1 - DEFINING MARKETING The set of tasks necessary for successful marketing management includes (1) developing marketing strategies
Social factors: Reference groups expose individual to new behaviors, influence attitudes and self-concept
- (KK) Meeting needs profitably || Managerial - Art and science of choosing target markets and getting, keeping and plans, (2) capturing marketing insights, (3) connecting with customers, (4) building strong brands, (5)
and growing customers through creating delivering and communicating superior customer value || Social (The shaping the market offerings, (6) delivering and communicating value, and (7) creating long-term growth.
American Marketing Association) - The activity, set of institutions and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners and society at large. 2 - DEVELOPING MARKETING STRATEGIES AND PLANS
- What? Goods, services, experiences, events, persons, places, properties, organizations, ideas, information 1. The value delivery process includes choosing / identifying (STP), providing / delivering (determine specific
- Marketing is managing demand and Marketers must identify underlying cause(s) and determine plan of action product features, prices, and distribution), and communicating superior value. The value chain (Michael
to shift demand to more desired rate (demand management) Porter) is a tool for identifying key activities that create customer value and costs in a specific business, through
9 strategic activities: 5 primary [(1) Inbound logistics (2) Operations (3) Outbound logistics (4) Marketing
- 8 types of demand: Negative (consumers dislike product and may pay to avoid it) Nonexistent (consumers (sales) (5) Service] + 4 support [(1) Procurement (2) Technology Development (3) HR management (4)
unaware or uninterested in product) Latent (consumers may share strong need that cannot be satisfied by an Firm infrastructure (general management, planning, finance, accounting, legal and government affairs)].
existing product) Declining (consumers buy product less frequently or not at all) Irregular (consumers
purchases vary on a seasonal, monthly…or even hourly basis) Full (consumers adequately buy all products put 2. Managers role is to identify best practice companies, estimate their performance, benchmark and improve own
into marketplace) Overfull (more consumers would like to buy than can be satisfied) Unwholesome (cons users performance. Strong companies success depends on both performance and departmental coordination on
attracted to products that have undesirable social consequences) core business processes: (1) Market-sensing (information about market) (2) New-offering realization (new
high-quality offerings) (3) Customer acquisition (target markets and new customers) (4) CRM (individual
- Market: Sellers constitute the Industry and buyers constitute the Market. Industry and Market (Sellers and customers) (5) Fulfillment management (orders, shipping and collecting payment). Managing these core
Buyers) are connected by 4 flows: processes effectively means creating a marketing network in which the company works closely with all parties
Key Customer Markets (drivers): in the production and distribution chain, from suppliers of raw materials to retail distributors. Companies no
- Consumer MKT (brand image, availability,
longer compete—marketing networks do. Characteristic of core competency: (1) source of competitive
communication & service quality) advantage with significant contribution to perceived customer benefit (2) widely applicable in different
- Business MKT (demonstrate, advertising &
markets (3) difficult for competitors to imitate.
reputation, sales force and price)
- Global MKT (which countries & how does it 3. According to one view, holistic marketing maximizes value exploration by (1) understanding the
work?) relationships between the customer’s cognitive space, the company’s competence space, and the collaborator’s
- Nonprofit and Governmental (lower selling
resource space; maximizes value creation by (2) identifying new customer benefits from the customer’s
prices) cognitive space, utilizing core competencies from its business domain, and selecting and managing business
Marketing Core Concepts: partners from its collaborative networks; and maximizes value delivery by (3) becoming proficient at customer
- STP: Segmentation (strategies: (1) concentration - single segment or niche (2) selective specialization - various
relationship management, internal resource management, and business partnership management.
singles segments (3) Specialization - product or markets (4) - total market coverage, with different products)
Targeting (Target Markets or Market Segments which present greatest opportunities) Positioning (Value 4. Market-oriented strategic planning is the
proposition: the intangible value proposition is made physical by an offering / set of benefits that will both satisfy managerial process of developing and
customer needs and be positioned in the mind of the target. maintaining a viable fit between the
organization’s objectives, skills, and
- Needs (basic human requirements - air, food, water, clothing, shelter, recreation, education, entertainment - 5 resources and its changing market
types of needs - Stated, Real, Unstated, Delight and Secret. Responding only to the Stated may not fully opportunities. The aim of strategic planning
address customer needs. Wants (needs which are directed to specific objects that might satisfy need - shaped is to shape the company’s businesses and
by society and differ between consumers) Demands (wants for specific products adjusted / backed by ability to products so they yield target profits and
pay. growth. Strategic planning takes place at four
levels: corporate, division, business unit,
- Brand: source of the offering | Value: central marketing concept; sum of the tangible and intangible benefits and and product.
costs to buyer; combination of quality, service an price (QSP - customer value triad) | Satisfaction: results from 5. The corporate strategy establishes the framework within which the divisions and business units prepare
balance between product’s perceived performance vs expectations; increases with higher quality and service, their strategic plans. Setting a corporate strategy means:
and decreases with higher price. (1) Defining the corporate mission: A good mission statement should (1) Focus on limited number of
goals (2) Stress company’s major policies and values (3) define company’s competitive spheres (4)
- Channels (to reach target Market): Communication Channels (deliver and receive message) Distribution take a long-term view (5) are short, memorable and meaningful
Channels (display, sell or deliver product to buyer/user) Service Channels (carry out transactions with potential (2) Establishing Strategic BUs: Market definition describes business a customer satisfying process.
buyers) | Supply chain: longest channel stretching from raw materials, through components, to finished products Target market definition focuses on current market. Strategic market definition focuses on potential
carried to final buyers. Supply Chain aka Superior Value Delivery Network (Chapter 2) -> result of partnering market (Marketing Myopia). SBUs 3 characteristics: (1) is a single business, or collection of related
with specific suppliers and distributors. businesses (2) has own set of competitors (3) has a manager responsible for strategic planning and
profit performance.
- Competition: All the actual and potential rival offerings and substitutes a buyer might consider. (3) Assigning resources to each SBU: use portfolio-planning models like GE/McKinsey Matrix (extent of
competitive advantage vs industry attractiveness) or BCG Growth ($ usage) - Share ($ generation)
Marketing Eras Matrix (relative market-share versus annual rate of market growth - SBUs classified as dogs, cash-
- Pre-founding (< 1900), Founding the Field (1900-1920), Formalizing the Field (1920-1950), Paradigm Shift - cows, question marks and stars). Policy Recommendations: Grow (invest, gain market share) Hold
Marketing, Management and Sciences (1950-1980); Shift intensifies (> 1980); Marketing for the 21st Century (maintain market share) Harvest (generate cash, "selling market share”) Divest (sell or close the
- Integrating… Communication (Multimedia: from traditional to traditional and online media) Logistics business)
(Multichannel: from traditional distribution to traditional distribution and transactional sites) Segmentation (Target (4) Assessing growth opportunities:
adaptation within broad mass markets) Time Horizon (short-term performance that contributes to long-term - INTENSIVE Growth (opportunities within current business: (1) current products + current markets =
performance and value) market-penetration (2) current products + new markets = market-development (3) new products +
current markets = product-development (4) new products + new markets = diversification
- 12 NEW key marketing behaviors, opportunities and challenges: (1) Network information technology - - INTEGRATIVE Growth (increase sales and profits through backward, forward, or horizontal
digital revolution (2) Globalization - technical advances (3) Deregulation - greater competition and growth integration within same industry - Merck example).
opportunities (4) Privatization - increased competitiveness and, thus, efficiency (5) Heightened competition - - DIVERSIFICATION Growth (Add attractive unrelated businesses - Disney move from film producer
among domestic and foreign brands (6) Industry Convergence - boundaries blurring (7) Retail transformation to licensing characters)
- entertainment into stores (8) Disintermediation - adding online services to offerings (9) Consumer Buying
Power - due to increased competition among sellers (10) Consumer Information - information largely available 6. Strategic planning for individual businesses includes defining the (a) business unit specific mission (within
(11) Consumer Participation - can influence peer and public opinion (12) Consumer Resistance - less bran broader company mission), (b) analyzing external opportunities and threats, analyzing internal strengths
loyalty; more price&quality sensitivity; over-marketed products avoided. and weaknesses, (c) formulating goals, (d) formulating strategy, (e) formulating supporting programs and
implementing the programs, and (f) gathering feedback and exercising control.
Company Orientation toward the Marketplace:
- Production concept: consumers prefer products that are widely available and inexpensive
- Product concept: consumers favor quality, performance and innovative features
- Selling concept: consumers and businesses won’t buy enough of organization’s products
- Marketing concept: Customer centered; key to achieve goals is by creating, delivering and communicating
superior customer value for target markets. Marketing Myopia: the goal is not to find the right customer for your
products but rather the right products for your customers. Myopia refers “focusing products rather than
customers”. Myopic culture would pave the way for a business to fail, due the short-sighted mindset and illusion
that a firm is in a so-called “growth industry”. This belief leads to complacency and loss of sight of what
customers needs really are. (ex.: business is energy not petroleum or transportation not railroads)
- Holistic Marketing concept: based on the development, design and implementation of marketing programs,
processes and activities, recognizing their breadth and interdependencies. Recognizes that “everything
matters” and an integrated perspective is necessary. (b) SWOT Analysis: tool for monitoring external (opportunities & threats) and internal (strengths &
- Relationship: building mutually satisfying long-
weaknesses) environment. External (macro and microenvironment forces): Opportunity - area of buyer need
term relationships with key constituents to earn and interest that a company has high probability of profitability; Threat - challenge posed by unfavorable trend
and retain business (CRM - customer; PRM - or development that would lead to lower sales or profit, in the absence of defensive marketing action.
partner; RM: relationship management). Internal: company should assess its strengths and weaknesses in order to better be able to take advantage
Outcome: marketing network. of identified opportunities.
- Integrated: assembles marketing programs to
create, communicate and deliver value to (c) Goal formulation: managing by objectives (MBO) depends if unit’s objectives are:
consumers. (1) Hierarchically arranged (2) Quantitative when possible (3) Consistent (4) Realistic
- Internal: all departments work together to
achieve customer goals. Requires vertical Ex.: ROI; Contribution Margin; Sales, Sales Growth; Market Share; Innovation (rate of new products
(senior management) and horizontal introduction); Reputation and Image (positioning sought); Customer Satisfaction
(interdepartmental) alignment.
- Performance: Justify investments in financial
(d) Strategy formulation: game plan for achieving goals. Michael Porter 3 Generic Strategies:
and profitability terms, as well as in terms of (1) Overall Cost Leadership: underprice competitor and gain market share, through efficient scale
brand building and customer base growing facilities, cost control, reduction and minimization (R&D, sales force, advertising, not quality nor service
(financial accountability). Considers ethical, (2) Differentiation: achieving unique superior performance in important customer benefit area largely
environmental, legal and social context of the valued, defending business through loyalty and reduced price sensitivity (requires good marketing ability)
role and activities of the marketer (social (3) Focus: company chooses one or more narrow market segment(s) to serve very well, and pursues (1)
responsibility marketing or (2). Assumption: company is more efficient and effective than competitor operating more broadly.
MARKETING MIX: 4P’s vs 4C’s |
Strategic alliances: (1) Product or service alliances (Pharmaceutical Licensing) (2) Promotional
Product is the solution to Customer
alliances (Disney & McDonald's (3) Logistics alliances (4) Pricing collaborations (Hotel & Car rental
| Price is the Cost to the customer |
mutual price discounts)
Distribution (place) is Convenience
for the customer | Promotion is
communicating with the customer (e) Program Formulation and Implementation: program must take into account SBU goals. Implementation
success depends on 7 elements: HARDWARE (strategy, structure and systems) and SOFTWARE (related
Holistic Marketing Concept (+ 4
to employees style, skill, staff and shared values)
Ps): People, Processes, Programs
and Performance.
(f) Feedback and Control: Because the market environment changes, the company can be efficient and lose
Product: Variety, Quality, Design, effectiveness. Peter Drucker: “do the right thing” / be effective rather than “do things right” / be efficient.
Features, Brand Name, Packaging,
Sizes, Services, Warranties, Returns
7. Each product level within a business unit must develop a marketing plan for achieving its goals. The marketing
|| Price: List price, Discounts,
Allowances, Payment Period, Credit plan is one of the most important outputs of the marketing process.
Te r m s | | P r o m o t i o n : S a l e s
promotion, Advertising, Sales Force, (1) Executive Summary and Table of Contents | (2) Situation Analysis: Market summary (demographics, needs,
Public Relations Direct Marketing ||
Place: Channels, Coverage,
trends, growth); SWOT; Competition; Product Offering; Keys to Success | (3) Marketing Strategy: Mission;
Marketing objectives; Financial objectives; STP; Marketing Program (4P’s) | (4) Financials: Break-even; sales
Assortments, Locations, Inventory,
Transport forecast; expense forecast | (5) Implementation Plan | (6) Controls
Buyer Business Practitioner Academic Seller
BEWARE (process oriented) (outcome) BEWARE
and create pressures for conformity that may affect product and brand choices. Examples:
- Membership Groups: primary (continuous, informal interaction | ex.: family) secondary (more formal and
require less continuous interaction | ex.: professional, religious).
- Aspirational Groups: groups a person hopes to join
- Dissociative Groups: those whose values a person or behavior an individual rejects
When reference group influence is strong, Marketers must target opinion leaders (person offers informal
advice or information about a specific product or product category).
Personal Factors:
- Age & Stage in Life-cycle: family life-cycle (number, age, gender of people in household);
psychological life-cycle (adult vs teenagers); critical life events or transitions may lead to new needs.
- Occupation & economic circumstances: designing different products for different occupational groups
and redesign, reposition when indicators point to an economic downturn or recession.
FRAMEWORK FOR MARKETING STRATEGY FORMATION
- Personality and self-concept: Human personality is a set of distinguishing human psychological traits
(0) 5C Market Analysis:
that lead to consistent and during responses to environmental stimuli. Brand personality are the mix of
- Customer Behavior: Helps design a product that fits the market and requires in-depth understanding of
human traits one can attribute to a particular brand. Consumers look for brands with personality
customers’ purchase.
consistent with their actual self-concept (although the match may be with the ideal self-concept or even
(1) Identify the decision-making unit (DMU) and its participants | Initiator (recognizes value solving problem and
the other self-concept), especially for publicly consumed products.
stimulates search for product) Gatekeeper (problem / product experts who control information / access to other
- Lifestyle and Values: A lifestyle (LS) is a persons’ pattern of living in the world. It portrays the “whole
DMU members) Decider (make the purchasing choice) Influencer (do not decide but have input in decision)
person” interacting with own environment. LS are shaped partly by money or time constraints. Core
Purchaser (consummate transaction) User (consume product)
values are belief systems that underlie attitudes and behaviors and determine people’s choices and
(2) Map the decision-making process (DMP) through quantitative (surveys) and qualitative (focus group
desires over the long term. Targeting core values is done on the basis that by appealing to people’s
discussions, customer interviews) methods.
inner selves, it is possible to influence their outer selves - their purchase behavior.
- Company: ensure that the product and approach fit the company (core competency - Prahalad & Hamel)
- Collaborators: analyzing set of external assets (PRM). Effective management of business ecosystems requires
understanding goals and capabilities of all partners.
- Competition: assessing others’ offerings, market addressed, approach used and predicting evolution over time.
- Context: Since this is always changing (ex.: Internet impact on existing business practices) there is the need for a
systematic analysis of cultural trends - coolhunting. Similarly, politics, regulation, law and social norms are
dynamic factors to consider and monitor for signs of disruption.
(1) Aspiration Decision | STP - “what value to what kind of customers?”
(2) Action Plan | Marketing Mix (“mix” because elements need to work together to form a cohesive plan)
- Product; Promotion; Place - create value to customers (outlay of money form the firm)
- Price - generates revenue to firm.
Pricing Decisions: 3 points to consider in effective pricing program are (1) value of the product to the customer
(rather than the firm’s cost of goods being the major pricing determinant); (2) opportunities to vary price across
customers according to the value they individually place on the item and (3) customers’ price sensitivity.
KEY PSYCHOLOGICAL CONSUMER BEHAVIOR / RESPONSE PROCESSES:
(1) Value-Based Approach: Key element: Perceived value
(1) MOTIVATION: 3 theories of human motivation
customer places on the item = upper
I. FREUD's: assumed that psychological forces shaping people’s behavior are largely unconscious
bound on what customer is willing to
and that a person cannot fully understand own motivations.
pay (WTP) and is a function of firms’
II. MASLOW's: assumed human needs are arranged in a hierarchy from most to least pressing.
and competitors’ offerings (price and
Maslow Pyramid Needs: (1) Physiological (food, water, shelter) (2) Safety (security, protection (3)
features) known to the customer.
Social (sense of belonging, love) (4) Esteem (self-esteem, recognition, status) (5) Self-
actualization (self-development and realization)
Firm cost = lower bound. Firms may
III. HERZEBERG's: two-factor theory that distinguishes factors in dissatisfiers from satisfiers. Two
sell below cost to spur trial and
major implications: First, sellers must avoid dissatisfiers (although this won’t sell a product it will at
adoption, with the belief that this will
least not unsell it). Second, seller should identify the major satisfiers or motivators of purchase in
increase perceived value and lead to
the market and then supply them.
greater pricing flexibility in the future.
(2) PERCEPTION: The process by which we select, organize and interpret information inputs to create a
Sale occurs if products’ value
meaningful picture of the world. People emerge with different perceptions of the same object because of 3
outweighs price, when compared with
perceptual processes (with active engagement and thought):
all competing products or services.
I. SELECTIVE ATTENTION: Since we cannot attend all stimuli, we screen most out. Marketers must
True Economic Value (TEV) = Price
work hard to learn how to attract consumers’ notice.
of the next-best alternative + Value of
II. SELECTIVE DISTORTION: Tendency to interpret information in a way that fits our perceptions. Can
performance differential compared to
work to the advantage of marketers with strong brands, when consumers distort and make
next-best alternative. Thus, TEV is a
information more positive.
function of competitors’ price.
III. SELECTIVE RETENTION: We tend to retain information that supports our attitudes and beliefs.
(2) Price Customization: common practice of aligning prices to value of a particular segment Again works to advantage of strong brands.
Different customer place different values on the same product. Intensity of use: Heavy users value a product IV. SUBLIMINAL PERCEPTION: selective perception mechanism with no active engagement or
more than light users. Heavy user may also be interested in added features or complementary products. thought, through subliminal messages in ads or packaging. Consumers are not consciously aware
Consumers that use product differently, consequently perceive value differently. Performance matters more to of them, yet they affect behavior.
consumers for whom cost of failure is extreme.
(3) LEARNING: Learning induces changes in our behavior arising from experience. Generalization: similar
(3) Price Sensitivity: stimuli with similar response. Discrimination: the process of learning to recognize differences in sets of
Increases when… (1) End user (rather than third party) bears the cost; (2) cost of item represents substantial % similar stimuli (which lead to adjusted response). Hedonic Bias: people’s tendency to attribute success to
of customers’ total expenditure; (3) Buyer is not end user but rather sells own end product in competitive themselves and failure to external causes.
market; (4) Buyers are able to judge quality without using price as indicator (perfume works otherwise since
price is an indicator of quality); (5) It is easy to shop around and assess alternatives; (6) there is no urgency to (4) EMOTIONS: Consumer response is not all cognitive and rational; much may be emotional and invoke
make a decision; (7) buyers can switch suppliers with no additional costs different kinds of feeling.
NOTE ON LOW-TECH MARKETING MATH (5) MEMORY: Short-term memory (STM - temporary and limited repository of information) and Long-term
(a) Types of cost: memory (LTM - more permanent, essentially unlimited repository). Brand association: consists of all bran-
1. Fixed Costs (FC) - do not depend on the quantity related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes and so on that become
produced or sold; occur periodically and so are linked to the brand node (Associative Network Memory Model - LTM nodes)
proportional to time
2. Variable Costs (VC) - depend on the quantity THE BUYING PROCESS: 5 STAGE MODEL
produced or sold; often assumed to be proportional to (1) PROBLEM RECOGNITION: Buying process starts when the buyer recognizes a problem or need
quantities; in reality VC per unit may depend on the triggered by internal or external stimuli.
total output produced (Fig. 1a & 1b)levant costs (2) INFORMATION SEARCH: two levels of engagement in search process. Heightened attention (person
3. Investment (I): its value (cost) does not depend on becomes more receptive to information) Active information search (actively learning about product).
quantity produced or number of periods. This are one- Successive brand sets involved until decision making: TOTAL set > AWARENESS set >
off expenditures for the entire project lifetime. CONSIDERATION set > CHOICE set > DECISION.
(3) EVALUATION OF ALTERNATIVES: Consumers will pay the most attention to attributes that deliver the
(b) Margins Calculations: sought-after benefits. Depend on: (1) Beliefs & Attitudes (2) Expectancy-Value Model
1. Unit Contribution (UC) or Unit Margin (UM): UM = Revenue per unit - VC per unit (Compensatory model through which consumers evaluate products combining brand beliefs according
2. Percent Margin (M%): M% = UM ($) / Revenue per unit to importance). If product not aligned with preferences, marketers can: redesign, alter beliefs about
3. Gross Margin (GM) GM = UC x Production Volume both own and competitors’ brand, alter importance weights, call attention to neglected attributes
4. Net Margin (NM): NM = GM - FC and, ideally, shift the buyers ideals.
5. ROI = NM / Investment (4) PURCHASE DECISION: Non compensatory models / Heuristics (“mental shortcuts”; rules of thumb
6. Retailer Selling Price (given % margin and cost): Selling Price = Cost / (1 - M%) in the decision process): (1) CONJUNCTIVE (consumer chooses the first brand to meet the minimum
standards for all attributes) (2) LEXICOGRAPHIC (consumer chooses the best brand on the basis of its
(c) Break-evens: sales level such that marginal relevant revenue is equal (=) to marginal relevant costs. perceived most important attribute) (3) ELIMINATION-BY-ASPECTS (consumer eliminates brands that
1. Break-even volume (BEV = q*): number of units sold which cover fixed costs. BEV = FC ($) / UM ($) do not meet minimum acceptable cutoffs. INTERVENING factors: (1) Attitude of others (the influence
2. Changes in FC worthwhile if result in Added Units sold: Added Costs ($) / UM ($) = Added Units sold of another person’s attitude depends on -1- intensity of other person’s negative attitude and -2-
3. Break-even point (BEP) is the sales level that generates a null Net Margin (NM): motivation to comply with other person’s wishes) (2) Unanticipated situational factors (purchase
decision may be modified, postponed or avoided by perceived risks: Functional - not up to expectation |
GM = FC or Total Revenue = Total Cost
Physical - threat to self or others | Financial (not worth price) | Social (risk of embarrassment) |
Break-even analysis is a key indicator for quick assessment if a certain project, marketing program or Psychological (affect mental well-being | Time (failure could use time to find another product).
marketing plan will likely contribute for improving the company profits (GO vs NO GO) (5) POST-PURCHASE BEHAVIOR: Since “the purpose of a business is to create and keep a customer”,
the marketer’s job doesn’t end with the purchase. Satisfaction: function of the closeness between
expectations and the product’s perceived performance (consumer disappointed, satisfied or delighted).
(d) Market Size and Share:
1. Break-even Market Share (BE MS%): BE MS% = BEV / Total Market or Segment Volume Actions: satisfied customer = word-of-mouth. Uses and Disposal: more quickly buyers consume, the
sooner they may be back in the market to repurchase it.
In general, BEP = q*: IC(q*) = IR(q*), where IC(q) are incremental costs of selling extra q units and IR(q) are
incremental revenues associated with selling the same q units. For most marketing analysis only incremental
Behavioral Types HIGH Involvement LOW Involvement
costs and revenues are managerially relevant.
Significant Difference Between Brands Complex Variety Seeking (avoid repetition
6 - ANALYZING CONSUMER MARKETS
and boredom - ex.: cookies)
What influences consumer behavior? Cultural, Social and Personal factors
Small Difference Between Brands Dissonance Reduction
(perception problem) Routine
Cultural factors: Culture fundamental determinant of a person’s wants and behaviors. Marketers must attend to
(instinct; laziness; repetition)
cultural values in each country to understand how to best market existing products and find new opportunities.
BEHAVIORAL DECISION THEORY (BDT) and BEHAVIORAL ECONOMICS
DECISION HEURISTICS
1) AVAILABILITY HEURISTIC - Consumers base their predictions on the quickness and ease with which a
particular example of an outcome comes to mind (product failure leads to increased willingness to buy
warranty).
2) REPRESENTATIVE HEURISTIC - Consumers base their predictions on how representative or similar the
outcome is to other examples (similar packagings improve category representativeness).
3) The ANCHORING and ADJUSTMENT HEURISTIC - Consumers arrive at an initial judgment and then adjust it
based on additional information. (Services - strong first impression is critical to establish a favorable anchor so
subsequent experiences will be interpreted in a more favorable light).
FRAMING: decision framing is the manner in which choices are presented to and seen by a decision maker.
Mental Accounting (Thaler): refers to the way consumers code, categorize and evaluate financial outcomes of
Major Segmentation VARIABLES for Consumer Markets:
choices. Core principles: (1) segregate gains (2) integrate losses (3) integrate smaller loses with larger gains (4)
(4) Descriptive Segmentation
segregate small gains from large losses.
Prospect Theory (Khaneman and Tversky): consumers are generally loss-averse.
CONSUMER BEHAVIOR AND THE BUYING PROCESS (PAPER)
Four frameworks about the process by which consumers make a purchase:
- COGNITIVE (deliberative, information-based processing of relevant product characteristics) vs EMOTIONAL (5) Behavioral Segmentation (usage rate, loyalty, product knowledge, involvement, purchase occasion, buying
(driven by the heart and entailing a subjective liking for one option over another). Many purchases have both a stage)
cognitive and emotional component. To determine whether a person´s buying process is largely cognitive, (6) Benefits sought (convenience, value, safety, status)
emotional or some combination of both, one can consider factors such as: PRODUCT TYPE (certain products
lend themselves to cognitive processing or serve an ego-expressive or hedonic purpose); CONTEXT (in which
the product will be used); INDIVIDUAL DIFFERENCES (natural tendencies of individual buyer).
- Cognitive decision making often is slower, more systematic and more exhaustive than emotional decision
making (marketers should tailor promotional efforts to cognitive or emotional purchase decisions).
- HIGH-INVOLVEMENT vs. LOW-INVOLVEMENT decision making: HIGH (anything from a wedding or a car or
house purchase; stems from factors such as expense, the risk inherent in making a bad choice and uncertainty
around which alternative is best; LOW (require far less effort; often happen quickly and are perceived as having
far lower risk). Whether a purchase fosters high or low involvement can change over time. Marketers should
adapt their selling strategies to consumers´ involvement levels (high – offer guarantees to reduce perceived
risk).
- OPTIMIZING vs “SATISFICING” decision making (the process whereby consumers settle for an alternative that
is “good enough” or that passes some acceptable threshold.
- As a general rule, the greater the expense (car, house, insurance plan), the more likely consumers will try to
optimize.
- COMPENSATORY vs. NON-COMPENSATORY decision making: COMPENSATORY – consumers consider all
of the attributes that are relevant, making trade-offs between those attributes (ex. Price is high can be
compensated for by its strengths on another attribute); NON-COMPENSATORY – consumers consider some,
but not all, of a product´s attributes, ignoring potential trade-offs between those attributes.
- Factors that drive decision in this scope: size of the choice set; importance of various attributes to the
consumer; availability. With Compensatory decision making it is necessary that a product scores high on every
attribute; otherwise needs to do especially well on 1 or 2 criteria that dominate consumers´decision.
CREATING CUSTOMER VALUE (PAPER)
CUSTOMER VALUE: Customer perceived value is the difference, from the customer point of view, between the
benefits and the costs associated with a a purchase. CUSTOMER SATISFACTION: pleasure or disappointment
resulting from comparing perceived performance (or outcome) of a product with expectations. CUSTOMER
LOYALTY: degree of behavioral and emotional commitment of a customer to a product or a bran (repeating
purchase probability).
Four types of Customer Value: (1) Economic (Energy efficient light bulbs) (2) Functional (navigation system,
cruise control) (3) Experiential (or Emotional: sense of beauty or self expression in cosmetics, fashion clothing) (4)
Social (beer, restaurants, Facebook).
(1) Economic: The basic idea is to consider the total cost of ownership or lifecycle cost. The maximum price a
customer is willing to pay (WTP) for a product is its Economic Value to the Customer (EVC)
(2) Functional: Offering new features or functional benefits.
(3) Experiential Value: Branding, design, customer experience and customer service and / or emotional benefits
they offer in their products and services.
(4) Social Value: Networked society where benefits derive from social interactions. 4 types:
(1) Network Effects: Virtuous cycle that provides an increasing return to scale through sharable features
which promote virality.
(2) Preference Formation: influenced by peers (see primary and secondary.
(3) Social Capital: consumer empowerment in order to generate & benefit from user-generated content.
(4) Social Relationships: offering products and services to enhance social relationships of their users.
CUSTOMER LIFETIME VALUE (CLV)
CUSTOMER PROFITABILITY (CP): A profitable customer yields over time (measures the past) a revenue
stream exceeding, by an acceptable amount, the cost stream. Not all customers are profitable. CP can be
measured at many levels of aggregation (individual customer, market segment, channel region, etc..) and is easier
to quantify than CLV.
PRODUCT PROFITABILITY: A profitable product yields over time a revenue stream exceeding, by an
acceptable amount, the cost stream.
CLV: Measure or prediction of the net profit (or net present value) attributed to the entire future relationship
with a customer. More difficult to quantify than CP but more useful in shaping managers’ decisions.
p : price paid by customer at time t
c : direct (marginal) cost of serving the customer at time t
i : interest rate or cost of capital for the firm
r : probability of customer repeat buying or “being alive” at time t
AC : customer acquisition cost
T : time horizon to estimate CLV
If margin and retention rate (survival probability)
are constant, and
CLV ($) = Margin ($) * (Retention Rate (%) ÷
[1 + Interest Rate (%) - Retention Rate (%)
Costs Associated Acquisition (CAA) = Unit Contribution Margin (UCM | $) - Unit Marketing Acquisition Costs
Costs Associated Retention (CAR) = Unit Consumption Rate (%) x Retention Rate (%) + Value of other
customer created or Cross-selling - Unit Marketing Retention Costs
8 - IDENTIFYING MARKET SEGMENTS AND TARGETS
MARKET SEGMENT: Set of customers (consumers) who are similar (homogeneous) and share needs, desires,
wants, behaviors, price or stimuli sensitivity, distribution channels or media consumption habits and consumer
characteristics or traits.
CHARACTERISTICS of a USEFUL SEGMENTATION: (1) Identifiability - extent to which managers can
recognize distinct groups of customers in the marketplace by using specific segmentation bases (2)
Substantiality - segment is a large enough portion of the market to ensure profitability of the targeted marketing
programs (3) Accessibility - the degree to which managers are able to reach targeted segments through
promotional or distributional effort (4) Stability - only segments that are stable in time can provide the underlying
basis for the development of successful marketing strategy (5) Responsiveness - the extent to which segments
respond uniquely to marketing efforts (6) Actionability - segments are actionable if their identification provides
guidance for decisions on effective specification of marketing instruments. Here the focus is whether the
customers in the segment and the marketing mix necessary to satisfy their needs are consistent with the goals
and core competencies of the firm.
SEGMENTING CONSUMER MARKETS: use descriptive (geographic, demographic and psychographic),
behavioral segmentation and benefits sought.
Major Segmentation VARIABLES for Business Markets:
(1) Descriptive Segmentation
I. Geographic (country, region, city, urban / rural)
II. “Firmographic” (industry, firm size, global / regional, ownership)
III. Buying approach (centralized / decentralized, purchase policies, involvement of decision makers)
(2) Behavioral Segmentation (volume, purchase frequency, attitude towards risk, loyalty, urgency)
(3) Benefits sought (price, product quality, service, relationship)
Business vs Consumer Markets: less number of buyers; large customers; proximity in relation supplier-
customer; often customers are clustered geographically; demand is derived (arises from customer market
demand) and fluctuant (seasonality); demand is also rigid, inelastic and does not respond to market mix
instruments such as price or advertising; buying process professionally conducted.
I. Geographic (country, region, city, urban / rural, climate)
II. Demographic (age, income, gender, generation, marital status, family size, occupation, education,
ethnicity, religion)
III. Psychographics* (lifestyle, personality, activities, interests, opinions)
*PSYCHOGRAPHIC Segmentation - VALS (Values,
Attitudes & Lifestyles): science of using psychology and
demographics to better understand consumers. Buyers
are divided in different groups on basis of psychological /
personality traits, lifestyles or values.
There are 2 main dimension in the VALS framework:
- The vertical dimension segments people based on the
degree to which they are innovative and have
resources such as income, education, self-confidence,
intelligence, leadership skills, and energy.
- The horizontal dimension represents primary
motivations and includes three distinct types:
I. Consumers driven by knowledge and principles are
motivated primarily by ideals. These consumers
include groups called Thinkers and Believers.
II. Consumers driven by demonstrating success to their
peers are motivated primarily by achievement. These
consumers include groups referred to as Achievers and
Strivers.
III. Consumers driven by a desire for social or physical
activity, variety, and risk taking are motivated
primarily by self-expression. These consumers
include the groups known as Experiencers and
Makers.
At the top of the rectangle are the Innovators, who have
such high resources that they could have any of the
three primary motivations. At the bottom of the rectangle
are the Survivors, who live complacently and within their
means without a strong primary motivation of the types
listed above.
(Michael Porter) 5 FORCES ANALYSIS: Framework to
analyze level of competition within an industry and to
develop business strategy. It draws upon industrial
organization (IO) economics to derive five forces (micro
environment) that determine the competitive intensity
and therefore attractiveness (profitability) of a market.
Framework includes - 3 forces from “horizontal”
competition: the threat of substitute products or
services, the threat of established rivals, and the threat
of new entrants; and 2 forces from “vertical” competition:
the bargaining power of suppliers and the bargaining
power of customers.
Threat of NEW ENTRANTS: Markets that yield high returns will attract new firms. This results in many new
entrants, which eventually will decrease profitability (profit rate towards zero = perfect competition). Most attractive
scenario: high entry barriers and low exit barriers. Threat of SUBSTITUTE PRODUCTS or SERVICES: The
existence of products outside the realm of the common product boundaries increases the propensity of customers
to switch to alternatives (ex.: tap water substitute for Coke) Threat of ESTABLISHED RIVALS (Industry Rivalry):
For most industries the intensity of competitive rivalry is the major determinant of the competitiveness of the
industry. Bargaining Power of BUYERS / CUSTOMERS: The buyer power is high if the buyer has many
alternatives. Implementing a loyalty program reduces a buyer power. The buyer power is also high if they
aggregate and pressure the firm together. If they act independently, buyer power is low. Bargaining Power of
SUPPLIERS: Suppliers can have a source of power when there are few substitutes to the raw materials,
components, labor and services (such as expertise) they provide to the firm.
10 - CRAFTING the BRAND POSITIONING
1. POSITIONING: the act of designing a companies offering in image to occupy a distinctive place in the minds of
the target market. The goal, is to locate the brand in the mind of customers to maximize the potential benefit to
the firm. The real trick is to strike just the right balance between what the brand is and what it could be.
2. Developing a Positioning requires the determination of a (1) frame of reference—by identifying the target
market and the resulting nature of the competition—; (2) the optimal points-of-parity (POPs) and points-of-
difference (PODs) for brand associations and (3) creating a brand mantra to summarize the positioning and
essence of the brand.
(1) Frame of Reference: defines which other brands a brand competes with and, therefore, which brands should 3. An alternative to being a follower in a large market is to be a leader in a small market, or niche.
be the focus of competitive analysis.
• Identifying competitors: Category membership - the product or set of products with which a brand competes
and which functions as close substitutes.
(2) POPs & PODs:
• PODs: Attributes or benefits that consumers strongly associate with brand, positively evaluate and believe
they could not find to the same extent with a competitive brand. Three criteria determine whether a brand
association can truly function as a POD: desirable to consumer, deliverable by the company, differentiating
from competitor.
• POPs: Attribute or benefit associations that are not necessarily unique to the brand but may in fact be shared
with other brands. This type of associations come in two basic forms: category POP (attributes or benefits that
consumer view as essential to a legitimate and credible offering within certain product / service category) 4. As important as a competitive orientation is in today’s global markets, companies should not overdo the
competitive POP (associations designed to overcome perceived weaknesses of brand; may be required to
either (1) negate competitor perceived POD or (2) negate a perceived vulnerability of the brand as a result
of its own POD) 5. Because economic conditions change and competitive activity varies, companies normally must reformulate
• Straddle Positioning: POD for one category become POP for other category, and vice-versa.
• Choosing POP&POD: Use perceptual maps are visual representations of consumer perception and
preferences; can reveal “wholes” or “openings” that suggest unmet consumer needs and marketing
opportunities.
(3) Brand Mantra (BM) is an articulation of the Art & Soul of the brand and is closely related to other branding
concepts like “brand essence” and “core brand promise”. Brand Mantras are short (3 to 5 word) phrases
that capture the irrefutable spirit of the brand positioning.
• Nike: Authentic, Athletic, Performance
• Designing a BM: designed with internal purposes in mind. Brand slogan, is an external translation that attempts
to creatively engage consumers (Nike: Just do it!).
• Criteria for BM: Communicate (define categories of business and set boundaries for the brand) Simplify
(should be memorable - short, crisp and vivid in meaning) Inspire (should stake out ground that is personally
meaningful and relevant to as many employees as possible)
4. Establishing a Positioning: Communicate brand positioning in the organization so it guides their words and
actions (one helpful schematic to do so is a brand positioning bull’s eye). Establishing the brand positioning
in the marketplace requires that consumers understand what the brand offers and what makes it a superior
competitive choice.
- Communicating Category Memberships | main ways to convey brands category membership: (1)
ANNOUNCING category benefits (2) COMPARING to exemplars (3) RELYING on the product descriptor
- Communicating POPs & PODs: one common difficulty in creating a strong, competitive brand positioning is
that many of the attributes or benefits that make up the POPs or PODs are negatively correlated (low price vs
high quality)
(a) Growth-Slump-Maturity: Sales grow rapidly when the product is first introduced and then fall to a stable
level sustained by late adopters buying the product for the first time and early adopters replacing it.
5. Differentiation Strategies: The key to competitive advantage is relevant brand differentiation—consumers (b) Cycle-Recycle: often describes the sales of new drugs. The pharmaceutical company aggressively
must find something unique and meaningful about a market offering. These differences may be based
promotes its new drug, producing the first cycle. Later, sales start declining, and another promotion push
directly on the product or service itself or on other considerations related to factors (means of differentiation)
produces a second cycle (usually of smaller magnitude and duration)
such as employees, channels, image, or services.
(c) Scalloped: sales pass through a succession of life cycles based on the discovery of new-product
characteristics, uses, or users. Sales of nylon have shown a scalloped pattern because of the many new
Emotional branding is becoming an important way to connect with customers and create differentiation from uses—parachutes, hosiery, shirts, carpeting, boat sails, automobile tires—discovered over time
competitors. Emotional brands share 3 specific traits: (1) Strong people focused corporate culture (2)
Distinctive communication style and philosophy (3) Compelling emotional hook. MARKETING STRATEGIES
Lovemarks: Command both respect and love and result from ability to achieve: (1) Mystery (stories, INTRODUCTION STAGE and PIONEER ADVANTAGE
metaphors, dreams, symbols) (2) Sensuality (sight, hearing, smell, touch, taste) (3) Intimacy (empathy, • Slow sales growth because it takes time to: roll out a new product, work out technical problems, fill dealer
commitment, passion)
pipelines and gain consumer acceptance (traction).
• High promotional expenditures to: inform potential customers, induce product trial, secure distribution
In general, firms should monitor 3 variables when analyzing potential threats posed by competitors: (1)
in retail outlets
share of market (volume) (2) share of mind (memory) (3) share of heart (preference)
• To be 1st (to enter a market) can be rewarding, but risky and expensive. To come in later (“second-mover
advantage”) makes sense if the firm can bring superior technology, quality, or brand strength to create a
6. Although small businesses should adhere to many of the branding and positioning principles larger companies
use, they must place extra emphasis on their brand elements and secondary associations and must be market advantage.
more focused and create a buzz for their brand. • Sources of Pioneers’ Advantage:
• (1) Early users will recall the brand name if the product satisfies them (2) The brand establishes the
Branding Guidelines for Small Businesses: attributes the category should possess (3) It normally aims at the middle of the market and so captures
(1) Creatively conducting low-cost marketing research more users (4) Customer inertia plays a role (5) Producer advantages: economies of scale,
(2) Focus on building one or two strong brands based on on one or two key associations
technological leadership, patents, ownership of scarce assets and other barriers to entry
(3) Employ a well integrated set of brand elements
• Peter Golder and Gerald Tellis:
(4) Create buzz and a loyal brand community
(5) Leverage as many secondary associations as possible • Doubts about pioneer advantage. Distinguish between: Inventor (first to develop patent in a new product
category) Product Pioneer (first to develop a working model) Market Pioneer (first to sell in the new-
product category) and Non-surviving Pioneers.
11 - COMPETITIVE DYNAMICS for MARKET LEADERS • 5 factors supporting long-term market leadership: (1) Vision of a mass market (2) Persistence (3)
Relentless innovation (4) Financial commitment (5) Asset leverage
1. A market leader has the LARGES MARKET SHARE in the relevant product market and usually leads in price
changes, new product introductions, distribution coverage and promotional intensity. To remain dominant, the
GROWTH STAGE
leader looks for ways to:
• Rapid climb in sales. Early adopters like the product and additional consumers star buying it.
• New competitors (attracted by opportunities) enter, add new product features and expand distribution.
I. EXPAND TOTAL MARKET DEMAND (dominant firm usually gains the most)
• Prices stabilize or fall slightly (depending on demand increases).
• With new customers (market-penetration; new-market expansion or geographical-expansion) or more
• Firms maintain or rise promotional expenditures to meet competitors and continue market education.
usage from existing customers (Amount: through larger size packages; Frequency: through additional
• Sales rise faster than promotional expenditures (better promotion-sales ratio). Profits increase as
opportunities or new ways to use the brand )
promotion costs are spread over a large volume and unit manufacturing costs fall faster than price
II. PROTECT while trying to expand demand…
declines (producer learning effect). Backup plan (new strategies) in case of decelerating rate of growth.
• Through defensive and offensive actions (continuous innovation, most constructive response)
• Sustaining rapid market share growth: (1) Improve product quality and styling, add new features (2) Add
• PROACTIVE MARKETING: (1) Responsive (finds stated need and fills it) (2) Anticipative (looks ahead to
new models and flanker products to protect core business (3) Enter new market segments (4) Increase
needs that customer may have in the future) (3) Creative (discovers solutions customers did not ask but
distribution coverage and enter new distribution channels (5) Shift from awareness & trial to preference &
which they adopt). Proactive skills: responsive anticipation & creative anticipation
loyalty communications (6) Lower prices to attract next layer of price-sensitive buyers.
• DEFENSIVE MARKETING: Reduce probability of attack, divert attacks to less threatened areas and lessen
intensity. Six defense strategies: (1) Position (occupying most desirable market space in consumers’ mind)
MATURITY STAGE
(2) Flank (erect outposts to protect weak front or support possible counterattack) (3) Preemptive (attack
• Normally lasts longer than the preceding ones. Most products are in this stage of the lifecycle, which
first and across the market, keeping everyone off balance) (4) Counteroffensive (leader meets attacker
divides into 3 phases: (1) Growth (sales growth starts to slow) (2) Stable (sales per capita flatten because
frontally so it will have to pull back to defend itself) (5) Mobile (leader stretches domain over new territories
of market saturation) (3) Decaying (absolute level of sales starts to decline and customers switch)
through market broadening and diversification) (6) Contraction (give up weaker markets and resign
• 3 Ways to change the course of a brand: MARKET MODIFICATION (expand market by working with
resources to stronger ones)
volume = number of brand users x usage rate per user) PRODUCT MODIFICATION (improving quality,
III. INCREASE … even if market size remain constant
features and style) MARKETING PROGRAM MODIFICATION (stimulate non product elements - price,
• Gain of market share does not automatically result in higher profit (ex.: labor-intensive services, with few
distribution and communications in particular)
economies of scale)
• First, leader must consider: (1) Possibility of “antitrust” action (competitors might claim “monopoly” and
DECLINE STAGE
seek legal action) (2) Economic cost (asses optimal market share; cost of gaining share might exceed • Decline might be slow (sewing machines) or rapid (floppy disks). Sales may plunge to zero or remain at a
value; costs rise with increased market share - legal work, PR and lobbying) (3) Danger of pursuing wrong
low level. Unless strong reasons exist, retention of a weak product is often very costly.
marketing activities (ex.: cutting prices) (4) Effect on actual and perceived quality (more customers can • Weak products: are unprofitable; consume disproportionate amount of managements’ time; require
put a strain on firm's resources, hurting product value and service delivery). frequent price and inventory adjustments; incur expensive setup for short production runs; draw advertising
and sales force attention (from healthy products) and cast a negative image on the firms’ portfolio.
2. Other Competitive Strategies: firms that occupy 2nd, 3rd and lower ranks can adopt 1 of 2 postures:
• Abandoning declining markets dependents on the height of exit barriers in the industry.
challengers or followers
• Harvesting: gradually reducing a product or business's costs while trying to maintain sales
• A market CHALLENGER attacks the market leader and other competitors in an aggressive bid for more • Divesting: Sell the product to another firm or liquidate the brand quickly or slowly
market share.
6. Like products, markets evolve through four stages: emergence, growth, maturity, and decline.
• 1st: Who to attack? (1) Market leader (2) Same size, underperforming firms (3) Small local and
regional firms
7. In a recession, marketers must (1) explore the upside of possibly increasing investments, (2) get closer to
• 2nd: How to attack ? (1) Frontal (matching competitor strategy - side with greater resources wins - or customers, (3) review budget allocations, (4) put forth the most compelling value proposition, and (5)
with modified approach - cutting price) (2) Flank (identifying shifts causing gaps to develop & serving fine-tune brand and product offerings.
uncovered market needs) (3) Encirclement (grand offensive on several fronts) (4) Bypass (diversifying
into: unrelated products; new geographical markets; new technologies) (5) Guerrilla (small, intermittent, • (1) Exploit marketplace advantages such as an appealing product, a weakened rival or development of a
conventional or… unconventional. Must be backed by stronger attack to beat opponent) neglected target market (2) In a downturn, consumers are willing to change. Opportunity to learn about
consumers thinking, feeling and doing (3) Budget reallocations can open up promising new options and
• Theodore Levitt: product imitation might be as profitable as product innovation, since no innovation eliminate sacred-cow approaches that no longer provide sufficient revenue benefits (4) Don’t overly
expenses or costs exists. A market FOLLOWER is a runner-up firm willing to maintain its market share and focus on price reductions and discounts, which can harm long-term brand equity and price integrity.
not invite competitive retaliation. It can play the role of counterfeiter (duplicates leaders’ product and Review pricing to ensure it still reflects good value (5) Review product portfolios and brand architecture
packages and sells it on the black market), cloner (emulates leaders’ product, name and packaging, with to assure the right products to sell to the right customers in right places and times.
slight variations), imitator (copies some things from leader but differentiates on packaging) , or adapter (takes
leaders' products and adapts or improves). PLC depends on consumer preference & adoption (BM), technological change and business strategy
• The Bass Model (BM) or Bass Diffusion Model was developed by Frank Bass and it consists of a simple
differential equation that describes the process of how new products get adopted in a population.
• A market NICHER serves small market segments not being served by larger firms. • The model presents a rationale of how current adopters and potential adopters of a new product
interact.
• The key to nichemanship is specialization: (1) offer high value, (2) charge premium price (3) achieve
• The basic premise of the model is that adopters can be classified as innovators or as imitators and the
lower manufacturing costs (4) shape a strong corporate culture and vision
speed and timing of adoption depends on their degree of innovativeness and the degree of imitation
• Nichers develop offerings to fully meet a certain group of customers’ needs, commanding a premium price among adopters.
in the process.. • The Bass model has been widely used in forecasting, especially new products' sales forecasting and
• Tasks: create, expand and protect niches. | Risks: niche might dry up or be attacked and the company is technology forecasting.
stuck highly specialized resources which may not have high-value alternative uses. | Firm Strategy: “stick to S = Sales in period t
its nitching” but not necessarily to its niche. Q = Cumulative Sales by the end of period t
M = Potential Market
p = Innovation coefficient
emphasis on competitors. They should maintain a good balance of consumer and competitor monitoring. q = Imitation coefficient
their marketing strategy several times during a product’s life cycle. Technologies, product forms, and brands
also exhibit life cycles with distinct stages. The life cycle stages are usually introduction, growth, maturity,
and decline. Most products today are in the maturity stage.
• PRODUCT LIFE CYCLE: Each product life cycle stage calls for different marketing strategies. The The coefficient p is called the coefficient of innovation,
introduction is marked by slow growth and minimal (or nonexistent) profits, due to heavy spending. If external influence or advertising effect. The coefficient q
is called the coefficient of imitation, internal influence or
successful, the product enters a growth stage marked by rapid market acceptance and sales growth with
word-of-mouth effect.
substantially increased profits. There follows a maturity stage in which sales growth slows, because the
product achieved acceptance by most potential buyers, and profits stabilize (or decline) due to increased Typical (average) values of p and q when time t is
measured in years:
competition. Finally, the product enters a decline stage and sales show a downward drift and profits erode.
• p = 0.03, and is often < 0.01
The company’s task is to identify the truly weak products, develop a strategy for each, and phase them out in NEW ADOPTERS
ADOPTERS • q = 0.38, with a typical range between 0.3 and 0.5
INNOVATORS
a way that minimizes impact on company profits, employees, and customers.
IMITATORS
12 - SETTING PRODUCT STRATEGY
1. Product is the first and most important element of the marketing mix. Product strategy calls for making
coordinated decisions on product mixes, product lines, brands, and packaging and labeling.
• The customer will judge the offering by three elements: (1) product features & quality (2) services mix &
quality (3) Price
2. In planning its market offer, the marketer need to think through the five levels of the product: the (1) core
benefit, the (2) basic product, the (3) expected product, the (4) augmented product, and the (5) potential
product, which encompasses all the augmentations and transformations the product might ultimately
undergo.
• (1) Service or benefit the customer is really buying: hotel guest is buying rest & sleep (2) core benefit
expressed as a product: bed, bathroom, towels, closet… (3) attributes & conditions buyers normally expect
when they purchase product: clean bed, fresh towels, working lamps… | Where competition takes place in
developing, emerging markets (4) exceeds customer expectations | where competition take place in 9. Physical products must be packaged and labeled. Well designed packages can create convenience value
developed markets (5) Where firms search for new ways do differentiate their offering. for customers and promotional value for producers. Warranties and guarantees can offer further assurance
to consumers.
• Differentiation & Competition force marketer to look at the users’ Total Consumption System: how the
user gets and uses products and related services. Augmentation adds (costs and) benefits which soon
become expected benefits and POPs in the category.
3. Products can be (1) nondurable goods, (2) durable goods, or (3) services.
• (1) tangible goods normally consumed in 1 or few uses (2) tangible goods that normally survive many years
(3) intangible, inseparable, variable, perishable products that normally require more quality control, supplier
credibility and adaptability.
In the CONSUMER-GOODS category are (4) convenience goods (staples - purchased on regular basis;
impulse goods - no planning or search effort; emergency goods - purchased when urgent), (5) shopping goods
(homogeneous - similar quality & different price; heterogeneous - different features and services), (6)
specialty goods, and (7) unsought goods.
• (4) frequent, immediate and effortless purchases (5) consumer compares - suitability, quality, price, style -
before purchase (6) Unique; buyers willing to make special purchasing effort with no comparisons (7)
consumer does not know or normally think of buying it.
The INDUSTRIAL-GOODS category has three subcategories according to relative cost and entry in
production process: (8) materials and parts, (9) capital items, and (10) supplies & business services.
• (8) raw materials - farm & natural products; manufactured materials & parts - components (9) Installations
- building and heavy equipment; major purchase | Equipment - portable factory & office equipment; tools (10)
short-term goods / services that facilitate developing and managing finished product - operating supplies,
maintenance and repair items, maintenance and repair services, and business advisory services
4. Brands can be differentiated on the basis of product (1) form, (2) features, (3) customization (4)
performance, (5) conformance, (6) durability, (7) reliability, (8) repairability, (9) style and design, as well 13 - DESIGNING and MANAGING SERVICES
as on the basis of service dimensions as (10) ordering ease, (11) delivery, (12) installation, customer (13)
training, customer (14) consulting, (15) maintenance & repair and (16) Returns
• (1) size, shape, physical structure (2) supplement the basic product. New feature introduction should be
done after: calculating customer value vs company cost; considering market potential for feature, time
until introduction and whether competitors would be able to copy it. (3) meet customer requirements (4)
level - low, average, high, superior - at which product primary characteristics operate (5) level at which
produced units are identical and meet expectations (6) expected operating life - under natural or stressful
conditions (7) probability of not malfunctioning or failure within specified time period (8) easiness of fixing
a product (9) products look & feel to the buyer (10) easiness in placing order with the company (11) how 2. Services are intangible, inseparable, variable, and perishable. Each characteristic poses challenges and
well product or service is brought to the customer - speed, accuracy, care (12) work done to make a product
operational in its planned location (13) helping employees use vendors’ equipment properly & efficiently
(14) data, information systems and advice services the seller provides to buyer (15) helping customers
keep purchased products in good working order (16) Controllable returns - result from problems or errors;
Uncontrollable returns - result from customers in person experience with products.
5. Design is the totality of features that affect how a product looks, feels, and functions. A well-designed
product offers functional and aesthetic benefits to consumers and can be an important source of
differentiation.
6. Most companies sell more than one product. A product mix can be classified according to width, length,
depth, and consistency. These four dimensions are the tools for developing the company’s marketing strategy
and deciding which product lines to grow, maintain, harvest, and divest. To analyze a product line and decide
how many resources to invest in it, product line managers need to look at sales and profits and market
profile.
• The Product Hierarchy stretches from basic needs to particular items that satisfy those needs: (1) Need
Family - core need that underlies the existence of a product family (2) Product Family - all product classes
that can satisfy a core need withe reasonable effectiveness (3) Product Class - group of products within the
product family recognized as having a certain functional coherence; aka Product Category (4) Product Line
- group of products with in a product class that are closely related (perform similar function), sold to same
customer groups, marketed through same outlets or channels, or fall within given price ranges (5) Product
type - group of items within product line that share one of several possible forms of the product (6) Item -
distinct unit within brand or product line, distinguishable by size, price, appearance or some other attribute.
7. A company can change the product component of its marketing mix by lengthening its product via line
stretching (down-market, up-market, or both) or line filling, by modernizing its products, by featuring certain
products, and by pruning its products to eliminate the least profitable.
• The Product System: group of diverse but related items that function in a compatible manner
• Product Mix / Assortment: set of all products and items a particular seller offers for sale. Consists of various
product lines and has certain width (how many different product lines the company carries), length (total
number of items in the mix), depth (how many variants are offered of each product in the line) and
consistency (how closely related the various product lines are).
• Product Line Analysis:
• Understanding product lines’: (1) sales & profits - items can differ in their potential for being priced
higher or advertised more; (2) market profile - review how the line is positioned relative to competitors’
lines, develop product maps.
• Line Stretching:
• Down-market Stretch: a company positioned in the middle market introduces a lower-priced line |
• Up-market Stretch: companies may wish to enter the high end of the market seeking more growth, higher
margins or simply position as full-line manufacturers.
• Two-way Stretch: companies that stretch their line both up- and down-market.
• Line Filling: adding more items within the present range; overdone if it results in self-cannibalization and
customer confusion.
• Line Modernization, Featuring and Pruning: Every line needs to be continually modernized. The question is
on how to re-shape it: partially (less cash draining; allows company to see how customers and dealers take to
the new style; but lets competitors see changes) or all at once. Should be done on a timely manner (not too
soon neither too late).
• Product Mix Pricing: Firm searches for a set of prices that maximizes profits on the total mix. We can
distinguish 6 situations calling for pricing: (1) Product Line Pricing (2) Optional-feature Pricing (3) Captive-
product Pricing (4) Two-part Pricing (5) By-product Pricing (6) Product-bundling Pricing - Packs
• (1) Price steps which customer associates with low- , average- and high-quality | sellers task is to
establish perceived quality differences that justify price differences (2) Firm decides which features to
include in standard price and which to offer separately - restaurants foods & beverages example (3)
Products that require ancillary products - razors & razor blades (4) Fixed fee plus a variable usage fee -
Amusement parks admission fee & fee for rides (5) Sugar cane by-product: waste sugar cane fiber used to
manufacture wallboard (6) Pure bundling - firm offers its products only as a bundle (tied-in-sales); Mixed
bundling - seller offers goods both individually and in bundles, normally charging less for the bundle.
8. Brands are often sold or marketed jointly with other brands. Ingredient brands and co-brands can add value, DETERMINANTS OF SERVICE QUALITY (by order of importance): 6 PRICING METHODS:
assuming they have equity and are perceived as fitting appropriately. • Reliability: ability to perform the promised service dependably and accurately 3 - PERCEIVED-VALUE: Firm must deliver the
• Responsiveness: willingness to help customer and provide prompt service value promised by their value proposition, and
• Co-branding aka dual branding and bundle branding: 2 or more well-known brands are combined into a • Assurance: knowledge and courtesy of employees and their ability to convene trust and confidence 1- MARKUP: The most elementary pricing method is customers must perceive this value. Firms use
joint product or marketed together. • Empathy: provision of caring, individualized attention to customers to add a standard markup to the product’s cost. the other marketing program elements, such as
• 4 types (of co-branding): same-company; joint-venture; multiple-sponsor and retail (two retail • Tangibles: the appearance of physical facilities, equipment, personal and communication materials advertising, sales force and the Internet to
establishments use the same location to optimize space and profits) communicate and enhance perceived value in
• Advantages: product convincingly positioned by virtue of the multiple brands; can generate greater sales; can DYNAMIC PROCESS MODEL: buyers’ minds.
open opportunities; can reduce costs. • Increasing customer expectations of what the firm will deliver can lead to improved perceptions of overall
• Potential Disadvantages: risk & lack of control in becoming aligned with another brand in consumers’ minds. service quality. 4 - VALUE PRICING: Win loyal customers by
• To succeed: both brands must have brand equity and the two brands must fit logical • Decreasing customer expectations of what the firm should deliver can lead to improved perceptions of charging a fairly low price for a high-quality
• Ingredient branding (ex.: Gore-Tex): (1) Consumers must believe ingredient matters to the performance (2) overall service quality. 2 - TARGET-RETURN: Firm determines the price
that yields its target rate of (fair) ROI offering. It’s not just lowering prices, rather
Consumer must be convinced that not all ingredient brands are the same (3) A distinctive signal / logo must covers reengineering the company’s operations
signal that the host product contains the ingredient (4) A coordinated “pull & push” program must help PAYMENT EQUITY: The perceived economic benefits in relationship to the economic costs (“Am I using this to become a low-cost producer without
consumers understand the advantages of the branded ingredient. service enough, given what I’ve paid for it?”) sacrificing quality, to attract a number of various
value conscious customers. Two important types
(2) INCORPORATING SELF-SERVICE TECHNOLOGIES (SSTs): Consumers value convenience in services. Not The total revenue curve starts at zero and rises with of value pricing: everyday low pricing (EDLP) -
all SSTs improve service-quality but they can make service transactions more accurate, convenient and faster. charging a constant low price with little or no
each unit sold. When the total revenue and total
SSTs can also reduce costs. price promotions and special sales; high-low
cost curves cross = break-even volume (BEV)
pricing - charge higher prices on everyday
• Packaging: Includes all activities of designing and producing the container for a product. It is the buyers’ first basis but run frequent promotions with prices
encounter with the product. Standard packaging levels: primary package (bottle) secondary package 14 - DEVELOPING PRICING STRATEGIES and PROGRAMS: temporarily lower than the EDLP level.
(cardboard) shipping package (corrugated box)
1. Despite the increased role of non-price factors in modern marketing, price remains a critical element of 5 - GOING-RATE: The firm bases its price
• Factors that contribute to the growing use of packaging as a marketing tool: (1) Self-service (2) Consumer- marketing. Price is the only element that produces revenue; the others produce costs. Pricing decisions have largely on competitor price - “follow the leader”.
affluence (3) Company and brand image (4) Innovation opportunity become more challenging, however, in a changing economic and technological environment. Popular when costs are difficult to measure or
competitive response uncertain. Companies feel
(1) increasing number of products are sold on a self-service basis (2) rising affluence means UNDERSTANDING PRICING: going price reflects industry’s collective wisdom.
consumers are willing to pay (WTP) a little more for the convenience, appearance, dependability and Pricing Environment: Downward price pressure from a changing economic environment coincided with some
prestige of better packages (3) packages contribute to instant recognition of company or brand (4) longer-term trends in the technological environment. Today, the Internet allows sellers and buyers to discriminate 6 - AUCTION-TYPE: English auctions - one
innovative packaging can bring benefits to consumers and profits to producers. among each other. From the buyers perspective, customers can instantly compare prices, name the price and seller with many buyers raising bids until top
have it met or get products free. On the other hand, sellers can monitor customer behavior and tailor offers price is reached. Dutch auctions - one seller,
• Objectives to be achieved by packaging: (1) Brand identification (2) Convey descriptive and persuasive individually or give certain customers access to special prices. Finally, through Internet, both buyers and many buyers or one buyer, many sellers.
information (3) Facilitate product transportation and protection (4) Assist at-home storage (5) Aid product sellers can negotiate prices in online auctions and exchanges or even in person. Auctioneer announces high price, slowly
consumption. decreases, until one bidder accepts. Sealed-bid
How Companies Price: Many companies do not handle pricing well. Effectively designing and implementing auctions - suppliers submit one bid (they do not
• Testing: after designing, the company must test its packaging through (1) Engineering tests - ensure that the pricing strategies requires deep understanding of consumer pricing psychology and a systematic approach to know other suppliers bids) above cost, but not to
package stands up under normal conditions (2) Visual tests - ensure that the script is legible and the colors setting, adapting and changing prices. high for fear of loosing auction.
harmonious (3) Dealer tests - ensure that dealers find the packages attractive and easy to handle (4)
Consumer tests - ensure that buyers will respond favorably (6) SELECTING THE FINAL PRICE: In selecting final price, company must consider additional factors,
Consumer Psychology and Pricing: Marketers recognize that consumers often actively process price
such as: (a) Impact of other marketing activities - price must take into account the brand’s quality and
information, interpreting it from the context of prior purchasing experience, formal communications (advertising,
• Labeling: a label (1) identifies, (2) describes and (3) promotes the product or brand. It might also (4) grade advertising relative to the competition (b) Company pricing policies - price must be consistent with
sales calls and brochures), informal communications (friends, colleagues or family members), pout-of-purchase or
the product - ex.: canned fruit quality A, B, C. company pricing policies; quote prices that are reasonable to customers and profitable to the company (c)
online resources and other factors. Purchase decisions are based on how consumers perceive prices and on
Gain-and-risk-sharing pricing - offer to absorb part or all the risk if the seller does not deliver the full
what they consider the current actual price to be - not on the marketers’ stated price.
• Warranties and Guaranties: all sellers are legally responsible for fulfilling buyers’ normal or reasonable promised value and share the gains (d) Impact of price on other parties distributors and dealers,
• 3 topics for understanding how customers perceive price: (1) Reference prices - comparing an observed
expectations. Warranties are formal statements of expected product performance by the manufacturer. competitors, suppliers, government, etc…
price with an internal reference price the consumer remembers or with an external frame of reference (2)
Guarantees reduce the buyers perceived risk. Price-quality inferences - many consumers use price as a quality indicator (3) Price endings - prices should
end in an odd number.
3. Firms often need to change their prices. A price decrease might be brought about by excess plant
capacity, declining market share, a desire to dominate the market through lower costs, or economic
1. A service is any act or performance that one party can offer to another that is essentially intangible and does 2. In setting pricing policy, a company follows a six-step procedure. It selects its (1) pricing objective. It (2)
recession. A price increase might be brought about by cost inflation or over-demand. Companies
not result in the ownership of anything. It may or may not be tied to a physical product. estimates the demand curve, the probable quantities it will sell at each possible price. It (3) estimates how
must carefully manage customer perceptions when raising prices.
its costs vary at different levels of output, at different levels of accumulated production experience, and for
• Categories of Service Mix: Five categories of offerings: (1) Pure tangible good with no accompanying differentiated marketing offers. It (4) examines competitors’ costs, prices, and offers. It (5) selects a pricing
ADAPTING THE PRICE: Companies usually do not set a single price, but rather develop a pricing structure
services (2) Tangible good with accompanying services (3) Hybrid - an offering of equal part of goods & method, and it (6) selects the final price.
that reflects variations a set of factors.
services (4) Major service with accompanying minor goods & services - requires a capital intensive good for
its realization but primary item is a service (air travel) (5) Pure service - intangible service (babysitting) SETTING THE PRICE - Steps in selecting a Pricing Policy: GEOGRAPHICAL PRICING (Cash, Countertrade, Barter): company decides how to price its products to
(1) SELECTING PRICING OBJECTIVE: the firm decides where it wants to position its offering. 5 major objectives:
different customers in different locations and countries. Many buyers want to offer other items in payment, a
(a) Survival - short-run objective; as long as prices cover variable costs and some fixed costs, the firm stays in
practice known as countertrade. This happens under several forms: (1) Barter - buyer & seller exchange
requires certain strategies. Marketers must find ways to give tangibility to intangibles, to increase the business; in the long-run, the firm must learn how to add value or face extinction (b) Max Current Profit - firm
estimates demand and costs associated with alternative prices and chooses the one that produces maximum goods, with money or third party (2) Compensation deal - seller receives % of payment in cash and rest in
productivity of service providers, to increase and standardize the quality of the service provided, and to
current profit, cash flow or rate of ROI (c) Max Market Share - firm believes a higher sales volume will lead to products (3) Buyback arrangement - seller sells a product and agrees to accept as partial payment
match the supply of services with market demand.
lower unit costs and higher long-run profit. They set the lowest price, assuming the market is price sensitive - products manufactured with the supplied equipment (4) Offset - seller receives full payment in cash but
• Distinctive Characteristics of services: (Greatly affect the design of marketing programs market-penetration pricing (d) Max Market Skimming - prices start high and slowly drop over time; this strategy agrees to spend a substantial amount of the money in that country within a stated time.
makes sense when -1- a sufficient number of buyers have high current demand -2- the unit costs of producing a
• 1) Intangibility: the service providers’ task is to “manage the evidence”, to “tangibilize the intangible”. small volume are high enough to cancel the advantage of charging what the traffic will bear -3- the high initial price PRICE DISCOUNTS & ALLOWANCES: most companies will adjust their list price, give discounts and
Marketers must try to demonstrate the service quality through physical evidence and presentation by dos not attract more competitors to the market and -4- the high price communicates the image of a superior allowances (for early payment, volume purchases and off-season buying) under several forms: (1)
place, people, equipment, communication material, symbols price. product. (e) Product-quality Leadership - “affordable luxuries”; products or services with high levels of perceived Discount - price reduction to buyers who pay bills promptly (2) Quantity Discount - price reduction to
quality, taste and status (f) Other objectives - nonprofit and public organizations may aim for partial or full costs those who buy large volumes (3) Functional Discount - trade discount offered by manufacturer to trade-
• 2) Inseparability: Services are produced and consumed simultaneously. Provider is part of the service and recovery, through private gifts and public grants. channel members if they perform certain functions: selling, storing and record keeping (4) Seasonal
can work with larger groups, work faster, train more service provider and build up confidence. Discount - price reduction to those who buy merchandise or services out of season (5) Allowance - an
(2) DETERMINING DEMAND: Generally, the higher the price, the lower the demand. Price Sensitivity: 1st step in
extra payment designed to gain reseller participation in special programs (turn in old item when buying new
• 3) Variability: Task is to reassure customers by offering service guarantees that may reduce consumer estimating demand is understanding price sensitivity factors. Customers are less price-sensitive to (a) low-cost one). Higher levels of management should should conduct “net price analysis” to arrive at the real price of
perceptions of risk. Services are highly variable because quality of services depends on who, when, where, items (b) items they buy infrequently; when (c) there are few or no substitutes or competitors (d) they do not
the offering.
to whom. 3 steps service firms can take to increase quality control: (1) Invest in good hiring & training readily notice the higher price (e) they are slow to change their buying habits (f) they think higher price is
procedures (2) standardize the service performance process throughout the organization - service blue- justified (g) the price is only a small part of the cost of obtaining, operating and servicing the product over its
print can map out the service process, the points of customer contact and the evidence of service lifetime. PROMOTIONAL PRICING: Pricing techniques to stimulate early purchase - (1) Loss-leader pricing -
from the customer point of view (3) monitor customer satisfaction. compensate dropped prices on well-known brands with additional sales for lower margins on loss-leader
ESTIMATING DEMAND: among some of the methods used to measure demand are (a) surveys - can explore items (2) Special event pricing - special prices in certain seasons to draw more customers (3) cash
• 4) Perishability: Since services can not be stored, demand or yield management are crucial. The right how many units customers would buy at different prices; might be biased (b) price experiments - vary prices of rebates (4) low-interest financing - instead of cutting prices, offer interest financing (5) longer payment
services must be available to right customers, at right places, at right times and at right prices to maximize different products in a store or charge different prices for the same product in similar territories to see how sales terms - stretch loans over longer periods and lower monthly payments (6) Warranties and service
profitability. Several strategies can produce a better match between service demand & supply: change (c) statistical analysis - of past prices, quantities sold and other factors looking for relationships. contracts - promote sales by adding free or low-cost warranty service contract (7) Psychological
discounting - set an artificially high price and then offer the product at substantial savings.
• Demand side: (1) Differential price - will shift some demand from peak to off-peak periods (2) non-peak PRICE ELASTICITY OF DEMAND: Determine how responsive, or elastic, demand is to change in price. Inelastic
demand - can be cultivated (3) complementary services - can provide alternatives to waiting customers demand: demand hardly changes with a small change in price. Elastic demand: demand changes considerably DIFFERENTIATED PRICING: occurs (at 3 levels) when a company sells a product or service at two or
(4) reservation systems - a way to manage demand level. with small changes in price. So, the higher the elasticity, the greater the volume growth resulting from a 1%
more prices that do not reflect a proportional difference in costs. 1st Degree: seller charges a separate
price reduction. Price elasticity depends on the magnitude and direction of the change. There may be a price
price to each customer depending on intensity of demand. 2nd Degree: seller charges less to buyers of
• Supply side: (1) part-time employees - can serve peak demand (2) peak-time efficiency - routines can indifference band within which price changes have little or no effect. Long-run price elasticity may differ from
larger volumes. 3rd Degree: seller charges different amounts to different classes of buyers, as in the
allow employees to perform only essential tasks during peak periods (3) Increased consumer participation short-run and seller will not know the total effect of a price change until time passes.
- frees service providers time (4) Shared services - can improve offerings (5) Facilities for future following cases: (1) Customer-segment pricing - different customer groups offered different prices for
expansion - can be a good investment. (3) ESTIMATING COSTS: Demand set a ceiling on the price companies can charge for its products. Costs set the same product or service (2) Product-form pricing - different versions of the product are priced differently,
floor. Thus, companies will charge a price that covers its cost of producing, distributing and selling the product, but not proportionally to their costs (3) Image pricing - price the same product at two different levels based
3. Superior service delivery requires managing customer expectations and incorporating self-service including a fair return for its effort and risk. on image differences (4) Channel pricing - different price depending on where the customer purchases it
technologies. Customers’ expectations play a critical role in their service experiences and evaluations. (5) Location pricing - same product is priced differently at different locations even though the cost of
Companies must manage service quality by understanding the effects of each service encounter. TYPES OF COSTS AND LEVELS OF PRODUCTION: Fixed costs (aka overhead costs) - costs that do not vary offering it, at each location, is the same (6) Time pricing - prices vary by season, day or hour (7) Yield
with production level or sales revenue. Variable costs - vary directly with level of production. Total costs = FC +
pricing - offering different pricing schedules to different consumers and dynamically adjusting prices
• Critical behavior leading to customer switching services: Pricing, inconvenience, core service failure, VC, for any given level of production. Average costs = TC / Production; cost per unit, at the level of production.
(airlines - offer discounted but limited early purchases, higher-priced late purchases and lowest rates on
service encounter failures, response to service failure, competition, ethical problems, involuntary switching There are more costs than those associated with manufacturing. To estimate the real profitability of selling the
manufacturer needs to use the activity-based cost (ABC) accounting, instead of standard cost accounting. unsold inventory just before it expires.
TWO IMPORTANT CONSIDERATIONS IN SERVICE DELIVERY: (1) M A N A G I N G C U S TO M E R E X P E C TAT I O N S :
ACCUMULATED PRODUCTION: The average cost declines with accumulated production experience. This is Price Discrimination: LEGAL (seller can prove its costs are different when selling different volumes or
Customers compare perceived- with expected-
called the experience curve aka learning curve. Experience-curve pricing carries major risks as it might give the different qualities of the same product to different retailers) ILLEGAL (if sellers offer different price terms to
service. Successful companies: satisfy + delight different people within the same trade group). Predatory-pricing (aka Dumping) is one other form of illegal
product a cheap image and also assumes competitors are weak followers. This strategy leads the company to
(exceeding customers expectations). The service pricing (where seller sells below cost with the intention of destroying competition)
build more plants (in order to meet demand) which can make it stuck to old technology if a competitor develops an
quality model highlights the main requirements for innovative, low-cost, technology. CONDITIONS FOR PRICE DISCRIMINATION SUCCESS: (1) Market segments must show different
delivering high service quality.
intensities of demand (2) Members in lower-price segment must not be able to resell product to higher-
TARGET COSTING: Costs change (decline) with production scale and experience. They can also change as a
price segment (3) Competitors must not be able to sell more cheaply (undersell) than the firm in higher-
• GAP 1: Between consumer expectation and result of concentrated effort by designers, engineers and purchasing agents reducing them through target
price segment (4) Costs of segmenting and policing the market must not exceed the extra revenue
management perception (management does not costing. The firm must examine each cost element and bring down costs so the final cost projections are in the
derived from price discrimination (5) Practice must not breed customer resentment and animosity (6)
correctly perceive what customers want). GAP 2: target range.
Particular form of price discrimination must not be illegal.
Between management perception and service-quality
(4) ANALYZING COMPETITORS’ COSTS, PRICES and OFFERS: Within the range of possible prices determined
specification (management might correctly perceive
by market demand and company costs, the firm must take competitors’ costs, prices and price reactions into 4. Companies must anticipate competitor price changes and prepare contingent responses. A number of
customers’ want, but not set as a performance responses are possible in terms of maintaining or changing price or quality.
account. If the firm’s offer contains features not offered by the nearest competitor, it should evaluate their worth
standard. GAP 3: Between service-quality to the customer and add that value to the competitor’s price. If the competitor’s offer contains some features
specifications and service delivery (employees might INITIATING & RESPONDING TO PRICE CHANGES
not offered by the firm, the firm should subtract their value from its own price. Now, the firm can decide whether
be poorly trained, incapable or unwilling to meet the it can charge more, the same, or less than competitor. Competitors are most likely to react when the number of
INITIATING PRICE CUTS: Both excess plant capacity (firm needs additional business) and drive to
standards). GAP 4: Between service delivery and firms is few, the product is homogeneous, and buyers are highly informed.
external communications (consumers expectations dominate the market through lower costs are circumstances that might lead a firm to cut prices. Possible
are affect by statements made by company (5) SELECTING A PRICING METHOD: Major considerations in price setting are: (1) Costs set the price floor (2) traps inherent to price cuts: (1) Low-quality - consumers assume quality is low (2) Fragile-market-share -
representatives and ads). GAP 5: Between perceived Competitors’ and substitutes prices provide an orienting point (3) Customers’ assessment of unique features low price buys market share but not market loyalty (3) Shallow-pocket - higher-priced competitor match
service and expected service: occurs when consumer establishes the price ceiling. lower price with deeper cash reserves and, thus, have longer staying power (4) Price-war - competitors
misperceives the service quality. respond by lowering their prices even more.
INITIATING PRICE INCREASE: Among circumstances provoking price increases are (1) cost inflation -
rising costs unmatched by productivity gains squeeze profit margins and lead companies to regular rounds
EVALUATING CHANNEL ALTERNATIVES -
or price increases (2) anticipatory pricing - raise price by more than the cost increase, in anticipation of
each channel alternative needs to be evaluated
further inflation or government price controls (3) over-demand - when company cannot supply all its
against:
customers and can increase price by (a) delayed quotation pricing (Construction - no final price until
product is finished / delivered) (b) escalator clauses (Major industrial projects - pay today’s price and all, or ECONOMIC CRITERIA: each channel
part, of inflation increase that takes place before delivery) (c) unbundling (maintains its price but removes or alternative will produce a different level of sales
prices separately one or more elements that were part of the former offer, such as free delivery / and costs (see chart).
installation) (d) reduction of discounts (not offering normal cash and quantity discounts). CONTROL & ADAPTIVE CRITERIA: producer
needs channel structures and policies that
The more similar the products offering from a company, the more likely the consumers are to interpret any provide high adaptability.
pricing differences as unfair. Several techniques for avoiding consumer hostile reaction when prices rise:
(1) maintaining sen of fairness, by giving customers advanced notice, so they can forward buy or shop
around (2) offering detailed explanation for increase (3) making low-visibility price moves first
(eliminating discounts or increasing minimum order sizes) (4) contracts or bids for long-term projects
containing escalator clauses. HYBRID CHANNELS & MULTICHANNEL MARKETING: occurs when a single firm uses 2 or more marketing channels
to reach customer segment. Each channel targets a different segment of buyers or different needs for one buyer and
5. The firm facing a competitor’s price change must try to understand the competitor’s intent and the likely delivers the right product, in the right places, in the right way at least cost. Make sure the hybrid channels work well
duration of the change. Strategy often depends on whether a firm is producing homogeneous or non- together and match each target customer preferred ways of doing business (channel integration)
homogeneous products. A market leader attacked by lower-priced competitors can seek to better
differentiate itself, introduce its own low-cost competitor, or transform itself more completely. DOUBLE MARGINALIZATION: accumulation of manufacturer and distributor margin, leading to a final retail price paid
by consumers which does not maximize system profits. Effects of Double Marginalization: (1) final retail price too
RESPONDING TO COMPETITOR’S PRICE CHANGES: The best response varies with the situation and high; (2) quantity sold is too low; (3) long distribution channel may make unfeasible the sale of certain products.
depends on the product’s life cycle stage, portfolio importance, competitor’s intentions and resources,
market's price & quality sensitivity, behavior of costs with volume and company’s alternative opportunities. CHANNEL DESIGN: to design a marketing channel system marketers (a) analyze customer needs and wants, (b)
establish channel objectives and constraints and (c) identify & evaluate major channel alternatives.
In markets characterized by high product homogeneity, the firm can try to enhance its augmented
product. If not possible, it may need to meet the price reduction. (a) There are 3 types of shoppers: (1) service / quality customers (2) price / value customers (3) Affinity customers.
Channels produce 5 service output: (1) Lot size (2) Waiting and delivery time (3) Spatial convenience (4) Product
In non-homogeneous product markets, the firm needs to consider the following issues regarding competitor
variety (5) Service backup
strategy: (1) Why did it change the price ? (2) Is the change permanent or temporary ? (3) Impact of not
(b) In terms of service output levels and associated cost and support levels
responding to price change in company’s market share and profits (4) How will competitor’s likely respond
(c) Channel alternatives differ in 3 ways: (1) types of intermediaries (Direct Marketing Channel - Sales Force,
to each possible reaction?.
Telemarketing, Mail, Internet, Own Stores, Own Warehouses | Indirect Marketing Channel - Wholesaler, Retailers,
Leaders frequently face low-price attacks, which they can address through 3 possible responses: (1) Dealers, Franchising, Specialized Stores, Agents) (2) number of intermediaries (Distribution: exclusive, selective,
further differentiate the product or service (2) introduce a low-cost venture (3) reinvent as a low-cost intensive) (3) terms & responsibilities of channel members
player.
Push Strategy: uses the manufacturers sales force, trade promotion money or other means to induce intermediaries to
D(p) = Demand (D) is a function of price (p)
carry, promote and sell the product to end user. Pull Strategy: the manufacturer uses advertising, promotion and other
forms of communication to persuade consumer to demand the product from intermediaries.
The company is free to charge the price (it is a price maker), therefore it has some market power
CHANNEL MANAGEMENT DECISIONS
Profit Function: p - price ; c - unit variable costs ; F - fixed costs ; D - demand
TYPES OF CONFLICTS & COMPETITION: Horizontal channel conflict - between channel members at the same
Golden Rule (PRICE ELASTICITY): margin should be inversely proportional to elasticity
level. Vertical channel conflict - between different levels of the channel. Multi-channel conflict - when the
manufacturer has established two or more channel that sell to the same market. It's likely to be specially intense when
the members of one channel get a lower price or work with a lower margin.
CAUSES OF CHANNEL CONFLICT: (1) Goal incompatibility - market-penetration vs high profits (2) Unclear roles &
rights (3) Differences in perception (4) Intermediaries dependence on the manufacturer (5) Violation of territory
exclusivity (grey market aka parallel market) (6) Different sales conditions among channel members (7) Power
asymmetry.
CONFLICT ZONES: In practice, conflicts emerge from differences of opinion about (1) margin sharing - commissions
(2) effort sharing - costs (3) unfair practices - discrimination.
STRATEGIES TO MANAGE CONFLICT: (1) Adoption of superordinate goals - survival, market share, high quality,
customer satisfaction (2) Exchange of employees (3) Joint membership of trade associations (4) Co-optation (5)
Diplomacy, mediation and arbitration (6) Legal recourse.
17 - DESIGNING & MANAGING INTEGRATED MARKETING COMMUNICATIONS
1. Modern marketing calls for more than developing a good product, pricing it attractively, and making it accessible to target
customers. Companies must also communicate with present and potential stakeholders and with the general public.
2. The marketing communications mix consists of eight major modes of communication: advertising, sales promotion,
public relations and publicity, events and experiences, direct marketing, interactive marketing, word-of-mouth
marketing, and personal selling.
15 - DESIGNING & MANAGING INTEGRATED MARKETING CHANNELS 3. The communications process consists of nine elements: sender, receiver, message, media, encoding, decoding,
CHAPTER SUMMARY response, feedback, and noise. To get their messages through, marketers must encode their messages in a way that
1. Most producers do not sell their goods directly to final users. Between producers and final users stands takes into account how the target audience usually decodes messages. They must also transmit the message through
one or more marketing channels, a host of marketing intermediaries performing a variety of functions. efficient media that reach the target audience and develop feedback channels to monitor response to the message.
2. Marketing channel decisions are among the most critical decisions facing management. The company’s
chosen channel(s) profoundly affect all other marketing decisions. 4. Developing effective communications requires eight steps: (1) Identify the target audience, (2) determine the
communications objectives, (3) design the communications, (4) select the communications channels, (5) establish the
3. Companies use intermediaries when they lack the financial resources to carry out direct marketing,
total communications budget, (6) decide on the communications mix, (7) measure the communications results, and
when direct marketing is not feasible, and when they can earn more by doing so. The most important
functions performed by intermediaries are information, promotion, negotiation, ordering, financing, risk (8) manage the integrated marketing communications process.
taking, physical possession, payment, and title.
(1) Profile target audience with market segments or image analysis (2) see point 5 below (3) see point 6 below;
4. Manufacturers have many alternatives for market. They can sell direct or use one-, two-, or three level
channels. Deciding which type(s) of channel to use calls for analyzing customer needs, establishing informational appeals - elaborates on product / services attributes or benefits; transformational appeals - elaborate on
channel objectives, and identifying and evaluating the major alternatives, including the types and non product related benefit or image. (4) check chapter 18 (5) see point 7 below
numbers of intermediaries involved in the channel.
5. Effective channel management calls for selecting intermediaries and training and motivating them. 5. In identifying the target audience, the marketer needs to close any gap that exists between current public perception
The goal is to build a long-term partnership that will be profitable for all channel members. and the image sought. Communications objectives can be to create category need, brand awareness, brand attitude,
6. Marketing channels are characterized by continuous and sometimes dramatic change. Three of the most or brand purchase intention.
important trends are the growth of vertical marketing systems, horizontal marketing systems, and 6. Designing the communication requires solving three problems: what to say (message strategy - POPs & PODs), how
multichannel marketing systems.
to say it (creative strategy), and who should say it (message source). Communications channels can be personal
7. All marketing channels have the potential for conflict and competition resulting from such sources as (advocate, expert, and social channels) or non personal (media, atmospheres, and events).
goal incompatibility, poorly defined roles and rights, perceptual differences, and interdependent
relationships. There are a number of different approaches companies can take to try to manage conflict. 7. Although other methods exist (affordable; % of sales; competitive parity), the objective-and-task method of setting
the communications budget, which calls upon marketers to develop their budgets by defining specific objectives (MS%
8. Channel arrangements are up to the company, but there are certain legal and ethical issues to be
goal; % of prospects persuaded to try; nº of advertising impressions per 1% trial time; nº of GRP purchased; determine
considered with regard to practices such as exclusive dealing or territories, tying agreements, and
average budget), is typically most desirable.
dealers’ rights.
9. E-commerce has grown in importance as companies have adopted “brick-and-click” channel systems. 8. In choosing the marketing communications mix, marketers must examine the distinct advantages and costs of each
Channel integration must recognize the distinctive strengths of online and offline selling and maximize communication tool and the company’s market rank. They must also consider the type of product market in which they
their joint contributions. are selling, how ready consumers are to make a purchase, and the product’s stage in the company, brand and product.
10.An area of increasing importance is m-commerce and marketing through smart phones and PDAs.
Characteristics of the marketing communications mix: (A) Advertising - can build long-term image or trigger quick sales: (1)
SLIDES from CLASSES: Pervasiveness - permits seller to repeat message many times (2) Amplify expressiveness - provides opportunities for
CHANNEL MEMBERS KEY FUNCTIONS: (1) Information about potential and current customer, dramatizing the company and its brands & products through the artful use of print, sound & color (3) Control - advertiser
competitor and other actors. (2) Communication to stimulate purchasing (3) Agreement on price and can choose the aspects of the brand & product on which to focus communications. (B) Sales promotion - offers 3
other terms (4) Place orders with manufacturers (5) Acquire the funds to finance inventories at different distinctive benefits: (1) Ability to be attention-getting (2) Incentive (3) Invitation. (C) Public Relations & Publicity:
levels in the marketing channel (6) Assume risks connected with carrying out channel work (7) Storage & offers 3 distinctive qualities: (1) High credibility (2) Ability to reach hard to find buyer (3) Dramatization. (D) Events &
transport (8) Payment & billing to customers (9) Transfer of ownership - Intermediation Experiences: offers 3 distinctive benefits: (1) Relevant (2) Engaging (3) Implicit, indirect soft-sell. (E) Direct &
Interactive Marketing: (1) Customized (2) Up-to-date (3) Interactive. (F) Word-of-mouth: offers 3 distinctive benefits:
CONSUMER MARKET CHANNEL LEVELS: The producer and the final customer are part of every (1) Influential (2) Personal (3) Timely. (G) Personal Selling: offers 3 distinctive benefits: (1) Personal Interaction (2)
channel. 0-Level (aka Direct Marketing Channel): consists a manufacturer selling directly to the final Cultivation (3) Response.
customer - Bimby @ door-to-door. 1-Level: one selling intermediary (manufacturer > retailer > consumer).
2-Level: two intermediaries (manufacturer > wholesaler > retailer > consumer). 3-Level: three
9. Measuring the effectiveness of the marketing communications mix requires asking members of the target audience
intermediaries (manufacturer > wholesaler > jobber (small scale wholesaler who sell to small retailer >
whether they recognize or recall the communication, how many times they saw it, what points they recall, how they felt
retailer > consumer).
about the communication, and what are their previous and current attitudes toward the company, brand, and product.
Channels normally describe a forward movement of products from source to user, but reverse flow 10.Managing and coordinating the entire communications process calls for integrated marketing communications (IMC):
channels are also important because: (1) reuse products or containers (2) refurbish product for sale (3) marketing communications planning that recognizes the added value of a comprehensive plan to evaluate the
recycle products and (4) dispose of products and packaging. strategic roles of a variety of communications disciplines, and that combines these disciplines to provide clarity,
consistency, and maximum impact through the seamless integration of discrete messages.
18 - MANAGING MASS COMMUNICATION: ADVERTISING, SALES PROMOTIONS, EVENTS &
EXPERIENCES AND PUBLIC RELATIONS
1. Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an
identified sponsor. Advertisers include not only business firms but also charitable, nonprofit, and government
agencies.
2. Developing an advertising program is a five-step process: (1) Set advertising objectives, (2) establish a
budget, (3) choose the advertising message and creative strategy, (4) decide on the media, and (5)
evaluate communication and sales effects.
DEVELOPING and MANAGING an ADVERTISING PROGRAM:
Advertising: Can be a cost-effective to disseminate messages, build brand preference or to educate people.
In developing an advertising program marketing managers must always start by identifying the target market and
buyer motives. Then, they can make the 5 major decisions, called “The 5 Ms”: (1) Mission (2) Money (3)
Message (4) Media and (5) Measurement.
(1) SETTING THE OBJECTIVES: Must flow from prior decisions on target market, brand positioning and marketing
program.
• An advertising objective is a specific communication task and achievement level to be accomplished with a
specific audience in a specific period of time. This objectives correspond to different stages in hierarchy of
effects model: (1) Informative Advertising - aims to create brand awareness and knowledge of new products
or new features of existing products (2) Persuasive Advertising - aims to create liking, preference, conviction
and purchase of a product or service (3) Reminder Advertising - aims to stimulate repeat purchase of (9) EVALUATING ADVERTISING EFFECTIVENESS:
products and services (4) Reinforcement Advertising - aims to convince current purchaser that they made • Most advertisers try to measure the communication effects of an ad: its potential impact on
the right choice. awareness, knowledge or preference. They would also like to measure the ad sales effect.
(2) DECIDING ON THE ADVERTISING BUDGET: • COMMUNICATION-EFFECT RESEARCH (aka copy-testing): Seeks to determine whether and ad is
• Factors affecting budgeting decisions: (1) Stage in PLC - new brand usually require higher budget to build/
communicating effectively. Marketers should perform the test both before an ad is put into media, and
raise awareness (2) Market Share and consumer Base - high MS usually require less advertising (3)
after it is printed or broadcast.
Competition and entropy - more competitors usually require high advertising spending (4) Advertising
frequency - more repetitions, higher budget (5) Product Substitutability - brand in less differentiated product
• SALES-EFFECT RESEARCH: Companies are generally interested in finding out whether they are
classes require high advertising
• Advertising elasticity: The predominant response function for advertising is often concave but can be S-
overspending or underspending on advertising. A Companies share of advertising expenditures
shaped. When S-shaped (TV ads), some positive amount of advertising is necessary to generate any sales produces a share of voice that earns a share of consumers minds & hearts and, ultimately, a
impact, but sales increases eventually flatten-out. share of market. Researchers try to measure the sales impact by analyzing historical or
experimental data. The historical approach correlates post sales to past advertising expenditures
(3) DEVELOPING THE ADVERTISING CAMPAIGN: using advanced statistical technics.
• Marketers employ both heart and science to develop the message strategy or positioning of an ad (What?)
and its creative strategy (How?) 3. Sales promotion consists of mostly short-term incentive tools, designed to stimulate quicker or
• (1) Message generation and evaluation: advertiser are always seeking the next big idea that connects with
greater purchase of particular products or services by consumers or the trade.
customers rationally and emotionally. 1st task: prepare creative briefing and positioning statement.
• (2) Creative development and execution: the ads impact depend not only on what it says but, often more
SALES PROMOTIONS:
important, on how it says it. Every advertising medium has advantages and disadvantages: (a) TV ad: most
powerful, but messages and brand can be overlooked (b) Print ad: detailed information and brand can be
overlooked (c) Radio ad: Pervasive and flexible, but lacks visual images and relatively passive nature of the • Advertising offers a reason to buy. Sales promotion offers an incentive. Sales promotion includes tools
consumer processing that results. for: (1) Consumer promotion (2) Trade promotion (3) Business and Sales Force promotion.
• (3) Legal and social issues: Marketers must be sure ads do not overstep social and legal norms or offend
the general public, ethnic groups, racial minorities or special interest groups. (1) OBJECTIVES: sales promotions tools vary in their specific objectives. Sellers use incentive-type
promotions to attract new triers, to reward loyal customer and to increase the repurchase rates of
(4) DECIDING ON MEDIA and MEASURING EFFECTIVENESS occasional users. Sales promotions, in markets of high brand similarity, can produce a high sales
• After choosing the message, the advertisers next task is to choose media to carry it. response in the short-run but little permanent gain in brand preference over the longer-term.
• Deciding on Reach, Frequency and Impact: Media selection, is finding the most cost-effective media to
deliver the desired number and type of exposures to the target audience. The effect of exposures on audience
(2) ADVERTISING vs PROMOTION: Loyal brand buyers tend not to change buying patters as a result of
awareness depends on: (1) Reach - R - the number of different persons or households exposed to particular
competitive promotions. Advertising appears to be more effective at depending brand loyalty.
media schedule at least once during a specified time period (2) Frequency - F - the number of times within
Price promotions may not build permanent total-category volume. Many consumer-packaged goods
specified time period that an average person or household is exposed to the message (3) Impact - I - the
qualitative value of an exposure through a given medium. companies fill forced to use more sales promotions than they wish.
(3) MAJOR DECISIONS: In using sales promotion, a company must: (1) establish objectives (2) select
• The relationship between reach, frequency and impact is captured in the following concept:
• Total number of exposures (E) = R x F (gross rating points - GRP) consumer and trade promotion tools (3) develop, pretest, implement and control the program
• Weighted number of exposures (WE) = R x F x I and (4) evaluate the results.
• Reach is most important when launching new products, flanker brands, extension of well known brands or • (1) Sales promotion objectives derive from broader communication objectives, which derive from
infrequently purchased brands, going after undefined target markets more basic marketing objectives for the product (2) The promotion planner should take into
• Frequency is most important where there are strong competitors, a complex story to tell, high consumer
account the type of market, sales promotion objectives, competitive conditions and each consumer
resistance, frequent purchase cycle. A key reason for repetition is forgetting. The higher the forgetting rate
promotion tools cost-effectiveness. Manufacturers award money to the trade to persuade the
associated with a brand, product category or message, the higher the warranted level of repetition.
retailer or wholesaler - 1 - to carry the brand - 2 - to carry more units - 3 - to promote the brand
by featuring display and price reduction - 4 - to stimulate retailers and their sales clerks to push
(5) CHOOSING AMONG MAJOR MEDIA TYPES:
the products. Tools examples: trade shows and conventions; sales contests; specialty advertising
• The media planner must know the capacity of the major advertising media types to deliver reach, frequency
and impact. Media planners, make their choices by considering factors such as: (1) Target audience media (3) Blending several media into total campaign concept; determine size of incentive; establish
habits (2) Product characteristics (3) Message requirements and (4) Costs conditions for participation; decide duration; choose distribution vehicle; establish timing of
promotion and total sales promotion budget. Develop control plans that cover lead time and selling
(6) ALTERNATE ADVERTISING OPTIONS: time for each individual promotion; lead time is the time necessary to prepare program prior to
• In recent years, reduced effectiveness of traditional mass media lead advertiser to increase their launching it. (4) Evaluate through data sales, consumers surveys and experiments.
emphasis on alternate advertising media:
• PLACE ADVERTISING (aka out-of-home advertising): is a broad category including many creative and
(4) ADDITIONAL COSTS BEYOND THE COST OF SPECIFIC PROMOTIONS: Promotions might
unexpected forms to grab consumers attention - billboards; public (unconventional) spaces; product
decrease long-run brand loyalty; can be more expensive than appear (if distributed to wrong
placement; point of purchase.
customers); costs of special production runs, extra sales force efforts and certain promotions irritate
• EVALUATING ALTERNATE MEDIA: The main advantage of non-traditional media is that they can often
reach a vary precise and captive audience in a cost effective manner. The challenge of non-traditional media retailers who might refuse to cooperate.
is demonstrating its reach and effectiveness through credible independent research.
MARKETING RESEARCH (PAPER):
(7) SELECTING SPECIFIC MEDIA VEHICLES: Marketing Research is the process by which marketing information is collected and analyzed. It
• The media planner must search for the most cost-effective vehicles within each chosen media type. In requires resources, both time and money. Some common objectives include: (1) forecasting (2)
making choices, the planner must rely on measurement services that estimate audience size, composition and customer analysis and segmentation (3) understanding consumer choice (4) testing levels of
media cost. Media planners than calculate the cost per thousand persons reached by a vehicle. marketing mix.
• Marketers need to apply several adjustments to the cost per thousand measure: (1) Adjust for audience
quality (2) Adjust the exposure value for the audience-attention probability (3) Adjust for the mediums It can be: Qualitative Research (most frequently used at the exploratory stage of situation
editorial quality - prestige and believability (4) Consider ad placement policies and extra services - such as assessment as part of an hypothesis building process | Quantitative Research (often used at the
confirmatory stage of situation assessment as part of an hypothesis testing process).
regional or occupational editions and lead time requirements for magazines.
RESEARCH DESIGNS: (1) Exploratory research (which is primarily for sizing up the situation,
(8) DECIDING ON MEDIA TIMING AND ALLOCATION: identifying variables of interest and learning the language of the customer; it tends to be qualitative
• In choosing media, the advertiser has both a macro and a micro scheduling decision. The MACRO
and to use both primary and secondary data) (2) Descriptive research (the so called - who, what,
scheduling decision relates to seasons and the business cycle. The MICRO scheduling decision calls for when, how research) (3) Experimental research (which examines the casual relationship between
allocating advertising expenditures within short period to obtain maximum impact. The chosen pattern variables; almost always quantitative).
should meet communications objectives set in relationship to the nature of the product, target customer,
distribution channels and other marketing factors. SOURCES OF DATA: (1) Primary resources (particularly effective for information about controllable
and influenceable variables) (2) Secondary Resources (often provide less biased information more
• TIMING pattern should consider: (1) Buyer turnover - expresses the rate at which new buyers enter the efficiently than some primary resources, regarding information about uncontrollable variables;
although secondary data can usually be obtained faster, cheaper and easier than primary data, the
market (the higher this rate, the more continuos the advertising should be) (2) Purchase frequency - the
disadvantage is that secondary data are often not entirely suited to the problem at hand)
higher the purchase frequency the more continuos the advertising should be (3) Forgetting rate - the higher
the forgetting rate the more continuos the advertising should be.
METHODS of DATA COLLECTION: focus group, surveys (interviews, phone), panels |
MARKETING MODELING: involves beliefs about cause & effect and involves issues beyond
• In launching new products, the advertiser must choose among: (1) Continuity - Exposures appear evenly marketing research | SOURCES of ERRORS and BIAS: both explicit (models, research methods,
throughout a given period (2) Concentration - Spending all advertising budget in a single period (3) Flighting measures and sampling) and implicit (questions, values, judgement and politics) are choices that
- Advertising during a period, followed by period with no advertising (4) Pulsing - Continuos advertising at low shape conclusions during marketing research.
weight levels, reinforced periodically by waves of heavier activity.