KOTLER RESUME Marketing Management Philip Kotler – Kevin Lane Keller SUMMARY PART 1 Understanding Marketing Management4 Defining Marketing for the 21st Century4 Developing Marketing Strategies and Plans5 PART 2 Capturing Marketing Insights13 Collecting Information and Forecasting Demand13 Conducting Marketing Research16 PART 3 Connecting with Customers18 Creating Long-term Loyalty Relationships18 Analyzing Consumer Markets21 Analyzing Business Markets25 Identifying Market Segments and targets28 PART 4 Building Strong Brands31 Creating Brand Equity31 Crafting the Brand Positioning34
Competitive Dynamics36 PART 5 Shaping the Market Offerings39 Setting Product Strategy39 Designing and Managing Services41 Developing Pricing Strategies and Programs46 PART 6 Delivering Value53 Designing and Managing Integrated Marketing Channels53 Managing Retailing, Wholesaling, and Logistics58 PART 7 Communicating Value60 Designing and Managing Integrated Marketing Communications60 Managing Mass Communications : Advertising, Sales Promotions, Events and Experiences, and Public Relations63 Managing Personal Communications : Direct and interactive Marketing, Word of Mouth, and Personal Selling68
PART 8 Creating Successful Long-term Growth72 Introducing New Market Offerings72 Tapping into Global Offerings86 Managing a Holistic Marketing Organization for the Long Run93 PART1: UNDERSTANTING MARKETING AND MANAGEMENT CHAPTER 1: DEFINITNG MARKETING FOR THE 21st CENTURY THE IMPORTANCE OF MARKETING Marketing is a significant dimension of any business in today’s highly competitive environment and financial success is often dependent on marketing ability. Marketing is crucial for business success. THE SCOPE OF MARKETING Marketing is about identifying and meeting human and social needs.
One of the shortest definitions of marketing is the process of meeting needs profitably. Marketing management is the art and the science of choosing target markets and getting, keeping and increasing customers though creating, managing, communicating and delivering superior customer value. UNDERSTANDING MARKETS Marketing can be used for: Services, products, services and products, events, experiences, people, places ideas Marketing managers seek to influence the level, timing, and composition of demand to meet the organization’s objectives. Eight states of market demand are possible: Full demand: consumers buy all services or products brought to market. – Overfull demand: there are more consumers demanding the service or product than can be satisfied. – Irregular demand: consumer purchases vary on a seasonal, monthly, weekly… – Declining demand: consumers begin to buy services or products less frequently or not all. – Negative demand: consumers dislike the service or product and may even pay a price to avoid it. – Nonexistent demand: consumers may be unaware of or uninterested in the product or service. – Latent demand: consumers may share a strong need that cannot be satisfied by an existing product or service. Unwholesome demand: consumers may be attracted to services or products that have undesirable social consequences. In each case, marketers must identify the underlying causes of the demand state then determine a plan of action to shift the demand to a more desirable state. HOW IS MARKETING PRACTICED? Marketing practice can be viewed in many perspectives. The traditional view is the KOTLERIAN marketing management view of managing the marketing mix after selecting target market and positioning. TRANSACTIONAL, RELATION AND SERVICE MARKETING
Transaction marketing is defined as attracting and satisfying potential buyers by managing the elements in the marketing mix. Interaction marketing: implies face to face interaction between individuals. Network marketing is with the consumers but occurs across and among organization. The concept was developed by the Nordic school from northern Europe and developments from the USA. Relationship marketing in its simplest form is a progression from the dominant and often criticized the 4 P focus. The relational is focus on building long-term relationships with consumers CHAPTER 2 : DEVELOPING MARKETING, STRATEGIES AND PLAN
Marketing is about satisfying consumers’ needs and wants. The task of any business is to deliver customer value at a profit. I. The value Delivery Process The traditional view of marketing is that the firm makes something and then sells it. Companies that subscribe to this view have the best chance of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style-for example, basic staple goods in developing markets. There, the “mass market” is actually splintering into numerous micro markets, each with its own wants, perceptions, preferences, and buying criteria.
The smart competitor must design and deliver offerings for well-defined target markets. II. The value Chain Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm is a synthesis of activities performed to design, produce, and market, deliver, and support its product. The value chain identifies nine strategically relevant activities-five primary and four support activities-that create value and cost in a specific business. He firm’s infrastructure covers the costs of general management, planning, finance, accounting, legal, and government affairs.
The firm’s task is to examine its costs and performance in each value-creating activity and to look for ways to improve it. Managers should estimate their competitors’ costs and performances as benchmarks against which to compare their own costs and performance. The firm’s success depends not only on how well each department performs its work, but also on how well the company coordinates departmental activities to conduct core business processes. • The market-sensing process. • The new-offering realization process. • The customer acquisition process. • The customer relationship management process. The fulfilment management process. To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. III. Core competencies Many companies today outsource less-critical resources if they can obtain better quality or lower cost. The key, is to own and nurture the resources and competencies that make up the essence of the business. A core competency has three characteristics: 1. It is a source of competitive advantage in that it makes a significant contribution to perceived customer benefits. 2.
It has applications in a wide variety of markets. 3. It is difficult for competitors to imitate. Business realignment may be necessary to maximize core competencies. It has three steps: 1. Defining the business concept or “big idea” 2. Shaping the business scope 3. Positioning the company’s brand identity. IV. A holistic marketing Orientation and Customer Value A holistic marketing orientation can also help capture customer value. The holistic marketing framework is designed to address three key management questions: 1. Value exploration- How can a company identify new value opportunities? 2.
Value creation- How can a company efficiently create more promising new value offerings? 3. Value delivery—–How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently? A. Value exploration Understanding the relationships among three spaces: – The customer’s cognitive space – The company’s competence space – The collaborator’s resource space. B. Value Creation To create new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about and observe whom customers admire and interact with, and who influences them.
C. Value Delivery The company must become proficient at customer relationship management, internal resource management, and business partnership management. Customer relationship management allows the company to discover whom its customers are, how they behave, and what they need or want. V. The central role of the strategic planning Successful marketing thus requires companies to have capabilities such as understanding customer value, creating customer value, delivering customer value, capturing customer value, and sustaining customer value.
To ensure that they select and execute the right activities, marketers must give priority to strategic planning in three key areas: managing a company’s businesses as an investment portfolio, assessing each business’s strength by considering the market’s growth rate and the company’s position and fit in that market, and establishing a strategy. For each business, the company must develop a game plan for achieving its long-run objectives. The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operates at two levels: strategic and tactical.
All corporate headquarters undertake four planning activities 1. Defining the corporate mission 2. Establishing strategic business units 3. Assigning resources to each SBD 4. Assessing growth opportunities I. Defining the corporate mission To define its mission, a company should address Peter Drucker’s classic questions:What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? These simple-sounding questions are among the most difficult a company will ever have to answer.
The good mission statements have five major characteristics. First, they focus on a limited number of goals. • Industry. Some companies will operate in only one industry; some only in a set of related industries; some only in industrial goods, consumer goods, or services; and some in any industry. • Products and applications. Firms define the range of products and applications they will supply. • Competence. The firm identifies the range of technological and other core competencies it will master and leverage. • Market segment. The type of market or customers a company will serve is the market segment. Vertical. The vertical sphere is the number of channel levels, from raw material to final product and distribution, in which a company will participate. • Geographical. The range of regions, countries, or country groups in which a company will operate defines its geographical sphere. II. Establishing Strategic Business Units Large companies normally manage quite different businesses, each requiring its own strategy. General Electric has classified its businesses into 49 strategic business units, SBlls. An SBU has three characteristics: 1.
It is a single business, or a collection of related businesses, that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3. It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit. III. Assigning Resources to Each SBU Once it has defined SBUs, management must decide how to allocate corporate resources to each. Management would want to grow, “harvest” or draw cash from, or hold on to the business. IV. Assessing growth Opportunities A. Intensive Growth
Corporate management’s first course of action should be are view of opportunities for improving existing businesses. B. Integrative Growth A business can increase sales and profits through backward, for- ward, or horizontal integration within its industry. Media companies have long reaped the benefits of integrative growth. C. Diversification Growth Diversification growth makes sense when good opportunities exist outside the present businesses-the industry is highly attractive and the company has the right mix of business strengths to be successful. D. Downsizing and Divesting Older Businesses
Weak businesses require a disproportionate amount of managerial attention. Companies must carefully prune, harvest, or divest tired old businesses in order to release needed resources to other uses and reduce costs. VI. Organization and Organizational Culture Five key strategies for managing change in an organization: 1. Avoid the innovation title-Pick 2. Use the buddy system-Find 3. Set the metrics in advance- 4. Aim for quick hits first- 5. Get data to back up your gut-Use testing to get feedback and improve an idea The Business Unit Strategic Planning I. The Business Mission
Each business unit needs to define its specific mission within the broader company mission. Therefore, a television-studio-lighting-equipment company might define its mission as, “To target major television studios and become their vendor of choice for lighting technologies that represent the most advanced and reliable studio lighting arrangements. ” II. SWOT ANALYSIS The overall evaluation of a company’s strengths, weaknesses, opportunities, and threats is called SWOT analysis. It’s a way of monitoring the external and internal marketing environment. A. External Environment (opportunity and threat) Analysis
The business unit should set up a marketing intelligence system to track trends and important developments and any related opportunities and threats. Good marketing is the art of finding, developing, and profiting from these opportunities. A marketing opportunity is an area of buyer need and interest that a company has a high probability of profitably satisfying. Opportunities can take many forms, and marketers need to be good at spotting them. To evaluate opportunities, companies can use market opportunity analysis (MOA) to determine their attractiveness and probability of success by asking questions like: To articulate the benefits convincingly to a defined target market(s)? – To locate the target market(s) and reach them with cost-effective media and trade channels? – To possess or have access to the critical capabilities and resources we need to deliver the customer benefits? – To deliver the benefits better than any actual or potential competitors? 5. To rate of return meet or exceed our required threshold for investment? B. Internal Environment (strengths and weaknesses) It’s one thing to find attractive opportunities, and another to be able to take advantage of them.
Each business needs to evaluate its internal strengths and weaknesses. C. Goal Formulation This stage of the process is called goal formulation. Goals are objectives that are specific with respect to magnitude and time. The unit’s objectives must meet four criteria: 1. They must be arranged hierarchically, from the most to the least important. 2. Objectives should be quantitative whenever possible. 3. Goals should be realistic. Goals should arise from an analysis of the business unit’s opportunities and strengths, not from wishful thinking. 4. Objectives must be consistent.
It’s not possible to maximize sales and profits simultaneously. III. Strategic Formulation A. Porter Generic Strategies – Overall cost leadership. Firms pursuing this strategy work hard to achieve the lowest production and distribution costs so they can price lower than their competitors and win a large market share. – Differentiation. The business concentrates on uniquely achieving superior performance in an important customer benefit area valued by a large part of the market. – Focus. The business focuses on one or more narrow market segments. B. Strategic Alliances Product or service alliances-One company licenses another to produce its product, or two companies jointly market their complementary products or a new product. – Promotional alliances One company agrees to carry a promotion for another company’s product or service. – Logistics alliances One company offers logistical services for another company’s product. – Pricing collaborations One or more companies join in a special pricing collaboration. Hotel and rental car companies often offer mutual price discounts. D. Program Formulation and Implantation
The unit has decided to attain technological leadership, it must plan programs to strengthen its R department, gather technological intelligence, develop leading-edge products, train the technical sales force, and develop ads to communicate its technological leadership. Businesses are also increasingly recognizing that unless they nurture other stake- holders-customers, employees, suppliers, distributors-they may never earn sufficient profits for the stockholders. E. Feedback and Control The company has to point out that it is more important to “do the right thing”-to be effective-than “to do things right”-to be efficient.
The most successful companies excel at both. Product Planning: The Nature and Contents of a Marketing Plan What, does a marketing plan look like? What does it contain? – Executive summary and table of contents. The marketing plan should open with a brief of the main goals and recommendations. A table of con- tents outlines the rest of the plan and all the supporting rationale and operational detail. – Situation analysis. This section presents relevant background data on sales, costs, the market, competitors, and the various forces in the macro environment.
How do we define the market, how big is it, and how fast is it growing? What are the relevant trends? What is the product offering and what critical issues do we face? Firms will use all this information to carry out a SWOT (strengths, weaknesses, opportunities, threats) analysis. – Marketing strategy . Here the product manager defines the mission, marketing and financial objectives, and groups and needs that the market offerings are intended to satisfy. The manager then establishes the product line’s competitive positioning, which will inform the “game plan” to accomplish the plan’s objectives.
All this requires inputs from other areas, such as purchasing, manufacturing, sales, finance, and human resources. – Financial projections. Financial projections include a sales forecast, an expense fore- cast, and a break-even analysis. On the revenue side, the projections show the forecasted sales volume by month and product category. On the expense side, they show the expected costs of marketing, broken down into finer categories. The break-even analysis shows how many units the firm must sell monthly to offset its monthly fixed costs and average per-unit variable costs. – Implementation controls.
The last section of the marketing plan outlines the controls for monitoring and adjusting implementation of the plan. Typically, it spells out the goals and budget for each month or qU31ter, so management can review each period’s results and take corrective action as needed. PART 3 : CAPTURING MARKETING INSIGHTS CHAPTER 3 : COLLECTING INFORMATION AND FORECASTING DEMAND Three developments make the need for marketing information greater now than at any time in the past: – Rise of global marketing – New emphasis on buyers’ wants, preferences and behaviour – Trend toward non price competition
To carry out their analysis, planning, implementation, and control responsibilities, marketing managers need a Marketing Information System (MIS). The MIS’s role is to assess the managers’ information needs, develop the needed information, and distribute that information in a timely manner. It is really easiest and effective with this method to collect information of various countries as it gives: – Quick information – Competitive advantage – Guides the marketing decision It relies on internal company records, marketing intelligence activities & research. INTERNAL RECORDS & MARKETING INTELLIGENCE
Spot important opportunities & problems THE ORDER-TO-PAYMENT CYCLE = the heart of the internal records system Favored firms are those which can promise timely delivery so they have to improve: o Speed o Accuracy o Efficiency This will save costs as well and it is the MIS role! SALES INFORMATION SYSTEMS Reports on current sales are indispensable for marketing managers. Inventory data warehouse is a great tool to capture all important data This will help to be aware of every kind of situation and manage it! Cookies are also a useful tool to provide information to companies.
Technological gadgets are revolutionizing sales information systems but sales dta must be carefully interpret. DATABASES, DATA WAREHOUSING, AND DATA MINING Databases are essential to companies to organize their information. This is used in several areas for different information: customer, product, sales person… Advantages: Save mailing expenses Help and make easy access to decision makers Can be used for statistical methods for usefukl information Managers can yield still deeper insights using its own in-house technology THE MARKETING INTELLIGENCE SYSTEM
It is a set of procedures and sources used by managers to obtain everyday information about pertinent developments in the marketing environment. It can also be called HAPPENINGS DATA. Several steps can be taken by companies to improve the quality of its marketing intelligence: – Train & motivate the sales force to spot and report new development – Motivate distributors, retailers, and other intermediaries to pass along important intelligence – Network externally: giving an immediate competitive advantage – Set up customer advisory panel – Take advantage of government data resources Purchase information from outside suppliers: lower costs – Use online customer feedback systems to collect competitive intelligence Competitive intelligence function works bests when intelligence operations collaborate closely with key users in the decision-making process! Needs and Trends A trend is a direction or sequence of events that have some momentum and durability. We can draw distinctions among fads, trends, and megatrends. Trends are more predictable and durable. A trend reveals the shape of the future. Trends and megatrends merit marketers’ close attention.
Identifying the Major Force In the economical arena, companies and consumers are increasingly affected by global forces. Substantial speedup of international transportation, communication, and financial transactions, leading to the rapid growth trade and investment, especially tripolar trade. – The rising economic power of several Asian countries in world markets. – The rise of trade blocs such as the European Union and the NAFTA signatories. – The severe debt problems of a numbers of countries, along with the increasing fragility of the international financial system.
Successful companies realize that the marketing environment presents a neverending series of opportunities and threats. The major responsibility for identifying significant changes in the macroenvironment falls to a company’s marketers. More than any other group in the company, marketing managers must be the trend trackers and opportunity seekers. 1. Within the rapidly changing global picture, marketers must monitor six major environmental forces: demographic, economic, natural, technological, political-legal, and social-cultural. 2.
In the demographic environment, marketers must be aware of worldwide population growth; changing mixes of age, ethnic composition, and educational levels; the rise of non traditional families; large geographic shifts in population; and the move to micromarketing and away from mass marketing. 3. In the economic arena, marketers need to focus on income distribution and levels of savings, debt, and credit availability. 4. In the social-cultural arena, marketers must understand people’s views of themselves, others, organizations, society, nature, and the universe.
They must market products that correspond to society’s core and secondary values, and address the needs of different subcultures within a society. 5. In the natural environment, marketers need to be aware of raw-materials shortages, increased energy costs and pollution levels, and the changing role of governments in environmental protection. 6. In the technological arena, marketers should take account of the accelerating pace of technological change, opportunities for innovation, varying R&D budgets, and the increased governmental regulation brought about by technological change. . In the political-legal environment, marketers must work within the many laws regulating business practices and with various special-interest groups. CHAPTER 4 : CONDUCTING MARKETING RESEARCH The components of a modern marketing information system A marketing information system (MIS): consists of people, equipment, and procedures to gather, short, analyze, evaluate and distribute needed, timely, and accurate information to marketing decision makers. Internal Records System It is the most basic information system used by marketing managers. (Sales, prices, inventory levels…)
The order-to-payment cycle Sales reporting system MARKETING INTELLIGENCE SYSTEM Is a set of procedures and sources used by managers to obtain their everyday information about pertinent developments in the marketing environment? MARKETING RESEARCH SYSTEM Are the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company? SUPPLIERS OF MARKETING RESEARCH Many ways: engaging students or professors to design and carry out marketing research projects; using online information services; checking out rivals.
THE MARKETING RESEARCH PROCESS Step 1 : Define the problem and research objectives Step 2 : developing the research plan. Decisions on the data sources, research approaches, research instruments, sampling plan, and contact methods Step 3 : Collect the information. The data collection phase of marketing research is the most expensive and the most prone to error. Step 4 : Analyze the information. Extract pertinent findings from the collected data. Step 5 : Present the findings. Major findings are pertinent to the major marketing decisions facing management.
MARKETING DECISION SUPPORT SYSTEM Is a coordinated collection of data, systems, tools and techniques with supporting software and hardware by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action? FORECASTING AND DEMAND MEASUREMENT • A VOCABULARY FOR DEMAND MEASUREMENT Market demand Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program.
Market potential Is the limit approached by market demand as industry marketing expenditures approach infinity, for a given environment? Company demand Is the company’s estimated share of market demand at alternative levels of company marketing effort? Forecast Is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment? A sales quota Is the sales goal set for a product line, company division, or sales representative? It is primarily a managerial device for defining and stimulating sales effort. A sales budget
Is a conservative estimate of the expected volume of sales and is used primarily for making current purchasing, production, and cash-flow decisions. Company sales potential ESTIMATING CURRENT DEMAND Total market potential Area market potential •Market-build-up method •Multiple-factor index method 3. Industry sales and market shares Estimating industry sales and market shares (Identifying competitors and estimating their sales ESTIMATING FUTURE DEMAND Survey of buyers’ intentions Composite of sales force opinions Expert opinion Market test method PART 3 : CONNECTING WITH CUSTOMERS CHAP 5 CREATING LONG TERM LOYALTY RELATIONSHIPS
Building customer value, satisfaction and loyalty Customer-perceived value (CPV) is the difference between the entire perceived customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Applying value concepts The customer value analysis reveals the company’s strengths and weaknesses relative to those of various competitors. Delivering high customer value Loyalty is a deeply held commitment to rebuy a preferred product and service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.
The value proposition consists of the whole cluster of benefits the company promises to deliver. The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. Total customer satisfaction Satisfaction is the difference between expectations and the product’s perceived performance. Product and service quality Quality is the totality of features and characteristics of a product or service which satisfy explicit or implicit needs. Maximizing customer lifetime value Customer profitability
A profitable customer is a person, household or company that revenues are higher than the company’s costs for attracting, selling and servicing that customer. But it is a very difficult task, even for banks. Customer profitability analysis is an accounting study which estimates all revenue coming from a customer less all costs (distribution, phone calls, traveling to meet the client, gifts). Measuring customer life time value Customer lifetime value estimates future profits over customer’s lifetime purchases. You can find it p. 172. Cultivating customer relationships
Customer relationship management (CMR) Customer relationship management is the process of carefully managing detailed information about individual customers and all customer “touch points”to maximize customer loyalty. A touch point is any occasion on which a customer meets a brand and a product. One-to-one marketing Identify your prospects and customers, don’t go after everyone. 1. Differentiate customers in terms of (1) their needs and (2) their value to your company. Spend more efforts on the most valuable customers. Do the customer profitability analysis. 2.
Interact with individual customers to improve your knowledge about their needs and build a stronger relationship. 3. Customize products, services, and messages to each customer. Increasing value of the customer base • Reducing the rate of customer defection. • Increasing the longevity of the customer relationship. • Increase sells with new offerings and opportunities, like accessories for motorcycles if you sell Harley-Davidson. • Making low-profit customers more profitable or terminating them. Like low-cost flying companies which charge customers for drinks or food. • Focusing disproportionate efforts on high-value customers.
Building loyalty Developing loyalty programs Frequency programs are design to provide rewards to customers who buy frequently and in substantial amounts. Many companies have created club membership programs. Customer databases and database marketing A customer database is an organized collection of comprehensive information about individual customers and prospects that is current, accessible and actionable for marketing purposes (sells, maintain relationships). Database marketing is the process of building, maintain and using customer databases to contact, transact and build customer relationships. Customer databases
Customer database contains customers past purchases, demographics (age, birthday, and family members), psychographics (activities, interests), media graphics (preferred media) and other useful information. A business database contains past purchases, volumes, prices, profits, buyer team member names, assessment of competitors their strengths and weaknesses. Data warehouse and dataminig Companies use databases to: 1. Identify prospects 2. Decide which customer should receive a particular offer 3. To deepen customer loyalty 4. To reactivate customer purchases 5. To avoid serious customer mistakes CHAP 6 ANALYZING CONSUMER MARKETS
What influences consumer behavior? Consumer behavior is the study of how individuals, groups and organizations select, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. Cultural factors Culture is the fundamental determinant of a person’s wants and behavior because of values. Subcultures provide more specific identification and socialization for their members. Subcultures include nationalities, religion, racial groups… Social classes are relatively homogeneous and enduring divisions in a society, hierarchically ordered and with members who share similar values, interests, and behaviors.
Reference groups A person’s reference groups are all the groups that have a direct or indirect influence on their attitudes or behavior. Membership groups have a direct influence. Primary groups are in constant contact with the person (family, friends, neighbors, coworkers). Secondary groups are religious, professional, trade-union groups. Aspiration groups are those a person hopes to join. Dissociative groups are based on individual reject. Opinion leader is the person who offers informal advice or information about a specific productor product category. Family
From family a person acquires an orientation toward religion, politics, and economics and a sense of personal ambition, self-worth, and love. It is a more direct influence on everyday buying behavior. Role and status A role consists of the activities a person is expected to perform. Each role carriers a status Personal factors Personality is a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli (including buying behavior). Brand personality is defined as the specific mix of human traits that we can attribute to a particular brand.
Lifestyle is person’s pattern of living in the world as expressed in activities, interests, and opinions. Key psychological processes Motivation : Freud, Maslow, Herzberg A need becomes a motive when its intensity drives us to act. Perception Perception is the process by which we select, organize, and interpret information inputs to create a meaningful picture of the world. Selective attention is the screening of stimuli and marketers must work hard to attract consumers’ notice. People are more likely to notice stimuli that relate to a current need People are more likely to notice stimuli they anticipate
Selective distortion is the tendency to interpret information in a way that fits our preconceptions. Because of the selective retention, we are pore likely to remember good points of a product we like and forget good points about competing products. Learning Learning comes from experiences and makes us changing our behavior. A drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where, and how a person responds. Discrimination means that we have learned to recognize differences in sets of similar stimuli and can adjust our responses accordingly.
The hedonic bias says people are more likely to attribute failure to external causes and success to themselves. Memory Associative network memory model explains that information are stored and linked with a different level of strength. Brand associations consist of all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes, and so on that become linked to the brand information stored. Memory encoding describes how and where information gets into memory. Memory retrieval is the way of the information gets out of the memory.
The buying decision process Marketers must identify who makes the buying decision: people can be initiators, influencers, deciders, buyers, or users. Problem recognition Information search Personal: family, friends, neighbors. Commercial: advertising, web sites, salespersons, packaging, displays. Public: mass media. Experiential: handling, examining, is using the product. Market partitioning is the process of identifying the hierarchy of attributes that guide consumer decision making for the marketer to understand different competitive forces and how this various sets get formed.
Evaluation of alternatives Belief is a descriptive thought that a person holds about something. Attitudes are a person’s favorable or unfavorable evaluations, emotional feelings, and action tendencies towards some object or idea. Expectancy-value model of attitude formation shows that consumers evaluate products and services by combining their brand beliefs according to importance. Purchase decision Heuristics are rules of mental shortcuts in the decision process. With the conjunctive heuristic the customer looks for every attribute and chooses the irst alternative that meets the minimum standard for all attributes. With the lexicographic heuristic the customer chooses the best brand on the basis of its perceived most important attribute. With the elimination-by-aspects heuristic the customer compares brands and eliminates those which don’t correspond to the minimum acceptable cutoffs. The perceived risks can modify, postpone or avoid a purchase decision. Functional risk: the product does not perform up to expectations. Physical risk: the product could threat health or well-being of the user or others.
Financial risk: the product is not worth the price paid. Social risk: the product results in embarrassment from others. Psychological risk: the product affects the mental well-being of the user. Postpurchase behavior Other theories of consumer decision making Level of consumer involvement Consumer involvement is the level of engagement and active processing responding to a marketing stimulus. Decision heuristics and biases The availability heuristic means that for example a customer who had troubles with a product would be more likely to purchase a future product with warranty.
The representativeness heuristic means that the customer buy a product to be seen as representative of a whole category. The anchoring and adjustment heuristic means that the first impression determines the interpretation of the further information. That is why it is very important to make a first good impression for a salesperson, for instance. Mental accounting Mental accounting refers to the way consumers code, categorize, and evaluate financial outcomes of choices. Prospect theory maintains that the consumers frame their decision alternatives in terms of gains and losses according to a value function.
CHAPTER 7 ANALYSING CONSUMER MARKETS A The study of consumer behavior Consumer behavior is the study of when, why, how and where people do or do not buy products. It tries to understand the buyer wants and decision making process both individually and in groups. It also attempts to evaluate influences on the consumer from groups such as family, friends, reference groups, and society in general. Its can be divided into three interdependent dimensions: – The study of culture – The study of social group – The study of the individual Culture
Culture is the essential determinant of a person’s wants and behavior. Every culture can be divided in subcultures that include nationalities, religions, geographic region etc and offer more precise identification for their members. Multicultural marketing appear to satisfy the different subcultures. We can also observe different social classes with people who have the same values, interests and behavior. Each social class show diverse product and brand preferences on different level. Social groups a. Reference group A reference group is a group that influences people attitudes and behavior.
There are different categories of groups: – Membership groups: have a direct influence on people (family, friends, colleagues…) – Aspirational groups: are thosea person wish to join – Dissociative groups: are thosea person, does not belong b. Family Family is the most influential primary reference group. There are two families: – Family of orientation: parents and sibling – Family of procreation: wife /husband children The individual consumer A consumer’s decisions are influenced by personal characteristics such as the age and stage in the life cycle, the occupation and economic, the life style and values and the buyer’s personality.
So to study and understand consumer behavior it’s really important to start with the consumer herself or himself. Explore into all these factors can provide clues to attain and serve consumers more effectively. B Key psychological process Motivation: Freud, Maslow, Herzberg a. Freud’s theory For Freud people ‘s behavior are unconscious. People not only react to their affirmed aptitudes, but also to other. b. Maslow’s theory c. Herzberg’s theory For Herzberg there are two different factors: – Dissatisfiers: factors that cause dissatisfaction – Satisfiers: factors that cause satisfaction
The sellers should try to keep away dissatisfiers’ factors and identify the principal satisfiers or motivator of purchase in the market and then provide them. I. Perception Perception is the processes by which we select organize and interpret information. People have different perception of the same object because of three perceptual processes: – Selective attention – Selective distortion: tendency to interpret information in a way that fits our preconception – Selective retention: only preserve information that support our manners and beliefs II. Learning People learn from their experiences and change their behaviour.
Marketers should build demand for a product by associating it with strong drives (internal stimulus pushing action), cues (minor stimuli) and providing positive support. III. Memory Memory is distinguished between to type of memory short-term memory and long-term memory. Marketing is a good way to be sure that consumers have the right type of products and services experiences to build the good brand knowledge and keep it in memory. Four main psychological processes affect consumer behavior r motivation, perception, learning, and memory. C Perspectives on consumer behavior
Numerous perspectives on consumer behavior can be considered: – The behaviorist perspective: focus on the impact of external influences on consumer behavior – The information processing perspective: appeared in the 60’s and 70’s thinks about how consumers mentally process, store, retrieve and use marketing information in the decision process – The emotional perspective: consumers affections should be included in the explanation of consumer decision making – The cultural perspective: culture show consumers view – A multiperspective approach: consumers do not have unlimited mental resources D The buying decision process the five stage model
To understand how consumer make buying decisions, marketers should identify who makes and has contribute into buying decision. People can be initiators, influencers, deciders, buyers or users. The classical buying process consists of the following succession of events: 1. Problem recognition (the buyer recognizes a problem) 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post purchase behavior (post purchase satisfaction, action, use and disposal) Marketers’ have to understand the consumer behavior at each stage. It’s not always easy because many different factors influence the diverse behavior.
CHAPTER 8 : IDENTIFYING MARKET SEGMENTS AND TARGETS I. The business market versus the consumer market Business marketers have numerous characteristics that contrast with those of consumer markets: – Fewer larger buyers: deal with much bigger buyer than the consumer market – Close supplier customer relationship: suppliers adapt their offering to individual business customer needs – Professional purchasing: goods are bought by trained purchasing agents – Multiple buying influence: more people typically influence business buying decisions – Multiple sales calls Derived demand: the demand for business goods resulting from the demand for consumer goods – Inelastic demand: the demand for goods won’t change even if prices change – Fluctuating demand: the demand for business goods and services tend to be more unstable than the demand for consumer goods and services – Direct purchasing: business buyers buy directly for manufactures II. Buying situations The business buyer faces many decisions in making a purchase. The number depends on the buying situation: complexity of the problem being solved, newness of the buying requirement, number of people involved and time requirement.
There are three types of buying situations: – Straight Rebuy: The purchasing department reorders supplies and chooses from suppliers on an approved list. The suppliers’ effort to maintain service and product quality. Their goal is to get a small order and then enlarge their purchase share over time. – Modify rebuy: the buyer wants to change products specifications – New task: the buyer buys the product for the first time III. Systems Buying and Selling Originally, « system buying » is a practice about government purchases of major weapons and communications systems.
Thus, many business buyers prefer to buy a total solution to a problem from one seller. A system selling is a key industrial marketing strategy in bidding to build large-scale industrial projects, such as dams, steel factory, irrigation systems, sanitation systems, pipelines, utilities and even new towns. B. Participants in the business buying process I. The buying centre The buying center consists of all those individuals and groups who contribute in the purchasing decision making process. Its include all members of the organization who take part in any roles in the purchase decision process. Initiators: request something be purchased – Users: use the product, initiate the buying proposal – Influencers: people who influence the buying decision – Deciders: decide on product requirements or on suppliers – Approvers: authorize the proposed actions – Buyers: have formal authority to select the supplier and arrange the purchase terms – Gatekeepers: have the power to prevent sellers or information from reaching member II. Buying centre influences Buying center typically include several participants with diverse interest.
If the business marketers want to influence these participants they should try to be attentive to many factors such as environment, organization, individual, motivations and interpersonal influences. III. Buying centre targeting Business marketers should answer at some questions to target their efforts appropriately. Who are the major decision participants? What decisions do they influence? What is their level of influence? The small sellers focus on reaching the key buying influencers and larger sellers the multilevel in depth selling to attain many participants. C. The Purchasing/Procurement Process a. Purchasing Department Perceptions
Recent competitive pressures have led many companies to upgrade their purchasing departments and elevate administrators to vice presidential rank. These new, more strategically oriented purchasing departments have a mission to seek the best value from fewer and better suppliers. b. Purchasing Organization and Administration Some companies have started to centralize purchasing. Headquarters identifies materials purchased by several divisions and buys them centrally, gaining more purchasing clout. At the same time, companies are decentralizing some purchasing operations by empowering employees to purchase small-ticket items.
D. Stages in the buying process The buying process consists of: 1. Problem recognition: the company recognizes a need that can be fixed by purchasing a good or service. 2. General need description and product specification:general characteristics and required quantity 3. Supplier search: identify the most appropriate suppliers 4. Proposal solicitation: invite the qualified suppliers to suggest proposals 5. Supplier selection: the buying center usually use a supplier evaluation to identify the most attractive suppliers 6. Order-routine specification: negotiations 7. Performance review: review of the chosen supplier
E. Managing business to business relationship Business marketers must form strong bonds and relationships with their customers and provide them added value. Some customers, however, may prefer more of a transactional relationship. a. The Benefits of Vertical Coordination Much research had advocated greater vertical coordination between buying partners and sellers, so they can transcend merely transacting and instead engage activities that create more value for both parties. Building trust is one prerequisite to healthy long-term relationships. b. Business Relationships: Risks and Opportunism
Researchers have noted that establishing a customer-supplier relationship creates tension between safeguarding and adaptation. Vertical coordination can facilitate stronger customer-seller ties but at the same time may increase the risk to the customer’s and suppliers specific investments. Specific investments, however, also entail considerable risk to both customer and supplier. Transaction theory from economics maintains that because these investments are partially sunk, they lock the firms that make them into a particular relationship. I. Transactions cost economics F. Institutional and government markets
PART 4 : BUILDING STRONG BRANDS CHAPTER 9 CREATING BRAND EQUITY I. What is a brand equity A. Role of brand Permit to consumers evaluate products (of specific brands), in order to find their needs. Brand signal a certain level of quality. Brand offer security for customers and firms B. The scope (ampleur) of branding A brand resides in the minds of consumer as an identity One of the first branding strategy is: consumers must be convinced their meaningful differences among brands in products or services C. Defining brand equity -is the added value endowed on product and service customer based brand equity: the customer brand knowledge is + when he reacts more favorably to a product and –when reacts less favorably 3 keys for favorably react: different responses about consumer needs associated the brand of something (image…), and ensuring consumer has great experiences with products. D. Brand equity as a bridge -brand knowledge (decide by customer) dictates future direction of the brand – Brand promise: is what the brand is and must do for consumers So, money spend for marketing is an investment for consumers’ brand knowledge E. brand equity model 4 models of B. equity models brand asset valuator (p 283) 5 categories: differenciation,energy, revelance, estum, knowledge -brandz: (p 284) relationship with brand (pyramid) -AAKER model: typically elements (value, uses, meaning, origin country, personality, symbols) -brand resonance model (p 285): development, building objectives II. Building brand equity This is the creating to have the right brand knowledge of consumers F. Choosing brand elements -It’s that identify and differentiate the brand -6 criteria: memorable, meaningful, likable, adaptable, transferable (for a new product, geography), protectable (not become generic as Kleenex, scotch).
G. Designing holistic marketing activities Brand contact with the consumer, there are 3 phase: Personalization: -stop mass market, throwback to personalizing marketing. – Each customer is unique: one to one marketing -build a strong consumer’s relationship Integration: -traditional mix marketing isn’t adequately, now we need variet of marketing to reinforce the brand. (Sponsoring, communication, promotion, events……….. ) Internalization: -companies must adopt an international perspective Choose the right moment, link internal and external marketing and bring the brand alive for employees H.
Leveraging (influence) secondary association Linking the brand with others information (p290), a brand can build equity by linking with others entities. III. Measuring brand equity 2 basic approaches: -Brand audit: uncover sources of brand equity, suggest way to improve its equity. Brand audit is use to prepare marketing plan -brand tracking studies: understanding thank to quantitative data from consumers, to facilitate day to day decision marketing. IV. Managing brand equity Brand management requires a long term view of marketing actions I. Brand reinforcement -Brand need to be carefully managed to survive
Improve product, service, and marketing Needs innovations/relevance throughout marketing program (p295) -marketing need some change to be competitive -brands need activities to awareness (new products, creatively design, ad campaign…) J. Brand revitalization New competitors can affect a brand, so brand have to be refresh Solution: -understanding the source of brand equity -bad association loosing the brand ?????? -create new positioning -change marketing program -come back to basic image V. Devising (concevoir) a brand Strategy -Brand extension: establish brand with introduce a new one sub brand: new brand combine with existing brand -brand line: all product -License product: brand name has been licensed to make the product K. Branding decision Develop a brand name for a product: 4 strategies Individual name:(old el Paso) advantage, if the product is low quality brand is not hurt Blanket family name: development cost is lower because we don’t need research/add, to create recognition Separate family name for all products: ex: craftsman for tools Corporate name combined with individual product name: Kellogg: kellogg’scorn flakes L. Brand extension Advantages: -customers know parent brand don’t need to create awareness for marketing, communication Feed back effect: knowledge Disadvantages: -confusion with new product -harm, hurt parent brand with bad a product (Success characteristic f 9. 8 p301) M. Brand portfolio Marketers need multiple brands to pursue these segments. Aim goal of brand portfolio is maximize brand coverage. -low end entry: attract customers to brand franchise -high end prestige: prestige of brand with adds CHAPTER 10 CRAFTING THE BRAND POSITIONING SEGMENT MARKETING A market segment consists of a group of customers who share a similar needs and wants.
Rather than creating the segments, the marketer’s task is to identify them and to decide which one to target. Market segments can be characterized in different ways, one approach is to: Identify preference segment categorized them by: Homogeneous preferences: if the customers have the same preferences Diffused preferences: the customer preference vary greatly in their requirement Clustered preferences: when natural market segment emerge from groups of customers with shared preferences NICHE MARKETING A niche is marketing is narrowly defined customers group seeking a distinctive mix of benefits or values.
Marketers usually identify niches by dividing a market into subsegments. Niche markets are generally fairly small is term of volume but constitute a sufficientetly attractive size, profit and growth potential. Also they are less likely to attract many other powerful competitors • Focusing their resources to gain economies though specialization LOCAL MARKETING Customizes merchandise to match the perceived demand of local areas The risk associated with localized marketing includes: • A tendency to drive up the manufacturing costs and to reduce economies of scale Grassroots marketing
INDIVIDUAL MARKETING Marketing one to one The researches seek to define segment by looking at descriptive characteristics: geographic, demographic and psychographic. GEOGRAPHIC SEGMENTATION Divide the market into different geographical units such as nations, states, regions… DEMOGRAPHIC SEGMENTATION The market is divided into groups on the basic of variable such as ages, family size, occupation, race… PSYCHOGRAPHIC SEGMENTATION Psychographic profiles are typically developed with reference to three variables know as the AIO factors that describe individual lifestyle: 1. Activities 2. Interests . opinions BEHAVIOURAL SEGMENTATION Marketers place buyers into groups on the basic of their knowledge of, attitude towards, use of or response to a product. To compete more effectively many companies are now adopting target marketing. Instead of scattering their marketing efforts they are focusing on customers they have the greatest chance of satisfying. Target marketing includes three activities: market segmentation, market targeting and market positioning. STEPS IN SEGMENTATION PROCESS 1. Needs-based segmentation Group customers into segments based on similar needs 2. Segment identification
Segment by behavior, psychographic, individual, demographic and geographic 3. Segment attractiveness: Determine the attractiveness of each segment 4. Segment profitability: Determine segment profitability 5. Segment positioning: for each segment create a value proposition and product-price positioning strategy based on that segment’s unique customer need and characteristics 6. Segment “acid test”: create segment storyboard to test the attractiveness of each segment’s positioning strategy 7. Marketing mix strategy: Expand segment positioning strategy to include all aspects of the marketing mix: the 4P
EFFECTIVE SEGMENTATION CRITERIA An effective segmentation must be: 1. Measurable: size, purchasing power… 2. Substantial: the segment are large and profitable enough toserve 3. Accessible: the segment can be effectively reached and seved. 4. Differentiable: the segment are distinguishable 5. Actionable: effective programs can be formulates for attracting and serving the segments Positioning is the act of designing the company offering and image to occupy a distinctive place in the minds of the target market. The goal is to establish the brand in the mind of the consumers.
The result of positioning is the successful creation of a consumer- focused value proposition CHAPTER 11 : COMPETITVE DYNAMICS Without customers, you don’t have business Creating loyal customers is at the heart of every business, the only value your company will ever create is the value that comes from the customers. Managers who believe that costumer is the company’s only true “profit center” consider the traditional organization chart (first figure), successful marketing companies invert the chart (second figure) At the top the customer, the front line is the people who meet, serve and satisfy customers
Many companies recognize the importance of satisfying theirs consumer in order to develop brand reputations that can deliver a sustainable competitive advantage The concept of costumer-perceived value enables marketers to discover what consumers want though the medium market research CUSTOMER-PERCEIVED VALUE (CPV) The CPVis the difference between the prospective customer’s evaluation of all benefits and all the costs of an offering and the perceived alternatives. Total costumer benefit is the perceived monetary value of the bundle of economic, functional and psychological benefits consumers expect from given market offering.
Total costumer cost is the perceived bundle of costs costumers expect to incur in evaluating, obtaining, using and disposing of the given market offering BUILDING CUSTOMER SATISFACTION Customers want loyalty, not perfection Customer can sense when a companies are consistently more loyal to investors, employees and regulators than to people who buy their products and services, customers are not being disloyal; they are being discriminating. The question is not how can we radically increase customer loyalty, but how can we radically increase our own loyalty to customers.
To increase our sellers, we need to develop consumer’s loyalty Total customer satisfaction Whether the buyer is satisfied after purchase depends on the offer’s performance; if the performance falls short of expectations, the customer is dissatisfied, if the performance match the expectations, the customer is satisfied, if the performance exceeds expectations, the customer is highly satisfied or delighted. Customer assessments of product performance depend on many factors, especially the type of loyalty relationship the customer has with the brand.
Although the customer-centre firm seeks to create a high customer satisfaction, that is not only his ultimate goal. Company might be able to increase its profitability by means other than increased satisfaction. Monitoring satisfaction Many companies are systematically measuring how well they treat their customers, identifying the factors shaping satisfaction and making changes in their operations and marketing as a result Customer satisfaction Companies should measure customer satisfaction regularly, because an important key to customer retention is customer satisfaction.
A high customer satisfaction brings high profits, the customer stay longer; the customers are less sensitive to the price and pay less attention to the competing brand. Measurement techniques A number of methods exist to measure customer satisfaction for example periodic surveys, customer loss rate. Influence of customer satisfaction For customer-centre companies, customer satisfaction is both a goal and a marketing tool. Companies need to be especially concerned today with their customer satisfaction level.
MAXIMIZING CUSTOMER LIFETIME VALUE Customer profitability A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream for attracting, selling and servicing that customer. CULTIVATING CUSTOMER RELATIONSHIPS Maximizing customer-perceived value means cultivating long-term customer relationship. Companies are now moving away from wasteful mass marketing to precision marketing designed to build strong customer relationships.
Customer relationship management Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch point” to maximize