Marketing 1
marketing – The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
Deliver genuine value.
Discover the needs and wants of prospective customers and satisfy them.
exchange – the trade of things of value between a buyer and a seller so that each is better off after the trade
4 Factors of Marketing – (1) two or more parties (individuals or organizations) with unsatisfied needs
(2) a desire and ability on their part to have their needs satisfied
(3) a way for the parties to communicate
(4) something to exchange.
How to discover customer needs – customer surveys, concept tests, and other forms of marketing research, crowdsourcing websites.
How to meet customer needs – (1) focus on what the customer benefit is
(2) learn from past mistakes
need – basic necessities such as food, clothing, and shelter.
want – shaped by person’s knowledge, culture, and personality
market – people with both the desire and the ability to buy a specific offering
target market – one or more specific groups of potential consumers toward which an organization directs its marketing program
The Four Ps: Controllable Marketing Mix Factors – Product: good, service, or idea to satisfy the consumer’s needs.
Price: What is exchanged for the product.
Promotion: A means of communication between the seller and buyer.
Place: A means of getting the product to the consumer.
Why are the marketing mix Controllable Factors? – they are under the control of the marketing department in an organization.
Market share – the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself
customer value proposition (utility, satisfaction) – A cluster of benefits that an organization promises customers to satisfy their needs. Derived from a good marketing mix.
Environmental Forces (Macro factors) – social, economic, technological, natural, and regulatory forces that affect marketing. Should work to influence them.
social: culture, beliefs, values, demographics, diversity
Customer value – the unique combination of benefits received by targeted buyers that includes quality, convenience, on-time delivery, and both before-sale and after-sale service at a specific price
3 Strategies of customer values – best price, best product, or best service
relationship marketing – hallmark of customer relationships; links the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefit
marketing program – a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers
marketing segments – relatively homogeneous groups of prospective buyers that
(1) have common needs
(2) will respond similarly to a marketing action
why marketing is a driving force in the modern global economy – (1) the evolution of the market orientation
(2) ethics and social responsibility in marketing
(3) the breadth and depth of marketing activities.
4 Market Stages of life – production era (to 1920s): Goods were scarce and buyers were willing to accept virtually any goods that were available and make do with them.
sales era (1920s to the 1960s): more goods than buyers could consume. Competition grew. Firms hired more salespeople to find new buyers.
marketing concept era (late 1950s): idea that an organization should (1) strive to satisfy the needs of consumers while also (2) trying to achieve the organization’s goals
customer relationship era (1980s): continuously seek to satisfy the high expectations of customers.
4 Business orientations – Product: 1st born, good product sells itself
Sales: More competition = more effort in sales
Marketing: Birth of marketing, finding ideal locations
Market: Everyone focuses & contributes to marketing
An organization that has a market orientation – (1) continuously collecting information about customers’ needs
(2) sharing this information across departments
(3) using it to create customer value.
customer relationship management (CRM) – the process of identifying prospective buyers, understanding them intimately, and developing favorable long-term perceptions of the organization and its offerings so that buyers will choose them in the marketplace and become advocates after their purchase.
requires the involvement and commitment of managers and employees throughout the organization and a growing application of information, communication, and Internet technology
customer experience – the internal response that customers have to all aspects of an organization and its offering.
This internal response includes both the direct (buying, using, obtaining) and indirect (reviews) contacts of the customer with the company.
social responsibility – the idea that organizations are accountable to a larger society.
1) profit responsibility, (2) stakeholder responsibility, and (3) societal responsibility.
societal marketing concept – the view that organizations should satisfy the needs of consumers in a way that provides for society’s well-being.
Ultimate consumers – are the people who use the products and services purchased for a household
organizational buyers – are those manufacturers, wholesalers, retailers, service companies, not-for-profit organizations, and government agencies that buy products and services for their own use or for resale.
utility – created by marketing, the benefits or customer value received by users of the product. This utility is the result of the marketing exchange process and the way society benefits from marketing
4 types of utility – form utility: types of possession, media
Place utility means having the offering available where consumers need it
time utility means having it available when needed.
Possession utility is the value of making an item easy to purchase through the provision of credit cards or financial arrangements, also experimentation & free trials
environmental scanning – The process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends is called
Environmental trends come from what 5 sources – social, economic, technological, competitive, and regulatory forces
social forces – of the environment include the demographic characteristics of the population and its culture.
Demographics – Describing a population according to selected characteristics such as age, gender, ethnicity, income, and occupation
traits of US population – Generally, the population is becoming larger, older, and more diverse
baby boomers – (1946-1964): wealthiest generation, 50 percent of all consumer spending, balance obligations to parents and children
Companies that target boomers will need to respond to their interests in health, fitness, retirement housing, financial planning, and appearance.
Generation X – (1965-1976): baby bust, self-reliant, supportive of racial and ethnic diversity, better educated, no extravagance, blend of caution, pragmatism, and traditionalism. Business travelers
First generation to have less than the previous generation. Spends more on food, housing, apparel, and entertainment. Most on the Internet & most online spending
Want online customer support; websites that are comprehensive, professional, and interactive; and advertising that is authentic, family-oriented, and unique.
Generation Y – (1977-1994): echo-boom, influence on music, sports, computers, video games, and all forms of communication and networking.
distinctive, memorable, personal experiences, work-life balance, strong-willed, passionate about the environment, and optimistic. Purposeful work where they have control.
Younger members are millennials, largest living generation
Generation Z – (1995-2010): broadest definitions of diversity and inclusivity to include race, ethnicity, the LGBT community, different body types, and those with physical challenges. “natural” look, discover and learn online, and expect a seamless use of digital and physical aspects of the marketplace
Fastest growing households – adult child who has moved back home with his or her parents, those with unmarried partners, and those with same-sex partners
blended family – merging families through remarriage
Causes of shift to southern and western states – The shift is the result of three components: natural population change (births minus deaths), state-to-state migration, and international migration (immigration minus emigration)
exurbs – more remote suburbs
Types of statistical areas (Census Bureau) – metropolitan statistical area: 50,000+ high degree of social and economic integration.
micropolitan statistical area: 10,000 < 50,000, high degree of social and economic integration.
2.5 million+ divided into metropolitan divisions.
Adjacent mixed into combined statistical areas
multicultural marketing – which are combinations of the marketing mix that reflect the unique attitudes, ancestry, communication preferences, and lifestyles of different races
culture – incorporates the set of values, ideas, and attitudes that are learned and shared among the members of a group
Changing US values – Past: achievement, work, efficiency, and material comfort.
Today: personal control, continuous change, equality, individualism, self-help, competition, future orientation, action, sustainability
Lecture: materialism, individualism, oriented on future, youthfulness
Value consciousness – the concern for obtaining the best quality, features, and performance of a product or service for a given price
economy – pertains to the income, expenditures, and resources that affect the cost of running a business and household.
macroeconomic features – GDP (gross domestic product), unemployment, and price changes (inflation or deflation) & customer expectations on economy
L-Shaped growth – Return to original growth rate after a drop
2 surveys on consumer confidence – Consumer Confidence Index, conducted by a nonprofit business research organization called the Conference Board
Index of Consumer Sentiment (ICS), conducted by the Survey Research Center at the University of Michigan
Microeconomic features – gross income: The total amount of money made in one year by a person, household, or family unit
disposable income: the money a consumer has left after paying taxes to use for necessities
discretionary income: the money that remains after paying for taxes and necessities. For luxuries
Technology – inventions or innovations from applied science or engineering research
1099 economy – Modern shift into a “sharing economy”
Future Tech – AI, Automation, Internet of Things (IoT), wearable tech
precycling – efforts by manufacturers and consumers to avoid creating waste.
marketspace – an information and communication-based electronic exchange environment occupied by sophisticated computer and telecommunication technologies and digital offering
electronic commerce – the activities that use electronic communication in the inventory, promotion, distribution, purchase, and exchange of products and services.
Intranets & Extranets – Tech for communication inside org & for suppliers/distributors/partners
competition – alternative firms that could provide a product to satisfy a specific market’s needs.
pure competition – many sellers and each has a similar product. Companies that deal in commodities common to agribusiness (for example, wheat, rice, and grain).
distribution (in the sense of shipping products) is important but other elements of marketing have little impact
monopolistic competition – many sellers compete with substitutable products within a price range. For example, if the price of coffee rises too much, consumers may switch to tea. Coupons or sales are frequently used marketing tactics.
Oligopoly – a few companies control the majority of industry sales. The wireless telephone industry, for example, is dominated by four carriers
pure monopoly – Only 1 firm sells product
What drives competition? – entry, the bargaining power of buyers and suppliers, existing rivalries, and substitution possibilities
barriers to entry – capital requirements, advertising expenditures, product identity, distribution access, or the cost to customers of switching suppliers
Powerful buyers & suppliers? – Buyers: few in number, low switching costs, product is most of cost
Supplier: product is critical to the buyer and when it has built up the switching costs
regulation – consists of restrictions state and federal laws place on business with regard to the conduct of its activities. Regulation exists to protect companies as well as consumers.
Sherman Antitrust Act (1890) – forbids
(1) contracts, combinations, or conspiracies in restraint of trade
(2) actual monopolies or attempts to monopolize any part of trade or commerce
Clayton Act (1914) – This act forbids certain actions that are likely to lessen competition, although no actual harm has yet occurred.
Robinson-Patman Act (1936) – No price discrimination (all agree to set base price)
consumerism – a grassroots movement started in the 1960s to increase the influence, power, and rights of consumers in dealing with institutions. This movement continues and is reflected in the growing consumer demand for ecologically safe products and ethical and socially responsible business practices
Consumer oriented federal laws – Fair Packaging and Labeling Act (1966), the Child Protection Act (1966), and the Consumer Product Safety Act (1972)
Lanham Act (1946) – which provides for registration of a company’s trademarks.
how are price fixing and price discounting illegal? – per se illegal, which means the courts see price fixing itself as illegal by Sherman act
Distribution Regulation – exclusive dealing: is an arrangement a manufacturer makes with a reseller to handle only its products and not those of competitors (Clayton Act)
Requirement contracts require a buyer to purchase all or part of its needs for a product from one seller for a time period
Exclusive territorial distributorships, a manufacturer grants a distributor the sole rights to sell a product in a specific geographical area.
tying arrangement, whereby a seller requires the purchaser of one product to also buy another item in the line.
Regulatory Agencies – FTC (1914): No false ads
FDA (1906): Food & Drug testing + ads
Consumer Product Safety (1972): Covers what is not seen by the above two, very limited
FTC Act of 1914 – Prevents incorrect or malicious advertising with
(1) issue cease and desist orders
(2) order corrective advertising
self-regulation – alternative to government control where an industry attempts to police itself
ethics – the moral principles and values that govern the actions and decisions of an individual or group.
laws – society’s values and standards that are enforceable in the courts
why do people view businesses as unethical? – increased pressure on business people to make decisions in a society characterized by diverse value systems
growing tendency for business decisions to be judged publicly by groups with different values and interests.
public’s expectations of ethical business behavior have increased.
ethical business conduct may have declined.
3 cultures that guide ethics – societal, business (industry), and corporate
business cultures – comprise the effective rules of the game, the boundaries between competitive and unethical behavior, the codes of conduct in business dealings.
caveat emptor – pre 1960s stance on business – let the buyer beware
Consumer Bill of Rights – JFK, 1962
(1) right to safety (industry laws)
(2) to be informed (accurate marketing)
(3) to choose (prevent slotting allowances)
(4) to be heard (ability to complain)
economic espionage – is the clandestine collection of trade secrets or proprietary information about a company’s competitors.
include illegal trespassing, theft, fraud, misrepresentation, electronic hacking, search of a competitor’s trash, and violations of written and implicit employment agreements
Economic Espionage Act (1996)
corruption – unethical conduct by a person entrusted with a position of authority, often to acquire a personal benefit.
The giving and receiving of bribes, kickbacks, and graft are the most common forms of corruption.
These practices are more common in business-to-business and government marketing than in consumer marketing.
Foreign Corrupt Practices Act (1977)
code of ethics – a formal statement of ethical principles and rules of conduct.
in 85-90% companies
relate to contributions to government officials and political parties, customer and supplier relations, conflicts of interest, and accurate recordkeeping.
Suffer from lack of specificity
whistleblowers – employees who report unethical or illegal actions of their employers.
moral idealism – a personal moral philosophy that considers certain individual rights or duties as universal, regardless of the outcome.
For example, the right to know applies to probable defects in an automobile that relate to safety.
Utilitarianism – a personal moral philosophy that focuses on “the greatest good for the greatest number” by assessing the costs and benefits of the consequences of ethical behavior. If the benefits exceed the costs, then the behavior is ethical
Social Responsibility – organizations are part of a larger society and are accountable to that society for their actions.
1) profit responsibility, (2) stakeholder responsibility, and (3) societal responsibility.
profit responsibility – companies have a simple duty: to maximize profits for their owners or stockholders.
stakeholder responsibility – obligations an organization has to those who can affect achievement of its objectives. These constituencies include consumers, employees, suppliers, and distributors.
societal responsibility – obligations that organizations Phave (1) to the preservation of the ecological environment and (2) to the general public.
need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth
sustainable marketing – seeks to meet today’s (global) economic, environmental, and social needs without compromising the opportunity for future generations to meet theirs. Green marketing, cause marketing, social audits, and sustainable development reflect this recognition.
cause marketing – which occurs when the charitable contributions of a firm are tied directly to the customer revenues produced through the promotion of one of its products.
social audit – Many companies develop, implement, and evaluate their social responsibility efforts by means of a social audit, which is a systematic assessment of a firm’s objectives, strategies, and performance in terms of social responsibility
5 steps of social audit – Recognition of a firm’s social expectations and the rationale for engaging in social responsibility endeavors.
Identification of social responsibility causes or programs consistent with the company’s mission.
Determination of organizational objectives and priorities for programs and activities it will undertake.
Specification of the type and amount of resources necessary to achieve social responsibility objectives.
Evaluation of social responsibility programs and activities undertaken and assessment of future involvement.
sustainable development – involves conducting business in a way that protects the natural environment while making economic progress.
Benefits: (1) favorable word of mouth among consumers and (2) typically outperform less responsible companies in terms of financial performance
Unethical consumer practices – These practices include filing warranty claims after the claim period; misredeeming coupons; making fraudulent returns of merchandise; providing inaccurate information on credit applications; buying counterfeit products; pirating music, movies, and software from the Internet; and submitting phony insurance claims.
Reasoning behind unethical consumers – (1) a belief that a consumer can get away with the act and it is worth doing
(2) “everybody does it.”
Why do consumers struggle to adapt purchasing for environmental benefits? – (1) may be unwilling to sacrifice convenience and pay higher prices to protect the environment
(2) lack the knowledge to make informed decisions dealing with the purchase, use, and disposition of products.
greenwashing – the practice of making an unsubstantiated or misleading claim about the environmental benefits of a product, service, technology, or company practice.
purchase decision process – 5 stages on what product to buy
1) problem recognition, (2) information search, (3) alternative evaluation, (4) purchase decision, and (5) postpurchase behavior.
problem recognition – perceiving a difference between a person’s ideal and actual situations big enough to trigger a decision
external search – High risk, low info cost
(1) personal sources (friends, family, social media)
(2) public sources
(3) marketer-dominated sources, ads
internal search – scan your memory for previous experiences with products or brands
useful for everyday items
alternative evaluation – clarifies the information gathered by (1) suggesting criteria to use for the purchase, (2) yielding brand names that might meet the criteria, and (3) developing consumer value perceptions.
consumer’s evaluation criteria – represent both the objective attributes of a brand (such as display) and the subjective ones (such as prestige) you use to compare different products and brands
consideration set – group of brands a consumer considers acceptable from among all the brands in the product class of which he or she is aware
purchase decision – from whom to buy and when to buy
whom: past circumstances, sale options, refunds/warrenty
when: store atmosphere, time, money
postpurchase behavior – After buying a product, the consumer compares it with his or her expectations and is either satisfied or dissatisfied.
cognitive dissonance – feeling of postpurchase psychological tension or anxiety
what varies involvement? – varies on personal, social, economic significance
High value: (1) expensive, (2) can have serious personal consequences, or (3) could reflect on one’s social image
3 types of problem solving – extended – Much effort, high cost purchases
limited – some research, ex. restaurant or appliance
routine – little effort, routine goods
what brands do with low consumer involvement – market leader: (1) maintaining product quality, (2) avoiding stockout situations, (3) using repetitive ads that reinforce
market challengers: break buying habits with free samples, coupons, and rebates
what brands do with high consumer involvement – Market leaders: info in ads, social media
Market challengers: comparative advertising with novel brands
5 Situtations that affect purchase decisions – (1) the purchase task: gift, personal use, social status
(2) social surroundings: ppl present when buying
(3) physical surroundings: decor, music, crowding
(4) temporal effects: time of day, time available
(5) antecedent states: customer’s mood, cash available
moments of truth – when a marketer has to be present to change a person’s mind on a product
consumer touchpoints – marketer’s product, service, or brand points of contact with a consumer from start-to-finish in the purchase decision process
consumer journey map – a visual representation of all the touchpoints for a consumer who comes into contact with a company’s products, services, or brands before, during, and after a purchase
pain points – experiences that detract from a customer’s experience
psychological influences – motivation and personality; perception; learning; values, beliefs, and attitudes; and lifestyle
motivation – the energizing force that stimulates behavior to satisfy a need. Because consumer needs are the focus of the marketing concept, marketers try to arouse these needs.
5 Need classes – Physiological needs: basic to survival, first
Safety needs: self-preservation, physical and financial well-being.
Social needs: love and friendship.
Personal needs: achievement, status, prestige, and self-respect.
Self-actualization: personal fulfillment.
personality – a person’s consistent behaviors or responses to recurring situations.
key traits – enduring characteristics within a person or in his or her relationships with others.
Such traits include assertiveness, extroversion, compliance, dominance, and aggression, among others.
These traits are inherited or formed at an early age and change little over the years
what is a person’s self-concept? – the way people see themselves and the way they believe others see them. Marketers recognize that people have an actual self-concept and an ideal self-concept.
perception – the process by which an individual selects, organizes, and interprets information to create a meaningful picture of the world.
selective perception – filtering of exposure, comprehension, and retention of all information around you
selective exposure – when people pay attention to messages that are consistent with their attitudes and beliefs and ignore messages that are inconsistent with them
Occurs in postpurchase stage
selective comprehension – involves interpreting information so that it is consistent with your attitudes and beliefs.
selective retention – consumers do not remember all the information they see, read, or hear, even minutes after exposure to it.
subliminal perception – you see or hear messages without being aware of them, debated if it’s significant or not
perceived risk – the anxiety felt because the consumer cannot anticipate the outcomes of a purchase but believes there may be negative consequences.
Includes financial, physical, “will product work”, “what will my friends think” (psychosocial)
More risk = more external searching
how do companies combat perceived risk? – seals of approval, endorsements, warranties, free trials, extensive instructions
learning – behaviors that result from (1) repeated experience and (2) reasoning.
behavioral learning – the process of developing automatic responses to a situation built up through repeated exposure to it.
4 key variables:
drive – need that moves you to action
cue – stimulus or symbol
response – action taken to satisfy drive
reinforcement – reward
stimulus generalization – when a response elicited by one stimulus (cue) is generalized to another stimulus
same brand for different products
stimulus discrimination – a person’s ability to perceive differences in stimuli
cognitive learning – involves making connections between two or more ideas or simply observing the outcomes of others’ behaviors and adjusting your own accordingly
brand loyalty – a favorable attitude toward and consistent purchase of a single brand over time, developed through positive reinforcement
attitude – learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way
beliefs – a consumer’s subjective perception of how a product or brand performs on different attributes. Beliefs are based on personal experience, advertising, and discussions with other people.
3 ways marketers change a customer’s attitude to a product – change a brand’s attributes (unhealthy), importance of ability (freshness), add new attributes (ingredient)
lifestyle – mode of living that is identified by how people spend their time and resources, what they consider important in their environments, and what they think of themselves and the world around them
psychographics – study of consumer lifestyles, provides insights into consumer wants
significance of VALS – survey of differences in all 18+ US adults
Ideals-motivated: change in society or not
Achievement-motivated: me-first vs live in moment
Self-expression-motivated: social vs. protect own’s thoughts
High- and low-resource: innovators vs survivors
sociocultural influences – personal influence, reference groups, family influence, social class, culture, and subculture.
opinion leaders – knowledgeable about or users of particular products and services, so their opinions influence others’ choices
word of mouth – the influencing of people during conversations, can create buzz or popularity
reference groups – people to whom an individual looks as a basis for self-appraisal or as a source of personal standards. Reference groups affect consumer purchases because they influence the information, attitudes, and aspiration levels that help set a consumer’s standards
4 types of groups – associative group: actually in it
brand community: group of consumers around a certain brand or product (Harley)
aspiration group: wish to join
dissociative group: wish to distance from
consumer socialization – The process by which people acquire the skills, knowledge, and attitudes necessary to function as consumers (ex. parents as kids)
family life cycle – the distinct phases that a family progresses through from formation to retirement, each phase bringing with it identifiable purchasing behaviors
2 styles of family decision making – joint decision making or spouse-dominant
5 roles of family decision making – 1. information gatherer
2. influencer
3. decision maker
4. purchaser
5. user
social class – defined as the relatively permanent, homogeneous divisions in a society into which people sharing similar values, interests, and behavior can be grouped. Determined by occupation, source of income, and education.
subcultures – Subgroups within the larger, or national, culture with unique values, ideas, and attitudes
Hispanic purchasing qualities – quality and brand conscious, prefer American-made,
strong family influence, ads are credible, convenience is not important, or any “dietary” options.
Must appeal to MANY subcultures
African purchasing qualities – spend more on boys’ clothing, rental goods, smartphones, audio equipment, health and beauty products
younger families, lower employment and educational opportunities, price conscious, they are strongly motivated by quality, choice, and personal culture. Most likely to recommend products to friends
Asian purchasing qualities – Very different cultures, divided into assimilated and nonassimilated. Appeal to all subgroups is best
hard work, strong family ties, appreciation for education, and median family incomes are high
business-to-business marketing – is the marketing of products and services to companies, governments, or not-for-profit organizations for use in the creation of products and services that they can produce and market to others.
organizational buyers – manufacturers, wholesalers, retailers, service companies, not-for-profit organizations, and government agencies that buy products and services for their own use or for resale.
Anything that’s not an ultimate consumer
3 types of organizational markets – organizational buyers are divided into…
(1) industrial, (2) reseller, and (3) government.
industrial firms – in some way reprocess a product or service they buy before selling it again to the next buyer.
counts banks that give loans
resellers – Wholesalers and retailers that buy physical products and resell them again without any reprocessing
government units – federal, state, and local agencies that buy goods and services for the constituents they serve
About 89,500 in US
North American Industry Classification System (NAICS) – Measures economic activity & 3 organizational markets in NAFTA
permit studies of market share, demand for products and services, import competition in domestic markets, and similar studies
derived demand – the demand for industrial products and services is driven by, or derived from, demand for consumer products and services.
For example, the demand for Weyerhaeuser’s pulp and paper products is based on consumer demand for newspapers
Size of purchase in an organization vs. a consumer – size of the purchase involved in organizational buying is typically much larger than that in consumer buying. The dollar value of a single purchase made by an organization can amount to millions or billions of dollars
Usually involves bidding, policies, & procedures
70% of all online purchases
# of buyers with an organization – Consumer products: thousands or millions
Organizations: 1000s to 10s
Name 2 buying objectives of organizations – increase profits through reducing costs or increasing revenues.
include an emphasis on buying from minority- and women-owned suppliers and vendors.
Organizational buying criteria – (1) price
(2) ability to meet the quality specifications required for the item
(3) ability to meet required delivery schedules
(4) technical capability
(5) warranties and claim policies in the event of poor performance
(6) past performance on previous contracts
(7) production facilities and capacity.
supplier development – deliberate effort by organizational buyers to build relationships that shape suppliers’ products, services, and capabilities to fit a buyer’s needs and those of its customers
Relationship bwtn organization buyer and seller – complex negotiations concerning delivery schedules, price, technical specifications, warranties, and claim policies
Reciprocity – an industrial buying practice in which two organizations agree to purchase each other’s products and services
frowned upon, can limit alternative suppliers
supply partnership – a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate consumer
can lead to sustainable procurement
organizational buying behavior – decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers
more individuals are involved, supplier capability becomes more important, and the postpurchase evaluation behavior is more formal.
buying center – share common goals, risks, and knowledge important to a purchase decision
Large & formalized become buying committees (7-Eleven)
Who are they, what influence/buying criteria do they have, how do they view the company?
composition of buying center – Depends on the specific item being bought.
Almost always a buyer or purchasing manager
Expensive purchase: president, or production VP
Key manufacutring products: R&D, engineering, and quality control
Anyone who will use the equipment
5 roles of buying center – Users: people who use the product
Influencers: affect the buying decision, usually by helping define the specifications for what is bought.
(Info Tech Manager)
Buyers: formal authority and responsibility to select the supplier and negotiate the terms of the contract.
(Senior purchasing managers)
Deciders: formal or informal power to select or approve the supplier that receives the contract.
(buyer or engineer/R&D)
Gatekeepers: control the flow of information in the buying center.
(Purchasing personnel, technical experts, and secretaries)
organizational buying situations – New buy: big risk, large buying center (all who have a stake in it)
Straight rebuy: reorders an existing product from an acceptable supplier, rarely checks engineers & R&D
Modified rebuy: change the product specifications, price, delivery schedule, or supplier. buying center might include people outside purchasing department
Why do organizations buy online? – (1) critical info (product availability, technical specifications, application uses, price, and delivery schedules) is easy to show online
(2) Tech reduces buyer order processing costs.
(3) reduces marketing costs, particularly sales and advertising expense, and broaden their potential customer base for many types of products and services.
E-marketplaces (B2B Exchanges, E-hubs) – online trading communities that bring together buyers and supplier organizations to make possible the real time exchange of information, money, products, and services
Can be independent or private exchanges.
Independent charge a fee for their service and can have the following features:
(1) thousands of geographically dispersed buyers and sellers
(2) volatile prices caused by demand and supply fluctuations
(3) time sensitivity due to perishable offerings and changing technologies
(4) easily comparable offerings between a variety of sellers.
Private are not neutral and favor the buyer
Auction types – traditional auction: seller puts an item up for sale and buyers bid with upward, sequential pressure. Usually get rid of excess merch
reverse auction: buyer communicates a need for a product or service and suppliers bid with downward, sequential pressure
Buyers welcome the low prices, suppliers welcome them as it gives them a chance to capture an unlikely buyer.
Some suppliers oppose due to the emphasis on prices, discourage consideration of other important buying criteria, and may threaten supply partnership opportunities.
Market segmentation/Market Segment – involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action
relatively homogeneous groups of prospective buyers that result from the market segmentation process. Each market segment consists of people who are relatively similar to each other in terms of their consumption behavior.
product differentiation – involves a firm using different marketing mix actions, such as product features and advertising, to help consumers perceive the product as being different and better than competing products. The perceived differences may involve physical features, such as size or color, or nonphysical ones, such as image or price.
market-product grid – a framework to relate the market segments of potential buyers to products offered or potential marketing actions
market segments are horizontal rows, product offerings are vertical columns
3 Segmentation strategies – Goal is to increase sales, profit, and return on investment.
(1) one product and multiple market segments
(2) multiple products and multiple market segments
(3) segments of one, or mass customization
one product and multiple market segments – Produce one product or service and sell it to two or more market segments
it avoids the extra costs of developing and producing additional versions of the product.
Includes books, magazine, and movies
Multiple Products and Multiple Market Segments – strategy is very effective if it meets customers’ needs better, doesn’t reduce quality or increase price, and adds to Ford’s sales revenues and profits.
mass customization – tailoring products to meet the needs of individual customers
Step forward from build to order (which either has limited options, or long delivery times)
organizational synergy – increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently.
means more products, improved quality of existing products, lower prices, easier access to products through improved distribution, etc.
Also leads to more profits
Cannibalization – a situation that occurs when sales of a new product cut into sales of a firm’s existing products
How to start segmentation? – 5 step process.
Start by grouping potential buyers into meaningful segments involves meeting some specific criteria that answer the questions, “Would segmentation be worth doing?” and “Is it possible?
Step 1 of segmentation – Group Potential Buyers into Segments
5 Criteria to form segments – Simplicity and cost-effectiveness of assigning potential buyers to segments
Potential for increased profit.
Similarity of needs of potential buyers within a segment.
Difference of needs of buyers among segments.
Potential of a marketing action to reach a segment.
4 ways to segment consumer markets – (1) geographic segmentation: where prospective customers live or work (region, city size)
(2) demographic segmentation: gender, race, age, income, birth era, occupation
(3) psychographic segmentation: personality, aspirations, lifestyle, or needs
(4) behavioral segmentation (observable actions): where they buy, what benefits they seek, how frequently they buy, and why they buy.
Frequency marketing – marketing initiative that rewards frequent purchases with cash, rebates, merchandise, or other premiums
focused on usage rate, or quantity consumed/ patronage over time
80/20 rule – concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers
ways to segment organizational markets – Geographic segmentation: sales or telephone call
Demographic segmentation: NAICS code or number of employees.
Behavioral segmentation: Usage rate
Step 2 of segmentation – Group Products to Be Sold into Categories
(Multi product only)
group products so buyers can relate to them, or with similar qualities
Step 3 of segmentation – Develop a Market-Product Grid and Estimate the Size of Markets
In a complete market-product grid analysis, each cell in the grid can show the estimated market size of a given product sold to a specific market segment.
Step 4 of segmentation – Select Target Markets carefully
Too narrow = can’t reach profit
Too broad = increase marketing so much cost exceeds profit
5 criteria in selecting target segments – Market size
Expected growth
Competitive position (less competition = better)
Cost of reaching the segment (don’t waste money on people that are hard to reach)
Compatibility with the organization’s objectives and resources (don’t force excessive spending on equipment to reach a niche market)
Step 5 of segmentation – Take Marketing Actions to Reach Target Markets
Market-product synergy – Focus 1 product or 1 market to streamline production/marketing
Marketing synergies often come at the expense of product synergies because a single customer segment will likely require a variety of products, which limits marketing but increases production costs
If product synergies are emphasized, marketing will have to address the concerns of a wide variety of consumers, which costs more time and money.
product positioning – the place a product occupies in consumers’ minds based on important attributes relative to competitive products
product repositioning – changing the place a product occupies in a consumer’s mind relative to competitive products.
2 types of product positioning – Head-to-head positioning: competing directly with competitors on similar product attributes in the same target market
Differentiation positioning: seeking a less-competitive, smaller market niche in which to locate a brand.
positioning statement – identifies the target market and needs satisfied, the product (service) class or category in which the organization’s offering competes, and the offering’s unique benefits or attributes provided.
Also used in R&D, advertising
perceptual map – displaying in two dimensions the location of products or brands in the minds of consumers. This enables a manager to see how consumers perceive competing products or brands, as well as the firm’s own product or brand.
4 steps of making a perception map – Identify the important attributes for a product
How target customers rate competing products with the attributes.
Discover where the company’s product positioning
Reposition the company’s product
marketing research – the process of defining a marketing problem and opportunity, systematically collecting and analyzing information, and recommending actions Done to reduce risk of making decisions
Challenges of good marketing research – Completely new product, obtain personal or past information accurately
5 steps of a Marketing Research Approach – define the problem, develop the research plan, collect relevant information, develop findings, take marketing actions
2 key elements of defining a problem in marketing research – setting the research objectives and identifying possible marketing actions.
3 types of marketing research – Exploratory research provides ideas about a vague problem or question.
Descriptive research involves trying to find the frequency with which something occurs or the extent of a relationship between two factors.
Causal research tries to determine the extent to which the change in one factor changes another one
measures of success – criteria or standards used in evaluating proposed solutions to the problem
why is defining a problem in marketing research so hard? – A lot of time is taken to develop a formal proposal
If the objectives are too broad, the problem may not be researchable. If they are too narrow, the value of the research results may be seriously diminished.
3 steps of developing a marketing research plan – (1) specify the constraints on the marketing research activity, (2) identify the data needed for marketing actions, and (3) determine how to collect the data.
what are constraints? (In a decision) – the restrictions placed on potential solutions to a problem. Examples include the limitations on the time and money available to solve the problem.
2 ways to control constraints – Adapt: Change response to it
Modify: Change constraint (legislation)
what are the two concepts of gathering market research data? – concepts: ideas about products
methods: approaches to collect data to solve a problem
new-product concept – a picture or verbal description of a product or service the firm might offer for sale
used to test consumer reactions
2 methods vital to marketing research data collection – (1) sampling: electing a group of distributors, customers, or prospects, asking them questions, and treating their answers as typical of all who are interested
(2) statistical inference: generalize the results from the sample to much larger groups of distributors, customers, or prospects to help marketing
Secondary: 2 types of internal data – Marketing input data (sales): budget reports, advertising expenditures, salespeople’s call reports
Marketing outcome data (marketing efforts)
Census 2010, American Community Survey, Economic Census – info on American households: people per household and their age, sex, race/ethnic background, income, occupation, and education
number and sales of establishments in the United States that produce a product or service based on each firm’s geography, industry sector, and NAICS code
Marketers use these data to identify characteristics and trends of ultimate consumers.
syndicated panel data – data gathered from households paid to answer questions over time
answers questions over periods of time
Pros/Cons of secondary data – Obtained before primary data
Pros: save time (data is already collected) and low cost
Cons: may be outdated, not tailored to researcher’s project
observational data – Facts and figures obtained by watching how people actually behave
mechanical methods – device or diary collects data
personal methods – watching people in person
mystery shoppers (customer experience management)
ethnographic research (professionals watch consumers use products in natural environment)
useful, flexible, costly and unreliable (observers have different conclusions from same event)
Reveals the “what” but not the “why”
Neuromarketing Methods – using brain scanning to analyze consumer responses to nonconscious stimuli, still experimental
questionnaire data – facts and figures obtained by asking people about their attitudes, awareness, intentions, and behaviors.
(Primary) 4 types of Idea Generation Methods – individual interview: probe questions, expensive
depth interview: lengthy, free-flowing questions to probe underlying ideas/feelings
Focus groups: informal talk of 6-10 customers w/ a moderator. Often recorder or viewed by managers
fuzzy front end methods: attempts to predict customer trends (trend hunting/watching)
Idea Evaluation Methods – Asking a questionnaire (balance cost with info quality & speed obtained)
Personal interview surveys: probe questions, costly
Mail surveys: usually biased with very happy/mad
Telephone interviews: flexible, may hang up allow
Online surveys (e-mail and Internet): Most people have internet, small cost, quick turnaround, can be marked spam or completed multiple times
Mall-intercept interviews: Ask random people in mall, cheap, but may not represent target audience
Types of questionnaire questions – 1. open-ended question
2. closed ended (fixed alternative question): pick from set of choices
3. dichotomous question: closed ended, yes or no
4. semantic differential scale: 5 point scale of 2 opposite adjectives
5. Likert Scale: extent one agrees/disagrees with a statement
4 other methods of primary data – (1) social media: track metrics & polls (conversation velocity, share of voice, and sentiment). May not represent target audience
(2) panels and experiments: track progress over time, test markers (food in 1 town). Requires updating participants, outside influence on variables
(3) data analytics: gather data from barcode scanners, counters, tracking software.
(4) data mining: extraction of hidden predictive information from large databases to find statistical links between consumer purchasing patterns and marketing action
Information Technology – all of the computing resources that collect, store, and analyze the data. Marketing researchers have observed that today we live in an era of data deluge
Big challenge of gathering useful information from large amounts of data (Big data)
intelligence enterprise – organizations that successfully use a combination of data, technology, and analytics to convert the data into useful information that will answer marketing questions and lead to effective marketing actions
Pros/Cons of Primary Data – Pros: flexible & specific to problem being studied.
Cons: more costly and time-consuming to collect than secondary data.
Cross tabulation (Cross Tab) – a method of presenting and analyzing data involving two or more variables to discover relationships in the data
Pros: simple format (direct interpretation), flexible in types of data
Cons: can be misleading with lack of observational data, can hide relationships (only 2-3 variables shown)
How to develop findings in Market research data – Managers are responsible for actions, delivering the results in clear pictures and, if possible, in a single page.
2 Steps of evaluating results of market research – Evaluating the decision itself: monitoring the marketplace to determine if more action should follow (are sales raising? If so do more adjusted ads)
Evaluating the decision process used: Was the marketing research and analysis used to develop the recommendations effective? Could it be improved?
sales forecast – the total sales of a product that a firm expects to sell during a specified time period under specified environmental conditions and its own marketing efforts
3 types of sales forcasting techniques – (1) judgments of the decision maker, (2) surveys of knowledgeable groups, and (3) statistical methods
direct forecast – estimating the value to be forecast without any intervening steps. Examples appear daily: How many quarts of milk should I buy? How much money should I withdraw at the ATM?
lost-horse forecast – starting with the last known value of the item being forecast, listing the factors that could affect the forecast, assessing whether they have a positive or negative impact, and making the final forecast.
Which 2 groups are surveyed for sales forecasts? – survey of buyers’ intentions: Ask potential customers if they’re interested, can be ideal for companies with few buyers (industrial products)
salesforce survey: asking salespeople for their estimates (they know what people do/don’t like). Can be biased if they’re over/under confident
trend extrapolation – extending a pattern observed in past data into the future.
Can be linear (linear trend extrapolation)
Assumption of current trends continue which can be very accurate or very wrong