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    Chapter 1

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    Manish Sadhu

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    of 26
    Chapter 1 Marketing in Today’s Economy 1.1_ Introduction ‘As noted in the opening Beyond the Pages 1.1 story, changes in marketing are dynamic and fast-paced, requiring companies to think outside the box in an effort to anticipate disruptions and new technology-enabled competition. To remain relevant and responsive, organizations — both for-profit and non-profit—require effective planning and a sound marketing strategy. Without these efforts, organizations would not be able to plan for changes that allow them to satisfy customers or meet the needs of other stakeholders. For example, having an effective marketing strategy allows Apple to develop popular products, such as the iPhone, iPad, Apple Watch, and its popular AirPods headphones, and stay ahead of the competition. Further, effec- tive planning and strategy allows Coca-Cola to continue its leadership in soft drinks, make key acquisitions, and continue its expansion into the lucrative sparkling water and energy drink markets. These and other organizations use sound marketing strategy to leverage their strengths and capitalize on opportunities that exist in the market. Every organization—from your favourite local restaurant to giant multinational corporations; from city, state, and federal governments to charities such as the Terry Fox Foundation and the Canadian Red Cross— develops and implements marketing strategies, How organizations plan, develop. and implement marketing strategies is the focus of this book. To achieve this focus, we provide a systematic process for developing customer-oriented marketing strategies and marketing plans that match an organization to its internal and exter- nal environments with a focus on adaptation to market, technology, and consumer changes. ur approach focuses on real-world applications and practical methods of marketing plan- ning, including the process of developing a marketing plan. The chapters of this book focus on and follow the steps of this process. Our goal is to give the reader a deeper understanding of marketing planning, the ability to organize the vast amount of information needed to complete the planning process, and an actual fel for the development of marketing plans. In this first chapter, we review some of the major challenges and opportunities that exist in planning marketing strategy in today’s economy. We also review the nature and scope of major marketing activities and decisions that occur throughout the planning process. Finally, we look at some of the major challenges involved in developing marketing strategy. Scanned with CamScanner Oaths econ a The Future of Marketing’ ‘Are you aware of the dynamic changes in marketing today? Most, businesses are developing plans and adjusting to technology dis- ruptions because new technology and innovation are altering the ‘way consumers and businesses make decisions. Some disruptive technologies include 30 Printing (Proto Labs), ride-sharing apps (Uber and lyf), blockchain (Coinbase Global) and artificial intell- {gence (Amazon Web Services). According tothe Technology Visions Consumer survey, 52 percent of consumers feel that these new technologies playa key role in or strongly impact their daly ives, Globally, consumers spend an average of si hours a day online as smartphones have become an extension of one’s existence and selfconcept. Going forward, marketers will be required to rethink core assumptions and theories about how to interact, serve, and satisfy consumers. This next generation of marketing strategies and {implementations is based on adapting tothe dynamic changesinthe ‘environment of marketing, Looking at top trends that wil shape the future of marketing provides a guide to addressing innovations. According to Gartner, Inc, trends are centred around“sculpting change! Artificial intli- ‘gence (Ain the form of machine learnings driving the innovation that willimpact consumers and marketers the most. Ais changing alltouchpoints with consumers including organizational interfaces and interactions. A-enabled robotics and drones are providing ser- vices that make marketing more effident. Al analyzes and interprets, large amounts of data using algorithms to make decisions often ‘exceeding the ability of frontline employees. Alis used by MeDon- ‘ald'sto dynamically change its drive-thru menu board, by Starbucks ‘throughout its supply chain, induding inventory management and scheduling of baristas, and by Domino’ Pizza, which has created a ‘multi-touchpoint platform to include smart speaker communica- tions, driverles vehicle delivery, and robots that deliver food. Allof ‘this makes it e25y low cost, and low effort for consumers to obtain products. Supply chain management—the coordination of al activities related to the flow of goods and services to the consumer—has become more important to create a spiderweb of interorganiza~ tional relationships to direct products to consumers. Marketing ‘consists of both supply and demand, and the supply chain plays ‘an important role for retalles such as Canadian Tire, Aritza, and ‘Amazon, Omnichannel, which embraces the integration of all the places and ways consumers and retail firms manage the flow of ‘communications and products is disrupting traditional thinking ‘about what is a marketing channel, This approach permits con- ‘sumers to have multiple touchpoints to purchase via apps, from a computer, smartphone, or tablet, a well as instore purchases ang return of products. The integrated consumer experience across at retal platforms is empowering consumers and retailers to change how products are purchased. ‘Consumer-centric technology augmentation can increase Cog. nitive and physical experiences. The Internet of Things (1oT) pro- Vides a system of interrelated computing devices that connec smartphones, computers, and almost everything to the Internet, ‘This makes applications and services more accessible to consumer, For example, Amazon Alexa allows users to easily adjust and moni- tor loT devices in their home, such as smart plugs and smart light, Finally, blockchain—a ledger that stores immutable records of data “blocks" over time—is changing marketing. An important aspect of blockchain technology is thatthe data is locked into the system without central control, making it secure and accurate. Walmart uses blockchain systems to trace produce and livestock from the field to the store shelf to provide an audit trail to manage supp chains and improve food safety. ‘These advancesin technology are changing how consumers buy and pay for things. Streaming services deliver content via Internet connectiontothe subscribers device. This contentis often pricedon a subscription basis which isa pricing strategy increasingly common to both consumer and business markets, Streaming services have dlsruptedtraitional musicand entertainment delivery. For example, Netflix, Disney+, Amazon Prime, and Crave rival traditional television networks with their streamed, on-demand content. The use of the Internet to provide any form of content to any device—when and where consumers want it—has fundamentally changed the way businesses and consumers access and consume a growing number cof products that are now digitally delivered. ‘These technology advances are reshaping the environment fot marketing strategy and enabling marketers to better serve consumt- ers, However, these changes also create challenges and opportuni ties for marketing. Technology shifts power to consumers, enabling them to access products and have more knowledge about product selection. Media fragmentation has put consumers in greater cot ‘rol of what they watch or listen to at their convenience. The omni ‘channel approach provides muttipletouchpoints, making shopping and product purchase an ongoing journey that permeates daily life and activities. Given these changes, marketing must deal with ne paradigms and social risks related to privacy, security, and ethic concerns. All of hiss changing value propositions to consumersané shifting demand patterns. These trends are discussed throughout thé remainder ofthis chapter and book. Scanned with CamScanner Chapter 1: Marketing in Today's Economy 3 1.2 The Challenges and Opportunities of Marketing in Today’s Economy ‘The advent of the Internet in the mid-1990s changed traditional ideas about marketing strategy. ‘As the Internet became more useful, companies emerged to serve new demands, many of which failed in the dot-com recession in the late 1990s and the historic collapse ofthe worldwide economy in 2008 known as the Great Recession. The powerhouse companies of the past have weakened and lost relevance in an economy marked by constant change and consumer skepticism. In their place, new and disruptive companies have utilized new technologies and strategies to change how we travel (Airbnb, Uber, and Kayak), shop for daily needs (Instacart), and even how we get food (Skip the Dishes, HelloFresh, and Door Dash). Consider the examples in Exhibit 1.1 and the changes they have introduced into how marketers and businesses operate. UT TTB LUE Dut atc RCI eee tits} Power Shift to ‘Online consumer Marketers need to be concerned with delivering a high-quality experience Customers reviews ‘with limited problems or they risk immediate, damaging consumer reviews, Good experiences also lead to better reviews and better sales, so marketers have become very responsive to online consumer content. Changesin Products| Digitization of andSelection products ‘One problem for retallers is lack of products to sell. The digitization of books, ‘music, maps, and calendars, plus the addition of flashlights, cameras, video, and alarm clocks into smartphones (among thousands of other things), leaves retail giants such as Walmart with fewer products to sell. ‘Audience and Media| Online content For decades, advertisers relied on spreading their messages through mass Fragmentation streaming ‘media outlets such as television, Today, audiences are spread across plat- forms, making it difficult to deliver marketing messages to potential custom- ers, This is why companies like Netflix are considering the use of advertising in their streaming service. ‘Changing Value Subscription-based | Changes to payment via monthly subscription requires marketers to contin- Propositions. | services ually provide and ensure the consumers getting value. An example is the 5 fi | difference of purchasing a movie digitally (you own it) versus subscribing to | Netflix (you pay to access it), Ifo new content is added to Netix, you will |. quickly change toa different service, but once you own a movie, you cannot swap it fora different one. Shifting Demand Sharing services ‘The advent of Uber and Airbnb has greatly altered the way that travellers. Patterns move around and where they stay. This change has reduced the need for taxis and created an oversupply of hotel rooms. Privacy, Security,and | Listening technology | The introduction of smart speakers such as Amazon's Echo and Google's Ethical Concerns ? Nest has allowed companies to gain access to our most personal and private ‘ eaek space, our home. This change introduces many questions of what these com- ats BR er panies should be listening to and how they should use the information they ONS eee gather. Scanned with CamScanner 1.2a Power Shift to Customers ‘Changes in how consumers access information and how marketers gather and utilize data affe, the buyer-seller power dynamic. Perhaps the single most important change during the last tw, decades isthe shift in power from marketers to consumers. Individual consumers and busine, customers have gained power via technology that allows easy comparison shopping and broads choices of where to purchase products. Using a smartphone and the Amazon app, customers cay walk London Drugs’ aisles, scan bar codes to check prices on Amazon, and order items for two. day delivery while in the store, or even same-day delivery in select markets. In fact, 71 percent q ‘consumers report using a mobile device in stores? This isthe reason that retailers such as Re Canadian Superstore and Best Buy price match Amazon and other online competitors. Howeve, ‘most consumers now begin product searches online, often keeping them from even entering; retail store. Thus, in many cases, consumers have more power, yet marketers are regaining Powe: via increasingly sophisticated data analytics. Inthe past, understanding consumer needs and pre erences was a difficult and costly task for marketers. Today, every click, swipe, and geolocation tag provide data points that can be used to better anticipate and serve customer needs. The topia of big data and analytics permeate marketing—and this book—because marketers now have growing insight into what is driving customers to purchase (or not). Advances in how marketer can process and understand consumer patterns has returned some power to the seller, yet the customer is still king in most marketing situations, drivin pricing, promotional, and experienc strategies of marketers. Marketers must ensure that their products and the experience they offer are unique and of high quality, thereby giving customers a reason to purchase their products provide positive reviews, and remain loyal to them. 1.2b Changes in Products and Selection The variety and assortment of goods and services offered forsale on the Internet and in traditional stores is staggering. Companies that have followed a digital-first strategy, such as ColourPop Cosmetics, are often able to undercut prices of established retail brands and introduce new products more quickly. Increased transaction efficiency allows customers to fulfill their needs ‘more easily and conveniently than ever before, Furthermore, the vast amounts of information available online has changed the way we communicate, read the news, and entertain ourselves. Customers have the news delivered to them automaticaly via smartphone apps that pull from hundreds of sources. Social media is the main source of news for nearly one in five Canadians, according to a report from the Reuters Institute.’ This radical increase in product selection and availability has exposed marketers to inroads by competitors from every corner of the globe. la addition, the ways that products are delivered have eliminated the need for thousands of prod- ucts, changing how marketers create a mix for retail and online stores. Smartphone and mobil technology have reduced or replaced entire sections of retail stores (e.g., CDs/DVDs, books, ‘maps, audio components, magazines, cameras), making the focus of most marketing efforts 02 consumable and household goods not easily replaced by digital and technology-enabled prod- ‘ucts, Thus, changes to products, availability of them, and increases to varieties available provide challenges to marketers. 1.2¢ Audience and Media Fragmentation Changes in media usage and the availability of new media outlets have forced marketers t0 rethink the way they communicate with potential customers. Television audiences have also bee? a favourite for marketing messages on traditional broadcast networks such as CBC, CTV, and Citytv, and cable networks such as TSN, YTV, and CTV News Channel. However, today most visual content is delivered through both traditional means and online streaming. In addition to visual content, traditional radio audiences have transitioned to streaming services, such # Spotify, Pandora, or YouTube, greatly reducing large audience concentrations based on ged” graphic locations and demographic listenership. These changes make it increasingly difficult for Scanned with CamScanner marketers to reach a true mass audience, Media audiences have become fragmented due to (1) the sheer number of media choices we have available today, and (2) the limited time consumers have to devote to any one medium. As shown in Exhibit 1.2, consumers spent much more time online using social media or online music streaming than traditional media, such as newspapers and magazines. However, despite the challenge of reaching mass audiences today, media frag- mentation does have a big advantage: It is easier to reach small, highly targeted audiences who are more receptive to specific marketing messages. Thus, for some marketing situations, oppor- tunities exist with small audiences (e.g., products focused on specific customers, such as wind surfers or rock climbers), but for others it has become increasingly difficult to spread messages toa large audience (e.g., political campaigns desiring to reach the entire Canadian population). 1.2d Changing Value Proposi Even before the Great Recession, consumers and business buyers were already facing increasing costs associated with energy, food, building materials, and other essentials. Then, as the economy weakened, buyers were forced to tighten their belts and look for other ways to lower expenses. For example, instead of using travel agents, consumers can use Expedia, and instead of hiring a real estate agent, they can sell their own house on Redfin. Consequently, many marketers learned a tough lesson: In situations where customers see goods and services as commodities, they will turn to the most convenient, least-expensive alternative, ‘Though the economy recovered from the Great Recession, this and other economic hardships, such as the recession caused by the COVID-19 pandemic, have forced consumer and business buyers to rethink value propositions and focus on the importance of frugality and value. The effects on business have been dramatic. Long-established retailers such as Pier 1 Imports and Forever 21 have filed for bankruptcy protection in the face of a highly commoditized market ns Exhibit 1.2 Time Spent with Media Time spent in hours, minutes Using the Watching TV Using social ListeningtoLsteringto eating Usinga Listening to Internet via (Oroadcast—mediavia. music broadcast pressmedia —games-——padcasts anydeice and anydevice streaming radio (orneand console streaming) services physcal rin) ‘Source Statistica “Daily time spent with selected media among adults in Canada in Janoary 20217 Accessed April 10,2022, at wwwstatista.comy satedcs/237478/daily-time-apentwith-medi-among,edults-dn-eanada Scanned with CamScanner part 1:Setting the tage for Marketing St egy i Amazon. A similar shakeout hap sme retailers such as Amazon. A si - and stiffcompetition Leeacaartt with established retalles oe Mem se Chater ats clothing talline etal lation tae Set fare Srp Maternity closing , shut down all of : ; me rel got ori of a es tines With 50 many yg aay fom mals ge to resort to buying Disney SPP 4 to become more comfortable with browsing and shat COVID-19 pandemic, eae frend is common across other entertainment categorie wa for apparel online. This s dd even music concerts, with many opting for in-home, “ts 7 : jovi theatres, sporting 5 ts : ey at lower costs in the convenience of their homes. : 1.2e Shifting Demand Patterns : or : changes in technology have shifted customer demand for certain product well-known example, where fradhiona newspapers are slowly disper ‘ i bile news continues to grow. Now, many newspaper companies iterate the brink of closing, while others have cut publication to only a fey es pet week, Another example isthe explosive growth in the digital distribution of mu sy ideo. The success of Apple Music, YouTube; Spotify, Netflix, and Disneys, along with continuing integration of television and computers, has dramatically shifted demand for music and movie industries. The direct-to-consumer streaming model has irreversibly ten, the entertainment industry on a global scale.’ Recently, pharmacies have fallen prey to chang, in demand. The increasingly competitive pharmaceutical business has led to delivery ofp scriptions and a few major pharmacy chains dominating the market. Online pharmacies x now appearing across Canada, offering not only access to medicine, but to pharmacists why will guide consumers on their medical needs.* This trend is not expected to reverse as bank grocery stores, malls, and specialty stores all struggle to address changing consumer demani for how and where they buy products. In some casesy gories. News is one Top CNSbatertockcom Scanned with CamScanner Chapter 1: Marketing in Today's Economy 1.2f Privacy, Security, and Ethical Concerns Changes in technology have made our society much more open than in the past. As a result, these changes have forced marketers to address real concerns about security and privacy, both online and offline. Further, businesses have always collected routine information about their customers. Now, customers are much more attuned to these efforts and the purposes for which the information will be used. Though customers appreciate the convenience of e-commerce and mobile access to information, they want assurances that their information is safe and confidential, Concerns over privacy and security are especially acute with respect to online businesses such as Facebook, Google, Amazon, mobile banking, and mobile devices that can track every move we ‘make, literally. In an in-home example, Amazon has responded to concerns over the information collected by its Echo devices that monitor sounds in the home, waiting to hear voice commands. In response to consumer privacy concerns, Amazon has improved the ability of consumers to discover what is monitored and limit what is recorded, Features include easy viewing and deletion of audio transcripts. These same concerns are also critical with respect to children, In the United States, many well-known and respected companies such as YouTube have been fined for violating the standards of the US Government's Children's Online Privacy Protection Act (COPPA), which can be reviewed in Exhibit 1.3. However, in Canada, there is not an equivalent to COPPA. The Office of the Privacy Commissioner in Canada has a website (https://www>privge.ca/en/about- the-opc/what-we-do/awareness-campaigns-and-events/privacy-education-for-kids) that pro- vides tips for parents and resources for teachers, but it does not provide the clarity of legislation brough by COPPA. There have been many calls for Canada to strengthen protection of children's privacy online, pointing to the need for something very similar to what is seen in Exhibit 1.3. 1.2g Unclear Legal Jurisdiction ‘When a company does business in more than one country (as many Internet-based firms do), that company often faces a dilemma with respect to differing legal systems. Today, this difference is especially important for firms that do business in both the United States and China. Google, for Exhibit 1.3 Six Steps to Children’s Online Privacy Lacoderast iW ad Ol eel Cy The Children’s Online Privacy Protection Act applies to operators of commercial websites and online services that attempt to collect personal information from children under the age of 13.The law explains what must be included in the firm’ privacy policy, when and how to seek verifiable Consent from a parent or guardian, and the firm’s responsibilities to protect children’s privacy and safety. Firms cannot evade the law’s provisions by claiming that children under 13 cannot visit their sites, nor can they make information optional or ask the visitor's age. In implementing the provisions of COPPA, the FTC issued the Children’s Online Privacy Protec- tion Rule, which is designed to give parents control over the information that is collected from their children. The rule requires website operators to do the following: 1. Determine if their company is a website or online service that collects personal information from children under 13. 2. Posta privacy policy that complies with COPPA. 3. Notify parents directly before collecting personal information from their children, . 4. Get parents’ verifiable consent before collecting information from their children. 5. Honour parents’ ongoing rights with respect to information collected from their children. 6. Implement reasonable procedures to protect the security of children’s personal information. Source: Adapted from United States Federal Trade Commission, “Childrens Online Privacy Protection Rule: A SixStep Compliance Plan for Your Business” htips//ww. te govlps-advice/busines-cener/guidancechildrens-online privacy: Protection-rue-sx-step-compliance (accessed February 27,2020). Scanned with CamScanner Part 1:Setting the Stage for Marketing Strategy stuation in dealing with the Chinese government’ censors example df ston in ding wth he Chines soreness don The company worked with the Chin’ the market, Though Dragonfly was ultimately termi” aspects of some oftheir sits oi icy would not commit to Not engage in ‘censorship in Google's vice president of public chive is also an issue with respect to protection of inte in the fare." Doing business 10 not offer the same protections found in Canada Mon property rights where Chinese high-tech and manufacturing also showing sna ae this inthe infomation seco, wi chinese fia du 0 infringe cue in Canada has to do with the privacy of data calleagy sin ith pest advancements in technology anda greater reliance on shopping on” renee ers are being looded with information about their customers, supplier artnge Cal ather members oftheir business network. The threat from hackers and competitors stad and ifretlrs are not careful, they are subject to breaches of the private information of te Consumers and ofthe inherent trust placed in them by consumers. Canadian law is cearony importance of privacy, evidenced by continued updating of the Personal Information Pras, tion and Eletronie Documents Act (PIPEDA). As the law tries to keep up with avanceme in technology, Canadian reales have to be aware ofthe need to understand rls aid uty PIPEDA, butalso regulations in othe juridtions in which they sll—from th very esti polices in Europe to more lax ones in other parts of the world.* ae Although the full effect of these challenges will not be recognized for Gad time, circum. stances have forced businesses to move ahead by adjusting their marketing activities at both te strategic and tactical levels. As we review the major marketing concepts and activities in this chapter, we will look at how today’s challenges have affected strategic planning in these ares. 1.3, Basic Marketing Concepts Marketing is many different things, Many people, see marketing as a function of business. From this functions such as production/operations, especially those not employed in marketing Perspective, marketing parallels other busines. research, management, human resources, and accout!- ing. Asa business function, the goal of ‘marketing is to connect the organization to its customers by promoting a customer-centric view that places the customer at the heart of all strategy and decision making. Other individuals, Particularly those working in marketing jobs, tend to set ‘managing the flow of ing and executing the conception, pricing, promotio™ and distribution of ideas, goods, and services to ‘teate exchanges that satisfy individual organizational objectives," Note how this definit tion focuses o and promotion). In 2 cae » or the marketing mix (product, price, pla 005, the Al os eis he pel at) competing inthe current note ne hanged the definition to better reflect the relies Marketing is an o; and delivering ani i Banizational function and a set of Processes for creating, communicatin® benefit the or value to customers for managit This definition shifts ; the fc customers. In, 2007, the a calves ane act Set of institutions, Society atfange se ePBINE offerings that h ‘i : uo fom the marketing mix and toward value creation iged the definition of marketing again: and processes for ave value for custo tivity, ir creating, communicatit® mers, clients, partners: Scanned with CamScanner Chapter 1: Marketing in Today's Economy Notice that the changes in the definition are not merely cosmetic in nature. The older defini- tions focused on the process of marketing to deliver value and manage customer relationships. ‘The most recent definition shifts from “value” to “offerings that have value” Also, the notion of stakeholders is made more explicit. Why would the AMA make these changes? First, breaking free from commodity status means finding ways to differentiate the offering, The new defi- nition recognizes that differentiation can come from any part of the offering, whereas older ‘conceptualizations of marketing placed the burden of differentiation on the product itself. The second reason has to do with marketing’s broader role in today's corporation. Firms do not just sell products; they sell the firm as a whole. Corporate relationships with partners, media, government, investors, employees, and society are every bit as important as relationships, with ‘customers. These types of relationships—which grow and thrive on exceptional value—are an absolute necessity in the commodity-driven status of many product markets. While the older definitions of marketing had a decidedly transactional focus, the new definition emphasizes long-term relationships that provide value for both the firm and its stakeholders. A final way to think about marketing relates to meeting human and social needs. This broad view links marketing with our standard of living, not only in terms of enhanced consumption and prosperity but also in terms of society's well-being. Through marketing activities, consumers can buy cars from South Korea and wines from South Africa; organizations can earn a viable profit, making both employees and shareholders happy. However, marketing must also bear responsibility for any negative effects it may generate. This is why the definition of marketing has gone from transaction exchanges to an assessment of the impacts on society when companies cteate offerings for the market. This view demands that marketers consider the social and ethical implications of their actions, and whether they practise good citizenship by giving back to their communities. Firms can successfully meet human and social needs through socially responsible marketing and business practices. This view is becoming increasingly accepted, as illustrated bya recent statement issued by the Business Roundtable, a non-profit association of nearly 200 top executives, that states the purpose of a corporation should be more than the interests of its shareholders. The group adds that corporations must also invest in their employees, protect the environment, and deal fairly and ethically with their suppliers.« Let's take a closer look at several basic marketing concepts. As we will see, ongoing changes in today’s economy have forever altered our way of thinking about these foundational aspects of marketing, 1.3a What Is a Market? ALits most basic level, a market isa collection of buyers and sellers. We tend to think of a market as a group of individuals or institutions having similar needs that can be met by a particular product. For example, the housing market is a collection of buyers and sellers of residential real estate, while the automobile market includes buyers and sellers of automotive transportation. Marketers or sellers tend to use the word market to describe only the buyers. This basic under- standing of a market has not changed in a very long time. What has changed, however, is not so much the “what” but the “where” of a market, that is, the location of the buyers and sellers. In both consumer markets (like housing and automobiles) and business markets (like replacement arts and raw materials), the answer to the “where” question is quickly becoming “anywhere” as ‘markets become less defined by geography. Increasingly, the market is a virtual market, spanning borders and boundaries via online platforms. Online markets such as Etsy and those created by pictures and experiences (often linked through sites such as Pinterest or Instagram) provide places where like-minded consumers can congregate, compare, exchange, and promote products and ideas—the essence of a market. Until recently, marketers have considered a marketplace to be a physical location where buyers and sellers meet to conduct transactions. Although those venues (e.g., grocery stores, malls flea markets) still exist, technology mediates some of the fastest growing markets. Early in the beginning of the dot-com era, the term marketspace was coined to describe these electronic Scanned with CamScanner WO Fart 1; setting the Stage for Marketing Strategy marketplaces unbound by time or space.”” Today, we refer to these electronic marketplaces as online markets or e-commerce. In e-commerce, physical goods, services, and information are exchanged through the Internet. Amazon has become the e-commerce equivalent of a shopping ‘mall as the company sells virtually all products, including groceries, shoes, apparel, jewellery, beauty aids, and sporting goods in addition to its traditional offerings of books and electronics, E-commerce also exists in the business-to-business realm. The shift from physical to electronic marketplaces has significant ramifications for marketers. The fact that customers can shop, place orders, and exchange information 24/7 means that these businesses must be capable of operating in that same time frame. In effect, online markets never take a break at closing time because they never close. It also means that firms lose some control over the information that is disseminated about their company or products, Through blogs, discussion forums, or even Twitter, customers can exchange information about an online merchant outside the merchant's website. Further. more, the substitution of technology for human interaction can be both a blessing and a curse, ‘Some sites, such as Clutch.ca (a used car marketplace), are successful because they eliminate the hassle of dealing with another human in the buying process. Many customers, however, are less interested in online markets because they lack the human element. In these cases, the design and implementation of the online experience is a serious challenge for online firms. Finally, the ‘wealth of information available through e-commerce not only makes customers more educated than ever before, but it also gives customers increased power through comparison shopping and price negotiation. 1.3b What Is Exchange? Closely related to the concept of a market, our ideas about exchange have changed in recent years. Exchange is traditionally defined as the process of obtaining something of value from someone by offering something in return; this usually entails obtaining products for money. For exchange to occur, five conditions must be met: 1. There must be at least two parties to the exchange. Although this has always been the case, the exchange process today can potentially include an unlimited number of partici- pants. Online travel sites such as Expedia provide a good example, Customers who browse for flights may see messages that there are only so many tickets available at a displayed price, Ticket prices update dynamically based on how many people are actively viewing and booking. 2, Each party has something of value to the other party. Exchange would be possible, but not very likely, without this basic requirement. The Internet has exposed us to a vast array of goods and services that we did not know existed previously, Today, not only can we buy 2 television or stereo receiver from a local merchant, we also have access to hundreds of online merchants. Furthermore, the ability to comparison shop products and their prices allows customers to seek out the best value, 3. Each party must be capable of communication and delivery. The advantages of today’s communication and distribution infrastructure are amazing, We can find and communicate with potential exchange partners anywhere and anytime via telephone, computers, interac: tive television, and smartphones. We can also conduct arm’s-length transactions in real time, with delivery of exchanged items occurring in a matter of hours, ifnnecessary. For example, if Canada, Amazon has improved its delivery time for its Prime members from two days to ont day. With minimum shipping costs removed, consumers are more likely to make purchases with a shorter transaction time in mind. 4, Each party must be free to accept or reject the exchange. In the online world, this condi- tion of exchange becomes a bit more complicated. Customers have grown accustomed to the ease with which they can return items to local merchants. Easy return policies are among the major strengths of traditional offline merchants; however, online retailers are becoming more competitive, For example, UPS stores accept returns for Amazon with a simple scat of a QR code, and FedEx is a drop-off and return centre for ‘Walmart, Scanned with CamScanner Chapter 1: Marketing in Toda 5. Each party believes itis desirable to exchange with the other party. Customers typically have a great deal of information about, or even a history with, offline merchants. In online exchange, customers often know nothing about the other party. To help resolve this issue, a number of third-party firms have stepped in to provide ratings and opinions about online merchants, Services such as Consumer Reports not only provide these ratings but also pro- vide product ratings and serve as shopping portals, eBay and Amazon go one step further by allowing buyers and sellers to rate each other. This gives both parties to the exchange process some assurance that reputable individuals or organizations exist on the other side ofthe transaction. ‘The bottom line is that exchange has become all too easy in today’s economy. Opportunities for exchange bombard us virtually everywhere we go. Customers do not even have to trouble themselves with giving credit cards or completing forms for shipping information. Most online ‘merchants will remember this information for us if we let them. For example, Amazon's “Buy Now” single-click ordering feature allows customers to purchase products with a single click or tap. The ease with which exchange can occur today presents a problem in that individuals who do not have the authority to exchange can still complete transactions. This is especially true for underage customers. 1.3¢ What Is a Product? It should come as no surprise that the primary focus of marketing is the customer and how the organization can design and deliver products that meet customers’ needs, Organizations create essentially all marketing activities as a means toward this end; this includes product design, pricing, promotion, and distribution. In short, an organization would have no reason to exist ‘without customers and a product to offer to them. But what exactly is a product? A simple definition of a product is something that can be acquired via exchange to satisfy a need or a want. This definition permits us to classify a broad ‘number of “things” as products: + Goods. Goods are tangible items ranging from canned food to fighter jets, from sports memorabilia to used clothing. The marketing of tangible goods is arguably one of the most widely recognizable business activities in the world. + Services. Services are intangible products consisting of acts or deeds directed toward people or their possessions. Banks, hospitals, lawyers, package delivery companies, airlines, hotels, repair technicians, nannies, housekeepers, consultants, and taxi drivers all offer services. Services, rather than tangible goods, dominate modern economies like the Canadian economy. Today, most services involve some digital component, such as Uber's use of the consumer's smartphone to connect with a driver and identify their intended route. + Ideas. Ideas include issues aimed at promoting a benefit for the customer. Examples include cause-related or charitable organizations such as the Canadian Cancer Society, Doctors, without Borders, and the Multiple Sclerosis Society of Canada, Ideas can also stem from political views, as most political parties in Canada spend time putting together platforms based on ideas. ‘* Information. Marketers of information include websites, magazine and book publishers, schools and universities, research firms, churches, and charitable organizations. Examples include YouTube and the popular TED Talks. In the digital age, the production and distribution of information has become a vital part of our economy. + Digital Products. Digital products such as software, music, and movies are among the most profitable in our economy. Advancements in technology have also wreaked havoc in these industries because pirates can easily copy and redistribute digital products in violation of copyright law. Digital products are interesting because content producers grant customers a license to use them, rather than outright ownership.” Economy Scanned with CamScanner " «People. The individual promotion of people, such as athletes or celebrities, is a huge business around the world. The exchange and trading of professional athletes takes place in a complex system of drafts, contracts, and free agency. Other professions, such as politicians, actors, professional speakers, and news reporters, also engage in people marketing. * Places, When we think of the marketing of a place, we usually think of vacation destinations such as Vancouver or Mont Tremblant. However, the marketing of places is quite diverse, Cities, provinces, and nations all market themselves to tourists, businesses, and potential residents. + Experiences and Events. Marketers can bring together a combination of goods, services, ideas, information, or people to create one-of-a-kind experiences or single events. Examply include theme parks such as Canada’s Wonderland, sporting events like the Grey Cup or Stanley Cup Finals, or stage and musical performances like Hamilton or a concert by The Weeknd. + Real or Financial Property. The exchange of stocks, bonds, and real estate, once marketed completely offline via real estate agents and investment companies, now occurs increasing online, For example, Realtor.ca is one of the largest real-estate listing services in Canada. * Organizations. Virtually all organizations strive to create favourable images with the public—not only to increase sales or inquiries, but also to generate customer goodwill. In this sense, General Electric is no different than the United Way: Both seek to enhance their images in order to attract more people (customers, volunteers, and clients) and money (sales, profit, and donations). ‘We should note that the products in this list are not mutually exclusive. For example, firms that sell tangible goods almost always sell services to supplement their offerings, and vice vers. Charitable organizations simultaneously market themselves, their ideas, and the informatio. that they provide. To effectively meet the needs of their customers and fulfill organizational objectives, mar keters must be astute in creating products and combining them in ways that make them uniqut Special events lke the Grey Cup combine people (players, fans) a place (one of nine Canadian CFL. cities), af event (the game), organizations (teams, sponsors), and, 1ds (souvenirs) to E Padus area repel aig S00ds (souvenirs) to create a memorable and unique Scanned with CamScanner Chapter 1: Marketing In Today's Economy = 13 from other offerings. A customer's decision to purchase one product or group of products over another is primarily a function of how well that choice will fulfil their needs and satisfy their wants, Economists use the term utility to describe the ability of a product to satisfy a customer's desires. Customers usually seek out exchanges with marketers who offer products that are high in one or more of these five types of utility: + Form Utility, Products high in form utility have attributes or features that set them apart from the competition. Often these differences result from the use of high-quality raw ‘materials, ingredients, or components, or from the use of highly efficient production processes. For example, Ruth's Chris Steakhouse, considered by many to bea top chain restaurant, provides higher form utility than other national chains because of the quality of beef they use. Chipotle even stresses form utility in its slogan, “Food with Integrity” many product categories, higher-priced product lines offer more form utility because they have more features or bells and whistles. Luxury cars are a good example. + Time Utility. Products high in time utility are available when customers want them. ‘Typically, this means that products are available now rather than later. Grocery stores, restaurants, and other retailers that are open around the clock provide exceptional time utility. Often the most successful restaurants around college campuses are those that are open 24/7. Many customers are also willing to pay more for products available in a shorter time frame (such as overnight delivery via FedEx), or for products available at the most convenient times (such as midmorning airline flights). + Place Utility. Products high in place utility are available where customers want them, which is typically wherever the customer happens to be at that moment (such as grocery delivery toahome) or where the product needs to be at that moment (such as florist delivery to a workplace). Home delivery of any product, convenience stores, vending machines, and e-commerce are examples of good place utility. Products that are high in both time and place utility are exceptionally valuable to customers because they provide the utmost in convenience. «Possession Utility. Possession utility deals with the transfer of ownership or title from marketer to customer, Products higher in possession utility are more satisfying because marketers make them easier to acquire. Marketers often combine supplemental services with tangible goods to increase possession utility. For example, furniture stores that offer easy credit terms and home delivery enhance the possession utility of their goods. In fact, any merchant that accepts credit cards enhances possession utility for customers that do not carry cash or checks. Expensive products, like a home or a new factory, require acceptable financing arrangements to complete the exchange process. * Psychological Utility. Products high in psychological utility deliver positive experiential or psychological attributes that customers find satisfying. Sporting events often fall into this category, especially when the competition is based on an intense rivalry. The atmosphere, energy; and excitement associated with being at the game can all create psychological benefits for customers. Conversely, a product might offer exceptional psychological utility because it lacks negative experiential or psychological attributes. For example, a vacation to the beach or the mountains might offer more psychological utility to some customers because itis seen as les stressful than a vacation to Disney World. ‘The strategic and tactical planning of marketing activities involves the important basic concepts ‘we have explored in this section. Marketers often struggle with finding and reaching the appro- priate markets for their products. In other cases, the market is easily accessible, but the product is wrong or does not offer customers a compelling reason to purchase it. The ability to match ‘markets and products in a way that satisfies both customer and organizational objectives is truly an art anda science. Doing so in an environment of never-ending change creates both opportu- nities and challenges for even the strongest and most respected organizations. : The process of planning marketing activities to achieve these ends is the focus of this book. ‘As we tum our attention to an overview of major marketing activities and decisions, we also Scanned with CamScanner Beyond the Pages 1.2 The A-to-Z of Amazon’s Marketing Strategy” | Jeff Bezos came up with the idea for an online bookstore nearly ‘30 yearsago.in 1954, before Google or eBay rose to popularity, Bezos uit his job in finance and created Amazon. When books proved to be a successful product, he asked some of his customers what else he should selon the site The response was overwhelming. Bezos realized Amazon met a customer need that was greater than books: He discovered that Amazon's product was convenience, ‘As consumer behaviour continues to evolve, Amazon's products, ‘and services have evolved as well The site is now the source of orig- inal award-winning shows and movies as part ofits Amazon Prime ‘offering. Groceries, household goods, and even pet food can now be easily purchased online or via Amazon's Echo device. Amazon also highlights “Amazon Choice" products, allowing customers an easy way to identify quality good products across categories. Bez0s attributes Amazon's success to its focus on the customer instead of the competition. For example, to maintain and build an exchange relationship withits customers, Amazon offers an‘A-to-Z Guarantee" that protects against damaged goods and late deliveries. Inaddition to online shopping, Amazon is now moving brick-and- ‘mortar innovation forward with Amazon Go Grocery. This untrad- tional, traditional store is a checkout fee, cashierless supermarket that uses cameras and sensors to automatically charge customers for thelr purchases via an app. The company sells its technology, called “Just Walk Out" to other businesses such as convenience stores, airport kiosks, and sports arenas. The company has also integrated various aspects of Whole Foods, Prime Now two-hour delivery, and ‘AmazonFresh grocery delivery to explore new ways tomeet customer needs. While an Amazon Go Grocery has been promised in Canada for many years, most locations are inthe United States. ‘Amazon always has its eye on the future, For example, with its sights on securing loyal Generation Z shoppers, the company intro- duced a feature that allows users to create supervised accounts for their teenagers so they can make parent-approved purchases. In. another move to become an indispensable part of every house- hold, Amazon has continued to evolve the Amazon Echo, a voice- controlled digital assistant. Through the Echo, users can check the weather, get news alerts play games, control connected smart home devices, order household goods, and more. Prime users, of which there are more than 200 milion globally, can also order Prime-eligible items that shipatno extra charge with quickand convenient delivery. |With focus on growth and new market opportunities, Amazon con- tinues tobe one of the world’s most innovative companies. as want to lay out the structure of the text. The chapters roughly coincide with the major activitie involved in developing marketing strategy and writing a marketing plan. Although our approad is orderly and straightforward, it provides a holistic representation of the marketing plannint process from one period to the next. As we will see, marketing planning is an evolving proces that has no definite beginning or end point. ‘Along the way, there will be examples and companies in the Beyond the Pages boxes throug ut the text to show how the marketing planning process comes to life in the real world. Th Amazon example in Beyond the Pages 1.2 provides a good example of the wholistic approach t marketing strategy that is followed throughout the text. 1.4 Major Marketing Activities and Decisions ‘Organizations must deal with a number of activities and decisions in marketing their product to customers. These activities vary in both complexity and scope. Whether the issue is a loo restaurants change in copy for a newspaper ad or a large multinational firm launching a ne product in a foreign market, all marketing activities have one thing in common: They aim to gi* customers a reason to buy the organization’ product. In this section, we briefly introduce activities and decisions that will be the focus of the remaining chapters of this book. 1.4a Strategic Planning ‘If an organization is to have any chance of reaching its goals and objectives, it must have a gat" plan or road map for getting there. A strategy, in effect, outlines the organization's over! direction and focus for a period of time, Effective marketing requires sound strategic planni” Scanned with CamScanner Chapter 1: Marketing in Today's Economy ata number of levels in an organization. At the top levels of the organization, planners concern themselves with macro issues such as the corporate mission, management of the mix of strategic business units, resource acquisition and assignments, and policy decisions. Planners at the middle levels, typically a division or strategic business unit, concern themselves with similar issues but focus on those that pertain to their particular product/market. Strategic planning at the front line of an organization is much more tactical in nature. Here, planners concern themselves with the development of marketing plans—more specific game plans for connecting products and markets in ways that satisfy both organizational and customer objectives. Although this book is essentially about strategic planning, it focuses on tactical planning and the development of the marketing plan. Tactical planning addresses specific markets or market segments and the development of marketing programs that will fulfill the needs of customers in those markets. The marketing plan provides the outline for how the organization will combine product, pricing, distribution, and promotion decisions to create an offering that customers will find attractive. The marketing plan also addresses the implementation, control, and refinement of these decisions. ‘To stand a reasonable chance for success, marketing plans should be developed with a keen appreciation of how they fit into the strategic plans of the middle and upper levels ofthe firm. In Chapter 2, we discuss the connection among corporate, business-unit, and marketing planning as well as how marketing plans must be integrated with the plans of other functions in the orga- nization (financial plans, production plans, etc.). We also discuss the structure of the marketing plan and some of the challenges involved in creating one. 1.4b Research and Analysis Strategic planning depends heavily on the availability and interpretation of information. Without this lifeblood, strategic planning would be a mindless exercise and a waste of time. Thankfully, today's planners are blessed with an abundance of information due to improving technology and the Internet. However, the challenge of finding and analyzing the right information remains. As many marketing planners have found, having the right information is just as important as having the right product. Marketers are accustomed to conducting and analyzing research, particularly with respect, to the needs, opinions, and attitudes of their customers. Although customer analysis is vital to the success of the marketing plan, the organization must also have access to three other types of information and analysis: internal analysis, competitive analysis, and environmental analysis. Internal analysis involves the objective review of internal information pertaining to the firms ‘current strategy and performance, as well as the current and future availability of resources. Analysis of the competitive environment, increasingly known as competitive intelligence, involves analyzing the capabilities, vulnerabilities, and intentions of competing businesses. ‘Analysis of the external environment, also known as environmental scanning, involves the analysis of economic, political, legal, technological, and cultural events and trends that may affect the future of the organization and its marketing efforts. Some marketing planners use the term situation analysis to refer to the overall process of collecting and interpreting internal, competitive, and environmental information. Across all aspects of the situation analysis, data analytics plays an increasingly prominent role in firm strategic planning, Throughout the chapters of this book, the importance of data and the ability to interpret it will become clear, as it is central to successful marketing programs. For strategic purposes, large amounts of data are compiled across diverse sources to drive higher-level ‘metrics and dashboards that help managers to assess markets and opportunities. Internal analysis focuses on sales, production, logistics, and other data points that identify the firms ability to operate and compete effectively. Competitive intelligence can include a variety of inputs, includ- ing AT scanning of customer reviews of competitors, detailed investigation of competitor prod- ucts, and even feedback from current customers that use products of other firms. Environmental scanning also includes inputs from industry sources, news sources, commissioned research and Scanned with CamScanner 5 ial media. These diverse data points are then analyzed via human, machine, ang ay eee dae tie insights that offer a view of short-, medium-, and long-term g ita and its products. su fon teripae lof asound marketing plan requires the says ofnformation ony In Chapter 3, we adress the collection and analysis of interna, custome, competi anon ronmental information. We also discuss the challenges involved in finding the right informa from an overwhelming supply of available information. The uncertainty and continual ¢, in the extemal environment also create challenges for marketers, as we have seen withthe pt upheaval and change resting from pandemics, war, and other challenges. As we wil xg type of esearch and analysis is perhaps the most dficlt aspect of developing a makeing 1,4¢ Developing Competitive Advantage ‘To be succesful a firm must possess one or more competitive advantages thatt can leverage, the market in order to meet its objectives. A competitiveadvantage is something that thee. does better than its competitors that gives it an edge in serving customers’ needs and/or main ing mutually satisfying relationships with important stakeholders. Competitive advantage critical because they set the tone, or strategic focus, of the entire marketing program. When i, advantages are tied to market opportunities, the firm can offer customers a compelling reason buy their products, Without a competitive advantage, the firm and its products are likely ob just one more offering among a sea of commoditized products. For example, Tesla’ investnen in the development and production of its batteries have given ita sizable competitive advan over other electric vehicle (EV) automakers.” In Chapter 4, we discuss the process of developing competitive advantages and establishing strategic focus for the marketing program. Competitive advantage typically comes from oneq ‘more sources, including relationships, legal, organization capabilities, human resources (peop: product, and/or pricing, Somewhat intertwined in these sources of competitive advantage ist ability of an organization to adapt to change, utilize technology in new ways, and effectively lyze and interpret data inputs. We also address the role of SWOT analysis (strengths and we nesses, opportunities and threats) as a means of tying the firms strengths or internal capil to market opportunities, Further, we discuss the importance of developing goals and object Having good goals and objectives is vital because these become the basis for measuring success of the entire marketing program, For example, Hampton Inn has a goal of 100 pet customer satisfaction. Customers do not have to pay for their stay if they are not complet satisfied.” Goals like these are not only useful in setting milestones for evaluating matt Performance; they also motivate managers and employees. This can be especially true vi ‘marketing goals or objectives help to drive employee evaluation and compensation program 1.4d Marketing Strategy Decisions ‘An organization's marketing strategy describes how the firm will fulfil the needs and ¥ of its customers. It can also include activities associated with mainta ining relationships ips other stakeholders, such as employees, shareholders, i ted ‘way, marketing strategy is a plan for hos it cl pega ‘one or more marketing programs; each program consiste of =e ng programs; two elements—a target m mati onde ‘marketing mix (sometimes known as the four Ps: product, price, lacs 4 7 foto) velop a marketing strategy, an organization must select the right combina get market(s) and marketing mix(es) to create distinct competitive advantages over its™ Scanned with CamScanner CChapter 1: Marketing In Today's Economy one or more target markets, they identify one or more segments of individuals, businesses, or institutions toward which the firm’s marketing efforts will be directed. Marketers increasingly use social networks as a way to target specific markets. Advances in technology have created some interesting changes in the ways that organizations segment and target markets, Marketers can now analyze customer-buying patterns in real time via point-of-purchase data collected from sales transactions and credit card usage, as well as by ana- lyzing clickstream data in online transactions. This allows organizations to target specific segments with product offers or promotional messages. Furthermore, technology now gives marketers the ability to target individual customers through direct mail and e-mail campaigns. This saves consid- erable time and expense by not wasting efforts on potential customers who may not be interested in the organization's product offering. However, these opportunities for marketers come at a price: ‘Many potential buyers resent the ability of marketers to reach them individually. Consequently, cus- tomers and governmental authorities have raised major concerns over privacy and confidentiality. Chapter 5 discusses the issues and strategies associated with market segmentation and target marketing. In that discussion, we will examine different approaches to market segmentation and Jook at target marketing in both consumer and business markets. Effective segmentation and target marketing set the stage for the development of the product offering and the design of a ‘marketing program that can effectively deliver the offering to targeted customers. Marketing Program Decisions As we will address in Chapter 6, successful marketing programs depend on a carefully crafted blend of the four major marketing mix elements (ie. product, price, distribution, and promotion). Earlier in the chapter, we discussed the many

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