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Marketing Management (PART 1 Understanding Marketing Management (Chap 2…
Marketing Management
PART 1 Understanding Marketing Management
Chap 2 Developing Marketing Strategies and Plans
Marketing and Customer Value
1.1 The Value Chain
A) The
value chain
is a tool for identifying ways to create more customer value by ensuring that
primary activities
and
support activities
are organized to design, produce, market, deliver, and support its product.
B) The firm's success depends on not only on how well each department performs its work, but also on how well the various departmental activities are coordinated to conduct
core business processes
. The core business processes include the following:
The market-sensing
process.
The new offering-realization
process.
The customer-acquisition
process.
The customer relationship management
process.
The fulfillment management
process.
1.2 Core Competencies
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
.
(
e.g. SickKids Foundation has leveraged the many distinctive capabilities of The Hospital for Sick Children so it can live up to its promise of being a world leader in children's health.
)
1.3 A Holistic Marketing Orientation and Customer Value
Holistic Marketing
sees itself as integrating the
value exploration, value creation,
and
value-delivery activities
with the purpose of building
long-term, mutually satisfying
relationships and
co-prosperity
among key stakeholders.
(
Value exploration: how can a company identify new value opportunities?
)
(
Value creation: how can a company efficiently create more promising new value offerings?
)
(
Value delivery: how can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently?
)
1.4 The Central Role of Strategic Planning
The
marketing plan
is the central instrument for directing and coordinating the marketing effort.
It operates at two levels:
1) The
strategic marketing plan
lays out the
target markets
and the
value proposition
that will be offered, based on an analysis of the best market opportunities.
2) The
tactical marketing plan
specifies the marketing tactics
, including
product features, promotion, merchandising, pricing, sales channels, and service
.
Corporate and Division Strategic Planning
2.1 Defining the Corporate Mission
Organizations develop
mission statements
to share with managers, employees, and (in many cases) customers.
Good mission statements have five major characteristics:
They focus on a
limited number of goals
.
They stress the company's
major policies and values.
They define
the major competitive spheres within which the company will operate
.
They are
short, memorable, and meaningful
as possible.
2.2 Assessing Growth Opportunities
A) The
Strategic-planning gap
The lowest curve projects the
expected sales
over the next five years from the
current business portfolio.
The highest curve describes
desired sales
over the same period.
B) Fill the Strategic-planning gap
1st:
intensive growth
2nd:
integrative growth
3rd:
diversification growth
2.3 Organization and Organizational Culture
A
corporate culture
is the shared experiences, stories, beliefs, and norms that characterize an organization.
(
e.g. the way people are dressed, how they talk to one another, and the way they greet customers.
)
Business Unit Strategic Planning
3.1 SWOT Analysis
The overall evaluation of a company's
Strengths, weaknesses, opportunities, and threats.
3.2 Strategy Formulation
Porter's Generic Strategies
: Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking
overall-cost leadership
,
differentiation
, and
focus
.
Overall-cost leadership
: firms pursuing this strategy must be good at engineering, purchasing, manufacturing, and physical distribution.
Differentiation
: the business concentrates on achieving superior performance in an important customer-benefit valued by a large part of the market. Thus, the firm must make products with the best components, put them together expertly, inspect them carefully, and effectively communicate their quality.
Focus
: the business focuses on one or more narrow market segments.
SUMMARY
SUMMARY
The
value-delivery process
involves choosing (or identifying), providing (or delivering), and communicating superior value. The
value chain
is a tool for identifying key activities that create value and costs in a specific business.
Strong companies develop superior capabilities in managing
core business processes
such as new-product realization, inventory management, and customer acquisition and retention. Managing these
core processes
effectively means creating a marketing network in which the company works closely with all parties in the production and distribution chain, from suppliers of raw materials to retail distributors. Companies no longer compete, marketing networks do.
Holistic marketing
maximizes value exploration by understanding the
relationships
among the customer's cognitive space, the company's competence space, and a collaborator's resource space. A company can maximize value creation by identifying new customer benefits from the customers' cognitive space, utilizing core competencies from its business domain, and selecting and managing business partners from its collaborative networks. It can maximize value delivery by becoming proficient at customer relationship management, internal resource management, and business partnership management.
Market-oriented strategic planning
is the managerial process of developing and maintaining a viable fit between an organization's objectives, skills, and resources and it changing market opportunities. The aim of strategic planning is to shape the company's businesses and products so that they yield target profits and growth. Strategic planning takes place at four levels: corporate, division, business unit, and product.
The corporate strategy
establishes the framework within which the divisions and business units prepare their strategic plans. Setting a corporate strategy entails four activities: defining the corporate mission, establishing strategic business units (SBU's), assigning resources to each SBU based on its market attractiveness and business strength, and planning new businesses and assessing growth opportunities.
Strategic planning
for individual businesses entails the following activities: defining the business mission, analyzing external opportunities and threats, analyzing internal strengths and weaknesses, formulating goals, formulating strategy, formulating supporting programs, implementing the programs, and gathering feedback and exercising control.
Each product level within a business unit must develop a
marketing plan
for achieving its goals. The marketing plan is one of the most important
outputs
of the marketing process.
Chap 1 Defining Marketing for the 21st Century
The Scope of Marketing
1.1 What is Marketing?
Marketing
is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society.
Marketing is about identifying and meeting human and social needs.
Marketing Management
is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value.
1.2 What is Marketed?
1) Goods
: Physical goods constitute the bulk of most countries' production and marketing efforts.
2) Services
: As economies advance, a growing proportion of their activities focuses on the production of services.
3) Events
: Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries.
4) Experiences
: By orchestrating several services and goods, a firm can create, stage and market experiences. e.g. Walt Disney World
5) Persons
: Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers.
6) Places
: Cities, provinces, regions, and whole nations compete to attract tourists, residents, factories, and company headquarters.
7) Properties
: Properties are intangible rights of ownership to either real property (real estate) or financial property (stocks and bonds).
8) Organizations
: Organizations work to build a strong, favourable, and unique
image
in the minds of their target publics.
9) Information
: The production, packaging, and distribution of information are major industries.
10) Ideas
: Every market offering includes a basic idea.
1.3 Who Markets?
A) MARKETERS AND PROSPECTS
A
marketer
is someone who seeks a response - attention, a purchase, a vote, a donation - from another party, called the
prospect
. They seek to influence the level, timing and composition of demand to meet the organization's objectives. Eight demand states are possible:
1) Negative demand
: Consumers dislike the product and may even pay to avoid it.
2) Nonexistent demand
: Consumers may be unaware of or uninterested in the product.
3) Latent demand
: Consumers may share a strong need that cannot be satisfied by an existing product.
4) Declining demand
: Consumers begin to buy the product less frequently or not at all.
5) Irregular demand
: Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis.
6) Full demand
: Consumers are adequately buying all products put into the marketplace.
7) Overfull demand
: More consumers would like to buy the product than can be satisfied.
8) Unwholesome demand
: Consumers may be attracted to products that have undesirable social consequences.
B) KEY CUSTOMER MARKETS
1) Consumer Markets
: Companies selling mass consumer goods and services, such as juices, cosmetics, athletic shoes, and air travel, spend a great deal of time establishing a strong
brand image
by developing a superior product and packaging, ensuring its availability, and backing it with engaging communications and reliable service.
2) Business Markets
: Companies selling business goods and services often face well-informed professional buyers skilled at evaluating competitive offerings.
3) Global Markets
: Companies in the global marketplace must decide which countries to enter; how to enter each country; how to adapt product and service features to each country; how to price products in each country; and how to design communications for different cultures.
4) Nonprofit and Governmental Markets
: Companies selling to nonprofit organizations with limited purchasing power, such as churches, universities, charitable organizations, and government agencies, need to price carefully.
Core Marketing Concepts
2.1 Needs, Wants, and Demands
A)
NEEDS
are basic human requirements, such as air, food, water, clothing and shelter.
Humans have strong needs for recreation, education, and entertainment. These needs become
WANTS
when they are directed to specific objects that might satisfy the need.
DEMANDS
are wants for specific products backed by an ability to pay.
B) FIVE TYPES OF NEEDS
1) Stated needs
: The customer wants an inexpensive car.
2) Real needs
: The customer wants a car whose operating cost, not initial price, is low.
3) Unstated needs
: The customer expects good service from the dealer.
4) Delight needs
: The customer would like the dealer to include an onboard GPS navigation system.
5) Secret needs
: The customer wants friends to see him or her as a savvy consumer.
2.2 Target Markets, Positioning, and Segmentation
By examining demographic, psychographic, and behavioural differences among buyers, marketers identify and profile distinct groups of buyers who might prefer or require varying product and service mixes.
After identifying market segments, the marketer decides which present the greatest opportunities, which are the
target markets
.
2.3 Offerings and Brands
Companies address customer needs through a
value proposition
, a set of benefits that satisfy those needs.
The intangible value proposition is made physical by an
offering
, which can be a combination of products, services, information, and experiences.
A
brand
is an offering from a know source. (
A brand name such as McDonald's carries many associations in people's minds that make up its image: hamburgers, cleanliness, convenience, courteous service, and golden arches.
)
All companies strive to build a brand image with as many, favourable, and unique brand associations as possible. (
e.g.
lululemon
has been successful in building a brand that signifies high-quality, trendy activewear.
)
2.4 Value and Satisfaction
The buyer chooses the offerings he or she perceives to deliver the most
value
, the sum of the tangible and intangible benefits and costs to him or her.
Satisfaction
reflects a person's judgement of a product's perceived performance in relationship to expectations.
2.5 Marketing Channels
To reach a target market, the marketer uses three kinds of marketing channels:
Communication channels
,
Distribution channels
,
Service channels
2.6 Marketing Environment
(consists of the
task environment
and the
broad environment
)
The
task environment
includes the actors engaged in producing, distributing, and promoting the offering.
The
broad environment
consists of 6 components:
demographic
environment,
economic
environment,
social-cultural
environment,
natural
environment,
technological
environment, and
political-legal
environment.
Company Orientation toward the Marketplace
3.1 Philosophy Should Guide a Company's Marketing Efforts
The
Production Concept
is one of the oldest concepts in business. It holds that consumers prefer products that are widely available and inexpensive.
The
Product Concept
proposes that consumers favour products offering the most quality, performance, or innovative features.
The
Selling Concept
holds that consumers and businesses, if left alone, won't buy enough of the organization's products.
The
Marketing Concept
emerged in the mid-1950s as a customer-centred, sense-and-respond philosophy.
The
Holistic Marketing Concept
is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies.
3.2 Integrated Marketing
Integrated Marketing
occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate and deliver value for consumers such that the whole is greater than the sum of its parts.
(
e.g. When BMW launched the modernized MINI Cooper in 2002, it employed an integrated marketing strategy in North America that included a broad mix of media: billboards, posters, Internet, print, PR, product placement, and grassroots campaigns. The imaginative integrated campaign built a six-month waiting list for the MINI Cooper.
)
SUMMARY
SUMMARY
Marketing
is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationship in ways that benefit the organization and its stakeholders.
Marketing management
is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.
Marketers are skilled at managing
demand
: they seek to influence its level, timing, and composition for
goods, services, events, experiences, persons, places, properties, organizations, information, and ideas
. They also operate in four different marketplaces:
consumer, business, global, and nonprofit and governmental.
Marketing is not done only by the marketing department. Marketing needs to affect every aspect of the customer experience. To create a strong marketing organization, marketers must think like executives in other departments, and executives in other departments must think more like marketers.
Today's marketplace is fundamentally different as a result of major societal forces that have resulted in many new consumer and company capabilities. These forces have created new opportunities and challenges and changed marketing management significantly as companies seek new ways to achieve marketing excellence.
There are five competing concepts under which organizations can choose to conduct their business:
the production concept, the product concept, the selling concept, the marketing concept, and the holistic marketing concept
. The first three are of limited use today.
The
holistic marketing concept
is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing recognizes that everything matters in marketing and that a broad, integrated perspective is often necessary. Four components of holistic marketing are
relationship
marketing,
integrated
marketing,
internal
marketing, and
performance
marketing.
The set of tasks necessary for successful marketing management includes
developing marketing strategies and plans, capturing marketing insights, connecting with customers, building strong brands, shaping the market offerings, delivering and communicating value, and creating long-term growth.
Part 3 Connecting With Customers
Chap 8 Identifying Market Segments and Targets
Market Targeting
2.1 Effective Segmentation Criteria
To be useful, market segments must rate favourably on five key criteria:
Measurable.
The size, purchasing power, and characteristics of the segments can be measured.
Substantial.
The segments are large and profitable enough to serve.
Accessible.
The segments can be effectively reached and served.
Differentiable.
The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.
Actionable.
Effective programs can be formulated for attracting and serving the segments.
2.2 Evaluating and Selecting the Market Segments
Full Market Coverage:
In
undifferentiated
or
mass marketing,
the firm ignores segment differences and goes after the whole market with one offer.
Multiple-Segment Specialization:
With
selective specialization,
a firm selects a subset of all the possible segments, each objectively attractive and appropriate.
Single-segement Concentration:
A
niche
is a more narrowly defined customer group seeking a distinctive mix of benefits within a segment.
Individual Marketing:
The ultimate level of segmentation leads to
segments of one, customized marketing, or one-to-one marketing.
Bases for Segmenting Consumer Markets
1.3 Demographic Segmentation
Dividends the market on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class.
Age and Life-Cycle Stage:
consumers wants and abilities change with age.
Life Stage:
people in the same part of life cycle may still differ in their life stage.
Life Stage
defines a person's major concern, such as going through a divorce, going into a second marriage, taking care of an older parent, deciding to cohabit with another person, deciding to buy a new home, and so on.
1.4 Psychographic Segmentation
Psychographics
is the science of using psychology and demographics to better understand consumers. In
psychographic segmentation,
buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values.
1.5 Behavioural Segmentation
In
behavioural segmentation,
marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product.
Decision Roles:
people play 5 roles in a buying decision:
initiator, influencer, decider, buyer, user.
User Status:
every product has its
nonusers, ex-users, potential users, first-time users, regular users, heavy users.
1.2 Geographic Segmentation
Dividends the market into geographical units such as nations, provinces, regions, counties, cities, or neighbourhoods.
1.1 Identifying Market Segments and Targets
A
market segment
consists of a group of customers who share a similar set of needs and wants.
Effective
Target marketing
requires that marketers do the following:
Identify and profile distinct groups of buyers who differ in their needs and wants. (
market segmentation
).
Select one or more market segments to enter (
market targeting
).
For each target segment, establish and communicate the distinctive benefit(s) of the company's market offering (
market positioning
)
SUMMARY
SUMMARY
Target marketing comprises three activities:
market segmentation, market targeting,and market positioning.
Market segments are large, identifiable groups with a market.
Two bases for segmenting consumer markets are
consumer characteristics
and
consumer responses
. The major segmentation variables for consumer markets are
geographic, demographic, psychographic, and behavioural.
Marketers use them singly or in combination.
Business marketers use all these variables along with operating variables, purchasing approaches, and situational factors.
To be useful, market segments must be
measurable, substantial, accessible, differentiable and actionable.
We can target markets at four main levels:
mass market, multiple segments, single (or niche) segments, and individuals.
A mass market targeting approach is adopted only by the biggest companies. Many companies target multiple segments defined in various ways such as various demographic groups who seek the same product benefit.
A niche is a more narrowly defined group. Globalization and the internet have made niche marketing more feasible to many.
More companies now practise individual and mass customization. The future is likely to see more individual consumers take the initiative in designing products and brands.
Marketers must choose target markets in a socially responsible manner at all times.
Chap 6 Analyzing Consumer Markets
What Influences Consumer Behaviour?
1.3 Personal Factors
Personal Factors that influence buyers' decision include
age, stage in the life cycle, occupation, economic circumstances, personality, self-concept, lifestyle, values.
A)
Personality and Self-Concept:
each person has personality characteristics that influence his or her buying behaviour.
By
personality
, we mean a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli (including buying behaviour).
Brand personality
is the specific mix human traits that we can attribute to a particular brand. Brand personalities have following traits:
Sincerity (down-to-earth, honest, wholesome, and cheerful)
Excitement (daring, spirited, imaginative, and up-to-date)
Competence (reliable, intelligent, and successful)
Sophistication (upper-class and charming)
Ruggedness (outdoorsy and tough)
Consumers often choose and use brands
with a brand personality
consistent
with their
actual self- concept
(how we would like view ourselves) or even on
others' self-concept
(how we think others see us).
B)
Lifestyle and Values:
A
lifestyle
is a person's pattern of living in the world as expressed in activities, interests, and opinions. Marketers search for
relationships between their products and lifestyle groups.
Consumer decisions are also influenced by
core values,
, the belief systems that underlie attitudes and behaviours. Marketers who target consumers on the basis of their values believe that
with appealing to people's selves,
it is possible to influence their
outer selves
- their purchase behaviour.
1.2 Social Factors
Social Factors such as
reference groups, family, and social roles and statuses
affect buying behaviour.
Reference Groups:
all the groups that have a direct (face-to-face) or indirect influence on his or her attitudes or behaviour.
Groups having a direct influence are called
membership groups.
Some of these are
primary groups
with whom the person interacts fairly continuously and informally, such as family, friends, neighbours and co-workers. People also belong to
secondary groups
, such as religious, professional and trade-union groups, which tend to be more formal and require less continuous interaction.
Where reference group influence is strong, marketers must determine how to reach an influence the group's
opinion leaders
, who is the person offers informal advice or information about a specific product or product category, such as which of several brands is best or how a particular product may be used.
Family
is the most important consumer buying organization in society.
1.1 Cultural Factors
Culture
is the fundamental determinant of a person's wants and behaviour.
Social Classes
relatively homogeneous and enduring divisions in a society, hierarchically ordered and with members who share similar values, interests, and behaviour.
Classic 7 Ascending Levels:
lower lowers → upper lowers → working class → middle class → upper middles → lower uppers → upper uppers
Key Psychological Processes
Motivation: Freud, Maslow, Herzberg
Maslow's Theory:
Human needs are arranged in a
hierarchy
from most to least pressing
physiological
needs (food, water, shelter)
safety
needs (security, protection)
social
needs (sense of belonging, love)
esteem
needs (self-esteem, recognition, status)
self-actualization
needs (self-development and realization)
The Buying-Decision Process: The Five-Stage Model
3.1 Five-Stage Model of the Consumer Buying process
Problem recognition → Information search → Evaluation of alternatives →
Purchase decision
→ Post-purchase behaviour
Purchase decision - Non-compensatory Models of Consumer Choice:
with
non-compensatory models
of consumer choice, positive and negative attribute considerations don't necessarily net out. Highlight 3 choice
heuristics
here:
1) Using the
conjunctive heuristic,
the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first alternative that meets the minimum standard for all attribute.
2) With the
lexicographic heuristic,
the consumer chooses the best brand on the basis of its perceived most important attribute.
3) Using the
elimination-by-aspects heuristic,
the consumer compares brands on an attribute selected probabilistically and eliminates brands that do not meet minimum acceptable cutoffs.
Purchase decision - Intervening Factors:
a consumer's decision to modify, postpone, or avoid a purchase decision is heavily influenced by one or more types of
perceive risk:
Functional Risk:
the product does not perform to expectations.
Physical Risk:
the product poses a threat to the physical well-being or health of the user or others.
Financial Risk:
the product is not worth the price paid.
Social Risk:
the product results in embarrassment in front of others.
Psychological Risk:
the product affects the mental well-being of the user.
Time Risk:
the failure of the product results in an opportunity cost of finding another satisfactory product. .
3.2 Moderating Effects on Consumer Decision Making
The manner or path by which a consumer moves through the decision-making stages depends on several factors, including
the level of involvement
and
extent of variety seeking,
as follows.
The level of involvement:
The
expectancy-value model
assumes a
high
level of
consumer involvement
, or engagement and active processing that the consumer undertakes in responding to a marketing stimulus.
Elaboration likelihood model
have two models: a)
The central coute:
high involvement; b)
Peripheral cues:
low involvement.
Behavioural Decision Theory and Behavioural Economics
Decision Heuristics
Heuristics come into play in everyday decision making when consumers forecast the likelihood of future outcomes or events.
The
availability heuristic:
Consumers base their predictions on
the quickness and ease
with which a particular example of an outcome comes to mind.
The
representativeness heuristic:
consumers base their predictions on
how representative or similar
the outcome is to other examples.
SUMMARY
SUMMARY
Consumer behaviour is influenced by three factors: cultural (culture, subculture, and social class), social (reference groups, family, and social roles and statuses), and personal (age, stage in the life cycle, occupation, economic circumstances, lifestyle, personality, and self-concept). Research into these factors can provide clues to reach and serve consumers more effectively.
Five main psychological processes that affect consumer behaviour are motivation, perception, learning, emotions, and memory.
The typical buying process consists of the following sequence of events: problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behaviour. The marketer's job is to understand the behaviour at each stage. The attitudes of others, unanticipated situational factors, and perceived risk may all affect the decision to buy, as will consumers' levels of post-purchase product satisfaction, use, and disposal, and the company's actions.
Consumers are constructive decision makers and subject to many contextual influences. They often exhibit low involvement in their decisions, using many heuristics as a result.
Part 5 Shaping The Market Offerings
Chap 12 Setting Product Strategy
Product and Brand Relationships
4.1 The Product Hierarchy
Using life insurance as an example:
need family
the core need that underlies the existence of a product family. e.g. security.
product family
all the product classes that can satisfy a core need with reasonable effectiveness. e.g. savings and income.
product class
a group of products within the product family recognized as having a certain functional coherence, also known as a product category. e.g. financial instruments.
product line
a group of products within the product class that related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels, or fall within given price ranges. e.g. life insurance.
product type
a group of items within a product line that share one of several possible forms of the product. e.g. term life insurance.
*item
(or
Stock-Keeping Unit (SKU)
or
product variant
) a distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute. e.g. prudential renewable term life insurance.
4.2 Product Systems and Mixes
A
product system
is a group of diverse but related items that function in a compatible manner. e.g. The extensive iPod system includes headphones and headsets, cables and docks, armbands, cases, power and car accessories and speakers.
A
product mix
(also called a
product assortment
) is the set of all products and items a particular seller offers for sale. e.g. Michelin has 3 product lines: tires, maps, and restaurant-rating services.
4.3 Product Mix Pricing
In
product mix pricing,
the firm searches for a set of prices that maximizes profits on the total mix. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition.
We distinguish 6 situations calling for product mix pricing:
produce line pricing
companies normally develop product lines rather than single products and introduce price steps. e.g. men's suits at three price levels:$300, $600, and $900, which consumers associate with low, average, high quality.
optional-feature pricing
many companies offer optional products, features, and services with their main product.
captive-product pricing
some products require the use of ancillary or
captive products.
two-part pricing
service firms engage in two-part pricing, consisting of a fixed fee plus a variable usage fee. e.g. cell phone users pay a minimum monthly fee plus charges of calls.
by-product pricing
the production of certain goods - meats, petroleum products, and chemicals - often results in by-products that should be prices on their value.
product-bundling pricing
sellers often bundle products and features.
Design
Design
is the totality of features that affect how a product looks, feels, and functions to a consumer.
Design offers
functional
and
aesthetic
benefits and appeals to both our
rational
and
emotional
sides.
Product and Service Differentiation
2.1 Product Differentiation
To be branded, products must be differentiated. Seller faces an abundance of differentiation possibilities, including:
form
the size, shape, or physical structure of a product.
features
most products can be offered with varying features that supplement their basic function.
customization
marketers can differentiate products by customizing them.
performance quality
most products occupy one of four performance levels: low, average, high or superior.
conformance quality
buyers expect high conformance quality, the degree to which all produced units are identical and meet promised specifications.
durability
a measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for vehicles, kitchen appliances, and other durable goods.
reliability
is a measure of the probability that a product ill not malfunction of fail within a specified time period.
repairability
measures the ease of fixing a product when it malfunctions or fails.
style
describes the product's look and feel to the buyer.
2.2 Services Differentiation
ordering ease
refers to how easy it is for the customer to place an order with the company.
delivery
refers to how well the product or service is brought to the customer.
installation
refers to the work done to make a product operational in its planned location.
customer training
helps the customer's employees use the vendor's equipment properly and efficiently.
customer consulting
includes data, information systems, and advice services the seller offers to buyers.
maintenance and repair
programs help customers keep purchased products in good working order.
returns
a nuisance to customers, manufacturers, retailers, and distributors alike, product returns are also an unavoidable reality of doing business, especially with online purchases.
Product Characteristics and Classifications
1.1 Definition
A
product
is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
1.2 Product Classifications
Marketers classify products on the basis of
durability, tangibility and use (consumer or industrial.)
Products fall into 3 groups according
durability & tangibility:
1. nondurable goods:
are tangible goods normally consumed in one or a few uses. e.g. beer, shampoo.
2. durable goods:
are tangible goods that normally survive many uses. e.g. refrigerators, machine tools, clothing.
3. services:
are intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility and adaptability. e.g. haircuts, legal advice, appliance repairs.
Packaging, Labelling, Warranties, and Guarantees
Packaging
Packaging includes all the activities of designing and producing the container for a product.
Various factors contribute to the growing use of packaging as a marketing tool:
Self-service
an increasing number of products are sold on a self-serve basis.
Consumer affluence
rising affluence means consumers are willing to pay a little more for the convenience, appearance, dependability, and prestige of better packages.
Company and brand image
packages contribute to instant recognition of the company or brand.
Innovation opportunity
unique or innovative packaging such as resealable spouts can bring big benefits to consumers and profits to producers.
SUMMARY
SUMMARY
Product is the first and most important element of the marketing mix. Product strategy calls for making coordinated decisions on product mixes, product lines, brands, and packaging and labelling.
In planning its market offering, the marketer needs to think through the five levels of the product:
the core benefit, the basic product, the expected product, the augmented product, and the potential product,
which encompasses all the augmentations and transformations the product might ultimately undergo.
Products can be nondurable goods, durable goods, or services. In the consumer-goods category are convenience goods (staples, impulse goods, emergency goods), shopping goods (homogeneous and heterogeneous), specialty goods, and unsought goods. The industrial-goods category has three subcategories: materials and parts (raw materials and manufactured materials and parts), capital items (installations and equipment), and supplies and business services (operating supplies, maintenance and repair items, maintenance and repair services, and business advisory services.)
Brands can be differentiated on the basis of product form, features, customization, performance, conformance, durability, reliability, repairability, style, and design, as well as on such service dimensions as ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair.
Design is the totality of features that affect how a product looks, feels, and functions. A well-designed product offers functional and aesthetic benefits to consumers and can be an important source of differentiation.
Most companies sell more than one product. A product mix can be classified according to the width, length, depth, and consistency. These four dimensions are the tools for developing company's marketing strategy and deciding which product lines to grow, maintain, harvest, and divest. To analyze a product line and decide how many resources to invest in it, product line managers need to look at sales and profits and market profile.
A company can change the product component of its marketing mix by lengthening its product via line stretching (down-market, upmarket, or both) or line filling, by modernizing its products, by featuring certain products, and by pruning its products to eliminate the least profitable.
Brands are often sold or marketed jointly with other brands. Ingredient brands and co- brands can add value, assuming they have equity and are perceived as fitting appropriately.
Physical products must be packaged and labelled. well-designed packages can create convenience value for customers and promotional value for producers. Warranties and guarantees can offer further assurance to consumers.
Chap 13 Designing and Managing Services
The Nature of Services
1.1 Service Industries are Everywhere
A
service
is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything.
Its production may or may not be tied to a physical product.
1.2 Categories of Service Mix
A) The service component can be a minor or a major part of the total offering. We distinguish 5 categories of offerings.
Pure tangible good
a tangible good such as soap, toothpaste, or salt with no accompanying services.
Tangible good with accompanying services
a tangible good, like a car, computer, or cell phone, accompanied by one or more services.
Hybrid
an offering, like a restaurant meal, or equal prats goods and services.
Major service with accompanying minor goods and services
a major service, like air travel, with additional services or supporting goods such as snacks and drinks.
Pure service
primarily an intangible service, such as babysitting, psychotherapy, or massage.
B) Customers typically cannot judge the technical quality of some services even after they have received them.
At the left are goods high in
search qualities,
that is characteristics the buyer can evaluate before purchase.
In the middle are goods and services high in
experience qualities,
that is characteristics the buyer can evaluate after purchase.
At the right are services high in
credence qualities,
that is characteristics the buyer normally finds hard to evaluate even after consumption.
1.3 Distinctive Characteristics of Services
Four distinctive service characteristics greatly affect the design of marketing programs:
intangibility
unlike physical products, services cannot be seen, tasted, felt, heard or smelled before they bought.
inseparability
whereas physical goods are manufactured, then inventoried, then distributed, and later consumed, services are typically produced and consumed simultaneously.
variability
because the quality of services depends on who provides them, when and where, and to whom, services are highly variable.
perishability
services cannot be stored, so their perishability can be a problem when demand fluctuates.
Managing Service Quality
Managing Customer Expectations
A) Factors Leading to Customer Switching Behaviour
pricing
high price, price increases, unfair pricing, deceptive pricing
inconvenience
location/hours, wait for appointment, wait for service
core service mistake
service mistakes, billing errors, service catastrophe
service encounter failures
uncaring, impolite, unresponsive, unknowledgeable
response to service failure
negative response, no response, reluctant response
competition
found better service
ethical problems
cheat, hard sell, unsafe, conflict of interest
involuntary switching
customer moved, provider closed
B) Recommendations for Improving Service Quality
listening
reliability
basic service
service design
recovery
surprising customers
fair play
teamwork
employee research
servant leadership
Managing Product Support Services
SUMMARY
SUMMARY
A service is any act or performance that one party can offer to another and that is essentially intangible and does not result in the ownership of anything. It may or may not be tied to a physical product.
Services are intangible, inseparable, variable, and perishable. Eacha characteristic poses challenges and requires certain strategies. Marketers must find ways to give tangibility to intangibles, to increase the productivity of service providers, to increase and standardize the quality of the service provided, and to match the supply of services with market demand.
Marketing of services faces new realities in the twenty-first century due to customer empowerment, customer co-production, and the need to satisfy employees as well as customers.
In the past, service industries lagged behind lagged behind manufacturing firms in adopting and using marketing concepts and tools, but this situation has changed. Achieving excellence in service marketing calls not only for external marketing but also for internal marketing to motivate employees, as well as interactive marketing to emphasize the importance of both "high tech" and "high touch".
Top service companies excel at the following practices: a strategic concept, a history of top-management commitment to quality, high standards, profit tiers, and systems for monitoring service performance and customer complaints. They also differentiate their brands through primary and secondary service features and constant innovation.
Superior service delivery requires managing customer expectations and incorporating self-service technologies. Customers' expectations play a critical role in their service experiences and evaluations. Companies must manage service quality by understanding the effects of each encounter.
Even product-based companies must provide post-purchase service. To offer the best support, a manufacturer must identify the services customers value most and their relative importance. The service mix includes both presale services (facilitating and value-augmenting services) and post-sale services (customer service departments, repair and maintenance services.)
Part 4 Building Strong Brands
Chap 10 Crafting the Brand Positioning
Differentiation Strategies
2.1 Differentiation Strategies
Means of Differentiation:
a company can use to differentiate its market offerings:
1. Employee differentiation; 2. Channel differentiation; 3. Image differentiation; 4. Services differentiation.
Emotional Branding:
emotional brands share 3 specific traits
1. a strong people-focuse corporate culture; 2. a distinctive communication style and philosophy; 3. a compelling emotional hook.
Developing and Establishing a Brand Positioning
1.4 Establishing Brand Positioning
Communicating Category Membership:
there are three main ways to convey a brand's category membership:
1. announcing category benefits; 2. comparing to exemplars; 3. relying on the product descriptor.
1.3 Identifying Optimal Points-of-Difference and Points-of-Parity
Once the competitive frame of reference for positioning has been fixed by defining the customer target market and nature of competition, marketers can define the appropriate
points-of-difference
and
points-of-parity associations
.
Points-Of-Difference (PODs):
are attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe that they could not find to the same extent with a competitive brand.
3 key criteria determine whether a brand association can truly function as a PODs:
Desirable to consumer; Deliverable by the company; Differentiating from competitors.
Points-Of-Parity (POPs):
on the other hand, are associations that are not necessarily unique to the brand but may in fact be shared with other brands.
1.2 Determine a Competitive Frame of Reference
The
competitive frame of reference
defines which other brands a brand competes with and therefore which brands should be the focus of competitive analysis.
1.1 Positioning
Positioning
is the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market.
SUMMARY
SUMMARY
To develop an effective positioning, a company must study competitors as well as actual and potential customers. Marketers need to identify competitors' strategies, objectives, strengths, and weaknesses.
Developing a positioning requires the determination of a frame of reference - by identifying the target market and the resulting nature of the competition - and the optimal points-of- parity and points-of-differences brand associations.
A company's closest competitors are those seeking to satisfy the sme customers and needs and making similar offers. A company should also pay attention to latent competitors, who may offer new or other ways to satisfy the same needs. A company should identify competitors by using both industry- and market-based analyses.
Points-of-difference are those associations unique to the brand and that are also strongly held and favourably evaluated by consumers. Points-of-Parity are those associations not necessarily unique to the brand but perhaps shared with other brands. Category point-of-parity associations are associations consumers view as being necessary to a legitimate an credible product offering within a certain category. Competitive Points-of-Parity associations are those associations designed to negate competitors' points-of-difference or overcome perceived weaknesses or vulnerabilities of the brand.
The key to competitive advantage is relevant brand differentiation - consumers must find something unique and meaningful about a market offering. These differences may be based directly on the product or service itself or on other considerations related to factors such as employees, channels, image and services.
Emotional branding is becoming an important way to connect with customers and create differentiation from competitors.
Although small businesses should adhere to many of the branding and positioning principles larger companies use, they must place extra emphasis on their brand elements and secondary associations and must be more focused and create a buzz for their brand.
Part 8 Creating Successful Long-term Growth
Chap 20 Introducing New Market Offerings
New-Product Options
Categories of New Products
New to the World
Additions
Improvements
Repositionings
Cost reductions
Challenges in New-Product Development
Factors That Limit New Product Development
Shortage of important ideas in certain areas
Fragmented markets
Social, economic, and governmental constraints
Cost of development
Capital shortages
Poor launch timing
Shorter product life cycles
Organizational support
Organizational Arrangements
The New-Product Development Decision Process
idea generation → idea screening → concept development and testing → marketing strategy → business analysis → product development → market testing → commercialization
Managing the Development Process: Ideas
Ways to Find Great New Ideas
Run informal sessions with customers
Allow time off for technical people to putter on pet projects
Make customer brainstorming a part of plant tours
Survey your customers
Undertake “fly on the wall” research to customers
Managing the Development Process: Concept to Strategy
Managing the Development Process: Development to Commercialization
The Consumer Adoption Process
SUMMARY
SUMMARY
Once a company has segmented the market, chosen its target customer groups and identified their needs, and determined its desired market positioning, it is ready to develop and launch appropriate new products and services. Marketing should participate with other departments in every stage of new-product development.
Successful new-product development requires the company to establish an effective organization for managing the development process. Companies can choose to use product managers, new-product managers, new-product committees, or new-product departments. Increasingly, companies are adopting cross-functional teams, connecting to individuals and organizations outside the company, and developing multiple product concepts.
Eight stages take place in the new-product development process: idea generation → idea screening → concept development and testing → marketing strategy → business analysis → product development → market testing → commercialization. At each stage, the company must determine whether the idea should be dropped or moved to the next stage.
The consumer adoption process is the process by which customers learn about new products, try them, and adopt or reject them. Today many marketers are targeting heavy users and early adopters of new products, because both groups can be reached by specific media and tend to be opinion leaders. The consumer adoption process is influenced by many factors beyond the marketer's control, including consumers' and organizations' willingness to try new products, personal influences, and the characteristics of the new product or innovation.
