must first understand the market. segments then must be identified in the market under study. For example. laptop. there is a large body of literature related to buying behavior in marketing because marketing focuses on the buyer and his/her characteristics. 2. 3. However.

If we look closer at this definition we can see that a marketing strategy is: A Marketing Mix Product or service Price AIMED AT a Target Market Distribution (Place) Promotion We will use this definition throughout our study of marketing principles and you will soon become comfortable thinking in these terms. However. it is important for marketers to attempt to model the expected buyer behavior involved for their product. if one researches. Marketing Strategy We will define marketing strategy as a marketing mix aimed at a specific target market. this process differs considerably across different types of markets as well as across different types of customers. We will discuss this issue further in the following chapter. marketers overestimate the importance of purchases to consumers. manufactures. While this definition is a use of the lower level of the term strategy.Usually when we attempt to model the buying process of our target customer. one is intimately involved with the product often virtually every working hour. and distributes a product to consumers. Example of seven-step segmentation process Let s Get It Together Family Organization Services . Understanding the significance of the purchase for the target customer Very often. This circumstance often results in a heavy emphasis on customer decision-making when in fact the customer may only react on a very shallow psychological plane to products offered and the purchase decision is in reality almost an afterthought. Naturally. we believe that the definition is appropriate for beginning students in marketing. Of course.

Step One: Identify the type of market with which you will be dealing The consumer market Step Two: Analyze the areas of satisfaction you are attempting to provide to this market. both parents work. that is. too complicated. at least one parent is college educated. above Psychographic busy or hectic lifestyle as described by people in segment little quality time Behavioristic family perceives life is too hurried. Behavioristic (a note to the reader: segmentation doesn t always requires the use of all four of these factors in creating a profile. what wants or needs do you intend to satisfy? We seek to enhance family life for parents and children alike by providing practical tools to improve organization in family life Step Three: Select dimensions with which to segment the market Demographic. too together (Please note: Our marketing research studies indicated these facts and allowed us to formulate our customer profile) . two children or more in household suburban location in medium to large city Geographic every geographic region of the U. identify the segments in the market under study Demographic household income over $80. has families who fit our profile. but we suggest you always use each dimension in your analysis. also see Demographic. Geographic. whether or not you decide to drop one later on in the process) Step Four: Based on the selected dimensions.000.S. Psychographic.

Therefore. Also. Chapter Three Exercises . we know that purchase behavior is a high involvement transaction for our target families. Bureau of the Census (Website is http://www.gov/ ) Accessible we can easily identify and communicate with households in profile. However. Step Seven: Combine the segmentation analysis with other analyses related to the product and market While we believe our concept has a lot of promise. Step Six: Create a profile of the customer identified including purchasing behavior predictions See Step Four above. Organizational research will continue while we conceptualize and offer our first seminars to keep track of changes in the social environment of our chosen geographic markets. yes. and community leaders. selecting specific households that may want our service is much more difficult. healthcare professionals. we must continue to flesh it out and do research. so. We will also maintain a research effort with all people contacted in relation to our concept including families who participate.S.census. we are starting our service in one city and expanding the service over the coming years. the segment is compatible with our organization and other products/services Substantive our research and projections indicate that there are millions of households in our target market. Compatible our organizational mission is aimed at serving this segment.Step Five: Evaluate whether the segment in which you are interested effective segmentation meets the four criteria for Measurable we were able to assess this segment and understand by using only the census data published by the U.

explore the markets and types of customers served by that industry. Organize your answer according to the different categories you find in your search. Check out the website of American Demographics Magazine at http://www. in the middle-income category. 18. in your opinion. list each of the four dimensions and describe the segment with those dimensions.com/. Pick a product category that is of interest to you. implementation. For example. Apply the seven-step process of market segmentation to a new product idea that you conceive listing your activities and comments in each step in the process. (For example. Go to your local grocery store or supermarket and visit a specific product section. evaluation. and behavioristics) to compare your findings to the material in your Principles of Marketing e-book. Prepare a one-page report on your findings. Summarize in a one-page report what you find after you get on the internet and search the keyword market segmentation. the local utility company may be owned by government. the market segment that Saturn Automobiles has worked towards pleasing is men and women with a college education. but there are many others.15. Using the four dimensions of segmentation for consumer markets. 21. They lead a relatively frugal lifestyle and seek economy and quality in their purchases. so as a customer it will be considered a government market. monitoring. Identify each step clearly. describe a market segment with which you are familiar. 19. 16.americandemographics. geographics. and personal care products are three good areas. bread.) 20. Read an article and write a one-page summary of the article and its relevance to marketing. How does it compare to the description you wrote in answer to question six in chapter one? Chapter Three Glossary market segmentation .dividing the market into different portions based on differences in customers . Write a job description for a manager of the marketing function. 17. correction) to a club to which you belong. psychographics. 23. Breakfast cereal. Observe the products offered and identify product categories that are based on different consumer segments. Apply the PIMC planning model (planning. In this exercise. 22. Do an internet search on each of the four dimensions of market segmenting consumer markets (demographics. If you have an industry of interest.

this dimension relates to benefits sought and expected use by the customer marketing strategy . more has been written about buying behavior than in any other area. In this chapter we examine a few basic concepts related to buying behavior. Consumer Buying Behavior Researchers in marketing have studied most areas of consumer behavior including the impact of everything from music to lighting on how people behave and how they consume products. We will focus on the basic constructs accepted today in the study of buying behavior.demographic dimensions grouping potential customers on objective factors.a marketing mix designed for and aimed at a specific target market Chapter Four . This is not surprising considering the fact that we live in a consumption-driven culture.Why do we study buying behavior in Marketing and what have we learned? In Chapter Three we explored the different types of markets and the process of dividing those markets into smalls portions called market segments. . you already know the answer: Marketers believe the Customer Rules thus we know our primary responsibility to the organization is to gain an intimate knowledge of our customers: what satisfies them and makes them happy and what benefits they are seeking in the marketplace. Why do you suppose this it true? Of course. and motivation for purchases behavioristic (or intended use) dimension used for market segmentation. for example. age/income/gender/ethnicity and level of education psychographic dimensions grouping potential customers on psychological factors including personality. We use the term a few because in marketing. life-style.

Involvement is often classified as high or low . The consumer thinks about options she may have to remedy her situation (internal search). And then she seeks external sources of information such as friends. . if a college student buys a new CD player for his car or a new sports-coat. Alternative identification and evaluation she has some ideas about what alternatives she has and how to approach them. Post purchase evaluation the consumer experiences her choice and determines if she is happy with it. and the internet.Consumer Decision-Making Most studies of the decision-making process in marketing have used an adaptation of the scientific method. mechanistic process above. we often don t go through all of the steps. As a student. She now must compare and contrast the options she has. This fact sometimes has to do with involvement . soft drinks. Involvement can be defined as the personal importance and social significance of the purchase. First. learning this approach is worthwhile for you so that you will have a general framework to understand your purchasing behavior and the purchasing behavior of others for purposes of marketing research. and new houses (all three of these would be high involvement) and while we frequently buy low involvement products (coffee. chewing gum) we also buy many more durable products that can be considered medium involvement. Feedback learning for future consumption behavior the consumer remembers how she feels about her purchase and makes note of it for future reference (internal search). Information search internal and external. because many products we buy fit into that area. Of course. We would add medium to the categories. For example. TV. laser surgery for vision correction. there are exceptions to the rather rigid. Choice and purchase based on this process of consideration the consumer now purchases the most attractive option she has identified. For example. For example. newspapers. both of these would probably be considered medium involvement because they are in the medium price range as far as his budget is concerned and there is some level of risk surrounding the purchase. we rarely buy new cars. The importance can be a function of how much the product or service costs and whether there are any social risks involved. her car has had major mechanical problems for the last two months. This decision-making process is as follows: Problem recognition the consumer recognizes a problem.

a person s family background can impact his or her buying behavior throughout life in many ways. think a situation in which you engaged in an impulse purchase. the situation strongly impacts what are willing and able to do as far as buying behavior. An impulse purchase is an unplanned purchase in which we just decide to buy the product with very little prior consideration. Why was there such a difference in her dress and preparation? The social nature of the two evenings was very different.There is also another important consideration called situational effects. Again. Reference Groups First. of course. feel no responsibility to follow the rules thus we may engage in unorthodox buying behavior that defies classification. thus situational effects strongly impacted this person s buying behavior. For example. although. you won t be able to tell which is which. a shopping trip is directed not to a specific. The student decides to go to Dillard s and buy a new blouse and a pair of new dressy slacks in preparation for the night out. a female college student is preparing to go out with her friends for the evening. reference groups are collections of other people who strongly affect what we buy and how we go about buying it. What do you think is the most influential reference group for most people? If you guessed family you are absolutely right. For example. planned purchase but just to see what available so while the cognitive perspective on shopping is useful. We. We have all had a battery go out in our car and most of us don t think of shopping for a battery until our present battery goes dead. and. we consider the following three as the most important overall. She and her buds have decided to go to a club where there will be music. Group/Social Variables that impact Buying Behavior While there are many different impacts on consumer buying behavior that have to do with groups. Sometimes adults buy what our family bought and sometimes they won t touch what my family liked . we just try to find a battery wherever we can and as soon as we can to solve our problem. The family is not only the most important reference group for children. For example. young men. most importantly. Just last night in the midst of studying for an exam when the same student went out with her friends for pizza at a local pizza parlor. . dancing. there is also a lot of buying behavior that defies understanding. as consumers. This has been shown to be true in durable goods such as cars and appliances. Often. Usually. Situational effects are all of the circumstances surrounding our purchases that may strongly impact our decision-making process. She also buys some makeup and fragrance. she wore jeans and a ragged sweatshirt. go to Walmart and observe customers there. You will see all types of people buying all kinds of things: some of those purchases will be planned and some will be unplanned.

A subculture can be any segment of society that hands down its own beliefs across an extended period of time.S. Thus. some will be groups you would like to be a member of but are not (for example. are called Aspirant Reference Groups. the business student honor society (http://www. Native Americans continually shifted geographic habitat due to weather and other human adversaries. is changing rapidly to accommodate many new ideas and ways of doing things.S. As our country developed in the eighteenth. nineteenth. This brings another factor into consideration.pdf. The U.betagammasigma. but still want to be somehow related to are called Associative Reference Groups and groups in which you would not seek membership are termed Disassociative Reference Groups.S. introduced by the music of African-Americans and adopted by large segments of the white population.org/) and other groups you would not like to be a member of: perhaps an example would be the winning lottery ticket losers club.gov/population/cen2000/c2kbr01-2. This person would belong to an associative reference group but not be a member of an aspirant reference group because in our example the fan does not really expect to be able to join the Rockies team in any official capacity. the U. Today the ethnic composition of the U. Historically dominated by the thoughts and mores of a Western European tradition.as well as. Marine. is still changing.census. Ethnicity .S. For example. has changed constantly over the last few thousand years and that process continues.S. the Proud. Many adopt the appearance of their aspirant or associative groups by engaging in consumption behavior to express their personal sentiment. Marines recruits people based on the attractiveness of being A U. Groups you would like to be a member of but are not. the Few. The family is a membership reference group whereas other reference groups may be nonmembership reference groups. one may buy a Colorado Rockies Hat and wear in public because s/he is a fan of that particular baseball team. and twentieth centuries. Incumbent in these changes in ethnicity are changes in Culture for the U. If we look at the great blues music tradition of the U.Culture/Sub culture The ethnic landscape of the U. An excellent overview of this important material can be found on the internet at http://www. We define culture as the totality of artifacts and behaviors handed down from one generation to the next. different ethnic groups joined the growing population.S. nondurable goods like laundry detergent and shampoo. If you consider the reference groups available to you. Beta Gamma Sigma. different subcultures intermingle their ideas and art forms in a ethnically diverse society. groups to which you don t really expect membership.S. . We see a subculture of music.

However. If you are apathetic about a certain product or issue. The MAM orientation to measuring attitudes is a . however. The stages may differ in the order they occur. as human beings are constantly learning about our environment and a portion of this learning is related to what we consume and when and how we consume it. In plain English. that may be changing quietly across our U. develop a feeling towards that product (evaluative stage) and then. However. Therefore. we can use a simple approach to understand how people form an attitude towards a product or service. you must remain aware and track changes occurring in the environment. For example.S. most consumers will probably first think about a product (cognitive stage). Learning can be defined as changes in attitudes or behavior based on experience. a consumer normally goes through three stages when forming an attitude. We will expand our discussion of attitude formation in the chapter on marketing communications. learning is an important concept in consumer buying behavior. an attitude is simply how we feel about something. if s/he likes the product. it is internally contradictory. you would be well advised to continually gather information on and be aware of this trend as consumers become more aware of this threat to health. Attitude formation can follow several different patterns. and it would not take much to drive them away from consuming beef and hamburger meat in all forms. we sometimes obtain knowledge that does impact our consumption patterns for some time. We learn constantly about products and services available and adjust our consumption patterns to what we learn. evaluative. If you were a marketing manager for a food company. An attitude can be defined predisposition to respond to stimuli. Attitudes are usually comprised of three parts: cognitive. population in response the Mad Cow and foot and mouth disease outbreaks in the United Kingdom (check out this website:(: http://www. you don t really have an attitude related to it. and behavioral. Many people are aware of this threat presently. purchase it (behavioral stage). For example. Although as a marketing person you can t assess it. Neutral attitude is an oxymoron.org/). today most people do not perceive significant risks in consuming hamburger meat.mad-cow. for a high involvement product. Attitude There are probably more studies of attitude in the marketing literature than any other individual variable affecting consumer buying behavior. The most common attitude model applied in business is the belief/importance weight model also called the multiattribute attitude model (MAM).Individual/Psychological Variables that Impact Buying Behavior Learning We. That is. Marketers cannot assess such learning easily.

service. Acceleration = 40 ( Mike used the constant sum scale for his importance weights and the weights add up to onehundred) What is Mike s attitude toward the brands he is considering? . He has visited several dealerships. Let us say that Mike has just graduated from college and is preparing to buy a new car. talked to his friends. and read product reviews on the internet (external search). economy. and acceleration): Saturn Ford Contour Pontiac Grand Am Cost Economy Quality Acceleration 5 7 8 4 5 7 7 4 7 6 8 5 Mike s importance weights are as follows: Cost = 40. Quality = 10. or idea E = evaluation of attribute i I = importance of attribute i A brief example will be offered to explain this approach. The MAM can be expressed in formula as follows: A = Ei*Ii Where: A = an attitude toward a product. He has prepared the following list of products and his evaluation of each product across four attributes (cost. quality. Economy = 10.simple but effective way to understand how people feel about products and services.

Research indicates that while subliminal perception exists. You may see a TV ad for Coca Cola (check it out at: http://www. perception is how we attach meaning to all of the inputs that we are exposed to in daily living. attention. this is really an exciting conspiracy theory that persists in media study. recognizing the product and the musical theme. if exposed to subliminal stimuli.parascope. first. Perception Perception can be defined as the way we experience life. and soon to be graduate. Humans normally go through several stages in the process of perceiving meaning. However. you find yourself humming the musical theme Life tastes good later in the day. you may see a red bottle of CocaCola and decide you are seeing Santa Claus. should be in possession of the facts. These inputs can be new words. Several popular writers have made considerable money on books they published warning consumers that You are being manipulated and you don t even know it.com/articles/0397/sublim. and finally. you attached meaning to the ad. you as a college student. Subliminal perception means literally below the level of consciousness thus if you can identify symbols or words in an ad.com/ ). These stages include exposure. For example. and retention. subliminal perception is not efficient at all. Second. you were present by the TV to be exposed to the ad.Solution Saturn 5*40 + 7*10 + 8*10 + 4*40 Attitude toward (Saturn) = ? Ford Contour 7*40 + 5*10 + 7*10 + 5*40 = Attitude toward Ford = ? Pontiac 7*40 + 4*10 + 6*10 + 8*40 = Attitude toward Pontiac = ? This approach to assessing attitudes is easy and can be a helpful tool for marketers attempting to understand how to improve their product offerings.htm.) . Marketers have been interested in perception because they are constantly trying to communicate product and service ideas to their target markets and they need to understand how that information will be received and understood. check out the following website for research on the matter of subliminal perception before you make up your own mind: (http://www. That is. or an advertisement about a product. Much has been written about subliminal perception over the years. you are not dealing with subliminal perception. While. a new song. Third.cocacola. attached meaning. That is. it may have gained your attention because you liked the music in the ad.

can be defined as the potential negative consequence of a certain action including buying or using a certain product or service.org/ ) Organizational Buying Behavior Organizational Decision-Making . You can see that marketers want to understand not only how they can use risk to make their products more appealing for purchase (for example. Psychological risk threats associated with some psychological construct. you are familiar with each type of risk as a consumer. (http://search. home security systems).yahoo. There are several types of risk that have been identified in research.Perception remains an important construct in marketing because the study of perception can give information to marketing communications professionals about when and how people receive and make sense of information. one can see how companies live in fear of hoaxes that will cause consumers to avoid the company s products (check out these websites to see some present hoaxes in our society. That is.ciac. we can advertise that there is no risk associated with taking aspirin for a headache. In marketing. for example. but some of the populace will perceive a health risk (physical risk) because they have heard that aspirin is dangerous.com/search?p=hoaxes&n=25 http://hoaxbusters. We will cover four kinds of risk: a. Physiological risk . Risk Risk. in the consumer buying behavior area.associated with threats to one s health Financial risk risk associated with the loss of economic wealth or financial security c. Also. b. we usually use the term perceived risk because the person or persons we are trying to understand determine the amount of risk. a threat to one s self-esteem d. Social risk a threat to one s social standing or social comfort Surely.

These people. Thus. Second. A list of the roles usually existing in the buying center might include: a) initiator this person first recognizes the need for the product or service and may or may not have a say in the purchase decision. the decision-making process for organizations is certainly more formalized. there has been considerable research on the roles assumed by people who impact the buying decision. d) buyer this person is responsible for obtaining the product. the group decision-making approach is consistent across most organizations whereas families may be less oriented to this form of decision-making at least for many decisions. Most families don t consider any structured approach to their decision-making as a group and many organizations find it necessary to codify many details about how purchase decisions shall be made. but s/he will still have an impact on the purchase decision. Again. there has been substantial disagreement about whether the differences in consumer decision-making and organizational decision-making are adequate to justify separate models of decision-making for the two. we do want to point out a couple of important differences that exist in a fairly universal way. we would suggest adding a stage to the consumer decisionmaking process covered earlier in this chapter. First. though s/he may or may not have any impact on what is purchased. We agree that the differences are small.Organizations often make decisions in a very similar fashion to consumers. e) decider this person is responsible for the final determination of what will be purchased. In considering the organizational purchase process we would recommend that the student remember two differences between consumer decision-making and organizational decisionmaking related to purchasing. marketers must strive to understand how organizations in their chosen markets reach the buying decision. c) influencer this person s role may be only tangential to product use. taken as a group. are called the buying center. First. and don t necessarily justify separate treatment. However. Organizations often solicit bids from an approved bidder list or publish specifications related to the product they are seeking to obtain. Government agencies are legend for incredibly complex buying approaches. However. . Second. One might argue that families are similar and we would agree. organizational purchase decisions are frequently made by a group of individuals. In fact. this person may or may not have a say in what is purchased. b) user this person will be responsible for operating the product that is bought or consuming the service that is purchased.

intriguing areas in today s marketing landscape. Sadly. the amount of research in this area is relatively small. Other individual/psychological variables including learning. Individual/Psychological Variables that Impact Organizational Buying Behavior While there has been a limited amount of research regarding these variables. such programs often are not really directed at customer satisfaction and relationship building but only represent something else to advertise that may increase sales. While many marketers have realized for years that the key to long-term success is at least in part customer knowledge and customer care. Certainly. perception. organizational relationships and organizational culture. this initiative is often lost in promotion without creation of a service delivery system to ensure that customers are treated as number one. may have a strong impact on what is ultimately purchased. There are some studies on perceived risk that indicate risk is an important personal consideration for industrial buyers as supported by the saying No one have ever been fired for buying from IBM. While this catch phrase has gained added space in trade magazines and academic journals. attitudes. However. the average businessto-business marketer doesn t really have easy access to much knowledge in this area. for example. Customer Relationship Management (CRM) This area of organizational marketing is one of the most vibrant. and organizational culture also are important considerations in organizational buying as well as consumer decisionmaking. You should also be able to explain why a marketer would be interested in who plays what role. Group/Social Variables that impact Organizational Buying Behavior While there are group variables that affect organizational buying behavior. Many organizations that aggressively advertise such programs haven t really . some companies will see this as another opportunity to be sales driven and use the concept as a way to promote their customer care programs.You should become familiar with these roles and be able to understand how they would be expressed in a group-buying scenario. There is still a lot to be learned in this area.

a medium involvement. 31. 28. Compare and contrast consumer-buying behavior and organizational behavior. Use the consumer decision-making process to describe a recent purchase you made. 27.done the research and made the commitment necessary to make the programs successful in the long term. 32. and a high involvement purchase you have made recently. 29. Chapter Four Exercises 24. Identify and fully describe one of each of the types of reference groups discussed in this chapter. . 30. c) The Marvin family is headed to Texas to visit relatives and wants to stop at a restaurant for lunch. it is not learning and not important to marketers. her car overheats on the interstate. 26. Explain how situational effects might impact a person s decision-making in each of the following examples: a) Mark has a job interview on Friday and is wondering what to wear b) Janie is driving across Utah to visit her parents and. Can you think of situational effects that would make the purchase of a new sports-coat a high involvement purchase? Explain. Give an example of a low involvement. Otherwise. Make comments on each stage of the process. Describe how your decision-making behavior was different for each purchase. Agree or disagree and explain. d) You have a first date tonight with a person to whom you are very attracted and are thinking about where to buy dinner. due to a broken radiator hose. Learning always changes behavior. Write a one-page essay on your thoughts about how you would classify your behavior and orientation to products you buy? 25. many businesses in organizational markets have realized the importance of relationship building and have made this a priority in their business planning activities. Identify the principal type of risk involved in each of the following: a) Janet undergoes a lab test for a health problem. However.

consumer decision . Chapter Four Glossary consumer behavior . Jerri decides to take a vacation and plans a trip to Africa.the totality of artifacts and behaviors handed down from one generation to the next learning changes in behavior based on experience perception the manner in which we experience our environment attitude the magnitude of either positive or negative feelings about something risk the potential negative consequence of a certain action including buying or using a certain product or service buying center the group of individuals who play a role in the process of acquisition of goods and services for the organization Customer relationship management the overall process of establishing and sustaining positive interactions with the organization s various stakeholders .making the approach that a consumer employs in arriving at a purchase decision consumer involvement .the personal importance and social significance of the purchase reference groups .b) c) d) e) Adam buys a new mini-compact car and is not sure about what his friends will say.collections of other people who strongly affect what we buy and how we go about buying it culture .com company. Jamie invests her tip income every week in a local .the processes people employ to obtain and use various products and services. Glenn misses a marketing exam and fails to contact anyone beforehand.

a marketing orientation requires that the organization study and understand what will bring its customers satisfaction. The marketing research department is responsible for providing this understanding. One marketing research project may entail questioning thousands of people by use of a survey instrument while another project may only involve meeting .Chapter Five How companies manage marketing research The meaning of marketing research Today. As the internet continues to develop there will be a trend towards more investment in marketing research. The marketing research function also. it is aimed at giving the marketing research function the breadth and depth of latitude that it needs to operate effectively. marketing research should never be seen as a separate entity isolated from the rest of the marketing function or from the other functional areas of the firm. marketing research departments often lose what creativity they had and begin to focus on a known set of techniques with which marketing research personnel are comfortable. However. Types of marketing research Marketing research approaches are varied. It is unlikely that many readers of this text will ultimately have marketing research as their primary employment so we have presented marketing research in a non-technical manner. It is very likely that anyone reading this book has been a respondent in some kind of marketing research study. Customers seek benefits. This may sound simple. but data analysis and presentation to management about customers and other issues. Often very creative techniques are needed to truly understand what the customer is seeking and how to deliver that solution on a profitable basis. Note that the outcome of marketing research is enhanced decision-making about needs and wants in the marketplace and how to meet those needs and wants. While this definition is very broad. ironically. We will define marketing research as all techniques used to provide information that assists the firm in all of its decision-making processes relevant to customers or clients. This results in a lack of fresh thinking and innovative approaches. As we have discussed a length. but it is not. and it is often difficult for the customer to express what those benefits are. If this happens. becomes separated from the R&D function and those in the organization responsible for new product conceptualization. This will be caused by the increasing isolation of the individual in our society and the corresponding need to access more information through impersonal versus personal methods. Also note that marketing research is responsible for not only data gathering about customers. marketing research is pervasive.

particularly qualitative marketing research. are often used to help obtain a real customer s assessment of a store s service quality (Check out the following websites: (http://www. A common use of the observational method is watching children play with prototypes of toys to understand which toy will be most popular. The reasons for this are that qualitative research is usually less expensive and faster to perform than quantitative marketing research. audience measurement for different types of media. Although marketing texts usually devote considerable attention to these approaches. Unfortunately. there is presently no required accreditation for a person to perform marketing research. http://www. the quantitative approach has given way to qualitative marketing research in many cases. Types of qualitative research include focus groups and observational studies.with a few present customers for breakfast. Mechanical observation is also used at retail stores to count the number of customers (sometimes with a simple turnstile) and in other public areas. Focus groups gather a small number of respondents together to discuss topics yielded by the research questions. There are many different types of marketing research projects that require various types of knowledge and academic background. qualitative research. Quantitative Marketing Research Types of quantitative marketing research include surveys. .com/).com/. to name only a few. Quantitative marketing research is composed of sophisticated techniques that require substantial competence in descriptive statistics while qualitative marketing research may require a broad knowledge of psychology (the study of individual behavior). at present.customer-1st. is growing much faster in popularity. parks for example. thus. Observational studies involve watching respondents while they are engaged in some activity. Approaches to conducting marketing research range from quantitative to qualitative in nature. Qualitative Marketing Research Qualitative research is less involved with numbers and usually provides a closer touch with the subjects in the research project. and social psychology (the study of individual behavior in a group).bmiltd.com/cgi-bin/nwscape/shoppers/welcome.) Secret shoppers. who are not well trained or educated in the discipline and do not have sufficient experience. and store audits. The moderator creates or is furnished with a discussion guide that outlines the areas to be explored in the focus group. A moderator leads the discussion and helps keep discussion lively and focused around the research questions. sociology (the study of group behavior).nwscape. there are many unqualified individuals and organizations that sell marketing research services. Thus. http://www. also called mystery shoppers.

results on which we can make reliable decisions. that is. we must follow a consistent process. b. this will often require a personal meeting with all of those involved in establishing the project including the client. b. d. and others involved in the project. Another meeting is usually required to define the problem or opportunity clearly enough to create research questions.The Marketing Research Process In order to obtain useful results. create a research design Meet with client(s) When beginning a marketing research project. . meet with client(s) jointly explore problem or opportunity to be researched create research questions d. We recommend a process that includes these steps: a. Establish a research project Conduct the research project Analyze the findings of the research project Summarize and Present the findings of the research project Assess the findings of the research project Establish a research project This step will usually involve four steps: a. The initial meeting is often not sufficient to establish the problem or opportunity to be researched. we need to start with identifying the problem or opportunity. based on the research questions. c. Although there are exceptions. the researcher(s). e. c.

if one says that sales are down in the southeast region. but we can say it happens often. A research question is a statement of what queries the project will seek to answer. We have no way of estimating how often this happens. The reason we break meeting with clients into a separate step is because there will often be several meetings. after meeting with the client. Often. This stage is a data gathering stage for the researcher.It is imperative that this initial meeting be approached with an open mind and no preconceived notions about the answer. the research questions may be stated for the southeast region study as: Research question 1 what is the impact of our competitors on our sales? Research question 2 what demographic changes have taken place recently? Research question 3 have there been changes in perception of our product? Note that the research question is rarely synonymous with a survey question that is. For example. Clients will often have lots of ideas about the project. demographic shifts in the population. a marketing research project is a waste of resources. not the problem. In our example. Thus. Create research questions After the researcher and client have agreed on problem or opportunity definition. It is important to realize that divergent thinking will play an important role at this point of the research process. If a client or company manager already has the answer (has already essentially decided on what the findings of the project will be). likely causes identified in client meetings included aggressive efforts by a new competitor. and the possibility that our product is outdated in the eyes of the marketplace. Reliability is the ability of a certain question to gain consistent responses over asking the same questions several times. For example. This is a symptom. The problem is the cause of the drop in sales in the southeast so the researcher must search upstream in time and events from the sales decline. this is the stage that the researcher must avoid seeking closure and keep an open mind about how to characterize the problem or opportunity under consideration. That is. Formulating dependable survey questions is a highly technical and demanding process that requires extensive training and experience. the researcher will be able to formulate research questions. if . However. several survey questions will usually be required to address one research question. Survey questions should be both reliable and valid. clients often bring a symptom into consideration as the problem. including the problems and a likely solution to the problem. We say this because too often the findings of a well-executed study are rejected because it found the wrong answer. the researcher may decide not to take the research project because the client is not ready to pursue the project.

we ask several people the same question and get very similar results. we can say the question is reliable. A meeting was held between the candy company and a marketing research company. First. When the budget will allow it. Often the client will have already decided on a research design without considering what the appropriate one would be. However. assume we are attempting to ascertain peoples attitudes toward Dillard s Department Store. a small candy manufacturer had decided it needed to research the market. Answers appear at the end of the chapter. both qualitative and quantitative approaches should be used to answer the research questions. to be reliable a question need only produce consistent answers and to be valid. this data is called secondary data. We have male and female models interview customers as they enter the store. For example. Marketing researchers should always explore sources . which is rare. a question must measure what the researcher claims it measures. When we do. Primary and Secondary data Collecting data can be done in two ways. Questions also need to be valid. this does not mean that the question will be useful for our study. Male models interview all females entering the store. After some consideration of research questions. The mail survey was deleted from the research plan. Were the findings of this survey reliable? Were they valid? Remember. For example. The results of the survey indicate that Ninety percent of those surveyed find the Dillard s shopping experience either Extremely enjoyable or Very enjoyable. Create a research design The research design is the approach we use to answer the research questions. The company had already created a survey form to be sent out though mail. Validity is the ability of a question to measure what it purports to measure. and female models interview all males entering the store. often clients must choose only one or two of the most compelling research questions to address using either a quantitative approach or a qualitative approach. and a mall intercept survey. Research designs can be qualitative or quantitative or include both types of research in larger projects. the research design was changed to include a series of focus groups. Alternatively. we can collect the data our self to address the research questions. the data collected are called primary data. When we use data for decision-making based data that has been collected by someone else to address different research questions. in one case.

A census is taken when we attempt to collect data from all possible respondents in a specified population. However. the responses gained only apply to the students we questioned in that sample.standardpoor. Results derived from nonprobability samples cannot be applied to the remainder of the population of interest.S. sampling is collecting data from only a portion of all possible respondents in the population of interest. Types of nonprobability samples are judgment samples (the interviewer as asked to apply his/her own opinion as to what respondents fit the profile of people to be interviewed). probability samples are much more complex and expensive to gather. secondary data research often begins with the examination of the NAIC (formerly SIC) codes relevant to the companies of interest in the study.dowjones. For example. this would be a nonprobability sample and would not necessarily produce results that would predict how most students and others on campus feel about the parking garage. In organizational marketing. Sampling and Selection of the Sample Often marketing research studies require that data be collected through the process of sampling. probability samples provide more powerful prediction abilities.com/Reference/Standards/North_American_Industry_Classification_System__NAI CS_/). if we draw a sample of students at a university to determine their attitudes toward raising tuition in order to build a parking garage on campus. published data can be obtained free with the help of professional library personnel. Professionaly librarians are highly trained and are usually happy to be of assistance. For example. On the other hand. once we agree that we need to gather data from a limited number of organizations or individuals. If we just meet students on campus and do interviews. These are only two of many organizations that provide such services.com/). Note this has to do with HOW the sample is selected. Thus. if we collect a nonprobability sample. However. Two such firms are Standard and Poors (http://www. in a probability sample we can generalize our results to the other students on campus (the population of interest). (see the following website: (http://dir. we must determine how they are to be chosen for the sampling process. Census Bureau attempts to count every person in the U. quota samples .yahoo. That is. Results derived from probability samples can be applied to the remainder of the population of organizations or people in the population of interest. every ten years.of secondary data before they decide to collect primary data.S. There are two types of sampling: probability sampling and nonprobability sampling. Many private reporting organizations provide information about industrial organizations based on the NAIC.com/) and the Dow Jones Company (http://www. the U. The internet contains huge amounts of secondary data and free.

One can see that the selection process for nonprobability samples is usually unsophisticated and straightforward. as in the case of samples there is not even a guarantee of that! Conduct the research project The research design should provide good guidance for performing the research.e. The statement of the research design should provide guidance to the researcher about how the data should be organized and classified. Analyze the findings of the research project This stage is comprised of organizing the data gathered and carefully ascertaining what the data indicate. normal distributions. SPSS. that is. The researcher must be careful to be organized and remain objective during this stage. statistical software is often used to facilitate activities in this stage of the project.homestead. independent researcher to execute the research study by following the statement of research questions and research design. offers a free statistical package on the internet at his website: http://openstat.. In the same spirit as this ebook. formerly a professor at Iowa State University. etc. Especially for quantitative studies. sometimes. (statistical package for the social sciences websites http://www.ats.com/. However. There is often some pressure on the researcher to find the right . As you already know. Professor Bill Miller. The statement of the research design should be sufficiently complete to allow a qualified. one for which we can apply basic descriptive statistical techniques as taught in business statistics courses (for example. for example. SAS.(the interviewer is given clear direction regarding how many people of what type to interview. research projects can be quantitative or qualitative in nature or even involve both kinds of research approaches. parametric. and convenience samples (the interviewer selects people to interview based on the easiest ones to interview).ucla. z scores.spss. when we decide to draw a probability sample.htm) or a similar statistical package is often used to perform the analysis necessary for this step.edu/at/software/stat/sas/sas. i. and fifty males). http://www.) A simple probability sample is one in which each subject in the population of interest has an equal and known probability of being included in our sample. fifty females. Can you think of a way to draw a sample of students at your university or organization that would have these two characteristics? Selection of nonprobability samples only requires that the people interviewed are in the population of interest and.com.

the researcher must draw conclusions from the findings and present the findings in a comprehensible manner. the best guide is to keep it simple and accessible to the reader of the report.S. The Marketing Research Industry There is a broad range of marketing research services available throughout the world. tend to be the most researched population in the world.answer as we indicated above.jwtworld. When summarizing and presenting a research project. if not the largest organization in the U. Many companies in the U. However.C. Conducting research projects in countries other than the U. but for the sake of integrity. and http://www.saatchi-saatchi. specializing in marketing research.com/. marketing research may be limited or culturally unacceptable.html. the researcher must remain objectiveas s/he records. provide marketing research services and data. They know how the use of jargon is often used to obfuscate the facts and this may indicate a lack of preparation on the part of the presenter. we in the U. for example). Ironically. Nielsen (http://acnielsen.S. A.com/) is one of the largest. often requires different research methods and may entail a total revamping of the research design.com/innovation/launch. Brief discussion of types of surveys While focus groups and other qualitative procedures are gaining popularity. surveys remain popular. Many of the major advertising agencies also conduct major consumer and organizational research (see http://www. this is particularly important when presenting a report to clients who are highly intelligent and educated. Summarize and Present the findings of the research project After the data are analyzed. as well. The temptation for the researcher is often to rely too heavily on statistics and this can very rapidly lose the attention and interest of the client.S. classifies and analyzes the data. Use of such terms as a two sigma range only succeeds in confusing the client and very often over-emphasis on jargon can alienate the client. In other countries. There are three primary kinds of surveys: . For example.S.

cost. surveys that utilize the internet as a medium for gathering data will increase. Firms engaged in organizational marketing can make use of this same concept by implementing trade show intercepts. However.wizard. Trade show intercepts are similar to mall intercepts in practice except that these interviews are conducting during a trade show and respondents are first qualified. Second. what proportion of those whom we contact will ultimately participate in our study.mail surveys. not on demographic criteria but on criteria related to their employment.html.com/wwpr. we also look at response rate. As more and more consumers block their phone lines from solicitation. As adoption of the internet as a method of communication continues. and a growing category. These approaches will remain popular into the foreseeable future although such intercepts are a nonprobability method of gathering data. First. cannot technically be generalized to the overall population of interest. face-to-face surveys (personal interviews). http://home. and thus. A few interesting websites that maintain data on surveys done regarding internet use are: http://www. at present it is difficult to verify the background of respondents and this reduces the attractiveness of the internet for data collection aimed at gaining attitudes toward products and services.com/tellus.hot-topics. that is. telephone surveys. flexibility or to what extent is the interviewer able to adjust his/her questions to the respondent depending on circumstances.isc. this depends on the research questions and how straightforward the survey questions are. there will be many. websites that keep track of internet usage. that is. Surveys can be easily adapted and completed on the internet making the data collection process relatively simple. An exception would be when the study involves those who are intimately related to internet operation and use such as Webmasters. Mail surveys are usually the least flexible. Telephone surveys are still popular but are becoming more difficult to execute due to growing telemarketing techniques that many consumers attempt to avoid. As time goes on. telephone surveys will become more challenging to conduct.html and http://www.htm). more specialized. but may provide the lowest cost per completed survey. And finally. telemarketers often adopt a foot in the door approach by which they first claim to be doing a marketing research study in order to gain a segue into a sales presentation over the telephone. Using technology to record learning from marketing research projects . Face-to-face surveys are still very popular. how much will it cost us to acquire each response to our survey. That is. which presently are quite similar to mail surveys in terms of advantages and disadvantages. internet surveys.org/ds/new-survey. particularly the mall-intercept interview format in which interviewers are asked to solicit respondents from the general population of people who visit shopping malls. However. We often categorize the different types of surveys on the three dimensions.

Discuss this sentence and explain what the speaker means. to be realistic. it should not be performed. marketing information managers must accept the fact that most organizational learning that takes place will probably occur through information catching rather than information seeking. Write up the results of the focus group explaining what you learned from the focus group. If a study does not have the potential to improve decision-making. Leading companies often catalog research projects on their intranet so that future decision makers will have past marketing results available. there is more information in our contemporary environment available than humanly possible to read and understand. Discuss this statement and explain what the person who made the statement may mean. This practice enhances organizational learning substantially. and describe why each is important in performing marketing research. create a discussion guide and perform a focus group with some of your fellow students. Do a search on the internet using the term international marketing research. Chapter Five Exercises Do a search on the internet using the term marketing research. this does not necessarily mean that other people in that organization will actually read and make use of those study results. reviewing all posted materials for the sole reason of learning more about the environment should probably adjust her or his expectations. as the reader already knows. knowledge gained from a marketing research study is lost as soon as the project is presented and a decision is made based on the study. Although performing marketing research is expensive. it is often much more expensive NOT to perform.Too often. . Write a one-page summary of what you found. should be stored and made readily available for use in the future. Therefore. Write a one-page summary of what you found. if well designed and executed. Based on a problem/opportunity statement. Lessons can be learned by reviewing past research that was flawed. making note of the more interesting websites you located. Compare and contrast quantitative marketing research and qualitative marketing research. making note of the more interesting websites you visited in the process. However. However. What problems did you have in the process? Do you believe this method is useful for gaining useful information for decision-making about customers? Compare and contrast reliability and validity. Marketing research projects. The information manager who enters the current environment with expectations that his fellow workers will avidly adopt and use the company intranet. Focus groups are a growing technique used in qualitative marketing research.

Perform a college intercept survey (that is. most all participants will enjoy shopping at Dillard s and respond accordingly! However. or store in which our product is sold? probability sample data gathered in a way that makes findings in the data applicable to the remainder of the population of organizations or people in the population of interest nonprobability sample data gathered in a way that fails to make findings in the data applicable to the remainder of the population of organizations or people in the population of interest secondary data information collected by someone other than the researcher to address different research questions . Summarize your results and write up a brief overview of your survey experience. do they tend to respond in a similar manner? question validity the extent to which the question measure what is purported to measure that is.com/. attitudes towards shopping at Dillard s were not being measured in the study. we were measuring attitudes towards the interviewers. Search the internet using the keywords mystery shoppers and secret shoppers Check out the website http://www. given the research design. Describe how you believe this marketing research company derives revenue for its business? Describe who you believe would be the organization s customers. Note on Dillard s Survey : The survey conducted at Dillard s was highly reliable but not valid. Chapter Five Glossary marketing research the process of obtaining information with which to improve marketing decision making marketing research process the series of steps followed in order to ensure the validity and reliability of information gathering processes research question . if we ask several people the same question. meet students on campus and ask them to participate in your survey) by creating a brief survey form (one-page. The survey can ask about anything from campus life to favorite recreational activities of students. Why? Because. does it measure attitudes towards our product and not attitudes toward the interviewer.marketscore. if we say the question measure peoples attitudes towards our product.Apply the marketing research process described in the chapter to outline how you would assess the reaction of consumers to a new chocolate bar. five or so questions). Unfortunately.a statement of what general areas of inquiry the project will seek to answer research design the plan formulated to answer the research questions questions reliability the ability of a question to produce consistent responses of separate trials that is.

primary data information gathered by the researcher to address specific questions of interest to that researcher focus group a qualitative data gathering technique in which a small number of people are brought together to discuss a series of questions of interest Chapter Six How do companies decide what products and services to market? In this chapter we begin a series of chapters on the components of the marketing mix: Product. created and commercialized. concept development) and downstream activities (for example. Our emphasis in this chapter will be the product or service that the organization markets and how products are envisioned. and Promotion. advertising and personal sales presentations). intended and unintended. Distribution. bad and good. In this chapter. there are significant differences in how different companies approach this function. we will review the process of product development and how companies manage that process. In this chapter we will discuss the following areas related to managing new product development (NPD): Ø Ø Ø Ø the ideal climate for NPD the NPD process pitfalls in the NPD the role of product positioning in NPD . Price. Products include all things the buyer receives including the physical attributes (a new car) and the intangible attributes (a warranty and a financing contract). We will define product as all things the buyer receives in an exchange. While the process is similar for consumer marketers and organizational marketers. It is sometimes helpful to list the main (sometimes called salient ) attributes for purposes of performing both upstream activities (for example.

Integrity management does what it says it will do Stages in a typical new product development process (NPD) The NPD is basically an exercise in idea management. Or. However. A list of these characteristics follows. Resources adequate economic and non-economic support for the task c. Freedom the ability to explore whatever directions of inquiry that are needed e. frequently a new product team may skip around stages when playing with a new product idea. idea choice one or more ideas are selected for initial investment idea prototype development an initial working model of the product is created for testing and evaluation final version development a model of the final version of the product is created commercialization the product is put into production and the distribution of the new product to customers begins . a. Encouragement sincere emotional support for the task d. representatives of the organization explore the product idea and assess its overall potential (No physical product yet exists). concept testing the idea is assessed through discussion with potential customers or users.The ideal climate for NPD There are several characteristics that help describe an ideal climate for the new product development process. idea generation conceptualize a list of new product ideas idea assessment evaluate the ideas based on a previously created list of criteria. Thus. In this stage ideas that are judged not to meet the criteria are removed from consideration. the process proceeds from stage to stage. Goal clarity the objectives of the task are jointly understood b.

whereas. This point brings about an underlying problem in judging new ideas. a commonly used analytical CPS technique is the 5 W s and H technique. There are many creative problem-solving (CPS) techniques that provide extra stimulation for generating ideas for new products and services. in a context of the arts. We have found that business firms primarily put more importance on the expected economic returns (value) of a new idea than whether the idea is particularly novel or new. Some organizations broker or sell new product ideas that don t entail serving current or planned future customer segments. This is why a formal meeting for idea generation should be somewhat of an oxymoron in healthy. in an organization with a healthy environment for creative thinking. . creative organizations.Each stage should feedback information into the previous stages and this information should be organized and retained for future use. However. fit with the organization s business and marketing strategy (you may want to go back and review compatibility in the discussion of requirements for effective segmentation in Chapter Three. Ideally. The Couger Center for the Study of Creativity and Innovation has applied over thirty CPS techniques in organizations with success. That is. idea generation should be fun and naturally occurring. and only rarely is it necessary to have a formal meeting to generate ideas. Some typical criteria are: potential estimated demand for the product. CPS approaches fall along a continuum from intuitive to analytical. judges often look to novelty first and value later. in the arts. Novelty can usually be judged fairly early on. Rudyard Kipling even wrote a poem about this technique. New ideas flow from every day activities within the organization. However. cost/revenue expectations.) Many product ideas may not match with the firm s current product line and there should be guidance about what to do if this happens. this emphasis is usually reversed. For example. Creative ideas are judged on two criteria: Novelty and Value (or utility). The appendix to this chapter describes how to use each of these two techniques. value is sometimes difficult to assess for some time. new ideas abound. Idea generation The idea generation stage is the first stage in the NPD. The wishful thinking technique is a more intuitive CPS approach. Idea assessment Most organizations have extensive guidelines concerning the criteria for new product ideas.

We have mentioned two types of thinking: convergent and divergent. That is.S. rather than stating what right about it. Note that when involved in the ideal approach to creative thinking.com/ and review DeBono s Six Hats Method ). but because people in the organization are more oriented to idea destruction than idea construction . The NPD process should begin with divergent thinking and then apply convergent thinking with a careful recording of all new ideas as the process proceeds. people feel they have time to play with ideas and forget about hard work or the expected conclusion. in the U. we constantly and incorrectly equate hard work with no fun and something to be feared or dreaded. If customers are involved in this stage. in our culture there is often more reward for observing what is wrong with an idea. culture are most familiar. in the U. culture. This fact might trouble some managers. In this approach to thinking the mind or minds of those involved follows a linear process of reasoning ultimately arriving at a point of conclusion. Concept testing In this stage. described in Chapter Eleven. Unfortunately. projective techniques can often be used to illicit the opinions of customers about new product ideas without asking the customers directly. Often the Five W s and H technique. DeBono is well known for coining the term lateral thinking which is a type of divergent thinking (see: http://www. people who are expert idea destroyers are often rewarded informally and formally in many organizations. Particularly. Divergent thinking is quite different in that it requires the participant or participants to play with ideas going off in unexpected directions. employees play with the idea and have fun considering its potential. but the endeavor is usually well worth the time expended.S. organizations must establish a clear understanding with personnel responsible for new product development how these two dimensions will be assessed. The rationale underlying concept testing is that organizations are much wiser to explore the idea thoroughly before actually building a physical prototype.S. Convergent thinking is the type of thinking with which most people in the U.In order to have a steady flow of new ideas. can be helpful in fleshing out the new product idea.edwdebono. not because the idea isn t any good. Many great ideas with considerable positive potential are rejected every day in organizations.

the organization decides where its resources are best invested. this process requires a healthy climate for creativity and innovation within which employees can let go of personal ownership of ideas and judge the ideas on an objective basis. a final version of the product is created to assess whether or not to take the product into the full commercialization stage. one can see that a trial run of preparing dishes from supply to delivery and sampling should take place to identify possible bottlenecks and problems in the process before an item is adopted for inclusion in the menu. In some cases a restaurant may maintain a panel of expert tasters comprised of current customers to assist in determining which new dishes to put on the menu. The major criteria for choice are listed and an importance weight is assigned to each attribute.product-testing.com/). A multiattribute model similar to the one we discussed in chapter three is often used to make such decisions. this stage is usually worthwhile to identify possible problems but also to assess whether the organization should make a commitment to full commercialization. Obviously. companies often adopt a test marketing approach. In fact. it can prepare different variations of the items and let the restaurant staff sample the items. .Idea Choice During this stage. Idea prototype development During this stage working models of the new product are created to assess the feasibility of mass production of the product. if I restaurant is in the process of developing new menu items. in our restaurant example above. For example. As the reader is no doubt aware. In the case of physical products. it is easier with services. which in many ways is the same of final version development except that test marketing entails a trial run of the total marketing mix (note the following website that performs new product tests for clients via the internet: http://www. than with tangible products. We should note that the same activity could be engaged with services. For example. Then competing ideas are assessed on this basis. Final version development Because learning takes place in each stage of NPD. usually.

Lack of Freedom absence of the ability to explore whatever directions of inquiry are needed. Common pitfalls in the NPD Process Various pitfalls can occur during the process of new product development. Lack of Goal clarity the objectives of the task are not jointly understood. An easy way to identify these barriers to new product development is to apply a CPS technique called the problem reversal technique and reverse the characteristics of an ideal climate described earlier considering the outcome of any of these characteristics being absent in the organization. A notable exception is when a firm seeks full-scale commercialization as soon as possible with its product or service. This stage usually is implemented in small increments in order to further refine all systems involved in marketing the new product or service. a. The following list may help explain how an absence of these characteristics can discourage new product development. Examples of this strategy include new products for the cinema and products that are low in uniqueness and thus will be copied quickly by competitors if initially successful. so people in the process are confused and disagree about what they are expected to accomplish b. Lack of Integrity management repeatedly fails to follow through on promises made. Lack of Encouragement management does not provide sincere emotional support for the task thus employees on the NPD team feel unconnected and neglected by management feeling that no one values their activity d. Members of the NPD team constantly feel restricted in considering novel approaches to problem solving because they may be seen by others as not relevant and too playful e. Lack of Resources there is inadequate economic and non-economic support for the task so that the NPD process is doomed from its beginning c.Commercialization After the organization has refined its production and distribution systems. thus leaving members of the NPD team frustrated and neglected this if often the cause of total shutdown of creativity of the NPD team . it only remains to enter the commercialization stage.

Unfortunately some of these roles are counterproductive and should be purposely deleted from the process. likes to have fun. always hesitant to approve of a new idea Serious Sandra has trouble with Willie s glee and Inga s constant questions. Okay. the wild idea man lots of ideas. How would that work? Edith. the observer says very little but is engaged in the process and has many ideas which must be actively drawn out by others you mean by Negative Roles: discourage new idea generation and product development Doubtful David fearful. often offered as humor War Story Wally always has a story about how we did it back then Of course. Always has a snide comment about other peoples ideas.Several roles are commonly adopted on new product development teams. all of the positive roles are nice to have on a NPD team. the analytical constantly asks questions such as exactly what do that? . Although there are many different possible roles in the idea generation stage of the NPD. the peacemaker unconsciously reduces conflict by focusing on ideas. and Knowing Nick have no legitimate place on an idea generation or even NPD team.never approves of anyone s ideas but his own. not people Otto. However. gets bored easily with details Inga. The roles of David and Wally can be tolerated if other team members can cope with them. Doubtful David. that is a great idea! Pam. . the encourager may often say Yeah. let s get to work and stop playing around Patty the parent similar to Sandra but feels compelled to take the group in hand and manage it believes she is responsible Nasty Nick . constantly says. These roles or roles similar to them tend to be present on most new product teams and can either facilitate the process or retard it. Patty the Parent. we will identify and discuss a few of the most common roles: Positive roles: enhance new idea generation and product development Willie.

manufacturing. For example. Examining the relative positions of products in the marketplace can be of great assistance in new product idea generation. you already have a rich understanding of product positioning through your everyday activities as a consumer. still another segment. Mercedes-Benz. Lexus. While this approach introduces the potential for more chaotic group meetings. We often think in terms of new benefits we can provide customers or new ways of providing those benefits. marketing. Thus product positioning is a critical part of understanding how to focus the new idea generation process. and finance. engineering. at Daimler-Chrysler/US. vitamin enriched versus all natural (is this segmentation based on lifestyle? ). and should be able to use positioning concepts as a way to understand where your product should fit in in the marketplace. it also introduces the potential for a rich cauldron for the creation of ideas. and more challenging to conduct at the same time. if someone says Mercedes-Benz you might think luxurious and expensive. These groups are comprised of people with different educational backgrounds and different organizational areas. as a marketing student should be aware of segmentation approaches. you. Do a keyword search internet using product . Breakfast cereals are available in many different types: sugar-added/no sugar added (is this segmentation based on benefits sought? ). some cereals may encourage overall regularity like bran cereals. if someone says luxurious and expensive. a traditional benefit sought with new cars is personal safety.S. One new product design team in the car industry sought out and hired as a consultant. NPD teams have members from most organizational functions including design.Organizing for New Product Development Just as everyone in the organization is responsible for customer satisfaction. which make them more productive. everyone in the organization should be responsible for new product ideas. Primary success in managing the NPD Process has been realized through the use of Cross-functional Teams. think about breakfast cereals. and finally. you might respond by saying BMW. as well as. Thus. For example. or Cadillac. For example. Whether you realize it or not. The task of conceptualizing ideas about new products should not be reserved for the few people who are members of the NPD teams. a retired U. Then. For example. The role of product positioning in NPD Product positioning can be defined as the image of a product in the mind of the target customer in relation to competing products and other products of the same company. Air Force officer who had spent his career in aircraft escape systems to stimulate the team s ideas about new features in car safety.

Do an internet search on the term new product development and prepare a one-page summary of your findings. 3. Choose a new product and describe what new additional benefits it purports to provide to consumers that its competitors do not. Have you ever been in a situation at work or in a university organization in which you were attempting to identify new ideas that were creative? Use the dimensions of an ideal creative environment to identify which dimension existed in your situation and which ones did not. We have conducted studies on many different organizations and employees indicate that the larger problem for them personally is not new ideas. 2. Go to your favorite drugstore and outline the product positions that are used either for toothpaste or shampoo. Use the Five W s and H technique to flesh out your answer. You. (Be sure to put your keyword in quotation marks to avoid references to other. 7. Chapter Six Exercises 1. the keyword idea generation and describe your findings in a one-page report. see new products everyday. 6. 5. Be sure to try to focus your description on new benefits not new features. Describe the segment to which this new product or service will appeal and what additional benefits will accrue to these potential customers. Describe the different benefits customers are seeking in each different position. 8. non-related areas. . Do an internet search on the term idea generation and prepare a one-page summary of your findings. but the fact that they don t believe their new ideas will be adopted or even seriously considered by management. Conceptualize a new product or new service for which you think there is a need. 4. Create a skit to perform in your class that demonstrates the idea generation process and the ten roles in the process described in the chapter. as a consumer. Lack of ideas versus lack of climate for creativity: Is lack of ideas a sign of lack of ability of employees or a lack of willingness on the part of employees? Organizations with a paucity of new product ideas should not assume that their employees are just not creative. Explain how a market segment relates to a product position 9.positioning and perceptual mapping.

it is worthwhile to explore high technology as a separate area. including exploration. a. that industry applies very sophisticated know-how in many areas. but usually in specific areas. good and bad. Marketing. one might think of the bituminous coal industry as being very low-tech. given its impact on contemporary lives. Market-Driven Decision Making Maintaining Balance Between R&D and Marketing Managing in a Fast-Paced Environment Market-Driven Decision Making . many would say that the computer industry is very hi-tech while. it is technology-intensive. extraction and analysis. Manufacturing. c. On the other hand. although in some fields. Finance. However. and others product positioning . For example. the easier it is to identify the areas of that industry that are technology-intensive. or high-tech. such as integrated circuit creation and manufacture. All of this to say. b.Chapter Six Glossary new product development process the stages people in the organization go through in order to create and market new products or services product all things a buyer receives in an exchange.the image of a product in the mind of the target customer in relation to competing products and other products of the same company Chapter Seven Specific Challenges of Marketing High Technology The meaning of High Tech Although marketing high technology operates on the same basic principles. in reality. usually the more one knows about any industry. as an industry can today be considered a commodity. intended and unintended cross-functional teams product development teams that include representatives from all or most the functional areas in the organization including R&D. Thus. computers. We will use the term high technology to mean sophisticated knowledge associated with some general field of endeavor. high technology can apply to most industries.

Therefore. In order to understand the forces are work. and when in doubt. However. based on your perception that there are no additional benefits to be realized by using the product. can be called technology driven because the focus is on the various technologies that comprise the firm s Core Competencies (or basic abilities in production and operations). The Research and Development (R&D) function is comprised of individuals who are highly educated and skilled in areas relevant to the technologies applied to develop the organization s core competencies. a new product must provide additional user benefits. whereas. not the needs of customers in the marketplace. a firm manufacturing sophisticated test and measurement products may have personnel trained in electrical engineering and computer science . or the same benefits in a more effective way. For example. not features. Sometimes the benefits of a feature become so well-recognized that we talk in terms of the feature. most people know that a turbocharger on a car indicates added acceleration. A firm that thinks in terms of features and organizes accordingly. Maintaining Balance Between R&D and Marketing Competent and focused Research and Development is the life s blood of any high technology organization. while many new product ideas in the realm of technology-intensive products and services have seen success. we recognize the benefits of the feature instantly with out reference to the benefits the feature will provide. based on the customer s perception. For example. they gain this knowledge based on the prospective ability of these technologies to provide benefits to their chosen customers. a product was created for which there was demand based on its technical features. it is preferable to think in terms of benefits. always look for additional benefits. and you are more likely to really understand customers needs. if someone offered you a solar-powered razor. The only reason technical features ever are needed is that they are able to provide additional benefits sought by a group of customers. itself. let us review what we have said about new products.Many areas of high technology have a past based on the premise of build it and they will come. These core competencies then often drive the firm s efforts. Thus. However. strive to understand various technologies. not on the new way of doing things. their success was based on the additional benefits people received. you might say no thank you. itself. Meaning that the orientation was initially to engineering. Firms that are market-driven. if someone offered you a solar-powered palm-top device. and ultimately. this is the exception rather than the rule. you might consider based on the added benefit that you would never have to change batteries in the device. therefore. For example. First.

While this concept is certainly applicable in some cases. thus including certain features may not provide the benefits the customer is seeking. The next-bench syndrome will only be a dependable guide to product development in high technology when the target customer is literally a clone of the employee in the R&D department. a characteristic of the R&D function is that employees in that function often are very bright people who strive to add to what is known in their area of expertise. There is a concept called quality function deployment (see the following website for a relevant article: http://akao. this link must exist in order to guide the allocation of resources among competing organizational needs. Thus.in their R&D department. Therefore. Marketing can provide the link between the R&D department s knowledge of technology and how that knowledge can be translated into delivering additional benefits to customers. Marketing personnel are trained to uncover what benefits (as translated into features) that customers are seeking. the interface between the marketing and R&D departments needs to be clearly defined. The difficulty often encountered is that a search for knowledge solely for the sake of knowledge (basic research) is rarely sufficient in a for-profit business venture. s/he is a perfect model for what a customer will need. However.) Managing in the Fast-Paced Environment of High Technology While marketing can add value high technology environments.nasa.gov/dfc/qfd. not benefits. Also. Another shortcoming of the next-bench syndrome is that engineers and scientists often think in terms of features. a link between the focus of activities of R&D departments and certain benefits sought by customers must ultimately be recognized. These benefits may be specific as in a faster way to do analysis or general as in easier to use. they tend to be either sales-driven or technology-driven.larc. it is imperative that there is a clear understanding of the role of marketing. This rarely happens because most firms in high technology industries are not market-driven. it can lead to investment in products and services that are not commercially viable. a pharmaceutical firm might have organic chemists and microbiologists in its R&D department. The next bench syndrome is a well-known approach to creating test and measurement products that argues a test engineer in R&D also has the exact needs of his/her customers. so that when the engineer has a need in the area of testing and measurement.html that helps in this process of translating benefits into features. Some indicators that a high-tech firm is sales-driven are: v v The top executive for marketing has the title: Vice-President of Sales and Marketing The marketing department has no marketing research personnel assigned to it . whereas.

because some day. Product positioning for High Technology In no area is it more important to position products than in technology-intensive environments. it is usually more feasible to position along the lines of benefits sought because that language translates instantly to how the customer is thinking. There are exceptions as discussed above. you may be responsible for introducing marketing principles into an organization yourself. For a student of principles of marketing. This is particularly important if the user is not an influencer as described in Chapter Three. While the saying build a better mousetrap and the world will beat a path to your door holds some truth.v v Sales personnel have little or no input into what products are developed Sales personnel are paid primarily on a commission structure with little incentive to develop long-term customer relationships Some indicators that a high-tech firm is technology-driven are: v Marketing has little or no input regarding what products are developed v There are no formal programs for marketing research other than visits to present customers by R&D personnel v No sophisticated technologies are used to uncover present and potential customers needs v Marketing s primary role is seen as either sell what we make or find prospects to buy what we make While there are many exceptions. but. most frequently customers are seeking how their job can be accomplished more efficiently and more effectively. this simply means that you must have a sound understanding of what marketing is in the ideal world. Chapter Seven Exercises . Often the reason it is difficult to position a high technology product offering is that the product really doesn t provide any additional benefits to its target customers. we believe that most organizations operating in high technology areas are characterized by either a sales orientation or a technology orientation. it is the proper answer for success). However. The temptation is often to position the product in terms of features.

sophisticated knowledge associated with some general field of endeavor Market-Driven Decision Making an approach to choice that is based on identified desires for benefits among specified customer groups Quality Function Deployment a concept that attempts to translate customer benefits sought into product features Next Bench Syndrome the assumption that a designer or engineer will have identical needs of his/her customers thus. the engineer is in the best position to know what products to design and build .driven organization in a high technology industry sector. Agree or disagree with the following statement giving the reasoning behind your answer: Technology sells. What is the role of the Research and Development Department? Do a search on the internet on the term Research and Development and summarize your findings in a one-page report. Describe the responsibilities of the marketing department in a sales. Interview a manager in a high technology sector and discuss the meaning of marketing with him or her. Describe the responsibilities of the marketing department in a technology driven organization versus a market-driven organization. Chapter Seven Glossary High technology . Read the article on Quality Function Deployment cited earlier in this chapter and write a two-page report on how the material covered in this article would apply to marketing.Does high technology mean the same thing to you as it did before you read this chapter? Write your answer in a one-page essay.

Most consumers link price with quality and there are many organizations that carefully reinforce the quality of their product. and consider that commodity is a candidate for a product in the future (fresh air and open space. what would you think of buying an engagement ring at Bob s Really Good. Native Americans had to locate close to a water supply. communicate much about a product or service. we don t consider air to breathe as being a commodity we must buy. f. Today. When the pricing decision is made. Price can. c. Just a few years ago. that is only because there is a plentiful supply. Check out BMW s website and watch on of the movies there. For example. d. it may not be a candidate for being approached as a product or service for sale. demand for bottled water is growing rapidly. many people find that the air supplied by the great outdoors is not sufficient in oxygen. think about the things you consume that you presently don t pay for.com/bmwe/index.shtml). e. the organization must consider several factors. by itself. or for that matter. Supply (or cost) Demand (or revenue) Perceptions in the marketplace Competition and Competitors pricing strategies Government Regulation Company s desired pricing position Supply (or cost) If there is an abundant supply of a product or service. in Colorado. they must buy air that is rich in oxygen by renting oxygen tanks to enhance their respiratory systems. particularly how we perceive certain goods and services as candidates for commercial products. people consumed very little bottled water throughout most of the United States. b. Of course. Hence. check out the websites of marketers of prestige items and observe how the price variable is used to indicate quality). (http://www. for example). using price as a surrogate cue (or substitute indicator) for quality. For example. .Chapter Eight How is the pricing decision made? The price variable in the marketing mix is a critical element. Jewelry Store. Of course. at a yard sale. For example. time can change most everything. thus. These factors are as follows: a. but didn t worry about having to purify the water. But Cheap.bmw. So.

Thus. Also. and a price to pay. These products were heavily demanded before the advent of the electric refrigerator. Usually there are consumer expectations that help guide the normative price. particularly in the case where there is only one supplier (a monopoly). A positive price simply describes how much something costs whereas a normative price describes what something should cost based on an individual s or a group s opinion. we often see that demand for a product can decrease or even disappear if substitute products are introduced that are perceived as being superior in their ability to provide the benefits being sought.S. For example.. eight track audiotapes were popular for a few years in the late 1960 s and early 1970 s until a newer technology in the form of cassette tapes was introduced and vinyl records of recorded music have largely given way to the Compact Disk (CD) as the preferred medium. Normative prices do not have to be specific. water. a branch of government often sets normative prices. how many times have you heard that. the positive price was so high for selected drugs used to treat AIDS that some groups protested that the normative price was simply too high gaining societal support and eventual price decreases from the manufacturers of these pharmaceuticals. the nature of demand changes constantly for goods and services. Consider the amount of demand today for ice boxes (products for keeping perishable food cool). For example. my water bill is too high! This interaction between positive price and normative price is an ongoing phenomenon and of particular interest to marketers who attempt to create and sustain customer satisfaction. there are notable exceptions to this rule. . These protest essentially were observing that gasoline had reach a price that was above the normative price for most people. We have seen above where many products traditionally considered as free.Demand (or revenue) To justify commanding a positive price in the marketplace. However. Will the internet and MP3 technology eclipse CD technology eventually? Perceptions in the marketplace Perceptions in the marketplace can set both a positive price and a normative price in the marketplace. and electricity. consider the recent higher prices for gasoline and the various protests put forth by individuals and groups that the gasoline prices were too high and not right. For example. For example. most states have a public utilities commission or board that is responsible for overseeing the pricing practices of firms that provide the populace with utility service for natural gas. there must be some demand for a product or service. have given way to other identical or similar products for which there is now a strong consumer demand. In the U. Thus.

a firm may function in an industry in which there is an established price leader that perennially sets a price that other firms follow. This competitive model is called monopolistic competition and is applicable for most everyday consumer purchases as well as business-to-business purchases in the U. to state government consumer protection laws. Competition and Competitors pricing strategies In the U.S.While the marketer does not usually have control over the normative price. Third. For example.S.. before starting a business. s/he can usually control the positive price. Setting price can be a time-consuming process and we will discuss setting price later in this chapter. there is already a normative price for a product or service above which a price may be considering unfair or price-gouging. one must obtain various licenses directed at everything from local government taxation and zoning laws. the firm may have to function in a heavily regulated environment.S. First. This type of environment is called a monopoly (one seller). function in an environment that is highly regulated. Government Regulation Most firms in the U. This type of competitive structure is called an oligopoly (few sellers). although this may not always be the case. the grand- . if the firm functions in a market where there are many competitors offering similar products. sellers are able to draw differences in perception of such things as quality and prestige among products. the firm may compete in an industry or market in which although products are physically similar. competition can have several impacts on the pricing decision. this discussion should have already made the reader aware of the importance of understanding whether by custom of the marketplace. However. Second. Fourth. (pure competition). and finally. the firm may not have a choice about what level price to seek. if the firm is the only seller of a product considered essential to public welfare.

the initial pricing decision can be time-consuming although there are exceptions. Thus. whether high/prestige or low/value and attempt to guide its constituencies (customers. we find that most of that regulation was brought about by pressure on congress exerted by businesses that were competing with other businesses.html) or Rolex Wristwatches.rolex. Only a small portion of these laws were passed to address the protection of consumers. is needed.daddy of them all in regulation.dollargeneral. the Federal Government which regulates all interstate commerce based on constitutional power and has major regulatory responsibility for the health and welfare of employees. the pricing decision can be quite simple. For example.com/). Company s desired pricing position Based on a company s business and marketing strategy. most of this regulation. In this case. The Pricing Decision As pointed out above. the pricing decision is impacted by many different factors. supplies. the capitalistic system is unable in its present form to halt abuses to the environment by organizations and thus.rollsroyce. some companies have a high price/exclusive/prestige position (check out the website for Rolls-Royce automobiles (http://www.co. This body of law still allows various environmental abuses such as the Summitville Mind disaster in the state of Colorado. the rancher will be forced to accept whatever price his/her cattle bring at the auction. A company should choose its own price position.com/) will want to position itself quite differently than a marketer of exclusive products similar to Rolex watches (see http://www.uk/rollsroyce/index. while onerous. see (http://www. for example). and others) to the conclusion the company desires. In fact. the pricing decision is reduced to answering the question: Can I accept the price being offered at . In this case. As we reviewed earlier in this chapter. while others have a low price position (Wal-Mart. In pricing livestock. general public. a local store that sells everything for a dollar (for example. employees. if we explore the primary legislation that impacts pricing. A cattle rancher may take his or her cattle to the local auction house once a year to thin his/her herd of older cows and young calves. However. for example. it should determine its pricing position. So. the next time you hear businesses cry Get the government off our backs realize the businesses are really saying get the government off my back but make sure the government protects me from unfair practices by my competition.

based on the benefits they would derive from it. For example. Traditionally. Pricing models based on cost Probably the oldest model used. would expect to pay . Why not just use cost-pricing always? While the approach is simple and has the advantage of guaranteeing some profit margin. can be based on the expected utility (benefits) that customers in the marketplace expect to receive from acquiring our product as compared to other available products. Thus. the general lesson we learn from the approach is an important one. for years a keystone or key-stoning pricing policy has been used by many retailers to set price. Prices can also set using demand for the product or service as a guide. based on demand and what others will similar skills can expect to receive in a free market. the price based on a demand-oriented model. this approach uses cost to the seller to determine a selling price. That is. This approach simply doubles the cost and arrives at the selling price. demand. by using solely a cost-based approach the seller my miss opportunities for additional profit or set a price too high to realize adequate sales to even cover cost. the rancher then has to decide whether to seek another auction or liquidate his/her herd. Thus. if an analysis of demand indicates that buyers. it often defies practical application. the approach ignores the most important factor in pricing. While. Pricing models based on demand Witness salaries paid to professional athletes. internal rate of return pricing usually begins with cost determination and then computes different projected levels of return on investment for future time periods. we first assess buyers perception of how much they would expect to pay for a product or service based on the utility (or usefulness) they would expect to derive from product or service and combine these individual utility functions to create a demand curve for the product in question. This pricing method was adopted by General Motors early in the company s history and was applied for decades with their products.the local auction? If the answer to this question is no. Cost and Demand Oriented Pricing Models We may use cost or demand as a basis for setting pricing. For example. usually the pricing decision is much more complicated and should involve a careful consideration of all five factors listed above. How are these prices for athletic talent determined? Usually. However. Many other models used cost as a pricing basis. this approach is straightforward theoretically. for example. However. this orientation is applied in microeconomic theory by creating demand curves based a summation of individual utility functions for buyers in the marketplace.

prospective buyers perceive a difference in products based on the distinction or reputation of particular brands. liquor. However. Many product categories this factor to set price. Of course. Prestige pricing is often applied by organizations that attempt to create a sense of exclusivity for their product or service. if prices are raised. s/he might be either setting price so high there will be no demand. For example. what happens to quantity demanded? We would usually argue that quantity demanded goes down. For example. s/he can sometimes demand an incredibly high salary based on his/her performance the previous season. or foregoing considerable profits. is the basis for setting price based on demand in Microeconomics. This pricing approach assumes that the product or service faces a market structure characterized by monopolistic competition. Thus. That is. if consumer testers try out a new. The customary price is a price level that consumers are used to paying based history or normal expectations. if demand is very high there are times when we can virtually ignore cost structures. Thus. if a seller focuses only on cost to set a price. theoretically. a basic understanding of price elasticity of demand is called for. this at least gives the seller some guidance in setting price. this approach requires a time consuming analysis and it not as simple as just setting the price based on cost. and automobiles all have a prestige segment created through the perception of exclusivity an distinction. In some cases. revolutionary vacuum cleaner. There may also be a customary price for a product or service. wristwatches.$30. can you think of a situation in which raising prices will result in more of the product or service being demanded? It is imperative that the marketer have a clear understanding of how quantity will respond to price changes. the organization must commit to a long-term strategy Understanding Price Elasticity of Demand Price elasticity of demand is a method used in microeconomics to understand how quantity demanded moves in conjunction with price changes. For example. if a professional athlete has a remarkable season of performance. The expected price is a price that consumers would anticipate being reasonable for the benefits derived from using the product. For example. Of course. when asked they indicate that they would pay normally anticipate paying $500 or less for the product. although the seller cost structure would mean losing money at a price of less than $500. there may be an expected price.000 dollars for a new kind of testing device. Price elasticity of . This approach is known as the expected price approach and. in order to create and sustain such a market position. However.

we characterize demand as inelastic demand. elasticity is termed elastic demand. Price elasticity formula in symbols: e = % q/ % p Where: e = elasticity of demand q = quantity demanded p = price The elasticity coefficient of elasticity. Setting Price The firm must arrive at a price that will provide it with sufficient profitability while being palatable to the marketplace. A very simple way to look at setting price is to consider the markup. . has a domain from greater than a positive one. Of course.demand can be computed by applying a simple formula for e the elasticity of demand as shown below: Price elasticity formula in words: Price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. e. When we have an elasticity coefficient equal to one. to less than a negative one. Markup can be computed on cost or selling price. When e is less than one. We will present examples at the conclusion of this chapter. the ultimate price is related to all five factors that we discussed above. When e is greater than one. demand is said to be unitary demand.

or SP = C + . or . In this case. This approach is not as intuitive and applies simple algebra to first define and then determine the selling price. now markup itself becomes an unknown. initially. if we use the same gift shop and price structure as our example above. Using Markup on selling price to determine selling price Some students ask How can I determine markup based on selling price if I don t know the selling price! Good question! We simply define the markup on the selling price in algebraic terms. the cost is $14. That is. SP = $14 + . while our formula is identical to the computation using cost as a basis for markup (SP = C + MU). Using Markup on cost to determine selling price In this approach to setting price. we first determine the markup and then add it to the cost to find the selling price. we simply multiply the cost by the percentage of markup.4 of the selling price rather than the price. SP = selling price. Therefore. once you understand this approach you will be able to remember it.4SP or the selling price is equal to $14 plus .4SP. the solution to our problem would be SP = C + MU. and MU = percentage markup. . as well. That is. That is. But please don t despair. we find that. Substituting in the formula: SP = C + MU. SP = C + .We would use the same simple formula for each approach to computing selling price: Selling price equals Cost plus Markup or SP = C + M. her selling price will be SP = $14 + . However.4SP. that this approach may not make as much sense to you initially if you are not comfortable with basic algebra. if a children s book costs the owner $14. Now. where. For example. She will use the formula.60. Selling price can also be determined as a markup based on a percentage of selling price as described in our discussion of key stoning above.4 (or forty percent of cost) to determine the selling price of items in her gift shop (for example. C = cost. we apply the same simple formula. let us assume that the owner of a small gift shop desires to gain an average forty percent markup based on a percentage of cost on a of the products she sells in her shop. That is. and the markup is . now we must draw on simple algebra and define the selling price as the unknown and the markup as a function of the selling price. now the markup is determined as a percentage of selling price rather than a percentage of cost.60 = $19.4 times the selling price. Solving for the selling price under this approach.4($14) or $14 + $5. Please note. we would find the following. grouping the terms with SP together to solve the equation.

$14 + . Create a product positioning map (four cell matrix) for wristwatches. Why do different companies have different approaches to pricing? Use the websites above to support your answer.cartier. .4SP =. So the equation now reads SP = 14 divided by .4SP equals $14.33.6SP. Explain your answer in a one-paragraph summary. (http://www. This simple approach to using selling price as a basis for markup is used by many retailers and if one ever wants to market a product to retailers (or wholesalers. .6 . Inc.6.33 into our formula to check your answer. On the right side of the equation.6SP (Remembering that SP is understood to be 1SP. . high quality (prestige) position in the marketplace.4 from both sides. Thus selling price is equal to $14 divided by .asp. Explore the website of Cartier.com/weddings/wedding_planner. SP minus .6SP divided by . On the left side of the equation.6SP = $14 further. substitute the selling price of $23. On the least side of the equation. Use the dimensions of price and prestige.4SP minus .6SP is equal to simply SP). Explore the website of Timex.com/) and write a paragraph observing differences between the Cartier and the Timex sites. Now our equation reads .6 or $23.we subtract .com). remove the . for that matter) one should understand this approach to arriving at selling price. 1SP minus . (Cartie ) (http://www. Why would BMW go to such expense to produce these movies? What is the price the viewer of the movie pays? Remember. Now. Chapter Eight Exercises Check out BMW s website described in above in Chapter Eight (and watch one of the movies there ( ambush or the hire ).timex.6SP = $14.com/). Be sure to describe the positioning of each company s products after viewing their respective websites. Explore the website of the Shane Company and describe this company s orientation to pricing and prestige (http://www. Summarize your product positioning map and what you learned by doing this positioning map in a two-page report. price does not have to be economic in nature. Inc.) Explore the website for Walmart and comment on Wal-Mart s approach to price (http://www.shanecompany.4SP equals .walmart.6 by dividing both sides by . Recalling that we can simplify the equation . that is. and describe how this company attempts to create a high price.

Cost-oriented pricing procedures used to arrive at a product s or a service s price using the organization s cost of producing the product or service. Chapter Eight Glossary Positive price the present cost or marked price of a product Normative price a price that is considered fair by an individual or group Company s desired pricing position an organization should reach its own conclusion based environmental factors.Go to a local supermarket and a local department store and write a half-page report that observes differences in how prices are displayed at each store. College tuition is a price just like any other. Agree or disagree with this statement and explain your answer.procedures used to arrive at a product s or a service s price using the demand structure in the marketplace. where it should set price and communicate that position to its constituencies. Demand-oriented pricing . Price elasticity of demand the relative change in demand that occurs in response to a relative change in price Prestige pricing the process of setting a price based on the perceived exclusivity or reputation of the company name or brand name of the product or service Chapter Nine How do producers get their products and services to their target customers? This area of the marketing mix is usually called distribution simply because its main concern is to distribute goods and services to the target customers. .

Today. The strategy is typically adopted by many organizations that have not done sufficient research to understand the specific characteristics their target customer and how the customer would generally prefer to obtain the product or service in question.com). This is not to the say that there will no longer be a need for bricks and mortar banks. it does not provide sufficient time utility. A marketer may adopt a broadcast strategy in which products are sent out to customers in as wide a manner as possible. this e-book is delivered to the user instantly anytime the user desires to access it. these services required personal contact between seller and buyer. Previously. For example. Buying a book over the internet still requires that the book be delivered to the buyer before consumption of the product . Therefore. bonds. particularly small firms due to the cost.Organizations typically use a large number of strategies to get their goods and services to target customers rather than only one. there will less and less need for personal interactions between financial institutions and their customers. as technology develops.principlesofmarketing. Critical to understanding and managing distribution are the concepts of time and place utility. organizations that are production-oriented concentrate primarily on manufacturing their products efficiently (with the underlying assumption that there will be a demand for the product). for example a new pair shoes) and the term services to refer to intangible products (for example a visit to the dentist). For example. Salesoriented organizations focus on promotion and personal selling and are not typically concerned with the ideal product solution that the customer is seeking. We use the terms goods to refer to tangible products (those that can be seen and touched. . investment decisions (in stocks. it is not necessary for customers of banks to meet face-to-face with bank representatives. The action on the part of the reader is to gain ability to log on to the internet and go to our website (http://www. many people manage their investments through the internet and never work face-to-face with another human being. Technology oriented firms assume that customers are seeking the most advanced technology. since the introduction of the Automatic Teller Machine (ATM). For example. the development of the market for e-books may change this situation. Time utility can be defined as having the product available when the customer would prefer to acquire it and place utility is having the product available where the customer would prefer to acquire it. Although traditionally services have been delivered through a direct marketing channel or directly from the seller to the buyer. This strategy is usually not efficient or effective for most firms. thus these firms focus on the most advanced way of doing things whether the customer is seeking this solution or not. for many products. or other investment options) historically required a face-to-face meeting between the investor and his investment advisor. Financial services offered by banks are similar in that. it is generally faster to buy a book from a local retailer than to obtain the same book through the internet. While the internet can provide the ultimate in time utility for some products or services (for example. those that cannot be seen or touched during the process of providing the service. All of the organizations above often adopt these respective orientations because they have insufficient knowledge of customers or concern for customers to engage in a focused distribution strategy. As the practice of direct deposit and other electronic forms of banking grow. e-mail). many services are now be delivered directly to the customer. However.

while distribution options usually exist. few do. five rights don t make a wrong thus the only viable way to know what the target market wants is to understand them well enough to answer the five rights. but in reality. This has to be a strategic or long-lived commitment with adequate resources devoted to accomplish the task. Focused Distribution Strategy Five Rights don t make a Wrong A focused distribution strategy is driven by customers needs. the organization seeks to deliver the right product with the right service. We say. if we market a product that customers would prefer to buy any time of day or night and any day of the week. we would strive to make the product available to customers on an around-theclock basis. This distribution strategy requires that the firm commit to learning about and caring about its customers. Again. frequently some creativity is required to identify and weave these options together into an effective system that provides high satisfaction levels to customers. and thus is created in relation to when and how customers would prefer to buy a product or service.because some segments of customers will still feel it necessary to visit personally with the bank s representations. Options for focused distribution in the consumer market . to the right customer. thus. there are usually many options available to create and effectively manage distribution. Thus. Options for focused distribution In the U. have grown to expect that some types of stores will always be open and thus many leading market-oriented organizations have responded to that expectation and many others have not. Many firms advertise that they have this commitment.S. the demand for all products and services does not occur on this basis. Note that many Wal-Mart stores adopted this approach to ensure that Wal-Mart products are available whenever customers might seek them and that Walgreen drugstores have adopted the same strategy. For example. not all customers for most products have the same wants and needs. Of course. Over the last few decades people in the U. the idea of being open to serve customers virtually all of the time is not a viable strategy. For many marketers. because the distribution function ( Place ) tends to be the least flexible component of the four P s in the marketing mix..S. at the right time and right place. For example. emergency medical care for people and their pets might constitute such a product (service). usually. Thus.

cheaptickets.com/) and Motel Six (website: http://www. This definition clearly identifies most shoppers at K-Mart as consumers.com/).com/). Goodyear Tire Stores (http://www.goodyeartires. as more and more people locate and book travel arrangements through internet providers (for example. For tangible goods (products). the alternatives fall into two basic options: (1) direct distribution and (2) the use a one or more marketing intermediaries. the buying behavior of consumers and those representing organizations differ considerably. A notable exception is the delivery of travel services in which at least some component of the service (finding an appropriate flight and booking it) is sometimes delivered via a marketing intermediary (travel agent).marykay.S.motel6. Travelocity (http://www. for example. we defined a consumer as someone who buys for their own.com) and Cheaptickets (http://www. This website will be of interest to most women in business if only in its educational attributes regarding organizational mission and culture. Motel 6 delivers its services directly to customers via an individual or company that has agreed to certain guidelines articulated in a franchising agreement. Organizational purchases are often more planned and driven by predefined specifications.travelocity. Direct distribution is an approach in which the producer also manages distributing the product to the consumer. . because most services are distributed directly from the producer of the service to the consumer of the service.. Although there are literally dozens of different alternatives for distributing products and services to consumers. there is becoming less demand for personal contact with travel agencies except in case of more complicated travel plans and travel plans for inexperienced travelers.html) operates a network of over 750 company-owned retail outlets in the U. The service component plays the major role in each of these businesses which is not surprising. thus company has chosen to own and operate its own retail stores and thus engage in direct distribution. if we consider Sam s Club and other similar organizations. Examples of direct distribution include Mary Kay cosmetics (website: http://www. However. personal non-business use. Why does this matter? As indicated in an earlier chapter. Mary Kay operates on a direct distribution system that depends on the performance of a large network Mary Kay Consultants who are independent contractors to Mary Kay.Earlier. whereas consumer purchases include a larger portion of unplanned purchases.com/about/employ/open/retail-06. This workforce is close to a million women who operate as independent business organizations. However. a portion of their sales come from those who are buying for businesses or institutions.

no doubt. the processing of the fish brought into port every day. and locating and catching fish. The above example would represent a distribution channel in which both wholesalers and retailers are needed as marketing intermediaries. your primary concern and abilities would be related to operating a fleet of boats. be an organization that has as its primary concern and abilities. the next time you go to the grocery. Why are producers who use direct distribution in the minority? Because there are many marketing intermediaries (called middlemen in the past) that provide better service and are much better equipped to provide distribution services than the producer. so that when a retailer advertises s/he cuts out the middleman. to buy our cantaloupes. that provide essential services which usually add value to products that we. However. are distributed through marketing intermediaries such as wholesalers and manufacturers representatives. Whereas. as consumers desire to purchase. the above discussion should help you conclude that while marketing intermediaries are not always use.Given the above examples. Although. realize that the reason you are able to buy exotic products from all around the world depends largely on the services of marketing intermediaries.S. there are different firms engaged in the different endeavors it requires to produce and deliver the product to the consumer s door. as a fishing operation one organization could do both fishing. . we have performed a service usually reserved for a marketing intermediary. if you operated a fishing fleet in Alaska. the transportation company that moves the melons from Rocky Ford to your home town. In the grocery industry. The key to the value of a marketing intermediary is that the marketing intermediary provides services with which we as consumers cannot do without. Colorado. In fact. Thus. and the retailer who grades the melons and places them for display in his/her grocery store. a wise person would spend his/her time focusing on this aspect of the business. providing consumers with more place and time utility. there would. For example.com) provide everything from training classes in merchandising to recipes for new dishes to their customers. They don t necessarily make distribution more expensive but they do often make it much better. companies like Sysco (http://www.fleming. this is not the case and most products in the U.com/) and the Fleming companies (http://www. The only time when a marketing intermediary is not needed is when we as consumers are willing to perform some of the services that the marketing intermediary performs. as well as distributed products from producers to retail grocers.sysco. there probably will be at least two intermediaries involved. in this case. it might not have the resources to peform both activities. and processing. Note that a retailer is technically a marketing intermediary. So. if we are willing to drive to Rocky Ford. it is unlikely that claim is true because. Clearly. in most industries. one might believe that most large companies choose to deliver goods to their customers through direct distribution. For example. technically the retailer IS a middleman! In summary.

but the main option other than the direct channel.wwid.As the reader can see. Industrial distributors are marketing intermediaries that service organizations by providing them with products and services in a convenient manner.S.com/search?p=manufacturers%27+representatives&n=25). these two types of markets usually make use of different kinds of marketing intermediaries.yahoo. Examine the following URL address to find the websites of different categories of manufacturers representatives. alone. thus. researchers have identified several different types of products based on consumer behavior. of which there are many different kinds. For example. manufacturers representatives are used widely in organizational markets than they are in consumer markets. is the option that includes the use of marketing intermediaries. That is. a manufacturers representative in the building materials industry might work for several different producers of structural materials for building homes. For consumer products. the purchase decision if not a high involvement purchase surrounded by considerable .S. the firms are often hidden from consumers since most are located in industrial districts within cities. It is helpful to consider three characteristics when attempting to place a product or service in one of these categories. See the following website for an example of an industrial distributor: http://www. pizza would be classified as a convenience good because most consumers buy it in that manner. A manufacturers representative is an independent organization that represents a group of different producers. First. and specialty goods.. there are many different options to distribution. at least in title. The manufacturers representative will usually have as clients several different producers that manufacture products used in the same industry or application.com/. We will describe four of these types of consumer products: Unsought goods. we must realize that we classify goods and services on what behavior we would expect from most consumers. when most people buy pizza. (http://search. shopping goods. convenience goods. However. For example. Different types of products in consumer markets It is helpful to study the type of behavior in which consumers engage to better understand their wants and needs when it comes to product or service delivery. There are literally tens of thousands of these firms in the U. Options for focused distribution in the organizational market Although there are instances in which the distribution channel to provide satisfaction to an organizational market is identical to the distribution that will provide maximum satisfaction to a consumer market such as Sam s Club in the U.

com/kkcollect. gasoline for your lawnmower). We also consider the price and the personal significance of the purchase.html also http://www. Therefore. Krispy Kreme Donuts: http://www.com/) or a long-standing involvement with the product (for example. because these directly impact how much time you are willing to spend on the making the purchase. Shopping goods are those products that are purchased less frequently for which the average consumer is willing to spend some extra time in the shopping process.bluebell. Thus with shopping goods the consumer will usually compare different brands and suppliers before s/he makes a purchase decision. when buying a new CD player for her car. This preference may be based on prestige of the supplier (for example. While you might say: I only eat the pizza baked by my favorite local pizza place: Rubino s Pizza. they are . For example. a consumer may want to compare several different brands and stores before she decides on which CD player to buy. normal consumption conditions (for example.perceived risk. but how most consumers buy pizza. One can see that with convenience goods. not a special occasion or of particular personal significance) and that is 3. Situational effects are also important to consider. The added time the consumer is willing to spend will vary directly with the cost of the new product and the personal significance (perceived risk or situational impacts) of the purchase. purchased frequently. Unsought goods are those products that consumers will not normally buy during regular shopping activities.com/). including time pressure and occasion of the purchase because each of these factors affect the personal significance of the purchase. we define a convenience good as a product or service that is purchased with: 1. you should realize that the pertinent question is not how you personally buy pizza. time and place utility are extremely important because the most available supplier of the product may be the one that is chosen solely on location of the supplier (for example. Rolex wristwatches http://www.krispykreme. While we all have need for these products and services. the family doesn t usually decide to spend a nice spring day shopping for burial plots and funeral services. For example. Specialty goods are products that we purchase for which we have a definite preference for the supplier.rolex. minimal amount of time expended under 2. We would observe the effort put into the purchase including how much time is spent on the purchase and how often the product is purchased.

trees that have been cut into boards in a lumber mill. for example. http://www. thus the intended use is to promote the gift shop and increase its sales. iii. For example.com/ ). Raw materials .not necessarily pleasurable to consider buying. The following are brief descriptions of the different types of good and services in organizational markets: i. thus we in one way or another avoid buying certain products and services during our normal shopping activities.northwesternmutual.sci-corp. not on behavior observed among organizational buyers and decision makers. For example. Marketers of unsought goods choose intriguing appeals. researchers have classified products. Intangible goods. Most of us only buy a battery when we believe our present battery most be replaced. if you own an automobile. spark plugs or windshield wipers in a new automobile. for example. Component parts products do not undergo any change in form utility and appear in the final product in identical form. for example. jet planes for a commercial airline carrier or ovens for a bakery. a local gift shop may need to buy a new neon sign for its window to draw the attention of passers-by. (for example.com/ . thus.prudential. . assuaging grief of family members) or financial risk (dramatizing the consequences of financial loss). The gift shop is buying the neon sign. usually based on perceived risk. look at http://www. ii. iv. Process materials products that have undergone some change in form utility.products that are in their natural form like salmon from the sea or coal from the earth. Thus the types of organizational products we identify are based on what purpose the organization has for the product or service being acquired. Different types of products in organizational markets In organizational marketing. Major equipment products for which the basic processes of the organization depend. but on the intended use of the product or service. think back to the last time you bought a battery for your car. but to use in the conduct of its business. either of personal risk (for example.com and http://www. such as life insurance also fit into this category. not to resell. the good is unsought in normal shopping activities.

List three different products that belong in each category of consumer products and explain why you think most consumers would classify them this way. Examples would include oil and grease for maintaining major equipment.v. Accessory equipment products that are used to facilitate and maintain basic production and operations of the firm. Many futurists expect present trends toward more time and place utility to continue. Why do are there different approaches for classifying consumer products and organizational products? Can you think of products that can fit into either area? Explain. personal nonbusiness use). Explain how drive-through windows for fast-food restaurants relate to place and time utility.html). vii. Visit the Sysco Website and write a one-page essay on what you found there (http://www. vi. .com/kkcollect. What are marketing intermediaries and why do most business people believe it is imperative in our economy to have marketing intermediaries? Are retailers (organizations that sell primarily to people who buy for their own. marketing intermediaries? Explain.sysco. Supplies these products are similar to convenience goods in the consumer products typology in that they are of minor cost and are consumed frequently. a hand drill used by a tent manufacturer. For example. and write a one-page report on what you find there.com/). Why are Rolex watches only distributed through selected jewelry stores and not K-Mart? In a onepage report describe how does this example identifies one of the common reasons for distributing a product through only a few outlets.krispykreme. Business services intangible portions of the company s basic processes that enhance and protect its operations for example security services and cleaning services Chapter Nine Exercises Read the history of Krispy Kreme donuts on the Krispy Kreme website (http://www.com/). Do you agree? Why or why not? Visit the Mary Kay website and write a one-page essay summarizing what you found there (http://www.marykay. Give two examples of other similar company success stories you find on the web and describe them in a one-page essay.

although that is incorrect. . Search the internet with the keyword industrial distributors and write a one-page summary on what you found. Often as a result of inadequate knowledge about customer needs and wants and characteristics Focused strategy a distribution strategy based on delivering the product or service based on performance of upstream marketing activities to determine the five rights of the organization s product or service.Give examples in which a personal computer would be major equipment for one organization and accessory equipment for another. Direct distribution an approach used by some organizations in which the organization itself is responsible for delivering its products and services to the customer. Why are consumers not more familiar with this type of organization? Is a premium sound system in a new car a component part or accessory equipment to an organizational marketer? Explain why most consumers would answer accessory equipment. Chapter Nine Glossary Broadcast strategy a distribution strategy based on delivering the product or service to customers on as a wide a basis as possible. Marketing intermediary an independent organization that assists producers in delivering their products and services to their customers Manufacturers representative a type of marketing intermediary that serves several noncompeting producers of complementary products by accessing and maintaining relationships with a wide variety of customers in business-to -business markets Industrial distributor a type of marketing intermediary in business-to-business that services organizations by providing them with products and services usually in a specific product category such as electrical or plumbing supplies.

although most consumers are aware of the product in over two hundred countries (see http://www. Coca-Cola must continually work hard to keep its name in front of consumers and remind them that the product is available and that it will provide the consumer with certain benefits. therefore. a strategy to be employed to communicate with that target audience and accomplish the objectives. often one or the other has taken place prior to the creation of a promotion program.com/). When you think of target markets. a description of the benefits to be delivered to that target audience third. realize that they are always changing. new Coca-Cola ads while persuading and reminding a portion of the target market. and 4. However. Reminder advertising is often placed by market leaders to support other promotional campaigns that are in progress. 3.com/). That is. it would first attempt to perform number four above. This process may seem backwards to some who would expect to make the media decision first. For example. most consumers in the U. culture are aware of and understand the benefits of Coca-Cola and where to find the product. So. Promotion takes place in the intermediate and later stages of marketing planning because promotion requires: 1. People age and change over time. a market-driven firm realizes that is must perform the first three steps prior to media choice. Thus. target markets do the same thing. first a definition of the target audience second. persuade. fourth. . the role of promotion has been identified as to inform. While these stages are always necessary. However. Definition of the target audience Traditionally. 2.cocacola.cocacola. so informational advertising may not be necessary (http://www. also continually inform a certain part of the target market who due to age or culture are not aware of the product yet.Chapter Ten What are the options for promoting products and services? We have already discussed the importance of performing upstream marketing activities prior to performing downstream marketing activities. and remind. clear objectives about what the program aims to accomplish.S. if an organization is sales-driven. Coca-Cola is committed to constant advertising.

Objectives for promotion programs can be either sales-oriented objectives or communicationoriented objectives. Clear objectives about what the program aims to accomplish Setting objectives for promotion programs is a critical part of achieving success. psychographic. For example. This is particularly true with today s media saturation and intense competition. if our target market first seeks the minimization of financial risk in their purchase. Description of benefits to be delivered to the target market It is imperative to understand what benefits (not product features) the target market will receive by buying our product or service and this description should be crafted in words that communicate these benefits to members of the target market. we caution promotion managers to avoid an approach that is too rigid and quells the creative process. we might choose to provide a thirty-day money back guarantee. we can either identify specific targets we wish to meet in terms of increased sales or specific targets we want to attain in terms of communicating with the target audience for the program. Thus. If we don t really understand our customers well. in practice. the target audience for consumer products is usually defined in terms of demographic. setting objectives sometimes destroys creativity associated with the promotion program. As we discussed in Chapter Three.History shows that market leaders can quickly lose their competitive position if they don t constantly keep their name in front of their target market. while we strongly recommend formulating objectives that will guide the promotion program. we create marketing programs to communication with members of the target market. the notion of empathy with the target market becomes critical. Thus. if our target market is more interested in minimizing technological risk in their purchase. Strategy to be employed to communicate with the target audience . Once we have clearly defined the target market. geographic. we might choose to decrease this perceived risk by providing a twelve-month technology trade-up program or adopting promotion comprised of user testimonials dealing with the product. That is. Whereas. and behavioristic attributes. it will show in our attempts to communicate with them. However.

an organization might adopt a direct mail strategy if it finds that direct mail would be the best way to reach its customers. This leaves no doubt regarding the word s meaning. This practice is call integrated promotion management or integrated marketing communications. the reader provide an explanation regarding how the strategy would be implemented. advertising usually accounts for the largest proportion of the promotion mix. knowledge (of certain attributes or benefits) or preference. On the other hand. Each of these measures can be used to assess how effective promotional efforts have been in attaining their objectives. personal selling traditionally comprises the largest expenditure for organizational markets. a company might discover through research that their target customers seek reliability above all other attributes thus the organization might adopt a strategy of emphasis on reliability. The Promotion Mix Traditionally. use of the word strategy has no guidelines and can confuse the issue. . When creating a promotion program we attempt to meld the four elements together in a cogent way so that each element supports the other and provides the target audience with a consistent message over time. we employ a promotion mix to effectively budget and distribute funds for promotion. Hence. strategy can refer to an overall game plan or orientation to the promotion program. whereas. or other characteristic of the article printed. We recommend that when the reader uses the word strategy. The promotion mix includes the following components: a) b) Advertising paying for space in a medium such as a newspaper or trade journal Personal Selling a face to face contact with a customer c) Sales Promotion any program that provides additional incentive for the customer to make a purchase d) Publicity obtaining space in a medium such as a newspaper in which we do not have to pay for the space based on the newsworthiness. the word strategy is used in several different ways in promotion management. First. Communication objectives can be driven by measures such as product awareness. For organizations marketing convenience goods in consumer markets. For example.Just as in planning.

weddings. Marie realized any funds spent for promotion must yield results in the form of increased sales. Colorado. Thus. Having worked in the shop part-time for many years. after the marketing research study. a strategy to be employed to communicate with that target audience For example. She commissioned a small marketing research study with her former university to explore her customer base. Marie believed that most her customers were from the local Manitou Springs area although a significant proportion of customers in the summer were tourists. Marie accepted this challenge although she had two small children and was a single mother. after earning a college degree with a major in marketing. The first step for Marie was to determine who the target audience for any promotion would be. there are four steps to creating successful promotion programs: 1) 2) 3) 4) a definition of the target audience a description of the benefits to be delivered to that target audience clear objectives about what the program aims to accomplish. Thus. Marie defined her target audience as Present customers with a ZIP code in the Manitou Springs city limits and ZIP codes contiguous to the Manitou Springs ZIP codes. Over sixty percent responded affirmatively to this question indicating that one of their main buying motives was to support local businesses and that the customer enjoyed visiting with members of the Ruohonen family. most customers were already familiar with Marie s Gift Shop before buying from the shop. was asked by her parents to manage the gift shop so that her parents could retire. Marie also realized that she should begin to keep a Customer Information System that would enable her to communicate regularly with her present customer. Marie s parents opened the shop and named it for their newborn daughter in 1968 and the shop has operated continuously since then. Another of the questions in Marie s study was Why do you make purchases from Marie s Gift Shop? One of the responses to this question on the survey was I am familiar with the Ruohonen family. The study also indicated that most of the customers purchased gifts for immediate family and friends for traditional gift-giving occasions including birthdays. . Two of the research questions for this study were (1) Who are our present customers and (2) why do they buy from us? The marketing research study found the answers to these questions were that over seventy percent of the current customers were from the Manitou Springs area and had been customers of Marie s Gift Shop for over two years. Marie.Creating Successful Promotion Programs As dicussed above. and Christmas. Marie s Gift Shop is a small store in downtown Manitou Springs.

usually audiences are measured by using a figure known at CPM or cost per thousand (the M denotes use of the Roman numeral designation for one thousand. However. Some researchers estimate that by the age of eighteen the average person in the U. it is much more challenging to understand how that person must feel. Marie s decided to adopt this approach as a long-term strategy and committed to this strategy for a three year period. For example. advertising . non-personal messages. Empathy is simply being able to understand another person s feelings are reactions to events in his or her environment. adoption of a promotion strategy should not usually be seen as short-term. advertising is sometimes very important to us as individuals. It is easy to feel sympathy for someone who is only twenty-one years old but dying of cancer. That is. What are the implications of this staggering statistic? First. We will discuss this promotion program in more detail in a later chapter. Why? First.S. one must understand and develop the attribute of empathy. b. these benefits were used as a guide for creating a promotion strategy for Marie s Gift Shop. was viewed well over one million advertisements and that figure is probably very low if we consider all commercial messages to which we are exposed in the U. advertising may possibly provide the lowest cost per contact. the three primary benefits customers were seeking were determined to be: a. However. However.Therefore. most of us consider ourselves experts in advertising because we have seen so many ads.S. Overview of Advertising As indicated above. the initial outlay for an advertising campaign may be the most expensive option for promotion. more expensive alternative for marketing communications. thus. This example demonstrates how fundamentally unimportant most advertising is to the average person. we often use advertising as a way to identify right and wrong behaviors: . usually placed in a mass medium. c. you will find many different references and categories presented there. advertising can be defined as communicating with target audiences through paid. to be truly expert. Advertising is the easiest but absolutely.) See the appendix to this chapter: An easy guide to audience measurement. However. If you do an internet search on the word. experience personalized service from a familiar source support local merchants like the Ruohonen family obtain a unique gift After a meeting with a local marketing communications firm.

it only remains for the marketer to explain how this solution will provide the benefits sought. has said: (true) .com/news_and_features/special_reports/) to get some perspective on how TV advertising has changed and developed over the last several decades. almost any career in personal selling is going have many disappointments if one defines a customer not saying yes instantly as a disappointment. a career in personal selling can yield a most rewarding professional life if a person can develop a strong self-esteem and truly believes in what s/he is selling. some ads give us cues about what is cool and what is not cool in everyday behaviors. ( review: http://www. Review the following article found at: http://www. In one way the students are correct. For example.htm Also.productivity. For example.both fundamental and minor behaviors in society.com/ and click on the index and go to the retromercials section found in Tvland (http://www. As Peter Drucker. low paid career full of disappointments and lack of personal freedom. marketing involves almost no selling. You might want to access http://www. Why? I think they see personal selling as a low status. thus easily avoiding the law. as consumers. we rarely experience a solution that is so well researched or a seller who . The tobacco industry continues to advertise heavily through alternative means that avoid regulations of the Federal Trade Commission (FTC). while continuing to advertise a product proven hazardous the health of its users. Drucker refers to the fact that if a marketer does his or her job and understands and delivers a product or service solution that the customer is truly seeking. a leading writer in marketing and management.jhtml) to see commercials that for the most part are over thirty years old. Can you identify how cool behavior and uncool behavior have changed in the last few decades? Also.nickatnight.htm Overview of Personal Selling Personal selling is the worst nightmare most of my marketing students have about a career in marketing. Mr. and the customer is then willing and eager to buy.net/Company Profile.tvland.gov/os/comments/tobaccocomments2/siegelmichaelmdmph. the reader might want to review the website of a company that has as its core business the placement of products in various media vehicles.com/ and also check out a history of advertising at (http://www.ftc. note how the motion picture industry continues to accept money to feature its products in films. However.adage.adage. you might want to access Advertising Age Magazine online at http://www.com/TVL. Why does this sound so unrealistic to many of us? Because.

jhtml) to observe the efforts put forth by this company to be truly customer-oriented. due in some cases to the efforts of new car manufacturers. As we gather more information about what customers we can better satisfy. this process is made much easier because the customer profile created early on in product or service development has already given clear definition to our target customers. family. we must remember that if an organization is truly marketing oriented. New and used car sales are examples of product categories that used the churning method for decades. This approach. used historically with many consumer products is called churning and is adopted by sales driven firms.values the customer this much. In many organizational markets. most companies in the U. it is no surprise that many consumers are dissatisfied with the product and services they buy. the process begins with many different possible customers. and narrows over time to more specific customers who are first identified as qualified prospects. The delivery system of the organization must strive to maintain flexibility . Investing in retaining current customers is much more cost-efficient than ignoring current customers in search of new customers. but in the future it will be essential. check out the My Saturn section on the Saturn website. including some follow-up activity.S. However. Thus. Therefore. New car manufacturers are recognizing that their long-term success depends on building and nurturing a diverse customer base. we continually use this information as feedback to more precisely align our solution with the benefits sought by our target market. although.saturnbp. the remaining firms that are solely sales-driven will eventually disappear from the economic landscape. For example. A qualified prospect can be defined as an individual. After identifying qualified prospects. organizations follow a process from the time preceding customer contact to the time following the sale. that is. as competition forces organizations to be more customer-oriented. As mentioned earlier in the text. this follow-up stage is called post-sales support and is one of the most effective methods for keeping customers. this practice is becoming less popular. locating and identifying qualified prospects becomes a primary function of the marketing or sales effort. or organization that is likely to be seeking the benefits we seek to provide and has the ability to obtain those benefits by entering into a relationship with our organization. so that their primary concern is not customer satisfaction but selling the customer what the company has available to sell. Today this commitment is still rare. However. are sales driven and not market driven. Traditionally in personal selling. Thus. Many firms view the personal selling process as a sales funnel. Check out the website for Saturn automobiles (http://www. while the sales funnel begins with a profile of our target customer and the benefits that s/he wants. This requires on-going customer research and an honest commitment to customers in all production and services systems that are responsible for delivering customer satisfaction. it remains to contact these prospects and consult with them about our chosen solution to their product needs in terms of the benefits they are seeking which we aspire to provide.com/index. the number of prospects decreases as we proceed through the sales process.

if one reviews the local Sunday paper. For example.html).throughout the personal selling process and be capable of adjusting the product solution to meet needs of customers as the organization gains better resolution about what those needs are exactly. sales promotion ends up being a large. However. a response to feedback from customers in a restaurant that this place it too smoky. especially high technology products. we must continually adjust our product or service offering to better provide those benefits. only a very small percentage of these coupons are ever even seen let alone exchanged by consumers. and many other promotional activities. one will find almost countless coupons included by advertisers to encourage customers to buy. These activities are used both in consumer markets and organizational markets although the methods often differ.org. For more information on personal selling and sales management consult the two topics at the following website: Overview of Sales Promotion Because we define sales promotion as any added incentive designed to inform. see http://www. In organizational markets. While this response is not as easy with tangible products. companies often spend large amounts of money on trade shows which are regional.key3media. catch-all category including coupons. While this approach to modeling the process if helpful. You might also want to check out this website that operates in the United Kingdom (http://www. Most traditional models of the selling process have the process culminate in a presentation and then proceed to a feedback stage that occurs after a presentation and purchase. it denies the required dynamic nature of customer relationships and often is too inflexible to be of maximum use. as we learn more about exactly what benefits our customers are seeking. see http://search.yahoo. special offers. national. and international expositions that usually share a common theme such as an industry (for example. customer sweepstakes.isp. it is an industry sponsored web presence. organizations marketing such goods must always aspire to solicit this kind of feedback and respond to it as quickly as possible. For example. That is. .com/comdex/) or some other theme (for example. persuade or remind a certain portion of the target market. must be forthcoming very quickly if the restaurant is to be successful.uk/welcome.com/search?p=international+trade+shows&n=25 ).

employees. We say audiences because at any given time. and the general public in several different contexts.publicity. the organization may be communicating with its customers. Obtain a copy of a local newspaper.Overview of Publicity Publicity differs from advertising in that the advertiser does not pay for the space in the medium or publication with publicity. This is not to say that there will not be creativity in individual marketing communications efforts.gazette. and see if you can find an article included in the newspaper that you believe was published without a charge to the advertiser based on its interest to readers. competitors. Formulating an Integrated Marketing Communications Plan The primary challenge in promotion management is the integration of all activities directed at communicating with one s various audiences so that the organization presents a consistent understandable image to those groups. the Gazette in Colorado Springs. For example.com /) publishes an article on a new car every week. Colorado (http://www. After different parts of the organization agree upon what image the organization seeks to attain. There are also public service announcements that often attain similar objectives.com/mri/. The main requirement of obtaining publicity in most media is that the article placed should be newsworthy and credible and of special interest to viewers or readers. all communications should be centrally produced and managed. an integrated marketing communications (MARCOM) program can be established and implemented. The same may be true of articles containing restaurant and movie reviews. The challenge with publicity is preparing an article that is newsworthy and of interest to the readers of a publication. That is. Check out this website for an example of a firm that does publicity exclusively: http://www. It is imperative that the organization create and reinforce a clear image in the marketplace. . only that these efforts will have agreed upon guidelines so that all of the different groups with which the organization communicates are given a consistent image of the organization. This article is usually published without a charge to the manufacturer of the car because the editors of the Gazette believe that readers will find the article newsworthy and of special interest. a new feature is placed because it ostensibly will be of interest to the readers of the publication. Thus. suppliers.

For example. Visit the Nick at Night website described in your chapter and view two retromercials on that site. there is usually a temptation to ignore this requirement and attempt to be all things to all people. Obtain a magazine advertisement for which you think the target market is clearly defined and comment on what you believe are the characteristics of that target market.All components of the promotion mix then have some underlying concept to reinforce. A Note on Positioning As we have indicated. and how) of the whole concept of the business. When asked who their target market would be the students responded Well. everyone who eats. Write a one-page essay on how you believe advertising has changed since your chosen retromercial aired. The students needed to more clearly define the concept of the restaurant and precisely who they were expecting to serve in the business. Two students had recently left military service and two others had received a departure bonus from a high technology firm. it is essential to know who the target customer is and what benefits s/he is seeking. in the example of Marie s Gift Shop described above. . For example. when. Several students in the group had managed to save some funds through various means. It would be difficult to position a restaurant to simultaneously meet all of these needs well. what. The students agreed that they wanted to open a restaurant together. one that primarily is designed to inform. this definition of a target market is too broad and provides insufficient guidance about the Five W s and H (who. employees. and the consistency of local ownership would be critical to maintain her chosen organizational image. the availability of unique products. the needs of those who are searching for a fast lunch will differ significantly from those who aspire to relax and talk over their lunch. For example. Obviously. Marie wanted to make sure that all communications with customers. and suppliers used the same logo and letterhead. one that tries to persuade. and one that reminds. Marie also realized that an emphasis on personal service. recently a group of MBA students at a university decided to enter into a business venture together. Chapter Nine Exercises Visit a Saturn dealership and another new car dealership and write a one-page summary of your experiences paying particular attention to sales-driven versus customer-driven behavior on the part of the salesperson or salespersons you met. why. Obtain three magazine ads. For example. where. We will describe Marie s chosen MARCOM program at length later on.

naa.org/marketscope/databank/QuarterlyClassified-new. Ask the manager about his/her promotion mix and what components are in it and how they are managed. note the following website in your essay (http://www.Go to a grocery store and interview the manager there. Describe what your reaction was when you learned of the amount.nfsa.htm) The Federal Trade Commission s 1999 report on advertising for tobacco products is available on the web (Federal Trade Commission Cigarette Report for 1999 ). Agree or disagree with the following statement and explain your answer using materials found in Chapter Ten. Write a one-page essay on your findings. (http://www. Also. If everyone is your customer. then no one is your customer. Chapter Ten Glossary MK 300 Appendix Chapter Ten An easy guide to audience measurement Overview of basic terms used in audience measurement Radio and TV audience measurement Situation description: A consumer packaged goods company runs a campaign on television for a new soap product Germ Buster Hand SoapÒ. The campaign will be targeted to this market throughout the holiday season of 2000. The product is to be introduced through a television ad campaign beginning October 2000 and running through December 2000. Use the keyword Professional selling to search the internet. . Read this report and write a one-page essay on your personal reactions. Write a one-page essay describing the results of your interview.com/). Go to the following website and obtain an estimate on how much was spent on classified ads in newspapers between 1995 and 2000. The market for this product is estimated to be around 20 million people who are particularly concerned about the presence of germs on their hands during food preparation.

which would you prefer to emphasize in a campaign: reach or frequency? On the other hand. Thus the Reach is 50 (that is 50% of the target market will see the ad. Can t do it all! For example. need to decide which is more important for our situation. That is. does that mean have you necessarily increased the communication and learning that has taken place with the target market? However. There is the growing question of effectiveness. some people subscribe to the three-hit theory. For example. Interest. your campaign reached 10 million prospects or half the target market. However. reach or frequency. Why? 2.) Concerning reach. Remember that you are spreading the amount of dollars over different communication objectives. or is it more important for prospects to be exposed to our message several times. fifty percent of the people in the target market will be exposed to the ad at least one or more times. Three effective exposures usually requires much greater than three total exposures. In our example.1. except to say the more is better. the GRP s would be 250. we can run ten second spots or sixty second spots and end up with the same GRP s (an exposure is an exposure) but do they have the same selling power. are the benefits the product delivers relatively easy to understand? If so. During the company s initial advertising campaign. the measure is helpful for comparing competing media schedules. ) While this measure has obvious shortcomings (that is. That is. This debate finds little agreement. it takes three effective exposures to move the prospect through the hierarchy of effects. In the preceding example. GRP s or gross rating points-the GRP level is a rule of thumb used by media personnel to assess the relative strength of the campaign. That is. That is. I think not. you need to analyze and think about what is needed to convey your message. is it more important for a larger proportion of the target market to be exposed at least once. In our example above. Thus. ad agencies and media representatives are glad to have you spend more money always. Reach the percentage of target prospects exposed to one or more ads for a brand during some stated period. GRP s yield a comparison of different options for reach and frequency through examining the relative exposure schedule of different campaign options (their relative bang for the buck. while your GRP s have increased with ten second spots. That is. the frequency or average number of exposures for the target market will be five. and Action). Of course. if product benefits are difficult to convey would your answer be different? J Think about different schedules and how they impact your communication potential. Suppose that media research indicates that the 5 million people in the target market will be exposed to this ad six times while 5 million people will be exposed four times during the campaign. (Attention. if you emphasize reach over frequency that means that more people will receive . is an exposure more powerful if it occurs previous to the food preparation period versus after the food preparation period) it has been applied traditionally in TV and radio advertising. Frequency the average number of exposures to advertisements received by all prospects who were reached during the given time period. half of the people (10 million people) in this target market will be exposed to the ad during the three-month life of the campaign. Desire.

Compare this to emphasizing frequency over reach so that fewer people will receive more exposures.fewer exposures. you are the marketer with the MASTER OF BUSINESS ADMINISTRATION DEGREE! Measures of television audiences and their relationships to each other Coverage (number of TV households in signal range of TV station or network) i i i i i i i i t t HUT (homes using TV) Percentage of coverage with sets turned on station. station or network) HUT X Audience share = Rating . or network Rating Percentage of coverage tuned to a particular program. After all. Funds are always limited and you will asked to make decisions of this sort that trade off resources and people in your organization expect to be able to trust your answers. Audience Share (percentage of HUT tuned to a particular program.

05 Audience Share during that time slot the percentage of homes using TV that is tuned to this cable channel is sixty percent Rating the rating for this infomercial would be .com/ and Arbritron Ratings. had the following viewership: Coverage this local cable channel can provide a coverage of 2 million households HUT for the 12 midnight to 1 a.C.Brief example A recent infomercial for Suzanne Somers Depression Cure aired on the local cable TV station in Out There.com/home/home. and also. http://acnielsen. we . Interesting websites to review: A. Nielsen and Company. time slot.05 X . Also. Simmons Study of Media and Markets (http://www.htm.html). There are many other resources for assessing markets and audience measurement that are easily accessed on the internet and you might want to see what you can find in your own search. If we used the basic CPM formula (cost of one unit of time)/number of households reached). we compare the cost of reaching one thousand viewers across different stations. Newspaper and magazine audience measurement The Basic CPM formula is used to compare different media options.03 Thus the percentage of total coverage tuned to this particular program was .60 = .demographics.m.com/. For example.smart-mktg.com/products/SMRBDOC. http://www. That is. the program reached 60.arbitron. Kansas. you might try American Demographics magazine to explore more information about audience characteristics at http://www. the percentage of coverage with TV sets turned on is one out of twenty or five percent or .000 households or three percent of the total coverage.03 or said another way.

individual and group creativity plays a critical role in all phases of marketing practice. For example. people use the term creative as a noun to describe the portion of an advertisement that comprises the artwork that translates the appeal or basic selling proposition of the ad and how the appeal will be conveyed to the target market. In new product development. This group of researchers concludes that a creative solution does not necessarily require new components but can simply integrate existing knowledge in a more valuable way.Chapter Eleven Creativity and Marketing If one explored the research in Marketing. or new product development. an innovation must demonstrate radical newness. . The examples above all miss the primary role of creativity in marketing. We will define creativity as identifying and describing new ideas that are novel and useful. For example. personal selling. for example. s/he would find many references to creativity. part of the task is to formulate the problem itself. A second group of definitions supposes creativity is the imaginatively gifted recombination of known elements into something new . Thus. Susan and Bryan will be responsible for doing the creative. In advertising. Most of these mentions of creativity would be found in one of three areas: advertising. This has implications for marketing and a firm s ability to be more market-oriented. Included are those situations in which the problem or opportunity as initially posed was vague and not well defined. three themes emerge that seem to be beneficial to the study of marketing and creativity. creativity is used to describe how individuals or teams can identify and implement new product ideas. Definitions of Creativity An examination of the literature of other disciplines reveals dozens of definitions of creativity. The first group of definitions suggests that. In personal selling. From these various definitions. to be truly creative. This definition has implications for upstream marketing activities including target customer needs assessment and competitive benchmarking studies. but creativity techniques may help identify new sources or new ways to consult those sources once they are identified. we may already know that tracking customers requires a continuous data collection effort. creativity is usually applied in a context of creative selling with no particular specific reference to the literature of creativity or what creativity really means. Thus. We will later discuss conditions for creative environments that can enable such imaginatively gifted recombination.

The Couger Center for the Study of Creativity has applied the 4-Ps model of creativity in many different contexts and found it to be a good guide for understanding creativity. . as well as the organization as a whole. A primary reason is that certain preconditions must be met and certain organizational components marshaled to help individuals and teams become creative. The model represents creativity as a dynamic phenomenon comprised of four highly interactive components: person. The Application of Creativity: The 4-P s Model The 4-Ps model provides a good structure for understanding creativity and its application in marketing. The model s simplicity allows for the individual measurement and assessment of each component as well as evaluation of the interaction of the components. This is especially applicable in an era where the marketing information management function is participating fundamentally in pursuing a distinctive competitive advantage for the organization. Nevertheless. and press (work climate). possibly because many highly publicized research efforts have been focused on the study of creativity in geniuses and highly accomplished professionals. such as a marketing department or marketing research department. Another strength of the model is that it can be applied to a specific functional organization. Few of us perceive ourselves to be creative. to be creative. process. The 4-Ps model of creativity provides the basis for the remainder of this chapter and addresses the application of structure and techniques for facilitating creativity in marketing. with a precipitous 4th grade slump . Most people are inclined to believe that creativity is inherited and that we either possess it or we don t. each of the four Ps is described and discussed in relation to marketing management and marketing research practice. In the remainder of this chapter. a solution must have value. most people utilize less and less of their native creative ability as they mature. The objectives of newness and imaginatively gifted recombination are meaningless if they do not provide value-added results.A third group of definitions believes that. Research demonstrates that creativity is present in everyone and is normally distributed. Nationwide studies of American school children reveal progressively lower scores on creativity tests as they move through the school system. product. Conditions of Creativity Individuals and teams that are otherwise regarded as equally competent do not perform equally. The First P: The Creative Person Numerous fallacies exist regarding creativity in people.

However. it is logical to assume that creative products and services will result. Management can also provide motivation for employees to become more creative. The Fourth P: Press (the Environment for Creative Work) Press is a term from the field of education that refers to the relationship between human beings and their environment. Studies indicate that organization s can create a set of norms that encourage creative thinking. The climate for creativity comprises those factors that stimulate or retard creative behavior. and are supported through a positive climate for creativity. Through encouraging the use of proven creativity techniques. There are many creative problem-solving techniques that have been shown to be helpful in marketing.Marketing management can stimulate creativity in employees by reinforcing the fact that all individuals are innately creative. While the space devoted to creativity in this e-book is limited. The Third P: The Created Product An analysis of creativity can also start with the end product. We discuss measuring the creative content of ideas in the marketing context below. it is helpful for employees to have ways to measure their creativity results. The Five W s and H technique and the Wishful Thinking technique are described in an appendix to this chapter. and can also facilitate a creative climate (discussed later) in which employees more easily obtain the intrinsic satisfaction of creatively accomplishing a task or project. judged and rewarded. Intrinsic motivation comes from the anticipated satisfaction of generating a creative idea and putting it into effect. marketing managers can help employees restore the natural curiosity and originality that they exhibited as preschoolers. Marketing management could then translate in specific terms how creativity would be recognized. Nevertheless. There has been considerable research on the ways that work environments influence creativity. Marketing management can provide extrinsic motivation by rewards. The Second P: The Creative Process Considerable research has focused almost exclusively on the creative process through which people can enhance their creative abilities and creative results. These norms . by identifying the characteristics necessary for objects to be classified as creative. are provided processes to facilitate creativity. a framework should be developed for measurement of creativity in marketing activities. Optimum results do not occur unless an organization has a positive climate for creativity. The importance of the work environment for encouraging/discouraging creativity is well supported in creativity research. It is important to consider both intrinsic and extrinsic motivation. such as recognition and financial incentives. Five major studies of creativity overwhelmingly show significant positive results when creative abilities are deliberately nurtured. Others believe that if people are informed about their native creativity capabilities. we provide description and directions for using two of these CPS techniques.

attention to these six dimensions will help ensure a healthy environment for creativity that will continue the production of many fresh ideas. Goal clarity . . Chapter Eleven Exercises Has your definition of creativity changed as a result of reading this chapter? Explain. People should be rewarded for identifying what is good about a new idea before they are allowed to be critical of the new idea. Burnside. in researched published in 1988. and universal organizational intolerance of cynicism and sarcasm.a clearly understood objective for the creative work Resources . found five characteristics of a work environment that encourages creative thinking.would include universal tolerance for new ideas.genuine and expressed support from management and co-workers **Congruity .the necessary financial and non-financial support Freedom . Organizations that systematically positively recognize those who find faults in new ideas will find their pool of new ideas drying up quickly since there is only negative reward for offering one s new ideas to the organization.the latitude to explore whatever directions of inquiry seem appropriate Encouragement . Those five dimensions are as follows: 1.the match between what management says and what management does **Suspended judgment maintaining an open marketplace for ideas in which the potential strengths of new ideas are always identified before their potential weaknesses (**we have added these two last dimensions to the list based on our own research experience) In marketing.

work back from the perfect solution introducing reality a little at a time. now. Why are those who constantly kill creative ideas by inappropriate joking or other behaviors so dangerous to the creative effort in an organization? Explain. and how of the situation under consideration draw up a list of responses to each dimension use this list as a way to identify creative responses to the problem or opportunity note: this technique is more analytical in nature because it provides a good checklist to make sure most areas are covered. While the technique is valuable to outline an area that needs to be explored. b. including a description of the 4 P s of creativity in your life at the time. why. Appendix I: Description of Two CPS techniques: Steps in using the Five W s and H Technique a. what would be the best solution to a situation if anything were possible.Form a small group and address a question assigned to you using one of the CPS techniques described below. Describe a moment in your life in which you believe you were most creative. How much change would have to take place? Explain. being careful to challenge each part of an idea considered impossible . where. identify the perfect solution that is. identify the who. another more intuitive technique is often helpful to use to generate new ideas after this technique is applied initially Steps in using the Wishful Thinking Technique a. when. Appoint a member of the group to keep notes of the events when your group starts problem solving. what. c. suspend reality (a challenge in itself!) b. c. Use the six dimensions of a healthy creative climate to describe how you would establish an ideal climate for creativity at your workplace. Review the material below on Personal Creativity Zones (PCZ s) and describe your own PCZ.

you must find your own PCZ through analysis and reflection. . At any rate. It is likely that some of the characteristics of your PCZ will match the PCZ of others. Your personal creativity zone includes all conditions. Does one PCZ work for all of the problems and opportunities I want to analyze and find solutions/answers to? FAQ 4. It is unlikely that you will have the same PCZ for all decisions you face. Probably not. and write down the conditions that surrounded that time of optimal personal creativity. Will my PCZ be identical to the PCZ s of my friends and coworkers? FAQ 5. For example. While sometimes there are similarities. For example. What is a personal creativity zone (PCZ)? FAQ 2. or a situation where you were most creative. Research in creativity has shown that very often the optimal number of members on a creative team is the dyad (two). Will my PCZ include others? Answers to FAQ S about Personal Creativity Zones 1. this technique is FUN!J Appendix II: How to identify your Personal Creativity Zone (PCZ) Finding your Personal Creativity Zone Frequently Asked Questions (or FAQ S) FAQ 1. that help you reach your maximum creative potential 2. identify the most creative time of your life. the technique is valuable because it starts with solutions rather than problems. How can I identify my PCZ? FAQ 3. 4. Plus. So constantly search for the person who stimulates your creativity. you must do the work to identify a personal creativity zone of your own. deciding whether to marry a certain person may call for a different PCZ than identifying what courses will be most likely to lead you to the right college degree and career. 3. environmental and personal. 5.Note: this technique is more intuitive in nature because it provides a good tool to challenge traditional knowledge that may be no longer applicable or relevant.

Chapter Twelve What is the international market and why is it important? As a consumer you regularly buy products manufactured in other countries.. and Canada are moving towards an open .S. see the following website and review our annual trade deficits for the last ten years): (http://www. so look forward to enjoying your approach to being creative. company. balance of trade and trade deficits you will find many different viewpoints on this topic.nestle.gov/foreign-trade/balance/c5700. You are. you should have a clear understanding and appreciation for the arguments expressed surrounding this issue. you may not be familiar with Fiskars.S. meaning that as a country we import more products than we export (for example. familiar with the fact that Nestles is a foreign company and that they recently merged with a U. Our point is that. usually has a negative balance of trade. (see http://www.census. while others believe that this open competition forces U. as a consumer you buy products manufactured in other countries almost daily.com/kbftables/usecon/trade/trade_balance_annual. Remember. Since NAFTA (North American Free Trade Agreement) was instituted.S.html for an article outlining the merger) and that many products you buy are manufactured in China (see http://www.fiskars.drmartens. based in Finland (http://www. If you do your own search on the keywords U.K. (http://www. rather than the exception. Critics argue that buying so many imported goods hurts the market for U. However. trade balance with China).6. no doubt. However.html for recent government data on the U.S. What is the impact of this trade deficit? Experts disagree as to whether this deficit creates real problems for the U.com/flash/). Mexico.S.com/) or that your Doc Marten s were probably under a brand name owned by a company based in U. creativity may be work but it is also supposed to be fun.S. businesses to learn how to compete effectively in global markets. economy or not.S.html). jobs.S. Purina. A full discussion of this issue is beyond the material in this course.kiplingerforecasts. The U. the U. International marketing is the rule today.com/all_about/index.

and the European Union (http://userpage.fu-berlin. these trade agreements will become more controversial.chemie. and the General Agreement on Taxes and Tariffs. Thus any student of marketing should have some understanding of global trade agreements. For example. The internet has changed the landscape of world trade.doc. particularly where small businesses are concerned.market without trade barriers (search with keyword NAFTA to find further information).gov/) for free information on international trade. Choosing a strategy for international marketing If an organization determines that it has the interest and capability to market its products internationally. . Such organizations often have knowledge relevant to doing business in a certain part of the world. NAFTA. the following four options have been identified: Export/import marketing intermediary hiring an agent to represent your organization Trading company enrolling for the services of a specialized company that will represent your organization in international markets Joint venture partnering with a foreign company that has its home office in the country of interest Wholly owned subsidiary going to the expense and risk of opening your own offices in the foreign country of interest However.ita.de/adressen/eu. also known as GATT (http://gatt.html) has tried to reach this goal for several years. today with the worldwide web s communication capabilities. the organization must then choose among several options. As global competition for the production and marketing of goods and services intensifies. the European Union. many of these categories have become obsolete because different kinds of organizations are filling the vacuum that previously existed in knowledge and information about foreign markets. Export/import Marketing intermediary The export/import marketing intermediary is usually an independent business that has a special knowledge of the export and import business. particularly. Traditionally.org/). see (http://www.

Understanding other cultures requires an effort at empathy.jpoststore.com/).cocacola. thus business people from the U. less developed countries). Explore different the websites of different companies to observe how those companies are managing their efforts at international marketing.S. note that Jarden means Jordan as in the Jordan River in the middle east*).Trading Companies Check out the internet site http://www.com/p/x/xrx. being silent is not an attribute of most subcultures in the U. there is nothing wrong or uncomfortable with silence. While this is intellectually easy to understand. many countries require that a foreign organization have at least fifty-percent of its ownership held by citizens of its own country. review (http://www. like many large organizations uses several different approaches to market its products in different regions of the world. one must try to understand what it is like to stand in another s shoes.com/product417.html. Also. You will note the Xerox. However. How would you approach marketing to these different areas of the world? The first step in any kind of marketing endeavor is to understand what satisfies the customer.html. For an example of how one multinational company manages its international marketing efforts see the website of Xerox Corporation at http://biz. For example.S. it is challenging to actually do. Sound easy? Try it. check out the Coca-Cola website to see how that company manages its international activities (http://www.com/ to find more information on trading companies and how they do business. often talk rather than listen to people from other countries.arabia. For example. Joint Venture Because of the historical abuses of imperialism (or situations wherein industrialized countries exploited smaller. and http://www. In some cultures in the world. and the first step in understanding is listening.yahoo.com/ remember to click on English on these websites. but as an exercise. http://www.alibaba. do not often exhibit.spa-saariselka.S. try to be in a group of people and not say a word for at least thirty seconds. This seems simple. That is.com/EngIndex. an attribute that we in the U.html. how does an Amazonian Indian see his or her world? .

com/servlet/ecmcs/ford/index.com/main. Can you identify country-oriented differences in these two companies? If so.S. Review the word international marketing on the internet and summarize your findings in a onepage report.Chapter Twelve Exercises Examine the Nokia website (http://www.motorola. if any.ford.moen. Write a one-page essay on an article you find discussing the disagreement between Ford Motor Company and Firestone Tires. Based on the opening vignette that discussed the Nestle Company s recent acquisition of Purina Feeds. Examine the website for Diamler/Chrysler Corporation (http://www. Compare the websites of Oras. Do you believe the differences you identified are due to the different countries within which the two organizations function? Explain thoroughly. Check the website below and describe how this website is related to marketing. make three predictions on other natural consolidations between other U.thehungersite.html) and make observations on differences you find in this site and the Motorola website (http://www. who is the customer and who is the marketer and what is being marketed? http://www. including your own thoughts on the merger in a one-page essay.firestone. it will minimize differences in the way different countries do business and will homogenize the environment of business. firms and foreign firms that you believe may take place in the future. Agree or disagree with the following statement and give reasoning for your position: the problems between Firestone Corporation (http://www.com/). Describe the meaning of the term balance of payments and explain why it is important for a student of marketing to understand this concept.com/ . list and discuss each difference you find. Discuss the following statement: As the worldwide web develops.jsp) were primarily because the companies are owned and operated by people in different countries with different cultures.com). What challenges.oras.nokia.com/home/). Find an article on the internet that discusses whether this merger will be successful.S.daimlerchrysler. Oy (http://www.com/) and Ford Motor Company (http://www. That is. do you believe exist for this merger based on cultural differences? Find an interesting website of a foreign company that you believe does a good job of describing the company s products and makes them of interest to a reader from the U.com/) and Moen (http://www.

there is nothing wrong or uncomfortable with silence. Based on the opening vignette that discussed the Nestle Company s recent acquisition of Purina Feeds. Can you identify country-oriented differences in these two companies? If so. review (http://www. note that Jarden means Jordan as in the Jordan River in the middle east*).com/main.S. Understanding other cultures requires an effort at empathy. it will minimize differences in the way different countries do business and will homogenize the environment of business. This seems simple. it is challenging to actually do.html. . Oy (http://www. For example. For example.S. and the first step in understanding is listening.arabia.moen. one must try to understand what it is like to stand in another s shoes. do not often exhibit.com/ remember to click on English on these websites. Review the word international marketing on the internet and summarize your findings in a onepage report. thus business people from the U. being silent is not an attribute of most subcultures in the U.com/home/). make three predictions on other natural consolidations between other U.com/product417. try to be in a group of people and not say a word for at least thirty seconds. Compare the websites of Oras.S.nokia.Explore different the websites of different companies to observe how those companies are managing their efforts at international marketing.oras. list and discuss each difference you find. However. http://www. Sound easy? Try it. and http://www. Do you believe the differences you identified are due to the different countries within which the two organizations function? Explain thoroughly.com/) and Moen (http://www.html) and make observations on differences you find in this site and the Motorola website (http://www. an attribute that we in the U. That is. In some cultures in the world. firms and foreign firms that you believe may take place in the future.motorola.com/EngIndex. how does an Amazonian Indian see his or her world? Chapter Twelve Exercises Examine the Nokia website (http://www. but as an exercise.spa-saariselka. Discuss the following statement: As the worldwide web develops.S. While this is intellectually easy to understand. often talk rather than listen to people from other countries.html.jpoststore. How would you approach marketing to these different areas of the world? The first step in any kind of marketing endeavor is to understand what satisfies the customer.com).

S. do you believe exist for this merger based on cultural differences? Find an interesting website of a foreign company that you believe does a good job of describing the company s products and makes them of interest to a reader from the U.com/) and Ford Motor Company (http://www.com/ . if any. who is the customer and who is the marketer and what is being marketed? http://www.firestone. Check the website below and describe how this website is related to marketing. including your own thoughts on the merger in a one-page essay. What challenges.jsp) were primarily because the companies are owned and operated by people in different countries with different cultures. Agree or disagree with the following statement and give reasoning for your position: the problems between Firestone Corporation (http://www.com/). That is.thehungersite.ford.com/servlet/ecmcs/ford/index. Find an article on the internet that discusses whether this merger will be successful. Describe the meaning of the term balance of payments and explain why it is important for a student of marketing to understand this concept.Examine the website for Diamler/Chrysler Corporation (http://www.daimlerchrysler. Write a one-page essay on an article you find discussing the disagreement between Ford Motor Company and Firestone Tires.

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