MKTG101 – Marketing (Prof Han Jin Kyung)

By Kay Thaye Thet Tun

Chapter 1: Marketing Key Concepts

What is  Marketing is engaging customers and managing profitable customer relationships.

marketing?  The aim of marketing is to create value for customers and build strong customer relationships in order to capture value from customers in return.
 The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering value
and satisfaction.

Marketing Create value for customers and build customer relationships

process - Understand the marketplace and the customer needs and wants
Needs - states of felt deprivation. Physical needs, social needs (belonging and affection) and individual needs for knowledge and self-expression)
Wants - form human needs take as they are shaped by culture and individual personality.
(E.g. an American needs food but wants a Big Mac. When backed by buying power, wants become demands)

Note: Companies go to great length to learn and understand customer needs, wants and demands.
Marketers do not create unnecessary needs, but they do remind people about their needs.

- Design a customer value-driven marketing strategy (market offerings- product, services, and experiences)

- Marketing Myopia: sellers focus too much on the specific products they offer than to the benefits and experiences produces by these products.
They focus on existing wants and lose sight of underlying customer needs.

Note: Smart marketers look beyond the attributes of the products and services they sell and create brand experiences for consumers. EG: you do not just
 visit Disney land; you immerse yourself in a world of wonder where dreams come true.
Avoiding marketing myopia: instead of saying SQ is an airline company, it is a transportation company

Customer  Once companies fully understand consumers and the marketplace, marketing management can design a customer value-driven marketing strategy
Value
(Driven What’s our target market?
marketing o Unable to serve all customers so decide target market by market segmentation and target marketing (select which segments it will go after).
strategy) o Marketing management is customer management and demand management.

What is our value proposition?

o A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.
o They answer the customer’s question: “why should I buy your brand rather than a competitor’s?”

Marketing 5 concepts which organisations design and carry out their marketing strategies
Management
Philosophies 1. Production Concepts
What is this? Idea that consumers will favour products that are available and highly affordable. Therefore, management should improve
production and distribution efficiency
Cons  Only work when demand > supply
 Can lead to marketing myopia, companies run a major risk of focusing too narrowly on their own operations and losing
sight of the real objective which is satisfying customer needs and building customer relationships

2. Product concepts
What is this? Idea that consumers will favour products that offer the most quality, performance, and features. Therefore, organisations
should devote its energy to make continuous product improvements.

Tools to create a desired response among a set of defined customers

4Ps: Product, Price, Place and Promotion
Cons  Product quality and improvement are important parts of most marketing strategies but focusing only on the company’s
products can also lead to marketing myopia.

3. Selling concept
What is this? Idea that consumers will not buy enough of the firm’s product unless the firm undertakes a large-scale selling and promotion
effort.
 This concept is typically practiced with unsought goods (eg. Life insurance or blood donations).
  These industries must be good at tracking down prospects and selling them on a product’s benefits.
Cons  High risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships.
The aim often is to sell what the company makes rather than make what the market wants. It assumes that customers
that buy the products will like it and if they don’t like it, they will forget their disappointment and buy it again later

4. Marketing concept
What is this? Idea that consumers will not buy enough of the firm’s product unless the firm undertakes a large-scale selling and promotion
effort.
 This concept is typically practiced with unsought goods (eg. Life insurance or blood donations).
 These industries must be good at tracking down prospects and selling them on a product’s benefits.
Cons  High risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships.
The aim often is to sell what the company makes rather than make what the market wants. It assumes that customers
that buy the products will like it and if they don’t like it, they will forget their disappointment and buy it again later

5. Societal Marketing concept

What is this? Focus on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do
 Instead of a product-centred make and sell philosophy, the marketing concept is a customer-centred sense-and-respond
philosophy
 The job is to find the right products for your customers.
Cons  Customer-driven companies research customers deeply to learn about their desires and it usually works well when a clear
need exists and when customers know what they want. But, in many cases, customers do not know what they want or
even what is possible. EG: if I asked people what they wanted; they would say faster horses. Such situations call for
customer-driving marketing- understanding customer needs even better than customers themselves do and creating
products and services that meet both existing and latent needs, now and in the future.
Societal Marketing  The idea that a company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long run
concept interests, and society’s long run interests.
 It calls for sustainable marketing, socially and environmentally responsible marketing that meets the present needs of consumers and
businesses while also preserving or enhancing the ability of future generations to meet their needs.

APPENDIX
 Chapter 2.1: Strategic Planning

Strategic planning  The managerial process of creating and maintaining a fit between the organisation’s objectives and resources and evolving market
opportunities.
 Resources & objectives + evolving market opportunities = long run profitability and growth
3 Steps Strategic
Planning 1. Defining the company mission
What is this?  A mission statement is a statement of the organisation’s purpose – what it wants to accomplish in the larger environment
 Should answer these questions “what is our business? Who is the customer? What do consumers value? What should our
business be?”
 Characteristics of a good mission statement:
o Market oriented (not product or service oriented as it will limit the opportunities for the company)
o Realistic, specific
o Fit market environment
o Distinctive competencies (e.g. Macs; low cost food and fast service provider)
o Motivating (visionary companies outperform non-visionary companies)
 EG of a good mission statement: Starbucks—to inspire and nurture the human spirit; one person, one cup and one
neighbourhood at a time

Note:
U need to review mission statements because companies evolve overtime
Mission statement gives u general foundation for stakeholders to see.
Hence, mission statements should be market-oriented.

2. Setting Company Objective and Goals

What is this?  The company needs to turn its broad mission into detailed supporting objectives for each level of management. Then
marketing strategies and programs must be developed to support these marketing objectives.
 3. Designing the business portfolio
What is this?  The collection of businesses and products that make up the company
 The best business portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the
environment.
 The company must:
o Analyse its current business portfolio or strategic business units (SBU’s)
o Decide which SBU’s should receive more, less or no investment
o Develop growth strategies for adding new products or businesses to the portfolio
 Characteristics of SBU’s:
o A distinct mission and specific target market
o Control over their resources
o Their own competitors
o Plans independent of other SBUs

Example:
SONY’s business portfolio: SONY PlayStation, SONY music, SONY VAIO (laptops)

Analysing the Example:

current business Boston Consulting Group Approach
portfolio

Star  High-growth, high-share businesses, or products

 Need heavy investments to finance their rapid growth
 Eventually their growth will slow down, and they will turn into cash cows.
Cash Cow  low-growth, high-share businesses, or products
 Established and successful SBUs need less investment to hold their market share
 Produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment
Question  low-share business units in high-growth markets
Mark  require a lot of cash to hold their share, let alone increase it
 Management has to think hard about which question marks it should try to build into stars and which should be phased out
Dog  Low-growth, low-share businesses, and products
 May generate enough cash to maintain themselves but do not promise to be large sources of cash

As time passes, SBUs change their positions in the growth-share matrix. Many SBUs start out as question marks and move to star category if they
succeed.
They later become cash cows as market growth falls and then finally die off and turn into dogs towards the end of the life cycle.
Hence, companies need to add new products continuously so that some will become stars and eventually cash cows that will finance other SBUs.
Problems with  Difficult, time consuming and costly to implement
matrix approaches  Management may find it difficult to define SBUs and measure market share and growth
 Focus on classifying current business but provide little advice for future planning
 Lead to unwise expansion or diversification (bias)
Strategies for
resource allocation

Product/Market  A portfolio planning tool for identifying company growth opportunities through market penetration, market development, product
expansion grid development or diversification.

Market Penetration  Increasing sales of current products to current market segments without changing the product
Example:
Add new stores in current market areas, improve advertising, prices, service or store design, distribution channels.
Market development  Identifying and developing new market segments for current company products
Example:
Identify new demographic (expand into female market) or geographic markets
Product development  Offering modified or new products to current market segments
Example:
New styles, flavours, colours or modified products
Diversification  Starting up or acquiring businesses outside the company’s current products and markets
 When diversifying, companies must be careful not to overextend their brand’s positioning
Example:
Under Armour recently expanded into the digital personal health and fitness tracking market by acquiring 3 fitness app
 companies

SWOT Analysis

Opportunity Matrix
Success Probability
Attractiveness High Low
High 1 2
 Low 3 4

1. Company develops a more powerful lighting system

2. Company develops a device for measuring the energy efficiency of any lighting system
3. Company develops a device for measuring illumination level
4. Company develops a software program to each lighting fundamentals to TV studio personnel

Threat Matrix
Probability of occurrence
Seriousness High Low
High 1 2
Low 3 4

1. Competitor develops a superior lighting system

2. Major prolonged economic depression
3. Higher costs
4. Legislation to reduce number of TV studio licenses

APPENDIX:
Companies must develop not only strategies for growing their business portfolios but also strategies for downsizing them. It must carefully prune, harvest or divest them.
 Chapter 2.2: Strategic Planning

Steps in Segmentation, Targeting and Positioning

 Dividing a market into distinct groups of buyer who have different needs, characteristics or behaviours and who might require separate marketing strategies or mixes.

Market Segmenting Consumer Market

Segmentation
Segmenting
Consumer Market

1. Geographic Segmentation  Localising their products, services, promotions to fit the needs of the individual geographic location.

2. Demographic  Most popular bases for segmenting customer groups because:

Segmentation o Customer needs, wants, usage rates often vary closely with demographic variables
o Demographic variables are easier to measure than most other types of variables
o Even when marketers first define segments using other bases, they must know a segment’s
demographic characteristics to assess the size of target market and reach it efficiently

 Age
o Offering different products or using different marketing approaches for different age and life-cycle
groups
o However, marketers must be careful of stereotypes as people at the similar age group can be
 purchasing very different things
 Gender
 Income
o Target affluent consumers with luxury goods and convenience services
o Can target the low- and middle-income group as well eg: dollar stores


3. Psychographic  Personality variable

Segmentation o “Make the most for your colour with the very best paint”—appeals to the older, practical do-it-
yourself personalities
 Lifestyle variable
 Social class variable
 Division bsed on knowledge, attitudes, uses, responses to a product

4. Behaviour segmentation  Occasions

o EG: Campbell’s advertises its soups more heavily in the cold winter months
o Still other companies try to boost consumption by promoting usage during non-traditional
occasions
 Benefits sought
o Finding the major benefits people look for in a product class, the kinds of people who look
for each benefit and the major brands that deliver each benefit
o EG: Fitbit makes health and fitness tracking devices aimed at buyers in 3 major benefit
segments: everyday fitness, active fitness and performance fitness
 User Status
o Marketers want to reinforce and retain regular users, attract targeted non-users and
reinvigorate relationships with ex-users.
o Potential users are consumers facing life-stage changes
 User rate
o Light, medium and heavy product users
o Heavy products user: small % of the market but account for a high % of total consumption
 Loyalty status
o Highly loyal customers can be a real asset. Instead of just marketing to loyal customers,
companies should engage them fully and make them partners in building the brand and
telling the brand story.
o By studying the less-loyal buyers, a company can detect which brands are most
 competitive with its own
o By looking at customers who are shifting away from its brand, the company can learn
about its marketing weaknesses and take actions to correct them
o Segmented into groups of non-users, ex-users, potential users, first time users, regular
users
 Readiness stage
o Awareness --> Interest --> Desire for product --> Action
 Attitude towards product

Note: centers on the use of the word “when”

Level of Market Segmentation

o Mass marketing: same product to all consumers (no segmentation) EG: Coca-Cola
o Segment marketing: different products to one or more segments (some segmentations) EG: Grand Hyatt, Hyatt regency, Hyatt motels
o Niche marketing: different products to subgroup within segments (more segmentation) EG: Standard or luxury SUVs
o Micromarketing: products to suit the taste of individuals and location (complete segmentation)

Note: Through market segmentation, companies divide large heterogenous markets into smaller segments that can be reached more efficiently and
effectively with products and services that match their unique needs

Market  Use many of the same variables above to segment their markets + additional variables such as customer operating characteristics, purchasing
Segmentation approaches, situational factors and personal characteristics
Segmenting Business  Almost every company serves at least some business market
Market

Market  Segment by geographic location

Segmentation o Assumes that nations close to one another will have many common traits and behaviour but there are exceptions
Segmenting  Segment by economic factors
International Market o Grouped by population income level or overall level of economic development. EG: BRIC (Brazil, Russia, India and China) are fast growing
developing economic
 Segment by political and legal factors
o Type and stability of government, receptivity to foreign firms, monetary regulations and amount of bureaucracy
 Segment by cultural factors
o Grouping markets based on common language, religions, values and attitudes, customs and behavioural patterns
  However, as new communications technologies such as social media connecting consumers all around the world, marketers can define and
reach segments of like-minded consumers no matter where in the world they are. Using intermarket segmentation, they form segments of
consumers who have similar needs and buying behaviour even though they are located in different countries. EG: Bentley target consumers
who are affluent regardless of their country.

Requirements for o Measurable

effective The size, purchasing power, and profiles of the segments can be measured.
segmentation o Accessible
The market segments can be effectively reached and served.
o Substantial
The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing
with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars especially for people whose
height is greater than seven feet.
o Differentiable
The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women
respond similarly to marketing efforts for soft drinks, they do not constitute separate segments.
o Actionable
Effective programs can be designed for attracting and serving the segments. For example, although one small airline identified seven market
segments, its staff was too small to develop separate marketing programs for each segment. Amount of resources available.

Market Targeting  Evaluating each market segment’s attractiveness and selecting one or more segments to serve. (identifying parts of market that it can serve
best and most profitably)
Marketing Targeting  Segment size and growth
Evaluating Market o Analyse current sales, growth rates and expected profitability for various segments
Segments o The largest, fastest growing segments are not always the most attractive ones, some companies may lack the skills and resources to serve
larger segment. Pick the suitable size to the available resources
 Segment structural attractiveness
o Factors that affect structural attractiveness: Competitors, availability of substitute products and the power of buyers and suppliers
o Strong competitors or easy for new entrants to enter--> less attractive
o Many substitute products --> limit prices and profits earned
o Strong bargaining power of buyers --> force prices down, demand more services and set competitors against one another
o Powerful suppliers --> control price or reduce the quality or quantity of ordered goods and services
 Company objectives and resources
o Company skills and resources needed to succeed in that segment
o A company should only enter segments in which it can create superior customer value and gain advantages over its competitors
 o Look for competitive advantage
Example: some attractive segments can be dismissed quickly because they do not mesh with the company’s long run objectives
Market Targeting  A target market consists of a set of buyers who share common needs or characteristics that a company decides to serve
Market Coverage  Market targeting can be carried out at several different levels:
Strategies

1. Undifferentiated Marketing
(mass marketing)
 Firm decides to ignore market segment differences and go after the whole market with one offer
 Focuses on what is common in the needs of the consumers rather than on what is different
 Difficulties arise in developing a product or brand that will satisfy all consumers and have trouble
competing with more-focused firms that do a better job of satisfying the needs of specific segments
and niches

2. Differentiated Marketing  Target several market segments and designs separate offers for each
(segmented marketing)  Creates more total sales than undifferentiated marketing across all segments

CON: Increases the costs of doing business, thus companies must weigh increased sales against increased
costs when deciding on a differentiated marketing strategy

3. Concentrated Marketing
(niche marketing)
 Instead of going after a small share of a large market, the firm goes after a large share in one or a few
smaller segments
Example: Stance socks targeted the socks market as it was often overlooked and sold an estimated 12
million pairs of socks
 The firm achieves a strong market position because of its greater knowledge of consumer needs in
the niches it serves and the special reptation it acquires
 It can market more effectively (by fine-tuning its products, prices, and programs to the needs of
carefully defined segments) and efficiently (targeting its products or services, channels and
communications programs towards only consumers that it can serve best and most profitably)
 Niching allows smaller companies to focus their limited resources on serving niches that may be
unimportant to or overlooked by larger competitors. Many companies start as niches to get a
foothold against larger competitors and then grow into broader competitors
 CON: Can be highly profitable but it involves higher than normal risks. Companies that rely on one or a
few segments for all of their business will suffer greatly if the segment turns sour or when larger
competitors decide to enter the same segment with greater resources

4. Micromarketing  Practice of tailoring products and marketing programs to suit the tastes of specific individuals and
local customer segments
 Local marketing
o Tailoring brands and promotions to the needs and wants of local customers
o SoLoMo (social+local+mobile) marketing: offer special offers when you are near the
stores
o Drawbacks: drive up manufacturing and marketing costs by reducing the economies of
scale, create logistics problems as they try to meet the different requirement of different
local markets
o But the advantages often outweigh the drawbacks
 Individual marketing
o Mass customisation from food to shoes (custom made)
o Other than customising products, marketers customise their marketing messages to
engage customers on a one-to-one message

Market Targeting  Single-segment concentration

Selecting Target o You get to know the market really well, but it is risky because if there is a rival, you risk losing all
Market Segments  Selective specialisation
o Diversifying their risk but you may lack synergy in the business you market or advertise
o EG: Tobacco companies
 Product specialisation
o Have relevant professionals but may result in marketing myopia
o EG: Boeing corporations
 Market specialisation
o Knows the specific market well but if the market shrinks then company have to find another market
o EG: Disney, theme parks, clothes, movies (all for children)
 Full market coverage
o Need a lot of money
o EG: Amazon, Nike and P&G
Market Targeting Choosing the BEST strategy depends on
Choosing a Market- o Company’s resources affect which strategy is the best, eg. when the firm’s resources are limited, concentrated marketing makes the most
Coverage Strategy sense.
o Product variability.
Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel. Products that can vary in design, such as cameras
and cars, are more suited to differentiation or concentration.
o Life-cycle stage
When a firm introduces a new product, it may be practical to launch one version only, and undifferentiated marketing or concentrated
marketing may make the most sense. In the mature stage of the product life cycle, however, differentiated marketing often makes more
sense.
o Market variability.
If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is
appropriate.
o Competitors’ marketing strategies should be considered.
When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal. Conversely, when competitors
use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing, focusing on the needs of
buyers in specific segments.

Market Targeting  Smart targeting helps companies become more efficient and effective by focusing on the segments that they can satisfy best and most
Socially responsible profitably
target marketing  Benefits consumers as companies that serve specific groups of consumers with offers carefully tailored to their needs

CON: target marketing sometimes generates controversy and concern:

o Targeting of vulnerable or disadvantages consumers with controversial or potentially harmful products e.g. fast food marketing to
children, adjustable rate home mortgages offered by big banks that the poor urban people can’t afford
o Fine line between serving customers better and stalking them

Note: Companies target disadvantage and vulnerable. Cig companies get the interest of children. Macdonald aiming children with happy meal

Market Positioning Product’s Position – The way the product is defined by consumers on important attribute (the place the product occupies relative to competing
Choosing a products)
Positioning Strategy
As a marketer, u want to plan positions to give your products the greatest advantage in selected target markets AND design marketing mixes to
create these planned positions.
Market Positioning
3 Steps in Choosing a 1. Identifying  A company can differentiate itself along the lines of products, services, channels, people of image.
Positioning Strategy possible o Product differentiation: Differentiated on features, performance, or style and design
Competitive o Service differentiation: Through speedy, convenient service. EG: Delivery, installation, repair services, customer
Advantages training services
o Channel differentiation: Gain competitive advantage through the way they design their channel’s coverage,
expertise and performance.
o People differentiation: Hiring and training better people than their competitors do
o Brand image differentiation: The company’s brand image should convey a product’s distinctive benefits and
positioning. If a Ritz-Carlton means quality, this image must be supported by everything the company is, says and
does.

2. Choosing the  Which differences to promote?

right o Important. The difference delivers a highly valued benefit to target buyers.
Competitive o Distinctive. Competitors do not offer the difference, or the company can offer it in a more distinctive way.
Advantage o Superior. The difference is superior to other ways that customers might obtain the same benefit.
o Communicable. The difference is communicable and visible to buyers.
o Pre-emptive. Competitors cannot easily copy the difference. EG: Patent
o Affordable. Buyers can afford to pay for the difference.
o Profitable. The company can introduce the difference profitably

3. Choosing a Selecting an overall positioning strategy
Overall  Each brand must adopt a positioning strategy designed to serve the needs and wants of its target markets.
differentiation
and Positioning
strategy
APPENDIX:
More for more: providing the most upscale product or service and charging a higher price to cover the higher cost
 Vulnerable as it invites imitators who claim the same quality but at a lower price

More for the same: Target claims to offer more in terms of store atmosphere, service, stylish merchandise and classy brand image but at comparable prices as Walmart.
Same for less: Everyone likes a good deal. Discount stores don’t claim to offer different or better products, they offer many of the same brands as department stores but at
deep discounts based on superior purchasing power and lower cost operations
Less for much less: few people need, want or can afford the very best in everything so they are willing to settle for less-than-optimal performance in exchange for a lower
price
More for less: winning value proposition.
 In the short run, some companies can achieve such lofty positions but in the long run, companies will find it very difficult to sustain such best-of-both positioning as
offering more usually costs more, making it difficult to deliver on the “for less” promise.
 Companies that try to deliver both may lose out to more focused competitors.

Communicating delivering the chosen position

 Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to its target consumers. All the company’s
marketing mix efforts must support the positioning strategy.
 If the company decides to build a position on better quality and service, it must first deliver that position. Designing the marketing mix—4Ps—involves working out the
tactical details of the positioning strategy.
o Thus, a firm that seizes on a more-for-more position knows that it must produce high-quality products, charge a high price, distribute through high-quality dealers,
and advertise in high-quality media. It must hire and train more service people, find retailers that have a good reputation for service, and develop sales and
advertising content that supports its superior offer. This is the only way to build a consistent and believable more-for-more position.
 Companies often find it easier to come up with a good positioning strategy than to implement it.
 Establishing a position or changing one usually takes a long time. In contrast, positions that have taken years to build can quickly be lost. Once a company has built the
desired position, it must take care to maintain the position through consistent performance and communication. However, the company should avoid abrupt changes
that might confuse consumers. Instead, a product’s position should evolve gradually as it adapts to the ever-changing marketing environment.
 Chapter 3.1: Product and Services Strategy

Product  Anything that can be offered to a market for attention, acquisition, use of consumption that might satisfy a need or want
 Include more than tangible objects, it also includes services, events, persons, places and ideas
Service  A form of product that consist of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the
ownership of anything
 Potential drivers for the rise in demand for services:
o Rise of middle class and upper income families
o Less concerned about material needs, increase in demand for services such as heath, education and entertainment
o Increase in technology and internet proliferation where the increase in reach and other services are provided

Example: Banking, hotel, air travel, repair services

Product-Service
Continuum
Level of Products Core Customer Value
and Services = Create actual product with essential elements

As marketers,
 Identify the core customer value that consumers
seek from product
 Desging the actural product and find ways to
aaugment it to create customer value

Product
Classification of Convenience products Shopping products
Consumer Products P buy frequently, immediately P less frequently purchased
P minimal comparison and buying effort P customers compare carefully on suitability, price, quality and
P low priced style
P readily available P fewer outlets but provide deeper sales support to help
customers in their comparison efforts

Example: laundry detergent, magazines, fast food
Specialty products
P unique characteristics or brand identifications
P special purchase effort
P Consumers do not compare speciality products
Example: Lamborghini, Rolex, designer clothes, gourmet food
Example: Furniture, clothing, hotel services
Unsought products
P New innovations
P products that a consumer either does not know about
P or knows about but does not normally consider buying
P Requires a lot of promoting, personal selling and other
marketing efforts

Example: life insurance, pre-planned funeral services, blood donation,

major new innovations

For more info, refer to appendix

Product How to distinguish Industrial and Consumer/ Personal product is = by purpose NOT type of product
Classification of
Industrial Products Example: Laptop for entertainment and leisure is a consumer product but purchasing a laptop for running a business is an industrial product.

o Materials and parts

 Include raw materials as well as manufactured materials and parts
 Raw materials: farm products and natural products
 Manufactured materials and parts: component materials (e.g. cement) and component parts (e.g. tires). Most
manufactured materials and parts are sold directly to industrial users.
 Price and service are major marketing factors; branding and advertising tend to be less important
o Capital items
 Industrial products that aid in the buyer’s production or operations, including installation and accessory equipment
 Installation: major purchases (e.g. factories) and fixed equipment (e.g. elevators, generators)
 Accessory equipment: portable factory equipment and tools (e.g. hand tools lift trucks) and office equipment (e.g.
computer, fax machines, desk)
 Equipment have shorter lives than installations and simply aid in the production process
o Supplies and services
 Supplies include operating supplies (e.g. lubricants, papers) and repair and maintenance items (e.g. paints)
 Supplies are convenience products of the industrial field because they are usually purchased with a minimum of effort or
comparison
 Business services include maintenance and repair services (e.g. window cleaning, computer repair) and business advisory
 services (e.g. legal, consulting). Such services are usually supplied under contract

Product Activities undertaken to create, maintain or change the attitudes and behaviour towards:
Classification of  Organisation: profit or non-profit
Other Marketable Business firms sponsor PR or corporate image marketing campaigns to market themselves and polish their images
Entities  Person: Politician, entertainers, sports figures, doctors, lawyers use person marketing to build up their reputation. Businesses uses well-
known personalities to help sell their products or causes.
 Place: Cities, states, regions or nations compete to attract tourists, new residents, conventions.
 Ideas: all marketing is the marketing of an idea but here we narrow our focus to the marketing of social ideas. Social marketing
encourages behaviours that will create individual and societal well-being. EG: Public health, environmental and rights campaigns

Individual product
and service decisions

*All of these is to create the core customer value

Product Attributes
Product quality  Ability of a Product to Perform Its Functions; Includes Level & Consistency
 Creating customer value and satisfaction
Product features  Competitive tool that help to Differentiate the Product from Those of the
Competition

Note: Should periodically survey buyers who have used the products then assess
each feature’s value to customers vs its cost to the company. Features that
customers value highly in relation to costs should be added.
Product style and design  Style simply describes the appearance of a product. May grab attention
and aesthetically appealing but does not necessarily make the product
perform better
 Design goes to the very heart of the product. Good design contributes to
 a product’s usefulness as well as to its looks

Note: Extremely important because it is expected that consumers get a

reasonable and satisfactory product quality and reliable product in this day and
age, hence, most of the emphasis is on style and design.
Example: Huawei vs Apple, similar quality but varying style and design

Branding

 Brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the products or
services of one seller or group of sellers and differentiates them from those of competitors
 Branding helps buyers in many ways:
o Helps consumers identify products that might benefit them
o Brand shows product quality and consistency—buyers know that they will get the same features, benefits
and quality each time they buy
 Branding helps sellers in many ways:
o Brand name and trademark provide legal protection for unique product features that otherwise might be
copied by competitors
o Helps seller to segment markets

Packaging  Activity of designing and producing the container or wrapper for a product.
 Packaging has become an important marketing tool.
  Packaging have to attract buyers to communicating brand positioning to closing the sale. All consumers who
buy and use the product will interact regularly with its packaging. Thus, the humble package represents prime
marketing space.

Note: Innovative and distinctive packaging may even become an important part of a brand’s identity.
Example: Blue boxes means Tiffany’s package is here.
Poorly designed packages such as hard-to-open packaging and overpackaging (creates an incredible amount of
waste).
Product safety and environment concern have become a major packaging concern.
Example of good packaging: Vodka

Labelling and Logos  Performs several functions:

o The label identifies the product or brand
o Describe several things about the product, who made it, where it was made, when it was made, how to
use, etc.
o Label might help to promote the brand and engage customers
 Can support the brand’s positioning and add personality to the brand; can become a crucial element in the
brand-customer connection
 Logos must be redesigned from time to time. But companies must take care when changing such important
brand symbols. Customers often form strong connections to the visual representations of their brands and may
react strongly to changes.
 Sellers must ensure that their labels contain all the required information

Product Support Services  Companies should design its support services to profitably meet the needs of target customers and gain
competitive advantage. How?
o Step 1: Survey customers to assess the value of current services and to obtain ideas for new
services
o Step 2: Assess costs of providing desired services
o Step 3: Develop a package of services to delight customers and yield profits to the company

Note: Important part of the customer’s overall brand experience.

Keeping customers happy after the sale is the key to building long lasting relationships

Example: Lexus believes that if you delight the customer, and continue to delight the customer, you will have a
customer for life.
Product LINE What is a product line?
Decisions  A group of products that function in similar manners and hence are closely related
 Products sold to same customer groups and market through same types of outlets/ fall within given price ranges

What is a major product line decision?

 Determining the correct product line length: number of items in product line
 If manager can increase profits by adding items = Product line TOO SHORT
 If manager can increase profits by drecreasing items = Product line TOO LONG

2 Way of Expanding
1. Product Line Filling  Adding more items within the present range of the line

Pros: Extra profits, satisfying dealers, using excess capacity, being the leading full-line company and plugging holes
to keep out competitors
Cons: Overdone if it results in cannibalisation and customer confusion. The company must ensure that the new
items are noticeable different from existing ones.
2. Product Line  Company lengthens its product line beyond its current range
Stretching  Stretch upwards:
- Add prestige to their current products or to reap higher margins.
CON: It is difficult to change the brand image if the brand is established as a common household name, therefore,
brands should spin-off like Toyota and Lexus.
Example: BMW expanded upwards with Rolls-Royce

 Stretch downwards:
- Company located at the upper end of the market can stretch their lines downward.
- May stretch downward to plug a market hole that otherwise would attract a new competitor or to respond
to a competitor’s attack on the upper end or because it finds faster growth in the lower-end segments.

Example: BMW expanded downwards with MINI cooper line

 Stretch both ways: start in the middle and goes both ways
Product MIX What is a product mix?
Decisions  An organisation with several product lines has a product mix. A product mix consists of all the product lines and items that a particular seller
offers for sale.
4 Important dimensions
Product mix width  Number of different product lines the company carries

Example: Different categories such as detergent or cosmetics

Product mix length  Total number of items a company carries within its product lines

Example: 11 brands within the detergent product line

Product line depth  Number of versions offered of each product in the line

Example: 5 different flavours and 5 different size of pringles potato chips, 25 different versions
Consistency of  How closely related the various product lines are in end use, production requirements, distribution channels
product mix or some other way

Example: Colgate’s product lines are consistent insofar as they are consumer products that go through the same
distribution channels. The lines are less consistent insofar as they perform different functions for buyers.

Note:
 A company can lengthen the product line to become a more full-line company. It can have more versions of each product and deepen its
product mix. A company can pursue more product line consistency depending on whether it wants to have a strong reputation in a single or
several fields.
 A company may also have to streamline its product mix to filter out marginally performing lines and to regain its focus.
Example: P&G sold off dozens of major brands that no long fit its evolving focus. “Less can be much more”
 SERVICE MARKETING
Nature and
characteristics of a
service

Service intangibility- EG: cosmetic surgery, concerts

Service inseparability: If a service employee provides the service, then the employee becomes a part of the service. Try to improve the branding
of the company and not the branding of the star person because if the star person leaves, then customers will leave with the star person.
Service variability: there will always be variability if the service is provided by humans and this is why companies are trying to introduce
automations using bots and programmes to reduce human variability.
Service perishability: some doctors charge patients for missed appointment because the service value existed only at that point and disappeared
when the patient did not show up. Perishability is not a problem when the demand is steady but when it fluctuates, service firms often have
problems as they have to own much more equipment than they would if demand were even throughout the day. Therefore eg. hotels charge
lower prices in off season to attract more guests.
Service profit chain
1. Internal service quality
 Superior employee selection and training, a quality work
environment, and strong support for those dealing with
customers, which results in . . .
2. Satisfied and productive service employees
 More satisfied, loyal, and hardworking employees, which
results in . . .
3. Greater service value
 More effective and efficient customer value creation,
engagement, and service delivery, which results in . . .
4. Satisfied and loyal customers
 Satisfied customers who remain loyal, make repeat purchases,
and refer other customers, which results in . . .
5. Healthy service profits and growth
 Superior service firm performance.
Marketing Strategies
for Service Firms Managing service  Develop a differentiated offer, delivery and image
differentiation  Offer can include innovative feature that set one company’s offer apart from competitors’ offers.
Example: A hands-on experience with merchandise before buying it
 Differentiate their service delivery by having more able and reliable customer-contact people, developing a
superior physical environment in which the service product is delivered, or designing a superior delivery process.
Example: Many groceries chains now offer online shopping and home delivery services.
 Differentiating their images through symbols and branding.
Example: McDonald’s golden arches

Managing service  It is harder to define and judge service quality than product quality. Customer retention is perhaps the best
quality measure of quality.
P Empower front-line employees.
Front line customer service should have some power if not they will have to keep checking with their
managers, increase waiting time, decrease customer satisfaction.
P Become customer obsessed
P Set high service quality standards but even the best companies will have occasional poor performance.
So, the key is to have good service recovery which can win more customer purchasing and loyalty than if things
had gone well in the first place.
P Actively seek for customer feedback and act upon these feedbacks.
 P Remedy customer dissatisfaction with service on social media. Respond quickly in real time.

Managing service  Can train current employees better or hire new ones who will work harder or more skilfully
productivity P Increase the quantity of their service by giving up some quality
P Harness the power of technology.
Example: Use data base to improve quality such as tracking peak hours to reduce crowd.

Note: But companies must avoid pushing productivity so hard that doing so reduces quality.
Attempts to streamline a service can make a company more efficient in the short run but that can also reduce its
longer run ability to innovate, maintain service quality. In fact, a company may purposely lower service productivity in
order to improve service quality, in turn allowing it to maintain higher prices and profit margins.
 Distribution & Retailing
Value Delivery Network  Consist of company, suppliers, distributors, customers
 Partner with each other to improve the performance of the entire system in delivering customer value
Importance of Marketing
Channels What is it?  Set of interdependent organizations that help make a product or service available
for use or consumption by the consumer or business user.
So what?  Marketing channel decisions are among the most important decisions that
management faces and will directly affect every other marketing decision.
How does channel member Intermediaries
add value?
P create greater efficiency in making goods available to target markets.
P Through their contacts, experience, specialization, and scale of operation,
 intermediaries usually offer the firm more than it can achieve on its own.
P reduce the amount of work that must be done by both producers and consumers.
P match supply from producers to demand from consumers.
What functions do  Information.
marketing channel Gathering and distributing information about consumers, producers, and other actors and forces in the marketing
perform? environment needed for planning and aiding exchange.
(intermediaries)  Promotion.
Developing and spreading persuasive communications about an offer
 Contact.
Finding and engaging customers and prospective buyers.
 Matching.
Shaping offers to meet the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging.
 Negotiation.
Reaching an agreement on price and other terms so that ownership or possession can be transferred
 Physical distribution.
Transporting and storing goods.
 Financing.
Acquiring and using funds to cover the costs of the channel work.
 Risk taking.
Assuming the risks of carrying out the channel work.
p.s.
The question is not whether these functions need to be performed (they must be) but rather who will perform them. The
various functions should be assigned to the channel members that can add the most value for the cost.
Channel Levels  Layer of intermediary that performs some work in bringing the product and its ownership closer to the final buyer.
- Length of a channel = Number of intermediary levels
- Higher the number of levels = Lesser the control = Higher channel complexity
 Direct marketing channel -- marketing channel that has no intermediary levels; sells directly to consumers
 Indirect marketing channel -- marketing channel containing one or more intermediary levels
Channel Behaviour & Channel is most effective when
Organisation o Each member is assigned tasks it can do best
o Members cooperate to attain overall channel goals & satisfy the target market

(The success of individual channel members depends on the overall channel success; therefore, all channel firm should work
together smoothly and cooperate to attain overall channel goals. However, individual channel members rarely take such a
broad view as cooperating to achieve overall channel goals sometimes mean giving up individual company goals. Such
disagreement over goals, roles and rewards generate channel conflict)

Channel Conflicts
Vertical Conflict  Occurs between different levels of the same channel (e.g. wholesaler to retailer)
Horizontal Conflict  Occurs around firms at the same level of channel (e.g. retailer to retailer)
Vertical Marketing Systems

Conventional Marketing Channel Vertical Marketing Channel

 1 or more independent producers, wholesalers, and
retailers.
 Separate business seeking to maximize its own profits
 No channel member has much control over the other
members
 No formal means exists for assigning roles and
resolving channel conflict.
 Producers, wholesalers, and retailers acting as a unified
system.
 One channel member owns the others, has contracts
with them or wields so much power that they all must
cooperate.

Types of VMS

Corporate VMS Contractual VMS Administered VMS

 Combines successive stages of
production and distribution under
single ownership
 Channel leadership is established
through common ownership
Ö : Rigid  vested in the whole
channel so if u want to get out of
wine industry, there is too much
inertia + less flexibility, Inefficiency
(may not be good at retailing and
good at wine production?)
 one company own the whole
distribution channel member (own
vineyard, make own wine bottle
own wine, own transport, sell at
own wineshop)
 no chance for vertical conflict
 Independent firms at different
levels of production and
distribution join through contracts.
 Coordinate their activities and
manage conflict through
contractual agreements.
 Franchise organization is the most
common type of contractual
relationship.
Contractual agreement among
channel members
 Coordinates successive stages of
production and distribution
through the size and power of one
of the parties (dominant member)
 Less common than corporate and
contractual
Leadership assumed by 1/ few
dominant members
Example:
 E.g. Cold storage has market
power and command better than
manufacturers
 Control among channel members
but not as strong as
contractual/corporate
Horizontal Marketing
Systems
Hybrid Marketing System
(Multichannel Distribution
System)
Example:
Always Fresh Produce
Company has a route selling
to more than 100 groceries,
schools, and restaurants at
wholesale prices
Changing Channel
Organisation
 2 or more companies at 1 level join to follow a new marketing opportunity.
 Companies can combine their financial, production resources to accomplish more than 1 company could alone. Works
well globally.
 Example: Banks in grocery stores, Star Alliance
 A single firm sets up 2 or more marketing channels to reach one or more customer segments.
 Almost every large company and many small ones distribute through multiple channels.
P it expands its sales and market coverage
P gains opportunities to tailor its products and services to the specific needs of diverse customer segments.
Ö channels are harder to control
Ö can generate conflict as more channels compete for customers and sales.
Trend towards disintermediation
Ö products or service producers cut out intermediaries
Ö go directly to final buyers
Ö new types of channel intermediaries displace traditional ones.

Marketing Logistic & Supply
Chain Management
Benefit of placing greater
emphasis on logistics for
several reasons
 Replacing channel intermediaries
Example: online music download services vs traditional music store retailers which sells physical CDs.
Traditional intermediaries must continue to innovate to avoid being swept aside.
Example: Netflix (used to sell online DVD by mail video rentals) was faced disintermediation threats due to video
streaming. But Netflix innovated and is now the number 1 content platform. 3
 Products and service platforms must develop new channel opportunities
Ö direct competition with their established channels, resulting in conflict.
 To ease this problem, companies often look for ways to make going direct a plus for the entire channel.
Example: Volvo Car will pass all online sales through established dealers for delivery. In that way, boosting sales
through direct marketing will benefit both Volvo and its channel partners.
 Marketing logistics (aka physical distribution) involves planning, implementing and controlling the physical flow of goods,
services and related information from points of origin to points of consumption to meet customer requirements at a
profit.
 In short, it involves getting the right product to the right customer in the right place at the right time.
P gain a powerful competitive advantage by using improved logistics to give customers better service or lower prices
P Improved logistics can yield tremendous cost savings to both a company and its customers.
P Explosion in product variety has created a need for improved logistics management.
P Improvement in information technology have created opportunities for major gains in distribution efficiency e.g. RFID
tags, satellite tracking quickly and efficiently manage the flow of goods, information and finances through the supply
chain.
P Affects the environment and a firm’s environmental sustainability efforts. Transportation, warehousing, packaging are
typically the biggest supply chain contributors to the company’s environmental footprint which is why many
 companies are developing green supply chain.

Classification of Retailing Product Line

Specialty stores
 The increasing use of market segmentation, market targeting, and product specialization has resulted in a greater need
for stores that focus on specific products and segments.
Departmental stores
 Carry a wide variety of product lines
 Service remains the key differentiating factors, emphasizing exclusive merchandise and high-quality service
Supermarkets
 Slow sales growth because of slower population growth and an increase in competition from discounters and specialty
food stores
 Some supermarkets have moved upscale, providing improved store environment and higher quality food offerings.
 They specialize in fresh produce and high-quality prepared food all at affordable price.
Convenience stores
 Experiencing growth and are trying to expand beyond their primary market of men by redesigning their stores to attract
female shoppers
 They are also expanding their offering to attract “fill-in” shoppers; people looking to pick up a few items between major
grocery store trips
Superstores
 Much larger than regular supermarkets and offer a large assortment of routinely purchased food products
 In recent years there is a rapid growth of superstores that are giant specialty stores called category killers. They feature
a deep assortment of a particular line.
 Retailer Marketing
Decisions

Wheel of retailing
Many will start at low end (low margin, low price and low status) then go to high end (high margin, high price and high status)
Retailing Trends &
Development New retail forms and shortening retail  New retails forms always emerging
lifecycles  Online retailing trend
 Limited time seasonal pop-up stores --> Online flash sales
 Today’s retail forms = converging
 Different retailers sell same products @ same prive to same
consumers (price transference offered by internet)
 Greater competition for retailers
 Greater difficulty in differentiating product assortment of different
types of retailers
Rise of Mega Retailers  Huge mass merchandisers & specilty superstores
 Fromation of vertical marketing systems
 offer better merchandise selections, good service, and strong price
savings to consumers
 shifted the balance of power between retailers and producers
 A small handful of retailers now controls access to enormous
numbers of consumers
Growth of direct, online, mobile and social  Thrive of online retailing
media retailing  Advanced technologies, easier-to-use and enticing online sites and
mobile apps, improved online services, and the increasing
sophistication of search technologies
 Blessing and curse to store retailers
Ö More competition for online-only retailers
P New channels for engaging and selling to customers
 Rise of showrooming
 check out merchandise at physical-store showrooms but then buy
it online
 Retailers develop effective strategies to counter showrooming
OR
 Embracing it as an opportunity to highlight the advantages of
shopping in stores versus online-only retailers
 Flip side of showrooming = Webrooming
The need for omni-channel retailing  To meet needs of omni-channel buyers
(increasing intertype competition)
Growing importance of retail technology
Global expansion of major retailers
Retail stores as communities or hangouts
 Integrating store and online channels into a single shopper
experience
 Successful merge of virtual and physical world = increasing share of
growth in online sales
 Progressive retailers
 Adoption of sophisticated systems (for checkout scanning)
 RFID inventory tracking
 Merchandise handling
 Information sharing and customer interactions
 Enhancing in-store shopping experience
 Experiential retailing environments, beacon technology (Bluetooth
connections), virtual reality
Ö Dramatically different retail environments when crossing countries,
continents, and cultures
Ö Retailers must understand and meet the needs of local markets.
Distribution Strategy
Exclusive
ONE distributor
In specific geographic location
Example:
Luxuxy, Cars, Designer
Intensive Selective
MULTIPLE distributor More than ONE distributor
In specific geographic location In specific geographic location
Example: Coke, FMCG Example:
TV, Furnitures
 Global Marketing

Global Firm Global Brand

By operating in more than one country, Has products that are
P gains marketing P manufactured, packaged and positioned the same way regardless of
P production the country in which they are sold
P research and development (R&D)
P financial advantages
Mac Donald Sephora
All of which are not available to purely domestic competitors
1. Looking at the Global
Marketing 1. Looking at the Global Marketing Environment
Environment International  Tariffs, duties and taxes
trade system  used to force favourable trade behaviours from other nations
Ö slow the approval process of imports
 Set quotas, limits on the amount of foreign imports that they will accept in certain product
categories.
 Exchange controls
 limits the amount of foreign exchange and the exchange rate
 Non-tariff trade barriers such as bias against its bids.
Certain other forces can help trade between nations:
 The World Trade Organization was designed to promote world trade by reducing tariffs and
the other international trade barriers.
 Regional free trade zones e.g. EU, North American Free Trade Agreement (NAFTA), Trans-
pacific partnerships (TPP).
 GATT: 62 year old treat designed to promote world trade by reduced tariffs
A nation's readiness for different products and services and its attractiveness as a market to foreign firms
depend on its economic, political legal and cultural environments.

Economic  Industrial structure shapes its

environment  product and service needs
 income levels and employment levels.
 Emerging economies = experiencing rapid economic growth and industrialisation e.g. BRICS
 Income distribution.
 Industrialized nations = low, medium and high-income households
 Subsistence economies = mostly of low income households. (fewest market opp)
Many are shifting their sights to include a new target – consisting of the world’s poorest consumers

Political-legal  Countries attitude towards

environment
  international buying
 government bureaucracy
 political stability
 monetary regulations.
Some nations are receptive to foreign firms; some are less accommodating.

 Political and regulatory stability such as corruption and governmental red tape.
 Increase in uncertainty and the cost of doing business increases as companies have to pay
bribes.
 A country’s monetary regulation such as
 currency limits
 changing exchange rates
 Unstable government may result in
 high inflation

Cultural  Companies must understand how culture affect consumer reaction in each of its world markets.
environment  They must also understand how their strategies affect local cultures.

1. The impact of culture on marketing strategy:

 Sellers must understand the ways that consumers in different countries think about and use
certain products.
Example: The average Frenchman uses almost twice as many cosmetic and grooming aids as
his wife
 Violate cultural norms and differences = very expensive and embarrassing
 Business norms and behaviors also varies from country to country
 Executives need to understand this kind of cultural nuances before conducting business in
another country which results in a high cost due to extensive market research done.
However, understanding cultural traditions, preferences, and behaviors can help companies not only
avoid embarrassing mistakes but also take advantage of cross-cultural opportunities.
2. The impact of marketing strategy on cultures
 Critics are worried that America is Americanizing the world’s culture.
 Countries around the globe are losing their individual cultural identities
 backlash against American globalization.
 The cultural exchange goes both ways: America gets as well as gives cultural influence.
E.g. the American childhood has been increasingly influenced by European and Asian cultural
import.
 Thus, globalization is a two-way street.
2. Deciding whether to go o Pre-empt threats from foreign firms
abroad  Global competitors attack the company's home market by offering better products/ lower prices.
 Company might want to counterattack this competitor in their home markets to tie up their resources.
o Company’s customers are expanding abroad
 Provide international servicing
o Higher profit opportunity in Foreign Markets
 Domestic market is shrinking
 Need larger customer base for economies of scale e.g. cars, shoes.
o Reduce dependence on any one market
 Risk reduction

3. Deciding which market

to enter
Determine Firm’s International
marketing objectives & policies
P Volume of foreign sales it wants
P Plans to stay small? (see international sales as small part of business)
P Plans to go bigger? (see international business as equal to domestic
business)

How many countries to market?  Be careful to not spread themselves too thin or expand beyond their
capabilities by operating in too many countries too soon.

What type of country to enter?  A country's attractiveness depends on the

 Product
 geographical factors
 income and population
 political climate

 After listing possible international markets, the company must carefully evaluate each one
 Possible global markets should be ranked on several factors
  market size, market growth, cost of doing business, competitive advantage, and risk level
 Goal is to determine the potential of each market and decide which market offers the greatest long-run return on
investment
4. Deciding how to enter 5 Modes of Entry into Foreign Markets
the market

EXPORTING
 Entering foreign markets by selling goods produced in the company’s home country, often with little modification
1. Indirect  Working through independent international marketing intermediaries
 Involves less investment
 firm does not require an overseas marketing network
 involves less risk
 International marketing intermediaries brings know-how and services to the relationship
 seller normally makes fewer mistakes

2. Direct  Sellers handle their own exports

 Investments and risks are greater + higher potential return
 Display centers & customer service centers

JOINT VENTURING
3. Licensing Company gives licensee the right to
P Use company's manufacturing process
P Trademark, pattern, trade secrets
 Company thus enters a foreign market at little risk
 Licensee gains production expertise or a well-known product or name without having to
start from scratch

Example:
 Coca Cola markets internationally by licensing bottlers around the world and supplying them with
the syrup needed to produce the product.
Licensing has potential disadvantages as the firm has less control over the licensee than it would
over its own operations. If the licensee is very successful, the firm has given up these profits and
when the contract ends, it may find it has created a competitor.

Joint Venture Entering foreign market by joining with foreign companies to produce/ market a product or
service
4. Contract  Company hires manufactures in foreign market to produce its products/ provide services
Manufacturing P Start faster with less risk
P Later opportunity either to form a partnership with or buy out the local manufacturer
P Reduce plant investment, transportation, and tariff costs
P Meet the host country’s local manufacturing requirements
Ö Less control over the manufacturing process
Ö Loss of potential profits on manufacturing
Sears opened up department stores in Mexico and Spain, where it found qualified local
manufacturers to produce many of the product it sells. This type of joint venture is known as
5. Management  Joint venture in which domestic firm supplies management know-how to a foreign firm
Contracting that supplies the capital

 Domestic firm = export management service rather than products

P low risk method of getting into a foreign market
P yields income from the beginning
Ö Not sensible if the company can put its scarce management talent to better uses
Ö If company can make better profits by undertaking the whole venture
Ö Management contracting also prevents the company from setting up its own operations
for period of time

Example:
The properties are locally owned (foreign firm) but Hilton manages the hotels with its world-
renowned hospitality expertise.
6. Joint Ownership A cooperative venture in which a company creates a local business with investors in a

foreign market who share ownership and control
 Company may lack financial, physical, or managerial resources to undertake the venture
alone
 foreign government may require joint ownership as a condition for entry
P Companies form joint ownership ventures to merge their complementary strengths in
developing a global marketing opportunity
Ö partners may disagree over investments, marketing as they have different cultures
Example:
HK Disneyland are joint ownership with the Chinese government owned group
DIRECT INVESTMENTS
7. Assembly  Entering a foreign market by developing foreign-based assembly or manufacturing facility
Facilities
8. Manufacturing P Lower costs
Facilities  Cheaper labor, raw material, foreign government investment incentives and freight
savings)
P Improve its image in the host country as it creates jobs
P Develops a greater relationship
 Government, customers, local suppliers, and distributors
 Allowing it to adapt its market to the local market better.
P Firm keeps full control over the investments
 Develop manufacturing and marketing policies that solve its long-term international
objectives

Ö Face many risks

 Restricted or devalued currency
 Falling markets or government changes
5. Deciding on the global marketing program
Deciding on the Marketing Mix
 Product

Straight Product Marketing a product in foreign market w/o any change

Extension
Example: iPad
Product Adaptation Changing the product to meet local conditions/ wants

Example: Dunkin' Donuts sells different flavors in different

countries.
Product Invention Creating something new for the foreign market
Example: Solar powered home lighting systems for people in the
developing world who do not have access to reliable power

Promotion Adjustments of communication campaigns for language and cultural differences

6. Deciding on the global
Example: Pepsi’s youthful “Live for now” campaign have a similar look worldwide but are adapted in marketing organisation
different global markets to feature local consumers, language and events. Deciding on the Marketing Mix

Marketers must take great care when localising their brand names & messages to specific global markets  1st: export department, 2nd:
international division, 3rd:
Communication Adaption - global communication strategy of fully adapting advertising messages to
global organization.
local markets
 Executives are trained in
Example: Nike changing the basic perception of running to increase usage of running shoes. worldwide operations (not
just domestic or international
Price  Uniform: Could set a uniform price globally but this amount will be too high for a price in poor operation)
countries and not high enough in rich ones.  Global companies
 Market based: It could charge what consumers in each country would bear, but this strategy recruit management
ignores differences in the actual cost from country to country. from many countries,
 Cost based: The country could use a standard markup of its cost everywhere, but this approach  buy components and
might price the company out of the market in some countries where costs are high e.g. Big Macs supplies where they
cost of living index cost the least,
 invest where the
Distribution Whole Channel View expected returns are
greatest.
 Designing international channels that consider the entire global supply chain and marketing channel,
forging an effective global value delivery network.
 Two major links between the seller and the final buyer:
  Today, major companies must become more global if they hope to compete.
 As foreign companies successfully invade their domestic markets, companies must move more aggressively into foreign markets.
 They will have to change from companies that treat their international operations as secondary to companies that view the entire world as a
single borderless market.

Global naming issues

 Keep name and spelling? 3M, IBM
 Translate name by sound?
 Translate name by meaning? Will not sound the same as the original name
 Ad Hoc basis? Creating a new name as the firm enters each market. Result: multitude of names, weak global image perception. E.g. Matsushita has
Panasonic in the west, National in the Asia pacific market, Le-sheng in Southern China.

Establishing the right image

 Cultural idiosyncrasies e.g. color, numbers, symbols, superstitions
 Not for its function but consumers’ perception, adjusting market mix to fit the market perception. E.g. Feng-sui. HSBC building has hollow lobby to keep
spirits happy.
 Competitor Orientation

Competitor
Analysis

1. Identify
competitor
2. Assess
competitor
3. Select Identifying  Companies must avoid “competitor myopia”.
competitor competitors
Example: Kodak didn’t lose out to competing film makers like Fuji, it fell to the makers of digital cameras that use
no film at all.

 Identify their competitors from an industry point of view,

 competitors as companies that are trying to satisfy the same customer need or build relationships with
the same customer group.
Example: From an industry point of view, Google’s competitors are Yahoo! but when Google takes a broader view
of serving market needs for online and mobile access to the digital world, Apple, Samsung, Microsoft are Google’s
competitors.
Industry exists to serve a Market

Assessing
competitors Determining  Find out relative importance that competitor place on current profitability, market
Competitors’ Objectives share growth, cash flow, technological leadership, service leadership, and other
goals
 Is competitor satisfied with current situation?
 Will they react to different competitive actions?
 Example: company that pursues low-cost leadership will react much more
strongly to a competitor’s cost-reducing manufacturing breakthrough than to the
same competitor’s increase in advertising.

Identifying Competitors’  Same strategic group? (Example: Ford & Toyota)

 Strategies  You can only succeed in this group if u develop strategic advantage over
them
 Competition most intense within a strategic group (there is also rivalry
with other groups)

Assessing Competitors’  Gather data on each competitor’s goals, strategies, and performance
Strength and  Learn about their competitor’s strengths and weaknesses through secondary data,
Weaknesses personal experience, and word of mouth
 Conduct primary marketing research with customers, suppliers and dealers or
check competitor’s online and social media sites
 Benchmark own self against competitors
 Compare products and processes
 Identify best practices  find ways to improve quality & performance
 Critical Success Factor
 Technology, image, finance, service, quality, distribution
 Market share, Mind share, Heart share

Estimating Competitors’  Using competitor’s objectives, strategies and strengths and weaknesses to
Reaction SUGGEST its likely reaction
 price cuts
 promotion increases
 new production introduction
 To anticipate reaction, must deeply understand mentality
 philosophy of doing business
 internet culture
 guiding beliefs
 REACTION PATTERNS
 Laid Back – Do not react quickly/ strongly
 Selective – Only react to certain types of moves
 Tiger – Aggressive reaction
 Stochastic – Random
Selecting
competitors Strong or Weak  Weak competitor
to attack Competitors  fewer resources, less time
and avoid  Strong competitor
 sharpen its ability, provides greater returns
 Useful tool: customer value analysis
 Determine benefits that target customers value
 How customers rate the relative value of carious competitors’ offers
 Compare your product’s features vs competitors’ and analyze perceived
importance to consumers
 Competitive advantage: find a place in the market where it meets
customers’ needs in a way rivals can’t

Good or Bad Good

Competitors P Competitors may share cost of market & product development
P Legitimize new technologies
P Competitors may serve less attractive segments or move to more product
differentiation
P Help increase total demand
Bad
Ö break the rules
Ö buy shares rather than earn it
Ö take large risks and play by their own rules

Finding uncontested  Seek unoccupied positions in uncontested market spaces

market spaces  Blue Ocean Strategy
 Create products and services for which there are no direct competitors
 Value Innovation
 Create powerful leaps in values for both the firm and its buyer
 Creating all new demand and rendering rivals obsolete
Designing a  Cost-effective competitive intelligence system
competitive  Receive timely intelligence about competitors
intelligence system  reports, assessments, emails and mobile alerts
Competitive
Marketing
Strategy Basic Competitive
Strategies
Overall cost leadership  Achieve lowest production and distribution costs
1. Basic [Porter’s 3 Generic  let the company price lower than competitors and win a large
Competitive
Strategies] market share
Strategies
2. Competitive Example: Lenovo
positions
Differentiation  Create a highly differentiated product line and marketing program
 comes across as the class leader of the industry
 customers would prefer to own this brand if its price is not too
high
Example: Nike

Focus  Focuses its efforts on serving a few market segments well

Example: Ritz Carlton focuses on the top 5% of corporate and leisure
travelers

Companies that pursue one of the above will likely perform well.
The firm that carries out the strategy best will make the most profits.

Competitive
Positions
Market
Leader Expanding  Developing new users, new uses, and more usage of its products
total demand  Find new users in many places
Example: targeting different demographics, girl Legos
 Discover and promote new uses for the product
 Encourage more usage by convincing people to use the
product more often or use more per occasion

Protect  Protect its current business against competitors’ attack

market share  It must prevent or fix weaknesses that provide
opportunities for competitors
 It must always fulfill its value promise and work tirelessly
to engage value customers in strong relationships
 Its prices must maintain consistent with the value that
customers see in the brand
 Continuous innovation

 Defense strategies
 Position defense, flank defense, preemptive defense,
counter offensive defense, mobile defense, contraction
defense
Expanding  On average profitability rises with increasing market share
 market share  depends on the strategy for gaining increased share
 high share companies with low profitability and many
low share companies with high profitability
 cost of buying high market share may far exceed the
returns

Market  Runner up firm that is fighting hard to increase its market share in the industry
Challenger  Challenge the market leaders and other competitors in an aggressive bid for
more market share
 Must first define which competitors to challenge and its strategic objective
 Often have the second mover advantage
 challenger can avoid the leader and instead challenge firms its own size or
smaller local and regional firms
 How to best attack the chosen competitor to achieve its strategic objectives?
P Full frontal attack:
 Matching the competitor’s product, advertising, pricing, and distribution
efforts
 Attacks the competitor’s strength rather than weakness
P Indirect attack:
 Cast out tactics that established leaders have trouble responding to or
choose to ignore

Market  A runner up firm that wants to hold shares in an industry without rocking the boat
Follower  Although the follower will probably not overtake the leader, it often can be
as profitable
 Follower must find right balance
 Following closely enough to win customers from the market leader
 Following at enough of a distance to avoid retaliation
 Example: Panasonic is happy to be a market follower. It is not innovative, products does
what it says but their price is slightly lower so it targets the price sensitive market

Take note:
Followers are often a major target of attack by challengers. Therefore, the market
follower must keep its manufacturing costs and prices low or its product quality and
service is high.

Market Nicher  A firm that serves small segments that the other forms in an industry overlook or
ignore
 SPECIALISATION
 Firms with low shares of the total market can be highly successful and profitable
through smart niching
 Ends up knowing the target customer group so well that it meets their needs
better than other firms that casually sell to that niche
 Nicher can charge a substantial markup over cost because of the added value
 An ideal market niche is big enough to be profitable and has growth potential
 The niche is of little interest to major competitors
 Nichers thrive by meeting in depth the special needs of well targeted consumer
groups
 A market nicher can specialize along several markets, consumers, and marketing mix
lines
 End-user, vertical-user, customer size, specific customer, geographic,
product, product feature, quality price, service, and channel
Risks:
 Market niche may dry up or might grow to the point it attracts larger
competitors
 Companies practice multiple niching to increases chances for survival
Balancing  Whether a company is a market leader, challenger, follower or nicher, it must watch its competitors closely and find the
Customer and competitive marketing strategy that positions it most effectively.
Competitor  It must continually adapt its strategies to the fast-changing competitive environment.
Orientation
 Competitor centered company moves are mainly based on competitors’ actions and reactions.
P Develops our fighter orientation, watches for weaknesses in its position and searches for competitors’ weaknesses (alert).
Ö However, the company becomes too reactive.
Rather than carrying out its own customer relationship strategy, it bases its own move on competitors moves.
As a result, it may end up simply matching or extending industry practices rather than seeking innovative new ways to create
more value for customers.
 Customer centered company focuses on customer development in designing its marketing strategies and delivering superior value
to its target customers.
P In a better position to identify new opportunities and set long run strategies that make sense
P By watching customer needs evolve, it can decide what customer groups and what emerging needs are the most important to
serve then it can concentrate its resources on delivering superior value to target audience.
Market center company place balanced attention to both customers and competitors in designing its marketing strategy. Today’s
companies must be market-centered companies.
 Market-Centered company: watch both customers and competitors
 Integrated Marketing Communication

Customer  Overall process of building and maintaining profitable customer relationships by delivering superior customer value and
Relationship satisfaction
Marketing
Why new emphasis  Changing demographics, more sophisticated competitors and overcapacity in many industries means fewer customers.
on retaining and  Costs 5 times as much to attract a new customer as to keep a current one satisfied.
growing  Losing a customer = losing the entire stream of purchases over a lifetime of patronage – the customer lifetime value
customers? Customer Delivered Value

Increase total customer value + Decrease total customer costs  increase in customer delivered value
Delivering  Expectations are based on customer’s past buying experience, the opinions of friends and marketers, and competitor
customer information and promises.
satisfaction at all  They do not make decisions objectively; they make decisions based on perceived value.
cost and time
Product falls short of expectation Dissatisfaction
Product matches expectation Satisfaction
Product exceeds expectation Highly satisfied/delighted

Today’s most successful companies are raising expectations and delivering performance to match.
These companies embrace total customer satisfaction
 Seeking total customer satisfaction
=/ Attempt maximum customer satisfaction
= Delivering right amount of satisfaction
 Purpose of Marketing = Generate customer value profitably – offer customer satisfaction without sacrificing profits
 Higher levels of customer satisfaction = Greater customer loyalty = Better company performance
 Company delivers on its basic value proposition and helps customers solve their buying problems
No direct
relationship
between
satisfaction and
loyalty

Satisfaction: Necessary but not sufficient condition

Customer Loyalty  Highly satisfied customers produce benefits

and Retention P less price sensitive
P remain customers longer
P talk favorably about the company and products to others
P tremendous difference between the loyalty of satisfied customers and completely satisfied customers
 Delighted customers have emotional and rational preferences for products  creates high customer loyalty
Customer-Product
Profitability Analysis

Companies should aim to have less losing customers and more profitable products.

Preference
Formation Initial Exposure  First-to-market – pioneering advantage as companies get to consumers early and shape
consumers perception
 Market to Youth Audience

Example: Credit cards for college students – banks lose money but are hoping it will pay off
once these students graduate and they will be active patron
Media and Promotion Campaign  Will be more expensive and not as effective as compared to being the pioneer
Market Share
Strategy vs Loyalty Market share strategy (Short-term strategy) Loyalty strategy (Long-term strategy)
Strategy
Goal Get Buyer switching Get Buyer loyalty
Market condition Low growth or saturated markets Low growth or saturated markets
Focal point Competition Customers
Measure of success Market shares relative to competition Customers share
Customer retention rate

Price Quality Mix Where is your company’s position at right now? And can/should it move to another quadrant?

Perceived Quality

Price Low Medium High

Low Economy Position Value Position Excellent Value Position/

Under-priced
Medium Poor Value Position/ Medium Value Position Value Position/ Under-
Over-Priced priced
High Poor Value Position/ Unsupported Price Premium Position
Over-Priced Premium
 Margin strategy Quality strategy

Managing Customer Retention  Treat the customer right.

 Consistently deliver superior value.
 Gain the trust of customers.
 Customer value trust over price.
 Focus on the right customers.
 Do not be all things to all customers.
 Measure/ manage customers response.
 Look from the customers perspective.
 Provide extras.
 Meeting the expectation is the bare minimum, extra unexpected act can create enthusiasm.
 Create switching costs.
 Reward loyalty directly; provide a solution.
Porter’s 5 Forces 1. Intense segment rivalry
 decrease attractiveness to new entrants
2. New entrants
 risky to do business; try to increase barriers to entry
3. Substitute products
 PED of product will be very elastic
4. Buyers growing bargaining power
 buyers may demand for more features which result in increase in cost
5. Suppliers growing bargaining power
 have multiple sources are suppliers to lower suppliers bargaining power

Industry Concept of  Number of sellers, degree of differentiation. E.g. monopoly, oligopoly, monopolistic competition
Competition  Entry, mobility and exit barriers
 Cost structure
 Degree of vertical integration
 Degree of globalization
Barriers and
Profitability
EXIT BARRIERS

ENTRY BARRIERS Low High

Low P Stable returns P Low + Risky returns

Example: Bubble tea

High P High + Stable returns P High + Risky returns

P Most favorable
Example: Telecomm

Promotion Mix  Advertising, Sales promotion, Events and experiences, Public relations and publicity, Online and social media marketing, Mobile
marketing, Direct and database marketing, Personal selling

Purpose of Promotion?
 communicate to the consumers: company sells goods or services that have a competitive advantage
 high product quality, rapid delivery, low prices, excellent services and unique features
How to Promote?
 Informing: Introduction & early growth (early stages of the product lifecycle)
 Persuading: Stimulate purchase  main promotion goal (growth stage of the product lifecycle)
 Reminding: Keep product or brand name in the consumer’s mind (mature stage of the product life cycle)
 Connecting: Form relationships with customers and potential customers to encourage them to be brand advocates (important
for all stages of PLC)

Integrated  All the types of marketing communications providing a consistent and relevant message to the customer
Marketing
Communication
 To understand the fundamental elements of effective communications,
1. Macro model marketing communication
2. Micro model marketing communication
 4 Major Communication Functions: Encoding, Decoding, Feedback, Response
Reaction of receiver after being exposed to message: Response
Noise: Unplanned static/ distortion during communication process
Feedback: Customer letting producer know about its product
Macro model marketing  Considers factors in effective communications
communication  The macro model marketing communication is a two-way process.
 The sender originates the message.
 Encoding is the conversion of the sender’s ideas and thoughts into a message usually words or signs.
Transmission of a message requires a channel some communication medium.
Reception occurs when the message is detected by the receiver.
Transmission may be hindered because of noise = anything that interferes with distorts or slows down the
transmission of information.
Decoding is the interpretation of the language and symbols sent.

Micro model marketing Micro models of marketing communications concentrate on consumers specific responses to
communication communications these models assume the buyer passes through cognitive, affective, and behavioral
stages in that order.
 Learn feel do sequence is appropriate when the audience is high involvement with the product
category perceived to have high differentiation
Example: automobiles.
 Do feel learn sequence is appropriate when the audience is high involvement with the product
category perceived to have low differentiation
Example: airlines tickets
 Learn do feel sequence is appropriate when the audience is low involvement with the product
category perceived to have low differentiation
Example: convenience produce.

Proper match between the message to be conveyed and the target markets attitude is the job of the marketing manager. Differences in
culture, age, social class, education, and ethnicity can lead to miscommunication.
The receiver's response to a message = direct feedback to the source. Since mass communicators are cut off from direct feedback, they
rely on market research or analysis of viewer perceptions for indirect feedback.
Steps in 1. Marketers must  Narrower we define the audience
Developing identify target  the more appropriate message and media.
Effective audience  Geographic, demographic, family life cycle, psychographic, benefits sought, user rate
Communications
2. Set communications  Introducing a brand new product category
objectives = focus on informing + building brand aware

 Influence brand purchase intention

 = move consumers to decide to purchase our brand

OR take purchase related action

3. Design the  what to say, how to say it and who should say
communications  Search for appeals themes/ ideas that will tie into the brand positioning
 Informational appeal:
Elaborates on product or service attributes or benefits
 Transformation appeal
Elaborates on a non-product related benefit or image
 Common appeals
profit (save money), health, fear, admiration (celebrities), convenience, fun and pleasure, vanity
and egotism, environmental consciousness
4. Select the Personal communications channels
communications  2 or more persons communicate F2F/ in-person to audience through phone, mail, or email
channels  derive their effectiveness from individualized presentation
 direct marketing personal selling and word of mouth.
Non personal channels
 communications directed to more than one person
 advertising, sales, promotions events and experiences and public relations

5. Decide on budget Affordable method

 Communications budget = what managers think they can afford
Percentage of sales method
 Expenditures = specific % of current or anticipated sales or of the sales price
Competitive parity method
 Communications budgets = achieve share of voice parity with competitors
Objective and task method
 Budget = defining specific objectives, identifying the tasks that must be performed to achieve those
objectives and estimating the costs of performing them
6. Decide on elements Advertising
of promotion mix P reaches geographically dispersed buyers
 P build up a long-term image for a product or trigger quick sales
Communication channels P pervasive, offers opportunities for dramatizing brands and products
that should be integrated P enables the advertiser to focus on specific aspects of the brand or product.
under the concept of
Integrated Marketing Sales promotion
Communications P coupons, contests, premiums to draw a stronger and quicker response.
P draws attention to the product
P provides an incentive that gives value to the customer
P invites the customer to engage in the transaction now.

Events and experiences

P highly relevant (consumers often personally invested in the outcome)
P More actively engaging for consumers and are typically indirect soft sell.

Public relations and publicity

P extremely effective when coordinated with the other communications mix elements.
P appeal is based on high credibility, the ability to reach prospects who avoid mass media and
targeted promotions and the ability to tell the story of a company brand or product.

Online and social media marketing

P Information can be changed or updated depending on response
P message can be prepared and diffused quickly.

Mobile marketing
P ability to be time sensitive reflecting when and where the consumer is.
P reach and influence consumers as they are making a purchase decision because consumers carry
their phones everywhere

Direct database marketing

P big data = more personal and relevant marketing communications.
P messages can be personalized for recipients
P used to create attention and inform consumers with a call to action included
P offer information that helps other communications.
 Personal selling
P most effective tool at later stages of the buying process particularly in building up buyer
preference, conviction, and action.
P customized for individuals
P it is relationship oriented
P it is response oriented.

7. Measure results  firm must measure its impact by asking members of the target audience whether they recognize or
recall the message
 How many times they saw it, what points they recall, how they felt about the message and what
are their previous and current attitudes toward the product and company
P IMC require company’s mass-market advertisements to all have SAME MESSAGE, LOOK, FEEL
P IMC produced better communication CONSISTENECY and greater SALEs impact
P IMC should start with an audit of all potential customer touchpoints