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[COMM 131] Marketing Notes

Chapter 1 Marketing: Creating and Capturing Customer Value

Marketing the process by which companies create value for customers and build
strong customer relationships in order to capture value from customers in return.
Marketing is managing profitable customer relationships
5 core customer & marketplace concepts:
1. Needs, wants, and demands
2. Market offerings (products, services, experiences)
3. Value & satisfaction
4. Exchanges & relationships
5. Markets
Needs states of felt deprivation
Wants the form human needs take as shaped by culture and individual personality
Demands human wants that are backed by buying power
Marketing process: (steps 1-4 are creating value for customers and building
customer relationships)

e and
needs and

design a


s and

value from
to create
profits and

Value = customer benefits perceived costs

Market set of actual and potential buyers of a product/service
Market Offering - some combination of products, services, information or experiences,
etc. offered to a market to satisfy a need or want.
Marketing management the art and science of choosing target markets and building
profitable relationships with them (there is customer management and demand

Production concept the idea that consumers will favour products that are available and
highly affordable and that the organization should therefore focus on improving
production and distribution efficiency
Product concept the idea that consumers will favour products that offer the most
quality, performance, and features and that the organization should therefore devote its
energy to making continuous product improvements
Selling concept the idea that consumers will not buy enough of the firms products
unless it undertakes a large scale selling and promotion effort
Marketing concept the marketing management philosophy that holds that achieving
organizational goals depends on knowing the needs and wants of target markets and
delivering the desired satisfactions better than the competitors do
Societal marketing concept the idea that a companys marketing decisions should
consider consumers wants, the companys requirements, consumers long run interests,
and societys long run interests
Customer relationship management the overall process of building and maintaining
profitable customer relationships by delivering superior customer value and satisfaction
Customer perceived value the customers evaluation of the difference between all the
benefits and all the costs of a market offering relative to those of competing offers
Customer satisfaction the extent to which a products perceived performance matches
a buyers expectations
Customer managed relationships marketing relationships in which customers
empowered by todays new digital technologies interact with companies and each other to
shape their relationships with brand
Consumer generated marketing brand exchanges created by consumers themselves,
both invited and uninvited by which consumers are playing an increasing role in shaping
their own brand experiences and those of other consumers
Partner relationship management working closely with partners in other departments
and organizations to jointly bring greater value to customers
Customer lifetime value the value of the entire stream of purchases that the customer
would make over a lifetime of patronage
Share of customer the portion of the customers purchasing that a company gets in its
product categories
Customer equity the total combined customer lifetime values of all the companys
customers. Measure of future value of companys customer base

Chapter 2 Company and Marketing Strategy: Partnering to build customer

Strategic planning the process of developing and maintaining a strategic fit between
the organizations goals and capabilities and its changing marketing opportunities
Steps in Strategic Planning

^Corporate Level ^ Corporate Level ^ Business unit, product, and market level
Mission Statement a statement of the organizations purpose what it wants to
accomplish in the larger environment. Are often product-oriented (i.e. We run theme
parks) but to be effective, should be market-oriented (i.e. We create fantasies a place
where dreams come true and America still works the way its supposed to)
Business portfolio the collection of businesses and products that make up the company
Portfolio analysis the process by which management evaluates the products and
businesses that make up the company
-look at SBUs (strategic business units a company division, a product line, or
sometimes a single product or brand) and assess their attractiveness and how much
support each one needs
Growth-share matrix - this is the Boston Consulting Group approach, in which a
company plans its portfolio by evaluating a companys SBUs in terms of market growth
rate and relative market share:
Stars high growth, high share businesses or products. Often need heavy
investments to finance their rapid growth, and will eventually slow and become
cash cows
Cash cows low growth, high share businesses or products. These established
and successful SBUs need less investment to hold their market share, and produce
a lot of cash that the company uses to pay its bills and support other SBUs
Question marks low share business units in high growth markets. They require
a lot of cash to hold their share, let alone increase it. Management has to think
hard about which question marks it should try to build into stars and which should
be phased out
Dogs low growth, low share businesses and products. May generate enough
cash to maintain themselves but have low potential

Product/Market expansion grid a portfolio planning tool for identifying company

growth opportunities through market penetration, market development, product
development, or diversification:
Existing Products

New Products



Market penetration a strategy for company growth by increasing sales of current

products to current market segments without changing the product
Market development a strategy for company growth by identifying and developing
new market segments for current company products i.e. Under Armour pursues women,
or new geographical markets
Product development a strategy for company growth by offering modified or new
products to current market segments i.e. UA introduces running shoes
Diversification a strategy for company growth through starting up or acquiring
businesses outside the companys current products and markets i.e. if UA moved into non
performance leisure wear
Downsizing reducing the business portfolio by eliminating products or businesses units
that are not profitable or that no longer fit the companys overall strategy. May be
necessary if firm grew too fast, entered areas where it lacks experience, entered too many
intl markets without proper research, etc.
Value chain the series of internal departments that carry out value creating activities to
design, produce, market, deliver, and support a firms products

Value delivery network the network made up of the company, suppliers, distributors,
and, ultimately, customers who partner with each other to improve the performance of the
entire system
The role of marketing management:
Analyze customer markets
Design marketing strategy
Communicate value propositions
Serve customers
Marketing strategy the marketing logic by which the company hopes to create
customer value and achieve profitable customer relationships
1. What customers will you serve? (segmentation and targeting)
2. And how? (differentiation and positioning)
-guided by marketing strategy, the company designs an integrated marketing mix made
up of product, price, place, and promotion
-to find the best marketing strategy and mix, the company engages in marketing analysis,
planning implementation, and control
-companies cannot profitably serve all customers in a give market too many different
kinds of customers and needs. Thus, each company must divide up the total market,
choose the best segments, and design strategies for profitably serving chosen segments:
Market segmentation dividing a market into distinct groups of buyers who have
different needs, characteristics, or behaviours, and who might require separate products
or marketing programs. Segments should be homogenous within and heterogenous
without, and the segments are only plausible customers
Market segment a group of consumers who respond in a similar way to a given set of
marketing efforts
Market targeting the process of evaluating each market segments attractiveness and
selecting one or more segments to enter
Value proposition the set of benefits that the marketer promises to deliver to customers
to satisfy their needs. Heres what we can do for you. Must differentiate it from the
competition and build customer value and satisfaction through the offer
Positioning arranging for a product to occupy a clear, distinctive, and desirable place
relative to competing products in the minds of target consumers i.e. Youtubes broadcast
yourself, Burger Kings have it your way
-Positioning, in other words, is sacrificing some portion of the marketplace so that you
can focus on the marketplaces of most value to youand bring clarity of message to
those markets.
Differentiation actually differentiating the market offering to create superior customer
Marketing mix the set of controllable, tactical marketing tools product, price, place,
and promotion that the firm blends to produce the response it wants in the target market




List Price
Payment Period
Credit Terms



Product the goods and services combination the company offers to the target market
Price the amount of money customers must pay to obtain the product
Place includes company activities that make the product available to target consumers
Promotion activities that communicate the merits of the product and persuade target
customers to buy it
-some say the four Ps should be the four Cs: customer solution, customer cost,
convenience, and communication
Steps in Marketing Planning:
1. Learn about your environment
2. Define your objectives
3. Design a strategy to achieve those objectives
4. Measure results to determine if you did achieve your objectives
SWOT analysis an overall evaluation of the companys strengths, weaknesses,
opportunities, and threats



do not confuse alternatives with opportunities i.e. have the ability to launch a
new ad campaign is not an opportunity, while consumers are trending towards
organic foods is

Marketing implementation the process that turns marketing strategies and plans
into marketing actions to accomplish strategic marketing objectives
Marketing control the process of measuring and evaluating the results of
marketing strategies and plans and taking corrective action to ensure that objectives
are achieved
Marketing ROI (return on marketing investment) the net return from a
marketing investment divided by the costs of the marketing investment. Quite
difficult to measure
Building customer relationships
-for a customer to be satisfied, the product must atleast meet expectations of a
customer; if expectations are exceeded, then customer delight ensues
-loyalty & retention increase as satisfaction levels increase
-customers have relationships with brands and companies, just like they do with
people, and these must be nurtured
-LOYALTY NOT ALWAYS GOOD! They know their value to you and may exploit
you for premium services and discounts. Not all customers are profitable, so make
use of selective relationship building (i.e. Best Buy had demons who made unfair
use of return policy and angels who were devout shoppers; ING fired customers
that called customer services too much)
Evolution of marketing philosophies over time:
1. More product in more outlets more people will buy it
2. Make a higher quality product and more people will buy it because it is the best
3. If we make a lot of high quality product and communicate it well, people will buy
4. Identify unmet needs in the marketplace and develop a solution to meet that need,
and people will buy it
5. Triple bottom line: people, products, planet. Long-term societal impact is
Environmental Analysis the marketing environment consists of actors and forces
inside and outside the organization that affect managements ability to build and maintain
relationships with target customers
Microenvironment actors close to the company that affect its ability to serve its
customers i.e. the company, suppliers, marketing intermediaries, competitors,
customers, publics
Macroenvironment larger societal forces that affect the micro-environment,
considered to be beyond the control of the organization i.e. demographics,
Differentiation Segmentation
natural environment,
technology, politics, culture differentiate
the rest of the planning process and be a translation of the
the market
mission; should
be detailed
intoand quantifiable: SMART (specific, measurable, achievable,
offering to
relevant, timely)

create superior
Chapter 7 - Designing a customer driven marketing strategy and marketingvalue

Targeting select the

segment or
segments to

Value for

Positioning position the

market offering
in the minds of

to Serve

Decide on a


Geographic segmentation dividing a market into different geographical units, such as
global regions, countries, regions within a country, provinces, cities, or even
Demographic segmentation dividing the market into segments based on variables
such as age, gender, family size, life cycle, household income, occupation, education,
ethnic or cultural group, and generation
Psychographic segmentation dividing a market into different segments based on
social class, lifestyle, or personality characteristics i.e. marketing to luxury, high energy,
Behavioural segmentation dividing a market into segments based on consumer
knowledge, attitudes, uses, or responses to a product. How you behave in the market i.e.
Hallmark what will people be using the cards for?
- Occasion segmentation dividing the market into segments according to
occsions when buyers get the idea to buy, actually make their purchase, or use the
purchased item i.e. most people drink OJ in the morning, but orange growers are
now promoting it as a refreshing snack, or Coke marketing diet Coke as an early
morning pick me up
- Benefit segmentation dividing the market into segments according to the
different benefits that consumers seek from the product i.e. for activewear, could
market to people looking for a balance between function and style, or to people
seeking high performance, or to people seeking durability and value
- User status markets can be segmented into non-users, ex-users, potential users,
regular users, and regular users of a product. Some people may be facing life
stage changes who can be turned into heavy users, like newlyweds or new parents
- Usage rate markets can be segmented into light, medium, and heavy users
- Loyalty status some consumers are completely loyal, while at the other end
some show no loyalty and either want something different every time or buy
whatevers one sale
Intermarket segmentation forming segments of consumers who have similar needs
and buying behaviour even though they are located in different countries I.e. IKEA
targets the global middle class, Coca Cola has special programs to target teens worldwide
To be useful, market segments should be:
- Measurable (How much buying power do they have? How big is it?)

Accessible (Is there a way to get to them Mennonites may not be a good idea)
Substantial (Is there enough buying power for you to be profitable?
Differentiable (segments are conceptually distinguishable and respond differently
to different marketing mix elements and programs)
- Actionable (effective programs can be designed for attracting and serving the
Target market - a set of buyers sharing common needs or characteristics that the
company decides to serve


Targeting Narrowly

Undifferentiated (mass) marketing a market-coverage strategy in which a firm

decides to ignore market segment differences and go after the whole market with one
Differentiated (segmented) marketing - a market-coverage strategy in which a firm
decides to target several market segments and designs separate offers for each
-can differentiate on product (consistency, durability), services (speed, convenience),
channels (coverage, expertise), brand image, and people (like hiring and training better
-differentiation must promote differences that are important, distinctive, superior (to that
of competitors), communicable, preemptive, affordable, profitable
Concentrated (niche) marketing a market coverage strategy in which a firm goes
after a large share of one or a few segments or niches i.e. Coca Colas Odwalla brand
Micromarketing the practice of tailoring products and marketing programs to the
needs and wants of specific individuals and local customer segments:
- Local marketing tailoring brands and promotions to the needs and wants of a
small group of people who live in the same city or neighbourhood or who shop at
the same store
- Individual marketing (mass customization) tailoring products and marketing
programs to the needs and preferences of individual customers i.e. watching an ad
that may know your age, gender, etc. or personalizing Nike sneakers
-when choosing a targeting strategy, you should also take into account company
resources, product variability, the products life cycle stage, market variability, and
competitors marketing strategies
-socially responsible marketing calls for segmentation and targeting that serve not just the
interests of the company but also the interests of those targeted i.e. dont advertise too
sexy lingerie, unhealthy fast food to young children
Product position the way the product is defined by consumers on important attributes
the place the product occupies in consumers minds relative to competing products i.e.

Subway positioned as healthy fast food, Axe is the brand for young mean who want to
Questions for marketers to consider
What associations should we create?
How many associations should we create?
How do we go about creating those associations?
Unique selling proposition (USP) focusing on one attribute and aggressively
promoting as being the best on that benefit
Multiple selling proposition (MSP) choosing a number of attributes and promoting
them all i.e. FedEx
Perceptual positioning maps show consumer perceptions of brands on important
buying dimensions; the size of each circle indicates the brands relative market share

Competitive advantage an advantage over competitors gained by offering greater

customer value, either through lower prices or by providing more benefits that justify
higher prices
Value Proposition the full positioning of a brand the full mix of benefits upon which
it is positioned
- more for more: providing the most upscale product/service and charging a high
rice to cover the higher costs i.e. LG appliances, Mercedes Benz
- more for the same: introducing a brand offering comparable quality to a more
for more product but at a lower price i.e. Lexus as opposed to BMW and
- the same for less: offering many of the same brands/products but at deep
discounts based on superior purchasing power and lower cost operations i.e. Best
Buy, Chapters, and Wal-Mart
- less for much less: in many cases consumers will gladly settle for less optimal
performance and additional services in exchange for a lower price i.e. Giant Tiger,
Winners, the Dollar Store
-create the association with a consistent message and product and repetition of that
message often a message needs to be repeated 10x

Positioning statement a statement that summarizes company or brand positioning,

taking this form: to (target segment and need) our (brand) is (concept) that (point of
i.e. To upscale families who desire a worry-free driving experience, Volvo is the car that
offers the utmost in safety and dependability because every Volvo we build is the sum
total of 80 years of focus on safety.
- Underposition fail to really position the company at all i.e. Segway
- Overposition give buyers too narrow a picture of the company, alienate too
many people
- Confusedly position leave buyers with a confused image of the company i.e.
Honda commercial: rock n roll car or mom car?
Repositioning an attempt to change the image consumers have of a brand or company.
Normally is necessary when consumers have developed a schema that is inconsistent with
the primary needs of the segment i.e. Kentucky Fried Chicken KFC; got rid of the fat
image that comes along with fried as people became more health-conscious. It can be
difficult to significantly change schemas, and may require the change of a brand name
Chapter 6 Understanding Consumer and Business Buyer Behaviour
Consumer buyer behaviour the buying behaviour of final consumers individuals
and households that buy goods and services for personal consumption
Consumer market all the individuals and households that buy or acquire goods and
services for personal consumption
Factors Influencing Consumer Behaviour:

C u ltu ra l

C u ltu re
S u b c u ltu re
S o cia l C la ss

S o c ia l

Re fe
re n ce
g ro u p s
Fa m ily
Ro le s a n d
S ta tu s

rso n a l
A g e & life c yc le
sta g e
O c c u p a tio n
E c o n o m ic
situ a tio n
L ife sty le
Pe rso n a lity &
se lf c o n cwants,

Ps y c h o lo g ic a l

M o tiv a tio n
Pe rc e p tio n
Le a rn in g
B e lie fs & A ttitu d e s

Culture the set of basic values,

and behaviours learned by a
member of society from family and other important institutions like church, schools,
peers, etc. i.e. Canadian values differ from American differ from Chinese
Subculture a group of people with shared value systems based on common life
experiences and situations. These include nationalities, religions, racial groups, and
geographic regions. May be ascribed (automatically a part of, like race) or achieved (one
you join)
Social class relatively permanent and ordered divisions in a society whose members
share similar values, interests, and behaviours. Is measured as a combination of
occupation, income, education, wealth, and other variables
Group two or more people who interact to accomplish individual or mutual goals


Reference group serve as direct (face to face) or indirect points of comparison or

reference in forming a persons attitudes or behaviour. i.e. a young hockey player hopes
to someday emulate Sidney Crosby and play in the NHL
Membership groups groups that have a direct influence and to which a person
Aspiration groups like Ferrari
Dissociative groups groups you dont want to be seen as a part of
Opinion leader person within a reference group who, because of special skills,
knowledge, personality, or other characteristics, exerts social influence on others
Online social networks online social communities blogs, social networking websites,
or even virtual worlds where people socialize or exchange information and opinions i.e.
Will it Blend? By Blendtec on Youtube
-family exerts a strong influence on consumer buyer behaviour think of children
influencing parents decisions and husband-wife decision making
-family teaches you what brands to buy
Role activities people are expected to perform according to the people around them
Status general esteem given to a role by society
roles and status influences consumer behaviour because people usually choose products
appropriate to their roles/status i.e. a mother will buy mom jeans rather than a mini skirt
-age and life cycle stage influences consumer behaviour because people change the goods
and services they buy over their lifetime, mostly due to demographics and life changing
events such as marriage, having children, buying a home etc.
-there is a difference between chronological age and perceived age
-people at the same life stage generally have more in common than those simply the same
age i.e. a person who is 23 and in school demands a lot of different products than person
thats 23 with a family and a job
-a persons occupation affects the goods and services bought i.e. blue collar workers buy
more rugged work clothes while executives buy business suits
-a persons economic situation will affect his store/product choices fairly obvious there
Lifestyle a persons pattern of living as expressed in her activities, interests, and
opinions. Consumers dont just buy products, they buy the lifestyles and values they
represents i.e. Merrell sells a Lets get outside lifestyle, not just rugged footwear
Personality the unique psychological characteristics that distinguish a person/group
and are stable over time. A brand personality is the specific mix of human traits that may
be attributed to a particular brand. Self-concept is the idea that peoples possessions
contribute to and reflect their identities, and so people make their buying decisions on
what they think best reflects the personality they wish to emulate. i.e. Macs if you see
yourself as young and with it you should have a Mac, not a PC
Self-concept how a person views themselves, including perceptions of personalities,
attitudes, behaviours, and social identities
Identity the multiple labels people use to describe who they are
Social Identity labels used to describe someone based on the groups in which they are
Big 5 personality factors:
- Neuroticism tendency to easily experience unpleasant emotions

Extraversion energy and the tendency to seek stimulation and the company of
- Openness to experience appreciation for art, emotion, adventure, unusual ideas,
imagination and curiosity
- Agreeableness tendency to be compassionate and cooperative rather than
suspicious and antagonistic toward others
- Conscientiousness tendency to show self discipline, act dutifully, and aim for
Motive (drive) a need that is sufficiently pressing to direct the person to seek
satisfaction of the need. The needs could be biological (i.e. hunger, thirst) or
psychological (need for recognition, belonging) i.e. an aging baby boomer may buy a
sportscar due to his motive to feel young and independent again
Maslows Hierarchy of Needs:
needs selfdevelop
Esteem needs
-- self
self esteem,
Social needs - sense of belonging, love
Safety needs - security & protection
Physiological needs - hunger, thirst, shelter

Perception the process by which people select, organize, and interpret information to
form a meaningful picture of the world. People can form different perceptions of the
same stimulus because of 3 perceptual processes:
- Selective attention the tendency for people to screen out most of the information
to which they are exposed
- Selective distortion describes the tendency of people to interpret info in a way
that will support what they already believe
- Selective retention means that consumers are likely to remember good points
made about a brand they favour and to forget good points made about competing
This means marketers must work hard to get their messages through
-there is also perceived risk (financial, physical, performance, social) if I buy the wrong
product, my friends might think Im less cool
Learning changes in an individuals behaviour arising from experience. Learning
occurs though the interplay of drives, stimuli, cues, responses, and reinforcement
Belief a descriptive thought that a person holds about something. May be based on
knowledge, opinion, faith and may or may not carry an emotional charge

Attitude a persons consistently favourable or unfavourable evaluations, feelings, and

tendencies toward an object or an idea. Are difficult to change as a person attitude fits
into a pattern. Attitude influences behaviour. i.e. Fuze drink fits well with peoples
attitudes about health and well being
Other external influences:
- Purchase task reason for decision ex. Gift vs. own use
- Social surrounding are there other people around
- Physical surrounding dcor, music, crowding
- Temporal Effects time of day or time available
- Antecedent states mood, cash on hand
Buyer Decision Process

Need Information
Purchase Postpurchas
recognition Search
Decision e Behaviour
-the figure suggests that consumers pass through all 5 stages with every purchase, but in
more routine purchases, consumers often skip or reverse some of the stages
1. Need recognition the buyer recognizes a problem or need, triggered by internal
stimuli (i.e. hunger) or external stimuli (an advertisement, conversation). At this point
the marketer should research consumers to find out what kinds of needs or problems
arise, what brought them about, and how they led the consumer to this particular product.
2. Information search an interested consumer may or may not search for more
information, from personal sources (friends, family), commercial sources (ads,
salespeople), public sources (mass media, internet searches) and experiential sources
(handling, examining, using the product). A company must design its marketing mix to
make prospects aware of and knowledgeable about its brand. It should carefully identify
consumers sources of info and the importance of each source
3. Evaluation of alternatives the consumer arrives at attitudes toward different brands
through some evaluation procedure. Marketers should study buyers to find out how they
actually evaluate brand alternatives. If they know what evaluative processes go on,
marketers can take steps to influence the buyers decisions
4. Purchase decision the decision to buy the most preferred brand. But two factors can
come between purchase intention and purchase decision: attitudes of others, and
unexpected situational factors
5. Postpurchase behaviour after the product is bought, the consumer will be satisfied
or dissatisfied and will engage in postpurchase behaviour of interest to the marketer. The
relationship between the consumers expectations and the products perceived
performance determines consumer satisfaction. This means sellers should only promise
what their product can deliver, as word of mouth travels quickly. Often, psychological

mechanisms will be at play and consumers will convince themselves they got what they
needed, and argue against the alternatives
Cognitive dissonance buyer discomfort caused by postpurchase conflict. Happens
with almost every major purchase because every purchase involves compromise.
-motivation, capacity, and involvement in decision varies depending on how much you
know, importance of decisions, distraction
Affect based decisions which product do you think will make you feel better?
Compensatory decision look at all alternatives, assign utility points, and choose the
one with the most utility
Noncompensatory decision system set up in mind; if a product doesnt meet a certain
attribute, it is no longer considered to reduce the consideration set
New product a good, service, or idea that is perceived by some potential customers as
Adoption process the mental process through which an individual passes from first
hearing about an innovation to final adoption:
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption
The 5 adopter groups
1. Innovators try new ideas at some risk
2. Early adopters guided by respect; are opinion leaders and adopt new ideas
early but carefully
3. Early majority deliberate, rarely leaders, but adopt new ideas before the
average person
4. Late majority skeptical, adopt an innovation only after a majority of people
have tried it
5. Laggards are tradition bound, suspicious of change, and adopt an innovation
only after a majority of people have tried it

Characteristics important in influencing an innovations rate of adoption:

- Relative advantage the degree to which the innovation appears superior to
existing products

Compatibility the degree to which the innovation fits the values and experiences
of potential consumers
- Complexity the degree to which the innovation is difficult to understand or use
- Divisibility the degree to which the innovation may be tried on a limited basis
- Communicability the degree to which the results of using the innovation can be
observed or described to others
-people buy things not only for what they can do, but also for what they mean. Our
possessions have personal and social meanings associated with them, and contribute to
and reflect our identities
-goods symbolize personal attributes, goals, social patterns, and strivings
-consumption reflects who we are, who we were, and who we want to be
-people engage in consumption to facilitate and strengthen relationships occurs through
shared consumption and gift giving
-people join marketplace cultures around their possessions i.e. brand communities, fan
communities, activity based consumption subcultures etc.
Quantitative Analysis
Strategic Importance
Market share
Market dominance
Contribution/profit margin Profitability
Breakeven analysis
Loss vs. Profit
Price Elasticity
Demand & Consumer circumstances
Price chains
Profit distribution across channel members
Marketing ROI
Measuring marketing effectiveness
Market share the percent of the total market (expressed in units or dollars) that your
brand or product controls
MSu/$ = Focal Brand Salesu/$
Total Market Salesu/$
-not all brands in a segment are sold at the same price, and so the unit market share will
differ from the dollar market share
-the first step for an accurate market share calculation is to estimate the size of the target
-we use the step-down approach to estimate a market size: first estimate say size of
Ontario laundry detergent market in comparison to Canada, and then the Toronto laundry
detergent market in comparison to all of Ontario, and then the size of price sensitive
consumers in Toronto (all in percentages, multiply percentages by populations to get an
Contrbution Margin the amount left over after accounting for VC to cover FC,
represented in $ or %
CMu = price - VCU CM% = price - VCu or
sales VC
Profit Margin the amount left over after accounting for both VC and FC, represented
in % or $
PM = price VCu - FCu
PM% = price VCu - FCu
Breakeven Analysis the break even volume is the volume at which the firms total
revenues equal to total cost.


Price - VCu
Price elasticity measures how responsive demand would be to a change in price
PE = percent change in demand
%change in = new - old
Percent change in price
-abs value of PE > 1 elastic demand. Consumers are sensitive to price changes so
lowering price will increase profits and increasing price will decrease profits
-abs value of PE < 1 inelastic demand. Consumers are not sensitive to price changes,
so lowering price will decrease profits and increasing price will increase profits
-abs value of PE = 1 unit elastic. Price is not a critical factor in profits
Cross-price elasticity examines the relationship between changing the price of one
product and measuring the effect on the demand of a second product. With
complementary products, raising the price of one will yield a decrease in demand in the
other i.e. hockey sticks and pucks. With substitute products, raising the price of one will
yield an increase in demand for the other i.e. Iphone and blackberry
CPE = % change in demand of product A
% change in price of product B
-if CPE < 0, products are complements
-if CPE > 0, products are substitutes
Price Chains are a tool that let us observe how the costs and prices change through the
distribution change. Ultimately its helpful to determine the retail price of products given
the profit goals of channel members
% Margin = price variable cost
1 margin %
% markup = price variable cost
P = VC (1 + markup %)
variable cost
Marketing ROI measures the return on investment of marketing based activities
ROI = change in sales change in spending
Change in spending
Chapter 5 Managing Marketing Information to Gain Customer Insights
-companies need info about customer needs & wants, the marketing environment,
competition, and the economy & other factors
-marketing managers do not always need more information, they need better information
Customer Insights fresh understandings of customers and the marketplace derived
from marketing information that become the basis for creating customer value and
Marketing information system (MIS) people and procedures for assessing
information needs, developing the needed information, and helping decision makers to
use the information to generate and validate actionable customer and market insights
-marketers can obtain the needed information from internal data, marketing intelligence,
and marketing research:
Internal databases electronic collections of consumer and market information
obtained from data sources within the company network i.e. look in customer service

department for records of customer satisfaction, look in accounting department for cash
records, etc.
Competitive marketing intelligence the systematic collection and analysis of publicly
available information about consumers, competitors, and developments in the marketing
environment. The goal is to improve strategic decision making by understanding the
consumer environment, assessing and tracking competitors actions, and providing early
warnings of opportunities and threats
Marketing research the systematic design, collection, analysis, and reporting of data
relevant to a specific marketing situation facing an organization.
The marketing research process:

Defining the
problem and

the research
plan for

the research
plan collecting and
analyzing the

and reporting
the findings

-defining the problem & objectives is the hardest but most important step
-research is often needed just to identify the cause of a problem. Immediately identifiable
problems are typically symptoms (recall: iceberg example)
Research Objectives:
Exploratory research marketing research to gather preliminary information
that will help define the problem and suggest hypotheses
Descriptive research marketing research to better describe marketing
problems, situations, or markets, such as the market potential for a product or the
demographics and attitudes of customers
Causal research marketing research to test hypotheses about cause and effect
relationships i.e. would a 10% decrease in tuition result in an enrollment increase
sufficient enough to offset the reduced tuition?
Creating normative implications through research build predictive models to
improve managerial decisions
When developing the research plan:
1. Specify constraints (i.e. time, money)
2. Identify data needed to answer research question (primary v. secondary)
3. Determine how to collect data (make sure you can take action on the data and
you know why you want specific data, not just collecting all data)
Secondary data information that already exists somewhere, having been collected for
another purpose. Can be internal (like financial statements) or external. Must make sure
that it is relevant, accurate, planned, current, and impartial
Primary data information collected for the specific purpose at hand, can be
observational or questionnaire data.
-cost savings





Commercial online databases computerized collections of information available from

online commercial sources or via the internet (to get secondary sources)
Planning Primary Data Collection
Research Approaches

Contact Methods
Mail / Email

Sampling Plan
Sampling Unit
Sample size

Research Instruments
Mechanical Instruments

Participant observation in person observation in natural environment (ethnography,

Non participant observation unobtrusive observation I.e. pantry audit, garbageology
Observational research gathering primary data by observing relevant people, actions,
and situation
Ethnographic research a form of observational research that involves sending trained
observers to watch and interact with consumers in their natural habitat
Netnographic research involves online observation of cultural phenomena i.e.
message boards, blogs, etc
Survey research gathering primary data by asking people questions about their
knowledge, attitudes, preferences, and buying behaviour. The best for gathering
descriptive information, and is very flexible. However, many people dont want to fill
surveys, may answer questions they dont know or answer questions with answers they
fabricated. In surveys, we can get descriptive data and analyze correlations and
differences across groups, but cannot draw causal conclusions
Experimental research gathering primary data by selecting matched groups of
subjects, giving them different treatments, controlling related factors, and checking for
differences in group responses. Manipulate independent variable, and then look at effect
on dependent variable. I.e. mcdonalds test new sandwich in two different stores with
different prices but same marketing efforts

Strengths and Weaknesses of Contact Methods

Telephone Personal
Quantity of Data that can be
Control of Interviewer Effects
Excellent Fair
Control of Sample
Response Rate
Focus group interviewing personal interviewing that involves inviting six to ten
people to gather for a few hours with a trained interviewer to talk about a product,
service, or organization. The interviewer focuses the group discussion on important
issues. Hindered by group dynamic and difficult to properly implement
In-depth interviews (IDI) extended interviews designed to uncover consumer
experiences and how consumption fit within their life story. Interview evolves as info is
revealed as opposed to following a predefined set of questions
Projective interviews stimuli based interviews where the participant is shown an item
i.e. ad, brand, ambiguous image and asked to discuss their interpretations of the item
Online marketing research collecting primary data online through internet surveys,
online focus groups, web based experiments, or tracking consumers online behaviour.
Low costs, higher response rate (easier for people to do, less intrusive). There are even
online qualitative research approaches like online depth interviews and blogs
Online focus groups gathering a small group of people online with a trained moderator
to chat about a product, service, or organization and to gain qualitative insights about
consumer attitudes and behaviour
Sample a segment of the population selected for marketing research to represent the
population as a whole
Types of Samples
Probability Sample
Simple random sample
Every member of the population has a known and equal chance of selection
Stratified random
The population is divided into mutually exclusive groups (such as age groups)
and random samples are drawn from each group
Cluster (area) sample
The population is divided into mutually exclusive groups (such as blocks) and
the researcher draw a sample of the groups to interview
Non Probability Sample
Convenience sample
The researcher selects the easiest population members from which to obtain
Judgment sample
The researcher uses judgment to select population members who are good
prospects for accurate information
Quota Sample
The researcher finds & interviews a prescribed number of people in each of
several categories
-mechanical instruments used for marketing can include neuromarketing instruments, or
mechanical devices that measure subjects responses (i.e. if a man at an ATM squints, the
font gets bigger), cable set-top boxes, people meters, check out scanners, pay how you
drive monitors

Customer relationship management (CRM) managing detailed information about

individual customers and carefully managing customer touch points to maximize
customer loyalty
Data mining the process of extracting patterns from data. The goal is to turn data into
business intelligence
Model a mathematical representation of a real life situation. Used in marketing to
explain how consumers individually or collectively respond to marketing activities, and
how competitors interact. Can be used to forecast outcomes of alternative marketing

Chapter 8 288 318 Developing and Managing Products and Services

Product anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need. Broadly defined, products include
services, events, persons, places, organizations, ideas, or mixes of these
Service an activity, benefit, or satisfaction offered for sale that is essentially intangible
and does not result in the ownership of anything
Organization marketing consists of activities undertaken to create, maintain, or
change the attitudes and behaviour of target consumers toward and organization. i.e.
when business firms sponsor public relations or corporate image advertising
Three levels of Product

Augmented Product:
-after sale service
and credit
-product support
brand name
quality level
r Value

-the augmented product is built around the core benefit and actual product by offering
additional consumer services and benefits i.e. Canada Goose: core benefits: warmth,
status. Actual product: style, brand logo, high quality. Augmented product: jacket
-if you can identify core benefit, you can identify direct and indirect competitors

Consumer products products and services bought by final consumers for personal
o Convenience product a consumer product that customers usually buy
frequently, immediately, and with a minimum or comparison and buying
effort. Typically have a low price, widespread distribution, and are mass
promoted by producer (not reseller). I.e. toothpaste, magazines
o Shopping product a consumer product that the customer, in the process
of selection and purchase, usually compares on such bases as suitability,
quality, price and style. Have a higher price, more selective distribution,
and are advertised/personally sold by both producer & reseller. I.e.
clothing, major appliances, TVs
o Specialty product a consumer product with unique characteristics or
brand identification for which a significant group of buyers is willing to
make a special purchase effort. Have strong brand preference & loyalty,
little comparison & price sensitivity, high price, exclusive distribution, and
carefully targeted promotion. i.e. luxury goods, such as Rolex watches
o Unsought goods a consumer product that the consumer either does not
know about or knows about but does not normally think of buying. Price
and distribution varies, advertising is aggressive. I.e. life insurance, blood
Industrial products a product bought by individuals and organizations for further
processing or for use in conducting a business. Includes materials and parts, capital
items, and supplies and services
New product development the development of original products, product
improvements, product modifications, and new brands through the firms own product
development efforts
-for every 1000 ideas, 100 will have enough commercial premise to warrant a small scale
experiment, only 10 will warrant substantial financial commitment, and only a couple
will end up successful
-80% of products fail in the first year. Why? Overestimating market size, poor design,
incorrect position, priced too high, advertised poorly, competition, etc.
8 major stages in new product development:
1. Idea generation the systematic search for new product ideas
2. Idea screening screening new product ideas to spot good ideas and drop poor
ones as soon as possible
3. Concept development and testing develop the ideas into a product concept (a
detailed version of the new product ide stated in meaningful customer terms), and
then test the concept an develop it
4. Marketing strategy development designing an initial marketing strategy for a
new product based on the product concept. Answer questions about how, where,
when, and to whom the product will be introduced. Describe goals and the
planned value proposition
5. Business analysis a review of the sales, costs, and profit projections for a new
product to find out whether these factors satisfy the companys objectives
6. Product development developing the product concept into a physical product
to ensure that the product idea can be turned into a workable market offering

7. Test-marketing the stage of new product development in which the product and
marketing program are tested in realistic market settings
8. Commercialization the full scale introduction of the new product into the
Product Life Cycle the course of a products sales and profit over its lifetime
1. Product Development company finds and develops a new product idea. During
this stage, sales are zero and investment costs mount.
2. Introduction a period of slow sales growth as the product is introduced. Profits
are non existent because of the heavy expenses of product introduction. Choose a
launch strategy consistent with intended product positioning. Increase awareness,
induce trial
3. Growth a period of rapid market acceptance and increasing profits. Firm may
face a trade off between high market share and high current profit (high market
share requires a lot of spending). Capitalize on increasing demand and sustain
4. Maturity a period of slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits level off or decline because
of increased marketing outlays to defend the product against competition. Try to
modify the market, modify the product and/or find new users and market
segments to maintain sales level.
5. Decline the period when sales fall off and profits drop. Reduce spending and
milk the brand.
-the PLC concept can describe a product class (gasoline powered automobile), a product
form (SUVs) or a brand (the Ford Escape)

Style a basic and distinctive mode of expression

Fashion a currently accepted or popular style in a given field
Fad a temporary period of unusually high sales driven by consumer enthusiasm and
immediate product or brand popularity i.e. pet rock, snuggie


Offer a basic


Use cost-plus


Build selective


Build product
among early
adopters and
Use heavy
promotion to
entice trial


Offer product
extensions, service,
Price to penetrate
Build intensive

Diversify brand & Phase out
weak items

Build awareness and

interest in the mass

Stress brand
differences and

Reduce to take
advantage of heavy
consumer demand

Increase to
encourage brand

Price to match or
beat competitors
Build more

Cut price
Go selective:
phase out
Reduce to
level needed
to retain
Reduce to

Developing a product/service means defining the benefits it will offer, which are
communicated and delivered through product quality, features, and style & design:
Product quality the characteristics of a product or service that bear on its ability to
satisfy stated or implied customer needs. Consistency and non-defective is also
Total quality management (TQM) an approach in which all the companys people are
involved in constantly improving the quality of products, services, and business processes
Packaging the activities of designing and producing the container or wrapper for a
product. Increased competition and clutter on retail store shelves mean that packages
now must perform many sales tasks attract attention, describe the product, make the
sale. Also has the task of protecting, increasing shelf life, facilitating handling, storing,
providing info, etc. Packaging like a 5 second commercial for the 53% of purchases made
on impulse
Labels identify the product or brand, and may describe several things about the product
(like nutrition info)

Product line a group of products that are closely related because they function in a
similar manner, are sold to the same customer groups, are marketed through the same
types of outlets, or fall within given price ranges i.e. Marriot offers several lines of hotels,
Nike has different lines of shoes
Product line length the number of items in the product line. The line is too
short if revenue can be increased by adding items. May allow for upselling (i.e. BMW 3
and 5 and 7 series), cross selling (i.e. HP printers and cartridges), or protecting against
economic swings (i.e. gap owns high and low end stores like Old Navy to Banana
Product line filling involves adding more items within the present range of the
line. However if overdone can result in cannibalization and customer confusion
Product line stretching occurs when a company lengthens its product line
beyond its current range. The company can stretch its line downward (lower end),
upward, or both ways. I.e. Toyota launching Lexus
Product mix (or product portfolio) the set of all product lines and items that a
particular seller offers for sale
Width the number of different product lines the company carries
Length the total number of items the company carries within its lines
Depth the number of versions of each product in the line
Consistency how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way
A company must consider 4 special service characteristics when designing marketing
- Service intangibility they cannot be seen, heard, tasted, felt, or smelled before
they are bought. Buyers look for signals of service quality, and draw conclusions
from what they do see.
- Service inseparability they are produced and consumed at the same time and
cannot be separated from their providers
- Service variability their quality may very greatly, depending on who provides
them and when, where, and how
- Service perishability they cannot be stored for later sale or use. I.e. if a client
doesnt show up, can be a big problem
Marketing Services requires understanding and managing of the service profit chain,
internal marketing, and interactive marketing
Service profit chain the chain that links service firm profits with employee and
customer satisfaction

Greater service
Internal servi
serviccee qual
qualiittyy -- Satisfied service value - better &
customers -Profits -- more
Satisfied service value - better & loyal customers customers leads
ternal support
support forfor
vvee loyal customers customers leads
toto growth
growth &&
serviccee workers'
workers' good
good more productive
serviccee toto
working envi
& of those whoprofits
profits and growth goals begins withpurchases
taking care
take care of customers
refer others

Internal marketing orienting and motivating customer contact employees and

supporting service people to work as a team to provide customer satisfaction, must
precede external marketing
Interactive marketing training service employees in the fine art of interacting with
customers to satisfy their needs
-Service companies face three major marketing tasks:
- Service differentiation develop a differentiated offer, delivery, and image
- Service quality be customer obsessed, set high standards, be reliable,
responsive, etc.
- Service productivity train current employees or hire new ones, harness
technology, be aware of ways to use economies of scale
-Remember, consumers are not buying goods or services, but a set of need-fulfilling
Chapter 9 Brand Strategy and Management
Brand a name, term, symbol, or design, or a combination of these, that identifies the
products or services of one seller or a group of sellers and differentiates them from those
of competitors. The enduring emotional association a consumer has with a particular
company or product. A collection of all the associations that it triggers in consumers
minds. Is a key tool we use to position our product.
-create a unique, memorable brand
-create specific associations between product and needs
-create positive attitudes towards brand
Lovemark the term for a brand that inspires the kind of loyalty we exhibit toward those
we love. To turn a brand into a lovemark, you must develop a relationship with
customers, tell a story

-brand communities need to have platforms where the community members can interact.
Enable members to form strong bonds with each other, which will ultimately lad to a
stronger brand community and a deeper sense of belonging i.e. eBay, Facebook

Brand advocates customers, employees, and others who willingly and voluntarily
promote their favourite brands
- Advocacy starts close to home start by creating advocates in the world
around you
- Advocacy begins with trust build trust with potential advocates by
nurturing their recommendations and opinions
- Make customers and employees part of the brand story
- Deliver an experience that gets them talking
- Outperform where they care the most
-Brands have personality, status, and value (brand equity)
Brand personality the sum total of all the attributes of a brand, and the emotions it
inspires in the minds of consumes i.e. Coke is traditional, pepsi is youthful, mac is hip,
IBM is conservative
Brand status they occupy a level of social regard with respect to one another i.e. Rolls
Royce is a higher status car brand than Ford
Brand equity the dollar amount attributed to the value of the brand, based on all the
intangible qualities that create that value. The extent to which people are willing to pay
more for a brand. Brands with strong equity rate high in differentiation, relevance,
knowledge, and esteem (from customer point of view)
-high brand equity means high brand awareness, strong loyalty & repeat sales, high
adoption of new products, and less susceptibility to price competition
Simple Brand Performance Measures
Measured By
Relative Satisfaction
Consumer preference for your product compared to market
or competitors
% of target market who are aware of your brand
Consumer switching rate (proportion of consumers who
switch from your brand to a competitor brand)
Relative Perceived
Perceived quality of your brand compared to the
% of total possible retail outlets carrying your brand
According to Keller, strong brands are:
- Customer focused the power of the brand lies in consumers minds. Pricing is
based on consumers value perceptions
- Centered on needs deliver benefits consumers truly desire and design brands
for customers vs assigning customers to brands
- Managed well stay relevant, be properly positioned, be consistent & authentic,
make use of all marketing tools, monitor and support the brand
-the main branding strategy decisions are brand name selection, brand positioning, and
brand sponsorship
Brand name selection the name should:
- Suggest something about the type of products it will brand i.e. Snuggle,
- Be easy to pronounce, recognize, and remember i.e. Tide, crest, Ziploc

Be distinctive I.e. Google, Lexus

Be extendable, that is, not tied to closely to one product i.e., Nike
Be pronounceable in many languages and should not translate to awkward phrases
i.e. Kodak
Be capable of registration and protection as a trademark (a brand name cannot be
registered if it infringes on existing brand names) i.e. Ugg, Novartis are
neologisms (made up words)

Beliefs &&





ss brand
Private brand

New brands

-marketers need to position their brands clearly in customers minds. They can position
brands at any three levels:
1. Positioning on Product attributes the least desirable level for brand positioning
as can be easily copied, and customers are more interested in what the attributes
will do for them. i.e. Pampers invented the disposable diaper and the marketing
focused on attributes such as fluid absorption and disposability
2. Positioning on Product Benefits if Pampers went beyond technical product
attributes and talked about the resulting containment and skin-health benefits from
dryness. i.e. Volvo (safety), Nike (performance), Lexus (quality)
3. Positioning on Product Beliefs and Values engaging customers on a deep,
emotional level i.e. Starbucks, Apple, and Victorias secret rely less on a products
tangible attributes and more on creating surprise, passion, and excitement
surrounding a brand. Taps into emotions
Brand sponsorship an important branding strategy decision, and begins with the
question to brand or not to brand
National brand (manufacturers brand) a brand created and owned by the
manufacturer of the product i.e. Kellogs Frosted Flakes
Private brand (store brand) a brand created and owned by a reseller of a product or
service i.e. No frills No Name brand, Presidents Choice by Loblaws, Xhilaration by
Target, Kirkland at Costco
Licensing selling the rights to apply a brand name, logo, or image to another
manufacturer i.e. a company can license the right to use the Coca Cola loo on a t-shirt, or
to make a Hello Kitty lunch box
Co-branding the practice of using the established brand names of two different
companies on the same product. Since each brand dominates in a different category, the
combined brands create broader customer appeal and greater brand equity. It also allows

a company to expand its existing rand into a category it might otherwise have had trouble
entering. i.e. Nike & ipod, Aeroplan and Visa, Crest & scope

-when it comes to developing brands, a company has 4 choices:

Existing Product

New Product Category


Line extensions extending an existing brand name to new forms, colours, sizes,
ingredients, or flavours of an existing product category i.e. Cheerios to Honey Nut
Cheerios, Multigrain Cheerios, Chocolate Cheerios
Brand extensions extending an existing brand name to new product categories i.e.
P&G extended Mr. Clean to Magic Eraser, Magic Reach, and auto cleaning kits Mr.
Clean Autodry). Gives a product instant recognition, faster acceptance, and saves the
higher advertising costs usually required to build a brand name. However, it involves
risk, as some may fail and could harm customer attitudes towards the other products
carrying the same brand name
Multibranding a brand development strategy in which the same manufacturer
produces many different brands in the same product category i.e. P&G sells 6 brands of
laundry detergent (Tide, Cheer, Gain, Era, Dreft, and Ivory). It is a way to establish
different features that appeal to different customer segments, lock up more reseller shelf
space, and capture a larger market share. However the company could also spread its
resources over many brands instead of building a few brands to a highly profitable level.
Touchpoints any and all points of contact a consumer has with a brand, including word
of mouth, company webpages, points of purchase, and advertising
Branded entertainment a form of entertainment, usually video, that is created with the
co-operation or financial support of a marketer i.e. BMW films, Lady Gagas music video
that shows them eating Subway, using a Polaroid, eating Miracle Whip
- Brands symbolize who we are
- Brands are incorporated into identity

Brands are loved

Consumers talk about brands as relationship partners
Brands posses personality traits
Brands are fulfilling our needs for a sense of belonging to a community
Brands are readily available images for us to create self associations

Chapter 11 Marketing Channels: Retailing and Wholesaling

Value delivery network the network made up of the company, suppliers, distributors,
and ultimately customers who partner with each other to improve the performance of
the entire system in delivering customer value
Marketing channel (or distribution channel) a set of interdependent organizations
that help make a product or service available for use or consumption by the consumer or
business user
-intermediaries play an important role in matching supply and demand i.e. millions of
bars of Lever 2000 hand soap is made every day, but you only buy a few at a time. Big
food and drug retailers buy soap by the truckload and stock it, and in turn you can buy
one bar along with toothpaste, shampoo, etc at the same time
-channel members add value by bridging the major time, place, and possession gaps that
separate goods and services from those who would use them
-adding a distributor reduces the number of channel transactions because rather than each
customer going to each manufacturer, all manufacturers can distribute to one distributor,
who can distribute to all customers
-specialization of channel members allows for economies of scale
Members of the marketing channel perform many key functions, such as helping to
complete transactions:
- Providing information gathering and distributing marketing research and info
about actors and forces in the marketing environment
- Promoting developing and spreading persuasive communications about an offer
- Contact finding and communicating with prospective buyers
- Matching shaping and fitting the offer to the buyers needs, such as packing,
assembling etc
- Negotiating reaching an agreement on price and other terms of the offer
Others help to fulfill the completed transactions:
- Logistics/Physical distribution transporting & storing goods
- Financing acquiring and using funds to cover the costs of the channel work
- Risk taking assuming the risks of carrying out the channel work
-channels will be most effective when each member is assigned to tasks it can do best and
all members cooperate
Channel level a layer of intermediaries that performs some work in bringing the
product and its ownership closer to the final buyer
-the number of intermediary levels indicates the length of a channel
Direct marketing channel a market channel that has no intermediary levels the
company sells directly to consumers i.e. Mary Kay, the Pampered Chef
Indirect marketing channel a marketing channel that includes one or more

Channel conflict disagreement among marketing channel members on goals, roles, and
rewards who should do what and for what rewards i.e. a Honda dealer in a large city
might complain that the other dealers in the city steal sales by pricing too low or
advertising outside their assigned territory. Another example is when Goodyear created
hard feelings and conflict with its premier independent dealer channel when it began
selling through mass-merchant retailers
Horizontal conflict same channel level. i.e. if Canon gave preferential treatment to
walmart over best buy
Vertical conflict different levels i.e. if Canon sells straight to customers in addition to
selling to best buy
Conventional distribution channel a channel consisting of one or more independent
producers, wholesalers, and retailers, each a separate business seeking to maximize its
own profits, even at the expense of profits for the system as a whole. No channel
member has much control over others, and no formal means exists for assigning roles and
resolving channel conflict

Vertical marketing system (VMS) a distribution

channel structure in which producers, wholesalers, and
retailers act as a unified system. One channel member
owns the others, has contracts with them, or has so much
power that they all cooperate
- Corporate VMS a VMS that combines
successive stages of production and distribution
under single ownership channel leadership is
established through common ownership. I.e.
Luxottica produced many famous eyewear brands
such as Ralph Lauren and Ray Ban, and then sells
these brands through LensCrafters and Sunglasses
Hut, which it also owns
- Contractual VMS a VMS in which
independent firms at different levels of production
and distribution join together through contracts to obtain more economies or sales
impact than they could achieve alone i.e. a franchise organization
o Franchise organization a contractual VMS in which a channel member,
called a franchisor, links several stages in the production-distribution
Manufacturer sponsored retailer franchise system i.e. Ford and its
network of independent franchised dealers
Manufacturer sponsored wholesaler franchise system i.e. Coca
Cola licenses bottlers (wholesalers) in various markets to buy Coca
Cola syrup and then bottle and sell the finished product to retailers
Service firm sponsored retailer franchise system i.e. Boston Pizza,
Booster Juice
- Administered VMS a VMS that coordinates successive stages of production
and distribution, not through common ownership and contractual ties, but though
the size and the power of one of the parties. Manufacturers of a top brand can
obtain strong trade cooperation and support from resellers (i.e. General Electric,
Kraft) and large retailers can exert strong influence on the many manufacturers
that supply the products they sell (i.e. Walmart)
Horizontal marketing system a channel arrangement in which two or more companies
at one level join together to follow a new marketing opportunity i.e. Tim Hortons express
in Esso stations, Harveys in Home Depot
Multichannel distribution system a distribution system in which a single firm sets up
two or more marketing channels to reach one or more customer segments i.e. a Producer
sells to Consumer segment 1 through catalogues and Internet, to 2 through retailers, to
business segment 1 through distributors and dealers, and to business segment 2 through
its own sales force. May be harder to control and generate conflict/cannibalization but
different channels can offer superior value and allows targeting of different customer

Cross channel integration when you could go through one channel to purchase and
return item through a different channel. Min. acceptable standard of service must be
maintained. i.e. browse a sears catalogue, order online, then in-store return
Disintermediation the cutting out of marketing channel intermediaries by product or
service producers, or the displacement of traditional resellers by radical new types of
intermediaries i.e. airlines sell directly to consumers, cutting travel agents out of the
Marketing channel design designing effective marketing channels by analyzing
consumer needs, setting channel objectives, identifying major alternatives, and evaluating
1. Analyzing consumer needs Do customers want to buy from nearby locations or
are they willing to travel; would they rather buy in person, by phone, or online?
Do they want services such as delivery, repairs, and installation?
2. Setting channel objectives should be stated in terms of targeted level of
customer service. Influenced by the nature of the company, its products, its
marketing intermediaries, its competitors, and the environment
3. Types and number of intermediaries There are often many to choose from, and
you need to choose how intensive your distribution strategy will be
a. Intensive distribution stocking the product in as many outlets as
possible i.e. Coca Cola, Aero
b. Exclusive distribution giving a limited number of dealers the exclusive
right to distribute the companys products in their territories . Enhances
brand image, allows stronger dealer selling support, more control over
dealer prices, promotions and services, and allows for higher markups i.e.
you can only buy Rolex at certain authorized dealers
c. Selective distribution the use of more than one, but fewer than all, of
the intermediaries who are willing to carry the companys products. Gives
producers good market coverage with more control and less cost than
intensive. i.e. Coach you cant buy at Walmart, but its at the Bay, coach
stores, Macys
4. Evaluating channel alternatives - each alternative should be evaluated against
economic, control, and adaptability criteria
Marketing channel management selecting, managing, and motivating individual
channel members and evaluating their performance over time
-the company must sell not only through the intermediaries, but to and with them
Retailing all activities involved in selling goods or services directly to final consumers
for their personal, non business use i.e. gas stations, furniture store, holiday inn
Retailer a business whose sales come primarily from retailing
Types of Retailers:
- Specialty stores - a retail store that carries a narrow product line with a deep
assortment within that line. Typically have high service
- Department store a retail organization that carries a wide variety of product
lines each line is operated as a separate department managed by specialist
buyers or merchandisers
- Supermarkets a large, low cost, high volume, low margin self-service store
(low service) that carries a wide variety of grocery and household products

Convenience store a small store, located near a residential area, that is open
long hours most das and carries a limited line of high turnover convenience goods
- Superstore a store much larger than a regular supermarket that offers a large
assortment of routinely purchased food products, non food items, and services
- Discount stores a retail operation that sells standard merchandise at lower
prices by accepting lower margins and selling at higher volume
- Off price retailer a retailer that buys at lees than regular wholesale prices and
sells at less than retail i.e. Winners, factory outlets, independents, and warehouse
- Factory outlets an off price retailing operating that is owned and operated by a
manufacturer and that normally carries the manufacturers surplus, discontinued,
or irregular goods
- Warehouse club an off price retailer that sells a limited selection of brand name
grocery items, appliances, clothing, and a hodgepodge of other goods at deep
discounts to members who pay annual membership fees i.e. Costco
Chain store two or more outlets that are commonly owned and controlled. Functions
such as purchasing, merchandising, advertising and inventory control are typically done
from a central location
-voluntary chain a wholesaler sponsored group of independent retailers that
engages in group buying and common merchandising, such as the independent grocers
-retailer cooperative a group of independent retailers that band together to set
up a jointly owned, central wholesale operation and conduct joint merchandising and
promotion efforts
Wheel of retailing a concept that states that new types of retailers usually begin as
low-margin, low price, low status operations but later evolve into higher priced, higher
service operations, eventually becoming like the conventional retailers they replaced

Wholesaling all activities involved in selling goods and services to those buying for
resale or business use
Wholesaler a firm engaged primarily in wholesaling activities
-provide warehousing, market info, break bulk, absorb risk, provide transportation &
delivery, etc.
Merchant wholesalers an independently owned wholesaler business that takes title to
the merchandise it handles

Broker a wholesaler who does not take title to goods (does not carry inventory) and
whose function is to bring buyers and sellers together and assist in negotiation
Agent a wholesaler who represents buyers or sellers on a relatively permanent basis,
performs only a few functions, and does not take title to goods
Marketing logistics (physical distribution) planning, implementing, and controlling
the physical flow of materials, final goods, and related info from points of origin to points
of consumption to meet customer requirements at a profit. Getting the right product to
the right customer at the right place at the right time
Supply chain management managing upstream and downstream value added flows of
materials, final goods, and related information among suppliers, the company, resellers,
and final consumers







Distribution centres large, highly automated warehouses designed to receive goods

from various plants and suppliers, take orders, fill them efficiently, and deliver goods to
customers as quickly as possibly
Just in time logistics system a type of inventory management system in which only
small inventories of parts or merchandise are held, and new stock arrives just in time
when it is needed
Chapter 12 Advertising & Public Relations
Promotion mix (marketing communications mix) the specific blend of promotion
tools that the company uses to persuasively communicate customer value and build
customer relationships
-promotion used to remind, inform, and persuade
5 Major Promotions Tools:
Advertising any paid form of non-personal presentation and promotion of ideas, goods,
or services by an identified sponsor
Sales promotion short term incentives to encourage the purchase or sale of a product or
Personal selling personal presentation by the firms sales force for the purpose of
making sales and building customer relationships
Public relations (PR) building good relations with the companys various public by
obtaining favourable publicity, building up a good corporate image, and handling or
heading off unfavourable rumours, stories, and events
-earned rather than paid media

Direct marketing direct connections with carefully targeted individual consumers to

both obtain an immediate response and cultivate lasting customer relationships
Integrated marketing communications (IMC) carefully integrating and coordinating
the companys many communications channels to deliver a clear, consistent, and
compelling message about the organization and its products
-conflicting images can confuse company or brand images
-advertising says buy a product, sales promotion says buy it now
-PR is very believable, and can reach prospects who avoid salespeople and ads
-direct marketing is directed to an individual, like online marketing, telephone marketing
Push strategy involves using the sales force and trade promotion to push the product
through channels. The producer promotes the product to channel members who in turn
promote it to final consumers
Pull strategy a promotion strategy that calls for spending a lot on advertising and
consumer promotion to induce final consumers to buy the product, creating a demand
vacuum that pulls the product through the channel

-business to consumer companies usually pull more, while business to business

companies typically push more
-advertising works best if you are changing your decision
You need all three of these for a great Ad The 1/3rd Principle:
1. Account Planning
a. Goals
b. Brand Values
c. Audience Profile
2. Creative Strategy
a. Tone & Manner
3. Media Planning
a. Media Choice
b. Metrics
c. Scheduling

Gross rating points a measure of the size of an audience reached by a specific media
vehicle or schedule; reach x frequency = exposure
ACM model an ad needs to get Attention, achieve Comprehension, and be Memorable
(make sure taglines/slogan attached to brand!)
-the motivation to process the message is key, people will be highly motivated if ore info
is given and consumers are influence by the quality of the arguments in the ad; people
will be less motivated if the visuals of the ad are emphasized and the processing is only

Noise: Get

1. Intermediate Consumer's
(Informa and

(Get them to
like you)

2. Heart and Mind Effects

(Give and
of the

3. Ultimate Results

Methods used to attract attention cut through the clutter:

-attractive visuals (including sexual appeals)
-entertaining/humorous (but remember that entertainment can be a tool, but is not the
Note: credibility of ads and brand image decrease if the gap between ad generated
perceptions and experience based perceptions is large
Chapter 13 Personal Selling and Sales Promotion
Personal selling personal presentation by the firms sales force for the purpose of
making sales and building customer relationships
-good for expensive, complex, custom made products (any or all) like a car
-also good if few, centrally located customers
-Highly interactive lots of communication
-Costly employing a sales force has
between the buyer and seller
many hidden costs in addition to wages
-Directly ease customer confusion and
-Difficult to manage large sales force
persuade purchase
-Salesperson may go off message from

-Excellent for communicating

complex/detailed info
-Relationships can be built up important if
closing the sale may take a long time

brand in order to secure the sale

-Not suitable if there are many buyers

Salesperson an individual representing a company to customers by performing one or

more of the following activities: prospecting, communicating, selling, servicing,
information gathering, and relationship building. They link the company with its
customers, and represent customers to the company. They coordinate the marketing and
sales (company should ensure the marketing department and sales department work
Sales promotion consists of short term incentives to encourage the purchase or sale of
a product or service. Are typically time sensitive and may correspond to seasons or
holidays. Often used in conjunction with advertising, personal selling, and direct
marketing as part of an integrated marketing campaign
-marketers should avoid quick fix price only promotions in favour of promotions
designed to build brand equity (try loyalty programs, like Shoppers)
-Can stimulate quick increases in sales by
-If used over the long term, customers may
targeting promotional incentives on
get used to the effect and wait for
particular products
-Good short term tactical tool
-Too much promotion may damage the
-Good for inducing trial
brand image
-Easier to track effectiveness
-sales may only be short term
Consumer promotions sales promotion tools used to boost short term customer buying
and involvement or to enhance long term customer relationships:
Samples offers of a trial amount of a product. Most effective but most
expensive way to introduce a new product or create excitement for an existing
one. Can be free or a small price, and sent by mail, delivered, handed out in store,
in an ad, etc
Coupons certificates that give buyers a saving when they purchase specified
products. Coupon clutter has resulted in a decline of redemption rate. Coupons
now offered online & on smartphones
Rebates cash refunds that are like coupons except that the price reduction
occurs after the purchase rather than at the retail outlet. Some customers wont
actually send in the rebate but will still buy (so > coupons), and allow for you to
get info from the customers when you send it in
Price packs offer consumers savings off the regular price of a product when
they buy in groups, such s two for the price of one or two related products banded
together at a lower price
Premiums goods offered either free or at low cost as an incentive to buy a
product. Including toys with kids products to DVDs in cereal, little bottle of
Vodka that comes with a large bottle, etc

Point of Purchase (POP) promotions include displays and demonstrations that

take place at the point of sale. I.e. demonstrators with food tasting, promotional
signs, aisle displays
Contests and Sweepstakes give consumers the chance to win something if they
submit an entry or their name for a draw. Can create considerable brand attention
and consumer involvement.
Event Marketing creating a brand-marketing event or serving as a sole or participating
sponsor of events created by others, or even sponsor the building the event takes place i.e.
Bud Light Sensation Festival, the Rogers Centre, Rexall Place
Trade promotions sales promotion tools used to persuade resellers to carry a brand,
give it shelf space, promote it in advertising, and push it to consumers. Many tools used
for consumer promotions are used and in addition there can be straight discounts off the
list price (price off, off invoice, off list), or allowances (usually so much off per case) in
return for the retailers agreement to feature the manufacturers products in some way.
They may also offer free goods, or push money (money or incentives for the retailers to
push the goods to customers). They may also give free specialty advertising items that
carry the companys name, such as pens, matchbooks, etc
-almost like a bribe
Business promotions sales promotion tools used to generate business leads, stimulate
purchases, reward customers, and motivate salespeople. i.e. conventions and trade
shows, sales contests (best salespeople win prizes)
Chapter 14 Direct and Online Marketing
Direct marketing connecting directly with carefully targeted individual consumers to
both obtain an immediate response and cultivate lasting customer relationships
-for buyers, is convenient, easy, and private; provides a lot of comparative information
(i.e. online), and is interactive and immediate
-for sellers, is good for building personal relationships, and is becoming low cost,
efficient and speeding as telemarketing, direct mail, and websites are used rather than in
person meetings
-gives sellers access to buyers that they could not reach through other channels
-Message customization without high costs
of personal selling
-Strong relationship building especially
when customer can control the interaction
-Convenient & able to reach specific target

-SPAM and other unwanted
correspondence when targeting is poorly
-Reliance on CRM (customer relationship
management) and database marketing
requires constant updating

Customer database an organized collection of comprehensive data about individual

customers or prospects, including geographic, demographic, psychographic, and
behavioural data. Can be used to locate good potential customers, generate sales leads,
learn about their customers in detail etc
Forms of Direct Marketing

Direct mail marketing direct marketing by sending an offer, announcement,

reminder, or other item to a person at a particular physical or virtual address.
Permits high target market selectivity, can be personalized, is flexible. Costs
more per thousand people than mass media but reaches better prospects. Now
being used with email, SMS, personalized URLs, etc
Catalogue marketing direct marketing through print, video, or digital
catalogues that are mailed to select customers, made available in stores, or
presented online. Create emotional connections with consumers
Telephone marketing (telemarketing) using the telephone to sell directly to
consumers and business customers. Not just them calling you, there is opt in
calling because of the do not call list in Canada
Direct response television marketing direct marketing via television, including
direct response television advertising (or infomercials) and home shopping
channels i.e. Shamwow, Snuggies
Kiosk marketing i.e. redbox, Kodak printer, AirCanada fight system
Mobile phone marketing
Podcasts audio or video files, such as a radio/TV program, sports feature, or
music video, that can be downloaded from the internet and viewed or listened to
on a personal electronic device. Many companies make them and showcase their
products i.e. Disney world
Interactive TV (iTV) lets viewers interact with TV programming and ads by
using their remotes. Still taking off, but for example the ads would be interactive,
you could buy products direct from TV after watching ad
Online marketing company efforts to market products and services and build customer
relationships over the internet
4 Major Online Marketing Domains:
1. Business to Consumer (B2C) online marketing businesses selling goods and
services online to individual consumers for their personal needs i.e.,
2. Business to Business (B2B) online marketing business using B2B websites,
email, online catalogues, online trading networks etc to reach new business
customers, serve current customers more effectively, and obtain buying
efficiencies and better prices i.e. at, or Dell has online business stores,
3. Consumer to consumer (C2C) online marketing online exchanges of goods
and information between individual consumers i.e. eBay, on blogs
4. Consumer to business (C2B) online marketing online exchanges in which
consumers search out sellers, learn about their offers, and initiate purchases,
sometimes even driving transaction terms i.e. when customers ask companies
questions on their websites, or where would be buyers can bid for
airline tickets or hotel rooms
Publicity any unpaid form of non personal communication through various media
outlets i.e. blogs, news stories

Chapter 12 Communicating Customer Value: Advertising and Public Relations

Public Relations Functions:
Press relations or press agency creating and placing newsworthy information in
the new media to attract attention to a person, a product, or a service
Product publicity publicizing specific products
Public affairs building and maintaining national or local community relations
Lobbying building and maintaining relations with legislators and government
officials to influence legislation and regulation
Investor relations maintaining relationships with shareholders and others in the
financial community
Development using public relations with donors or members of non profit
organizations to gain financial or volunteer support
-companies use PR to build good relations with consumers, investors, the media, and
their communities i.e. Got Milk? Advertising campaign
-companies do not pay for the space or time in the media, but pay for a staff to develop
and circulate info and manage events
-lines between advertising and PR are blurring, and so they should work hand in hand for
Buzz marketing takes advantage of social media by getting consumers themselves to
spread info about a product or service to others in their communities
-PR also used for crisis communications; respond quickly, take responsibility, be
Major Advertising Decisions

& sales

of sales
-% of
-Objectives and

strategy &

Media Decisions
frequency, &
major media
specific media
media timing

& profit
Sales &
Return on

Advertising Objective a specific communication task to be accomplished with a

specific target audience during a specific period of time. The overall advertising goal is to
help build customer relationships by communicating customer value, and help move
consumers through the buying process
Informative advertising used heavily when introducing a new product or brand to the
market; the objective is to build primary demand by communicating the benefits of the

Persuasive advertising becomes more important as competition in the product category

increases. The goal is to build selective demand (persuade the consumer that the
companys products has more benefits than the competitors)
Comparative advertising (attack advertising) when a company directly or
indirectly compares its brands with one or more other brands
Reminder Advertising important for mature products helps to maintain customer
relationships and keep consumers thinking about the products i.e. for Tide and Crest
Advertising budget the dollars and other resources allocated to a product or company
advertising program
Affordable method setting the advertising budget at the level management thinks the
company can afford. This ignores the effects of advertising on sales, and places
promotion last among spending priorities and often results in Underspending
Percentage-of-sales method setting the promotion budget at a certain percentage of
current of forecasted sales, or as a percentage of the unit sales price. Wrongly views sales
as the cause of promotion rather than the result
Competitive parity method setting the promotion budget to match competitors
outlays. There are no grounds that the competition has a better idea of what a company
should be spending than the company itself, however, and will not help prevent
promotion wars
Objective and task method the company sets its advertising budget based on what it
wants to accomplish with promotion. This entails (1) defining specific objectives, (2)
determining the task that must be performed to achieve these objectives, and (3)
estimating the costs of performing these tasks. The sum of these causes is the proposed
ad budget. This is the most logical budget setting method.
Advertising strategy the strategy by which the company accomplishes its advertising
objectives. It consists of two major elements: creating advertising messages and
selecting advertising media
Product Placement embedding brands as props within other programming
Creative concept the compelling big idea that will bring the advertising message
strategy to life in a distinctive and memorable way
-Advertising appeals should be 1) meaningful 2) believable and 3) distinctive
Execution style the approach, style, tone, words, and format used for executing and
advertising message:
Slice of life shows one or more typical people using the product in a normal
Lifestyle shows how a product fits in with a particular lifestyle i.e. Lululemon
shows woman doing yoga
Fantasy creates a fantasy around the product or its use i.e. Travellers insurance
ad where gentleman flies by umbrella and helps people
Mood/Image builds a mood/image around the product/service such as beauty,
love, intrigue, or serenity; few claims are made about the product except through
suggestion i.e. Incredible India ad showing inspiring experiences and vibrant
Musical shows people or cartoon characters singing about the product i.e. Oscar
Meyer wiener jingle

Personality symbol creates a character that represents the product i.e. Mr.
Clean, Tony the Tiger, Wendy for Wendys
Technical Expertise shows the companys expertise in making the product
Scientific evidence presents survey or scientific evidence that the brand is
better or better liked than one or more other brands i.e. Crest toothpaste
Testimonial evidence or endorsement features a highly believable or likeable
source endorsing the product. Could be ordinary people or celebrities
Advertising media the types of media and media vehicles through which advertising
messages are delivered to their intended audiences:
Step 1: Decide on reach, frequency, and impact
Reach a measure of the percentage of people in the target market who are
exposed to the ad campaign during a given period of time
Frequency a measure of how many times the average person in the target
market is exposed to the message
Media impact the qualitative value of a message exposure through a given
medium. I.e. a message in Newsweek will be more believable than in National
Step 2: Choose among media types
Choose media that will effectively and efficiently present the advertising message to
target customers, taking into account each mediums impact, message effectiveness, and
cost. Often a marketer uses a mix of media.
Traditional Media types:
Good mass-marketing coverage; low cost High absolute costs; high clutter;
per exposure; combines sight, sound, and fleeting exposure; less audience
motion; appealing to the senses
The Internet
Direct Mail



High selectivity; low cost; immediacy;

interactive capabilities
Flexibility; timeliness; good local market
coverage; broad acceptability; high
High audience selectivity; flexibility; no
ad competition within the same medium;
allows personalization

Relatively low impact; the audience

controls exposure
Short life; poor reproduction quality;
small pass along audience

High geographic and demographic

selectivity; credibility and prestige; highquality reproduction; long life and good
pass along readership
Good local acceptance; high geographic
and demographic selectivity; low cost

Long ad purchase lead time; high

cost; no guarantee of position

Relatively high cost per exposure;

junk mail image

Audio only; fleeting exposure; low

attention (the half heard medium);
fragmented audiences

Out of home

Flexibility; high repeat exposure; low

cost; low message competitions; good
positional selectivity

Little audience selectivity; creative


Digital media includes any form of media delivered on a screen and operated by a
computer, such as electronic signs and video screens
Alternative media any form of non-traditional out of home media, such as ads in
public washrooms, on tops of taxis, etc.
New media a term applied to media that is still in the early stages of being used for
advertising, such as the iPad
Media vehicle the specific media (publication or program) within a general media type
(magazine, radio, television) i.e. TV is a media type, but CTV and Hockey Night in
Canada are media vehicles. Magazines are a media type, but Macleans and Chatelaine
are media vehicles
-when choosing a media vehicle, assess audience quality (for Huggies, Parenting
magazine would be high while Maxim will be low), audience engagement (Vogue readers
pay more attention to ads than Newsweek readers), and editorial quality (Time and WSJ
are more believable than Star or National Enquirer)
CPM cost per 1000 impressions
Step 3: Decide on Media Timing
Seasonal advertising varying advertising to follow a seasonal pattern, for example
promoting more heavily before holidays (Portrait Studio), cold and flu season (Vicks
NyQuil), summer (bathing suit companies)
Continuity advertising evenly over a given period
Pulsing scheduling ads unevenly over a given time period ; advertising heavily for a
short period to build awareness that carries over to the next period
Flighting Schedule includes blitz, and is when there is a lot of advertising, a period of
none, and then some more i.e. for movies
Return on advertising investment the net return on advertising investment divided by
the costs of the advertising assessment
-measure communications effects (i.e. copy testing, consumer recall, product awareness,
product knowledge, product preference)
-measure sales effects
Advertising agency a marketing services firm that assists companies in planning,
preparing, implementing, and evaluating all or portions of their marketing programs
Chapter 10: Pricing Understanding and Capturing Customer Value
Price the amount of money charged for a product or a service, or the sum of the values
that customers exchange for the benefits of having or using the product or service
-price allocates resources
Customer-value based pricing setting price based on buyers perceptions of value
rather than on the sellers cost. Cannot design a product and marketing program and then
set the price with this method. Includes good value pricing and value added pricing

Design a

Cost based pricing:


Set price
based on

buyers of

Set target
product to
price toto match
that can
needs and
costs that
be incurred
desired value
-cant assign a value to some satisfactions i.e. at a restaurant: environment, conversation,
atat target
target price
status, perceptions
Value based pricing:

Good value pricing offering just the right combination of quality and good service at a
fair price. Everyday low pricing is one of these, and examples include Costco, Walmart,
etc. High low pricing in contract involves charging higher prices on an everyday basis
but running frequent temporary price promotions, examples include Sears and the Bay
Value added pricing attaching value-added features and services to differentiate a
companys offers and justify charging higher prices (as opposed to just cutting the price)
Cost based pricing setting prices based on the costs for producing, distributing, and
selling the product plus a fair rate of return for the effort and risk
Cost-plus pricing (markup pricing) adding a standard markup to the cost of the
product. Doesnt really make sense since it ignores consumer demand and competitor
prices, but is popular because it ties price to cost which simplifies pricing
Break-even pricing (target return pricing) setting price to break even on the costs of
making and marketing a product, or setting price to make a target return. Still fails to
consider customer value and the relationship between price and demand
Competition based pricing setting prices based on competitors strategies, prices,
costs, and market offerings
-internal factors affecting pricing include the companys overall marketing strategy,
objectives, and marketing mix, as well as other organizational considerations
-external factors include the nature of the market and the demand and other
environmental factors
Target costing pricing that starts with an ideal selling price, and then targets costs that
will ensure that the price is met
-some companies de-emphasize price or even position their products on high prices,
featuring high prices as part of their products allure
-the sellers pricing freedom varies with different types of markets:
Under pure competition no single buyer or seller has much affect on the going
market price
Under Monopolistic competition sellers try to develop differentiated offers for
different customer segments and in addition to price, use other marketing
strategies to set their offers apart
Under Oligopolistic competition the market consists of a few sellers who are
highly sensitive to each others pricing and marketing strategies

In a pure monopoly the market consists of one selling, where pricing can be
controlled by that seller, or the government (i.e. Canada Post)
Demand curve a curve that shows the relationship between the price charges and the
resulting demand level. Usually demand and price are inversely related, so that the
higher the price, the lower the demand.
Price elasticity a measure of the sensitivity of demand to changes in price. If demand
hardly changes with a small change in price, its inelastic. If it changes greatly, its elastic.
If demand is elastic rather than inelastic, sellers will consider lowering their prices as it
will increase total revenue, and vice versa.
New product pricing:
Market skimming pricing (price skimming) setting a high price for a new product to
skim maximum revenues layer by layer from the segments willing to pay the high price;
the company makes fewer but more profitable sales. The products quality and image
must support its higher price and enough buyers must want the product at that price. The
costs of producing a smaller volume cannot be so high that they cancel the advantage of
charging more. The competitors should not be able to enter the market easily and
undercut the high price. Better when fewer direct substitutes
Market penetration pricing setting a low initial price for a new product in order to
attract a large number of buyers and a large market share i.e. IKEA did in China. The
market must be price sensitive and production/distribution costs must fall as sales volume
Product Mix Pricing
Pricing Situation
Product Line Pricing
Setting prices across an entire product line
Optional product
Pricing optional or accessory products sold with the main
Pricing products that must be used with the main product
By-Product pricing
Pricing low value by-products to get rid of them
Product bundle pricing Pricing bundles of products sold together
Product Line pricing setting the price steps between various products in a product line
based on cost differences between the products, customer evaluations of different
features, and competitors prices i.e. buy basic for one price, standard for another,
platinum for a third (highest)
Optional product pricing the pricing of optional or accessory products along with a
main product i.e. a car buyer can add a GPS, add an ice maker to fridge
Captive product pricing setting a price for products that must be used along with a
main product, such as blades for a razor and games for a video game console. Also called
two part pricing, where the service is broken into a fixed fee and a variable usage rate
(i.e. TV, theme parks)
By product pricing setting a price for by-products to make the main products price
more competitive i.e. selling wood chips
Product bundle pricing combining several products and offering the bundle at a
reduced price
Pricing Cues:

Pricing cues like sale signs and prices that end in 9 become less effective the more they
are employed, so it's important to use them only where they pack the most punch. That is,
use pricing cues on the items for which customers' price knowledge is poor. Consider
employing cues on items when one or more of the following conditions apply:
Customers purchase infrequently. The difference in consumers' knowledge of the price
of a can of Coke versus a box of baking soda can be explained by the relative infrequency
with which most customers purchase baking soda.
Customers are new. Loyal customers generally have better price knowledge than new
customers, so it makes sense to make heavier use of sale signs and prices that end in 9 for
items targeted at newer customers. This is particularly true if your products are exclusive.
If, on the other hand, competitors sell identical products, new customers may have
already acquired price knowledge from them.
Product designs vary over time. Because tennis racket manufacturers tend to update
their models frequently, customers who are looking to replace their old rackets will
always find different models in the stores or on-line, which makes it difficult for them to
compare prices from one year to the next. By contrast, the design of tennis balls rarely
changes, and the price remains relatively static over time.
Prices vary seasonally. The prices of flowers, fruits, and vegetables vary when supply
fluctuates. Because customers cannot directly observe these fluctuations, they cannot
judge whether the price of apples is high because there is a shortage or because the store
is charging a premium.
Quality or sizes vary across stores. How much should a chocolate cake cost? It all
depends on the size and the quality of the cake. Because there is no such thing as a
standard-size cake, and because quality is hard to determine without tasting the cake,
customers may find it difficult to make price comparisons.

Price Adjustments
Discount and allowance
Segmented pricing
Psychological pricing
Promotional pricing
Geographical pricing
International pricing

Reducing prices to reward customer responses such as paying
early or promoting the product
Adjusting prices to allow for differences in customers,
products, or locations
Adjusting prices for psychological effect
Temporarily reducing prices to increase short run sales
Adjusting prices continually to meet the characteristics and
needs of individual customers and situations
Adjusting prices for international markets

Discount a straight reduction in price on purchases during a stated period of time or of

larger quantities i.e. quantity discount, seasonal discount

Allowance promotional money paid by manufacturer to retailers in return for an

agreement to feature the manufacturers products in some way i.e. trade-in allowances for
cars, promotional allowances for when retailers advertise
Segmented pricing selling a product or service at two or more prices, where he
difference in prices is not based on differences in costs. Will only be effective if the
market is segmentable and the segments show different degrees of demand. Also, lower
priced segments cannot sell to higher prices segments
-customer segment pricing (museums and movie theatres have children, adult and senior
-product form pricing (different versions of product priced differently like evian water
spray and evian water in bottles)
-location based pricing (theatres vary prices of seats for different locations, universities
charge higher for international)
-time-based pricing (varying price by season, month, day or even hour, like matinee
Psychological pricing pricing that considers the psychology of prices and not simply
the economics; the price is used to say something about the product i.e. someone might
assume a lawyer that charges $500 per hour is better than the one who charges $50 per
-there can be strange number effects (people influenced by 9, fractional prices, judgments
anchored on left most digits)

Reference prices prices that buyers carry in their minds and refer to when they look at
a given product, similar to signpost items
-signpost items exist when say someone walks into a supermarket and sees the price of
Coke is higher than they normally see, they would then expect that the prices of most
other things in that store will also be high
-sometimes stores will incur losses on items they think may be used as signpost items in
order to encourage customers to buy other items/complement items
Promotional pricing temporarily pricing products below the list price and sometimes
even below cost to increase short run sales. Be careful, as can create deal prone
customers or erode a brands value
Geographical pricing setting prices for customers located in different parts of the
country or the world
FOB origin pricing the goods are placed free on board a carrier, and at that
point the title and responsibility pass to the customer, who pays the freight
Uniform delivered pricing the company charges the same price plus freight to
all customers, regardless of location
Zone pricing the company sets up 2+ zones, all customers within a given zone
pay a single total rate, the more distant the zone, the higher the price
Dynamic pricing adjusting prices continually to meet the characteristics and needs of
individual customers and situations i.e. on eBay, airlines, amazon (prices online can be
change hour by hour)
Common pricing mistakes:
-reducing prices too quickly to get sales
-pricing based on costs, not customer value
Loss leader strategy when a popular item is priced below cost to attract customers,
hoping that they will buy other more profitable items

Factors Affecting Price Decisions

Marketing Objectives
Consumer Perceptions of Price and Value
Sets the ceiling you cannot charge more than
Pricing objectives (i.e.
Nature of demand
survival, profit
Market type (pure competition, monopoly,
maximization, market share,
quality perceptions)
monopolistic, etc)
Marketing Mix
Price-demand relationship (demand curve &
Pricing coordinated with the
price elasticity)
other elements i.e.
distribution, advertising
Competitors costs, prices, and possible
Pricing strategy influences the nature of
Costs set the floor the
competition (low price, low margin strategies
lowest amount that should
inhibit competition, the opposite attracts it)
be charged
Economic conditions, reseller reactions,
government restrictions and social

Article: Social Marketing and Corporate Social Responsibility

-Public sector

-Public/Private Social
-private sector

Social marketing the use of commercial marketing concepts and tools in programs
designed to influence individuals behaviour to improve their well being and that of
Key Marketing Concepts:
Action is the objective (not profit)
Target audience is focus
The exchange is critical
Segment markets
Use all four Ps
Analyze and be aware of competition
Monitor and be flexible
-a lot of concepts are the same as the standard marketing mix but there is a different
approach you are marketing an idea
i.e. Movember is type 1
Tangible, personal benefits

Intangible, societal

Cost is Low

Cost is High
Cell A Initiative to persuade men to be examined for colon cancer
- cost is low

- action clearly benefits the individuals

Cell B Recycling programs
- cost is low
- action benefits society
Cell C Smoking cessation program
- cost (difficulty) is high
- action benefits the individual first
Cell D Initiative to reduce chlorofluorocarbon (CFC)
- cost to affected chemical companies is high
- action benefits society
Weaknesses of Social Marketing:
Limited resources (people, money, time), especially with NGOs and NFPs
Unsought goods
Typically face resistant consumers and barriers to being able to effectively use
the marketing mix (4 Ps) to influence change
o Hard to reduce perceptions of price
o Limited ability to impact product being offered
o Limited ability to affect place
The Public/Private Partnership
-sometimes non profits will partner with for profit organizations:
Corporate philanthropy (sponsorship)
Strategic Contributions (Yoplait saves lid to save lives)
Mainstream involvement (Coca Cola and WWF)
NGO Accountability (Walmart and EDF)
-however, this can lead to issues as the reasons of existence for these two types of
organizations are different
-can create barriers to trust and loss of control of message
-will likely hurt bottom line of for profit
CSR consists of voluntary initiatives taken by companies over and above their legal or
social obligations that integrate societal and environmental concerns into their business
operations and interactions with stakeholders
Pros of CSR
Cons of CSR
-increases customer (stakeholder) engagement
-risks of positioning on CSR
-insurance effects if you screw up but have a good
-typically adds cost
rep, serves as insurance
-maintenance of credibility and
-ability to attract top talent (and investors)
risk of greenwashing
-efficiency improvements

Article: Brand Report Card

1. The brand excels at delivering the benefits customers truly desire.
2. The brand stays relevant.


The pricing strategy is based on consumers' perceptions of value.

The brand is properly positioned.
The brand is consistent.
The brand portfolio and hierarchy make sense.
The brand makes use of and coordinates a full repertoire of marketing activities to
build equity.
8. The brand's managers understand what the brand means to consumers.
9. The brand is given proper support, and that support is sustained over the long run.
10. The company monitors sources of brand equity.