Chapter 1

The Value of Marketing

 Financial success often depends on marketing ability
 Successful marketing builds demand for products and services, which, in turn, creates
jobs
 Marketing builds strong brands and a loyal customer base, intangible assets that
contribute heavily to the value of a firm

The Scope of Marketing

Marketing is about identifying and meeting human and social needs

AMA’s formal definition:

Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large

Marketing Management
The art and science of choosing target markets and getting, keeping, and growing customers
through creating, delivering, and communicating superior customer value

What is Marketed?
 Goods
 Services
 Events
 Experiences
 Persons
 Places
 Properties
 Organizations
 Information
 Ideas

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Who Markets?
A marketer is someone who seeks a response—attention, a purchase, a vote, a donation—
from another party, called the prospect

8 Demand States
 Negative
 Non existent
 Latent
 Declining
 Irregular
 Unwholesome
 Full
 Overfull

Structure Of Flows In A Modern Exchange Economy

A Simple Marketing System

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Key Customer Markets
 Consumer markets
 Business markets
 Global markets
 Nonprofit & governmental markets

Core Marketing Concepts

Needs: the basic human requirements such as for air, food, water, clothing, and shelter

Wants: specific objects that might satisfy the need

Demands: wants for specific products backed by an ability to pay

 Target markets
 Positioning
 Segmentation

Value proposition: a set of benefits that satisfy those needs

Offerings: a combination of products, services, information, and experiences

Brands: an offering from a known source

Marketing channels

 communication
 Distribution
 service

Paid media: TV, magazine and display ads, paid search, and sponsorships

Owned media: a company or brand brochure, web site, blog, Facebook page, or twitter account

Earned media: word of mouth, buzz, or viral marketing

Value: a combination of quality, service, and price (qsp: the customer value triad)

Satisfaction: a person’s judgment of a product’s perceived performance in relationship to

expectations

Supply chain: a channel stretching from raw materials to components to finished products
carried to final buyers

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

Marketing environment
 Task environment
 Broad environment

The New Marketing Realities

 Technology
 Globalization
 Social responsibility

A dramatically changed marketplace

New consumer capabilities

 Can use the internet as a powerful information and purchasing aid

 Can search, communicate, and purchase on the move
 Can tap into social media to share opinions and express loyalty

New company capabilities

 Can use the internet as a powerful information and sales channel, including for
individually differentiated goods
 Can collect fuller and richer information about markets, customers, prospects, and
competitors
 Can reach customers quickly and efficiently via social media and mobile marketing,
sending targeted ads, coupons, and information

Company Orientation toward the Marketplace

 Production
 product
 selling
 marketing

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Relationship marketing
 Customer’s
 employees
 marketing partners
 financial community

Integrated marketing
Devise marketing activities and programs that create, communicate, and deliver value such that
“the whole is greater than the sum of its parts.

Internal marketing
The task of hiring, training, and motivating able employees who want to serve customers well

Performance marketing
 Financial accountability
 environmental impact
 Social impact

Marketing Mix Components (4 Ps)

Modern marketing management

 People
 processes
 programs
 performance

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Marketing management tasks
 Developing market strategies and plans
 Capturing marketing insights
 Connecting with customers
 Building strong brands
 Creating value
 Delivering value
 Communicating value
 Creating successful long-term growth

Chapter 2

Marketing and customer Value

 The value delivery process
 The value chain
 Core competencies

The value delivery process

 choosing the value
 providing the value
 communicating the value

The Value chain

A tool for identifying ways to create more customer value

Every firm is a synthesis of activities performed to design, produce, market, deliver, and
support its product

Core business processes

 Market-sensing process
 New-offering realization process
 Customer acquisition process
 Customer relationship management process
 Fulfilment management process

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Core competencies
 A source of competitive advantage and makes a significant contribution to perceived
customer benefits
 Applications in a wide variety of markets
 Difficult for competitors to imitate

Maximizing Core competencies

 (Re)define the business concept
 (Re)shaping the business scope
 (Re)positioning the company’s brand identity

Central role of strategic planning

 Managing the businesses as an investment portfolio
 Assessing the market’s growth rate and the company’s position in that market
 Establishing a strategy

Marketing plan
The central instrument for directing and coordinating the marketing effort

 Strategic
 Tactical

Strategic Planning, Implementation, and Control Processes

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Corporate and division strategic planning

 Focus on a limited number of goals

 Stress the company’s major policies and values
 Define the major competitive spheres within which the company will operate
 Take a long-term view
 Are as short, memorable, and meaningful as possible

Establishing Strategic Business Units

 A single business or collection of related businesses
 Has its own set of competitors
 Has a leader responsible for strategic planning and profitability

Assigning Resources to Each SBU

 Management must decide how to allocate corporate resources to each SBU
 Portfolio-planning models
 Shareholder/market value analysis

Assessing growth opportunities

 Intensive Growth
 Integrative Growth
 Diversification Growth
 Downsizing and Divesting Older Businesses

Intensive growth
Corporate management should first review opportunities for improving existing businesses

Integrative growth
A business can increase sales and profits through backward, forward, or horizontal integration
within its industry

Diversification growth
Diversification growth makes sense when good opportunities exist outside the present
businesses. The industry is highly attractive and the company has the right mix of business
strengths to succeed

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Downsizing and Divesting Older Businesses
Companies must carefully prune, harvest, or divest tired old businesses to release needed
resources for other uses and reduce costs

Organization and Organizational Culture

 A company’s organization consists of its structures, policies, and corporate culture, all
of which can become dysfunctional in a rapidly changing business environment
 Corporate culture: The shared experiences, stories, beliefs, and norms that
characterize an organization

Marketing Innovation
 Innovation in marketing is critical
 Employees can challenge company orthodoxy and stimulate new ideas
 Firms develop strategy by choosing their view of the future
Scenario analysis

The Business Unit Strategic-planning Process

SWOT Analysis
 Strengths
 weakness
 opportunities
 threats

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External environment
 Marketing opportunity: an area of buyer need and interest that a company has a high
probability of profitably satisfying.
 Environmental threat: challenge posed by an unfavorable trend or development that,
in the absence of defensive marketing action, would lead to lower sales or profit

Market Opportunity Analysis (MOA)

 Can we articulate the benefits convincingly to a defined target market(s)?
 Can we locate the target market(s) and reach them with cost-effective media and trade
channels?
 Does our company possess or have access to the critical capabilities and resources we
need to deliver the customer benefits?
 Can we deliver the benefits better than any actual or potential competitors?
 Will the financial rate of return meet or exceed our required threshold for investment?

Internal environment
 Strengths
 Weaknesses

Goal formulation (MBO)

 Unit’s objectives must be arranged hierarchically
 Objectives should be quantitative
 Goals should be realistic
 Objectives must be consistent

Program Formulation and Implementation - McKinsey’s Elements of

Success
 Skills
 Strategy
 Staff
 Structure
 Style
 Systems

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  Shade values

Strategic formulation - Porter’s Generic Strategies

 overall cost leadership
 differentiation
 Focus

Categories of marketing alliances

 Product or service alliance

 Promotional alliance
 Logistics alliances
 Pricing collaborations

Feedback and control

Peter Drucker: it is more important to “do the right thing”—to be effective—than “to do
things right”—to be efficient

 The most successful companies, however, excel at both

Marketing Plan Contents

 Executive summary
 Table of contents
 Situation analysis
 Marketing strategy
 Marketing tactics
 Financial projections
 Implementation controls

Evaluating a Marketing Plan

 Is the plan simple/succinct?
 Is the plan complete?
 Is the plan specific?
 Is the plan realistic?

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Other marketing plan contents
 Marketing research
 Specifications for internal and external relationships
 Action plans and schedules

Chapter 3

Components of a Modern Marketing Information System (MIS)

 Internal company records
 Marketing intelligence activities
 Marketing research

Internal records
 Internal reports of orders
 Sales
 Prices
 Costs
 Inventory levels
 Receivables
 Payables

Marketing intelligence
Marketing intelligence system: a set of procedures and sources that managers use to obtain
everyday information about developments in the marketing environment

Identifying the Major Forces

Six major forces in the broad environment

 Demographic
 Natural
 Economic
 Technological
 Socio-cultural
 Political legal

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Improving marketing intelligence
 Motivate sales force to report new developments
 Motivate intermediaries to pass along intelligence
 Hire external experts to collect intelligence
 Network internally and externally
 Set up a customer advisory panel
 Take advantage of government-related data
 Purchase information from outside research vendors
 Collect marketing intelligence on Internet

Marketing Intelligence on the internet

 Independent customer goods and service review forums
 Distributor or sales agent feedback sites
 Combo sites offering customer reviews and expert opinions
 Customer complaint sites
 Public blogs

Communicating & Acting on Marketing intelligence

The competitive intelligence function works best when it is closely coordinated with the
decision-making process

 Given the speed of the Internet, it is important to act quickly on information gleaned
online

Analysing the Macroenvironment

Needs and Trends

 Fad
 Trend
 Megatrend

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The Demographic Environment
 Worldwide population growth
 Population age mix
 Ethnic and other markets
 Educational groups
 Household patterns

The Economic Environment

 consumer psychology
 income distribution
 income, savings, debt, credit

Income distribution
 Very low incomes
 Mostly low incomes
 Very low, very high incomes
 Low, medium, high incomes
 Mostly medium incomes
 Subsistence economies
 Raw-material-exporting economies
 Industrializing economies
 Industrial economies

The Sociocultural Environment

 Views of ourselves
 Views of others
 Views of society
 Views of nature
 Views of organizations
 Views of the universe

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The Sociocultural Environment
Core cultural values

Values are passed from parents to children and reinforced by social institutions

Subcultures

Groups with shared values, beliefs, preferences, and behaviours emerging from their special
life experiences or circumstances

The natural environment

Corporate environmentalism

Opportunities await those who can reconcile prosperity with environmental protection

The Technological Environment

 Accelerating pace of change
 Unlimited opportunities for innovation
 Varying R&D budgets
 Increased regulation of technological change

The Political-Legal Environment

 Laws
 Government agencies
 Pressure Groups

Forecasting and Demand Measurement

Market demand measures

 Potential market
 Available market
 Target market
 Penetrated market

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Market demand vocabulary
 Market share
 Market-penetration index
 Share-penetration index

Demand measurement vocabulary

 Market forecast
 Market potential
 Company demand
 Company sales forecast
 Company sales potential

Estimating Current Demand

Total market potential

 Chain-ratio method

Area market potential

 Market-buildup method
 Multiple-factor index method

Industry sales and market share

Estimating future demand

 Survey of buyers’ intentions

Forecasting and purchase probability scale

 Composite of sales force opinions

 Expert opinion
 Past-sales analysis
 Market-test method

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 Chapter 4

The Scope of marketing research

 American Marketing Association

Marketing research is the function that links the consumer, customer, and public to the marketer
through information—information used to identify and define marketing opportunities and
problems; generate, refine, and evaluate marketing actions; monitor marketing performance;
and improve understanding of marketing as a process

 Importance of marketing insights

Generating insights (how and why we observe certain effects in the marketplace)

 Who Does Marketing Research?

Marketing departments in big firms

Everyone at small firms

Syndicated-service research firms

Custom marketing research firms

Specialty-line marketing research firms

Research conducted at small companies

 Tap employee creativity
 Engage students/professors
 Use Internet
 Check out rivals
 Tap partner expertise

The Scope of marketing research

Overcoming Barriers to the Use of Marketing Research

 Many companies still fail to use it sufficiently or correctly

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The Marketing Research Process
1. define the problem and research objectives
 Define the problem
 Define the decision alternatives
 Define the research objectives
2. develop the research plan
 Data sources
Secondary data vs. primary data
 Research approaches
Observational research
Focus group research
Survey research
Behavioural research
 Research instruments
Questionnaires
Qualitative measures
 Technological devices
Galvanometer
Tachistoscope
Eye-tracking
Facial detection
Skin sensors
Brain wave scanners
Audiometer
GPS
 Sampling plan
Sampling unit: Whom should we survey?
Sample size: How many people should we survey?
Sampling procedure: How should we choose the respondents?
3. collect the information
4. analyse the information
5. Present the Findings
6. Make the Decision

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Measuring Marketing Productivity
 Marketing metrics
 Marketing-mix modelling
 Marketing dashboards

Marketing-Mix Modelling
Analyses data from a variety of sources, such as retailer scanner data, company shipment data,
pricing, media, and promotion spending data, to understand more precisely the effects of
specific marketing activities

Marketing Dashboards
“A concise set of interconnected performance drivers to be viewed in common throughout the
organization.”

 Customer-performance scorecard
 Stakeholder-performance scorecard

Chapter 5

Building Customer Value, Satisfaction, and Loyalty

1. Customer-perceived value (CPV)
 The difference between the prospective customer’s evaluation of all the benefits and
costs of an offering and the perceived alternatives
 Total customer benefit vs. total customer cost

customer value analysis

1. Identify the major attributes and benefits that customers value
2. Assess the quantitative importance of the different attributes and benefits
3. Assess the company’s and competitors’ performances on the different customer values
against their rated importance
4. Examine how customers in a specific segment rate the company’s performance against
a specific major competitor on an individual attribute or benefit basis
5. Monitor customer values over time

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 2. Customer-perceived value (CPV)
 Choice processes
 Delivering high customer value
 Loyalty
3. Total customer satisfaction
 A person’s feelings of pleasure or disappointment that result from comparing a product
or service’s perceived performance (or outcome) to expectations
4. Monitoring satisfaction: many companies are systematically measuring how well they
treat customers, identifying the factors shaping satisfaction, and changing operations
and marketing as a result
 Periodic surveys, customer loss rate, mystery shoppers, J. D. Power’s satisfaction
ratings
5. Product and service quality
 Quality is the totality of features and characteristics of a product or service that bear on
its ability to satisfy stated or implied needs
 Conformance quality vs. performance quality
 Impact of quality

Maximizing Customer Lifetime Value

 Customer profitability analysis

Activity-based costing (ABC)

 Customer lifetime value (CLV)

The net present value of the stream of future profits expected over the customer’s lifetime
purchases

Attracting and Retaining Customers

Reducing defection/customer churn

 Define and measure retention rate

 Distinguish/identify customer attrition causes
 Compare lost CLV to reducing defection rate

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Attracting and Retaining Customers - Managing the customer base
 Focus on high-profit customers
 Reduce customer defection
 Increase customer longevity
 Terminate low-profit customers
 Share of wallet & cross/upselling

Building loyalty
 Interact closely with customers
 Develop loyalty programs
 Create institutional ties

Brand communities
A specialized community of consumers and employees whose identification and activities
focus around the brand

Value Creation Practices

 Social networking

Welcoming, empathizing, governing

 Impression management

Evangelizing, justifying

 Community engagement

Staking, milestoning, badging, documenting

 Brand use

Grooming, customizing, commoditizing

Cultivating Customer Relationships

 Personalizing/permission marketing
 Customer empowerment
 Customer reviews/ recommendations
 Customer complaints

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 Chapter 6

What Influences Consumer Behaviour?

1. Consumer behavior
 The study of how individuals, groups, and organizations select, buy, use, and dispose
of goods, services, ideas, or experiences to satisfy their needs and wants
 Influenced by cultural, social, and personal factors
2. Cultural factors
 Culture
 Subcultures
 Social classes
3. Social factors
 Reference groups
 Cliques
 Family
 Roles and status
4. Personal factors
 Age/stage in life cycle
 Occupation and economic circumstances
 Personality and self-concept
 Lifestyle and values

Reference Groups
 Membership groups

Primary vs. secondary

 Aspirational groups
 Dissociative groups
 Opinion leader

Family
Family of orientation vs. family of procreation

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Key Psychological Processes
1. Emotions
Many different kinds of emotions can be linked to brands
2. Learning
 Induces changes in our behaviour arising from experience
 Drive and cues
 Generalization and discrimination
3. Perception
The process by which we select, organize, and interpret information inputs to create a
meaningful picture of the world
 Selective attention
 Selective distortion
 Selective retention
 Subliminal perception
4. Memory
 Short-term vs. long-term memory
 Associative network memory model
 Brand associations
 Memory encoding
 Memory retrieval
5. Motivation
A need becomes a motive when it is aroused to a sufficient level of intensity to drive
us to act

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The Buying Decision Process
The consumer typically passes through five stages

1. Problem recognition
The buyer recognizes a problem/need triggered by internal/external stimuli
2. Information search
 Personal sources
 Commercial sources
 Public sources
 Experiential sources
3. Evaluation of alternatives
Expectancy-value model
4. Purchase decision
Compensatory vs. non compensatory models
 Conjunctive heuristic
 Lexicographic heuristic
 Elimination-by-aspects heuristic
5. Post purchase behaviour
 Postpurchase satisfaction
 Postpurchase actions
 Postpurchase uses and disposal

Model Of Consumer Behaviour

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Types of perceived risk
 time risk
 physical risk
 financial risk
 social risk
 functional risk
 psychological risk

Moderating Effects on Consumer Decision Making

 Low-involvement Consumer Decision Making
 Variety-Seeking Buying Behaviour

Behavioural Economics
1. Decision Heuristics
 Availability heuristic
 Representativeness heuristic
 Anchoring and adjustment heuristic
2. Framing
 Mental accounting

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 Chapter 9

What is market segmentation and target marketing?

Market Segmentation is the process by which customers in markets with some heterogeneity
can be grouped into smaller, more similar or homogenous segments

 Geographic segmentation
 Psychographic segmentation
 Behavioural segmentation
 Demographic segmentation

Target market is a group of individuals for whom a firm creates and maintains a marketing
mix that specifically fits the needs and preferences of that group

Why Segment a Market?

 Mass marketer
 combiner
 segmenter

Advantages of Market Segmentation

 Customer analysis
 Competitor analysis
 Effective resource allocation
 Strategic marketing planning

How STP Creates Value

 Marketing resources are focused to better meet customers’ needs and deliver more
value to them
 Customers develop preference for brands that better meet their needs and deliver more
value
 Customers become brand/supplier loyal, repeat purchase, communicate favourable
experiences
 Brand/supplier loyalty leads to increased market share and creates a barrier to
competition

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  Fewer marketing resources needed over time to maintain share due to brand or supplier
loyalty
 Profitability (value to the firm) increases

Categories for Describing Consumers

 Demographic
 Geographic
 Psychographic and Values
 Behavioral

List of Values
 Self-respect
 Security
 Warm relationship with others
 Sense of Accomplishment
 Self-fulfilment
 Sense of belonging
 Respect from others
 Fun and enjoyment
 Excitement

Desirable Criteria for Segments

 Sizeable
 Identifiable
 Reachable
 Respond differently
 Coherent
 Stable

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Major Segmentation Variables for Business Markets
 Demographic
 Operating variables
 Purchasing approaches
 Situational factors
 Personal characteristics

Major Segmentation Variables for Business Markets: Demographic

 Industry:

Which industries should we focus on?

 Company size:

What size companies should we focus on?

 Location:

What geographic areas should we focus on?

Major Segmentation Variables for Business Markets: Operating Variables

 Technology:

What customer technologies should we focus on?

 User/Nonuser status:

Should we focus on heavy, medium, light users or nonusers?

 Customer capabilities:

Should we focus on customers needing many or few services?

Major Segmentation Variables for Business Markets: Situational Factors

 Urgency:

Should we focus on companies that need quick and sudden delivery or service?

 Specific application:

Should we focus on certain applications of our product rather than all applications?

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  Size of order:

Should we focus on large or small orders?

Major Segmentation Variables for Business Markets: Purchasing

Approaches
 Purchasing-function organizations:

Should we focus on companies with highly centralized or decentralized purchasing

organizations?

 Power structure:

Should we focus on companies that are engineering dominated, financially dominated, etc.?

 Nature of existing relationships:

Should we focus on companies with which we have strong relationships or simply go after the
most desirable companies?

 General purchase policies:

Should we focus on companies that prefer leasing? Service contracts? Systems purchases?
Sealed bidding?

 Purchasing criteria:

Should we focus on companies that are seeking quality? Service? Price?

Major Segmentation Variables for Business Markets: Personal

Characteristics
 Buyer-Seller similarity:

Should we focus on companies whose people and values are similar to ours?

 Attitudes toward risk:

Should we focus on risk-taking or risk avoiding customers?

 Loyalty:

Should we focus on companies that show high loyalty to their suppliers?

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Managing Segmentation
1. Define segmentation problem
View market segmentation problem as a series of hierarchical stages -- for example
Identify broad strategic “macro-segments” that effectively define market structure
 Industry groups
 Product usage (rate of usage, application, etc.)
 Geographic location, etc.
Within macro-segments, conduct research to find “micro-segments” for competitive
advantage
 Segmentation on buyer needs and value
 Segmentation on product benefits
2. Conduct market research
 Exploratory Study
 Market Segmentation Study
 Segment Response Analysis & Planning
 Implement Marketing Program
3. Build segmentation database
4. Define market segments
5. Describe market segments
Organization size as a descriptor
 Large – Medium – Small
Segments based on needs
 Price sensitive
 Durability Sensitive
 Service Sensitive
6. Implement results

Segmentation Process Summary

 Articulate a strategic rationale for segmentation (i.e., why are we segmenting this
market?).
 Select a set of needs-based segmentation variables most useful for achieving the
strategic goals.

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  Select a cluster analysis procedure for aggregating (or disaggregating customers) into
segments.
 Group customers into a defined number of different segments and describe them…and
target them with descriptor data.
 Target the segments that will best serve the firm’s strategy, given its capabilities and
the likely reactions of competitors.

Segmentation: Advanced Tools

 Factor analysis (to reduce data before cluster analysis).
 Cluster analysis to form segments.
 Discriminant analysis to describe segments.

Reality of Market Segments

In practice, market segments are

 Hard to define
 Fuzzy, and
 Overlapping

And, customer needs evolve over time

A Good Segmentation Study

 Identifies segments of customers with differentiated needs.

How many different segments?

How do their needs differ?

 Enables segments to be separately targeted/reached (this can be problematic even if

segments have distinctly different needs).
 Finds one or more attractive segments (i.e. a profitable and separate marketing program
can be designed for selected segments).
 Facilitates the implementation of the segmentation scheme as an ongoing process, not
a discrete project.

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Target Marketing Strategies: Mass Marketing
 Involves no segmentation whatsoever
 Is an undifferentiated approach
 Works best when the needs of an entire market are homogeneous
 Is efficient from a production standpoint
 Results in lower marketing costs
 Is inherently risky and vulnerable to competitors

Target Marketing Strategies: Differentiated Marketing

Involves dividing the total market into groups of customers having relatively common or
homogenous needs and developing a strategy to pursue one or more of these groups

Multi-segment Approach

Attracting buyers in more than one segment by offering a variety of products that appeal to
different needs

Market Concentration

Focusing on a single market segment and attempting to gain maximum share in that segment

Target marketing Strategies: Niche Marketing

 Focuses marketing efforts on one small, well-defined market segment or niche that has
a unique, specific set of needs
 Requires that firms understand and meet the needs of target customers so completely
that the firm’s substantial share of the segment makes it highly profitable

Individualized Segmentation Approaches

 One-to-One Marketing

Involves creating an entirely unique product offering for each customer

 Mass Customization

An extension of one-to-one marketing

Refers to providing unique solutions to individual customers on a mass scale

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  Permission Marketing

Customers choose to become a member of the firm’s target market

Key advantage: Customers are already interested in the product offering

 Are viable due to advances in technology

 Allow firms to combine demographic data with behavioral data to precisely match
customer preferences
 Will become more important in the future
 Can be prohibitively expensive to deliver
 Depend on automated delivery and personalization

Effective Segmentation Criteria

 Measurable
 Substantial
 Accessible
 Differentiable
 Actionable

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