Marketing Slide

Pricing Strategies:
Additional Considerations
Chapter 11
New Product Pricing Strategies
Market- Market-
skimming penetration
pricing Pricing
New Product Pricing Strategies
Market-skimming pricing strategy sets high initial prices to “skim” revenue
layers from the market.
Market-skimming pricing (price skimming) Setting a high price for a new
product to skim maximum revenues layer by layer from the segments
willing to pay the high price; the company makes fewer but more
profitable sales.
With each new generation of Apple iPhone, iPad, or Mac computer, new
models start at a high price then work their way down as newer models
are introduced. In this way, Apple skims the maximum amount of revenue
from the various segments of the market. For example, through smart
premium pricing, Apple vacuums up as much as 92 percent of all
smartphone profits
Market-skimming pricing
• Market skimming makes sense only under certain conditions.
• First, the product’s quality and image must support its higher
price, and enough buyers must want the product at that price.
• Second, the costs of producing a smaller volume cannot be so
high that they cancel the advantage of charging more.
• Finally, competitors should not be able to enter the market
easily and undercut the high price
What is Price
Skimming?
Market-penetration pricing
• Market-penetration pricing Setting a low price for a new
product in order to attract a large number of buyers and a large
market share.
• Companies set a low initial price to penetrate the market
quickly and deeply—to attract a large number of buyers quickly
and win a large market share. The high sales volume results in
falling costs, allowing companies to cut their prices even
further.
Market-penetration pricing
• Several conditions must be met for this low-price strategy to
work.
• First, the market must be highly price sensitive so that a low
price produces more market growth.
• Second, production and distribution costs must decrease as
sales volume increases.
• Finally, the low price must help keep out the competition, and
the penetration price must maintain its low-price position.
Otherwise, the price advantage may be only temporary.
Penetration Price
Penetration Pricing
A Brief History of Netflix Price Hikes
Product Mix Pricing Strategies
• The strategy for setting a product’s price often has to be changed

when the product is part of a product mix. In this case, the firm looks
for a set of prices that maximizes its profits on the total product mix.
Pricing is difficult because the various products have related demand
and costs and face different degrees of competition
Product mix
• Product mix, also known as product assortment or product
portfolio, refers to the complete set of products and/or
services offered by a firm. A product mix consists of product
lines, which are associated items that consumers tend to use
together or think of as similar products or services.
A product line
• A product line is a group of related products all marketed under a single
brand name that is sold by the same company. Companies sell
multiple product lines under their various brand names, seeking to
distinguish them from each other for better usability for consumers.
• #1 Width
• Width, also known as breadth, refers to the number of product
lines offered by a company. For example, Kellogg’s product lines
consist of: (1) Ready-to-eat cereal, (2) Pastries and breakfast
snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural
goods.
• #2 Length
• Length refers to the total number of products in a firm’s product
mix. For example, consider a car company with two car product
lines (3-series and 5-series). Within each product line series are
three types of cars. In this example, the product length of the
company would be six.
• #3 Depth
• Depth refers to the number of variations within a product line.
For example, continuing with the car company example above, a
3-series product line may offer several variations such as coupe,
sedan, truck, and convertible. In such a case, the depth of the 3-
series product line would be four.
Product Mix Width
Nestle
Product Mix Pricing Strategies
Optional Captive
Product line
product product
pricing
pricing pricing
By-product Product
pricing bundle pricing
Copyright © 2016 Pearson Education, Inc. 11-10

Product line pricing
• Setting the price steps between various products in a product line based
on cost differences between the products, customer evaluations of
different features, and competitors’ prices.
• Companies usually develop product lines rather than single products. In
product line pricing, management must determine the price steps to set
between the various products in a line. The price steps should take into
account cost differences between products in the line. More important,
they should account for differences in customer perceptions of the value
of different features
Optional product pricing
• Many companies use optional-product pricing—pricing optional or
accessory products along with the main product.
• For example, a car buyer may choose to order a navigation system and
premium entertainment system.
• Refrigerators come with optional ice makers.
• And when you order a new laptop, you can select from a bewildering
array of processors, hard drives, docking systems, software options, and
service plans.
• Pricing these options is a sticky problem.
• Companies must decide which items to include in the base price and
which to offer as options.
Captive product pricing
• Setting a price for products that must be used along with a main product,
such as blades for a razor.
• In the case of services, captive-product pricing is called two-part pricing.
The price of the service is broken into a fixed fee plus a variable usage
rate.
• Captive products can account for a substantial portion of a brand’s sales
and profits.
• However, companies that use captive-product pricing must be careful.
Finding the right balance between the main-product and captive product
prices can be tricky. Even more, consumers trapped into buying expensive
captive products may come to resent the brand that ensnared them
By-product pricing
• Setting a price for by-products to help offset the costs of disposing of
them and help make the main product’s price more competitive.
• Producing products and services often generates by-products. If the by-
products have no value and if getting rid of them is costly, this will affect
the pricing of the main product. Using by-product pricing, the company
seeks a market for these by-products to help offset the costs of disposing
of them and help make the price of the main product more competitive
Life cycle of Tomato by products
Product bundle pricing
• Combining several products and offering the bundle at a
reduced price.
• Using product bundle pricing, sellers often combine several
products and offer the bundle at a reduced price. For example,
fast-food restaurants bundle a burger, fries, and a soft drink at
a “combo” price. Microsoft Office is sold as a bundle of
computer software, including Word, Excel, PowerPoint, and
Outlook
Principles of Marketing
Kotler and Armstrong
Chapter 14:
Engaging Customers
and Communicating
Customer Value
Integrated Marketing
Communications Strategy

The Promotion Mix
The promotion mix is the specific blend of promotion tools that

the company uses to persuasively communicate customer
value and build customer relationships.

The 5
Promotional
Mix Elements
The Promotion Mix
Advertising is any paid form of nonpersonal presentation and
promotion of ideas, goods, or services by an identified
sponsor.
• Broadcast
• Print
• Online
• Mobile
• Outdoor

The Promotion Mix
Sales promotion is a short-term incentive to encourage the

purchase or sale of a product or service.
• Discounts
• Coupons
• Displays
• Demonstrations

The Promotion Mix
Personal selling is the personal interaction by the firm’s sales

force for the purpose of engaging customers, making sales,
and building customer relationships.

The Promotion Mix
Public relations involves building good relations with the

company’s various publics by obtaining favorable publicity,
building up a good corporate image, and handling or heading
off unfavorable rumors, stories, and events.

The Promotion Mix
Direct and digital marketing involves engaging directly with

carefully targeted individual consumers and customer
communities to both obtain an immediate response and build
lasting customer relationships.

Integrated Marketing Communications
The Need for Integrated Marketing Communications
Integrated marketing communications (IMC) involves carefully

integrating and coordinating the company’s many communications
channels to deliver a clear, consistent, and compelling message
about the organization and its products.

Integrated Marketing Communications
FIGURE | 14.1 Carefully blended mix of promotion tools

Integrated Marketing
Communications

Six buyer-readiness stages
The marketing communicator needs to know where the target
audience now stands and to what stage it needs to be moved.
The target audience may be in any of six buyer-readiness
stages, the stages consumers normally pass through on their
way to making a purchase. These stages are awareness,
knowledge, liking, preference, conviction, and purchase
Steps in Developing Effective Marketing Communication
Determining the Communication Objectives
FIGURE | 14.3
Buyer-Readiness Stages

Awareness and knowledge
• The marketing communicator’s target market may be totally unaware

of the product, know only its name, or know only a few things about
it. Thus, the marketer must first build awareness and knowledge.
• For example, General Mills recently announced that it was removing artificial
flavors and colors from its popular BigG cereals—such as Trix, Cocoa Puffs, Cap’n
Crunch, and Golden Grahams. To make consumers aware of these and other
changes, General Mills launched a major “Love Cereal Again” campaign
Liking-preference-Conviction
• Assuming that target consumers know about a product, how do they

feel about it? Almost all American consumers know about Trix, Cocoa
Puffs, and other BigG cereals. These brands have been around since
the late 1950s.
• General Mills wants to move buyers through successively stronger
stages of feelings toward the revamped cereals.
• These stages include liking (feeling favorable about BigG cereals),
preference (preferring the BigG cereals to competing brands), and
conviction (believing that BigG cereals are the best cereals for them).
Purchase
• Finally, some members of the target market might be convinced

about the product but not quite get around to making the purchase.
The communicator must lead these consumers to take the final step
Setting the Total Promotion Budget and Mix
Setting the Total Promotion Budget
• The affordable method sets the promotion budget at the level

management thinks the company can afford.
• The percentage-of-sales method sets the promotion budget

at a certain percentage of current or forecasted sales or as a
percentage of the unit sales price.

Setting the Total Promotion Budget and Mix
Setting the Total Promotion Budget
• The competitive-parity method sets the promotion budget to

match competitors’ outlays.
• The objective-and-task method develops the promotion

budget by specific promotion objectives and the costs of tasks
needed to achieve these objectives.

Shaping the Overall Promotion Mix
The Nature of Each Promotion Tool
Advertising can reach masses of geographically dispersed buyers
at a low cost per exposure, and it enables the seller to repeat
a message many times.
Personal selling is the most effective method at certain stages of

the buying process, particularly in building buyers’
preferences, convictions, actions, and developing customer
relationships.

The Nature of Each Promotion Tool
Sales promotion includes coupons, contests, cents-off deals, and
premiums that attract consumer attention and offer strong
incentives to purchase.
Public relations is a very believable form of promotion that includes

news stories, features, sponsorships, and events.
Direct and digital marketing is an immediate, customized, and

interactive promotional tool that includes direct mail, catalogs,
telephone marketing, online, mobile, and social media.
Promotion Mix Strategies
PULL PUSH
Pull strategy
• Using a pull strategy, the producer directs its marketing activities
(primarily advertising, consumer promotion, and direct and digital
media) toward final consumers to induce them to buy the product.
For example, Unilever promotes its Axe grooming products directly to
its young male target market using TV and print ads, web and social
media brand sites, and other channels. If the pull strategy is effective,
consumers will then demand the brand from retailers
A push Strategy
• A push strategy involves “pushing” the product through marketing
channels to final consumers. The producer directs its marketing
activities (primarily personal selling and trade promotion) toward
channel members to induce them to carry the product and promote it
to final consumers.
Promotion Mix Strategies
Push Strategy
Pull Strategy

Automated garden Hose
Chapter One
Creating and Capturing Customer

Value
Copyright © 2009 Pearson Education, Inc. Chapter 1- slide 1

Publishing as Prentice Hall
Creating and Capturing Customer Value
Topic Outline
• Define marketing and outline the steps in the
marketing process
• Understanding the Marketplace and Customer
Needs
• Designing a Customer-Driven Marketing Strategy
• Preparing an Integrated Marketing Plan and
Program
• Building Customer Relationships
• Capturing Value from Customers
• The Changing Marketing Landscape
Copyright © 2010 Pearson Education, Inc.

Chapter 1- slide 63
What Is Marketing?
Marketing is a process by which

companies create value for customers
and build strong customer relationships
to capture value from customers in
return.
COMMUNI DELIVERING
CREATING CATING VALUE

Chapter 1- slide 64
Customer Perceived Value
Understanding the Marketplace and
Customer Needs
• Core Concepts
• Customer needs, wants, and demands
• Market offerings
• Customer Value and satisfaction
• Exchanges and relationships
• Markets
Chapter 1- slide 66
Understanding the Marketplace and Customer Needs
Customer Needs, Wants, and Demands
• States of deprivation
• Physical—food, clothing, warmth, safety
Needs • Social—belonging and affection
• Individual—knowledge and self-expression
Wants • Form that human needs take as they are shaped by

culture and individual personality
Demands • Human wants backed by buying power

Chapter 1- slide 67
Need
Want
Demand
Maslow’s
Hierarchy of
Needs
• Market offerings are some

combination of products, services,
information, or experiences offered to a
market to satisfy a need or want
• Marketing myopia is focusing only on
existing wants and losing sight of
underlying consumer needs

Chapter 1- slide 70
• Marketing myopia is the failure & narrow-minded
approach of marketing management of a company;
which only focuses on certain attributes of the
product or service while completely ignoring the
long terms goals such as product quality, customers
need, demand and satisfaction.
• Examples Of Marketing Myopia
• Kodak lost much of its share to Sony cameras when
digital cameras boomed and Kodak didn't plan for it.
• Nokia losing its marketing share to android and IOS.
• Hollywood didn't even tap the television market as it
was focused just on movies.
Customer Value and Satisfaction
Expectations
Customers
• Value and
satisfaction
Marketers
• Set the right level of
expectations
• Not too high or low
Chapter 1- slide 73
Exchange is the act of obtaining a

desired object from someone by offering
something in return
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Markets are the set of actual and

potential buyers of a product or service

Designing a Customer-Driven Marketing Strategy
Marketing management is the art and

science of choosing target markets and
building profitable relationships with
them
– What customers will we serve?
– How can we best serve these customers?

Chapter 1- slide 76
Selecting Customers to Serve
Market segmentation refers to dividing

the markets into segments of customers
Target marketing refers to which
segments to go after

Chapter 1- slide 77
Selecting Customers to Serve
Demarketing is marketing to reduce

demand temporarily or permanently; the
aim is not to destroy demand but to
reduce or shift it

Chapter 1- slide 78
Choosing a Value Proposition
• The value proposition is the set of

benefits or values a company promises
to deliver to customers to satisfy their
needs

Chapter 1- slide 80
Marketing Management Orientations
Production Product Selling Marketing Societal

concept concept concept concept concept

Chapter 1- slide 81
Production concept is the idea that

consumers will favor products that are
available or highly affordable

Chapter 1- slide 82

Product concept is the idea that
consumers will favor products that offer
the most quality, performance, and
features. Organizations should
therefore devote its energy to making
continuous product improvements.

Chapter 1- slide 84
Selling concept is the idea that

consumers will not buy enough of the
firm’s products unless it undertakes a
large scale selling and promotion effort

Chapter 1- slide 86
Marketing concept is the idea that

achieving organizational goals depends
on knowing the needs and wants of the
target markets and delivering the
desired satisfactions better than
competitors do

Chapter 1- slide 88
The Marketing Concept
The Selling Concept

Societal marketing concept is the idea

that a company should make good
marketing decisions by considering
consumers’ wants, the company’s
requirements, consumers’ long-term
interests, and society’s long-run
interests

Chapter 1- slide 91
Societal
Marketing
Concept
Social marketing
• Social marketing is marketing designed

to create social change, not to directly
benefit a brand. Using
traditional marketing techniques, it raises
awareness of a given problem or cause,
and aims to convince an audience to
change their behaviors.
•
Preparing an Integrated Marketing Plan and Program
• The marketing mix is the set of tools

(four Ps) the firm uses to implement its
marketing strategy. It includes product,
price, promotion, and place.
• Integrated marketing program is a
comprehensive plan that communicates
and delivers the intended value to
chosen customers.
Chapter 1- slide 97
The Marketing Mix
Kotler Marketing
• https://www.youtube.com/watch?v=bilOOPuAv
TY
Building Customer Relationships
Customer Relationship Management
(CRM)
• The overall process of building and

maintaining profitable customer
relationships by delivering superior
customer value and satisfaction

Chapter 1- slide 100
Relationship Building Blocks: Customer
Value and Satisfaction
Customer Customer
perceived value satisfaction
• The difference • The extent to
between total which a
customer value product’s
and total perceived
customer cost performance
matches a
buyer’s
expectations

Customer Relationship Levels and Tools
Basic
Relationships
Full
Partnerships
The Changing Nature of Customer
Relationships
• Relating with more carefully selected
customers uses selective relationship
management to target fewer, more
profitable customers
• Relating more deeply and interactively by
incorporating more interactive two way
relationships through blogs, Websites,
online communities and social networks
Partner relationship management

involves working closely with partners in
other company departments and
outside the company to jointly bring
greater value to customers

Partner Relationship Management
• Partners inside the company is every
function area interacting with customers
– Electronically
– Cross-functional teams
• Partners outside the company is how
marketers connect with their suppliers,
channel partners, and competitors by
developing partnerships
Partner Relationship Management
• Supply chain is a channel that stretches

from raw materials to components to
final products to final buyers
• Supply management
• Strategic partners
• Strategic alliances

Capturing Value from Customers
Creating Customer Loyalty and
Retention
• Customer lifetime value is the value of

the entire stream of purchases that the
customer would make over a lifetime of
patronage

Lifetime
Value
Customer
Lifetime Value
Customer 10000/1200=8.33
Acquisition Cost
Clients 800
Avg Order/per 1.5 CLTV=1200*25*6

0%*5=90000/800
=112.5
Transaction 800*1.5=1200
Avg Order value 25
Profit margin 60%
Churn Rate 20%
Time 1/20%=5 month

Growing Share of Customer
Share of customer is the portion of the

customer’s purchasing that a company
gets in its product categories
Share of Wallet

Customer equity is the total combined

customer lifetime values of all of the
company’s customers
Customer
Equity

Building Customer Equity
• Building the right relationships with the
right customers involves treating
customers as assets that need to be
managed and maximized
• Different types of customers require
different relationship management
strategies
– Build the right relationship with the right
customers

The New Marketing Landscape
Major Developments
Rapid
Digital age globalization
Ethics and
Not-for-profit
social
marketing
responsibility

Chapter
Two
Company and Marketing Strategy
Partnering to Build Customer
Relationships
Company and Marketing Strategy
Topic Outline
• Companywide Strategic Planning:

Defining Marketing’s Role
• Designing the Business Portfolio
• Planning Marketing: Partnering to Build
Customer Relationships
• Marketing Strategy and the Marketing Mix
• Managing the Marketing Effort
Companywide Strategic Planning
Strategic Planning
Strategic planning is the process of

developing and maintaining a strategic
fit between the organization’s goals and
capabilities and its changing marketing
opportunities

Defining a Market-Oriented Mission
• The mission statement is the

organization’s purpose, what it wants to
accomplish in the larger environment
• Market-oriented mission statement
defines the business in terms of
satisfying basic customer needs

Setting Company Objectives and Goals
Business Marketing
Objectives Objectives

Assignment
• Write down 10 Organization’s

• Vision
• Mission
• Core values
• Do it with a group of 10 students
Designing the Business Portfolio
The business portfolio is the collection

of businesses and products that make
up the company
Portfolio analysis is a major activity in
strategic planning whereby
management evaluates the products
and businesses that make up the
company
Analyzing the Current Business Portfolio
Strategic business unit (SBU) is a unit
of the company that has a separate
mission and objectives that can be
planned separately from other company
businesses
• Company division
• Product line within a division
• Single product or brand
Analyzing the Current Business Portfolio

Market & Growth Potential
Market Size Growth Rate Example

Market Share
Formula
BCG Matrix/ Growth Share Matrix
Problems with Matrix Approaches
• Difficulty in defining SBUs and

measuring market share and growth
• Time consuming
• Expensive
• Focus on current businesses, not future
planning

Developing Strategies for Growth and Downsizing
Product/market expansion grid is a tool for

identifying company growth opportunities through
market penetration, market development, product
development, or diversification

Developing Strategies for Growth and Downsizing
Product/Market Expansion Grid Strategies

Developing Strategies
for Growth and Downsizing
Market penetration is a growth strategy

increasing sales to current market
segments without changing the product
Market development is a growth strategy
that identifies and develops new market
segments for current products

Product development is a growth
strategy that offers new or modified
products to existing market segments
Diversification is a growth strategy for
starting up or acquiring businesses
outside the company’s current products
and markets
Downsizing is the reduction of the

business portfolio by eliminating
products or business units that are not
profitable or that no longer fit the
company’s overall strategy

Planning Marketing
Relationships
Value chain is a series of departments

that carry out value-creating activities to
design, produce, market, deliver, and
support a firm’s products

Planning Marketing
Relationships
Value delivery network is made up of

the company, suppliers, distributors,
and, ultimately, customers who partner
with each other to improve performance
of the entire system

Marketing Strategy and the Marketing
Mix
Marketing Strategy and the Marketing Mix
Customer-Driven Marketing Strategy
Market segmentation is the division of a
market into distinct groups of buyers who
have distinct needs, characteristics, or
behavior, and who might require separate
products or marketing mixes
Market segment is a group of consumers who
respond in a similar way to a given set of
marketing efforts
Customer-Centered Marketing Strategy
Market targeting is the process of

evaluating each market segment’s
attractiveness and selecting one or
more segments to enter

Customer-Centered Marketing Strategy
Market positioning is the arranging for a

product to occupy a clear, distinctive,
and desirable place relative to
competing products in the minds of the
target consumer

Customer-Centered
Marketing Strategy
• Differentiation is the process of distinguishing a
product or service from others, to make it more
attractive to a particular target market. This
involves differentiating it from competitors'
products as well as a firm's own products.
Developing an Integrated Marketing Mix
• Marketing mix is the set of controllable tactical

marketing tools—product, price, place, and
promotion—that the firm blends to produce the
response it wants in the target market

The Marketing Mix
Product
• Anything that can be offered to a market for

attention, acquisition, use or consumption that
might satisfy a want or need. It includes physical
objects, services, persons, places, organizations
and ideas”
Price
• Price is the amount of money that your
customers have to pay in exchange for your
product or service. ... Your pricing strategy should
reflect your product's positioning in
the market and the resulting price should cover
the cost per item and the profit margin
Place
• The process of moving products from the producer
to the intended user is called place. In other words,
it is how your product is bought and where it is
bought. This movement could be through a
combination of intermediaries such as distributors,
wholesalers and retailers.
Promotion
• In marketing, promotion refers to any type of
marketing communication used to inform or
persuade target audiences of the relative merits of
a product, service, brand or issue. The aim of
promotion is to increase awareness, create interest,
generate sales or create brand loyalty
Mix
SWOT Analysis
Marketing tricks
• https://www.youtube.com/watch?v=CvdoCtRTzZ
U
Managing the Marketing Effort
Market Planning—Parts of a Marketing Plan

• Marketing Implementation
• Implementing is the process that turns marketing plans

into marketing actions to accomplish strategic
marketing objectives
• Successful implementation depends on how well the

company blends its people, organizational structure,
decision and reward system, and company culture
into a cohesive action plan that supports its
strategies
Marketing Control
• Controlling is the measurement and

evaluation of results and the taking of
corrective action as needed
• Operating control
• Strategic control

Measuring and Managing Return
on Marketing Investment
• Return on Marketing Investment

(Marketing ROI)
• Return on marketing investment (marketing ROI) is the net
return from a marketing investment divided by the costs
of the marketing investment. Marketing ROI provides a
measurement of the profits generated by investments in
marketing activities.

Mix
Chapter Three
Analyzing the Marketing

Environment

Analyzing the Marketing
Environment
Topic Outline
• The Company’s Microenvironment

• The Company’s Macroenvironemnt
• Responding to the Marketing
Environment

The Marketing Environment
The marketing environment includes

the actors and forces outside marketing
that affect marketing management’s
ability to build and maintain successful
relationships with target customers

The Marketing Environment
• Microenvironment consists of the actors

close to the company that affect its
ability to serve its customers -- the
company, suppliers, marketing
intermediaries, customer markets,
competitors, and publics

The Company’s
Microenvironment
Actors in Microenvironment
The Company’s Microenvironment
The Company
• Top management
• Finance
• R&D
• Purchasing
• Operations
• Accounting

Suppliers
• Provide the resources to produce goods
and services
• Treated as partners to provide customer
value

• Honda requires that strategic suppliers open up
their books and give Honda full access to their
financial information. This helps Honda
purchasing associates, Honda engineers, and
supplier engineers to work as a team to achieve
target costs and quality standards
Marketing Intermediaries
• Help the company to promote, sell

and distribute its products to final
buyers

Types of Marketing Intermediaries
Physical
Resellers distribution
firms
Marketing
services Financial
agencies intermediaries

• Resellers are distribution channel firms that help
the company find customers or make sales to
them. These include wholesalers and retailers
that buy and resell merchandise
• Physical distribution firms help the company
stock and move goods from their points of origin
to their destinations
• . Marketing services agencies are the marketing
research firms, advertising agencies, media firms,
and marketing consulting firms that help the
company target and promote its products to the
right markets
• . Financial intermediaries include banks, credit
companies, insurance companies, and other
businesses that help finance transactions or
insure against the risks associated with the
buying and selling of goods
• For example, when Coca-Cola signs on as the
exclusive beverage provider for a fast-food chain,
such as McDonald’s.
• Partnering with intermediaries: Coca-Cola

provides its retail partners with much more
than just soft drinks. It also pledges powerful
marketing support.
Competitors
• Firms must gain strategic advantage by

positioning their offerings against
competitors’ offerings

Publics
• Any group that has an actual or potential
interest in or impact on an organization’s
ability to achieve its objectives
– Financial publics
– Media publics
– Government publics
– Citizen-action publics
– Local publics
– General public
– Internal publics

• Financial publics. This group influences the company’s
ability to obtain funds. Banks, investment analysts, and
stockholders are the major financial publics.
• • Media publics. This group carries news, features,
editorial opinions, and other content. It includes
television stations, newspapers, magazines, and blogs
and other social media.
• • Government publics. Management must take
government developments into account. Marketers must
often consult the company’s lawyers on issues of product
safety, truth in advertising, and other matters.
• • Citizen-action publics. A company’s marketing decisions
may be questioned by consumer organizations,
environmental groups, minority groups, and others. Its
public relations department can help it stay in touch with
consumer and citizen groups.
• • Internal publics. This group includes workers, managers,
volunteers, and the board of directors. Large companies
use newsletters and other means to inform and motivate
their internal publics. When employees feel good about
the companies they work for, this positive attitude spills
over to the external publics.
•
• • General public. A company needs to be concerned
about the general public’s attitude toward its products
and activities. The public’s image of the company affects
its buying behavior.
• • Local publics. This group includes local community
residents and organizations. Large companies usually
work to become responsible members of the local
communities in which they operate
Macro Environment of Marketing
• Macro environment factors which consist of external

forces. These external factors influence the company’s
marketing strategy is a great length.
• The external environment factors are uncontrollable and
the company finds it hard to tackle the external factors.
• Elements of macro-environment of marketing are;
• Demographic factors.
• Economic factors.
• Natural forces.
• Technology factors.
• Political factors.
• Cultural factors
Macroenvironment of
Marketing
The Company’s Macroenvironment
Demographic Environment
Demography is the study of human populations

in terms of size, density, location, age, gender,
race, occupation, and other statistics
• Demographic environment is important
because it involves people, and people make
up markets
• Demographic trends include age, family
structure, geographic population shifts,
educational characteristics, and population
diversity
• Changing age structure of the

population
– Baby boomers include people born
between 1946 and 1964 (Post
World War 2)
– Most affluent Americans
– https://www.youtube.com/watch?v=-
sbf12-koKM Nike ad
• Generation X includes people born

between 1965 and 1976
– High parental divorce rates
– Cautious economic outlook
– Less materialistic
– Family comes first
– Lag behind on retirement savings

• Millennials (gen Y or echo boomers)
include those born between 1977 and
2000
– Comfortable with technology
– Includes:
• Tweens (ages 8–12)
• Teens (13–19)
• Young adults (20’s)

Generational marketing is important in

segmenting people by lifestyle of life state
instead of age

More people are: (USA Perspective)
• Divorcing or separating
• Choosing not to marry
• Choosing to marrying later
• Marrying without intending to have children
• Increased number of working women
• Stay-at-home dads

(Geographic shift)
• Growth in United States West and
South and decline in Midwest and
Northeast
• Moving from rural to metropolitan areas
• Changes in where people work
– Telecommuting
– Home office
– Divorcing
or asseparating
Publishing Prentice Hall
• Changes in the workforce

– More educated
– More white collar

Increased Diversity
Markets are becoming more diverse
– International
– National
• Includes:
– Ethnicity
– Gay and lesbian
– Disabled

Economic Environment
Economic environment consists of

factors that affect consumer purchasing
power and spending patterns
• Industrial economies are richer markets
• Subsistence economies consume most
of their own agriculture and industrial
output
Economic Environment
• Changes in income
• Value marketing involves ways to offer
financially cautious buyers greater
value—the right combination of quality
and service at a fair price

Economic Environment Changes in Consumer Spending Patterns
• Ernst Engel—Engel’s Law

• As income rises:
– The percentage spent on food declines
– The percentage spent on housing remains
constant
– The percentage spent on savings
increases
Natural Environment
Natural environment involves the natural
resources that are needed as inputs by
marketers or that are affected by
marketing activities
• Trends
– Shortages of raw materials
– Increased pollution
– Increase government intervention
– Environmentally sustainable
Copyright © 2010 Pearson Education,strategies
Inc.
Technological Environment
• Most dramatic force in changing the

marketplace
• Creates new products and opportunities
• Safety of new product always a concern

Political Environment
Political environment consists of laws,

government agencies, and pressure
groups that influence or limit various
organizations and individuals in a given
society

• Political Environment
• Legislation regulating business

• Increased legislation
• Changing government agency enforcement
• Increased emphasis on ethics
• Socially responsible behavior
• Cause-related marketing

Cultural Environment
Cultural environment consists of

institutions and other forces that affect a
society’s basic values, perceptions, and
behaviors

Cultural Environment Persistence of
Cultural Values
Core beliefs and values are persistent and are passed

on from parents to children and are reinforced by
schools, churches, businesses, and government
Secondary beliefs and values are more open to
change and include people’s views of themselves,
others, organizations, society, nature, and the
universe.
Chapter 3- slide 28
Responding to the Marketing Environment
Views on Responding
Uncontrollable Proactive Reactive
• React and • Aggressive • Watching

adapt to actions to and reacting
forces in the affect forces to forces in
environment in the the
environment environment

Chapter Five
Consumer Markets and Consumer

Buyer Behavior

Consumer Markets and Consumer Buyer Behavior
Topic Outline
• Model of Consumer Behavior
• Characteristics Affecting Consumer
Behavior
• Types of Buying Decision Behavior
• The Buyer Decision Process
• The Buyer Decision Process for New
Products
Model of Consumer Behavior
• Consumer buyer behavior refers to the
buying behavior of final consumers—
individuals and households who buy
goods and services for personal
consumption
• Consumer market refers to all of the

personal consumption of final
consumers
Figure 5.1 Model of Buyer Behavior
Characteristics Affecting
Consumer Behavior
Culture is the learned values,

perceptions, wants, and behavior from
family and other important institutions

Characteristics Affecting Consumer Behavior
• Subculture are groups of people within

a culture with shared value systems
based on common life experiences and
situations
– Hispanic
– African American
– Asian
– Mature consumers
Social classes are society’s relatively

permanent and ordered divisions whose
members share similar values,
interests, and behaviors
• Measured by a combination of
occupation, income, education, wealth,
and other variables

Groups and Social Networks
Membership Aspirational Reference

Groups Groups Groups
• Groups with • Groups an • Groups that
direct individual form a
influence wishes to comparison
and to belong to or reference
which a in forming
person attitudes or
belongs behavior
• Word-of-mouth influence and buzz
marketing
– Opinion leaders are people within a
reference group who exert social influence
on others
– Also called influentials or leading adopters
– Marketers identify them to use as brand
ambassadors

WOM vs Buzz vs Viral
Buzz
Viral Marketing Marketing
Enduring WOM
• Online social networks are online
communities where people socialize or
exchange information and opinions
• Include blogs, social networking sites

(facebook), virtual worlds (second life)

• Social Factors
• Family is the most important consumer- buying
organization in society
• Social roles and status are the groups, family,

clubs, and organizations that a person belongs to
that can define role and social status

Personal Factors
• Age and life-cycle stage
• RBC Royal Band stages
– Youth—younger than 18
– Getting started—18-35
– Builders—35-50
– Accumulators—50–60
– Preservers—over 60

Personal Factors
Occupation affects the goods and

services bought by consumers
Economic situation includes trends in:
Personal Interest
Savings
income rates

Personal Factors
Lifestyle is a person’s pattern of living as
expressed in his or her psychographics
• Measures a consumer’s AIOs (activities,

interests, opinions) to capture
information about a person’s pattern of
acting and interacting in the
environment
AIO
• Activities, Interests, and Opinions (AIO) are a person's
characteristics used by market researchers to construct
the individual's psychographic profile in their research.
Activities
• Activities focus on someone's daily routine and

hobbies. A person who rides their bicycle to
work and plays sports on the weekends likely
has different purchasing patterns than an
employee who drives a car to work and watches
a lot of movies. Club memberships,
entertainment choices, vacations, and social
events can give marketers clues about a
consumer's activities.
Interests
• A person's interests reveal concepts and ideals

that drive their passions. A mother of three may
list family, cooking, crafts, and toys as interests
on a survey. Interests may also include hobbies,
affiliations, and pastimes. A consumer may have
varied interests, such as coin collecting, model
shipbuilding, gardening, and fishing. By
identifying the interests of a target consumer,
companies can better identify how to appeal to
them.
Opinions
• Everyone has opinions, and consumers are no

different. Marketers would like to know people's
opinions about movies, public figures,
politicians, actors, and television shows.
Marketing agencies also need to know
consumers' opinions about brands, products,
and stores. AIO aims to create a psychographic
profile of a consumer, with the goal of targeting
advertising to various types of people.
Personal Factors
• Personality and Self-Concept

– Personality refers to the unique
psychological characteristics that lead to
consistent and lasting responses to the
consumer’s environment

Personal
Dominance Autonomy
Factors
Defensiveness Adaptability Aggressiveness

Psychological Factors
Motivation
Perception
Learning
Beliefs and attitudes

Motivation
A motive is a need that is sufficiently

pressing to direct the person to seek
satisfaction
Motivation research refers to qualitative

research designed to probe consumers’
hidden, subconscious motivations
Perception is the process by which
people select, organize, and interpret
information to form a meaningful picture
of the world from three perceptual
processes
– Selective attention
– Selective distortion
– Selective retention

Selective attention is the tendency for people to screen
out most of the information to which they are exposed
Selective distortion is the tendency for people to interpret
information in a way that will support what they already
believe
Selective retention is the tendency to remember good points
made about a brand they favor and forget good points about
competing brands

• Learning is the change in an

individual’s behavior arising from
experience and occurs through interplay
of:
Drives Stimuli Cues
Responses Reinforcement
Copyright © 2 010 Pearson Education, Inc. Chapter 5- slide 251
• The definition of a cue is a signal to a person to
do something. An example of cue is a word in a
play telling an actor when to come on stage.
• a stimulus is any object or event that elicits a
sensory or behavioral response in an organism.
Beliefs and Attitudes
Belief is a descriptive thought that a

person has about something based on:
• Knowledge
• Opinion
• Faith

Attitudes describe a person’s relatively

consistent evaluations, feelings, and
tendencies toward an object or idea

Types of Buying Decision Behavior
Complex buying behavior

Dissonance-reducing buying behavior
Habitual buying behavior
Variety-seeking buying behavior

Fig: Types of Buying Decision Behavior
Complex buying behavior
• This type is also called extensive. The customer

is highly involved in the buying process and
thorough research before the purchase due to
the high degree of economic or psychological
risk. Examples of this type of buying behavior
include purchasing expensive goods or services
such as a house, a car, an education course, etc.
Dissonance-reducing buying behavior
• Like complex buying behavior, this type presupposes lots
of involvement in the buying process due to the high
price or infrequent purchase. People find it difficult to
choose between brands and are afraid they might regret
their choice afterward (hence the word ‘dissonance’).
• As a rule, they buy goods without much research based
on convenience or available budget. An example of
dissonance-reducing buying behavior may be purchasing
a waffle maker. In this case, a customer won’t think
much about which model to use, chousing between a
few brands available.
Habitual buying behavior
• This type is characterized by low involvement in

a purchase decision. A client sees no significant
difference among brands and buys habitual
goods over a long period. An example of
habitual buying behavior is purchasing everyday
products.
Variety seeking behavior
• In this case, a customer switches among brands

for the sake of variety or curiosity, not
dissatisfaction, demonstrating a low level of
involvement. For example, they may buy soap
without putting much thought into it. Next time,
they will choose another brand to change the
scent.
THE CONSUMER BUYING PROCESS
The Buyer Decision Process
Need Recognition
• Occurs when the buyer recognizes a

problem or need triggered by:
– Internal stimuli: when one of the person’s
normal needs—for example, hunger or thirst—
rises to a level high enough to become a drive
– External stimuli: an advertisement or a
discussion with a friend might get you thinking
about buying a new car

Information Search Sources of

Information
• Personal sources—family and friends
• Commercial sources—advertising, Internet
• Public sources—mass media, consumer organizations
• Experiential sources—handling, examining,
using the product

Evaluation of Alternatives
• How the consumer processes

information to arrive at brand choices

Purchase Decision
• The act by the consumer to buy the most

preferred brand
• The purchase decision can be affected by:
– Attitudes of others: If someone important to you thinks that
you should buy the lowest-priced car, then the chances of you
buying a more expensive car are reduced
– Unexpected situational factors: economy might take
a turn for the worse, a close competitor might drop its
price, or a friend might report being disappointed in
your preferred car.
Postpurchase Decision
• The satisfaction or dissatisfaction that the consumer feels about
the purchase
• Relationship between:
– Consumer’s expectations
– Product’s perceived performance
• The larger the gap between expectation and performance, the
greater the consumer’s dissatisfaction
• Cognitive dissonance is the discomfort caused by a
postpurchase conflict
Samsung Galaxy S5 Vs The Competition
Post-Purchase Decision
Customer satisfaction is a key to

building profitable relationships with
consumers—to keeping and growing
consumers and reaping their customer
lifetime value

The Buyer Decision Process for New Products
Adoption process is the mental process

an individual goes through from first
learning about an innovation to final
regular use.
• Stages in the process include:
Awareness Interest Evaluation Trial Adoption

Adoption process
• Awareness. The consumer becomes aware of the new

product but lacks information about it.
• Interest. The consumer seeks information about the
new product
• Evaluation. The consumer considers whether trying the
new product makes sense.
• Trial. The consumer tries the new product on a small
scale to improve his or her estimate of its value.
• Adoption. The consumer decides to make full and
regular use of the new product
Individual Differences in Innovativeness
• The five adopter groups have differing values.

• Innovators are venturesome—they try new ideas at some risk.
• Early adopters are guided by respect—they are opinion leaders in
their communities and adopt new ideas early but carefully.
• Early mainstream adopters are deliberate—although they rarely
are leaders, they adopt new ideas before the average person.
• Late mainstream adopters are skeptical—they adopt an innovation
only after a majority of people have tried it.
• Finally, lagging adopters are tradition bound—they are suspicious
of changes and adopt the innovation only when it has become
something of a tradition itself.
Adopter categories
based on relative time
of adoption of
innovations
Time of adoption of innovation

Influence of product characteristics on rate of adoption
• Five characteristics are especially important in

influencing an innovation’s rate of adoption. For
example, consider the characteristics of all-electric
vehicles in relation to their rate of adoption:
1. Relative advantage.
2. Compatibility
3. Complexity
4. Divisibility
5. Communicability
Relative advantage
• Relative advantage. The degree to which the

innovation appears superior to existing products.
• All-electric cars require no gas and use clean,

less costly energy. This will accelerate their rate
of adoption. However, they have limited driving
range before recharging and cost more initially,
which will slow the adoption rate.
Compatibility
• Compatibility. The degree to which the

innovation fits the values and experiences of
potential consumers.
• Electric cars are driven the same way as gas-
powered cars. However, they are not compatible
with the nation’s current refueling network. Plug-
in electric charging stations are few and far
between. Increased adoption will depend on the
development of a national network of recharging
stations, which may take considerable time.
Complexity
• Complexity. The degree to which the innovation

is difficult to understand or use.
• Electric cars are not different or complex to
drive, which will help to speed up adoption.
However, the “conceptual complexity” of the
new technologies and concerns about how well
they will likely work slow down the adoption
rate.
Divisibility
• Divisibility. The degree to which the innovation

may be tried on a limited basis.
• Consumers can test-drive electric cars, a positive
for the adoption rate. However, current high
prices to own and fully experience these new
technologies will likely slow adoption
Communicability
• Communicability. The degree to which the

results of using the innovation can be observed
or described to others.
• To the extent that electric cars lend themselves
to demonstration and description, their use will
spread faster among consumers.

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Pricing Strategies:

• The strategy for setting a product’s price often has to be changed

Copyright © 2016 Pearson Education, Inc. 11-10

Copyright © 2016 Pearson Education, Inc. 14-1

The promotion mix is the specific blend of promotion tools that

Copyright © 2016 Pearson Education, Inc. 14-6

Copyright © 2016 Pearson Education, Inc. 14-7

Sales promotion is a short-term incentive to encourage the

Copyright © 2016 Pearson Education, Inc. 14-8

Personal selling is the personal interaction by the firm’s sales

Copyright © 2016 Pearson Education, Inc. 14-9

Public relations involves building good relations with the

Copyright © 2016 Pearson Education, Inc. 14-10

Direct and digital marketing involves engaging directly with

Copyright © 2016 Pearson Education, Inc. 14-11

Integrated marketing communications (IMC) involves carefully

Copyright © 2016 Pearson Education, Inc. 14-15

FIGURE | 14.1 Carefully blended mix of promotion tools

Copyright © 2016 Pearson Education, Inc. 14-16

Determining the Communication Objectives

Copyright © 2016 Pearson Education, Inc. 14-22

• The marketing communicator’s target market may be totally unaware

• Assuming that target consumers know about a product, how do they

• Finally, some members of the target market might be convinced

• The affordable method sets the promotion budget at the level

• The percentage-of-sales method sets the promotion budget

Copyright © 2016 Pearson Education, Inc. 14-33

• The competitive-parity method sets the promotion budget to

• The objective-and-task method develops the promotion

Copyright © 2016 Pearson Education, Inc. 14-34

Personal selling is the most effective method at certain stages of

Copyright © 2016 Pearson Education, Inc. 14-36

Public relations is a very believable form of promotion that includes

Direct and digital marketing is an immediate, customized, and

Copyright © 2016 Pearson Education, Inc. 14-38

Creating and Capturing Customer

Copyright © 2009 Pearson Education, Inc. Chapter 1- slide 1

Copyright © 2010 Pearson Education, Inc.

Marketing is a process by which

Copyright © 2010 Pearson Education, Inc.

Wants • Form that human needs take as they are shaped by

Demands • Human wants backed by buying power

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• Market offerings are some

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Exchange is the act of obtaining a

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Markets are the set of actual and

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Marketing management is the art and

Copyright © 2010 Pearson Education, Inc.

Market segmentation refers to dividing

Copyright © 2010 Pearson Education, Inc.

Demarketing is marketing to reduce

Copyright © 2010 Pearson Education, Inc.

• The value proposition is the set of

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Production Product Selling Marketing Societal

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Marketing Management Orientations

Production concept is the idea that

Copyright © 2010 Pearson Education, Inc.

Marketing Management Orientations

Copyright © 2010 Pearson Education, Inc.

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