S-33

CLASS NOTES

Marketing

Professor: Carmen Lages

Assistant: Cludia Iglsias
Classes semester: 1st 2012/2013
Author (student): Ana Rute Ferreira Valente

Version: 20131028

Based on: student notes

These notes do not substitute any theoretical or practical classes. It is also not a perfect substitute to any of the recommended
bibliography by the subjects teacher. It was not reviewed by any course instructor and may contain some mistakes.

 Index
Page

Introduction to the marketing concept and plan 05

Situation Analysis 10

Marketing Strategy: STP 17

Consumer Buying Behavior 23

Marketing Mix Tactics: Brand 27

Marketing Mix Tactics: Product 33

Marketing Mix Tactics: Promotion 44

Marketing Mix Tactics: Place/Distribution 60

Marketing Mix Tactics: Price 67

Implementation and Control 75

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 Introductiontothemarketingconceptandplan

Definitionofmarketing

Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering, and freely exchanging products and
servicesofvaluewithothers.

Oneoftheshortestgooddefinitionsofmarketingismeetingneedsprofitably.(Ex:
IKEA > people want good furniture at a lower price: it created knockdown
furniture)

Marketing is the activity, set of institutions, and processes for creating,

communicating,delivering,andexchangingofferingsthathavevalueforcustomers,
clients,partners,andsocietyatlarge.

Selling is not the most important part of marketing: marketing is to know and
understandthecustomersowellthattheproductorservicefitshimandsellsitself

Marketersmarket10maintypesofentities:goods(ex:foodproducts),services(ex:
hotels), events (ex: world cup), experiences (ex: Walt Disney), persons (ex: David
Beckham), places (ex: Las Vegas), properties (Investment companies and banks
market securities), organizations (ex: Tesco), information (ex: Universities in their
sites),andideas(ex:consumePortuguesegoods)

Marketingmanagement
The art and science of choosing target markets and getting, keeping, and growing
customersthroughcreating,delivering,andcommunicatingsuperiorcustomervalue.

Themarketingprocess

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CoreMarketingConcepts

Needs,wants&demands
Needs: the basic human requirements such as for air, food, water, clothing, and
shelter. Humans also have strong needs for recreation, education, and
entertainment.
Wants: they are directed to specific objects that might satisfy the need (ex: a
consumerneedsfoodbutwantbreadandanicetea)
Demands: Demands are wants for specific products backed by an ability to pay.
ManypeoplewantaMercedes;onlyafewareabletobuyone.
Marketingcannotcreateneeds,theyalreadyexist.Needsareuniversal.Wantsare
relatedwithcultureandmarketerscaninfluencethem.

TargetMarkets,Positioning&Segmentation
Segmentation: Not everyone likes the same cereal, restaurant, college, or movie.
Therefore,marketersstartbydividingthemarketintosegments.
Target:marketerdecideswhichpresentthegreatestopportunities.
Positioning: positionsin the minds of the target buyers as delivering somecentral
benefit(s).

Offerings&Brands
The intangible value proposition is made physical by an offering, which can be a
combinationofproducts,services,information,andexperiences.
Abrandisanofferingfromaknownsource.

Value&Satisfaction
Value: Balance between benefits and costs. Choose the offerings with the most
value
Satisfaction:reflectsapersonsjudgmentofaproductsperceivedperformancein
relationshiptoexpectations.

MarketingChannels
Three types of marketing channels: Communication (to deliver and receive
messages from target buyers), distribution (to display, sell, or deliver the physical
product or service(s) to the buyer or user) and service (To carry out transactions
withpotentialbuyers)

SupplyChain
Longer channel stretching from raw materials to components to finished products
carriedtofinalbuyers

Competition
Includes all the actual and potential rival offerings and substitutes a buyer might
consider

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 MarketingEnvironment
Consistsontaskenvironmentandbroadenvironment.Taskenvironment:theactors
engaged in producing, distributing, and promoting the offering. The broad environment
consists of six components: demographic environment, economic environment, social
culturalenvironment,naturalenvironment,technologicalenvironment,andpoliticallegal
environment.(PESTFORCES)

Marketingtrytoproducevaluetobuyerandtoseller:marketingsuccessful

Historicalevolution
Productionera(industrialrevolution:massproduction/economiesofscale)> Sales era
(consumer demand increases: sales orientation (personal selling/advertising); Focus:
transaction) > Marketing era (demand>offer; companies learn to identify consumer
needs and wants before producing; Focus: consumer) > Relationship Marketing era
(longtermperformance;conquertheloyaltyofexistingconsumers,
ie, repeated selling; invest in favorable relations with all stakeholders (internal and
external) and not only consumers. ex: social responsibility, green marketing; Focus:
Relationships)

Sellingvs.Marketing

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Tosum:

Whatchanged?

Traditional Relationshipmarketing
marketing
Timeperspective Shortterm LongTerm

DominatingmarketingFunction Marketingmix InteractiveMarketing

PriceElasticity Customers more sensitive Costumerslesssensitiveto
toprice(volume) price
(customersatisfaction)
Dimension of the dominant Qualityofproduct Qualityoftheinteractions
quality
CustomerSatisfactionMeasure Marketshare Clientshare
Customerknowledge Anonymous Individualidentification

Frequencyofcontacts Sporadic Constant

ManagementFocus ProductManagement ClientManagement

TraditionalmarketingRelationshipmarketing

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Evolutionofthemarketingrole

Themarketingplan
Agoalwithoutaplanisjustawish

Thereisadynamicenvironmentmeaningthatwearenotalone.Marketinglinksthe
company with environment: looking outside the company and organize internally.
Organizations FAIL when they do not adjust to changes (in the needs of the
consumers,inthecompetition,newopportunities,newthreats,etc.).

The marketing planning allows the adjustment of the organization to the
environmentwhichispermanentlychanging

Theplanningisacircularprocesswhichdevelopsintwodirections:
Planning,and
Feedbackusedtocoordinateallthestagesoftheplanningcycle

A marketing plan is a written document that summarizes what the marketer has
learned about the marketplace and indicates how the firm plans to reach its
marketingobjectives.Itcontainstacticalguidelinesforthemarketingprogramsand
financialallocationsovertheplanningperiod.

Usefulness: Keeps the business focused on the consumer, aware of the market
developmentsandcompetitorinitiatives,realisticinitsexpectationsandprudentin
theuseoftheinstitutionsscarceresources

Itisalsolinkedtotheplansofotherdepartments

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 The most frequently cited shortcomings of current marketing plans, according to

marketing executives, are lack of realism, insufficient competitive analysis, and a
shortrunfocus

Mostmarketingplanscoveroneyear

Should answer to questions: Where are we? Situation analysis organization and
environment; Where do we want to go? Objectives; How will we get there?
Determination of the main target market(s), Determination of the positioning
towards the good or service, Identification of a competitive edge; What, when,
where, how, who? Development of the marketing mix to be implemented; What
will we need? Determination of the necessary budgets and assignment of tasks
withinatimeframe;Howwillweknowifitworked?Determinationoftheformsof
control

Amarketingplanusuallycontainsthefollowingsections:
ExecutiveSummaryandTableofcontents:briefsummaryforseniormanagementof
themaingoalsandrecommendations
SituationAnalysis:External:MicroandMacroEnvironment;Internal:theCompany;
SWOTandTOWS
MarketingStrategy:mission,marketingandbusinessobjectives,STP
MarketingTactics:Marketingmix
Financial projections: include a sales forecast, an expense forecast, and a break
evenanalysis.
ImplementationandControl:3Ms



SituationAnalysis

Whereisthecompanynow?Wheredoesitwanttogo?Howdoesitgetthere?What
isthemarketthatitisoperating?(Ex:FastfoodinPortugal)

Internalsituationanalysis:theOrganization

o Sales and cost evolution: Data about

Cost
company sales/transactions (global sales leadership
evolution, sales per product evolution,
globalprofitevolution,profitperproduct
evolution, sales evolution per geographic
area, per client type, per point of sales,
persalesperson);companycoststructure
(fixed and variable costs, cost per unit Focus Differentiation
produced,costperunitsold)

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 o Strategicsituation:

1) Portersgenericcompetitivestrategies
OverallcostleadershipFirmsworktoachievethelowestproduction
and distribution costs so they can underprice competitors and win
marketshare.Theproblemisthatotherfirmswillmakethesame(ex:
primark)
DifferentiationThebusinessconcentratesonachievingsuperiorperformanceinan
important customer benefit area. The firm seeking quality leadership, for example, must
make products with the best components, put them together expertly, inspect them
carefully,andeffectivelycommunicatetheirquality(ex:innovationIKEA)
FocusThebusinessfocusesononeormorenarrowmarketsegments,getstoknow
them intimately, and pursues either cost leadership or differentiation within the target
segment(ex:Ferrari)

2)Assessinggrowthopportunities(AnsoffsProductmarketgrowthgrid)

Corporatemanagementsfirstcourseofactionshouldbeareviewofopportunities
forimprovingexistingbusinesses.
One useful framework for detecting new intensive growth opportunities is a
productmarketexpansiongrid.Thecompanyfirstconsiderswhetheritcouldgainmore
market share with its current products in
their current markets, using a market
penetration strategy (least risky). Next it
considerswhetheritcanfindordevelopnew
marketsforitscurrentproducts,inamarket
development strategy (more risky). Then it
considers whether it can develop new
products of potential interest to its current
markets with a productdevelopment
strategy. Later the firm will also review opportunities to develop new products for new
marketsinadiversificationstrategy(themostrisky).

o Portfolioanalysis

1) BCGmatrix
BCGs GrowthShare Matrix, uses relative market
share (COMPETITIVENESS relative to the most
dangerous competitor more than one is good) and
productmarketgrowthrate(ATTRACTIVENESStwo
digits > strong growth market) as criteria to make
investmentdecisions,classifyingasdogs,cashcows,
questionmarks(problemchild),andstars.


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 Twosuccesstrajectoriesandtwounsuccessfulones:
Innovative: Uses financial resources generated by CASH COWS to invest
inR&Dandthenpenetratesamarket
witha new product whichtakesover
theexistingones.

Follower: Uses resources generated
by CASH COWS and enters as a
problematic child in a market
dominated by a leader, assuming an
aggressive strategy of market share
development.

Disaster: A star product reduces its
market share due to lack of
investment, becoming a PROBLEM
CHILD.

Mediocrity: PROBLEM CHILD which
continues to vegetate without
managingtoincreaseitsmarketshare,headingtowardstheDOGS.

2) GE/McKinseyMatrix
The GE/McKinsey Matrix classifies each strategic business unit by the
extentofitscompetitiveadvantageproductcompetitiveness(evaluates
relativemarketshare,sales,productquality,pricecompetitiveness,etc.)
and the market attractiveness (evaluates market growth rate,
seasonality, scale economies, industrys sales and costs to enter the
market)inordertosupportdecisionsoninvestmentordisinvestmentin
eachproduct.

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 o InStartups:product,marketandteam

External situation analysis: The marketing environment > Macro (PEST + Natural
Forces);>Micro(Marketdemandandmarketactors)

o Macro(PEST+NaturalForces)

Political/legal: Legal restrictionswith direct influenceon the marketing mix
tactics(legislationatproduct,price,etc.)

Economic/Competitive: PIB/GNP growth rate,
foreseen inflation rate, interest rate evolution,
consumerpriceindex,unemploymentrate

Sociocultural: buying decision process, target
market population (demographic tendency and per
capitaconsumption)

Technological: Foreseen technological evolution,
companysaccessibilitytonewtechnologies

+NaturalForces:Sustainability(shortageofrawmaterials,increasedenergy
costs,antipollutionlegislation)

OrganizationshavelittleornocontrolunderthePESTforces.
Changesinthemacroenvironmentcreateboththreatsandopportunitiesfor
thecompany

Micro(Marketdemandandmarketactors)
Organizationshavecontrolovermicroenvironment.

1) Market demand: Secondary data analysis of market variables about demand:
sales,marketshare,numberofcustomers
Market in volume: the market is measured through measurement units
dictatedbythegoodsphysicalnature(wheattons;oliveoilliters;etc.)
Market in value: Measured through the monetary value () paid by all its
consumers.
Marketinexistingunits:Fordurablegoods(TV,automobiles,etc.)

2) Market actors: buyers and consumers, competitors, suppliers and
intermediaries,otherstakeholders.
Michael Porter has identified five forces that determine the intrinsic longrun
attractiveness of a market or market segment: industry competitors, potential
entrants,substitutes,buyers,andsuppliers.Thethreatstheseforcesposeareas
follows:
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 Threatofintensesegmentrivalryasegmentisunattractiveifitalreadycontains
numerous aggressive competitors. Its even more unattractive if its stable or
declining, if plant capacity must be added in large increments, if fixed costs or exit
barriersarehigh,orifcompetitorshavehighstakesinstayinginthesegment.These
conditions will lead to frequent price wars, advertising battles, and newproduct
introductionsandwillmakeitexpensivetocompete.Thecellularphonemarkethas
seenfiercecompetitionduetosegmentrivalry.

Threat of new entrantsthe most attractive
segmentisoneinwhichentrybarriersarehighand
exitbarriersarelow.

Threat of substitute productsa segment is
unattractive when there are actual or potential
substitutesfortheproduct.Iftechnologyadvances
or competition increases in these substitute
industries,pricesandprofitsarelikelytofall.

Threatofbuyersgrowingbargainingpower
a segment is unattractive if buyers possess strong
or growing bargaining power. Buyers bargaining
powergrowswhentheyareconcentratedororganized,whentheproductrepresents
a significant fraction of their costs, when the product is undifferentiated, when
buyers switching costs are low, when buyers are pricesensitive because of low
profits.

Threatofsuppliersgrowingbargainingpowerasegmentisunattractiveifthe
companys suppliers are able to raise prices or reduce quantity supplied. Suppliers
tend to be powerful when they are concentrated or organized, when they can
integratedownstream,whentherearefewsubstitutes,whenthesuppliedproductis
an important input, and when the costs of switching suppliers are high. The best
defenses are to build winwin relationships with suppliers or use multiple supply
sources.

SWOTandTOWS(Internal+External)
The overall evaluation of a
companys strengths, weaknesses,
opportunities, and threats is called
SWOT analysis. Its a way of
monitoringtheexternalandinternal
marketingenvironment.



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 External:

Opportunities: A marketing opportunity is an area of buyer need and interest that a

companyhasahighprobabilityofprofitablysatisfying.













Intheopportunitymatrix,thebestmarketingopportunitiesfacingtheTVlighting
equipmentcompanyappearintheupperleftcell(#1).Theopportunitiesinthelowerright
cell(#4)aretoominortoconsider.Theopportunitiesintheupperrightcell(#2)andthe
lowerleft cell (#3) are worth monitoring in the event that any improve in attractiveness
andpotential.

Threats: An environmental threat is a challenge posed by an unfavorable trend or

developmentthat,intheabsenceofdefensivemarketingaction,wouldleadtolowersales
orprofit.













Thethreatsintheupperleftcellaremajor,becausetheyhaveahighprobabilityof
occurrenceandcanseriouslyhurtthecompany.
Todealwiththem,thecompanyneedscontingencyplans.Thethreatsinthelowerright
cell are minor and can be ignored. The firm will want to carefully monitorthreats inthe
upperrightandlowerleftcellsintheeventtheygrowmoreserious.

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OrganizationMission
Anorganizationexiststoaccomplishsomething:tomakecars,lendmoney,providea
nights lodging. So, the mission is the organizations purpose, usually setting out its
competitive domain, which distinguishes the business from the others of its type. A
missionstatementdefinesinaparagraphorsoanyentitysreasonforexistence.Over
time,themissionmaychange,totakeadvantageofnewopportunitiesorrespondto
newmarketconditions.
To define its mission, a company should address these questions: What is our
business? Who is the customer? What is of value to the customer? What will our
businessbe?Whatshouldourbusinessbe?

OrganizationVision
Aviewofwhattheorganizationwantstobecome(sometimesmightreflectwhatthe
companyisalreadyandwantstocontinuetobe).
Describeshowthefuturewilllookiftheorganizationachievesitsmission

Examples:
NovaSBE>Mission:NovaSBEprovidesaworldclasslevelofhighereducationand
research;Vision:OurvisionistobeamongthebestinEurope.
MinnesotaDepartmentofhealth>Mission:Toprotect,maintainandimprovethe
healthMinnesotans;Vision:KeepingallMinnesotanshealthy.

ObjectivesBusinessobjectives&Marketingobjectives
Businessobjectives
IncreaseROI;Increasetheprofitmargin;achieveacertaingrowthrate;valueofthe
businessordividendspaidtoshareholders;survival

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 Marketingobjectives
Shortterm(13years);mediumterm(36years);Longtermalignedwithvision(6
12+years)
Quantitative:Profit,volume,sales,marketshare,costs
Qualitative: Image/reputation, customer satisfaction, service quality perception,
employeesatisfaction
Increase lifetime value of customers;Increase the averagenumber of items
purchased per sale; Increase the frequency that a loyal customer shops; Increase
thepercentageofcustomerswhoarereturningcustomers;Increasethenumberof
newcustomers;Increasecustomersatisfaction;Increasevisibilityandmemorability
of brand identity; Increase new customers from referral and word of mouth;
Increaseemployeesatisfaction

Objectivesshouldbe: Dated
Realizable
Exact
Ambitious
Measurable

MarketingStrategy:STP
Segmentation
Strategictriangle:STP
Identifyingmarketsegments
Choosingtargetmarkets
PositioningtheProductin
targetsmind
Targeting
Segmentation Positioning

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 Basesforsegmentingconsumermarkets(BtoC)

Market segmentation divides a market into welldefined slices. A market segment
consists of a group of customers who share a similar set of needs and wants
through the use of segmentation variables. The marketers task is to identify the
appropriate number and nature of market segments and decide which one(s) to
target.

We use two broad groups of variables to segment consumer markets. Some
researchers try to define segments by looking at descriptive characteristics:
geographic(Thecompanycanoperateinoneorafewareas,oritcanoperateinall
but pay attention to local variations), demographic (One reason demographic
variables are so popular with marketers is that theyre often associated with
consumer needs and wants > it changes a lot with the age, gender, income,
nationality, etc.) and psychographic (People within the same demographic group
canexhibitverydifferentpsychographicprofiles)

Other researchers try to define segments by looking at behavioral considerations,

such as consumer responses to benefits, usage occasions, or brands (marketers
dividebuyersintogroupsonthebasisoftheirknowledgeof,attitudetoward,use
of, or response to a product).The researcher then sees whether different
characteristicsareassociatedwitheachconsumerresponsesegment.Forexample,
do people who want quality rather than low price in an automobile differ in
theirgeographic,demographic,andpsychographicmakeup?

BasesforsegmentingBusinessmarkets(BtoB)

We can segment business markets with some of the same variables we use in
consumer markets, such as geography, benefits sought, and usage rate, but
businessmarketersalsouseothervariables.
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 The demographic variables are the most important, followed by the operating
variablesdowntothepersonalcharacteristicsofthebuyer

Example: A rubbertire company can sell tires to manufacturers of automobiles,
trucks, farm tractors, forklift trucks, or aircraft. Within a chosen target industry, it
canfurthersegmentbycompanysizeandsetupseparateoperationsforsellingto
largeandsmallcustomers

Other variables: Purchasing Approaches, Situational Factors, Personal

Characteristics


Tosum:
BtoC BtoB
Customercharacteristics Productrelated(behavioral) Thesizeandgrowthpotentialof
theaccount
Demographics:age, Benefitsought Geographiclocation
gender,family
SocioEconomics:income, Purchasingbehavior:brand Sectorandtradecategory
occupation,socialclass loyalty,pricesensitivity,etc.

Geographiclocation: Usagesituationand Supplychainrelationship

country,region purchasingoccasion
Personalityandlifestyle: Usercapabilities
extrovert,introvert,
confident
Usercapabilities:
experience,expertise

Effectivesegmentation













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Multivariablesegmentation

Targeting

There are many statistical techniques for developing market segments. Once the
firmhasidentifieditsmarketsegmentopportunities,itmustdecidehowmanyand
whichonestotarget.Marketersareincreasinglycombiningseveralvariablesinan
efforttoidentifysmaller,betterdefinedtargetgroups.

In evaluating different market segments, the firm must look at two factors: the
segmentsoverallattractivenessandthecompanysobjectivesandresources.

Marketers have a range or continuum of possible levels of segmentation that can

guidetheirtargetmarketdecisions:









Singlesegmentsandindividualsassegmentsarerisky.

Thetargetmarketcanbetheproperconsumersorthebuyers.Theconsumersare
therealusers(forexamplebabyinChico);Thebuyersarewhobuysthegoods(for
exampletheparents).

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 Targetingchoicecriteriafortargetmarket













Positioning

Acompanydiscoversdifferentneedsandgroupsinthemarketplace,targetsthoseit
cansatisfyinasuperiorway,andthenpositionsitsofferingssothetargetmarket
recognizesthecompanysdistinctiveofferingsandimages

Positioning is the act of designing a companys offering and image to occupy a
distinctiveplaceinthemindsofthetargetmarket.Thegoalistolocatethebrandin
themindsofconsumerstomaximizethepotentialbenefittothefirm.Agoodbrand
positioning helps guide marketing strategy by clarifying the brands essence,
identifyingthegoalsithelpstheconsumerachieve,andshowinghowitdoessoina
uniqueway.

The real trick in positioning is to strike just the right balance between what the
brandisandwhatitcouldbe

Positioning requires that marketers define and communicate similarities and

differencesbetweentheirbrandanditscompetitors.

1)PositioningResearch
Segmenttarget;
Main competitors(companies that satisfy the same customer need) for this
segmentAcompanyneedstogatherinformationabouteachcompetitors
realandperceivedstrengthsandweaknesses;
Consumerschoicecriteria/desiredbenefits;
Evaluationmadebytheconsumershowdotheyevaluatecomparativelythe
differentbrandspresentinthemarket
2)Strategydefinition
Real positioning To propose differences that are easily identifiable by the
consumers(tobethefirst,tocreatenewattributes,reinforcementofthecurrentposition,
searchfornewposition)
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 Psychological positioning To influence the feelings of the consumers

towardsthebrands(toalterthebrandscredits,toaltertheimportanceofthevaluationof
attributes,attackingcompetitorbrands)

Positioningidentifiesthebrandanddifferentiatesitbystorytelling,slogan,humor,
etc.

Positioningmapofhypotheticalconsumerpreferences(ineachtypeofcompany
choosetheaxesthatmakemoresense)




Slides








Repositioning(ex:mini)

Successfulpositioning
Consistency,clarity,competitiveness,credibility

Positioningstatement
Ex:Redbull:Toyoung,activesoftdrinkerswhohavelittletimeforsleep;Redbullis
thesoftdrinkthatgivesyoumoreenergyandallowsyoutopushthelimitsfurther.
Ex: Style in a box: To the Lionesses, Style in a Box is the ideal place to get the
perfect look that offers a wide selection of luxury dresses at the lowest price
becauseitistheonlyonlinerentadressplatformintheIberianPeninsula.
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Checklist: Is the Current Position Strategy Working?; Is the Segmentation Strategy

Appropriate?; How Strong Is the Competition?; Are There Sufficient Resources To
CommunicatethePosition?

Conclusion:Marketingstrategyisaprocessoftransformingknowledgeaboutconsumers
intocompetitiveadvantageoffirms.

ConsumerBuyingBehavior

ConsumerBehavior
Whatinfluencesconsumerbehavior?
Buyingbehaviormodel

=consumer

Stimulus Organism Response

Stimulus Response

Consumerbehavioristhestudyofhowindividuals,groups,andorganizationsselect,buy,
use,anddisposeofgoods,services,ideas,orexperiencestosatisfytheirneedsandwants.
A consumers buying behavior is influenced by the consumer characteristics: cultural,
social, and personal factors. Of these, cultural factors exert the broadest and deepest
influence.

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Cultural factors Culture is the fundamental determinant of a persons wants and

behavior.Marketersmustcloselyattendtoculturalvaluesineverycountrytounderstand
howtobestmarkettheirexistingproductsandfindopportunitiesfornewproducts.

Socialfactorssocialfactorssuchasreferencegroups,family,andsocialrolesandstatuses
affectourbuyingbehavior.

PersonalfactorsPersonalcharacteristicsthatinfluenceabuyersdecisionincludeageand
stage in the life cycle, occupation and economic circumstances, personality and self
concept, and lifestyle and values. Because many of these have a direct impact on
consumerbehavior,itisimportantformarketerstofollowthemclosely.

Consumerpsychology

The starting point for understanding consumer behavior is the stimulusresponse model
showninthefigure.

Marketing and environmental stimuli enter the consumers consciousness, and a set of
psychologicalprocessescombinewithcertainconsumercharacteristicstoresultindecision
processesandpurchasedecisions.Themarketerstaskistounderstandwhathappensin
theconsumersconsciousnessbetweenthearrivaloftheoutsidemarketingstimuliandthe
ultimate purchase decisions. Four key psychological processesmotivation, perception,
learning,andmemoryfundamentallyinfluenceconsumerresponses.

MotivationAneedbecomesamotivewhenitisarousedtoasufficientlevelofintensity
todriveustoact.Motivationhasbothdirectionsweselectonegoaloveranotherand
intensitywepursuethegoalwithmoreorlessvigor.

Perception A motivated person is ready to acthow is influenced by his or her

perception of the situation. In marketing, perceptions are more important than reality,
becauseperceptionsaffectconsumersactualbehavior.Perceptionistheprocessbywhich
weselect,organize,andinterpretinformationinputstocreateameaningfulpictureofthe
world. One person might perceive a fasttalking salesperson as aggressive and insincere;
another,asintelligentandhelpful.Eachwillrespondtothesalespersondifferently.

LearningWhenweact,welearn.Learninginduceschangesinourbehaviorarisingfrom
experience. Most human behavior is learned, although much learning is incidental.
Learning theorists believe learning is produced through the interplay of drives, stimuli,
cues,responses,andreinforcement.

Emotions Consumer response is not all cognitive and rational; much may be emotional
and invoke different kinds of feelings. A brand or product may make a consumer feel
proud,excited,orconfident.Anadmaycreatefeelingsofamusement,disgust,orwonder.

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Memory Cognitive psychologists distinguish between shortterm memory (STM)a

temporaryandlimitedrepositoryofinformationandlongtermmemory(LTM)amore
permanent, essentially unlimited repository. All the information and experiences we
encounter as we go through life can end up in our longterm memory. We can think of
marketing as a way of making sure consumers have product and service experiences to
createtherightbrandknowledgestructuresandmaintaintheminmemory.

ConsumerBuyingProcess

Problem Information
Evaluation
Purchase
Post
recognition of purchase
search decision
alternatives behavior

Smart companies try to fully understand customers buying decision processall the
experiences in learning, choosing, using, and even disposing of a product. Marketing
scholars have developed a stage model of the process. The consumer typically passes
through five stages: problem recognition, information search, evaluation of alternatives,
purchase decision, and postpurchase behavior. Clearly, the buying process starts long
beforetheactualpurchaseandhasconsequenceslongafterward.Consumersdontalways
passthroughallfivestagestheymayskiporreversesome.Whenyoubuyyourregular
brand of toothpaste, you go directly from the need to the purchase decision, skipping
informationsearchandevaluation.

ProblemrecognitionThebuyingprocessstartswhenthebuyerrecognizesaproblemor
need triggered by internal or external stimuli. With an internal stimulus, one of the
persons normal needshunger, thirst, sex rises to a threshold level and becomes a
drive.Aneedcanalsobearousedbyanexternalstimulus.Apersonmayadmireafriends
newcarorseeatelevisionadforaHawaiianvacation,whichinspiresthoughtsaboutthe
possibilityofmakingapurchase.

Information search Surprisingly, consumers often search for limited amounts of

information.Surveyshaveshownthatfordurables,halfofallconsumerslookatonlyone
store, and only 30 percent look at more than one brand of appliances. Information
sources: Personal Family, friends, neighbors, acquaintances; Commercial Advertising,
Web sites, salespersons, dealers, packaging, displays; Public Mass media, consumer
ratingorganizations;ExperientialHandling,examining,usingtheproduct.

Evaluation of alternatives How does the consumer process competitive brand

information and make a final value judgment? First, the consumer is trying to satisfy a
need. Second, the consumer is looking for certain benefits from the product solution.
Third, the consumersees eachproduct as a bundle of attributes with varying abilities to
deliver the benefits. The attributes of interest to buyers vary by productfor example:
Hotellocation,cleanliness,atmosphere,price.

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Purchase decision In the evaluation stage, the consumer forms preferences among the
brandsinthechoicesetandmayalsoformanintentiontobuythemostpreferredbrand.
Inexecutingapurchaseintention,theconsumermaymakeuptofivesubdecisions:brand
(brand A), dealer (dealer 2), quantity (one computer), timing (weekend), and payment
method(creditcard).

Postpurchase behavior After the purchase, the consumer might experience dissonance
fromnoticingcertaindisquietingfeaturesorhearingfavorablethingsaboutotherbrands
and will be alert to information that supports his or her decision. Marketing
communications should supply beliefs and evaluations that reinforce the consumers
choice and help him or her feel good about the brand. The marketers job therefore
doesntendwiththepurchase.Marketersmustmonitorpostpurchasesatisfaction,post
purchaseactions,andpostpurchaseproductusesanddisposal.

Purchaserolesplayedbytheconsumer:Initiator,influential,decisionmaker,buyer,
final consumer/user. Ex: For example, assume a wife initiates a purchase by
requesting a new treadmill for her birthday. The husband may then seek
informationfrommanysources,includinghisbestfriendwhohasatreadmillandis
akeyinfluencerinwhatmodelstoconsider.Afterpresentingthealternativechoices
to his wife, he purchases her preferred model, which ends up being used by the
entirefamily.Differentpeopleareplayingdifferentroles,butallarecrucialinthe
decisionprocessandultimateconsumersatisfaction.

The degree of involvement of the consumer influences the duration of the buying
process. The degree of involvement depends of the degree of risk, the personal
relevanceandthetimeavailable.

Fourtypesofbuyingbehavior

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 Individualvs.organizationbuyingdecisionprocess
What is organizational buying? Organizational buying as the decisionmaking
process by which formal organizations establish the need for purchased products
and services and identify, evaluate, and choose among alternative brands and
suppliers. Business marketers face many of the same challenges as consumer
marketers. In particular, understanding their customers and what they value is of
paramountimportancetoboth.

OrganizationalBuyingDecisionProcess

Problem
recognition
Generalneed
description
Product
specification
Suppliersearch

Performance Orderroutine
Supplierselection
Proposal
review specification solicitation



Purchase roles played by the organization: Initiator, influencer, approver, decider,
buyer,user,andgatekeeper(Peoplewhohavethepowertopreventsellersorinformation
from reaching members of the buying center. For example, purchasing agents,
receptionists,andtelephoneoperatorsmaypreventsalespersonsfromcontactingusersor
deciders).



MarketingMixTacticsBrand

Definition of brand: brand is a name, term, sign, symbol, or design, or a

combination of them, intended to identify the goods or services of one seller or
groupofsellersandtodifferentiatethemfromthoseofcompetitors.
Abrandisthusaproductorservicewhosedimensionsdifferentiateitinsomeway
fromotherproductsorservicesdesignedtosatisfythesameneed.

This differentiation may be functional, rational, or tangiblerelated with the
productperformanceofthebrand.Theymayalsobemoresymbolic,emotional,or
intangiblerelated with what the brand represents or means in a more abstract
sense.

TheScopeofBranding:Howdoyoubrandaproduct?Althoughfirmsprovidethe
impetus to brand creation through marketing programs and other activities,
ultimately a brand resides in the minds of consumers. It is a perceptual entity
rootedinrealitybutreflectingtheperceptionsandidiosyncrasiesofconsumers.

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27

 Brandingisendowingproductsandserviceswiththepowerofabrand.Itsallabout
creatingdifferencesbetweenproducts.Marketersneedtoteachconsumerswho
theproductisbygivingitanameandotherbrandelementstoidentifyitaswell
aswhattheproductdoesandwhyconsumersshouldcare.Brandingcreatesmental
structures that help consumers organize their knowledge about products and
services in a way that clarifies their decision making and, in the process, provides
valuetothefirm.

DifferentiationStrategies
Forbrandingstrategiestobesuccessfulandbrandvaluetobecreated,consumers
mustbeconvincedtherearemeaningfuldifferencesamongbrandsintheproduct
or service category. Brand differences often relate to attributes or benefits of the
productitself.So,tobuildastrongbrandandavoidthecommoditytrap,marketers
muststartwiththebeliefthatyoucandifferentiateanything.

DifferentiationfactorsItisnecessarytohaveaclearpositioning.













Productvs.Brand

Product(tangible) Brand(intangible)
Madeinafactory Livesinthemind
Canbecopied Unique
Canbeoutdated Potentiallytimeless
Involvestransactions Formsrelationships

ABrandcantranscendProduct(ex:NikeJusttoit)


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28

 WhyweneedaBrand:
thebenefitstoconsumers


1. Createsfamiliarity(aidschoice)
2. SignalsQuality/RiskReduction
3. Conveysinformation
4. Vehicleforselfexpression

Thebenefitstoorganizations
1. Pricepremiumpossibilityoverunbrandedalternatives
2. Barriertoentry
3. Abilitytoextendbrandnametoothercategories
4. Leverageindistributionchannels


BrandManagement

o BrandidentityWhatmakesthebrandmeaningful,uniqueandtimeless.Itis
auniquesetofbrandassociationsthattheBrandstrategistaspirestocreate
andmaintain.
o Brand Positioning Positioning means emphasizing the distinctive
characteristics that make the brand different from its competitors and
appealing to the stakeholders through marketing actions/tactics. A key
concept in Brand positioning is based on one fundamental principle: all
choicesarecomparedtoalternatives.
o BrandimageBrandimageishowthebrandisperceivedbyitsmaintarget
audiences (consumers and other stakeholders). Image is what audience
sees.

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 MentalBrandAssociations
In this model, we can think of consumer brand knowledge as a node in memory
with a variety of linked associations. The strength and organization of these
associationswillbeimportantdeterminantsoftheinformationwecanrecallabout
the brand. Brand associations consist of all brandrelated thoughts, feelings,
perceptions, images,experiences, beliefs, attitudes, and so onthat become linked
tothebrandnode.

Brandequity
Brand equity is the added value endowed on products and services. It may be
reflected in the way consumers think, feel, and act with respect to the brand, as
wellasintheprices,marketshare,andprofitabilitythebrandcommands.
Marketers and researchers use various perspectives to study brand equity.
Customerbasedapproachesviewitfromtheperspectiveoftheconsumereither
an individual or an organization and recognize that the power of a brand liesin
whatcustomershaveseen,read,heard,learned,thought,andfeltaboutthebrand
over time. Customerbased brand equity is thus the differential effect brand
knowledge(thoughts,feelings,experiences,beliefs,andimages)hasonconsumer
responsetothemarketingofthatbrand.
Differences in response are a result of consumers brand knowledge. Brands must
createstrong,favorable,anduniquebrandassociationswithcustomers,likeiPod,
forexample,does.
Brand equity is reflected in perceptions, preferences, and behavior related to all
aspectsofthemarketingofabrand.Strongerbrandsleadtogreaterrevenue.Table
9.1summarizessomekeybenefitsofbrandequity.

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30


Brand

Brand Brand

Brand Brand

Brand
Brand

o DriversofBrandEquity:
Brandelements,Marketingactivities,Meaningtransference.

o BrandEquitymodels

1) BrandAssetValuator
It compares the brand equity of thousands of brands across hundreds of different
categories.Therearefourkeycomponentsorpillarsofbrandequity,accordingtoBAV:
Energized differentiation Relevance, Esteem, andKnowledge.(And thencreatea matrix
with the brands and in axis x: Esteem and knowledge and in axis y: energized
differentiationandrelevance)

high

Niche/
Leadership
Momentum

high

New/ Eroding/
unfocussed
declining

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 2) BRANDZ
BrandZ model of brand strength was developed at the heart of which is the
BrandDynamicspyramid.Accordingtothismodel,brandbuildingfollowsaseriesofsteps.
For any one brand, each person interviewed is assigned to one level of the pyramid
dependingontheirresponsestoasetofquestions.TheBrandDynamicsPyramidshowsthe
numberofconsumerswhohavereachedeachlevel.

3) AakerModel
David Aaker views brand equity as a set of 5 categories of assets & liabilities linked to
brand that add or subtract from the value provided by the product or service to firm
and/ortothefirm'scustomers.Thesecategoriesofbrandassestsare:Brandloyalty;Brand
awareness; Perceived quality; Brand association; other proprietary assets (patents,
trademarks,etc.)

4) BrandResonanceModel
Thebrandresonancemodelalsoviewsbrandbuildingasanascendingseriesofsteps,from
bottom to top: (1) ensuring customers identify the brand and associate it with a specific
product class or need; (2) firmly establishing the brand meaning in customers minds by
strategically linking a host of tangible and intangible brand associations; (3) eliciting the
proper customer responses in terms of brandrelated judgment and feelings; and (4)
convertingcustomersbrandresponsetoanintense,activeloyalty.

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 BrandingStrategies












MarketingMixTactics:Product

Conceptofproduct:productisanythingthatcanbeofferedtoamarkettosatisfya
want or need, including physical goods, services, experiences, events, persons,
places, properties, organizations, information, and ideas. So, the product is
everything,favorableandunfavorable,tangibleandintangiblethatisreceivedfrom
anexchange.
Goodtangibleproduct.Hasphysicalexistence.
Serviceintangibleproduct.Providesintangiblebenefitstothecustomer.
Idea Concepts that provide stimulus to resolve problems or adapt to the
environment.

Products can be offered to two markets: Consumer products or Business to
Consumer(BtoC):purchasedtosatisfypersonalorfamilyneeds;Industrialproducts
or Business to Business (BtoB): purchased by organizations for regular use or to
transforminacreationofnewproducts.

Wedistinguishfivecategoriesofproducts:
1. Puretangiblegoodatangiblegoodsuchassoap,toothpaste,orsalt;

2. Tangible good with accompanying servicesa tangible good, like a car,
computer,orcellphone,accompaniedbyoneormoreservices.

3. Hybridan offering, like a restaurant meal, of equal parts goods and

services.

4. Major service with accompanying minor goods and servicesa major

service,likeairtravel,withadditionalservicesorsupportinggoodssuchassnacksand
drinks.
5.Pureintangible(service)primarilyanintangibleservice,suchasbabysitting,
psychotherapy,ormassage.

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Good Service
Tangible Intangible
Ownershipistransferredwhenapurchase Ownershipis(usually)not
takesplace transferable
Canberesold Cannotberesold
Production,purchaseandconsumption Productionandconsumptionare,
takeplaceindifferenttimesandlocations usually,simultaneousandoftentake

placeinthesamespace

Canbetransported
Producedbythemanufacturer
Indirectcontactbetweencompanyand
customerispossible
Cannotbetransported
Thebuyer/customerparticipatesin
theproductionoftheservice
Directcontactisusuallynecessary

LinkagebetweenServicesandGoods
Goods and Services complement one another. Goods frequently require servicing
after their purchasing. Services frequently require tangibility for easier consumer
perception and consumption of it. Goods and Services are marketed in combinations to
differenttargetmarkets.

Thefundamentallevelisthecorebenefit:theserviceorbenefitthecustomerisreally
buying.

Theactualproductistheset
ofattributesandconditions
buyersnormallyexpect
whentheypurchasethis
product.

Themarketerpreparesan
augmentedproductthat
exceedscustomer
expectations.
Whenproductsaregoods Whenproductsareservices
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34

 Customerstypicallycannotjudgethetechnicalqualityofsomeservicesevenafter
theyhavereceivedthem.Nextfigureshowsvariousproductsandservicesaccording
to difficulty of evaluation. At the left are goods high in search qualitiesthat is,
characteristicsthebuyercanevaluatebeforepurchase.Inthemiddlearegoodsand
services high in experience qualities characteristics the buyercan evaluate after
purchase. At the right are goods and services high in credence qualities
characteristicsthebuyernormallyfindshardtoevaluateevenafterconsumption.

Concept of service: A service is any act or performance one party can offer to
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. Can be
providedbymachines(ex:ViaVerde)orhumans(ex:universityclass)

o Characteristics:intangibility,inseparability,variability,andperishability.
Intangibilityservicescannotbeseen,tasted,felt,heard,orsmelledbefore
theyarebought(ex.Plasticsurgery)

InseparabilityWhereasphysicalgoodsaremanufactured,theninventoried,
then distributed, and later consumed, services are typically produced and
consumed simultaneously. A haircut cant be storedor produced without
thebarber.

VariabilityBecausethequalityofservicesdependsonwhoprovidesthem,
when and where, and to whom, services are highly variable. Some doctors
haveanexcellentbedsidemanner;othersarelessempathic.

Perishability Services cannot be stored, so their perishability can be a
problem when demand fluctuates. Public transportation companies must
own much more equipment because of rushhour demand than if demand
wereeventhroughouttheday.

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 TheExtendedMarketingMixforServices

o Physical Evidence This refers to the way your product, service, and
everythingaboutyourcompany,appearsfromtheoutside.
1) Backstage Invisible to client; Internal organization and systems; That
part of a firm that reflects the rules, regulations, and processes upon
whichtheorganizationisbased.

2) FrontstageTheuseofphysicalevidencetodesignserviceenvironments:
Ambient conditions (room temperature and music, comfort level);
Inanimate objects (furnishings); Other physical evidence (signs, symbols,
colors).

o People Service providers: The primary providers of a core service (waiter,
dentist, college instructor, etc.). Contact personnel: Employees other than
the primary service provider who briefly interacts with customer. An
extremely important part of any company is having the right people to
supportthecompanysproductsand/orservice.

o Processes Solid procedures and policies that are in
place,whichpertainstothecompanysproductsand/or
service. A process develops over time. It can be
improved by improving key inputs and outputs. A
service process has two dimensions: invisible
(backstage)andvisibletoclient(frontstage).

Servicequalitymodel
Customersformserviceexpectationsfrommanysources,suchaspastexperiences,word
ofmouth,andadvertising.Ingeneral,customerscomparetheperceivedservicewiththe
expectedservice.Iftheperceivedservicefallsbelowtheexpectedservice,customersare
disappointed. Successful companies add benefits to their offering that not only satisfy
customers but surprise and delight them. Delighting customers is a matter of exceeding
expectations. The servicequality model in next figure highlights the main requirements
fordeliveringhighservicequality.Itidentifiesfivegapsthatcauseunsuccessfuldelivery.

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36

 Gap 1Management does not

always correctly perceive what
customers want. Hospital
administrators may think patients
wantbetterfood,butpatientsmay
be more concerned with nurse
responsiveness.

Gap 2Management might
correctly perceive customers
wants but not set a performance
standard. Hospital administrators
may tell the nurses to give fast
service without specifying it in
minutes.

Gap3Employeesmightbepoorly
trained,orincapableoforunwilling
to meet the standard; they may be held to conflicting standards, such as taking time to
listentocustomersandservingthemfast.

Gap 4Consumer expectations are affected by statements made by company

representatives and ads. If a hospital brochure shows a beautiful room but the patient
finds it to be cheap and tacky looking, external communications have distorted the
customersexpectations.

Gap5Thisgapoccurswhentheconsumermisperceivestheservicequality.Thephysician
may keep visiting the patient to show care, but the patient may interpret this as an
indicationthatsomethingreallyiswrong.

Based on this servicequality model, researchers identified five determinants of service

qualityinthisorderofimportance:

1)ReliabilityTheabilitytoperformthepromisedservicedependablyandaccurately.

2)ResponsivenessWillingnesstohelpcustomersandprovidepromptservice.

3)AssuranceTheknowledgeandcourtesyofemployeesandtheirabilitytoconveytrust
andconfidence.

4)EmpathyTheprovisionofcaring,individualizedattentiontocustomers.

5) TangiblesThe appearance of physical facilities, equipment, personnel, and

communicationmaterials.

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 Howtoincreasequalitycontrol
Service buyers are aware of variability (characteristic of service) and often talk to
othersbeforeselectingaserviceprovider.Toreassurecustomers,somefirmsoffer
service guarantees that may reduce consumer perceptions of risk. Here are three
stepsservicefirmscantaketoincreasequalitycontrol:

Investingoodhiringandtrainingprocedures.Recruitingtherightemployeesand
providingthem withexcellent training is crucial, regardless of whether employees
arehighlyskilledprofessionalsorlowskilledworkers.

Standardize the serviceperformance process throughout the organization. A
serviceblueprintcanmapouttheserviceprocess,thepointsofcustomercontact,
andtheevidenceofservicefromthecustomerspointofview.

Monitor customer satisfaction. Employ suggestion and complaint systems,
customersurveys,andcomparisonshopping.Customerneedsmayvaryindifferent
areas,allowingfirmstodevelopregionspecificcustomersatisfactionprograms.

Solutionstocustomerfailures
Unfortunately,althoughmanyfirmshavewelldesignedandexecutedproceduresto
deal with their own failures, they find managing customer failures much more
difficult.Solutionscomeinallforms,astheseexamplesshow:

1) Redesign processes and redefine customer roles to simplify service
encounters.

2) Incorporatetherighttechnologytoaidemployeesandcustomers.

3) Create highperformance customers by enhancing their role clarity,

motivation,andability.

4) Encouragecustomercitizenshipsocustomershelpcustomers.

AchievingExcellenceinServicesMarketing
The increased importance of the
service industry has sharpened the
focusonwhatittakestoexcelinthe
marketingofservices.

Marketing excellence
Marketing excellence with services
requires excellence in three broad
areas: external, internal, and
interactive marketing. External
marketing describes the normal
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38

 work of preparing, pricing, distributing, and promoting the service to customers;

Internalmarketingdescribestrainingandmotivatingemployeestoservecustomers
well; Interactive Marketing describes the employees skill in serving the client.
Clients judge service not only by its technical quality (Was the surgery successful?),
but also by its functional quality (Did the surgeon show concern and inspire
confidence?).

Productslifecycle
A companys positioning and differentiation strategy must change as the product,
market,andcompetitorschangeovertheproductlifecycle(PLC).Tosayaproduct
hasalifecycleistoassertfourthings:
1. Productshavealimitedlife.

2. Product sales pass through distinct stages, each posing different challenges,
opportunities,andproblemstotheseller.

3. Profitsriseandfallatdifferentstagesoftheproductlifecycle.

4. Products require different marketing, financial, manufacturing, purchasing, and

humanresourcestrategiesineachlifecyclestage.

Mostproductlifecyclecurvesareportrayedasbellshaped(seefigure).Thiscurve
istypicallydividedintofourstages:introduction,growth,maturity,anddecline.
1.IntroductionAperiodofslowsalesgrowthastheproductisintroducedinthe
market. Profits are nonexistent because of the heavy expenses of product
introduction.

2. GrowthA period of rapid market acceptance and substantial profit
improvement.

3. MaturityA slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits stabilize or decline because of
increasedcompetition.

4.DeclineSalesshowadownwarddriftandprofitserode.

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39

 Marketing Introduction Growth Maturity Decline

activities
Product Basic Service Diversificationof Abandonofweaker
Extensions brandsandmodels products
guarantees
Price High Penetration Pricestofight Progressivefall
price competitors
Distribution Selective Intensive Intensive Selective
Communication Buildproduct Build Stressbrand Reducetominimallevel
awarenessandtrial awarenessand differencesand neededtoretainhard
amongearlyadopters interestinthe benefitsand core
anddealers massmarket encouragebrand loyals
switching
Promotion Highfor Reduction Increasedtodefend Reduction
experimentation fromcompetition

Marketing Introduction Growth Maturity Decline
activities
Sales Low Fastgrowth Maximum Decrease
Costs Highcost/client Scaleeconomies; Lowcost/client Lowcost/client
Medium
cost/client
Profits Negativeorreduced Growing High Decreasing
Customers Innovative Earlyadopters+ Stablemajority Laggards
Initialmajority
Competitors Few,simple Growing Stable,sophisticated Decreasing
Marketinggoals Createproduct Maximize Maximizetheprofit, Reduceinvestmentsand
knowledge marketshare whiledefendmarket increaseprofitabilityof
share thebrand

PLC:examplesofproductsindifferentstages

PLC:DurationisvariableFashionproductshaveveryshortlifecycle

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40

Development&managementofproductsinPLC

1) ManagementofproductsintheIntroductionstage
Newproductdevelopment
Processofproductadoption
Awareness
Interest
Evaluation
Trial
Adoption

2) ManagementofproductsintheGrowthstage
Qualitymodifications

3) ManagementofproductsintheMaturitystage
Qualitymodifications
Functionalmodifications
Stylemodifications

4) ManagementofproductsintheDeclinestage
Productextension(ex:Marlboro(cigarettes)toclothes)
Range: group of products offered by the company, defined around a same
technology,business,marketormarketsegment.
Line:subgroupofproductsthatarecloseandconsideredasaunitbymarketing,
technicalorfinalusagestandards.
Item:specificversionoftheproductthatcanbedesignatedasadistinctoffer.
Deletingproductsorrepositioningbrands(ex:mini)

NewProductDevelopmentProcess

Manytop companies use thestagegate system to divide the innovation processinto

stages,withagateorcheckpointattheendofeach.Tomovefromthebusinessplan
stage into product development requires a convincing market research study of
consumerneedsandinterest,acompetitiveanalysis,andatechnicalappraisal.

The stages in the newproduct development process are shown in the next figure.
Many firms have parallel sets of projects working through the process, each at a
differentstage.Thinkoftheprocessasafunnel:Alargenumberofinitialnewproduct
ideas and concepts are winnowed down to a few highpotential products that are
ultimatelylaunched.Buttheprocessisnotalwayslinear.

Manyfirmsuseaspiraldevelopmentprocessthatrecognizesthevalueofreturningto
anearlierstagetomakeimprovementsbeforemovingforward.

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41

1. IdeagenerationThenewproductdevelopmentprocessstartswiththesearchfor
ideas. Some marketing experts believe the greatest opportunities and highest
leveragewithnewproductsarefoundbyuncoveringthebestpossiblesetofunmet
customer needs or technological innovation. Newproduct ideas can come from
interactingwithvariousgroupsandusingcreativitygeneratingtechniques.

2. IdeascreeningThepurposeofscreeningistodroppoorideasasearlyaspossible.

3. ConceptdevelopmentandtestingProductideaisdifferentfromproductconcept.
Butaproductideacanbeturnedintoseveralproductconcepts.Ex:Concept1An
instantdrinkforadultswhowantaquicknutritiousbreakfastwithoutpreparation;
Concept2Atastysnackforchildrentodrinkasamiddayrefreshment;Concept3A
health supplement for older adults to drink in the late evening before they go to
bed. Concept testing means presenting the product concept to target consumers,
physicallyorsymbolically,andgettingtheirreactions.Themorethetestedconcepts
resemblethefinalproductorexperience,themoredependableconcepttestingis.

4. Marketing strategy development Following a successful concept test, the new
productmanagerwilldevelopapreliminarythreepartstrategyplanforintroducing
thenewproductintothemarket.Thefirstpartdescribesthetargetmarketssize,
structure, and behavior; the planned product positioning; and the sales, market
share, and profit goals sought in the first few years. The second part outlines the
planned price, distribution strategy, and marketing budget for the first year. The
third part of the marketing strategy plan describes the longrun sales and profit
goalsandmarketingmixstrategyovertime.

5. BusinessanalysisAftermanagementdevelopstheproductconceptandmarketing
strategy,itcanevaluatetheproposalsbusinessattractiveness.Managementneeds
to prepare sales, cost, and profit projections to determine whether they satisfy
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 companyobjectives.Iftheydo,theconceptcanmovetothedevelopmentstage.As
new information comes in, the business analysis will undergo revision and
expansion.

6. ProductdevelopmentTheCompanywilldeterminewhethertheproductideacan
translateintoatechnicallyandcommerciallyfeasibleproduct.

7. Market testing After management is satisfied with functional and psychological

performance,theproductisreadytobebrandedwithaname,logo,andpackaging
andgointoamarkettest(ex:makeatastingforadrink).

8. CommercializationCommercializationincursthecompanyshighestcoststodate.
The firm will need to contract for manufacture or build or rent a fullscale
manufacturingfacility.

NewProductprobabilityofsuccess

TheConsumerAdoptionProcess

Adoption is an individuals decision to become a regular user of a product and is
followedbytheconsumerloyaltyprocess.Newproductmarketerstypicallyaimat
earlyadoptersandusethetheoryofinnovationdiffusionandconsumeradoptionto
identifythem.
The consumeradoption process is the mental steps through which an individual
passesfromfirsthearingaboutaninnovationtofinaladoption.Theyare:
1. AwarenessThe consumer becomes aware of the innovation but lacks
informationaboutit.

2.InterestTheconsumerisstimulatedtoseekinformationabouttheinnovation.

3.EvaluationTheconsumerconsiderswhethertotrytheinnovation.

4. TrialThe consumer tries the innovation to improve his or her estimate of its
value.

5.AdoptionTheconsumerdecidestomakefullandregularuseoftheinnovation.



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43

 Readinesstotrynewproductsandpersonalinfluence
Persons level of innovativeness is the degree to which an individual is relatively
earlierinadoptingnewideasthantheothermembersofhissocialsystem.
Adopter categories (The five adopter groups differ in their value orientations and
theirmotivesforadoptingthenewproduct):

o Innovators are technology enthusiasts; they are venturesome and enjoy
playingwithnewproductsandmasteringtheirintricacies.
o Earlyadoptersareopinionleaderswhocarefullysearchfornewtechnologies
thatmightgivethemadramaticcompetitiveadvantage.Theyarelessprice
sensitiveandwillingtoadopttheproductifgivenpersonalizedsolutionsand
goodservicesupport.
o Early majority are deliberate pragmatists who adopt the new technology
whenitsbenefitsareprovenandalotofadoptionhasalreadytakenplace.
o Latemajorityareskepticalconservativeswhoareriskaverse,technologyshy,
andpricesensitive.
o Laggardsaretraditionboundandresisttheinnovationuntilthestatusquois
nolongerdefensible.



MarketingMixTactics:Promotion

Promotion objectives: Create awareness, Stimulate demand, Encourage product

trial,Identifyprospects,Retainloyalcustomers,Facilitateresellersupport,Combat
competitivepromotionalefforts,Reducesalesfluctuations

ClassicalelementsofthePromotionalMix

Sales Public
Advertising
Promotion Relations


Direct
SalesForce
Marketing

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 1.Advertising
Itisanonpersonal,paidcommunicationform,fromanidentifiablesource,through
themassmedia.Advertisingcanbeacosteffectivewaytodisseminatemessages,
whether to build a brand preference or to educate people. In developing an
advertising program, marketing managers must always start by identifying the
target market and buyer motives. Then they can make the five major decisions,
knownasthefiveMs:Mission:Whatareouradvertisingobjectives?Money:How
much can we spend and how do we allocate our spending across media types?
Message: What message should we send? Media: What media should we use?
Measurement:Howshouldweevaluatetheresults?

Anadvertisingobjective(orgoal)isaspecificcommunicationstaskandachievement
level to be accomplished with a specific audience in a specific period of time. We
can classify advertising objectives according to whether their aim is to inform,
persuade, remind, or reinforce: Informative advertising aims to create brand
awareness and knowledge of new products or new features of existing products;
Persuasiveadvertisingaimstocreateliking,preference,conviction,andpurchase
ofaproductorservice.Somepersuasiveadvertisingusescomparativeadvertising,
which makes an explicit comparison of the attributes of two or more brands;
Reminderadvertisingaimstostimulaterepeatpurchaseofproductsandservices;
Reinforcementadvertisingaimstoconvincecurrentpurchasersthattheymadethe
rightchoice.

Indesigningandevaluatinganadcampaign,marketersemploybothartandscience
todevelopthemessagestrategyorpositioningofanadwhattheadattemptsto
conveyaboutthebrandanditscreativestrategyhowtheadexpressesthebrand
claims.

Every advertising mass media has advantages and disadvantages. Here, we briefly
reviewtelevision,radio,exterioroutdoorsandinternetadvertisingmedia:








Highratings;Segmentedand Repetitiveandfastcontact Locationexposureto Stronggrowth;Reduced
morefregmentedmedia;
distribution;Fewtechnical consumertrafficiskey; costsofexecution;Possibility
Strongpublicitysaturation; restrictions;Weakcreation Widevarietyofsupportsand toincorporateresponse

Highcosts;Allowsbigimpact quality;Publicitysaturation; increasinglycreative mechanisms/interactivity;
(imageandsound);Allows limitedcreationexecution solutions;Strongrepetition Highertrafficingenericsites;
creativeexecution (onlysound) ofthemessage;Noprecision Technologyallowsforsome
inimpactmeasurement measurement(nrofclicks,
fromwhere,when,etc.)



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45

 FCBGridHowAdvertisingWorks

2.SalesPromotion
Salespromotion,akeyingredientinmarketingcampaigns,consistsofacollectionof
incentive tools, mostly short term, designed to stimulate quicker or greater
purchaseofparticularproductsorservicesbyconsumersorthetrade.
Whereasadvertisingoffersareasontobuy,salespromotionoffersanincentive.

Reasonsforincrease
Increased power of distributors; Increased number of brands; Decrease brand
loyalty; Increased consumer sensitivity to promotions; Increased accountability of
managersforshortmediumtermresults;Competitorsactions.

Salesobjectives
Sellers use incentivetype promotions to attract new customers, to reward loyal
customers, and to increase the repurchase rates of occasional users. Sales
promotionsoftenattractbrandswitchers,whoareprimarilylookingforlowprice,
good value, or premiums. If some of them would not have otherwise tried the
brand,promotioncanyieldlongtermincreasesinmarketshare.
Sales promotions in markets of high brand similarity can produce a high sales
response in the short run but little permanent gain in brand preference over the
longerterm.Inmarketsofhighbranddissimilarity,theymaybeabletoaltermarket
shares permanently. In addition to brand switching, consumers may engage in
stockpilingpurchasing earlier than usual (purchase acceleration) or purchasing
extraquantities.Butsalesmaythenhitapostpromotiondip.

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Sales promotion includes tools for consumer promotion, trade promotion, and
businessandsalesforcepromotion.

Consumer Promotion vs. Trade Promotion Strategic option in marketing
communications

Pulltofinalconsumer
Objectives: Lead Consumers to Try a New
Product; Deviate Consumers from Competition
Products; Maintain and Reward Loyal
Consumers;IncreaseSalesinShortTerm.
Instruments: samples, coupons, postsale
reimbursement, quantity discounts, prizes,
demonstration retail site, extra product, testing,
contests,complementarybrands,games.

Pushtothedistributor
Objectives: Get better negotiating conditions; Increase Shelf Space; Advantage in store
display;RewardCommittedDistributors
Instruments: Price discount, Loans, Buyback guarantee, offer of goods, contests, prizes,
exhibitors,quantitydiscounts,freegifts,offerofmerchandising.

Developingaprogram
Indecidingtouseaparticularincentive,marketersmustfirstdetermineitssize.Acertain
minimumisnecessaryifthepromotionistosucceed.Second,themarketingmanagermust
establishconditionsforparticipation.Incentivesmightbeofferedtoeveryoneortoselect
groups. Third, the marketer must decide on the duration of the promotion. Fourth, the
marketermustchooseadistributionvehicle.A15centsoffcouponcanbedistributedin
the product package, in stores, by mail, online, or in advertising. Fifth, the marketing
manager must establish the timing of promotion, and finally, the total sales promotion
budget. The cost of a particular promotion consists of the administrative cost (printing,
mailing, and promoting the deal) and the incentive cost (cost of premium or centsoff,

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includingredemptioncosts),multipliedbytheexpectednumberofunitssold.Thecostofa
coupondealwouldrecognizethatonlyafractionofconsumerswillredeemthecoupons.

MainIssues
o Shorttermpotentialadvantage
Consumershavelittletimetonoticeadmessages;salespromogetattention.

o Shorttermpotentialdisadvantage
Buyerspurchasesonspecialdealsoftenbecomelessbrandloyal

o Longtermpotentialadvantage:
Helpsachieveshelfplacement/instoredisplay,thusincreasingvisibility

o Longtermpotentialdisadvantage
Riskofnegativeimpactonbrandequity(especiallywithpricediscounting)


3.PublicRelations
Not only must the company relate constructively to customers, suppliers, and
dealers,itmustalsorelatetoalargenumberofinterestedpublics.Apublicisany
groupthathasanactualorpotentialinterestinorimpactonacompanysabilityto
achieve its objectives (stakeholders). Public relations (PR) include a variety of
programstopromoteorprotectacompanysimageorindividualproducts,meaning
a favorable reputation (favorable opinion or positive feeling from the stakeholder
towardstheorganization).

ManyFactorsContributetoanOrgsFavorableReputation:
Visualimageoutputs>Companyname;logo;brands;slogan;signs;business
cards;etc.
ContactPersonnel>Boardmembers;staff;receptionists;salespeople;etc.
Organizational Identity > Company mission; shared common values;
structureandorganization
Physicalinfrastructures>Offices;factories;salesareas
Marketing communication outputs > Ads; audiovisuals; brochures; posters;
newsinmassmedia

MarketingPublicRelations
Many companies are turning to marketing public relations (MPR) to support
corporate or product promotion and image making. The old name for MPR was
publicity, the task of securing editorial spaceas opposed to paid spacein print
andbroadcastmediatopromoteorhypeaproduct,service,idea,place,person,
ororganization.
InconsideringwhenandhowtouseMarketingPublicRelations,managementmust
establish the marketing objectives, choose the PR messages and vehicles,

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 implementtheplancarefully,andevaluatetheresults.ThemaintoolsofMPR(for
ReputationBuilding)are:
Meetings Appointments
(formalpersonalcontacts) Congress
Meetings
Conferences
SpecialEvents Contests
Galasandparties
Publications Brochuresandpamphlets
Magazinesandnewspapers(internalorexternal)
Newsletters
PublicServiceActivities Joinsocialcauses
Joineducationalprograms
Sponsorship Supportentityforcommercialpurposes
Patronage Supportentityforsocialresponsibilitypurposes
Others Visitstothefacilities
Postsaleservices
Etc.


Advertisingvs.Publicity

There is a clear difference between Advertising and Publicity. Advertising is something

you get by paying for it. Publicity however, is something you hope you'll get. Why?
Because publicity can be generally gained at no cost to you. And it generally has many
times the credibility of advertising. So, advertising is content you pay for (radio, TV,
newspaper, banner advertising, etc). Publicity on the other hand, refers to free content
aboutyouandyourcompanythatappearsinthemedia.It'swhatotherssayaboutyou.

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Publicitycanresultwhenanarticleyouwriteispublished,orwheninformationyougiveto
aneditorconvinceshim/hertofeatureastoryaboutyouorisbasedonapublicityrelease
issuedbyaPublicRelationsfirmyouhaveretained.Overtime,thesestorieshelpcreatea
favorableimpressionofyourproductorservices.

Possible issues for publicity releases (for appear in the media without have to pay):
Changesinmarketingpersonnel;Supportofasocialcause;Improvedwarranties;Quality
awards;Companynamechanges;Interviewswithcompanyofficials;Internationalbusiness
efforts;Athleticeventsponsorship;Visitsbycelebrities;Reportsonnewdiscoveries;New
Products;Newslogan;Researchdevelopments;Employment;Historyofthebrand;etc.

Sponsorshipvs.Patronage(ThemaintoolsofMPR(forreputationbuilding)cont.)
Sponsorship Patronage
Motivation Primarilycommercial Primarilysocialresponsibility
Objective Reputationbuildingby Reputationbuildingthroughidentity
bonding building
Message Marketingdriven Institutional,civilandsocial
TargetPublic Potentialconsumers Specificstakeholdergroup
Generalpublicopinion
Exploration Immediateraiseof Discretesocialrecognition
commercialvalue
Results Shortandmediumterm Longterm

ExofSponsorship:RedBullAirRace
ExofPatronage:ProgramfromTeatroNacionaldeSoCarlos

CrisisManagement(ThemaintoolsofMPR(forreputationbuilding)cont.)
o Preventionofnegativeincidentsandevents(Ex:Shell)
Safetyprograms,inspections,andeffectivequalitycontrolprocedures
Predeterminedpoliciesandproceduresthatexpeditenewscoverage

o Responsetonegativeincidentsandevents(Ex:GoogleinHaiti)
Beingstraightforwardwiththepressandthepublic

MeasuringPREffects(Itisusefulto)
o Environmentalmonitoring
Identifieschangesinpublicopinionaffectingtheorganization

o Publicrelationsaudit
Assessesanorganizationsimageamongthepublicorevaluatestheeffectofa
specificpublicrelationsprogram

o Communicationsaudit
Analyzesthecontentoforganizationalmessages

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o Socialaudit
Measures the extent to which stakeholders view the organization as being
sociallyresponsible


4.SalesForce
Companies now spend hundreds of millions of dollars each year to train the
salespeopleinmethodsofanalysisandcustomermanagement.Theyshouldinform
andpersuadethecustomerstobuyproducts.(Ex:vacuumcleaners)

PersonalSellingefficiency
o Moreeffectivethanadvertisingincomplexsellingsituations

o Allows to answer questions and explain the FABVs (Features, Advantages,
Benefits&Values)

o Helpsrelationshipbuilding

o Mostprecise(targeted)formofpromotionmethods

o Most expensive element in promotion mix because of the salary

investmentvstimespentperclient;otherexpenses:travel,accommodation,
meals, business expenses, etc; personal selling can bethe largest operating
expenseofacompany.

PersonalSellingvs.Advertising
PersonalSellingIsLikelyto
BeMoreImportantWhen:
Consumeris Geographicallyconcentrated,
relativelysmallnumbers
Productis Expensive,technically
complex,custommade,
specialhandlingrequired
Priceis Relativelyhigh
Channelsare Relativelyshort
AdvertisingIsLikelytoBeMore
ImportantWhen:
Geographicallydispersed,relatively
largenumbers
Inexpensive,simpletounderstand,
standardized,nospecialhandling
Relativelylow
Relativelylong

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 ThePersonalSellingProcess

o Prospecting and qualifying More companies are
taking responsibility for finding and qualifying leads (potential
customers) by using sales records, trade shows, commercial
databases, newspaper announcements, telephone directories,
email directories, responses to advertisement, recommendations
fromcurrentcustomers,etc.

o Preapproach The salesperson needs to learn as
muchaspossibleabouttheleads(specificproductneeds,current
use of brands, feelings about available brands, personal
characteristics).

o Approach The manner in which a salesperson
contacts a potential customer. Purpose is to gather information
aboutthebuyersneedsandobjectives.ItisImportanttocreatea
favorable first impression and build rapport with prospective
customer

o Presentation and demonstration The salesperson
tells the product story to the buyer, using a features,
advantages,benefits,andvalue(FABV)approach.Attractandhold
the prospects attention. Stimulate interest in the product. Use
audiovisualtechnologytoheightentheimpactofthepresentation.

o Overcoming objections Customers typically pose
objections.Tohandletheseobjections,thesalespersonmaintains
a positive approach, asks the buyer to clarify the objection,
questionsinsuchawaythatthebuyeranswershisownobjection,
denies the validity of the objection, or turns it into a reason for
buying.

o Closing Closing signs from the buyer include
physical actions, statements or comments, and questions. Reps
canaskfortheorder,recapitulatethepointsofagreement,offer
to help write up the order, ask whether the buyer wants A or B,
get the buyer to make minor choices such as color or size, or
indicatewhatthebuyerwilllosebynotplacingtheordernow.The
salespersonmightofferspecificinducementstoclose,suchasan
additionalservice,anextraquantity,oratokengift.

o Followup and maintenance Determining if the
delivery and setup of order was completed to the customers
satisfaction.Ascertainingthecustomersfutureproductneeds.
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 SalesForceManagement



o Determining the sales force structure Methods for
determining optimal sale force size: Dividing the number of sales
calls necessaryto serve customers by thenumber ofsales callsa
salesperson makes annually; Adding additional salespersons until
the cost of adding one more salespersons equals the additional
sales that would be generated by that person. Methods for
defining sales territory: Geographic area; Customer type; Type of
product.


o Recruit the right people Intrinsic motivation;
Disciplined work style; Ability to handle repeated no; Ability to
closeasale;Abilitytobuildrelationshipswithcustomers;Establish
a set of qualifications that best match the firms particular sales
tasks.


o Training sales representatives Training period can
be anywhere from a few weeks to a year or more; Training is
expensive,butyieldsstrongreturns.


o SupervisingsalesrepresentativesProvidedirection:
Annual call plans and timeandduty analysis can help provide
direction,TheInternetisthefastestgrowingsalestechnologytool.


o Motivating sales representatives Basic
compensation plans: Salary plus bonus; Motivational incentives:
Enjoyableworkingconditions,Jobsecurity,Opportunitiestoexcel;
Motivational methods: Sales contests, Awards (travel,
merchandise,andcash).


o Evaluating sales representatives Sales vs. Expense
reports: Sales volume, Average number of calls per day, Average
sales per customer, Actual sales relative to sales potential,
Number of new customer orders, Average cost per call, Average
grossprofitpercustomer.


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 5.DirectMarketing
Direct marketing is the use of consumerdirect (CD) channels to reach and deliver
goodsandservicestocustomerswithoutusingmarketingmiddlemen.

DirectMarketingGrowth

BenefitsofDirectMarketing
o Tocustomers:
Fun,Convenient&HassleFree
SavesTime
LargerMerchandiseSelection
ComparisonShopping
OrderProductsforThemselvesorOthers

o Tocompanies:
MailingListsforAlmostAnyMarket
CustomizedOffers
OngoingRelationshipswithCustomers
TimedtoAchieveHigherReadership&Response
AlternativeMedia/MessageTesting
Privacy
MeasurableResponse

CustomerDatabase
Organized collection of comprehensive data about individual customers or
prospects,includinggeographic,demographic,psychographic,andbehavioraldata.
It can be used to identify prospects, tailor products, and maintain customer
relationships. Database marketing requires substantial investment in hardware,
software,personnelanditallowtobuildcustomerloyaltybytailoringnewoffersto
theirspecificinterests(ex:Amazon).
So,themainusesofthisdatabasearetoidentifyprospects,matchcustomersand
offers,todevelopcustomerloyaltyandtoseereactivecustomers.
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 DirectMarketingchannels
Direct marketers can use a number of channels to reach individual prospects and
customers:

Direct mail: Directmail marketing means sending an offer, announcement, reminder, or
otheritemtoanindividualconsumer.(Ex:KitKat)

Catalog: In catalog marketing, companies may send fullline merchandise catalogs,

specialtyconsumercatalogs,andbusinesscatalogs,usuallyinprintformbutalsoasDVDs
oronline.

Telemarketing: Telemarketing is
the use of the telephone and call
centerstoattractprospects,sellto
existing customers, and provide
service by taking orders and
answeringquestions.

DirectResponse TV: Feedback
mechanism between the company
andtheconsumer.Itisanadd.

Kiosk Marketing: A type of direct
sellinginwhichakiosk,asmallbuildingthatmighthouseasellingorinformationunit.

OnlineMarketing:Onlinepresencethatallowsfeedbackliketellmeyouropiniontothe
customerinteractswiththecompany.

DirectMarketingTools
Objectives Tools
Toknowandtoberelevanttocustomers Databases
Directlycommunicatewithcustomers Magazines,Website,Email,SalesForce,
RetailSites
Listentothecustomers Surveys,CustomerService,CallCentre,
Website
Rewardsthecustomers Loyaltycardsandloyaltycredits
Teamwithcustomers CustomerClubs,Events,Forums

PublicandEthicalIssuesinDirectMarketing
Direct marketers and their customers usually enjoy mutually rewarding relationships.
Occasionally,however,adarkersideemerges:

o IrritationManypeopledontlikehardsell,directmarketingsolicitations.

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 o Unfairness Some direct marketers take advantage of impulsive or less

sophisticatedbuyersorpreyonthevulnerable,especiallytheelderly.

o DeceptionandfraudSomedirectmarketersdesignmailersandwritecopy
intendedtomisleadorexaggerateproductsize,performanceclaims,orthe
retailprice.

o Invasion of privacy It seems that almost every time consumers order

productsbymailortelephone,applyforacreditcard,ortakeoutamagazine
subscription,theirnames,addresses,andpurchasingbehaviormaybeadded
to several company databases. Critics worry that marketers may know too
muchaboutconsumerslives,andthattheymayusethisknowledgetotake
unfairadvantage.


IntegratedMarketingCommunications
A method of carefully coordinating all promotional activities to produce a
consistent,unifiedmessagethatiscustomerfocused.

Traditional
Contemporary

TraditionalviewofMarketingCommunications:

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 ContemporaryIMCApproach:

IMCpopularitygrowth

From To
MediaAdvertising MultipleFormsofCommunication
MassMedia SpecializedMedia
Manufacturerdominance Retailerdominance
GeneralFocus DataBasedMarketing
Lowagencyaccountability Greateragencyaccountability
Traditionalcompensation PerformanceBasedcompensation
LimitedInternetAvailability WidespreadInternetAvailability


IMCisstrategicandgoaloriented
IMC is a strategic business process used to plan, develop, execute and evaluate
coordinated, measurable, persuasive brand communication programs with
stakeholders.ThegoalofIMCistogenerateshorttermfinancialreturnsandbuild
longtermbrandvalue/equity.
IMCtobuildbrandequity:

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Marketing communication activities contribute to brand equity and drive sales in many
ways:bycreatingbrandawareness,forgingbrandimageinconsumersmemories,eliciting
positivebrandjudgmentsorfeelings,andstrengtheningconsumerloyalty.

(Recall from Class 2 the difference and evolution from mass marketing to relational
marketing>TheRelationshipMarketinghasanimpactoncommunications)

ImplicationsofRelationshipMarketing
o Marketingismoreandmoreaboutbuildingrelationships
o The fragmentation of the media and the new technology offer new targeting
opportunities
o Thereisanincreaseofbelowthelineactivities
o Direct marketing/database marketing and public relations offer new opportunities
tocreaterelationships
o Bigger need for coordination between the traditional and emerging disciplines of
promotionalmix.

ThethreestrategicoptionsinMarketingCommunications:PushStrategy,PullStrategy
(seeonsalespromotionsection)andProfileStrategy

o ProfileStrategy

MarketingVersusCommunicationsObjectives

MarketingObjectives CommunicationObjectives
Generallystatedinthefirmsmarketingplan Derivedfromtheoverallmarketingplan
Achievedthroughtheoverallmarketingplan Morenarrowthanmarketingobjectives
Quantifiable,suchassales,marketshare,ROI Basedonparticularcommunicationstasks
Tobeaccomplishedinagivenperiodoftime Designedtodeliverappropriatemessages
MustbeDREAM Focusedonaspecifictargetaudience

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 MarketingCommunicationEffects
The marketing communications activities
mustbeintegratedtodeliveraconsistentmessage
andachievethestrategicpositioning.Marketerscan
judgemarketingcommunicationsaccordingtotheir
ability to affect experiences and impressions, build
customerloyaltyandbrandequity,anddrivesales.
For example, how well does a proposed ad
campaign contribute to awareness or to creating,
maintaining,orstrengtheningbrandassociations?Doesasponsorshipimproveconsumers
brandjudgmentsandfeelings?Doesapromotionencourageconsumerstobuymoreofa
product?Atwhatpricepremium?

MarketingandPromotionProcessModel

Situation Marketing
STP
Analysis Mix

Meaning:

STP
TheMarketingSegmentationProcess:FindWaysToGroupConsumersAccordingToTheir
Needs>FindWaysToGroupMarketingActionsUsuallytheProductsOfferedAvailable
TotheOrganization>DevelopaMarket/ProductGridToRelatetheMarketSegmentsTo
the Firms Products and Actions > Select the Product Segments Toward Which the Firm
DirectsItsMarketingActions>TakeMarketingActionsToReachTargetSegments

The Target Marketing Process: Identify Markets with Unfulfilled Needs > Determining
Market Segmentation > Selecting Market To Target > Positioning Through Marketing
Strategies

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The Positioning Marketing Process: Identify the Competitors > Assess Perceptions of
Them > Determine Their Positions > Analyze Consumer Preferences > Make the
PositioningDecision>MonitorthePosition
(Confirmthechecklistinclass4)

MarketingMixTactics:Place/Distribution

WhatisDistribution?
Itisbeingintherightplace,intherightmoment,intherightamount,withtheright
services.Distributionistheconvenientabilityoftheproduct(goodorservice)from
the point of view of the consumer. 'Place' is concerned with various methods of
transportingandstoringgoods,andthenmakingthemavailableforthecustomer.
Again, getting the right product to the right place at the right time involves the
distributionsystem.Thechoiceofdistributionmethodwilldependonavarietyof
circumstances. It will be more convenient for some manufacturers to sell to
wholesalers who then sell to retailers, while others will prefer to sell directly to
retailersorcustomers.

Roleoftheintermediary

Mostproducersdonotselltheirgoodsdirectlytothefinalusers;betweenthemstandsa
setofintermediariesperformingavarietyoffunctions.Theseintermediariesconstitutea
marketing channel (also called a trade channel or distribution channel). Formally,
marketingchannelsaresetsofinterdependentorganizationsparticipatingintheprocessof
makingaproductorserviceavailableforuseorconsumption.Theyarethesetofpathways

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aproductorservicefollowsafterproduction,culminatinginpurchaseandconsumptionby
thefinalenduser.

Types of intermediaries: Wholesalers (Wholesaling includes all the activities in selling

goodsorservicestothosewhobuyforresaleorbusinessuse.Itexcludesmanufacturers
and farmers because they are engaged primarily in production, and it excludes retailers)
and retailers (A business or person that sells goods to the consumer, as opposed to a
wholesalerorsupplier,whonormallyselltheirgoodstoanotherbusiness)theybuy,take
title to, and resell the merchandise; they are called merchants; Brokers, manufacturers
representatives,salesagentssearchforcustomersandmaynegotiateontheproducers
behalf but do not take title to the goods; Transportation companies, independent
warehouses, banks, advertising agenciesassist in the distribution process but neither
taketitletogoodsnornegotiatepurchasesorsales;theyarecalledfacilitators.

Channels of all types play an important role in the success of a company and affect all
other marketing decisions. Marketers should judge them in the context of the entire
processbywhichtheirproductsaremade,distributed,sold,andserviced.

IntermediariesfacilitatelinkProductionConsumption

Distributionfunctions:Goodsvs.Services

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 TypesofDistributionChannels
o Direct Distribution A zerolevel channel, also called a direct marketing
channel,consistsofamanufacturersellingdirectlytothefinalcustomer.The
major examples are doortodoor sales, home parties, mail order,
telemarketing, TV selling, Internet selling, and manufacturerowned stores.
(zerolevelchannel)

o Indirect Distribution A chain of intermediaries through which a product
movesinordertobemadeavailableforpurchasebyaconsumer.Anindirect
channelofdistributiontypicallyinvolvesaproductpassingthroughadditional
levels/steps as it moves from the manufacturing business via distributors to
wholesalers and then retail stores. A onelevel channel contains one selling
intermediary, such as a retailer. A twolevel channel contains two
intermediaries. In consumer markets, these are typically a wholesaler and a
retailer. A threelevel channel contains three intermediaries. In the
meatpacking industry, wholesalers sell to jobbers, essentially smallscale
wholesalers,whoselltosmallretailers.Obtaininginformationaboutendusers
andexercisingcontrolbecomesmoredifficultfortheproducerasthenumber
ofchannellevelsincreases.(onelevelchannel)

(a)ConsumerMarketingChannels (b)IndustrialMarketingChannels

Figure(b)IndustrialMarketingChannelsshowschannelscommonlyusedinB2Bmarketing.
An industrialgoods manufacturer can use its sales force to sell directly to industrial
customers;oritcanselltoindustrialdistributorswhoselltoindustrialcustomers;oritcan
sell through manufacturers representatives (also known as sales agent who work on
commissions) or its own sales branches directly to industrial customers, or indirectly to
industrial customers through industrial distributors. Zero, one, and twolevel marketing
channelsarequitecommon.

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Numberofintermediaries:Shallweuseashorterorlongerchannel?
Takeintoaccount:
Industrialgoods?
Highgeographicaldispersionofcustomers?
Lowpurchasingfrequency?
Largenumberofclients?
Customizedproducts?
Largenumberofcompetitors?
Expensiveproducts?

Thereisnoestablishedruleforthenumberofintermediaries

ReasonstochooseDirectDistribution:Greatercontrol;Suitablemiddlemennotavailable;
Internet makes direct distribution easier; Direct contact with customer needs; Quicker
responseorchangeinthemarketingmix;Lowercost?

DistributionStrategy(Numberofintermediaries)

o Intensive
Intensive distribution places
the goods or services in as many
outlets as possible. This strategy
serves well for snack foods, soft
drinks, newspapers, candies, and
gumproducts consumers buy
frequently or in a variety of
locations. So, it provides location
andtimeconveniencemeaningthat
it makes products accessible all of
thepossiblepointsofsalesandthis
ismoreimportantthanservices.
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o Selective
Selective distribution relies on only some of the
intermediaries willing to carry a particular product.
Whetherestablishedornew,thecompanydoesnotneed
to worry about having too many outlets; it can gain
adequate market coverage with more control and less
cost than intensive distribution. Makes products
accessible only in selected points of purchase due to
image.Serviceismoreimportantthanconvenience




o Exclusive
Exclusive distribution means severely limiting the
number of intermediaries. Its appropriate when the
producerwantstomaintaincontrolovertheservicelevel
andoutputsofferedbytheresellers,anditoftenincludes
exclusive dealing arrangements. By granting exclusive
distribution, the producer hopes to obtain more
dedicatedandknowledgeableselling.Itrequiresacloser
partnershipbetweensellerandresellerandisusedinthe
distributionofnewautomobiles,somemajorappliances,
and some womens apparel brands. There is one single
placeperterritorialzone.Imageandservicingarecritical.


TypesofOrganizationoftheDistributionChannel
Distribution channels dont stand still. Well look at the recent growth of vertical,
horizontal,andmultichannelmarketingsystems.

o Traditional Channels (conventional marketing channel): consists of an
independent producer, wholesaler(s), and retailer(s). Each is a separate
businessseekingtomaximizeitsownprofits,evenifthisgoalreducesprofit
forthesystemasawhole.Nochannelmemberhascompleteorsubstantial
controloverothermembers.Therelationsbetweentheorganizationscanbe
explainedinthetheoreticalmodelofsupplyanddemand.Itleadstofrequent
conflictsandinexistenteconomiesofscale.
o MarketingChannels
VerticalMarketingSystems:Averticalmarketingsystem(VMS),bycontrast,
includes the producer, wholesaler(s), and retailer(s) acting as a unified
system(samecompany).Onechannelmember,thechannelcaptain,ownsor
franchisestheothersorhassomuchpowerthattheyallcooperate.Vertical
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 marketingsystems(VMSs)arosefromstrongchannelmembersattemptsto
controlchannelbehaviorandeliminateconflictoverindependentmembers
pursuing their own objectives. VMSs achieve economies through size,
bargainingpower,andeliminationofduplicatedservices.

Comparison between a conventional distribution channel and a marketing channel in a

verticalintegrationsystem:

ConventionalMarketingChannel VerticalMarketingChannel

Horizontal Marketing Systems: Another channel development is the horizontal
marketingsystem,inwhichtwoormorecompaniesthatworkinthesamesectorandat
the same level put together resources or programs to exploit an emerging marketing
opportunity. Each company lacks the capital, knowhow, production, or marketing
resourcestoventurealone,oritisafraidoftherisk.Thecompaniesmightworktogether
onatemporaryorpermanentbasisorcreateajointventurecompany.

MarketingimplementationProducervs.Distributor

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 Relationsbetweenthemembersofthechannel
o Cooperation in the channel: occurs when channel members are brought
together to advance the goals of the channel, as opposed to their own
potentiallyincompatiblegoals.Theycooperateaimingatmutualbenefits(ex:
producersandsupermarkets)
o Conflict in the channel: is generated when one channel members actions
prevent another channel from achieving its goal (ex: breach in the contract
byoneoftheparts)
o Leadership in the channel: Can be assumed by producers, wholesalers or
retailers. It happens when the influences of a member of the channel
determinethetotalperformanceofthechannel(ex:Ol).

TheRoleofMerchandising
Merchandising In the broadest sense,merchandisingis any practice which
contributes to the sale of products to a retail consumer. At a retail instore level,
merchandisingreferstothevarietyofproductsavailableforsaleandthedisplayof
those products in such a way that it stimulates interest and entices customers to
makeapurchase.

o Objectivesoftheproducer
Maximize the volume of their sales to the detriment of the ones of the
competing brands. Value the image of their brands and develop strong
relationshipswiththedistribution.
o Objectivesofthedistributor
Sales of all the products in the point of sales. It does not seek only to
maximize sales volume, but also to maximize the profitability of
space/logisticoperations.Itprivilegesthesaleoftheproductwhichensurea
strong raw margin and a quick rotation of stocks. It offers the maximum
satisfactiontopointofsalesclientsmakethechoiceeasierbyreducingthe
fatigueandminimizingtheclientseffort.

MerchandisingInterventionAreasSeduction

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MerchandisingInterventionAreas
Productdisplayinstorespace

EyelevelPlacetheproductswithhighermargins

HandlevelPlacetheproductswithhigherrotation

GroundlevelPlacetheproductsofbiggerdimensions.

TheValueaddsvs.CostsofDifferentChannels

Each channel alternative needs
tobeevaluatedagainsteconomic
criteria since each channel
alternative will produce a
differentlevelofsalesandcosts.
The figure shows how six
different sales channels stack up
in terms of the value added per
saleandthecostpertransaction.





MarketingMixTactics:Price

Definition of Price: Price is the amount of money charged for a good or service.
Priceisthesumofallthevaluesthatconsumersexchangeforthebenefitsofusing
the good or service. Pricing is the processencompassing all therelevantdecisions
andfactorsthatwilldetermineaspecificpriceforagoodorservice.Rent,tuition,
fares,fees,rates,tolls,retainers,wages,andcommissionsareallthepriceyoupay
forsomegoodorservice.

WhatisPricefortheMarketer?
o Itisdirectlyrelatedtoprofit/performance:
Profit=(PricexsoldQuantity)TotalCosts.
o Canbeusedsymbolicallytocommunicatesinceithasapsychologicalimpact
ontheconsumer:
Raising the price > ex. emphasis on the quality/status of the
product
Bringingdowntheprice>ex.Emphasisonvalueformoney

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 o It is the only variable in marketingmix which can be quickly altered to

respondto:
Changesindemand
Actionsofthecompetition
o Changedwithoutlargedirectcostimplications.
o Directlycreatesrevenue(allotherelementsleadtocosts).
o Key in positioning strategy since sends quality cues to the customers
(Normallylowprice>lowquality,butnotalways)
o Effectivepricingleadstosustainablecompetitiveadvantage.

WhatisPricefortheConsumer?
o For the consumer/buyer, price is evaluated according to the value of the
product that is perceived considering the benefits that it brings
(usefulness/satisfaction).Theconsumersperceptionofvalueisinfluencedby
the characteristics of the target market: Purchasing power and perceived
value for money. Ex: price of a tourist plane ticket (lower) vs. executive
(higher); by the price charged by the competitors: The choice of the
consumer is made by comparing the value between the various offers
perception of benefit vs. costs; by the purchase situation: High price of the
productsinconveniencestoresopenatnight;bythetypeofproduct:Higher
sensitivitytothepriceincreaseonfuels(dailyuse)vs.priceincreaseonnew
passport(occasional)

o Valuetotheconsumer=Benefitsvs.Costs
Benefits=tangibleorintangible
Costs=monetaryprice+time+effort+

o Howtoincreasethevaluefortheconsumer?
EitherbyIncreasingbenefits
OrbyReducingprice

ThePricingdecisionsareaffectedbymultiplefactors

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 SettingPricePolicy
Afirmmustsetapriceforthefirsttimewhenitdevelopsanewproduct,whenit
introducesitsregularproductintoanewdistributionchannelorgeographicalarea,
and when it enters bids on new contract work. The firm must decide where to
positionitsproductonqualityandprice.

o Step1:SelectingthePricingObjective(PricingStrategy)

Thecompanyfirstdecideswhereitwantstopositionitsmarketoffering.Theclearer
afirmsobjectives,theeasieritistosetprice.Fivemajorobjectivesare:Survival(Aslong
aspricescovervariablecostsandsomefixedcosts,thecompanystaysinbusiness.Survival
is a shortrun objective.), maximum current profit (try to set a price that will maximize
currentprofits.Theyestimatethedemandandcostsassociatedwithalternativepricesand
choose the price that produces maximum current profit, cash flow, or rate of return on
investment. This strategy assumes the firm knows its demand and cost functions),
maximummarketshare(Theybelieveahighersalesvolumewillleadtolowerunitcosts
and higher longrun profit. They set the lowest price, assuming the market is price
sensitive), maximum market skimming (Companies unveiling a new technology favor
setting high prices to maximize market skimming. Prices start high and slowly drop over
time. Ex: iPhone), and productquality leadership (Many brands strive to be affordable
luxuriesproductsorservicescharacterizedbyhighlevelsofperceivedquality,taste,and
status with a price just high enough not to be out of consumers reach. Ex: Starbucks,
Aveda,VictoriasSecret,BMW).

Tosumup,thepricingobjectivesare:

o Survival
o Profit,ReturnonInvestment&CashFlow(maximumcurrentprofit)
o MarketShare(maximummarketshare)
o ProductQualityEmphasis&StatusQuo(productqualityleadership)

AndthePriceStrategies:

o Forproductslaunchedinthemarketforthe1sttime:
SkimmingPrice(maximummarketskimming)
PenetrationPrice(maximummarketshare)

o Forproductsalreadyexistinginthemarket:

Pricecompetition
Policywherebytheproductcompetesbasedonprice(equalorinferior
tothecompetitors)
strategicoptionofapositionofvalueformoneyforalowprice,
actionsofthecompetition,
costreduction(institutionalormarketing),
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 NonPricecompetition
Policy whereby the marketeer/ company differentiate from the
competitionbyfocusingonfactorsotherthanprice(usuallysuperior
tothecompetitors).
bigger/betterservice,
quality,
communication,
packaging,etc.

o Step2:DeterminingDemand

Eachpricewillleadtoadifferentlevelofdemandandhaveadifferentimpactona
companys marketing objectives. The normally inverse relationship between price and
demandiscapturedinademandcurve.Thehighertheprice,thelowerthedemandifall
other factors remain constant (!) (there are exceptions The classic demand curve does
not apply to all products: prestigious products jewelry, designer clothes, and exclusive
fragrancessellbetterathighprices(thoughonlyuptoacertainamountP3)thanatlow
prices). (a)Normaldemandcurve (a)Demandcurveforprestigiousproducts







Pricesensitivity:Thedemandcurveshowsthemarketsprobablepurchasequantity
at alternative prices. It sums the reactions of many individuals with different price
sensitivities.
PriceElasticityofDemand:Ifdemandhardlychangeswithasmallchangeinprice,
wesaythedemandisinelastic.Ifdemandchangesconsiderably,demandiselastic.

Estimating the demand curve: By surveys (to explore how many units consumers
would buy at different proposed prices); By price experiments (can vary the prices of
different products in a store or charge different prices for the same product in similar
territories to see how the change affects sales); By statistical analysis (of past prices,
quantities sold, and other factors can reveal their relationships. The data can be
longitudinal(overtime)orcrosssectional(fromdifferentlocationsatthesametime).
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 Thedeterminationofpriceundermarketingguidance
Pricemustnotbedeterminedbasedontheassumptionthatallother
factors are constant the marketing environment changes (faster
andfaster):
a)Theneedsanddesiresoftheconsumerschange
b)Thecompetitorsarealwaysmodifyingtheirmarketingmix
c) There are sudden developments that change the market (ex:
technological innovation) with great impact in the value of the
product
Priceisstillthevariableofmarketingmixwhichiseasiertoadjust.

o Step3:EstimatingCosts
Thecompanywantstochargeapricethatcoversitscostofproducing,distributing,
andsellingtheproduct.
Typesofcostsandlevelsofproduction:
Fixed costs (overhead) are costs that do not vary with production
level or sales revenue. A company must pay bills each month for
rent,heat,interest,salaries,andsoonregardlessofoutput.
Variablecostsvarydirectlywiththelevelofproduction.Acompany
mustpaymanpower,rawmaterials,etc.
Total costs consist of the sum of the fixed and variable costs for
anygivenlevelofproduction.
Average cost is the cost per unit at that level of production; it
equalstotalcostsdividedbyproduction.
Topriceintelligently,managementneedstoknowhowitscostsvarywithdifferent
levelsofproduction.

o Step4:AnalyzingCompetitorsCosts,PricesandOffers
Within the range of possible prices determined by market demand and
company costs, the firm must take competitors costs, prices, and possible
pricereactionsintoaccount.Ifthefirmsoffercontainsfeaturesnotoffered
by the nearest competitor, it should evaluate their worth to the customer
and add that value to the competitors price. If the competitors offer
containssomefeaturesnotofferedbythefirm,thefirmshouldsubtracttheir
value from its own price. Now the firm can decide whether it can charge
more, the same, or less than the competitor. So, it is necessary to make
marketstudies,observatorypanels,etc.

o Step5:SelectingaPriceFixingMethod
1) Price fixing according to company costs (Cost Plus, Markup, Full Cost,
BreakEvenPointandROI)Amonetaryorpercentagevalueisaddedtotheproduct
cost,involvingthecalculationofprofitmargins
Advantage:simpletoimplement,
Disadvantage:maynotcontemplatethesupply/demandrelation
Disadvantage:maynotcontemplateapricepolicyorpricingobjectives
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 CostPlusThesalesmancostiscalculatedandthepriceisdeterminedthrough
theadditionofaspecificamountorcostpercentage.Itisappropriatewhen
theproductioncostsarehardtopredictortheproductiontakesaverylong
time.Itcanbringdisadvantagestothebuyerifthesalesmanwantstoraise
thepricetoachieveahighermargin.
MarkupPercentageaddedbytheintermediariesinviewoftheirexpectations
ofcostandriskinordertoguaranteeprofit.Canbecalculatedovercostsor
overthesales.
FullcostConsistsofcalculatingthetotalcostprice.Addingupallthecostsin
whichonehasincurredtoproduceandselltheproduct.
BreakEvenPointItisthelevelofactivityinwhichthecompanybalancesits
exploration[Q=CF/(pvcv)]
ReturnonInvestment(ROI)ROI=RL/Investment;ROI=(ProfitxQuantities)
CF/Investment

2)Pricefixingbasedondemand
Themarketershouldbeabletoestimatethedemandoftheconsumer
Highdemand>HighPrice
Lowdemand>Lowprice
The marketer must be able to segment intensities of demand (per type of
consumer,typeofdistributionchannel,hourofthepurchase,etc)sothathecan
distinguishwhenheraisesorreducestheprice.

o Step6:SelectingthefinalPrice(Pricedecisions)

1) Price based on the value for the client The higher the perceived value,
the more is the client willing to pay: the client will not pay more for a
servicethanwhathethinksitisworth.
2) PricebasedoncostCompaniesdetermineaminimumpricewhichallows
themtocoveralltheircosts(fixedandvariable)
3) Price based on the competition The consumers compare offers and, if
they do not see any differences between them, they will choose the
cheapestone.

So,thereisaminimumlevel(basedontheircosts)andamaximumlevel(takesinto
consideration the value perceived by the consumer). The price charged by competition
helpstodecidebetweenminimumandmaximumlevels.

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 CostsforServices(totheconsumer)
TotalCosts=
MONETARYPRICE+
+TIMECOSTS(Associatedtotheconceptofopportunitycost)
+ PHYSICAL COSTS (Undesirable physical consequences like fatigue or physical
discomfort)
+ PSYCHOLOGICAL COSTS (Undesirable mental consequences like mental strain,
insecurity,fear,frustration,fury)
+ SENSORY COSTS (Negative sensations experimented by the client, through his 5
senses,likeexcessivenoise,unpleasantodors,excessiveheatorcold)

Acquisitionprice
Fromthepointofviewoftheclient,thepricechargedbytheserviceprovidermay
bethefirstofmanycosts
+ FINANCIAL COSTS OF THE SERVICE (Include, apart from the price of the service,
costslikethefuelnecessarytogettothestore,theparking,meals,babysitting,)
+ NON FINANCIAL COSTS OF SERVICE ACQUISITION (Represent costs with time,
effort,anxietyduetowaitingperiods,etc.associatedtothesearchandacquisition
oftheservice)

HowtoincreasevalueinServices?
Addingbenefitstothemainservice
Addingsupplementaryservices
Reducingcostsassociatedwithprovidingtheservice
Reducing the times involved in the process of acquisition, delivery and
consumptionoftheservice;
Minimizingthepsychologicalcostsoftheservicethroughouttheentireprocess;
Eliminatingphysicalcostsoftheservice,namelyintheresearchanddeliveryof
theservice;
Decreasing the unpleasant sensory costs by creating a more pleasant visual
environment,reducingnoise,modernizingthefurniture,etc.

Reducingcoststotheconsumer(time,psychological,etc)mayleadahighervalue
perceived by the consumer, which in turn may be an opportunity to increase the
price

PricePolicyforServices
Pricestrategiestoreduceuncertainty:
Incorporatinghigherpriceintheattributesmostvaluedbytheclient;
Returnguaranteeincaseofdissatisfaction;
Definition of a fixed price before the delivery of the service in order to eliminate
surprises(Ex:advantageofestimates).

Makessenseinquickshiftingcontextsinwhichthesuppliersdonoteasilycontrol
theircostsandthetimeofprovidingtheservice
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 RelationalPriceStrategies:
Whenthepurposeismaintaininglongtermrelationshipswiththeclients,reducing
pricemaynotbeenoughtopreventthemfrom,inthefirstopportunity,lookingfor
acompetitorwithabetteroffer
The important thing in this strategy is to create mechanisms to make the clients
more loyal. (Ex: In PT, the family and friends pack; at TIMBERLAND, the fidelity
coupon10%discountafter250inshopping,)

Strategiesofleadershipbylowprices:
Servicesprovidedatalowpricearespecificallydirectedtoclientswithlowbudgets
Thecanleadtopurchasesinbigvolumes
The great challenge is convincing the clients that the low price isnt associated to
equallylowquality
Asecondchallengeistomanagethemaintenanceoflowcostsinawayastoensure
profit(Ex:Thenewtrendsoflowcostflyingcompanies)

PriceQualityRelation

Intheabsenceofotherinformation,pricecanbeareferencefortheevaluationof
the level of quality of a product. The price is tied to the image of the product; a wrong
decisionmightreducesalesandaffecttheposition.Thepricedeterminestheposition,high
orlowrange,occupiedbytheproductasregardsthecompetition.

Fromwhatyoulearneduntilhere,itissupposedtounderstandthat,ingeneralterms:
o Product
Lowpricelowquality
Highpricehighquality
o Promotion
Lowpriceadvertising
Premiumpricepersonalsale
o Distribution
Lowpriceintensivedistribution
Premiumpriceselective/exclusivedistribution

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 ImplementationandControl

MajorproblemsinDevelopingandImplementingtheMarketingPlan

Thenexttablesummarizesthecharacteristicsofagreatmarketingcompany,great
not for what it is but for what it does. Great marketing companies know the best
marketersthoughtfullyandcreativelydevisemarketingplansandthenbringthemtolife.
This is what is supposed to do, to avoid the problems presented above. Marketing
implementation and control are critical to making sure marketing plans have their
intendedresultsyearafteryear.

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 MarketingImplementation
Marketing implementation is the process that turns marketing plans into action
assignments and ensures they accomplish the plans stated objectives. A brilliant
strategicmarketingplancountsforlittleifnotimplementedproperly.

MarketingImplementationQuestions
Howdoyou
Product:Whatisneeds/wantsitsatisfies? <Createvalue?
Promotion:Howdoyoucommunicateincentivesthat <Communicatevalue?
motivatebehaviorfromcustomers?
Place:Howconvenientistheavailabilityofyouroffer? <Delivervalue?
Price:Howdocustomerspayandhowmuchdotheypay? <Capturevalueback?

MarketingImplementationApproaches
Nowadays, the quality is more and more important. So, one of the approaches of
marketing implementation is Total Quality Management integrative philosophy of
management for continuously improving the quality of products and processes. TQM is
based on the premise that the quality of products and processes is the responsibility of
everyoneinvolvedwiththecreationorconsumptionoftheproductsorservicesofferedby
an organization, requiring the involvement of management, workforce, suppliers, and
customers,tomeetorexceedcustomerexpectations.

TheotherapproachisOrganization.Nowadaysthereisafocusonadecentralized
organization:

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 TraditionalOrganizations MarketOrientedOrganizations

Recall from Class 2 that Marketing evolved from Traditional to Relationship
Marketing.RelationshipMarketing:

o Analyzebothfinancialandnonfinancialmetrics
o Focusoncompetitoranalysis
o Focusonconsumersinboththeshortandthelongrun(brandloyalty)
o Pay attention to relationships with key stakeholders (internal audiences,
suppliers,intermediaries,government,etc.)

MarketingImplementationComponents

o Definethe3Ms:Money,Minute,Men

Money:Whatarethecostsassociatedtotheimplementationofeach
ofthetactics?Example:Isitworthwhiletoadvertise(ifyes,howmuch
in each media?) or shall we use other marketing communications
techniques? A Public Relations high impact event with new creative
executions?AskPRagenciesforbudgets.

Minute: Chronograms (calendars, Ganttcharts, etc.) are crucial to
establish what time resources to allocate along the duration of the
plan(predefinedaccordingtoobjectives).

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 Men: Define who is responsible for what (and when); suggest the
additionofpeoplewhenmissingcriticalexpertise.DefinetheMaturity
Relevant for the Task (MRT) while taking into consideration
competence,qualificationsandotherperformanceindicators.

MarketingControl
Marketingcontrolistheprocessbywhichfirmsassesstheeffectsoftheirmarketing
activities and programs and make necessary changes and adjustments. The next
tablelistsfourtypesofneededmarketingcontrol:annualplancontrol,profitability
control,efficiencycontrol,andstrategiccontrol.

MarketingImplementationGap(betweentheintendedandrealizedstrategy)





IntendedStrategy:Thestrategythatcompanydecidesonduringtheplanningphase
Implementation:Theprocessofputtingmarketingstrategiesintoaction(tactics)
RealizedStrategy:Theactionthatactuallytakesplace

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 MarketingImplementationGapControl
1) (Re) definition of marketingobjectives(ex: reduce costs, increase product use,
conquernewcustomers,increasebrandloyalty)
2) Establish the desired performance standards (ex: establish the desired financial
andnonfinancialresults)
3) Evaluation of current performance face to the initially desired performance
standards Required information from: Internal marketers, external organizations
whichprovidemarketingassistancetothefirm.

ControllingMarketingActivities
4)CorrectiveActions:Redefineobjectives
Change performance standards (due to changes in the
marketingenvironment;ifthestandardsareunrealistic)
Improve existing performance (rethinking personnel
motivationmethods;withbettercoordinationofpersonnelefforts)
Definenewmeasurestoestablishobjectives

ContingencyPlans
A contingency plan is a plan developed for an outcome other than in the usual
(expected)plan.Itisoftenusedforriskmanagementwhenanexceptionalriskthat,
thoughunlikely,wouldhavecatastrophicconsequences.




Tofinish,justasummaryoftheprincipalconceptsandrelationshipsinMarketing:

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