Quarter 2: Module 1:

Market Opportunity Analysis and Consumer Analysis

This module includes the differentiation of strategic marketing and tactical

marketing, marketing environment, marketing research, consumer and business analysis,
and marketing segmentation, targeting and positioning.

At the end of this module, you will be able to:

a. Distinguish the difference between strategic and marketing planning in terms of

objectives and processes;
b. Analyze the elements of macro- and micro-environment and their influence to
marketing planning;
c. Define marketing research, its importance to a business enterprise and identify the
steps in marketing research;
d. Describe the consumer and business markets;
e. Differentiate the buying behavior and decision making of individual/ household
customer versus the business (organizational) customer;
f. Identify and segment market for a product or service; and
g. Select the appropriate target market segment and its positioning.

Topic 1:
STRATEGIC MARKETING VS. TACTICAL MARKETING

What you already know?

Strategic planning is a broad process that can address the entire business, or a
portion of the business such as marketing. Marketing planning is written based from
strategic plans. In order to distinguish between the two, it's important to understand their
objectives and purposes.
Kick-Start

Remember the moment when you were preparing

for a Christmas Party or a school/club event. What
was the most common thing that you do before you
finally organize such program? Did your group meet
and discuss matters related to dates, program,
materials, working committees and the like? Can you
consider it a planning process?

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 Definitely you would answer yes, any activity may it be in personal life, school and
business requires certain level of planning to successfully accomplish the task. Planning
is technically done in different nature and level. Today, we will learn the difference
between a strategic plan and a technical plan in the context of business and marketing.

DISCUSSION

STRATEGIC PLANNING
In simple terms, a strategy is a plan for reaching a specific goal. In business, a
strategy is a broad goal, such as increasing sales or market share or creating a particular
image for the business. When creating marketing plans start with broad strategies and
support them with specific tactics. Planning on the other hand, is the process of predicting
future events and conditions and of determining the best way to attain the goals and
objectives of the organization.
Strategic planning is a management process of creating and maintaining fit
between the objectives and resources of the organization and the changing marketing
opportunities. The very goal of strategic planning is the long-term profitability and
growth of the company. This means there is a need for long-term commitment of
resources in order to make strategic decisions.
Strategic planning is designed to provide an organization, its divisions,
departments or even individual players with a game plan or road map to achieve specific
goals and objectives. Strategic planning identifies internal and external effects and
opportunities to consider in the creation of strategies and tactics. From a marketing
standpoint, strategic planning might help to identify new market opportunities as well as
new competitive threats.
A number of steps are involved in any strategic planning process, including a
strategic marketing planning process. Strategic planning for individual organizations
includes defining the business mission, analyzing external opportunities and threats,
analyzing internal strengths and weaknesses, formulating goals, formulating strategy,
formulating supporting programs, implementing the programs, and gathering feedback
and exercising control. In many organizations, the overall strategic plan provides
direction for the creation of sub-pans, including a strategic marketing plan.
It is not enough to plan. A plan must include some form of measurement and a
process for monitoring and reviewing results. An overall strategic plan might outline
broad objectives for marketing. The marketing plan would detail more specific objectives
for the marketing department to monitor and report on. The results achieved whether they
fall short or exceed expectations, provide input used to consider changes or adjustments
in the plan. On-going measurement and reporting can help to ensure the strategic plan
continues to achieve measurable results.

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Strategic Planning versus Tactical Planning
 Strategy and tactics are words closely connected and, unfortunately, used
interchangeably. Yet, in business terminology, the words strategy and tactics refer to
separate business functions and practices.
In real world business usage, the term strategy actually is the thinking process
required to plan a change, course of action, or organization. Strategy defines, or outlines,
the desired goals and why a company should go about achieving them. Owners or upper
management decide what the guiding philosophy and values will be, and how people
involved in the businesses operations should act, in attaining their objectives. It can be a
compilation of many complex multi-faceted plans created for achieving pre-established
objectives.
Tactics are the specific actions to be taken in implementing a strategy. These
actions comprise what is to be done, in what order, using which tools and personnel. A
company may employ a number of tactics and involve many different departments and
people in this effort to reach a common goal. It may even recruit suppliers to accomplish
objectives. Tactics typically requires the involvement of the organization as a whole.
Tactical planning is short range planning that emphasizes the current operations
of various parts of the organization. Short range is defined as a period of time extending
about one year or less in the future. Managers use tactical planning to outline what the
various parts of the organization must do for the organization to be successful at some
point one year or less into the future. Tactical plans are usually developed in the areas of
production, marketing, personnel, finance and plant facilities.

KNOWLEDGE SELF-CHECK 1.1

Discuss the difference between strategic planning and tactical planning.

STRATEGIC PLANNING PROCESS

∙ Defining the Corporate Mission

An organization exists to achieve something such as to make cars, lend money,

provide a night's lodging, and so on. Its specific mission or purpose is usually obvious
when the business starts. Eventually, however, the mission may lose its application
because of changed Market conditions or may become ambiguous as the corporation adds
new products and markets. When management senses that the organization is wandering
from its mission, it must renew its search for purpose. According to Peter Drucker, it is
time to ask some fundamental questions such as:
1. What is the business?
2. Who is the customer?
3. What is of value to the customer?

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4. What will the business be?
5. What should the business be?
 Successful companies continuously raise these questions and answer them
considerately and comprehensively.
A well-worked-out mission statement provides employees with a joint sense of
purpose, direction, and opportunity. It also guides geographically dispersed employees to
work separately and yet cooperatively toward realizing the organization's goals.
Good mission statements focus on a limited number of goals, emphasize the
company's main policies and values, and identify the company's major competitive
scopes. These include:
1. Industry scope - The industry or range of industries in which a company will
operate. For example, 3M will go into almost any industry where it can make
money.

2. Products and applications scope - The range of products and applications that a
company will supply. St. Lukes Hospital aims to serve patients with world-class
and high-quality care with its sophisticated and highly-technologically advanced
equipment.

3. Competence scope - The range of technological and other core competencies that
a company will master and leverage. Japan's NEC has built its core competencies
in computing, communications, and components to support production of laptop
computers, televisions, and other electronics items.

4. Market-segment scope - The type of market or customers a company will serve.

For example, BMW makes only luxurious cars for the elite market and its name
has a reputation for high-quality image.

5. Vertical scope - The number of channel levels starting from raw material to final
product and distribution in which a company will play a part. Some companies
have large vertical scopes. While small firms with low or no vertical integration
may outsource design, manufacture, marketing, and physical distribution.

6. Geographical scope - The range of regions or countries in which a company will

operate. Some companies may operate in a specific city or state. Multinational
companies such as Procter & Gamble and Coca-Cola operate in almost every part
of the world.

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∙ Environmental Scanning

Environmental scanning is the collection and interpretation of information about

forces, events, and relationships that may affect the future of an organization. It allows a
company to constantly look for threats and opportunities before they are fully apparent.
Marketing operates in a complex and changing environment. Players in the
internal environment are suppliers, intermediaries, customers, competitors, publics, and
others which may work with or against the company. Major external environmental
forces such as demographic, economic, natural, technological, political, and socio
cultural can shape marketing opportunities, pose threats, and affect the company's ability
to build customer relationships. In larder to develop effective strategies, marketers must
first understand the environment in which the business operates.

∙ Goal Formulation
After the company has completed a SWOT analysis of the internal and external
environments, it can progress to create definite goals for the planning period in a process
termed as goal formulation. Managers use the word goals to describe objectives that are
definite with respect to magnitude and time. Measurable goals make possible and
uncomplicated management planning, implementation, and control. In order to be
effective, goals must be attainable, consistent, comprehensive, and intangible.
Other important trade-offs in setting goals include:
1. balancing short-term profit versus long-term growth
2. balancing deep penetration of existing markets with development of new markets
3. balancing profit goals versus non-profit goals and
4. balancing high growth versus low risk

Each choice in this set of goal trade-offs calls for a different marketing strategy.

∙ Strategy Formulation

Goals indicate what a business unit wants to achieve. Strategy describes the game
plan for achieving those goals. Every business strategy consists of a marketing strategy
plus a compatible technology strategy and sourcing strategy. Although many types of
marketing strategies are available, Michael Porter has condensed them into three generic
types that provide a good starting point for strategic' thinking: overall cost leadership,
differentiation, or focus.
1. Overall cost leadership - Here the business operates to realize the lowest
production and distribution costs in order that it can price lower than competitors
and gain more market share. Firms practicing this strategy must be good at
engineering, purchasing, manufacturing, and physical distribution. They need less

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skill in marketing. Most fast-food firms use this strategy. The problem is that
competitors may come out with still lower costs, hurting a firm that has rested its
entire potential on cost leadership.

2. Differentiation - Here the business concentrates on achieving superior

 performance in a vital customer benefit area, like being the leader in service,
quality, style, or technology, but not leading in all of these things. Intel, for
instance, differentiates itself through leadership in technology, coming out with
new microprocessors at breakneck speed.

3. Focus - Here the business focuses on one or more narrow market segments, getting
to know these segments thoroughly and practicing either cost leadership or
differentiation within the target segment. Airwalk shoes, for example, came to
prominence by concentrating on the very narrow extreme-sports segment.

Firms that do not pursue a clear strategy are called "middle-of-the-roaders" which
do the worst. These firms could fall upon hard times because they do not stand out as
lowest in cost, highest in perceived value, or best in serving some market segment.
Middle-of-the-roaders try to be good on all strategic dimensions, but because strategic
dimensions require different and often inconsistent ways of organizing the firm, these
firms end up being not particularly excellent at anything. Strategy formulation in the age
of the Internet is particularly challenging. Some companies cope by creating four
different, possible short-term scenarios for each strategy. In this technique, companies
can act quickly when they see a scenario unfolding. Other companies hold weekly
meetings with the firm's top decision-makers to brainstorm strategies for handling new
threats. Through revisiting strategic plans frequently, both companies are able to stay
ahead of environmental changes.

∙ Program Formulation
Once the business unit has developed its principal strategies, it must workout
detailed supporting programs. Thus, if the business has decided to attain technological
leadership, it must plan programs to strengthen its R&D department, gather technological
intelligence, develop leading-edge products, train the technical sales force, and develop
ads to communicate its technological leadership.
After these marketing programs have been tentatively formulated, the marketing
people must estimate their costs. Activity-based cost (ABC) accounting should be applied
to each marketing program to determine whether it is likely to produce sufficient results
to justify the cost.
Activity-based Costing is a costing model that aids a company in determining the
costs of certain activities involved in producing a product/service and distributing that
product/service to a customer. ABC traces indirect costs (commonly called

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"overhead") to products, services, and customers by identifying resource and their costs,
the consumption of these resources by activities, and the performance of activities to
produce output. Examples of resource expenses are salaries, operating supplies,
equipment depreciation, and electrical power. They represent the capacity to perform
work.

∙ Implementation
 The implementation stage of the process is the putting of the marketing strategies
and plans into action. The implementation stage involves assignments addressing the
who, where, when and how of reaching the goals and objectives of a business. This stage
requires the giving of specific tasks and timelines to individuals and groups. The business
employees gather the necessary resources to execute the program formulated and release
the organization's product or service to the public.

∙ Feedback and Control

As it implements its strategy, the firm requires to track the results and monitor new
developments in the internal and external environments. Some environments are fairly
stable from year to year. Other environments evolve slowly in a fairly predictable way.
Still other environments change rapidly in significant and unpredictable ways.
Nonetheless, the company can count on one thing. The marketplace will change.
And when it does, the company will need to review and revise its implementation,
programs, strategies, or even objectives.
A company's strategic fit with the environment will inevitably erode because the
environment changes fast. Thus a company might remain efficient while it loses
effectiveness. Peter Drucker pointed out that it is more important to "do the right thing"
(effectiveness) than "to do things right" (efficiency). The most successful companies
excel at both.
Once an organization fails to respond to a changed environment, it has difficulty
recapturing its lost position. The key to organizational health is the firm's willingness to
examine the changing environment and to adopt appropriate new goals and behaviors.
High-performance organizations continuously monitor the environment and use flexible
strategic planning to maintain a viable fit with the evolving environment.

KNOWLEDGE SELF-CHECK 1.2

Enumerate and discuss the steps in Strategic Planning.

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MARKETING PLANNING
Based from the overall strategies, marketing managers can create a marketing
plan. Planning is forecasting future events and identifying strategies to achieve
organizational objectives in the future. Marketing planning entails crafting activities
connected to marketing objectives and the changing marketing environment. Marketing
planning is the foun6tion for all marketing strategies decisions. Issues like product lines,
distribution channels, marketing communications and pricing are explained in the
marketing plan. A marketing plan sets out how to put marketing strategy into practice. It
serves to document how the organization's strategic objectives will be achieved through
specific marketing strategies and tactics, with the customer as the starting point. It is also
linked to the plans of other departments within the organization.
A written marketing plan offers clearly stated activities that will assist both
management and employees in understanding and working to attain common goals. It
will also allow the examination of the marketing environment in combination with the
internal mechanism of the business. A written marketing plan also serve as reference
point for achievement of upcoming activities. The marketing plan allows the marketing
manager to penetrate the market with the knowledge of opportunities and problems.
The overall structure of a marketing plan is viewed as a series of sequential steps.
There is no single format for a marketing plan. Every marketing plan should be unique to
the firm for which it is created. The marketing process consists of:
1. Defining the business mission - The firm's long term resource allocation,
profitability and survival depends on the right definition of the business mission.
The mission statement sets up the limitations for all succeeding decisions,
objectives and strategies. A mission statement should not center on the product or
service to offer but on the market/s the organization desire to serve.

2. Situation analysis - A situation analysis often referred to as SWOT analysis

examines the Strengths and Weaknesses of a company (internal environment) as
well as the Opportunities and Threats within the market (external environment).

3. Setting the marketing objectives - The marketing objectives serve as the

foundation for measuring the success of marketing plan activities. These
objectives should be consistent with the priorities of the firm. Objectives must
flow from the mission statement of the organization.

4. Describe the target market - A target market is composed of individuals or group

of individuals who share common characteristics who therefore may have
comparable needs. A market segment should be identified in order to know which
market to focus and target. Target markets can be selected by attracting the entire

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market with only one marketing mix, concentrate on only one segment or
attracting multiple markets with multiple marketing mixes.

5. The marketing mix - A marketing mix is a unique combination of the four Ps

which are product, place, promotion and pricing. In order to satisfy the target
market and achieve competitive advantage, there must be a carefully designed
marketing mix. A careful blending of the marketing mix that satisfies a chosen
target market produces a subset of the overall marketing strategy.
 a. Product strategy - Product is a broad concept that comprises the satisfaction
of customer needs in relation to a good, service or idea. This strategy
entails beyond deciding what goods and services the firms should offer to
the target market. It consists further of the decisions about customer
service, package design, brand names, trademarks, patents, warranties, the
lifecycle of the product, positioning of the product in the market and the
development of new product.

b. Place (distribution) strategy - The use of this strategy must guarantee that
products are accessible for consumers at the right quantities at the right
times and places The decisions in this strategy consist of the modes of
transportation, warehousing, inventory control, order processing and
selection of marketing channels.

c. Promotion strategy - Promotion is the communication relation between

buyers and sellers. In developing a promotional strategy, marketers must
be cautious in blending the various elements of promotion in order to
successfully communicate with the target market. Most companies utilize
the integrated marketing communication (IMC) approach to send unified
and consistent message to the target consumers using all promotional
activities.

d. Price strategy - Price (Discussed in Lesson 2/Chapter 4) is what the buyer

has to give up to acquire a product. Pricing strategy deals with setting
profitable yet justifiable prices. Price is an essential competitive weapon.
It is an important element of the marketing mix because it means revenue
for the company.

6. Follow-up the marketing plan - After carefully writing a marketing plan, it must
be implemented for result. Implementation is the turning the marketing plan into
action assignments and guarantee that these assignments are done in a manner that
realizes the marketing objectives. After implementation of the marketing plan it

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should be evaluated. Evaluation means measuring the extent to which marketing
objectives have been accomplished during the specified time frame. During
evaluation reasons for failure could be discover which could be because of
unrealistic objectives, inappropriate marketing strategies, poor implementation
and changes happened in the environment after objectives were set and strategy
was applied. Once implemented the plan must also be monitored on a regular
basis. Control offers the mechanisms for evaluating marketing outcomes based on
plan's objectives and correct actions that made the plan unsuccessful. Formal and
informal control programs must be in place to make the operation more efficient.
 KNOWLEDGE SELF-CHECK 1.3
Enumerate and discuss the steps in Marketing Planning.

APP LICATIO N 7
Direction: Read the article below and answer the following questions under it.

Numi Tea
Source: http://www.cengagebrain.comicontent/boone8203x_032458203x_01.01toc.pdf

Numi Tea founders, siblings Ahmed and Reem Rahim, immigrated to the United
States when they were young children and grew up in Cleveland, Ohio. Reem became a
biomedical engineer. Ahmed traveled the world as a photographer and settled for a time
in Prague where he opened two tea shops. Reem eventually left her career to pursue life
as an artist. In 1999, the two reconnected in Oakland, California, and started Numi Tea in
Reem's apartment.
"I think in the positioning of our brand, we wanted to target a certain type of
customer base, from the natural health food stores, to fine dining and hotels, to
universities and coffee shops, gourmet stores," says Ahmed. "What I've been most
surprised about in our growth is the mass market consumer." In recent years, demand by
the average American consumer for organic and ethically produced products has
exploded. At the same time, economic influences have driven the more affluent and
natural foods consumers to large discounters such as Target, super-size grocery chains,
warehouse clubs and online shopping.
Today, explains Jennifer Mullin, vice president of marketing for Numi Tea, the
average Numi consumer is female, college educated, and buys two to three boxes of tea
per month, usually, green tea. She also buys organic products whenever possible. All of

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these details, while not surprising, are fairly new. Until Mullin joined the team and
formalized their marketing department, Numi assumed their customers fit the same
profile as the staff — young, cool, and urban. While many of Numi tea drinkers are all
these things, Mullin's findings proved that the company needed to put some additional
energy toward targeting the younger, college market. They launched an initiative to raise
awareness of the product on campuses where people are more inclined to be interested in
issues of sustainability, fair-trade, and organics. Because Numi teas are considered a
premium product, they do have an affordable, but still higher price point than
conventionally produced teas. College students in general have less money to spend, so
Numi approached the food service departments of universities such as Stanford to serve
the tea as part of their prepaid meal plans. Not only does the food service contract
represent a giant account, it encourages trial. Sampling is Numi's most successful
marketing activity for attracting new users. Students can learn to love the product,
essentially for free.
The most compelling reason for drinking Numi tea is its health benefits. The
company found that they don't need to spend much time talking up the organic aspect of
their product. In the premium and natural foods space where Numi operates, organic is
expected. There is the threat that as the terms "organic" and "natural" invade the
mainstream marketplace, a lack of trust or cynicism may arise as some products will
inevitably fail to live up to their labels' claims. This is why Numi relies heavily on
educating its consumers about the product. When targeting women, their most valued
consumer, says Jennifer, "we have an in-house PR team that works a lot with editors [of
women's magazines] to educate them on tea and make sure they understand the healthy
properties of tea." They follow up with sampling at Whole Foods or events targeted
toward environmentally conscious moms. Numi rounds out the education efforts on its
Web site with more health information as well as in-depth articles on the benefits of
specific teas.
Although still young, the Numi brand is expanding rapidly and has enjoyed
success overseas as well. Whatever the marketing and PR teams do — store sampling,
environmental events, or partnerships with like-minded companies such as Clif Bar—
they continue to survey and assess the demographic and psychographic profiles of their
consumer.
Questions:
1. How will you describe the target market of Numi Tea? Explain 2. What is
the marketing mix used by Numi Tea? Discuss the combination. 3. How is
Numi Tea differentiated from its industry? Give details.

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Topic 2: MARKETING ENVIRONMENT

What you already know?

The marketing environment represents a mix between the internal and external
forces which surround an organization and have an impact upon it, especially their ability
to build and maintain successful relationships with target customers. The marketing
environment surrounds and impacts upon the organization. Therefore, marketers should
assess and evaluate the marketing environment to deliver value to satisfied customers.
Kick-Start
 Visit one of the businesses nearby in your
area. Prepare an interview question guide
that inquires about the internal and external
factors that affects their operation
positively and negatively. Include also
questions on how are they using their
company’s strengths in taking advantage of
opportunities and combating future threats
that might affect their operation. Share the
results of your interview in class.

DISCUSSION

THE MARKETING ENVIRONMENT

The marketing environment is everything a company must take into consideration

in marketing planning. The elements of a marketing environment include, but are not
limited to, the changing preferences of customers, competition, the legal, political and
regulatory environment, company's own resources and budget, current trends and the
overall economy. All these elements affect marketing decisions or at last they should,
because all of them influence a company's prospects.
A company's marketing environment is composed of the actors and forces outside
marketing that affect marketing management's ability to build and maintain successful
relationships with target customers. Hence, companies should constantly watch and adapt
to the changing environment. More than any other group in the company, marketers must
be environmentally updated and seekers of opportunities.

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Although every marketer in an organization should watch closely the outside
environment, they must also do marketing research and marketing intelligence. This is for
the purpose of collecting information about the marketing environment.
They should also spend more time in customer and competitor environments.
Through vigilantly studying the environment, marketers can create flexible strategies to
meet new marketplace challenges and opportunities.
The marketing environment has two types of environment namely the micro
environment and the macro environment. The micro-environment involves actors close to
the company that influence its ability to serve its customers such as the company itself,
suppliers, marketing intermediaries, customer markets, competitors, and the general
public. The microenvironment is relatively controllable since the actions of the business
may influence such stakeholders. The macro-environment on the other hand, involves the
larger societal forces that influence the microenvironment such as demographic,
economic, natural, technological, political, and cultural forces. The organization cannot
control these forces, it can only prepare for changes taking place.

THE MICRO ENVIRONMENT

Micro environment are forces that closely influence the company and directly
affect the organization's relationships. The factors consist of the company itself,
suppliers, marketing intermediaries, customer markets, competitors, and the general
public.
The Company
In designing marketing plans, marketing management considers other company
groups such as top management, finance, research and development (R&D), purchasing,
operations, and accounting. All of these interconnected groups shape the internal
environment. Top management situates the company with its mission, objectives, broad
strategies, and policies. Marketing managers construct decisions within the strategies and
plans prepared by top management.
Marketing managers must work directly with other company departments. Other
departments have a great influence on the marketing department's plans and actions. And,
under the marketing concept, all of these functions must think under the shoes of
customers.
Suppliers
Suppliers are essential link in the company's overall customer value delivery
network. They make available the resources required by the company to generate its
goods and services. Supplier problems can gravely affect marketing. Marketing managers
must observe supply availability and costs: Supply shortages or delays, labor strikes, and
other events can cause sales problems in the short run and spoil customer satisfaction in

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the long run. Escalating supply costs may compel price increases that can damage the
company's sales volume.
Most marketers nowadays consider their suppliers as partners in forming and
delivering customer value. Most companies understand very well the importance of
creating close relationships with its suppliers. Instead of bullying suppliers, companies
partner with them and help them meet its very high expectations. They discover about
suppliers' businesses, carry out combined improvement activities, help train suppliers'
employees, offer day by day performance feedback, and aggressively seek out supplier
concerns. High supplier satisfaction denotes that a company can depend on suppliers to
help it get better its own quality, trim down costs, and quickly grow new products.
Marketing Intermediaries
 Marketing intermediaries assist the company promote, sell, and distribute its
products to ultimate buyers. They -consist of resellers, physical distribution firms,
marketing services agencies, and financial intermediaries. Resellers are distribution
channel firms that assist the company look for customers or create sales to them. These
comprise wholesalers and retailers who purchase and resell merchandise. Physical
distribution firms assist the company store and move goods from their points of origin to
their destinations. Marketing services agencies consist of the marketing research firms,
advertising agencies, media firms, and marketing consulting firms that assist the
company target and endorse its products to the right markets. Financial intermediaries
consist of banks, credit companies, insurance companies, and other businesses that assist
finance transactions or cover against the risks related with the buying and selling of
goods. Like suppliers, marketing intermediaries is an essential element of the company's
general value delivery network. In its pursuit to generate satisfying customer
relationships, the company must perform more than just optimize its own performance. It
must partner well with marketing intermediaries to optimize the performance of the entire
system. Therefore, today's marketers know the significance of operating with their
intermediaries as partners instead of just simply channels through which they sell their
products.
Competitors
A company to be successful must provide greater customer value and satisfaction
compared to its competitors do. Hence, marketers must act more than just get used to to
the needs of target consumers. They also must achieve strategic advantage by situating
their offerings better than competitors' offerings in the minds of consumers. Each
company must have its own distinct and unique competitive marketing strategy. Each
firm should reflect on its own size and industry position in contrast to those of its
competitors. Huge companies with leading positions in an industry can make use of
definite strategies that smaller firms cannot afford. However, being huge is not sufficient.
There are winning strategies for big companies, but there are also those that can cause

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failures. Even small firms can create strategies that provide them greater rates of return
than huge companies benefit from.
Cautious marketing decisions must factor in competitors like their most likely
number and how good they are at what they do will affect the marketing plans. If, for
instance, competitors are able to offer their product for a much lower price, the
company's marketing strategy must stress the fact that its product is of a higher quality,
that its warranty is better, or that the product lasts longer. If there are few or no local
competitors, a company is free to expand into new markets.
Publics
The company's marketing environment also comprises various publics. A public
is any group that has a genuine or possible interest in or influence on an organization's
ability to attain its objectives. There are seven types of publics, namely:
 1. Financial publics - This group impacts the company's ability to acquire funds
like banks, investment analysts, and stockholders.
2. Media publics - This group carries news, features, and editorial opinion. It
consists of newspapers, magazines, television stations, and blogs and other
Internet media.
3. Government publics - Management must consider government developments.
Marketers should regularly check with the company's lawyers on subjects of
product safety, truth in advertising, and other matters.
4. Citizen-action publics - Often consumer organizations, environmental groups,
minority groups, and other related groups make query about a company's
marketing decisions. Its public relations department can facilitate in getting
in-touch with consumer and citizen groups.
5. Local publics - This group consists of local residents and community
organizations. Big firms typically form departments and programs that take
care of neighbourhood community issues and give community support.
6. General public - A company needs to be apprehensive about the general
public's attitude on its products and activities. The public's image of the
company influences its buying.
7. Internal publics - This group includes workers, managers, volunteers, and the
board of directors.

Customers
All businesses aim to produce profit through serving the customer demand. They
all want to gain more in terms of profitable sale rather than more sales volume. Today
marketing of a company starts and also ends with the customers.

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Now, a company to be successful must get customers for its products. This is the
basis on the importance of customers in the micro environment of business. Products
sales rely chiefly on the level of consumer satisfaction.
In fact, customer satisfaction surveys are now regularly performed by companies.
Every business firm sets up systems to frequently observe customer attitude and customer
satisfaction. Nowadays it is commonly established that the satisfaction of customers is
the bottom line for company's success. Normally the customers consist of individuals,
business enterprises, institutions and government.

KN O WL E D GE SE LF-CH E C K 2. 1

What are the actors/forces under the micro-environment? THE MACRO

ENVIRONMENT
 Even though the marketer has no direct control over the macro external
environment, a greater understanding and awareness of these changing market conditions
can be achieved through external analysis. External analysis will help identify future
events, uncover possible threats and realize potential opportunities.
The macro marketing environment takes into account all forces that can influence an
organisation, but are outside of their control. Therefore, macro environment is less
controllable. The macro environment consists of much larger all-encompassing
influences which impact the microenvironment from the broader global society.
There are six major macro marketing environment forces to deal with (PESTLE):
political, economic, socio-cultural, technological, legal and environmental.
Political Forces
The political forces refer to the stability of the political environment and the
attitudes of political parties or movements. This may manifest in government influence
on tax policies, or government involvement in trading agreements. Political refers to
attitudes and approaches. Political may represent influences, restrictions or opportunities,
but they are not mandatory.
For the Philippines, 2016 is a big year because the country is due to vote in a new
president. It is a year in which the current government will seek to take bold steps to
leave a positive and lasting legacy while the opposition tries to present itself as a credible
alternative.
The year 2015 had been an exciting year for Philippine politics. The following
events had shaped Philippine politics in 2015:
1. The state visit and apostolic journey of Pope Francis was a much needed spiritual
boost for many people in the Philippines, the largest Catholic-dominated nation in

16
Asia. He visited Typhoon Yolanda victims, interacted with the youth and street
children, and spoke about "scandalous" poverty and corruption in front of the
country's top leaders. The pope reminded politicians to "reject every form of
corruption that diverts resources from the poor". The pope spent only five days in the
Philippines but he has already made a huge impact on local politics.

2. After Pope Francis left the Philippines, it signaled the unofficial start of campaigning
for the 2016 presidential election. There has been intense bickering among
politicians after a few months. The ruling coalition consolidated its ranks and
election machinery while aggressively marginalizing the political opposition.

3. The dispute with China over the conflicting territorial and maritime claims in the West
Philippine Sea (South China Sea) is still the main agenda that the Philippines will
continue to raise in the Asia-Pacific region. The Philippines has filed a case in the
United Nations Arbitral Tribunal against the ownership claims of China. This will
further inspire Filipinos to mobilize against what they see as China's bully behavior
 in the region.

4. The next few months are crucial to put into action the roadmap for peace which the
government has drafted in cooperation with the leaders of the Moro Islamic
Liberation Front. The initial challenge is to pass the Bangsamoro Basic Law in
Congress without it being diluted; and to convince legal scholars and critics that it
does not violate the 1987 Constitution. If Aquino succeeds in establishing the
Bangsamoro transition authority before the end of his term this year, it will be a
major legacy of his administration. Another initiative that Aquino can pursue is the
resumption of the stalled peace talks with communist rebels.

5. The economic experience of the Philippines had been under global scrutiny when the
country hosted the annual summit of the Asia Pacific Economic Cooperation
(APEC). The theme of last year's APEC gathering is "Building Inclusive Economies,
Building a Better World". President Aquino was so proud of the country's strong
economic fundamentals, although critics reminded APEC participants about the
failure of the economy under Aquino to solve poverty and deep inequality in society.
The last time Manila hosted the APEC summit was in 1996.

6. The planned economic integration of the Association of Southeast Asian Nations

(ASEAN 2015) is another major event, but still not much prominent in the country's
politics.

7. Disaster recovery is a priority for both the national and local governments. President
Aquino does not allow the slow pace of rehabilitation in the Yolanda-affected towns
to continue. His leadership wanted success of the disaster recovery program in
Samar and Leyte. Local politicians in other disaster-hit towns are also working hard,

17
they risk losing public support if they appear ineffective in distributing relief and
making aid money useful in reviving the local economy.
Economic Forces
The economic forces represent the wider economy and consist of external factors
in a business' market and the broader economy that can influence a business. Examples of
these forces are economic growth rates, salary levels, levels of employment and
unemployment, credit trends, costs of raw materials, interest rates and monetary policies,
exchange rates and inflation rates and pricing patterns that affect consumer spending
habits and purchasing power. These may also vary from one country to another.
The following are some noteworthy trends in the Philippine economy:
1. The Philippines' economic freedom score is 62.2, making its economy the 76th
freest in the 2015 Index. Its score has increased by 2.1 points since last year, with
notable improvements in financial freedom, freedom from corruption, and labor
freedom outweighing declines in business freedom and the management of public
spending. The Philippines ranks 13th out of 42 countries in the Asia—Pacific
 region, and its overall score is above the world and regional averages.

2. Registering one of the 10 best score improvements in the 2015 Index, the
Philippines has charted an upward trajectory of economic freedom for the past
five years, further advancing into the "moderately free" category. Wide-ranging
reforms to address structural weaknesses and improve overall economic
competitiveness have put greater emphasis on improving regulatory efficiency,
enhancing regional competitiveness, and liberalizing the banking sector.
Demonstrating a high level of resilience and overcoming the devastating impact
of the massive typhoon that ripped through the central part of the country, the
Philippine economy has recorded an average growth rate exceeding 5 percent
over the past half-decade.

3. Despite notable progress since 2011, however, lingering institutional challenges will
require a deeper commitment to reform. Corruption continues to be a serious
cause for concern, jeopardizing prospects for long-term economic development.
The inefficient judiciary, which remains susceptible to political interference, does
not provide effective protection for property rights or strong and transparent
enforcement of the law.
Socio-cultural Forces
The socio-cultural forces include institutions and other forces that affect the basic
values, behaviors, and preferences of the society, all of which have an effect on consumer
marketing decisions. They may include demographics, age distribution, population
growth rates, level of education, distribution of wealth and social classes, living
conditions and lifestyle.

18
Here are some important socio-cultural trends in the Philippines:
1. More volunteerism and reaching out but donors will only work with or donate to
people (or organizations) they know and trust

2. More and more young people will be Catholic or Christian cool for healing and
comfort while seeking for spiritual or philosophical explanation especially when
faced with many challenges

3. Greater influence of social media as consumers' preferred information source

4. Prominence of Instagram than Facebook among the younger population for more
visual, spontaneous and quick communication

5. More people into multitasking

6. Awareness of aging population in health and wellness to be in control of their

youthful health resulting to the continues growth of businesses belonging to the
 7S's (spring water, sugar-free, spa, sleep, skin, stem cell, surgery)

7. More women being educated and working

8. More couples are either co-habiting or are getting married and having children at a
later age

9. Middle class now has many other opportunities like travel for work or vacation

10. The breadwinner may now be the wife or the woman instead of the man

11. Smaller-size families with one or two children with both parents working for
double income sources

12. The lower socioeconomic classes who are into cohabiting because getting married
is more expensive, living together is for convenience and practical reasons

13. More lifestyle diseases brought by abuse and unhealthy eating and habits

Technological Forces
The technological forces refer to the rate of new inventions and development,
changes in information and mobile technology, changes in internet and e-commerce or
even mobile commerce, and government spending on research. There is often a tendency
to focus on technological developments on digital and internet-related areas. It also

19
includes materials development and new methods of manufacture, distribution and
logistics which can create new products, new markets and new marketing opportunities.
The following are some important developments in technology:
1. Wearables in the mainstream continue to flourish and be incorporated into sports
clothing, shoes and equipment
2. Mobile devices create direct relationships with consumers
3. Software surfaced on mobile devices like smartphones and tablets but also in cars,
aircraft engines, running shoes and human beings
4. A new era in education where there are no more lectures where everyone has access
to the same materials globally
Legal Forces
The legal forces also affect an organisation even though a company cannot
directly influence any laws. Lobbying or becoming part of a trade organisation is widely
accepted in helping to shape particular legal decisions. Legal factors include national
employment laws, international trade regulations and restrictions, monopolies and
mergers' rules, and consumer protection. Legal factors need to be complied with.
 Changes in the legal environment can limit or even stop certain marketing
activities. The tobacco industry is a case in point. In the Philippines there are already
certain strict regulations to follow when it comes to smoking:
1. Smoking is prohibited in enumerated indoor public places and workplaces such as
government facilities, healthcare _find educational institutions, and facilities
frequented by minors while, in other public places and workplaces, including
bars and nightclubs, designated smoking areas are allowed. Smoking is
prohibited in public land transportation vehicles and terminals.

2. Many forms of tobacco advertising and promotion are prohibited, though tobacco
advertising and promotion at points of sale and free distribution of tobacco
products, among other promotional activities, are allowed. There are some
restrictions on tobacco sponsorship and the publicity of such sponsorship.

Rotating text-only health warning labels covering 30 percent of the front of the
package are required on tobacco product packaging. A new law was passed in July 2014,
which will require graphic health warnings on 50% of each of the principal display areas
of tobacco product packaging.
Environmental Forces
Environmental forces include all those that influence or are determined by the
surrounding environment such as climate, weather, geographical location, and global

20
changes in climate. Environmental forces can also include issues such as limited natural
resources, waste disposal and recycling procedures.
Here is the list of the most talk about issues of the environment:
1. The biggest issue facing the environment is over population of humans which
create all other major environmental issues

2. It is too late to undo the harm that climate change has done to the environment.
The best to do is control the additional impact upon the environment by
developing more environmentally friendly ways of energy production by
reducing the mining and burning of fossil fuels.

3. The loss of biodiversity on the planet can be openly connected to the behaviors
of human beings. Humans have damaged and keep on destroying the habitats
of species on an everyday basis. When one species is killed, it has a knock on
effect in the food chain which sequentially disturbs the eco
systems inter-reliant on one another.

4. The human race's use and misuse of nitrogen for decades. Every year, humans
 convert an estimated 120 million tons of nitrogen from the atmosphere into
reactive forms such as nitrates, mostly in the production of nitrogen-based
fertilizer for crops and in the use of food additives.

5. Some experts say that wars will be fought over who owns the water supply.
Currently, one third of humans have scarce access to clean, fresh water. The
number is projected to swell by to up to two thirds by 2050. That is that two
thirds of the world's population will not have access to clean water. Over
population, demand and pollution from industry is to blame.

6. Over the last 250 years, surface acidity of the ocean has increased by a
projected 30%. The acidity is likely to amplify by 150% by 2100. The effect
of over acidification of the oceans on sea creatures like shellfish and plankton
is comparable to osteoporosis in humans. The acid effectively is dissolving
the skeletons of the creatures.

7. Pollution of air, water and soil by chemical compounds that take many years to
breakdown. Most of these chemicals are the bi-products of the modern
lifestyle and are produced by industry and motor vehicle exhaust. Pollution
isn't just restricted to the air. Soil is another place where pollution is starting
to take hold. Common toxic substances consist of heavy metals, nitrates and
plastic. A lot of the plastics that are not needed by humans end up the ocean.
These plastics tend to go unnoticed by humans as the pollution is typically
blown out to sea by prevailing winds.

21
8. Weakening of the ozone layer has been mostly attributed to the discharge of
chemical pollution containing the chemicals Chlorine and Bromide. Once the
chemicals reach the upper atmosphere, they cause ozone molecules to break
apart causing a hole to form, the largest of which is over the Antarctic. The
atmosphere blocks lots of of the harmful UV rays from the sun that can injure
living tissue. In an attempt to decrease this process, CFCs have been
prohibited in many manufacturing processes and products.

9. It is projected that by 2050 that there will be no fish living in the sea. The death
of many fish species is owed to humans over fishing the oceans to supply an
ever increasing population's demand for sea food.

10. Since 1990 half of the world's rain forests have been damaged. The clearing
of forests persist at a frightening rate. Trees are now disappearing globally.
KN O WL E D GE SE LF-CH E C K 2. 1

KN O WL E D GE SE LF-CH E C K 2. 2

Enumerate
and describe the actors/factors under the macro environment.

A PP L IC A T IO N 8
Direction: Read the article below and answer the following questions under it.

China's Me Generation
Source: Principles of Marketing, 4th edition, 2012 by Armstrong & Kotler

Changes in the world demographic environment have major implications for

business.
For example, consider China. Thirty years ago, to curb its skyrocketing
population, the Chinese government passed regulations limiting families to one child
each. As a result, China's youth born after 1980 — called "balinghou" or the "Me
generation" by their elders—have been showered with attention and luxuries resulting in
what's known as the "little emperor" or "little empress" syndrome. As many as six adults,
two parents, and four doting grandparents may be indulging the whims of each only child
—all 600 million of them (almost twice the entire U.S. population). Parents with only one
child at home now spend about 40 percent of their income on their cherished child.
China's Me generation, now ranging in age from new-borns to their early 30s, is
affecting markets for everything from children's products to financial services, cell phone

22
services, and luxury goods. For example, Starbucks is targeting China's Me generation,
positioning itself as new kind of informal but indulgent meeting place.
China's one-child rule created a generation of people who have been pampered by
parents and grandparents and have the means to make indulgent purchases. Instead of
believing in traditional Chinese collective goals, these young people embrace
individuality. "Their view of this world is very different," says the president of Starbucks
Greater China. "They have never gone through the hardships of our generation."
Starbucks is in sync with that, he says, given its customized drinks, personalized service,
and original music compilations. "In the U.S., most of Starbucks' business is takeaway,"
says one analyst. "It is the opposite in China. Young people go to Starbucks as a
destination and spend hours there. They like to be seen as chic and cosmopolitan."
Questions:
1. How will you characterize China's Me generation as customers? Explain. 2. How did
the one-child rule affect the macro environment forces in China? Discuss. 3. How does
Starbucks compare the American market with the Chinese market especially the Me
generation? Explain.
 23
Topic 3: MARKETING RESEARCH

What you already know?

A company faces many marketing problems. It faces problems about consumers,
product, market competition, sales promotion, etc. Marketing research helps to solve
these problems. Marketing research is a systematic process. It first collects data
(information) about the marketing problem. Secondly, it records this data. Then it
analyzes (studies) this data and draws conclusions about it. After that, it gives
suggestions (advice) for solving the marketing-problem. So, marketing research helps to
solve the marketing problems quickly, correctly and systematically.
Kick-Start

Research for business failures in the Philippines

and develop a Top Five List for Business
Failures. Discuss how market research can
possibly reduce the amount of business failure.
Share your work in class.

DISCUSSION

MARKETING RESEARCH DEFINED

The American Marketing Association defines marketing research as the
function that links the consumer, customer, and public to the marketer through
information. Information are used to name and describe marketing opportunities and
problems; create, improve, and assess marketing actions; check marketing performance;
and get better the understanding of marketing as a process. Marketing research details the
information necessary to tackle these issues, devises the method for gathering
information, supervises and implements the data collection process, examines the results,
and communicates the result and their repercussions.
Marketing research collects full information about consumers. It finds out the
needs and expectations of the consumers. So the company produces the goods according
to the needs and expectations of the consumers. Marketing research helps the company to

24
make its production and marketing policies. It helps the company to introduce new
products in the market. It helps to identify new-markets.
Marketing research also collects full information about the competitors. The
company uses this information to fight competition. It also helps the marketing manager
to take decisions.
Marketing research is very systematic, scientific, objective and organized. It has a
wide scope. It includes product research, consumer research, packaging research, pricing
research, etc.
Marketing research is a continuous process. It has a few limitations. However, a
company cannot survive and succeed without it.
The significant features of marketing research are as follows:
1. Wide and comprehensive scope - Marketing research has a very wide scope. It
includes product research, packaging research, pricing research, market research,
sales research, and so on. It is used to solve marketing problems and to take
marketing decisions. It is used to make marketing policies. It is also used to
introduce new products in the market and to identify new markets. Marketing
research is used to select channels of distribution, in advertising strategy, for sales
promotion measures, and others.

2. Systematic and scientific - Marketing research is conducted in a step-by-step

manner. It is conducted in an orderly fashion. Therefore, it is systematic.
Marketing research uses scientific methods. Thus, it is also scientific.

3. Science and art - A science collects knowledge (data) while an art uses this
knowledge for solving problems. Marketing research first collects data. It then
uses this data for solving marketing problems. Therefore, it is both, a science and
an art.

4. Collects and analyzes data - Marketing research gathers data accurately and
objectively. It first collects reliable data and then analyses it systematically and
critically.

5. Continuous and dynamic process - The company faces marketing problems

throughout the year. So, marketing research is conducted continuously. It
continuously collects up-to-date data for solving the marketing problems. Large
companies have their own marketing research departments. They conduct
marketing research continuously throughout the year. Therefore, marketing
research is a continuous process. It is a dynamic process because it goes on
changing. It does not remain static. It uses new methods and techniques for
collecting, recording and analyzing the data.

25
6. Tool for decision-making - The marketing manager has to take many decisions .
 For this, he requires a lot of data. Marketing research provides correct and up-to
date data to the marketing manager. This helps him to take quick and correct
decisions. Therefore, marketing research is an important too 1 for decision
making.

7. Benefits company and consumers - Marketing research is useful to the company in

many ways. It increases the sales and profits of the company. It helps the
company to fight competition and boost its goodwill in the market. It reduces the
marketing risks. In short, marketing research brings success to the company. It
also brings the company closer to the consumers. It gives convenience and
satisfaction to the consumers.

8. Similar to military intelligence - Marketing research is a commercial intelligence

gathering activity. It works similar to military intelligence. Marketing intelligence
first makes a systematic study and only then takes a business action. Marketing
research collects reliable data about the consumers, the competitors, the market,
etc. This data is then organized and used for planning, decision-making and
problem solving. This data is also further used for introducing new products and
services in the market.

9. Applied research - Applied research is used for solving problems. Marketing

research is used for solving marketing problems. Therefore, it can be said that,
marketing research is also an applied research. It has a practical value because it
is used for solving present and future problems.

10. Connected with MIS - Marketing research is a component of Marketing

Information System (MIS). Marketing research and MIS are interrelated. Both are
used to solve marketing problems and to take marketing decisions.

11. Reduces gap between producers and consumers - Marketing research informs
producers about the needs and wants of the consumers. The producers produce
goods according to the needs and demands of the consumers. This brings
satisfaction to the consumers and in return producers make good profits. So,
marketing research reduces the gap between the producers and the consumers.

12. Uses different methods - Marketing research uses three methods for collecting
data which are survey method, experiment method and observation method. All
three methods are scientific. The researcher has to use a suitable method for
collecting a reliable data.

26
13. Has few limitations - Marketing research has few limitations too. It is not an exact
science. So, it does not give accurate results. It provides suggestions and not
solutions. It is also a costly and time-consuming process.
 14. Accurate data collection and critical analysis - Marketing research gives much
importance to accurate data collection and its critical analysis. Thus, in a
Marketing research, the data must be first collected accurately. That is, collected
data or gathered information must be accurate, reliable and relevant. Later, this
information must be systematically and critically examined before making any
decisions.

KNOWLEDGE SELF-CHECK 3.1

Discuss the characteristics and features of marketing research.

IMPORTANCE OF MARKETING RESEARCH TO BUSINESS ENTERPRISES

A business faces many types of marketing problems. It faces problems about its
product, price, place and promotion. It also faces problems about product design,
packaging, branding, marketing channels and advertising. Some marketing problems are
very serious. Therefore, in marketing, managers use marketing research as an important
tool to solve marketing problems.
Marketing research helps company and decision makers as follows:
1. Provides valuable data - Marketing research provides valuable data to the decision
makers. It provides data about demand, supply, consumer behavior, competition,
etc. This data is used for decision making. This data improves the quality of
decisions. It makes the decision very successful.

2. Studies consumer behavior - Marketing research provides data about consumer

behavior. It provides data about age, incomes, likes, dislikes, etc. of the
consumers. It also finds out the opinions of the consumers about a company's
product. This data is used to make production and marketing policies.

3. Selects promotional techniques - Marketing research helps the company to select

suitable sales promotion techniques. It helps to select marketing techniques. It
helps to select proper media for advertising. It helps to solve the problems of
after-sales service. It also helps to prepare the budget for advertising and sales
promotion.

4. Supplies marketing information - Marketing research supplies data about the

market situation. This market-related data is used to find out:

27
a. The present and future demand and supply position.
b. The level of competition and steps taken to control it.
c. Market opportunities.
 d. The cause of fall in sales level.
5. Evaluates marketing performance - Marketing research helps the company to
evaluate its marketing performance and to take steps to improve it. Marketing
research is used to find out the effect of price, package, brand name, etc. on sales.
It is used to find consumers' reaction towards the company's product. It is used to
evaluate the inventory and pricing policies. It is also used to evaluate the
effectiveness of advertising, sales promotion techniques, channels of distribution,
etc.

6. Miscellaneous needs and importance — Miscellaneous needs and importance of

marketing research are as follows:

a. Marketing research improves the efficiency of the marketing department. This

creates goodwill and good reputation.
b. It helps the marketing manager to take the rational and effective decisions.
c. It helps to choose suitable staff for doing research.
d. It is used to make growth and expansions programs.
e. It benefits all like the company, distributor, advertising agency, consumer,
government and the entire society.

KN O WL E D GE SE LF-CH E C K 3. 2

How important is listening to customers in the success of relationship marketing

In your own words, discuss the importance of marketing research. strategies?

STEPS IN MARKETING RESEARCH

The chances of making good decisions improve when the right information is
provided at the right time. In order to attain this goal, the marketing researcher should
follow several steps.
Stage 1: Formulating the Marketing Research Problem
Formulating a problem is the first step in the research process. In many ways,
research starts with a problem that management is facing. This problem needs to be
understood, the cause diagnosed, and solutions developed.

28
 A management problem must first be translated into a research problem.
Management problems focus on an action. Research problems, on the other hand, focus
on providing the information needed in order to solve the management problem.
Once the problem is given an approach from a research angle, finding a solution
is easier. For example, "sales are not growing" is a management problem. Translated into
a research problem, the company may examine the expectations and experiences of
several groups such as potential customers, first-time buyers, and repeat purchasers. This
will determine if the lack of sales is due to:
1. Poor expectations that lead to a general lack of desire to buy, or 2.
Poor performance experience and a lack of desire to repurchase. Stage 2:
Statement of Research Objectives
After identifying and defining the problem and formulating the research problem,
the researcher must take a formal statement of research objectives. Such objectives may
be stated in qualitative or quantitative terms and expressed as research questions,
statement or hypothesis. For example, the research objective, "To find out the extent to
which sales promotion schemes affected the sales volume" is a research objective
expressed as a statement.
On the other hand, a hypothesis is a statement that can be refuted or supported by
empirical finding. The same research objective could be stated as, "To test the
proposition that sales are positively affected by the sales promotion schemes undertaken
this summer." Example of another hypothesis may be: "The new packaging pattern has
resulted in increase in sales and profits." Once the objectives or the hypotheses are
developed, the researcher is ready to choose the research design.
Stage 3: Research Design
The research design is a plan or framework for conducting the study and
collecting data. It is defined as the specific methods and procedures used to acquire the
information needed. It represents a framework for the research plan of action.
The objectives of the study are included in the research design to ensure that data
collected are relevant to the objectives. At this stage, the researcher should also determine
the type of sources of information needed, the data collection method (e.g., survey or
interview), the sampling, methodology, and the timing and possible costs of research.
There are three types of research design:
∙ Exploratory Research

Exploratory research is used in cases where the marketer has little or no

understanding about the research problem due to lack of proper information. For
example, a marketer has heard about social media marketing techniques which are

29
employed by their competitors with great success but he is not familiar with using these
for his products/services.
The marketer needs to use exploratory market research to gain/discover insights
about this situation. Thus, when the goal of the marketer is to precisely formulate
problems, clear concepts, gain insights, eliminate impractical ideas and form hypotheses
then exploratory research is used.
Exploratory research follows an unstructured format and makes use of qualitative
techniques, secondary research and expert’s opinion. For example, the marketer from the
previous case can use books, syndicated research, case studies, focus groups, expert
interviews and survey techniques to conduct exploratory research.
The results of exploratory research can’t be used for marketing decisions in most
cases at least not directly. However, the core goal of exploratory research is to equip
marketers with enough information to facilitate marketers plan a format research design
correctly. For example by conducting exploratory research the marketer can find out that
the competition is using popular social media channels like Facebook, Twitter, LinkedIn
and YouTube to reach target consumers effectively and successfully engaging customers
with the brand directly. Now with this information he can plan a formal research design
to test his hypothesis.
∙ Descriptive Research
Descriptive research describes marketing problems, situations, or markets, such as
the market potential for a product or the demographics and attitudes of consumers.
Descriptive research is used to find accurate answers of questions
like: 1. Who are users of my products / services?
2. How they are using my products / services?
3. What proportion of population uses my products / services?
4. What is the future demand for my products / services?
5. Who are all my competitors?
Thus descriptive research is used to explain, monitor and test hypotheses created
by marketers to help them find accurate answers. Due to this reason descriptive research
is rigid, well structure and well planned and uses quantitative techniques like
questionnaires, structured interviews, data analysis etc.
∙ Causal Research
Causal research is used by marketers to find cause and effect relationship of
variables. It is also sometimes referred as "If.. Then..." method. In this type of research,

30
the marketer tries to understand the effects of manipulating independent variable on other
dependent variable.
 Causal research uses field and laboratory experimentation techniques to achieve
its goals. This research is used by marketers mainly to predict and test hypotheses.
Here are cases where causal research can be used:
1. What will happen to sale of my product if I change the packaging of the product?
2. What will happen to sale of my product if I change the design of the product? 3.
What will happen to sale of my product if I change the advertising?
Stage 4: Planning the Sample
Sampling involves procedures that use a small number of items or parts of the
population (total items) to make conclusion regarding the population. A marketing
research project will rarely examine an entire population. It's more practical to use a
sample which is a smaller but accurate representation of the greater population. In order
to design a sample, a researcher must find answers to these questions:
1. From which base population is the sample to be selected?
2. What is the method (process) for sample selection?
3. What is the size of the sample?
Upon knowing who the relevant population is established there is already a base
for the sample. This will allow the researcher to make inferences about a larger
population. There are two methods of selecting a sample from a population: probability
or non-probability sampling.
The probability method relies on a random sampling of everyone within the larger
population. Randomly choosing subjects can increase the chance that a sample will
reflect the population at large. Here are some types of probability methods of sampling:
1. Simple random sampling - Simple random sampling refers to any sampling method
that has the following properties:

a. The population consists of N objects.

b. The sample consists of n objects.
c. If all possible samples of n objects are equally likely to occur, the sampling
method is called simple random sampling.
There are many ways to obtain a simple random sample. One way would be the
lottery method. Each of the N population members is assigned a unique number. The
numbers are placed in a bowl and thoroughly mixed. Then, a blind-folded researcher
selects n numbers. Population members having the selected numbers are included in the
sample.

31
2. Stratified sampling - With stratified sampling, the population is divided into
groups, based on some characteristic. Then, within each group, a probability
sample (often a simple random sample) is selected. In stratified sampling, the
 groups are called strata. As an example, a national survey is conducted. The
researcher might divide the population into groups or strata, based on geography -
north, east, south, and west. Then, within each stratum, he might randomly select
survey respondents.

3. Cluster sampling - With cluster sampling, every member of the population is

assigned to one, and only one, group. Each group is called a cluster.

A sample of clusters is chosen, using a probability method (often simple random

sampling). Only individuals within sampled clusters are surveyed.

Note the difference between cluster sampling and stratified sampling. With
stratified sampling, the sample includes elements from each stratum. With cluster
sampling, in contrast, the sample includes elements only from sampled clusters.

4. Multistage sampling - With multistage sampling, a sample is selected by using

combinations of different sampling methods. For example, in Stage 1, the
researcher might use cluster sampling to choose clusters from a population. Then,
in Stage 2, he might use simple random sampling to select a subset of elements
from each chosen cluster for the final sample.

5. Systematic random sampling - With systematic random sampling, the researcher

creates a list of every member of the population. From the list, he randomly
selects the first sample element from the first k elements on the population list.
Thereafter, he selects every kth element on the list. This method is different from
simple random sampling since every possible sample of n elements, is not equally
likely.
Non- probability method is based in part on the judgment of the researcher, and
often employs convenience samples, or by other sampling methods that do not rely on
probability. Here are some types of non-probability methods of sampling:
1. Voluntary sample - A voluntary sample is made up of people who self-select into
the survey. Often, these folks have a strong interest in the main topic of the
survey. Suppose, for example, that a news show asks viewers to participate in an
on-line poll. This would be a volunteer sample. The sample is chosen by the
viewers, not by the survey administrator.

2. Convenience sample - A convenience sample is made up of people who are easy to

reach. Consider the following example. A researcher interviews shoppers at a
local mall. If the mall was chosen because it was a convenient site from which to

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solicit survey participants and/or because it was close to the researcher's home or
business, this would be a convenience sample. The final stage of the sample
design involves determining the appropriate sample size. This important step
involves cost and accuracy decisions. Largersamples generally reduce sampling
 error and increase accuracy, but also increase costs.

Stage 5: Data Collection Techniques

The collection of data relates to the gathering of facts to be used in solving the
problem. Hence, methods of market research are essentially methods of data collection.
There two kinds of data:
1. Secondary data are facts and figures that have already been recorded before the
marketing research project. Data that are secondary can be collected from
concerned reports, magazines and other periodicals, especially written articles,
government publications, company publications, books, etc. There are two
sources of secondary data which are the internal sources and external sources.
Internal sources include data that exists and is stored inside the organization.
External data is data that is collected by other people or organizations from the
organization's external environment.

2. Primary data are facts and figures that are newly collected for the marketing
research project. Data that are primary can be collected from the original base
through empirical research by means of various tools.
There are many ways to collect data. Two important methods to consider are
interviews and observation.
Interviews required a researcher to ask questions and receive responses. Common
modes of research communication include interviews conducted face-to-face, by mail, by
telephone, by email, or over the Internet. This broad category of research techniques is
known as survey research. These techniques are used in both non-experimental research
and experimental research.
Another way to collect data is by observation. Observing a person's or company's
past or present behavior can predict future purchasing decisions. Data collection
techniques for past behavior can include analyzing company records and reviewing
studies published by external sources.
In order to analyze information from interview or observation techniques, a
researcher must record results. Because the recorded results are vital, measurement and
development are closely linked to which data collection techniques he decided on.
The way of recording the data changes depends on which method to use.

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Stage 6: Analysis and Interpretation
In order for data to be useful, they must be analyzed. Analysis techniques vary
and their effectiveness depends on the types of information collected, and the type of
measurements to be used. Because they are dependent on the data collection, analysis
techniques should be decided before this step.

Stage 7: The Marketing Research Report

The marketing research process culminates with the research report. This report
will include all of information, including an accurate description of the research process,
the results, conclusions, and recommended courses of action. The report should provide
all the information the decision maker needs to understand the project.
It should also be written in language that is easy to understand. It's important to
find a balance between completeness and conciseness. The researcher doesn't want to
leave any information out. However, he can't let the information get so technical that it
overwhelms the reading audience.

KN O WL E D GE SE LF-CH E C K 3. 3

Enumerate
and discuss the steps in marketing research.

A PP L IC A T IO N 9
Direction: Read the article below and answer the following questions under it.

Buy-ology-How Neuromarketing is Trying to Understand Consumers

Source: Marketing in Asia, 2nd edition, 2013 by Kerin, Theng, Hartley and Rudelius

Is much of the more than $12 Billion spent on traditional marketing research
(focus groups, surveys and so on) wasted? Brand guru Martin Lindstrom believes so.
Why? Because 85% of the consumers' thoughts, feelings or preferences toward products,
brands and advertisements reside deep within the subconscious part of the brain and can't
be understood using traditional techniques.
Lindstrom is a believer in a relatively new field of neuro-marketing which uses
high-tech brain scanning instruments to record the brain's responses to various marketing
stimuli (package designs, brand logos, fragrances, TV ads and so on) via the five senses

34
(sight, sound, smell, touch and taste). Two instruments are typically used when stimuli
are presented:
1. An expensive, dough-shaped functional magnetic resonance imaging (fMRI)
scanner where different areas of the brain "light up" can be mapped
 2. Less costly cap with dozens of sensors plugged into an electroencephalograph
(EEG) where the real-time changes in brain wave patterns can be seen.
So why is neuro marketing, important to marketers? Lindstrom draws these
fascinating conclusions that could have a significant impact on current marketing actions:
∙ Brand logos don't work. Instead brands should focus on indirect logo signals, such as
shapes, sound, smell, color and so on.

∙ Ads with sex appeal don't sell. Men in particular don't recall these types of ads nearly
as much as non-sexually oriented ads.

∙ Successful brands function like religion. Participants' brains respond similarly to

brand messages and religious icons.

∙ Warning labels on cigarettes don't work. Interestingly, the labels stimulate the area of
the brain responsible for cravings.
So what do you think about neuromarketing? Are you concerned that marketers
will invade your privacy by influencing what you buy? This much you can be sure of:
More neuromarketing research is on the way.
Questions:
1. How does neuromarketing differ from traditional way of research? Compare. 2. Do
you think neuromarketing is more accurate way of researching? Defend your side.
3. Why do you think neuromarketing is still not commonly used in the Philippines?
Discuss.

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Topic 4: CONSUMER AND BUSINESS MARKETS

What you already know?

The success of a marketing strategy involves gaining a comprehensive
understanding of the particular markets that the company serves. These markets can
either be consumer markets or business markets. As there is a significant difference
between these two markets, the marketing strategies adopted to serve them also differ.
These strategies need to be developed based on the needs, wants and buying processes of
the particular market.
Kick-Start
Think about your previous buying experience.
Prepare a list of factors that you consider
before buying certain product. Share your
work in class.
There are a lot of factors that might influence
buyer’s behaviour, it could be personal,
psychological or even social. Understanding
these factors will help marketers better
understand consumer characteristics.

DISCUSSION

CONSUMER BEHAVIOR DEFINED

Marketing is so much more than creating a catchy phrase or a jingle people will
sing for days. Understanding consumer behaviour is vital aspect of marketing. Consumer
behaviour is the study of how people make decisions about what they buy, want, need or
act in regards to a product, service or company. It is critical to understand consumer
behaviour to know how potential customer will respond to a new product or service. It
also helps companies identify opportunities that are not currently met.
A recent example of a change in consumer behavior is the eating habits of consumers
that have drastically increased the demand for gluten-free (GF) products. The companies that
monitored the change in eating patterns of consumers created GF products to fill a void in the
marketplace. However, many companies did not monitor consumer behavior and were left
behind in releasing GF products Understanding consumer behavior allowed the pro-active
companies to increase their market share by anticipating the shift in consumer wants.

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To fully understand how consumer behavior affects marketing, it's vital to understand
the three factors that affect consumer behavior: psychological, personal, and social.
Psychological Factors
In daily life, consumers are being affected by many issues that are unique to their
thought process. Psychological factors can include perception of a need or situation, the
person's ability to learn or understand information, and an individual's attitude. Each person
will respond to a marketing message based on their perceptions and attitudes. Therefore,
marketers must take these psychological factors into account when creating campaigns,
ensuring that their campaign will appeal to their target audience.
Personal Factors
Personal factors are characteristics that are specific to a person and may not relate to
other people within the same group. These characteristics may include how a person makes
decisions, their unique habits and interests, and opinions. When considering personal factors,
decisions are also influenced by age, gender, background, culture, and other personal issues.
For example, an older person will likely exhibit different consumer behaviors than a younger
person, meaning they will choose products differently and spent their money on items that
may not interest a younger generation.
Social Factors
The third factor that has a significant impact on consumer behavior is social
characteristics. Social influencers are quite diverse and can include a person's family, social
interaction, work or school communities, or any group of people a person affiliates with. It
can also include a person's social class, which involves income, living conditions, and
education level. The social factors are very diverse and can be difficult to analyze when
developing marketing plans. However, it is critical to consider the social factors in consumer
behavior, as they greatly influence how people respond to marketing messages and make
purchasing decisions. For example, how using famous celebrities can influence buyers.

DESCRIBE CONSUMER MARKET

The consumer market pertains to buyers who purchase goods and services for
consumption rather than resale. However, not all consumers are alike in their tastes,
preferences and buying habits due to different characteristics that can distinguish certain
consumers from others. These particular consumer characteristics include various
demographic, psychographic, behavioral and geographic traits. Marketers usually define
these consumer characteristics through market segmentation, the process of separating and
identifying key customer groups.

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Demographic Characteristics
Characteristics of consumer markets based on demographics include differences in
gender, age, ethnic background, income, occupation, education, household size, religion,
generation, nationality and even social class. Most of these demographic categories are
further defined by a certain range. For example, companies may identify the age of their
consumers in the 18 to 24, 25 to 34, 35 to 54, 55 to 65, and 65+ age groups. Companies often
identify these demographic characteristics through market research surveys used to discover
which demographic groups comprise the majority of their customer base. Companies can
then target their advertising towards these demographic groups. For example, a new cell
phone may be targeted toward 18 to 24-year-olds with incomes between Php 15,000 and Php
25,000.

Psychographic Characteristics
 Consumer market characteristics can also be psychographic in nature.
Psychographic characteristics of consumers include interests, activities, opinions, values
and attitudes. Once the psychographics are compiled, a personality profile emerges. For
example, a psychographic may reflect a socially conscious consumer who strives to
support non-profits through his purchasing habits and tends to participate in
environmentally friendly activities. Obviously, many magazines are geared toward a
consumer's interest. Opinions and attitudes can be either specific or general. A company
may better understand consumer opinions and attitudes after conducting a focus group,
and can use that information to tailor advertising or marketing campaigns. Consumer
values can pertain to how a group of individuals feels about certain social issues, which
can be of interest to non-profit or charitable organizations.
One of the most popular classifications based on psychographic measurements is
SRI International's Values and Lifestyles (VALS) framework. The VALS 2 system
classifies all adults into eight groups based on psychological attributes drawn from survey
responses to demographic, attitudinal, and behavioral questions, including questions
about Internet usage. The major tendencies of these groups are:
1. Actualizers - Successful, sophisticated, active, "take-charge" people whose
purchases often reflect cultivated tastes for relatively upscale, niche-oriented
products.

2. Fulfilleds - Mature, satisfied, comfortable, and reflective people who favor durability,
functionality, and value in products.

3. Achievers - Successful, career- and work-oriented consumers who favor

established, prestige products that demonstrate success.

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4. Experiencers - Young, vital, enthusiastic, impulsive, and rebellious people who
spend much of their income on clothing, fast food, music, movies, and video.

5. Believers - Conservative, conventional, and traditional people who favor familiar

products and established brands.

6. Strivers - Uncertain, insecure, approval-seeking, resource constrained consumers

who favor stylish products that emulate the purchases of wealthier people.

7. Makers - Practical, self-sufficient, traditional, and family-oriented people who

favor products with a practical or junctional purpose, such as tools and fishing
equipment.

8. Strugglers - Elderly, resigned, passive, concerned, and resource-constrained

consumers who are cautious and loyal to favourite brands.
Behavioral Characteristics
Behavioral characteristics can also be garnered through marketing research.
Behavioral characteristics of consumer markets include product usage rates, brand
loyalty, user status or how long they have been a customer, and even benefits that
consumers seek. Companies like to know how often their consumers visit their
restaurants, stores or use their products. Company marketing departments usually try to
distinguish between heavy, medium and light users, whom they can then target with
advertising. Marketers like to know which customers are brand loyalists, as those
consumers usually only buy the company's brand.
Geographic Characteristics
Consumer markets also have different geographic characteristics. These
geographic characteristics are often based on market size, region, population density and
even climate. There are several ways that a market can be geographically segmented. The
company can divide your market by geographical areas, such as by city, county, state,
region, (like the West Coast), country, or international region, (like Asia). It can also
divide the market into rural, suburban, and urban market segments. And, the firm can
segment a market by climate or total population in each area. A small retailer may find
opportunities in a small market in which larger competitors have no interest. Companies
that sell beachwear will likely sell more products in warmer climates. Consumers in
different regions of the country also have different tastes in food and style.

KNOWLEDGE SELF-CHECK 4.1

Discuss the factors that influence consumer behavior.

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CONSUMER PURCHASE DECISION PROCESS

In order to successfully reach their target

market, marketers must have some idea of how
much time and effort consumers will put into a
purchase decision. Here are the steps in
consumer purchase decision.

Problem Recognition
The need recognition is the first and most important step in the buying process. If
there is no need, there is no purchase. This recognition happens when there is a lag
between the consumer's actual situation and the ideal and desired one.
However, not all the needs end up as a buying behavior. It requires that the lag
between the two situations is quite important. But the "way" (like product price, ease of
acquisition) to obtain this ideal situation has to be perceived as acceptable by the
consumer based on the level of importance he attributes to the need.
In addition to a need resulting from a new element, the gap between the actual
situation and the ideal situation may be due to three cases. The current situation has not
changed, but the ideal situation has. Or, the ideal situation is still the same but it's the
actual situation has changed. Or finally, the two situations have changed.
The recognition of a need by a consumer can be caused in different ways. Different
classifications are used:
1. Internal stimuli (physiological need felt by the individual as hunger or thirst)
which opposes the external stimuli such as exposure to an advertisement, the sight
of a pretty dress in a shop window or the mouth-watering smell of a chocolate
cake when passing by a bakery.

2. Classification by type of needs:

a. Functional need - the need is related to a feature or specific functions of the
product or happens to be the answer to a functional problem. Like a computer
with a more powerful video card to be able to play the latest video games or a
washing machine that responds to the need to have clean clothes while
avoiding having to do it by hand or go to the laundry station.

40
b. Social need - the need comes from a desire for integration and belongingness in
the social environment or for social recognition. Like buying a new fashionable
bag to look good at school or choose a luxury car to show success in life.

c. Need for change - the need has its origin in a desire from the consumer to
change. This may result in the purchase of a new coat or new furniture to
change the decoration of one's apartment.

3. The Maslow's hierarchy of needs - Developed by the eponymous psychologist,

this is one the best known and widely used classifications and representations for
hierarchy of needs. It specifies that an individual is guided by certain needs that
he wants to achieve before seeking to focus on the following ones:

a. Physiological needs - basic needs like hunger and thirst

b. Safety needs - security and protection
c. Need of love and belonging - love and friendship
d. Need of esteem (for oneself and from the others) - recognition, status
e. Need of self-actualization - self-development and realization
Information Search
Once the need is identified, it's time for the consumer to seek information about
possible solutions to the problem. He will search more or less information depending on
the complexity of the choices to be made but also his level of involvement. (Buying pasta
requires little information and involves fewer consumers than buying a car.)
Then the consumer will seek to make his opinion to guide his choice and his
decision-making process with:
1. Internal information - This information is already present in the consumer's
memory. It comes from previous experiences he had with a product or brand and
the opinion he may have of the brand. Internal information is sufficient for the
purchasing of everyday products that the consumer knows - including Fast
Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG). But
when it comes to a major purchase with a level of uncertainty or stronger
involvement and the consumer does not have enough information, he must turns
to other sources of information.

2. External information - This is information on a product or brand received from and

obtained by friends or family, by reviews from other consumers or from the press.
Not to mention, of course, official business sources such as an advertising or a
seller's speech. During his decision-making process and his consumer buying
decision process, the consumer will pay more attention to his internal information

41
and the information from friends, family or other consumers. It will be judged
more objective than these from advertising, a seller's speech or a commercial
brochure of the product.

Alternative Evaluation
Once the information collected, the consumer will be able to evaluate the different
alternatives that offer to him, evaluate the most suitable to his needs and choose the one
he think it's best for him.
In order to do so, he will evaluate their attributes on two aspects.
1. objective characteristics - such as the features and functionality of the product

2. subjective characteristics - such as perception and perceived value of the

brand by the consumer or its reputation
Each consumer does not attribute the same importance to each attribute for his
decision and his consumer buying decision process. And it varies from one shopper to
another. Mrs. Serrano may prefer a product for the reputation of the brand X rather than a
little more powerful but less known product. While Mrs. Camilar has a very bad
perception of that same brand.
 The consumer will then use the information previously collected and his
perception or image of a brand to establish a set of evaluation criteria, desirable or
wanted features, classify the different products available and evaluate which alternative
has the most chance to satisfy him.
The process will then lead to what is called evoked set. The evoked set is the set
of brands or products with a probability of being purchased by the consumer. This is
because the consumer has a good image of it or the information collected is positive.
On the other hand, inept set is the set of brands or products that have no chance of
being purchased by the shopper. This is because the consumer has a negative perception
or has had a negative buying experience with the product in the past. While inert set is the
set of brands or products for which the consumer has no specific opinion.
The higher the level of involvement of the consumer and the importance of the
purchase are stronger, the higher the number of solutions the consumer will consider will
be important. On the opposite, the number of considered solutions will be much smaller
for an everyday product or a regular purchase.

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Purchase Decision
Now that the consumer has evaluated the different solutions and products
available for respond to his need, he will be able to choose the product or brand that
seems most appropriate to his needs. Then proceed to the actual purchase itself.
His decision will depend on the information and the selection made in the
previous step based on the perceived value, product's features and capabilities that are
important to him.
But his consumer buying decision process and his decision process may also
depend or be affected by such things as the quality of his shopping experience or of the
store (or online shopping website), the availability of a promotion, a return policy or good
terms and conditions for the sale.
For example, a consumer committed to the idea of buying a stereo of a well known
brand could change his decision if he has an unpleasant experience with sellers in the
store. While a promotion in a supermarket for a yogurt brand could tip the scale for this
brand in the consumer's mind who was hesitating between three brands of his evoked set.
Post-purchase behavior
Once the product is purchased and used, the consumer will evaluate the adequacy
with his, original needs or whether he has made the right choice in buying this product or
not. He will feel either a sense of satisfaction for the product.
 On the contrary, he will feel disappointed if the product has fallen far short of
expectations. Satisfaction on the product will influence his future decisions and buying
behavior. If the product has brought satisfaction to the consumer, he will then minimize
stages of information search and alternative evaluation for his next purchases in order to
buy the same brand. In this manner he will become a loyal customer.
On the other hand, if the experience with the product was average or
disappointing, the consumer is going to repeat the 5 stages of the consumer buying
decision process during his next purchase but exclude the brand from his evoked set.
The post-purchase evaluation may have important consequences for a brand. A
satisfied customer is very likely to become a loyal and regular customer. Especially for
everyday purchases with low level of involvement — such as Fast-Moving Consumer
Goods (FMCG) or Consumer Packaged Goods (CPG). A loyalty which is a major source
of revenue for the brand when the company combines all purchases made by customer
throughout his entire life also called lifetime customer value. Lifetime customer value is
the "Holy Grail" that all brands in the industry are trying to achieve.
Positive or negative, consumers will also be able to share their opinion on the
brand whether in their family or by word-of-mouth. On a much broader scale now with

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social networks or on consumer product review websites, an unhappy customer can have
a strong power to harm for a brand.

KNOWLEDGE SELF-CHECK 4.2

Discuss the steps involved in consumer buying process.

DESCRIBE BUSINESS MARKET

The business market comprises all the organizations that buy goods and service
for use in the production of other products and services that are sold, rented, or supplied
to others. It also includes retailing and wholesaling firms that acquire goods for the
purpose of reselling or renting them to others at a profit. In the business buying process
business buyers determine which products and services their organizations need to
purchase, and then find, evaluate, and choose among alternative suppliers and brands.
Companies that sell to other business organizations must do their best to understand
business markets and business buyer behavior.
Intermediaries
Companies that sell to both consumers and other businesses may market their
products through intermediaries, such as retailers, wholesalers or distributors. To build
business through these channels, companies operate a marketing program focused on
intermediaries. They must encourage intermediaries to stock their products through
incentive programs and support them with marketing collateral, such as advertisement
templates or point-of-sale display material.
Services Market
Companies that offer services also market them to consumers, other businesses
and government agencies: However, marketing services requires different skills and
strategies and therefore represents a different business market. Companies offer
consumers services, such as plumbing, hairdressing or landscaping. They may also
provide professional services, such as management consultancy, accountancy or property
maintenance, to other businesses or government agencies.
Industrial Businesses
Companies that sell products to other businesses operate in the business-to
business market, or B2B. They may sell materials or components that other companies
use to manufacture their own products, or they might sell finished goods, such as office
equipment or machine tools. Companies market their products through a sales team or via
intermediaries, such as distributors. Although a purchasing manager is responsible for
making the final buying decision, other employees, such as technical managers,
manufacturing managers or finance directors, may influence the choice of product and
supplier.

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Institutional Markets
The institutional market consists of schools, hospitals, nursing homes, prisons and
other institutions that provide goods and services to people in their care. Institutions
differ from one another in their sponsors and activities. Many institutional markets are
characterized by low budget and captive patrons. For instance hospital patients have little
choice but to eat whatever food the hospital supplies. A hospital purchasing staff has to
decide on the quality of food to buy for patients. Because the food is provided as a part of
the total service package, the buying objective is not for profit. Nor is strict cost
minimization the goal because patients receiving poor quality food will complain to
others and damage the hospital's reputation. Thus, the hospital purchasing staff must
search for institutional food vendor whose quality meets or exceeds a certain minimum
standard and whose prices are low. Many marketers set up separate divisions to meet the
special characteristics and needs of institutional buyers.

Government Markets
The government market offers big opportunities for small and big companies. In
most countries, government organizations are major buyers of goods and services.
Companies who wish to sell products and services to governments must know the
similarities and differences of government buying and business buying. In order to
succeed in the government market, sellers need to locate key decision makers, identify
the factors that affect buyer behavior and understand the buying decision process.
Government organizations require suppliers to submit bids and the contract is
awarded to the supplier with the lowest bid. Government buying has emphasized price,
making suppliers invest their effort in technology to bring costs down.

TYPES OF BUSINESS PURCHASE DECISIONS

Not all buying situations are first-time occurrences. There are actually three types
of buying situations that can occur:
1. Straight Rebuy - These purchase situations involve routine ordering. In most cases
buyers simply reorder the same products or services that were previously
purchased. In fact, many larger companies have programmed re-purchases into an
automated ordering system that initiates electronic orders when inventory falls
below a certain pre-determined level. For the supplier benefiting from the re
purchase this situation is ideal since the purchaser is not looking to evaluate other
products. For competitors who are not getting the order it may require extensive
marketing efforts to persuade the buyer to consider other product or service
options.

45
2. Modified Rebuy - These purchases occur when products or services previously
considered a straight re-purchase are for some reason now under a re-evaluation
process. There are many reasons why a product is moved to the status of a
modified re-purchase. Some of these reasons include: end of purchase contract
period, change in who is involved in making the purchase, supplier is removed
from an approved suppliers list, mandate from top level of organization to re
evaluate all purchasing, or strong marketing effort by competitors. In this
circumstance the incumbent supplier faces the same challenges they may have
faced when they initially convinced the buyer to make the purchase. For
competitors the door is now open and they must work hard to make sure their
message is heard by those in charge of the purchase decision.

3. New Task Purchase - As the name suggests, these purchases are ones the buyer has
never or rarely made before. In some ways new task purchases can be considered
as either minor or major depending on the total cost or overall importance of the
purchase. In either case the buyer will spend considerably more time evaluating
alternatives. For example, if faced with a major new task purchase, which often
involves complex items, such as computer systems, buildings, robotic assembly
lines, etc., the purchase cycle from first recognizing the need to placement of the
order may be months or even years.

KNOWLEDGE SELF-CHECK 4.3

What are the different types of business markets and their common buying
situations?

THE BUSINESS BUYING PROCESS

There are eight stages of the business buying process. New-task buying situations
usually go through all the stages of the buying process. Modified and straight rebuys may
skip some of the stages.

Problem Recognition
The buying process starts when someone in the company identifies a problems or
need that can be met by acquiring a specific product or service. Problem recognition can
result from internal or external stimuli. Internally, the company may decide to launch a new
product that needs new production equipment and materials. Or a machine may stop working
and require new parts. Perhaps a purchasing manager is not happy with the present supplier's
product quality, service or prices. Externally, the buyer may

46
get some novel ideas at a trade show, see an advertisement or receive a phone call from a
salesman who offers a better product at an affordable price.

General Need Description

Having identified a need, the buyer prepares a general need description that explains
the characteristics and quantity of the needed item. For standard items, this stage few
problems. For complex items, however, the buyer may have to work with others like
engineers, users, consultants to define the item. The team may rank the importance of
reliability, durability, price and other attributes desired in the item. In this stage the marketer
may help the buyer define their needs and give information about the value of different
product characteristics.

Product Specification
The buying organization in this step needs to develop the item's technical product
description or specification through the assistance of a technical or engineering team using
value analysis. Value analysis is a method to reduce cost in which components are studied
cautiously to know if they can be redesigned, standardized or made by less costly manner of
production. The team makes the decision on the best product specifications. Similarly, sellers
can use value analysis as a means to help secure a new account. Through showing buyers a
better way of making an object, outside sellers can turn straight rebuy situations into new task
situations that offer them a chance to acquire new business.

Supplier Search
The buyer in this stage searches for a supplier to find the best vendors. The buyer can
make a list of qualified suppliers from information coming from trade directories, Internet or
calling other companies for recommendations. Nowadays, it is the Internet where more
companies look for suppliers. The buyer spends more in money and time for supplier search
especially if it is a new task situation and the item is complex and expensive. The supplier's
task is to be part of the list in major directories and create a good image in the marketplace.
Salespeople should make certain that their company is always considered when buyers are in
search of suppliers.

Proposal Solicitation
In this stage of the business buying process, the buyer sends invitation to qualified
suppliers to propose. In response to the invitation, some invited suppliers will either send a
catalog or their sales representative. If the item is complex and expensive, the buyer will
require comprehensive written proposals of formal presentation from individual potential
supplier. Marketers should be well-versed in researching, writing and presenting proposals in
response to buyer proposal solicitations. Proposals have to be

47
marketing documents not merely technical documents. Presentations need to inspire
confidence and must make the marketer's company be noticeable from the competition.

Supplier Selection
The members of the technical ,or engineering team reviews the proposals submitted and
pick the supplier or suppliers. In this stage the team must come up with the list of the desired
supplier attributes and their comparative significance. The members of the team will rate the
suppliers using the attributes and identify the best supplier. It must also be decided how many
suppliers will be used and maintained. The trend nowadays is less number of suppliers to
make it easier to facilitate inventory.

Some even use single sourcing. Although, many firms are still reluctant toward the use of
single sourcing. They fear that they become over dependent to a single supplier or the single-
source supplier may become over-comfortable in the relationship and lose its competitive
edge.

Order-Routine Specification
This time the buyer prepares an order-routine specification. An order-routine
specification consists of the final order with the chosen supplier or suppliers and make a list
items like technical specifications, quantity needed, expected time of delivery, return policies
and warranties. In the case of maintenance, repair and operating items are included.

Performance Review
In this stage of the business buying process, the buyer reviews supplier performance. The
buyer may get in touch with users and request them to rate their satisfaction. The result of the
review may lead the buyer to decide whether to continue, modify or end the arrangement.
The same factors should be monitored by the seller to make certain that the seller is giving
the expected satisfaction.

KNOWLEDGE SELF-CHECK 4.4

Discuss the steps involved in business buying process.

48
A PP L IC A T IO N 10
Direction: Read the article below and answer the following questions under it.

How Brands can Adjust to "New Era" of China's Luxury Cooldown Source: Jing
Daily, December 17, 2013; jingdaily.com/how-brands-can-adjust-to-new-era-of-chinas-luxury-cooldown/#.VpTKa7Z95dh

On the heels of Bain & Company's October global luxury goods report stating that
China's luxury growth has slowed to 2.5 percent in 2013, the consultancy has released a
study outlining the slowdown's major causes and impacts, as Well as advice for what brands
can do about it.

The study found, as Jing Daily has previously noted, that the government's ongoing
corruption crackdown is only one factor in China's luxury slowdown: changing consumer
tastes and shifting purchase channels also play a major part. The report confirms Jing Daily's
previous assertion that the crackdown has also not had a uniform effect on the industry,
taking its toll on more heavily gifted items such as luxury watches, which saw an 11 percent
decline in sales over the past year.

The major bright spots in the market was women's wear, which grew by an estimated
10 percent this year, and shoes, which showed "strong momentum" with an estimated 8
percent growth. Cosmetics, which make up one-fourth of luxury goods sold on the mainland,
also logged 10 percent growth; however, this number isn't as much of a bright spot
considering the fact that the number is down from 15 percent last year.

Changing consumer tastes are also a major factor in the slowdown, finds the report. It
states that in tier 1 cities, "as Chinese shoppers become more sophisticated, they realize that
the only way to show their uniqueness and personality is through fashion with personalized
mix and match, not with accessories that everybody can wear." These changing tastes are also
leading to a differentiation between tier 1 and lower-tier cities, as second- and third-tier
locations have more "traditional" shoppers, according to Bain.
 Meanwhile, shopping abroad and through parallel dialogue channels—services where
others purchase luxury goods abroad and sell through professional agencies or Taobao —
have had a major effect on the slowdown this year as tariffs remain high and more Chinese
tourists are traveling internationally. While one third of all luxury goods sold Chinese customers
are purchased outside of the mainland and Hong Kong, the study finds that nearly 60 percent of
China's luxury consumers have used a daigou channel to buy goods, and half of those who haven't
would consider doing so in the future.

There have been several effects of this changing luxury landscape. First, store expansion
in mainland China "is no longer enough to drive growth," says the report. It notes that of 20
luxury brands studied, the number of store openings this year declined to 100, compared to about
150 last year. Brands have been shifting their focus to store renovation, relocation; and
operational improvement.

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In addition, luxury consumers are "extremely well informed" about their purchases now.,
The study found that 73 percent use the internet, including company websites, news, microblogs,
mobile apps, and more to obtain information before they buy.

Bain has several pieces of advice for brands in navigating the cooling market. "Brands
have to master a broader set of management skills to succeed in China now," said Bruno Lannes,
a Bain partner in Greater China and lead author of the Chinese edition of the study. "There are
three new imperatives coming from the increased sophistication of Chinese shoppers: changing
focus to managing fashion lines, merchandising and inventory; tailoring customer strategies to
multiple segments; and, training store staff to provide the best customer experience for these
diverse and increasingly more sophisticated Chinese shoppers."

Questions:

1. How will you describe the buying characteristics of Chinese shoppers? Discuss 2.
Are Filipino shoppers comparable to Chinese shoppers? Explain your answer. 3. Is the
use of the Internet really advantageous? Explain briefly.
 50
Topic 5: MARKETING SEGMENTATION, TARGETING,
AND POSITIONING (STP)

What you already know?

In order to be an effective and efficient business, firms should seek out their
target customer market. A good understanding of the principles of market segmentation is
an important building block of a company's marketing strategy. Market segmentation
serves as the foundation for an efficient, streamlined and ultimately successful approach
to customers, and a means of targeting products and services accurately, with the
minimum of wastage.
Kick-Start

Imagine that you are already working in

Multi-national Company as a management
trainee. How would you divide up the
Philippine population if you wanted to market
a product or service to them? Based on what
criteria or characteristics?

DISCUSSION

MARKET SEGMENTATION
A market is composed of individuals or organizations with the ability and willingness
to make purchases to fulfil their needs or wants. A market segment is a subdivision or part of
an overall market with specific and distinctive characteristics. As opposed to mass marketing
where companies direct their marketing activities to the entire market. In market
segmentation, companies tailor-fit their marketing to the needs and wants of the particular
market segment. Market segmentation involves grouping various customers into segments
that have common needs or will respond similarly to a marketing action. Each segment will
respond to a different marketing mix strategy, with each offering alternate growth and profit
opportunities.
Segmentation involves finding out what kinds of consumers with different needs
exist. In the case of auto market, some consumers demand speed and performance, while
others are much more concerned about roominess and safety. In general, it holds true that

51
no one can please everybody and experience has revealed that firms that concentrated in
meeting the needs of one group of consumers over another tend to be more advantageous.

STP Process: Segmentation, Targeting and Positioning (STP)

Segmentation calls for some tough choices. There may be a great number of variables
that can be used to differentiate consumers of a given product category. Yet, in reality, it
becomes impossibly burdensome to work with more than a few at a time. It is indeed a
requirement to find out which variables will be most helpful in distinguishing different
groups of consumers.

Market segmentation tries to quantify the ways in which different groups assign value
to a product or service. In this sense, it allows companies to reach the greatest number of
consumers through greater awareness of how people respond to advertising.

For the segmentation to be useful, the following criteria must be met:

1. Substantiality - The targeted segment needs to be large enough to justify creating and
maintaining a customized marketing mix. Simply put, there would be no point in
wasting marketing budget on a market segment that is inadequately large, or has
insignificant spending power. A feasible market segment is usually a homogenous
group with obviously defined characteristics such as age group, socio-economic
background and brand perception. Longevity is also significant. No market
segmentation expert would advocate focusing on an unsteady customer group that is
prone to break up, or change beyond recognition within a year or two.

2. Measurability - The company must be able to identify this specific segment and its size
measurable. Market segments are usually measured in terms of sales value or the
number of customers within the segment. Dependable market research should be able
to determine the size of a market segment to a reasonable degree of accuracy, so that
strategists can then decide whether, how, and to what extent they should center their
efforts on marketing to this segment.

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3. Accessibility - The company must have access to its targeted segment with its specific
 marketing mix. When differentiating a market segment, it is vital to consider how the
group could be accessed and, significantly, whether this falls within the strengths and
abilities of the company's marketing department. Different segments might react better
to outdoor advertising, social media campaigns, television infomercials, or any number
of other approaches.

4. Differentiable - The best market segment should be internally homogeneous. Internal

homogeneity means all customers within the segment have similar preferences and
characteristics but externally heterogeneous. Differences between market segments
should be clearly defined, so that the campaigns, products and marketing tools applied
to them can be executed are unrelated.

5. Actionable - The market segment must have practical value. Its characteristics must give
supporting data for a marketing position or sales approach. This in turn must have
outcomes that are easily quantified, ideally in relation to the existing measurements of
the market segment as defined by initial market research.

Bases for Segmenting Consumer Market

Marketers used several bases or variables to divide a total market into segments. It is
significant that the bases for segmentation to be used should be thought of wisely because an
unsuitable segmentation strategy could lead to lost sales and overlooked profit opportunities.
It is best to pinpoint the bases that will give substantial, measurable and accessible segments
that display different response patterns to marketing mixes.

The major variables that might be used in segmenting are geographic, demographic,
psychographic and behavioral variables.

Geographic Segmentation
Geographic segmentation means segregating markets by region of the country or the
world, market size, market density or climate. A company may decide to operate in one or a
few geographical areas or operate in all areas but pay attention to geographical differences in
needs and wants. Market density is the number of people within a unit of land like census
tract. Climate is normally used for geographic segmentation because of its tremendous effect
on residents' needs and purchasing behavior. Air-conditioning and heating systems are
products with different appeal based on climate.
There are four reasons why consumer goods companies use regional approach to
marketing:
1. Many firms have to find new ways to make sales because of slow and strong
competition
2. Retailers using their computerized checkout stations with scanners can get precise
assessment of which brands sell most in the region

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3. New-regional brand intended for local tastes and preferences are introduced by many
packaged-goods manufacturers
 4. More regional approach lets consumer goods companies to respond more swiftly to
competitors

Demographic Segmentation

Demographic segmentation is market segmentation according to age, race, religion,

gender, family size, ethnicity, income, and education. Demographics can be segmented into
several markets to help an organization target its consumers more accurately. With this type
of segmentation, an organization can categorize the needs of consumers.

The following are the variables of demographic factors used in market

segmentation:
1. Age - Age segmentation is the use of marketers of a variety of terms to refer to
different age groups.

a. School-age-children - This exert substantial influence over family purchases

specifically in food. As young as two years old, children pick their choices on
what they want to eat, play with and wear.

b. Generation Y/Millenials (Tweens/Teens) - Members of this generation were

born between 1982 and 2003. Tweens are also called preteens. They desire to be
kids but also wanted the fun of being teenagers. Most retailers in the clothing
industry serve this group with styles similar to those worn by teenagers and
young adults. Teens are technology savvy and very social consumers. The teens
in this group are interested in apparel that enhances their personalities and self-
expression. These groups grew with the Internet and are actively involved in
their own entertainment. They are comfortable in the digital world and cannot
imagine life without cell phones and iPods.

c. Generation X - Members of this generation were born between 1981 and 1965.
This group is very family-oriented, well-educated and optimistic. Many of them
are parents and they make purchase decisions with inputs from and thoughts for
their families. They are also comfortable with the Internet. Most often they have
searched their choices online before they make purchase at a retail store.
Television though is still an important marketing tool for them because they
were raised on television. This generation are becoming more concerned about
social issues and protecting the natural environment for the welfare of the next
generation. This is the reason why they are buying goods and services that
support certain causes.

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d. Baby boomers - Members of this generation were born between 1946 and 1964, a
popular target of marketers because of their numbers and income levels.
Boomers tend to value health and quality of life. Their usual purchases consist of
organic foods, financial investments, travel and fitness. Although they are not
particularly brand loyal.
 e. Seniors - Members of this generation were born beyond 1946. Mostly they are
composed of retirees living on modest incomes (pensions). However, there are
also those who are well-off financially with both time and money for leisure
activities and luxury items. They spend money conservatively.

2. Gender - Gender segmentation is dividing a market into different segments based on

gender. It has long been used in clothing, cosmetics, toiletries,' and magazines. More
recently, many mostly women's cosmetics makers have begun marketing men's lines.
For example, Nivea markets Nivea for Men, a product line for men ranging from its
3-in-1 Active3 body wash, shampoo, and shaving cream combination to a revitalizing
eye cream. L'Oreal and Procter & Gamble are focusing also on the growing markets
of men's cosmetics like moisturizers, bronzers, hair dye and shaving accessories.

3. Income - Income segmentation is dividing a market into different income segments.

Income influences consumers' wants and determines their buying power. Upscale
products are designed specifically for affluent people. Other companies try to appeal
to low-income earners. The marketers of products and services such as automobiles,
clothing, cosmetics, financial services, and travel have long used income
segmentation.

4. Family life cycle - The family life cycle is a series of stages established through a
combination of age, marital status and the presence or absence of children. As a
person grows older, he is moving steadily from one stage to another, moving from an
initial buying behavior focusing only on oneself to a more mature and responsible
one, by taking into consideration not only his needs but also the needs of his family. By
understanding in which stage a person is in the family life cycle, marketers can anticipate
their needs, and determine the products and services they can provide him. Basically, the
family life cycle model describes the stages through which consumers pass through their
lives when they have families.

Psychographic Segmentation

Psychographic segmentation divides buyers into different segments based on

personality characteristics, motives, lifestyles and geodemographics.

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1. Personality - Personality mirrors a person's traits, attitudes and habits. An ultimate
personality descriptor is clothing. People buy clothes that give others the idea of who
they are.

2. Motives - A motive is a need that is sufficiently pressing to direct the person to seek
satisfaction. Products and services have varying appeals. Marketers appeal to
consumers' emotional motives when selling baby products and life insurance. Most
carmakers target customers with rational motives when appeal to economy, reliability
and dependability. However, for luxury carmakers like Mercedes Benz, Jaguar and
 Cadillac they appeal to customers using status-related motives.

3. Lifestyles - Lifestyle is a person's way of living and describes how an individual

spends his time, the importance of things around him, his beliefs and socioeconomic
characteristics like income and education.

4. Geodemographics - Geodemographics divides the potential market into neighborhood

lifestyles. This manner of segmentation combines geographic, demographic and
lifestyle segmentations.

Behavioral Segmentation

Behavioral segmentation divides buyers into segments based on their knowledge,

attitudes, uses, or responses to a product. Many marketers believe that behavior variables are
the best starting point for building market segments.

1. Occasions - Buyers can be grouped according to occasions when they get the idea to
buy, actually make their purchase, or use the purchased item. Occasion segmentation
can help firms build up product usage. Some holidays, such as Mother's Day and
Father's Day, were originally promoted partly to increase the sale of cakes, candy,
flowers, cards, and other gifts. And many marketers prepare special offers and ads for
holiday occasions. For example, Coke, Goldilocks, and Jollibee runs ads throughout
the year but prepares special ads and packaging for holidays and events such as
Christmas, Valentines, Graduation and even Easter.

2. Benefits Sought - A powerful form of segmentation is grouping buyers according to the

different benefits that they seek from a product. Benefit segmentation requires
finding the major benefits people look for in a product class, the kinds of people who
look for each benefit, and the major brands that deliver each benefit.

3. User Status - Markets can be segmented into nonusers, ex-users, potential users, first-
time users, and regular users of a product. Marketers want to reinforce and retain
regular users, attract targeted nonusers, and reinvigorate relationships with ex-users.
Included in the potential user group are consumers facing life-stage changes such as
newlyweds and new parents who can be turned into heavy users.

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4. Usage Rate - Markets can also be segmented into light, medium, and heavy product
users. Heavy users are often a small percentage of the market but account for a high
percentage of total consumption.

5. Loyalty Status - A market can also be segmented by consumer loyalty. Consumers can
be loyal to brands. Buyers can be divided into groups according to their degree of
loyalty. Some consumers are completely loyal that they buy one brand all the time.
Other consumers are somewhat loyal that they are loyal to two or three brands of a
given product or favor one brand while sometimes buying others. Still other buyers
show no loyalty to any brand that they either want something different each time they
 buy, or they buy whatever's on sale.

KNOWLEDGE SELF-CHECK 5.1

Discuss the four methods of market segmentation.

MARKET TARGETING

Market targeting involves breaking a market into segments and then concentrating
marketing efforts on one or a few key segments. Marketers select target markets using four
different strategies which are undifferentiated targeting, concentrated targeting, multi-
segment targeting and customized marketing.

Undifferentiated Targeting

An undifferentiated targeting strategy assumes that all members of a market have

similar needs that can be met with a single marketing mix. Undifferentiated targeting occurs
when the marketer ignores the apparent segment differences that exist within the market and
uses a marketing strategy that is intended to appeal to as many people as possible.

This strategy can occur by default. Companies which lack a marketing orientation
may practice this strategy because of lack of customer knowledge. It is convenient since a
single product has to be developed.

A company using an undifferentiated targeting strategy essentially adopts a mass market

philosophy. It views the market as one big market with no individual segments. The company
uses one marketing mix for the entire market. The company assumes that individual
customers have similar needs that can be met with a common marketing mix.

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Concentrated Targeting

A concentrated targeting strategy focuses all marketing efforts on a single market

segment. A company may target just one segment with a single marketing mix. It
understands the needs, and motives of the segment's customers and designs a specialized
marketing mix. Several segments may be identified but a company may not serve all of them.
Some may be unattractive or out of line with the company's business strengths.

The strategy is suited for companies with limited resources as these resources may be
too stretched if it competes in many segments. Focused marketing allows R&D expenditure
to be concentrated on meeting needs of one set of customers and managerial activities are
devoted to understanding and catering to their needs.
Multi-segment Targeting

Multi-segment targeting is a strategy that uses two or more marketing mixes to target
two or more market segments. A company following multisegment targeting strategy serves
two or more well defined segments and develops a distinct marketing mix for each one of
them. Separate brands are developed to serve each of the segments.

It is the most sought alter target market strategy because it has the potential to
generate sales volume, higher profits, larger market share and economies of scale in
manufacturing and marketing. But the strategy involves greater product design, production,
promotion, inventory, marketing research and management costs.

Customized Marketing

Customized marketing is tailoring a particular product to the specific needs of an

individual customer. In some markets, the requirements of individual customers are unique
and their purchasing power is sufficient to make designing a separate marketing mix for each
customer a viable option. Many service providers such as advertising, marketing research
firms, architects and solicitors vary their offerings on a customer to customer basis.

They will discuss face to face with each customer their requirements and tailor their
services accordingly. Customized marketing is also found within organizational markets
because of high value of orders and special needs of customers.

KNOWLEDGE SELF-CHECK 5.2

Describe the different types of market targeting.

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MARKET POSITIONING

Market positioning is developing a product and brand image in the minds of

consumers. It can also include improving a customer's perception about the experience they
will have if they choose to purchase a company's product or service. The business can
positively influence the perceptions of its chosen customer base through strategic
promotional activities and by carefully defining the marketing mix.

A company discovers different needs and groups in the marketplace, targets those
needs and groups that it can satisfy in a superior way, and then positions its offering so that
the target market recognizes the company's distinctive offering and image. If a company does
a poor job of positioning, the market will be confused as to what to expect. If a company
does an excellent job of positioning, then it can work out the rest of its marketing planning
and differentiation from its positioning strategy.
 Effective positioning involves a good understanding of competing products and the
benefits that are sought by target market. It also requires the firm to identify a differential
advantage with which it will deliver the required benefits to the market effectively against the
competition. Business should aim to define themselves in the eyes of their customers in
regards to their competition.

In positioning, the marketing department creates an image for the product based on its
intended audience. This is created through the use of promotion, price, place and product.
The more intense a positioning strategy, typically the more effective the marketing strategy is
for a company. The end result of positioning is the successful creation of a market-focused
value proposition, a cogent reason why the target market should buy the product.

There are two approaches in product positioning which are head-to-head positioning
and differentiation positioning. Head-to-head positioning is competing directly with
competitors on similar product attributes in the same target markets. While differentiation
positioning seeks a less competitive smaller market niche in which to position the brand.

Once the company has developed a clear positioning strategy, it must communicate
that positioning effectively through all facets of the marketing mix and every point of contact
with customers. On the other hand, companies risk confusing the target audience if their
marketing tactics run counter to their positioning.

Perceptual Mapping

Perceptual mapping is a technique of attempting to determine through graphing how

different product brands are perceived by consumers when mapped or compared against two
or more product dimensions. Typically, marketers can see how consumers perceive the
position of a product, product line, brand, or company relative to their competition.

59
There are several bases for positioning which a company may use including the
following:

1. Attribute - highlight a product feature or customer benefit; example Tide detergent

powder is positioned on bringing incomparable whiteness

2. Price and quality - stress high price as an indication of quality or emphasize low price
as a signal of value; example premium automobile brands like BMW and Mercedes
maintain their quality such that their customers are ready to give the highest pricing
for the cars

3. Use or application - stress unique use/s; example are mobile phones and telecom
companies with their different offerings

4. Product user - focuses on a personality or type of user; example L'Oreal position itself
targeting fashion-conscious women

5. Product class - associate with a particular category of products; example margarine

 brand with butter

6. Competitor - an explicit or implicit frame of reference of one or more competitors;

example Philippine Daily Inquirer and Manila Bulletin in terms of circulation and
readership

7. Emotion - focuses on how the product makes customer feels; example Nike's "Just Do
It" offers an emotional message of achievement and courage

Start with the Positioning Statement.

A positioning statement is a brief description of the target market as well as a convincing
picture of how the company wants that market to perceive the brand. A positioning statement
is an internal tool. Every product and marketing decision about the brand has to be aligned
with and support the positioning statement. A good positioning statement is a guidepost for
the marketing efforts. It helps maintain focus on the brand and its value proposition while
working on market strategy and tactics.

Here are six keys to keep in mind about a positioning statement:

1. It is simple, memorable, and tailored to the target market.

2. It provides an unmistakable and easily understood picture of the brand that

differentiates it from competitors.

3. It is credible, and the brand can deliver on its promise.

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4. The brand can be the sole occupier of this particular position in the market. The brand
can "own" it.

5. It helps evaluate whether or not marketing decisions are consistent with and
supportive of the brand.

6. It leaves room for growth.

Here's a basic template for writing a positioning statement:

For [insert Target Market], the [insert Brand] is the [insert Point of Differentiation] among all
[insert Frame of Reference] because [insert Reason to Believe].
1. The point of differentiation (POD) describes how your brand or product benefits
customers in ways that set you apart from your competitors.

2. The frame of reference (FOR) is the segment or category in which your company
competes.

3. The reason to believe is just what it says. This is a statement providing compelling
evidence and reasons why customers in your target market can have confidence in
 your differentiation claims.

The point of differentiation, frame of reference, and reason to believe must be

meaningful, important, and convincing to customers, not just to the company.

Examples of Great Positioning Statements

The following positioning statement was used by Amazon.com in 2001, when it sold
books almost exclusively:

For World Wide Web users who enjoy books, Amazon.com is a retail bookseller that
provides instant access to over 1.1 million books. Unlike traditional, book retailers,
Amazon.com provides a combination of extraordinary convenience, low prices, and
comprehensive selection.

KNOWLEDGE SELF-CHECK 5.3

Adopt and local store and prepare your own positioning statement for them.

SEGMENTING BUSINESS MARKETS

Business markets can be segmented in a variety of ways depending on the marketer's
overall objectives and product and service offerings. The more specifically and precisely the
market can be segmented, the greater the odds that the marketer will be able to connect with
the audience and compel desired action. Here are some of the bases of segmenting business
markets:

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1. Geographical location - Companies situated in same region most probably have
similar environment or culture as well as they speak similar languages. People living
in different places will have different resources and culture. Moreover, the growth
rate may differ in different regions also

2. Company size (small, medium, large) - There can be segments on the basis of the
company size as it can be prominently noticed that the companies that are larger in
size have different goals as compared to the companies that are small. Large
organizations need more volume of product as the consumption pattern of the large
organizations is different from the small -ones.

3. Usage Rate (non-user, light user, moderate user, and heavy user) - In business¬to
business market there can be segment based on the consumption of the product. The
companies that give continuous order for the product can be grouped as the frequent
buyers who are actually the regular customers. There can be a segment of potential
customers so that they can be targeted in a way that they get attracted towards that
product and order it. Similarly there can be light users and moderate users as well.

4. End user Application - The product that are used in the formation of another product
without undergoing any further processing.

5. Type of buying situation (straight re-buy, modified re-buy, and new task) - There can
 be segments on the basis of buying situation as in straight re-buy it is a routine
purchase order, in modified re-buy there a need of some research when the buyer
wants some changes in size, color or price and in new task there is a lot of research
required to come up with a new product.

KNOWLEDGE SELF-CHECK 5.4

Discuss the business segmentation process.

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A PP L IC A T IO N 11
Direction: Read the article below and answer the following questions under it.

What Obama Can Teach You About Millennial Marketing

By Peter Feld. Published on August 11, 2008

Source: http:Iladage.comlarticlelnewslobama-teach-millennial-marketing11302541

Baby boomers and Gen Xers declared mass marketing dead long ago. We live in a
world of fragmented media surrounded by cynical consumers who can spot and block an
ad message from a mile away. But what Gen Xers and boomers may not realize is that the
unabashed embrace of select brands by millennials, from technology to beverages to
fashion, has made this decade a true golden era of marketing for those who know what
they're doing. And when it comes to marketing, the Barack Obama campaign knows what
it's doing.
Mr. Obama's brand management, unprecedented in presidential politics, shows
pitch-perfect understanding of the keys to appealing to the youngest voters. Perhaps
inevitably, among the first apps introduced for Apple's new iPhone, the latest success
from another millennial mass marketer was an Obama "Countdown to Change" calendar
that ticks off the seconds until Election Day.
So what's the appeal to the under-30 set? True, the youth vote traditionally skews
Democratic, but the difference this year is that Mr. Obama has actually motivated
turnout. His success, it seems, is a result of both product and the branding behind it. The
qualities he projects -a cool, smooth aura, the communal values of hope and unity, his
teeming crowds and his campaign's seamless graphics-are the essence of appealing to
millennials.
"Millennials want someone smart, funny and with a slight edge," observes Allison
Mooney, who tracks youth trends for Fleishman-Hillard's Next Great Thing. Mr. Obama's
occasional prickly moments, as when he dismissed Mr. McCain's recent ad comparing
him to Paris Hilton -- "Is this the best you can do?" -shows them he gets it. "Obama's
kind of mellow. He doesn't have polarizing views."
On-message
Neil Howe agrees. Mr. Howe -- co-author with the late William Strauss of "Generations"
(1991) and "Millennials Rising" (2001), which christened the generation -- said that Mr. Obama
"has a certain coolness, detachment and a slight formality. He never loses his temper."

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Then there's the messaging. Mr. Obama sticks very well to his script, said Mr. Howe. And
that hasn't gone unnoticed in most quarters. Wrote Newsweek's Andrew Romano, "Obama is the
first presidential candidate to be marketed like a high-end consumer brand." His rising-sun logo
echoes the one-world iconography of Pepsi, AT&T and Apple.

Design guru Michael Bierut told Romano that the stand-alone logo, consistent use of the
Gotham typeface ("very American ... conversational and pleasant") and his online look and
feel make Mr. Obama the first candidate with a "coherent, top-tobottom, 360-degree system at
work. ... There's an absolute level of control that I have trouble achieving with my corporate
clients." Mr. Obama's packaging might discomfit older generations, who may think of themselves
as immune to mass marketing. But it is "no problem" for millennials, whom Mr. Howe sees as
averse to chaos and unpredictability (a trouble spot for both the Hillary Clinton and John
McCain campaigns), and are "very comfortable with a very smooth brand that has minimal
turmoil."
Questions:
1. Do you think the success of President Obama's in the election is due mainly on how he
was marketed like a high-end consumer brand? Defend your answer.

2. For the Presidential election 2016 in the Philippines, choose a candidate and create a
package campaign for him/her just like a consumer brand.
References:
Serrano, AC. (2016). Principles of Marketing
https://www.youtube.com/watch?v=iGOw39GWDaI&fbclid=IwAR0SCW5hy2R7AOjK
f6ZxJFyFgv6vWYZzSRCMQd_HK9HSEM-0sfF8V2mUMc
https://saylordotorg.github.io/text_principles-of-marketing-v2.0/s06-consumer-behavior
how-people-m.html

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