EBS Marketing
EBS Marketing
March 2004
1.
1.
Marketing Management Process
Marketing Management Process
Marketing is a social process involving the
Marketing is a social process involving the
activities necessary to enable individuals and
activities necessary to enable individuals and
organizations to obtain what they need and
organizations to obtain what they need and
want through exchanges with others and to
want through exchanges with others and to
develop ongoing exchange relationships.
develop ongoing exchange relationships.
Marketing anticipates and measures the needs
Marketing anticipates and measures the needs
and wants of a given group of consumers and
and wants of a given group of consumers and
responds with a flow of need-satisfying
responds with a flow of need-satisfying
products and services.
Exchange
Exchange
A society cannot reap the full benefits of A society cannot reap the full benefits of
specialization until it develops the means to facilitate specialization until it develops the means to facilitate
the trade and exchange of surpluses among its the trade and exchange of surpluses among its
members. members.
– At least two partiesAt least two parties
– Each must offer something of valueEach must offer something of value
– Each must be aware of the offering of the other, and capable Each must be aware of the offering of the other, and capable of communication and delivery
of communication and delivery
– Each must be free to accept or reject the other’s offerEach must be free to accept or reject the other’s offer
– Each must be willing and able to negotiate terms so that the Each must be willing and able to negotiate terms so that the exchange is mutually beneficial
Customers
Customers
Ultimate consumersUltimate consumers buy goods and services for their buy goods and services for their
own personal use (including household). own personal use (including household).
Organizational consumersOrganizational consumers buy goods and services for buy goods and services for
resale, as inputs to the production of other goods and resale, as inputs to the production of other goods and
services, or for use in its day-to-day operations. services, or for use in its day-to-day operations.
A A needneed is the gap between a person’s actual and is the gap between a person’s actual and
desired states: physical, social or emotional. A
desired states: physical, social or emotional. A wantwant reflects the consumer’s desires or preferences for reflects the consumer’s desires or preferences for
specific ways of satisfying a basic need. specific ways of satisfying a basic need.
– A need is for foodA need is for food
– A want is for an Italian sausage pizza from the Golden A want is for an Italian sausage pizza from the Golden Mushroom Pizzeria
Products and Services
Products and Services
Products are essentially tangible, physical objects that Products are essentially tangible, physical objects that
provide a service, e.g., a watch tells time. provide a service, e.g., a watch tells time.
Services Services per seper se are less tangible and may be provided are less tangible and may be provided
by: by:
– Physical objects (as above)Physical objects (as above)
– People (lawyer, architect, consultant)People (lawyer, architect, consultant)
– Institutions (Lutheran church, United Way)Institutions (Lutheran church, United Way) – Places (golf course, Costa del Sol)Places (golf course, Costa del Sol)
How Exchanges Create Value
How Exchanges Create Value
Customers buy benefits, not products. A service’s Customers buy benefits, not products. A service’s
benefits may be cost reduction, time saving or benefits may be cost reduction, time saving or
increased effectiveness. increased effectiveness.
The The valuevalue is a function of the intrinsic product is a function of the intrinsic product
features, service and price. The customer’s ultimate features, service and price. The customer’s ultimate
satisfaction
satisfaction will depend on whether the product will depend on whether the product actually delivers the anticipated benefits.
actually delivers the anticipated benefits.
Sellers should concentrate on consumer needs, not Sellers should concentrate on consumer needs, not
products. This longer-term orientation builds loyalty products. This longer-term orientation builds loyalty
and reduces price sensitivity by increasing the and reduces price sensitivity by increasing the
Defining a Market
Defining a Market
A market consists of:
A market consists of:
– individuals and organizations…individuals and organizations…
– who are interested and willing to buy a particular who are interested and willing to buy a particular product to obtain benefits that satisfy a need or product to obtain benefits that satisfy a need or
want… want…
– and have the resources to do so.and have the resources to do so.
A few markets are homogeneous, but most can
A few markets are homogeneous, but most can
be further divided into segments, where the
be further divided into segments, where the
customers in each seek a different set of
Strategic Marketing
Strategic Marketing
Which customer needs and wants are not being
Which customer needs and wants are not being
satisfied by competitive product offerings?
satisfied by competitive product offerings?
How do benefits and choice criteria vary by
How do benefits and choice criteria vary by
demographic variables?
demographic variables?
Which product features and marketing
Which product features and marketing
programs appeal most to customers in those
programs appeal most to customers in those
segments?
segments?
How can the seller position its product –
How can the seller position its product –
differentiating it from competitive offerings –
differentiating it from competitive offerings –
to obtain a sustainable
Marketing Functions
Marketing Functions
For exchanges to occur, the product, money and For exchanges to occur, the product, money and
information must flow back and forth across space information must flow back and forth across space
and time: and time:
– TitleTitle: negotiating an exchange of ownership: negotiating an exchange of ownership – Physical productPhysical product: transportation and storage: transportation and storage
– Marketing communicationMarketing communication: advertising, personal selling, : advertising, personal selling, sales promotion, publicity
sales promotion, publicity
– FeedbackFeedback: Marketing research, environmental scanning, : Marketing research, environmental scanning, competitive intelligence
competitive intelligence
– Credit and paymentCredit and payment: financing, billing, collection: financing, billing, collection
Marketing Institutions
Marketing Institutions
Each of the marketing functions must be performed by Each of the marketing functions must be performed by
someone. someone.
– Producers may market directly to consumers when (1) there Producers may market directly to consumers when (1) there are few potential customers and average orders are large, (2) are few potential customers and average orders are large, (2)
unique product characteristics require it, (3) tight control unique product characteristics require it, (3) tight control
over marketing and distribution is desired, or (4) information over marketing and distribution is desired, or (4) information
and logistics allow. and logistics allow.
– More typically, there are numerous middlemen in the More typically, there are numerous middlemen in the marketing channel
marketing channel: merchant wholesalers (who take title), : merchant wholesalers (who take title), agents (who do not), retailers and facilitating agencies
agents (who do not), retailers and facilitating agencies (research, transportation, advertising, collection).
Costs and Benefits
Costs and Benefits
Transactional efficiencyTransactional efficiency allows customers to buy and allows customers to buy and
wide variety of goods from a single source in one wide variety of goods from a single source in one
transaction. transaction.
Functional efficiencyFunctional efficiency emerges when the exchange emerges when the exchange
activity can be performed more efficiently by a activity can be performed more efficiently by a
channel member. channel member.
There are utilities ofThere are utilities of possessionpossession (minimizing the (minimizing the
customer’s shopping time and risk),
customer’s shopping time and risk), placeplace (a (a convenient location) and
convenient location) and timetime (available when the (available when the customer desires).
customer desires).
The Marketing Manager
The Marketing Manager
…
…
should be responsible for:
should be responsible for:
• Evaluating the needs, wants and purchasing Evaluating the needs, wants and purchasing
patterns of a customer segment patterns of a customer segment
• Developing an integrated plan to facilitate purchase Developing an integrated plan to facilitate purchase
transactions by that segment transactions by that segment
• Designing a marketing channel system to carry out Designing a marketing channel system to carry out
those activities those activities
• Coordinating and monitoring the effectiveness of Coordinating and monitoring the effectiveness of
Marketing Management
Marketing Management
Marketing management is the process of:
Marketing management is the process of:
– analyzing, planning, implementing, coordinating analyzing, planning, implementing, coordinating and controlling programs …
and controlling programs …
– involving the conception, pricing, promotion and involving the conception, pricing, promotion and distribution of …
distribution of …
– products, services and ideas …products, services and ideas …
– designed to create and maintain beneficial designed to create and maintain beneficial exchanges with target markets …
exchanges with target markets …
Strategy Development
Strategy Development
Most firms develop a hierarchy of interdependent Most firms develop a hierarchy of interdependent
strategies, each formulated at a different level of the strategies, each formulated at a different level of the
organization and dealing with different issues. organization and dealing with different issues.
– CorporateCorporate: The company’s mission, the business it is in, its : The company’s mission, the business it is in, its major objectives (e.g., growth) and its core values
major objectives (e.g., growth) and its core values – Business UnitBusiness Unit: How it will compete in its industry; : How it will compete in its industry;
development and exploitation of competitive advantage. development and exploitation of competitive advantage. – MarketingMarketing: Target markets, product features, pricing and : Target markets, product features, pricing and
promotion promotion
These must be consistent in direction, in available These must be consistent in direction, in available
resources and with the realities of the firm’s external resources and with the realities of the firm’s external
Market Opportunity Analysis
Market Opportunity Analysis
Environmental and competitor analysis –
Environmental and competitor analysis –
especially the actions and capabilities of
especially the actions and capabilities of
current and potential competitors
current and potential competitors
Industry and product life-cycles
Industry and product life-cycles
Customer analysis – buying behavior
Customer analysis – buying behavior
Market research – key demographics
Market research – key demographics
Segmentation – and product positioning and
Segmentation – and product positioning and
differentiation to obtain competitive advantage
Strategic Marketing Program
Strategic Marketing Program
Elements
Elements
1.
1. Specific objectives: sales volume, market share, Specific objectives: sales volume, market share, profitability (contribution)
profitability (contribution) 2.
2. Overall marketing strategy: which may be Overall marketing strategy: which may be
constrained by higher-level strategies, resource constrained by higher-level strategies, resource limitations and core capabilities
limitations and core capabilities 3.
3. Decisions on tactics: the 4 P’s – product offering, Decisions on tactics: the 4 P’s – product offering, price, promotion and place (distribution) – are
price, promotion and place (distribution) – are within the control of the firm.
within the control of the firm.
It then depends on effective implementation
It then depends on effective implementation
and mid-course corrections.
Recent Developments
Recent Developments
affecting Marketing Management
affecting Marketing Management
Globalization
Globalization
Increased importance of service
Increased importance of service
Technology – especially the research and
Technology – especially the research and
marketing channel possibilities of the internet
marketing channel possibilities of the internet
Relationships across functions and firms – and
Relationships across functions and firms – and
the use of cross-functional teams within the
the use of cross-functional teams within the
firm, and up and down its supply chain
2. Strategic Role of Marketing
2. Strategic Role of Marketing
Marketing managers’ familiarity with
Marketing managers’ familiarity with
customers, competitors and environmental
customers, competitors and environmental
trends often means they play a crucial role in
trends often means they play a crucial role in
influencing strategies formulated at the higher
influencing strategies formulated at the higher
levels in the firm.
levels in the firm.
Planning processes may incorporate market
Planning processes may incorporate market
and competitive analyses.
and competitive analyses.
– Market orientation (marketing concept) is having Market orientation (marketing concept) is having as a primary goal the satisfaction of unmet
as a primary goal the satisfaction of unmet customer needs.
Strategy Defined
Strategy Defined
A strategy is a fundamental pattern of present
A strategy is a fundamental pattern of present
and planned objectives, resource deployments
and planned objectives, resource deployments
and interactions of an organization with
and interactions of an organization with
markets, competitors and other environmental
markets, competitors and other environmental
factors.
factors.
Most firms have a hierarchy of interrelated
Most firms have a hierarchy of interrelated
strategies, each formulated at a different level:
strategies, each formulated at a different level:
• Corporate (global)Corporate (global) • Business UnitBusiness Unit
Components of Strategy
Components of Strategy
1.
1.
Scope
Scope
. Should reflect the firm’s mission, and
. Should reflect the firm’s mission, and
may choose geography, industries and
may choose geography, industries and
products.
products.
2.
2.
Goals and objectives
Goals and objectives
. Selects specific
. Selects specific
dimensions and performance levels: e.g.,
dimensions and performance levels: e.g.,
market share, new products, efficiency.
market share, new products, efficiency.
3.
3.
Resource deployments
Resource deployments
. Allocating limited
. Allocating limited
resources to those areas that will produce the
resources to those areas that will produce the
greatest returns.
Components of Strategy, 2
Components of Strategy, 2
4.
4.
Identification of a
Identification of a
sustainable competitive
sustainable competitive
advantage
advantage
. What are firm’s distinctive
. What are firm’s distinctive
competencies and strengths (differentiation)?
competencies and strengths (differentiation)?
5.
5.
Synergy
Synergy
. Do the firm’s businesses, product
. Do the firm’s businesses, product
markets, resource deployments and
markets, resource deployments and
competencies complement and reinforce one
competencies complement and reinforce one
another?
Strategic Intent or Vision
Strategic Intent or Vision
A clearly-stated mission (customer needs and
A clearly-stated mission (customer needs and
firm functions) can help instill a shared sense
firm functions) can help instill a shared sense
of direction, relevance and achievement.
of direction, relevance and achievement.
The firm’s scope and focus might be more
The firm’s scope and focus might be more
effectively defined by a more general but
effectively defined by a more general but
personally-motivating statement of strategic
personally-motivating statement of strategic
intent or vision: e.g., “Beat Benz!”
intent or vision: e.g., “Beat Benz!”
While being clear about the ends, the statement
While being clear about the ends, the statement
should be flexible around the means, thus
should be flexible around the means, thus
leaving room for employee improvisation.
Corporate Strategy
Corporate Strategy
Attempts to develop and maintain distinctive
Attempts to develop and maintain distinctive
competencies focus on:
competencies focus on:
– Generating superior financial, capital and human Generating superior financial, capital and human resources
resources
– Designing effective organizational structures and Designing effective organizational structures and processes
processes
– Seeking synergy among the firm’s various Seeking synergy among the firm’s various businesses (shared resources, functional businesses (shared resources, functional
Core Values
Core Values
Ethics is concerned with the development of
Ethics is concerned with the development of
moral standards by which actions and
moral standards by which actions and
situations can be judged.
situations can be judged.
As unethical practices can damage the trust
As unethical practices can damage the trust
between a firm and its suppliers and customers,
between a firm and its suppliers and customers,
thereby impairing the development of
thereby impairing the development of
long-term relationships (with consequences for sales
term relationships (with consequences for sales
and profitability), more firms are choosing to
and profitability), more firms are choosing to
make ethical statements.
Corporate Objectives
Corporate Objectives
…
…
must be specific and measurable.
must be specific and measurable.
Therefore,each objective contains four
Therefore,each objective contains four
components:
components:
1.
1. A A performance dimensionperformance dimension or attribute sought. or attribute sought. 2.
2. A measure or A measure or indexindex for evaluating progress. for evaluating progress. 3.
3. A target or A target or hurdle levelhurdle level to be achieved. to be achieved. 4.
4. A A time frametime frame within which the target is to be within which the target is to be accomplished.
Corporate Objectives, 2
Corporate Objectives, 2
Most firms have multiple objectives. Customer-Most firms have multiple objectives.
Customer-focused objectives – satisfaction, retention, loyalty – focused objectives – satisfaction, retention, loyalty –
are being given greater emphasis in many firms, are being given greater emphasis in many firms,
alongside more traditional growth and profitability alongside more traditional growth and profitability
goals. goals.
There is a gap between what the firm will become on There is a gap between what the firm will become on
its present course and what it would like to become: its present course and what it would like to become:
this is the basis of a “gap analysis”. this is the basis of a “gap analysis”.
One objective may enjoy higher priority, or One objective may enjoy higher priority, or
Alternate Corporate Growth
Alternate Corporate Growth
Strategies
Strategies
Current Products
Current Products New ProductsNew Products
Current Current Markets Markets New New Markets Markets Market penetration Market penetration • increase market shareincrease market share
• increase product usage increase product usage
(frequency, quantity, new
(frequency, quantity, new
applications)
applications)
Market development
Market development • Expand markets for Expand markets for
existing products existing products (geographic expansion, (geographic expansion, Product development Product development • product improvementsproduct improvements
• product line extensionsproduct line extensions
• new productsnew products
Diversification
Diversification • vertical integrationvertical integration
Defining Strategic Business Units
Defining Strategic Business Units
1.
1.
A homogeneous set of markets to serve with
A homogeneous set of markets to serve with
a limited number of related technologies.
a limited number of related technologies.
2.
2.
A unique set of product markets, in the sense
A unique set of product markets, in the sense
that no other SBU within the firm competes
that no other SBU within the firm competes
for the same customers with similar products.
for the same customers with similar products.
3.
3.
Control over those factors necessary for
Control over those factors necessary for
successful performance.
successful performance.
4.
Business Unit Strategy
Business Unit Strategy
SBU’s goals are constrained by the corporate
SBU’s goals are constrained by the corporate
goals. Objectives are aggregated across
goals. Objectives are aggregated across
product-market entries in the business unit.
product-market entries in the business unit.
Focus is on industry attractiveness, and how
Focus is on industry attractiveness, and how
the firm’s distinctive competencies serve the
the firm’s distinctive competencies serve the
needs of customers in the target segments.
needs of customers in the target segments.
Concentric diversification
Concentric diversification
: new products for
: new products for
existing customers or new customers for
existing customers or new customers for
existing products.
Product-Market Entry Strategy
Product-Market Entry Strategy
Product-market entry goals are constrained by Product-market entry goals are constrained by
corporate and business unit goals. corporate and business unit goals.
Objectives for a specific product-market entry are Objectives for a specific product-market entry are
usually centered on sales, market share, contribution usually centered on sales, market share, contribution
margin and/ or customer satisfaction. margin and/ or customer satisfaction.
The critical issue concerning its scope is the The critical issue concerning its scope is the
specification of target markets for a particular product specification of target markets for a particular product
or product line. Firms then seek competitive or product line. Firms then seek competitive
advantage and synergy through a well-integrated advantage and synergy through a well-integrated
program of
program of marketing mixmarketing mix elements, i.e., the 4 P’s: elements, i.e., the 4 P’s: product, price, place (channel) and promotion.
Resource Allocation
Resource Allocation
One of the best known of the One of the best known of the portfolio modelsportfolio models is the is the
Boston Consulting Group
Boston Consulting Group matrix. The quadrants are matrix. The quadrants are
defined by market growth and market share; occupied by
defined by market growth and market share; occupied by
Cash Cows, Stars, Question Marks and Dogs.
Cash Cows, Stars, Question Marks and Dogs. Criticisms:Criticisms:
1.
1. Market growth rate is an inadequate descriptor of overall industry Market growth rate is an inadequate descriptor of overall industry attractiveness.
attractiveness.
2.
2. Relative market share is inadequate as a description of overall Relative market share is inadequate as a description of overall competitive strength.
competitive strength.
3.
3. Calculating market share is very sensitive to how the industry is Calculating market share is very sensitive to how the industry is defined.
defined.
4.
Value Based Models
Value Based Models
First, assess the economic value that a strategy is First, assess the economic value that a strategy is
likely to produce by examining the cash flows it will likely to produce by examining the cash flows it will
generate. generate.
Second, estimate the shareholder value that a strategy Second, estimate the shareholder value that a strategy
will produce by discounting its forecast cash flows by will produce by discounting its forecast cash flows by
the business’s risk-adjusted cost of capital. the business’s risk-adjusted cost of capital.
Finally, evaluate strategies based on the likelihood Finally, evaluate strategies based on the likelihood
that the investments required by a strategy will deliver that the investments required by a strategy will deliver returns greater than the cost of capital. The amount of returns greater than the cost of capital. The amount of
return a strategy generates in excess of the cost of return a strategy generates in excess of the cost of
capital is its
Limitations of Value-based Planning
Limitations of Value-based Planning
The process can evaluate the alternatives, but
The process can evaluate the alternatives, but
not create them. That is, the process does not
not create them. That is, the process does not
produce the best alternative: it only indicates
produce the best alternative: it only indicates
the best of those evaluated.
the best of those evaluated.
There may be various biases either in favor or
There may be various biases either in favor or
against alternatives: over-estimating market
against alternatives: over-estimating market
share or sales revenue, for example.
share or sales revenue, for example.
This is merely a tool, and not a substitute for
This is merely a tool, and not a substitute for
strategic planning.
Marketing Role in Strategic Planning
Marketing Role in Strategic Planning
The essence of strategic planning at all levels is identifying The essence of strategic planning at all levels is identifying threats to avoid and opportunities to pursue. Marketing
threats to avoid and opportunities to pursue. Marketing managers are usually most familiar with conditions and managers are usually most familiar with conditions and
trends in the marketing environment. trends in the marketing environment.
The The marketing conceptmarketing concept holds that the planning and holds that the planning and
coordination of all company activities around the primary coordination of all company activities around the primary
goal of satisfying customer needs is the most effective goal of satisfying customer needs is the most effective
means to attain and sustain a competitive advantage and means to attain and sustain a competitive advantage and
achieve company objectives over time. achieve company objectives over time.
Market-oriented firms also adopt a variety of Market-oriented firms also adopt a variety of
organizational procedures to improve the responsiveness organizational procedures to improve the responsiveness
Marketing Role
Marketing Role
The effective performance of marketing
The effective performance of marketing
activities – particularly those associated with
activities – particularly those associated with
tracking, analyzing and satisfying customers’
tracking, analyzing and satisfying customers’
needs – will become even more critical for the
needs – will become even more critical for the
successful formulation of and implementation
successful formulation of and implementation
of strategies.
of strategies.
The ability to create, manage and sustain
The ability to create, manage and sustain
exchange relationships with customers,
exchange relationships with customers,
vendors, distributors and others will become a
vendors, distributors and others will become a
key strategic competence for firms in the
3. Environmental Analysis
3. Environmental Analysis
Analyzing the major environmental trends is Analyzing the major environmental trends is
essential to developing strategic marketing programs essential to developing strategic marketing programs
to take advantage of opportunities and to minimize to take advantage of opportunities and to minimize
threats. threats.
1.
1. PhysicalPhysical
2.
2. Political/ legal (including regulatory)Political/ legal (including regulatory)
3.
3. TechnologicalTechnological
4.
4. DemographicDemographic
5.
5. EconomicEconomic
6.
6. Socio-culturalSocio-cultural
7.
Trends Defined I
Trends Defined I
PhysicalPhysical: resource availability, climate, environmental : resource availability, climate, environmental
degradation. This may also represent an opportunity degradation. This may also represent an opportunity
(green products, waste recovery processes). (green products, waste recovery processes).
Political/ legalPolitical/ legal: confiscation, expropriation (some : confiscation, expropriation (some
compensation), domestication, exchange (currency) compensation), domestication, exchange (currency)
control, a variety of other pointless or control, a variety of other pointless or
counterproductive interferences counterproductive interferences
TechnologicalTechnological: shorter time to market; biology : shorter time to market; biology
(genetic mapping and modification, pharmacology, (genetic mapping and modification, pharmacology,
Trends Defined II
Trends Defined II
DemographicDemographic: aging, family structure and fertility, : aging, family structure and fertility,
migration, ethnic composition migration, ethnic composition
EconomicEconomic: Purchasing Power Parity is more realistic : Purchasing Power Parity is more realistic
measure than per capita GDP; barriers to international measure than per capita GDP; barriers to international
trade trade
Socio-culturalSocio-cultural: values (e.g., individual liberty, : values (e.g., individual liberty,
personal accountability), attributes and general personal accountability), attributes and general
behavior behavior
CompetitiveCompetitive: globalization of business, technological : globalization of business, technological
growth and complexity, channel changes (supply growth and complexity, channel changes (supply
chain management, direct marketing), deregulation, chain management, direct marketing), deregulation,
Impact and Timing of Events
Impact and Timing of Events
Opportunity/ threat matrix (2 x 2):Opportunity/ threat matrix (2 x 2): – High and low probabilityHigh and low probability
– High and low impactHigh and low impact
– High/ high events should be closely monitoredHigh/ high events should be closely monitored
– High impact/ low probability should be re-assessed from time High impact/ low probability should be re-assessed from time
to time in both dimensions
to time in both dimensions Response strategiesResponse strategies
– Opposition (but often is beyond firm’s control)Opposition (but often is beyond firm’s control) – AdaptationAdaptation
– Offensive (taking advantage)Offensive (taking advantage) – RedeploymentRedeployment
4. Industry Dynamics
4. Industry Dynamics
Products might be defined at the industry Products might be defined at the industry
(automotive), product class (passenger vehicles), (automotive), product class (passenger vehicles),
product type (compact) and brand levels (Volkswagen product type (compact) and brand levels (Volkswagen
Beetle). Beetle).
– The more generic the product class, The more generic the product class,
– The higher the aggregation and the more stable the product The higher the aggregation and the more stable the product life cycle curve,
life cycle curve,
– The less useful it is to do strategic planning, which seeks to The less useful it is to do strategic planning, which seeks to identify opportunities and threats for specific product-market identify opportunities and threats for specific product-market
relationships. relationships.
At the product-type level, even if they serve different At the product-type level, even if they serve different
needs, products tend to be close substitutes for one needs, products tend to be close substitutes for one
Market Hierarchy
Market Hierarchy
Although firms differ in the levels they target,
Although firms differ in the levels they target,
the trend is towards greater specificity – that is,
the trend is towards greater specificity – that is,
towards targeting more precisely the defined
towards targeting more precisely the defined
segments at the lower levels of the hierarchy.
segments at the lower levels of the hierarchy.
e.g., Total world market
e.g., Total world market
North American
North American
market
market
Gulf South market
Gulf South market
Families with
Families with
young children making $50 000 or more
young children making $50 000 or more
annually
Product Life Cycle
Product Life Cycle
This concept holds that a product’s sales
This concept holds that a product’s sales
change in a predictable way over time and that
change in a predictable way over time and that
products go through a series of five distinctive
products go through a series of five distinctive
changes: Introduction
changes: Introduction
Growth
Growth
Shake-out
Shake-out
Maturity
Maturity
Decline. This may provide an
Decline. This may provide an
indication of how the firm’s strategy and
indication of how the firm’s strategy and
marketing programs must change.
marketing programs must change.
The model fails to take into account that the
The model fails to take into account that the
cycle is driven by the evolution of consumer
cycle is driven by the evolution of consumer
preferences (the market), technology (the
preferences (the market), technology (the
product) and competition (the supply side).
Cycle Stage Characteristics
Cycle Stage Characteristics
• IntroductionIntroduction: overcoming lack of awareness and : overcoming lack of awareness and
limited availability limited availability
• GrowthGrowth: sharp increase in sales; product line expands; : sharp increase in sales; product line expands;
improvements continue; brand differentiation improvements continue; brand differentiation
increases increases
• Shake-outShake-out: (competitive turbulence) decreasing : (competitive turbulence) decreasing
growth rate; intense price competition growth rate; intense price competition
• MaturityMaturity: stability in demand, competition and : stability in demand, competition and
technology technology
• DeclineDecline: products succeeded by superior technology; : products succeeded by superior technology;
Adoption Process
Adoption Process
1.
1.
Awareness
Awareness
: but with insufficient motivation
: but with insufficient motivation
to seek information
to seek information
2.
2.
Interest
Interest
: but not involved
: but not involved
3.
3.
Evaluation
Evaluation
: mental rehearsal stage
: mental rehearsal stage
4.
4.
Trial
Trial
: actual use, but on a limited basis if
: actual use, but on a limited basis if
possible
possible
5.
5.
Adoption
Adoption
: continues to use and adopts in lieu
: continues to use and adopts in lieu
of substitutes
Speed of Adoption
Speed of Adoption
1.
1.
Risk: cost of product failure or dissatisfaction
Risk: cost of product failure or dissatisfaction
2.
2.
Relative advantage over other products
Relative advantage over other products
3.
3.
Relative simplicity of the new product
Relative simplicity of the new product
4.
4.
Compatibility with previously-adopted idea
Compatibility with previously-adopted idea
5.
5.
Extent to which a trial can be conducted on a
Extent to which a trial can be conducted on a
small scale
small scale
6.
6.
Ease with which the central idea of the new
Ease with which the central idea of the new
product can be communicated
Adopter Categories
Adopter Categories
Innovators
Innovators
(first 2 ½ %): venturesome;
(first 2 ½ %): venturesome;
receptive to new ideas; tend to be high income
receptive to new ideas; tend to be high income
Early Adopters
Early Adopters
(next 13 to 14 %): opinion
(next 13 to 14 %): opinion
leaders
leaders
Early Majority
Early Majority
(34%): want to be sure that new
(34%): want to be sure that new
product will succeed before adopting it
product will succeed before adopting it
Late Majority
Late Majority
(34%): forced to do so
(34%): forced to do so
Industry Analysis
Industry Analysis
An attractive industry plays a large role in determining An attractive industry plays a large role in determining
a firm’s strategy – particularly its aggressiveness. a firm’s strategy – particularly its aggressiveness.
Characteristics: size, growth rate, number of firms, Characteristics: size, growth rate, number of firms,
geographic scope, degree of vertical integration, ease geographic scope, degree of vertical integration, ease of entry and exit, channels of distribution, customers, of entry and exit, channels of distribution, customers,
technology, scale/ learning effects technology, scale/ learning effects
Driving forces: changes in market’s long-term growth Driving forces: changes in market’s long-term growth
rate; changes in buyer segments; diffusion of rate; changes in buyer segments; diffusion of
proprietary knowledge; changes in cost and proprietary knowledge; changes in cost and
Industry Competition
Industry Competition
Five interactive competitive forces that collectively Five interactive competitive forces that collectively
determine an industry’s long-term attractiveness: determine an industry’s long-term attractiveness:
• Present competitorsPresent competitors: investment intensity, product : investment intensity, product
differentiation, switching costs differentiation, switching costs
• Potential competitorsPotential competitors: economies of scale, learning effects, : economies of scale, learning effects,
gaining distribution channels gaining distribution channels
• Bargaining power of suppliersBargaining power of suppliers: especially when their product : especially when their product
is a large part of the buyer’s value-added is a large part of the buyer’s value-added
• Bargaining power of buyersBargaining power of buyers: concentration, threat of : concentration, threat of
backward integration, product’s importance to buyer, buyer backward integration, product’s importance to buyer, buyer
profitability profitability
5. Consumer Behavior
5. Consumer Behavior
Consumers purchase products and services as Consumers purchase products and services as
potential solutions to their unsatisfied needs and potential solutions to their unsatisfied needs and
wants. Consumer decision making is essentially a wants. Consumer decision making is essentially a
problem-solving process. problem-solving process.
The more marketers know about the factors affecting The more marketers know about the factors affecting
their customers’ buying behavior, the greater their their customers’ buying behavior, the greater their
ability to: ability to:
– Design attractive product and service offeringsDesign attractive product and service offerings – Define and target meaningful market segmentsDefine and target meaningful market segments
Consumer Decision Making
Consumer Decision Making
High involvement Low involvement
Extended information search
Habit/ routine
Complex decision making
Brand loyalty
Limited decision making, including variety seeking and impulse
High-involvement,
High-involvement,
Complex Decision-Making Process
Complex Decision-Making Process
Five mental steps:Five mental steps:
– Problem identification: the gap between current and desired Problem identification: the gap between current and desired state determines strength
state determines strength
– Active information gathering: so long as perceived benefit Active information gathering: so long as perceived benefit outweighs opportunity and psychological costs, although outweighs opportunity and psychological costs, although
product, situational and personal factors may increase search product, situational and personal factors may increase search – Evaluation of alternatives: relative importance of cost, Evaluation of alternatives: relative importance of cost,
performance, social and availability attributes performance, social and availability attributes
– Purchase: choice of source may involve a similar processPurchase: choice of source may involve a similar process – Post-purchase evaluation: the gap between anticipated and Post-purchase evaluation: the gap between anticipated and
Information Sources
Information Sources
Sources may be personal (experience, family), Sources may be personal (experience, family),
commercial (advertising, brochures) or public
commercial (advertising, brochures) or public
(professional advice).
(professional advice).
In general, commercial sources perform an informing In general, commercial sources perform an informing
function, while personal and public sources perform an
function, while personal and public sources perform an
evaluating and legitimizing function.
evaluating and legitimizing function.
Rather than evaluating all possibilities, consumers often Rather than evaluating all possibilities, consumers often
focus on their
focus on their evoked setevoked set; and may concentrate on certain ; and may concentrate on certain attributes and their relative importance: their
attributes and their relative importance: their choice choice criteria
criteria..
Services are more difficult to standardize (and therefore Services are more difficult to standardize (and therefore
compare), and cannot be evaluated until consumed, or
compare), and cannot be evaluated until consumed, or
even later.
Low-Involvement Purchase
Low-Involvement Purchase
Decisions
Decisions
The risks associated with making a poor decision are low, The risks associated with making a poor decision are low,
and often driven by problem avoidance.
and often driven by problem avoidance. Brand evaluations occur after purchase.Brand evaluations occur after purchase.
Price (discount, coupon) is often determinative.Price (discount, coupon) is often determinative.
Wide distribution is essential: consumers are not Wide distribution is essential: consumers are not
motivated to seek out the product.
motivated to seek out the product.
Inertia: buying the same brand repetitively to avoid Inertia: buying the same brand repetitively to avoid
making a choice (not to be confused with brand loyalty).
making a choice (not to be confused with brand loyalty). Passive exposure to advertising may may motivate Passive exposure to advertising may may motivate
impulse purchase (desire for change or variety).
impulse purchase (desire for change or variety).
Psychological and Personal
Psychological and Personal
Influences
Influences
Some of the important psychological variables Some of the important psychological variables
affecting consumer decision making include affecting consumer decision making include
perception, memory, needs
perception, memory, needs andand attitudesattitudes. These may . These may be influenced by demographics.
be influenced by demographics.
Perception is the process by which a person selects, Perception is the process by which a person selects,
organizes and interprets information: a sequence of organizes and interprets information: a sequence of
exposure, attention, comprehension and retention. For exposure, attention, comprehension and retention. For
low-involvement products, consumers bypass low-involvement products, consumers bypass
attention and comprehension. attention and comprehension.
Perception is selective, and filters for relevance and Perception is selective, and filters for relevance and
Perception and Memory
Perception and Memory
Only a portion of the information (if any) of
Only a portion of the information (if any) of
the information is retained.
the information is retained.
– To be transferred to long-term memory, the To be transferred to long-term memory, the
information must be rehearsed and internalized. information must be rehearsed and internalized.
– The message is is The message is is categorizedcategorized and the separate bits and the separate bits integrated
integrated into an overall image. into an overall image.
A person can discriminate between two objects
A person can discriminate between two objects
only when they differ by more than a
only when they differ by more than a
just
just
noticeable difference (JND)
Needs and Attributes
Needs and Attributes
FishbeinFishbein model: Attitude model: AttitudeAA = = BBiiIIii, where:, where:
– AttitudeAttitudeA A = consumer’s overall attitude toward Brand A= consumer’s overall attitude toward Brand A – BBi i = consumer’s belief of the extent to which attribute = consumer’s belief of the extent to which attribute ii is is
associated with Brand A associated with Brand A
– IIii is the importance of attribute is the importance of attribute ii to the consumer when to the consumer when choosing a brand to buy.
choosing a brand to buy.
– k is the total number of attributes considered by the k is the total number of attributes considered by the consumer when evaluating alternative brands
consumer when evaluating alternative brands
Fishbein is a compensatory model, meaning that a Fishbein is a compensatory model, meaning that a
high score on one attribute can compensate for a high score on one attribute can compensate for a
Non-compensatory Models
Non-compensatory Models
LexicographicalLexicographical model: Starting with the most model: Starting with the most
important attribute, evaluation appears until one brand important attribute, evaluation appears until one brand
appears clearly superior on that dimension, then the appears clearly superior on that dimension, then the
evaluation process ends. evaluation process ends.
ConjunctiveConjunctive model: Alternative brands are compared model: Alternative brands are compared
to a set of standards rather than to each other. to a set of standards rather than to each other.
Alternatives falling below any minimum are rejected. Alternatives falling below any minimum are rejected.
DisjunctiveDisjunctive model: High standards are set for a few model: High standards are set for a few
key attributes, and the consumer considers only those key attributes, and the consumer considers only those
Model applicability
Model applicability
Marketers would like to have information
Marketers would like to have information
about:
about:
– Attributes or decision criteria consumers use to Attributes or decision criteria consumers use to evaluate a product category
evaluate a product category
– The relative importance of those attributes to The relative importance of those attributes to different consumers
different consumers
– How consumers rate their brand compared to How consumers rate their brand compared to competitor offerings on important attributes competitor offerings on important attributes
‘
‘
Variety-seeking behavior
Variety-seeking behavior
’ is only relevant in
’ is only relevant in
societies that provide a wide variety of choices.
Attitude Change
Attitude Change
Changing attitude toward a product class:
Changing attitude toward a product class:
increases the total market
increases the total market
Changing the importance consumers attach to
Changing the importance consumers attach to
one or more attributes
one or more attributes
Adding a salient product characteristic to an
Adding a salient product characteristic to an
existing set
existing set
Improving the ratings of salient product
Improving the ratings of salient product
characteristics of a particular brand
characteristics of a particular brand
Demographics and Lifestyle
Demographics and Lifestyle
Demographics may influence:
Demographics may influence:
– Nature of consumers’ needs and wantsNature of consumers’ needs and wants
– Ability to buy products and services to satisfy those Ability to buy products and services to satisfy those needs and wants
needs and wants
– Perceived importance of various attributes and Perceived importance of various attributes and choice criteria
choice criteria
– Preferences for different products or brandsPreferences for different products or brands
Lifestyles are broad patterns of activities,
Lifestyles are broad patterns of activities,
interests and opinions.
Social Influences
Social Influences
These are particularly evident when consumers
These are particularly evident when consumers
buy high-involvement, socially-visible
buy high-involvement, socially-visible
products or services.
products or services.
– CultureCulture
– Social class – similarities in income, education and Social class – similarities in income, education and occupation
occupation
– Reference groups – willingness to seek and take Reference groups – willingness to seek and take recommendations
recommendations
6. Organizational Buying Behavior
6. Organizational Buying Behavior
Differences between consumer and organizational Differences between consumer and organizational
markets: markets:
– Demand characteristicsDemand characteristics: industrial demand is : industrial demand is derivedderived from from consumer demand; is relatively inelastic in the short run; is consumer demand; is relatively inelastic in the short run; is
more erratic; is more cyclical. more erratic; is more cyclical.
– Market demographicsMarket demographics: larger; fewer in number; : larger; fewer in number; geographically concentrated; more apt to buy on geographically concentrated; more apt to buy on
specifications. specifications.
– Buyer – seller relationshipsBuyer – seller relationships: closer buyer – seller : closer buyer – seller
relationships; professional buying specialists following relationships; professional buying specialists following
Nature and Scope of Org. Markets
Nature and Scope of Org. Markets
There is a strong correlation between the level of a There is a strong correlation between the level of a
country’s economic development and its demand for country’s economic development and its demand for
industrial goods and services. industrial goods and services.
Buyers are classified as:Buyers are classified as:
– ResellersResellers: Includes wholesalers and retailers; may be an : Includes wholesalers and retailers; may be an important market for industrial goods and services
important market for industrial goods and services
– Goods producersGoods producers: Includes producers of raw materials : Includes producers of raw materials (farms, mills, mines)
(farms, mills, mines)
– Service producersService producers: A trend to becoming increasingly : A trend to becoming increasingly important segment
important segment
Org. Buying Participants
Org. Buying Participants
UsersUsers: Use or work with the product or service: Use or work with the product or service InfluencersInfluencers: Provide information for evaluating : Provide information for evaluating
alternative products and suppliers; usually technical alternative products and suppliers; usually technical
experts experts
GatekeepersGatekeepers: Control the flow of information to others : Control the flow of information to others
in the purchasing process, with these “others” in the purchasing process, with these “others”
primarily comprising the organization’s purchasing primarily comprising the organization’s purchasing
agents and the supplier’s salespeople agents and the supplier’s salespeople
BuyersBuyers (Purchasing agents): Have the authority to (Purchasing agents): Have the authority to
contact suppliers and negotiate a purchase contact suppliers and negotiate a purchase
Org. Buying Center
Org. Buying Center
For most high-value organizational purchases, several For most high-value organizational purchases, several
people from different departments (“
people from different departments (“the buying the buying center
center”) participate in the decision process. ”) participate in the decision process.
Planning a marketing program aimed at organizational Planning a marketing program aimed at organizational
customers involves determining which individuals to customers involves determining which individuals to
target, how and when each should be contacted and target, how and when each should be contacted and
what kinds of information and appeals each is likely to what kinds of information and appeals each is likely to
find most useful or persuasive. find most useful or persuasive.
FactorsFactors: newness of problem, information needs, new : newness of problem, information needs, new
Buying Situations
Buying Situations
Straight rebuyStraight rebuy: involves purchasing a common : involves purchasing a common
product or service the organization has bought many product or service the organization has bought many
times before. Needs: quality assurance, parity pricing, times before. Needs: quality assurance, parity pricing,
on-time delivery to minimize inventory on-time delivery to minimize inventory
Modified rebuyModified rebuy: needs remain unchanged, but buying : needs remain unchanged, but buying
center members are not satisfied with the product or center members are not satisfied with the product or
supplier supplier
New-task buyingNew-task buying: a new or unique need; buying : a new or unique need; buying
center members have little or no experience; effort to center members have little or no experience; effort to
collect information on products and suppliers and to collect information on products and suppliers and to
Purchase Decision-Making Process
Purchase Decision-Making Process
1.
1. Recognition of a problem or needRecognition of a problem or need: usually in : usually in
production processes or day-to-day operations production processes or day-to-day operations (implies specs); requirements planning
(implies specs); requirements planning
2.
2. Search for information on products and suppliersSearch for information on products and suppliers: A : A
value analysis
value analysis is a systematic appraisal of an item’s is a systematic appraisal of an item’s design, quality and performance requirements; design, quality and performance requirements; make-or-buy decisions; supplier qualification might include or-buy decisions; supplier qualification might include finances, reputation for quality and reliability
finances, reputation for quality and reliability
3.
3. Evaluation and selection of suppliersEvaluation and selection of suppliers: choice criteria : choice criteria
reflect desired benefits; sometimes use quantitative reflect desired benefits; sometimes use quantitative ratings; reciprocity (can they be a buyer of
ratings; reciprocity (can they be a buyer of ourour products?)
Decision-Making Process, 2
Decision-Making Process, 2
4.
4.
Purchase
Purchase
: a good portion of industrial buying
: a good portion of industrial buying
involves a purchasing contract – (1) a blanket
involves a purchasing contract – (1) a blanket
purchasing order, (2) an annual requirement
purchasing order, (2) an annual requirement
purchasing arrangement – supplier
purchasing arrangement – supplier
exclusivity for discount, or (3) stockless
exclusivity for discount, or (3) stockless
purchasing arrangement: dedicated inventory.
purchasing arrangement: dedicated inventory.
5.
5.
Performance evaluation and feedback
Performance evaluation and feedback
: when
: when
the purchase is made and the goods delivered,
the purchase is made and the goods delivered,
the buyer’s evaluation (sometimes formal) of
the buyer’s evaluation (sometimes formal) of
the product and the supplier begins.
Long-term Relationships
Long-term Relationships
Repeat purchasingRepeat purchasing is often routine. The challenge to a is often routine. The challenge to a
supplier is to get the buyer interested in the more supplier is to get the buyer interested in the more
extensive evaluation processes of a modified rebuy. extensive evaluation processes of a modified rebuy.
A A logistical alliancelogistical alliance might include computerized might include computerized
ordering: convenient for the buyer, valuable loyalty ordering: convenient for the buyer, valuable loyalty
for supplier for supplier
Both parties must trust each other to prevent Both parties must trust each other to prevent
opportunistic behavior that would advance short-term opportunistic behavior that would advance short-term interests at their partner’s expense. This trust is more interests at their partner’s expense. This trust is more
Industrial Goods and Services
Industrial Goods and Services
… … fall into six categories:fall into six categories:
1.
1. Raw materialsRaw materials: receive relatively little processing before : receive relatively little processing before
they are sold; marketed directly to processors or they are sold; marketed directly to processors or
manufacturers manufacturers
2.
2. Component materials and partsComponent materials and parts: materials are processed to : materials are processed to
some degree; parts are assembled without further changes some degree; parts are assembled without further changes
in form in form
3.
3. InstallationsInstallations: buildings and major capital equipment: buildings and major capital equipment
4.
4. Accessory equipmentAccessory equipment: industrial machin
