Ch 1 Kotler (pp 22-49) 

Creating customer value and engagement

−Ch 2 Kotler (pp 68-73) Marketing strategy and marketing mix as part of the Marketing
Process
Chapter 5: Understanding the Marketplace and Consumer Value: Consumer
Behavior (pages 150-173)
Chapter 7 : Segmentation, targeting and positioning (pages 204-227)
Kotler Chapter 8  (pages 232-249) and Chapter 9 (pages 281-287)
Kotler Chapter 10  (pages 292-310) and Chapter 11 (pages 316-332)
Place - Distribution

Read Kotler Chapter 12 (pp 342-348, 352-353)

Read Kotler Chapter 13 (pp 374-385)
Promotion – Communication

 Read Kotler Chapter 14 (pp 408-421)

a. Read Kotler Ch 15 (pp 434-456)

Sales Promotion

b. Read Kotler Ch 16 (pp 479-485)

4. Digital Marketing

a. Read Kotler Ch 17:

o pp 493-495 (Digital Marketing transformation cases)
o pp 498-510 (Digital Marketing tools overview)

MLO 1: Apply fundamental marketing concepts and marketing plan elements in a well-defined simple business context. Key areas are: 
- Marketing concepts and process, 
- Marketplace and customer value, 
- Marketing strategy and marketing mix 
 
MLO 2: Explain the critical role of digital development in the marketing context.  

Week 1
Ch 1 Kotler (pp 22-49) Creating customer value and engagement
−Ch 2 Kotler (pp 68-73) Marketing strategy and marketing mix as part of the Marketing
Process

From slides
Marketing is a process by which companies create value for customers and build strong
customer relationships in order to capture value from customers in return.

Needs are states of felt deprivation.

Wants are the form human needs take as they are shaped by culture and individual personality.
Demands are human wants that are backed by buying power.

• Market offerings are some combination of products, services, information, or

experiences offered to a market to satisfy a need or want.
• Marketing myopia—paying more attention to the specific products than to the benefits
and experiences produced

OFTEN REPEATED: A market is the set of actual and potential buyers of a product or
service. Sellers must search for buyers, identify their needs, design good market offerings, set
prices for them, promote them, and store and deliver them. Although marketing was traditionally
carried out by sellers, the concept now also includes consumers. Consumers engage in marketing
when they search for products, interact with companies to obtain information, and make their
purchases. Thus, in addition to customer relationship management, companies must also deal
with customer-managed relationships as customers are empowered and marketing is made a two-
way affair.

Week 2

Chapter 5: Understanding the Marketplace and Consumer Value: Consumer

Behavior (pages 150-173)

Objectives week 2: understanding the Marketplace and the variables that impact
customer behavior:

•Understand the concept of customer: B2C vs B2B

•Review the environmental forces that affect the company's ability to serve its
customers (P&O week 2 and week5)
•Name the main sources for Marketing information (inclass)
•Understand customer behavior, needs and wants

Key concepts:

 B2C customer (consumer) vs B2B customer

 Marketing environment
 Consumer buyer behavior
 Buyer decision process
 Adoption process

 Consumer buyer behavior is the buying behavior of final consumers—individuals and

households that buy goods and services for personal consumption.
 Consumer markets are made up of all the individuals and households that buy or
acquire goods and services for personal consumption.
 Business buyer behavior refers to the buying behavior of the organizations that buy
goods and services for use in the production of other products and services that are sold,
rented, or supplied to others.

The main differences are in market structure and demand, the nature of the buying unit, the types
of decisions, and the decision process involved.

To create value for customers and build meaningful relationships with them, marketers must first
gain fresh, deep insights into what customers need and want.  customer insights to develop a
competitive advantage.
most marketing managers are overloaded with data and often overwhelmed by it. This problem is
summed up in the concept of big data, complex data sets generated by today’s sophisticated
information generation.
Marketers don’t need more information; they need better information. They need to make better
use of the information they already have.

they develop the needed information using :

1. Internal databases
Many companies build extensive internal databases, electronic collections of consumer and
market information obtained from data sources within the company’s network. Information in
the database may include:
• information on customer characteristics
• sales transactions
• website visits
 • customer satisfaction and service records
• records of sales, costs, and cash flows
• reports on production, shipments, and inventories
Internal databases usually can be accessed more quickly and cheaply than other information
sources. However, the data is often collected for other purposes, so it may be incomplete or in
the wrong form. Keeping the database current also requires special effort, equipment, and
techniques.

2. Marketing intelligence
Competitive marketing intelligence is the systematic collection and analysis of publicly
available information about consumers, competitors, and developments in the marketing
environment.
The goal of marketing intelligence is to improve strategic decision making by understanding the
consumer environment, assessing, and tracking competitors’ actions, and providing early
warnings of opportunities and threats. Marketing intelligence techniques range from:
• observing consumers firsthand
• quizzing the company’s own employees
• benchmarking competitors’ products
• researching the internet
• monitoring internet buzz

Good marketing intelligence can help marketers gain insights into how consumers talk about and
connect with their brands. Many companies send out teams of trained observers.
Companies also need to actively monitor competitors’ activities. Firms use competitive
marketing intelligence to gain early warnings of competitor moves and strategies, new-product
launches, new or changing markets, and potential competitive strengths and weaknesses. Much
competitor intelligence can be collected from:
• people inside the company
• suppliers, resellers, and key customers
• monitoring competitors’ websites
• internet searches of specific competitor names, events, or trends
• tracking consumer conversations about competing brands and the company’s own
brands
• thousands of online databases

3. Marketing research
Marketing research is the systematic design, collection, analysis, and reporting of data relevant
to a specific marketing situation facing an organization.
Whereas marketing intelligence involves actively scanning the general marketing environment,
marketing research involves more focused studies to gain customer insights relating to specific
marketing decisions.
In addition to marketing intelligence information about general consumer, competitor, and
marketplace happenings, marketers often need formal studies that provide customer and market
insights for specific marketing situations and decisions.
Companies use marketing research in a wide variety of situations. For example, marketing
research enables marketers to:
 • gain insights into customer motivations, purchase behavior, and satisfaction
• assess market potential and market share
• measure the effectiveness of pricing, product, distribution, and promotion
activities
Sometimes firms simply purchase data collected by outside firms to aid in their decision making.

Factors Influencing Consumer Behavior

Consumer purchases are influenced strongly by cultural, social, personal, and psychological
characteristics.

Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of
society from family and other important institutions.
Social classes are society’s relatively permanent and ordered divisions whose members share
similar values, interests, and behaviors. (Measured as a combination of occupation, income,
education, wealth…etc)

Social
Marketers are working to harness the power of online social networks to promote their products
and build closer customer relationships.
The family is the most important consumer buying organization in society,
Word-of-mouth influence: The personal words and recommendations of trusted friends, tend to
be more credible than those coming from commercial sources

Personal
how occupations and economic situations affect the goods and services they buy.
how different it is to market it for different ages/life cycle stages

Psychographics measure a consumer’s AIOs (activities, interests, opinions) to capture

information about a person’s pattern of acting and interacting in the environment.

Selective attention is the tendency for people to screen out most of the information to which
they are exposed.
Selective distortion is the tendency for people to interpret information in a way that will support
what they already believe.
Selective retention is the tendency to remember good points made about a brand they favor and
forget good points made about competing brands.
how a belief they hold influenced one of their purchase decisions.
Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence their
buying behavior.
If some of the beliefs are wrong and prevent purchase, the marketer will want to launch a
campaign to correct them.

The buying process starts long before the actual purchase and continues long after,
Therefore, marketers must focus on the entire buying process, not just the purchase decision.

in more routine purchases, consumers often skip or reverse some of the stages. Much depends on
the nature of the buyer, the product, and the buying situation.

Need recognition may occur because of an advertisement or a discussion with a friend, This is
the stage where the marketer should research consumers to find out what kinds of needs or
problems arise, what brought them about, and how they led the consumer to this particular
product.

Information Search
An interested consumer may or may not search for more information. If the consumer’s drive is
strong and a satisfying product is near at hand, he or she is likely to buy it then. If not, the
consumer may store the need in memory or undertake an information search related to the need.
The most effective sources, however, tend to be personal. Commercial sources normally inform
the buyer, but personal sources legitimize or evaluate products for the buyer.

Evaluation of Alternatives
Alternative evaluation is the stage of the buyer decision process in which the consumer uses
information to evaluate alternative brands in the choice set. Once consumers arrive at a set of
final brand choices, marketers need to know how consumers process information to choose
among alternative brands.

Purchase decision is the buyer’s decision about which brand to purchase.

The purchase intention may not be the purchase decision due to:
• Attitudes of others
• Unexpected situational factors
Once the evaluation is complete, the consumer’s purchase decision will generally be to buy the
most preferred brand.
Preferences and even purchase intentions do not always result in an actual purchase.

Postpurchase behavior is the stage of the buyer decision process in which consumers take
further action after purchase, based on their satisfaction or dissatisfaction.
After purchasing the product, the consumer will either be satisfied or dissatisfied and will engage
in postpurchase behavior of interest to the marketer.
What determines whether the buyer is satisfied or dissatisfied with a purchase? The answer lies
in the relationship between the consumer’s expectations and the product’s perceived
performance.

Customer Journey The sum of the ongoing experiences consumers have with a brand that affect
their buying behavior, engagement, and brand advocacy over time.

“Customer Journey” is a more comprehensive way to refer to the “Buyer Decision Process”

Adopter Categories
People differ greatly in their readiness to try new products. In each product area, there are
“consumption pioneers” and early adopters. Other individuals adopt new products much later.
People can be classified into the adopter categories

The five adopter groups shown in the slide have differing values.

• Innovators are venturesome—they try new ideas at some risk.

• Early adopters are guided by respect—they are opinion leaders in their communities and
adopt new ideas early but carefully.
• The early mainstream is deliberate—although they rarely are leaders, they adopt new
ideas before the average person.
 • The late mainstream is skeptical—they adopt an innovation only after a majority of
people have tried it.
• Lagging adopters are tradition bound—they are suspicious of changes and adopt the
innovation only when it has become something of a tradition itself.

This adopter classification suggests that an innovating firm should research the characteristics of
innovators and early adopters in their product categories and direct initial marketing efforts
toward them.

Note: New product marketers often target innovators and early adopters, who in turn influence
later adopters.

Week 3

Chapter 7 : Segmentation, targeting and positioning (pages 204-227)

in this week we will go through the second step of the marketing process : designing a
value-driven marketing strategy.  You will be able to:

1.    Explain the steps in designing a value-driven marketing strategy: Segmentation,

Targeting, Differentiation and Positioning.
2.    List and discuss the major basses for segmenting consumer markets
3.    Explain how companies identify attractive market segments
4.    Discuss how companies differentiate and position their products for maximum
competitive advantage

the goal is to create value for customers and build profitable customer relationships.
Next comes marketing strategy—the marketing logic by which the company hopes to create
this customer value and achieve these profitable relationships. The company decides which
customers it will serve (segmentation and targeting) and how (differentiation and positioning).

company designs an integrated marketing mix made up of factors under its control—product,
price, place, and promotion (the four Ps).

Market segmentation requires dividing a market into smaller segments with distinct needs,
Psychographic segmentation divides a market into different segments based on social class,
lifestyle, or personality characteristics.
Behavioral segmentation divides a market into segments based on consumer knowledge,
attitudes, uses of a product, or responses to a product
income segmentation: companies target affluent consumers with luxury goods
Gender segmentation: men’s personal care industry has exploded, and many cosmetics brands
that previously catered mostly to women—like L’Oréal and Nivea—now successfully market
men’s lines.
geographic segmentation
:It works on the principle that people in that location have similar needs, wants, and cultural
considerations. By understanding what people in that area require, brands can target more relevant
marketing messages and suitable products to customers who are then aware and more likely to buy.
Demographic segmentation is a precise form of audience identification based on data
points like age, gender, marital status, family size, income, education, race, occupation,
nationality, and/or religion. age and life-cycle

Requirements for Effective Segmentation

Measurable: The size, purchasing power, and profiles of the segments can be measured.
Accessible: The market segments can be effectively reached and served.
Substantial: The market segments are large or profitable enough to serve.
Differentiable: The segments are conceptually distinguishable and respond differently to
different marketing mix elements and programs.
Actionable: Effective programs can be designed for attracting and serving the segments.

A target market is a set of buyers who share common needs or characteristics that the company
decides to serve.
companies can target very broadly (undifferentiated marketing), very narrowly
(micromarketing), or somewhere in between (differentiated or concentrated marketing).

Positioning
is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing
products from competing brands and give them the greatest advantage in their target markets.

Choosing a Differentiation and Positioning Strategy

• Identifying a set of possible competitive advantages to build a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy
• Communicating and delivering the chosen position to the market

Value proposition is the full mix of benefits upon which a brand is positioned.
shows possible value propositions on which a company might position its products. In the figure,
the five green cells represent winning value propositions— differentiation and positioning that
gives the company a competitive advantage.

More for more: This positioning involves providing the most upscale product or service and
charging a higher price to cover the higher costs. Although more for more can be profitable, this
strategy can also be vulnerable. It often invites imitators who claim the same quality but at a
lower price.

More for the same: Companies can attack a competitor’s more for more positioning by
introducing a brand offering comparable quality at a lower price. For example, Toyota
introduced its Lexus line with a more for the same value proposition versus Mercedes and BMW.

The same for less: Offering the same for less can be a powerful value proposition—everyone
likes a good deal. Discount stores such as Walmart and “category killers” such as Best Buy,
PetSmart, David’s Bridal, and DSW Shoes use this positioning.

Less for much less: A market almost always exists for products that offer less and therefore cost
less. Few people need, want, or can afford “the very best” in everything they buy. In many cases,
consumers will gladly settle for less than optimal performance or give up some of the bells and
whistles in exchange for a lower price. For example, Family Dollar and Dollar General stores
offer more affordable goods at very low prices.

More for less: Of course, the winning value proposition would be to offer more for less. Many
companies claim to do this. And, in the short run, some companies can actually achieve such
lofty positions. For example, when it first opened for business, Home Depot had arguably the
best product selection, the best service, and the lowest prices compared to local hardware stores
and other home improvement chains. Offering more usually costs more, making it difficult to
deliver on the “for less” promise in the long run.

Positioning statement summarizes company or brand positioning using this form:

To (target segment and need) our (brand)
is (concept)
that (point of difference)

Example: “To busy multitaskers who need help remembering things,

Evernote is a digital content management application
that makes it easy to capture and remember moments and ideas from your everyday life using your
computer, phone, tablet, and the Web.”

Week 4

 Read Kotler Chapter 8  (pages 232-249) and Chapter 9 (pages 281-287)

In this week we will start defining the Marketing Mix with the "P" for Product. You will
learn how to

1. Define Product and Services, and describe the levels that create value for
customer
2. Describe the decisions companies make regarding their individual products and
services, product lines and product mix
3. Identify the four characteristics of services and its marketing implications
4. Discuss the basics of branding strategy and the decisions in building a brand.
5. Describe the stages of the product life cycle and how marketing strategies
change
6. Apply your learnings to a real business situation during the workshop

Product is anything that can be offered in a market for attention, acquisition, use, or
consumption that might satisfy a need or want.
Services are a form of product that consists of activities, benefits, or satisfactions and that is
essentially intangible and does not result in the ownership of anything.
Companies are now creating and managing customer experiences with their brands or company.

Three Levels of Product

The most basic level is the core customer value, which addresses the question: What is the buyer
really buying?
At the second level, product planners must turn the core benefit into an actual product. They
need to develop product and service features, a design, a quality level, a brand name, and
packaging.
Finally, product planners must build an augmented product around the core benefit and actual
product by offering additional consumer services and benefits.

Core, actual, and augmented product: People who buy an iPad are buying much more than a
tablet computer. They are buying entertainment, self-expression, productivity, and connectivity
—a mobile and personal window to the world.

Product and service classifications

• Consumer products
− Convenience: Bought frequently without much planning(Toothpaste)
− Shopping: Less frequent purchase, involves comparisons of brands (cars)
− Specialty: Strong brand preference and loyalty, little comparison and low price
sensitivity (e.g. luxury products)
− Unsought: Little product knowledge, typically doesn’t consider buying(Life
insurance, funeral)
− Industrial products Bought for further processing or use in a business
(Materials and parts like raw materials) The distinction between a consumer
product and an industrial product is based on the purpose for which the product
is purchased. If a consumer buys a lawn mower for use around home, the lawn
mower is a consumer product. If the same consumer buys the same lawn mower
for use in a landscaping business, the lawn mower is an industrial product.
Individual Product Decisions

Figure shows the important decisions in the development and marketing of individual products
and services.

Product attributes
quality refers to the characteristics of a product or service that bear on its ability to satisfy stated
or implied customer needs.
Quality affects product or service performance; thus, it is closely linked to customer value and
satisfaction.
Product features
The company can then create higher-level models by adding more features. Being the first
producer to introduce a valued new feature is one of the most effective ways to compete.
Style and Product Design
Good design doesn’t start with brainstorming new ideas and making prototypes. Design begins
with observing customers, understanding their needs, and shaping their
product-use experience. Product designers should think less about technical product
specifications and more about how customers will use and benefit from the product

Product line is a group of products that are closely related because they:
- function in a similar manner,
- are marketed through the same types of outlets,
- fall within given price ranges.

The major product line decision involves product line length—the number of items in the
product line. The line is too short if the manager can increase profits by adding items; the line is
too long if the manager can increase profits by dropping items
A company may stretch downward to plug a market hole that otherwise would attract a new
competitor or respond to a competitor’s attack on the upper end.
Or it may add low-end products because it finds faster growth taking place in the low-end
segments.
Companies can also stretch their product lines upward. Sometimes, companies stretch upward to
add prestige to their current products. Or they may be attracted by a faster growth rate or higher
margins at the higher end.

Four Service Characteristics

Intangibility refers to the fact that services cannot be seen, tasted, felt, heard, or smelled before
they are purchased.
Inseparability refers to the fact that services cannot be separated from their providers.
Variability refers to the fact that service quality depends on who provides the services as well as
when, where, and how the services are provided.
Perishability refers to the fact that services cannot be stored for later sale or use.

Managing service differentiation creates a competitive advantage.

• Offer
• Delivery
• Image

Brand
Is the name, term, sign, or design or a combination of these, that identifies the maker or seller of
a product or service.
Branding also gives the seller several advantages. The seller’s brand name and trademark
provide legal protection for unique product features that otherwise might be copied by
competitors. Branding helps the seller to segment markets.

Brand Positioning
Marketers can position brands at any of three levels.
1. Attributes
2. Benefits
 3. Beliefs and values
The strongest brands are positioned on strong beliefs and values, engaging customers on a
deep, emotional level.

Attributes are the least desirable level for brand positioning because competitors can easily
copy attributes. Customers are not interested in what the attributes are—they are interested in
what the attributes will do for them.
A brand can be better positioned by associating its name with a desirable benefit.
The strongest brands are positioned on strong beliefs and values, engaging customers on a
deep, emotional level.
Successful brands engage customers on a deep, emotional level.
Brands ranging from Apple, Google, Disney, and Coca-Cola to Google and Pinterest have
achieved this status with many of their customers.
Customers don’t just like these brands, they have strong emotional connections with them and
love them unconditionally.

Brand Development Strategies

It can introduce line extensions, brand extensions, multibrands, or new brands.

Line extensions occur when a company extends existing brand names to new forms, colors,
sizes, ingredients, or flavors of an existing product category. A line extension works best when it
takes sales away from competing brands, not when it “cannibalizes” the company’s other items.

Brand extension extends a current brand name to new or modified products in a new category.

Multibrands: Companies often market many different brands in a given product category. For
example, in the United States, PepsiCo markets at least eight brands of soft drinks (Pepsi, Sierra
Mist, Mountain Dew…..four brands of bottled teas and coffees (Lipton, SoBe, Starbucks,…. Etc.
 ). Each brand includes a long list of sub-brands.
 As with multibranding, offering too many new brands can result in a company spreading its
resources too thin. Thus, P&G, PepsiCo, Kraft, and other large consumer-product marketers are
now pursuing megabrand strategies—weeding out weaker or slower-growing brands and
focusing their marketing dollars on brands that can achieve the number-one or number-two
market share positions with good growth prospects in their categories.

New brands: A company might believe that the power of its existing brand name is waning, so a
new brand name is needed. Or it may create a new brand name when it enters a new product
category for which none of its current brand names are appropriate. For example, Toyota created
the separate Lexus brand aimed at luxury car consumers and the Scion brand, targeted toward
Millennial consumers.

The product life cycle (PLC), Figure 9.2, is the course of a product’s sales and profits over its
lifetime. It involves five distinct stages: product development, introduction, growth, maturity,
and decline.

Maturity Stage
Modification Strategies
• Modify the market
• Modify the product
• Modify the marketing mix
Inspiring more usage: Thanks to the “Quaker Up” campaign, 137-year-old Quaker now has a
more contemporary appeal as a lifestyle brand that helps give young families the fuel and energy
needed to get through the day.

When modifying the market,

the company tries to increase consumption by finding new users and new market segments for its
brands.
Modifying the product
involves changing characteristics such as quality, features, style, or packaging to attract new
users and inspire more usage.
The company can improve the product’s styling and attractiveness or improve the product’s
quality and performance—durability, reliability, speed, and taste.
Modifying the marketing mix involves improving sales by changing one or more marketing
mix elements.
The company can offer new or improved services to buyers. It can cut prices to attract new users
and competitors’ customers.
It can launch a better advertising campaign or use aggressive sales promotions—trade deals,
cents-off, premiums, and contests. In addition to pricing and promotion, the company can also
move into new marketing channels to help serve new users.
Decline Stage

• Maintain the product

• Harvest the product
• Drop the product

The sales of most product forms and brands eventually dip.

This is the decline stage. Sales decline for many reasons, including technological advances,
shifts in consumer tastes, and increased competition.

Carrying a weak product can be very costly to a firm, and not just in profit terms. There are
many hidden costs. A weak product may take up too much time and resources that might be
better used to make “healthy” products more profitable, and a product’s failing reputation can
cause customer concerns about the company and its other products. The biggest cost may well lie
in the future. Keeping weak products delays the search for replacements, creates a lopsided
product mix, hurts current profits, and weakens the company’s foothold on the future.

For these reasons, companies must identify products in the decline stage and decide whether to
maintain, harvest, or drop them

Management may decide to maintain its brand, repositioning or reinvigorating it in hopes

of moving it back into the growth stage of the product life cycle.

Management may decide to harvest the product, which means reducing various costs (plant and
equipment, maintenance, R&D, advertising, sales force), hoping that sales hold up.
Finally, management may decide to drop the product from its line. The company can sell the
product to another firm or simply liquidate it at salvage value. If the company plans to find a
buyer, it will not want to run down the product through harvesting.

Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

lists strategies for each stage.

Week 5

 Read Kotler Chapter 10  (pages 292-310) and Chapter 11 (pages 316-332)

In this week we will cover the second "P" of the Marketing Mix: Price.

You will learn how to:

1. Define what price is.

2. Explain the three major pricing strategies: cost, competition, customer.
3. Identify other considerations affecting price decisions: target market and
positioning, demand (price elasticity).
4. Describe the major new product strategies and product mix pricing strategies.
5. Discuss the key issues related to initiating and responding to price changes.

What is a Price?
Price is the amount of money charged for a product or service, 
or the sum of all the values  that customers exchange for the benefits of having or using the
product or service.

Historically, price has been the major factor affecting buyer choice. In recent decades, however,
non price factors have gained increasing importance.
Price is the only element in the marketing mix that produces revenue; all other elements
represent costs.
Price is also one of the most flexible marketing mix elements; prices can be changed quickly.

How does a company like Starbucks price their products?

Starbucks is a master of employing value based pricing to maximize profits, and they use
research and customer analysis to formulate targeted price increases that capture the greatest
amount consumers are willing to pay without driving them off.

Three major pricing strategies

ü customer value-based pricing
ü cost-based pricing
ü competition-based pricing

Figure 10.1 suggests three major pricing strategies: customer value-based pricing, cost-based
pricing, and competition-based pricing.
The price the company charges will fall somewhere between one that is too low to produce a
profit and one that is too high to produce any demand. 
Customer perceptions of the product’s value set the ceiling for prices. Likewise, product costs set
the floor for a product’s price.

In setting its price between these two extremes, the company must consider several external and
internal factors, including competitors’ strategies and prices, the overall marketing strategy and
mix, and the nature of the market and demand.

Cost-based pricing
sets prices based on the costs for producing,  distributing, and selling the product , plus a fair
rate of return (markup) for effort and risk.

Value-based pricing
Uses the buyers’ perceptions of value rather than the seller’s cost.

Effective customer-oriented pricing involves understanding how much value consumers place on
the benefits they receive from the product and setting a price that captures that value.

Ø Good-value pricing is offering just the right combination of quality and good service at a
fair price.
Ø Everyday low pricing (E D L P) involves charging a constant everyday low price with
few or no temporary price discounts.
Ø High-low pricing involves charging higher prices on an everyday basis but running
frequent promotions to lower prices temporarily on selected items.

Value Based Pricing Example # 3 - Apple

No conversation about value based pricing is complete without talking about Apple. The
technology company has made charging a higher price than fair value into an art form.  After all,
their customer base is one of the most loyal in the consumer technology world. While
Apple's business model has recently come under criticism, their products' price point remains at a
premium. 
How does Apple do it?
Apple's M.O. in terms of setting prices begins and ends with the customer. They are a classic
example of the brand name being more valuable than the product, overall.
For Apple customers, the value of their product is based on:
-The already existing Apple ecosystem that they've built up through purchases over the years
-Familiarity with iOS and macOS
-Apple being the first to launch a bonafide smartphone system (which made them the default
pioneers of the technology for end-users)
-The sleek design element that's different from other such products 
-Software and hardware integration that makes Apple products work very well within that
ecosystem
Essentially, Apple has ditched market research in favor of creating and maintaining brand loyalty
- and their profits reflect that.

Figure 10.2 Value-Based Pricing versus Cost-Based Pricing

Companies with lower costs can set lower prices that result in smaller margins but greater sales
and profits. However, other companies—such as Apple, BMW…—intentionally pay higher costs
so that they can add value and claim higher prices and margins.

Competition-Based Pricing
is setting prices based on competitors’ strategies, costs, prices, and market offerings. 
. Consumers will base their judgments of a product’s value on the prices that competitors charge
for similar products.

market-skimming pricing and market-penetration pricing.

Pricing strategies usually change as the product passes through its life cycle. The introductory
stage is especially challenging. Companies bringing out a new product face the challenge of
setting prices for the first time. They can choose between two broad strategies: market-skimming
pricing and market-penetration pricing.

Market skimming makes sense only under certain conditions. First, the product’s quality and
image must support its higher price, and enough buyers must want the product at that price.
Second, the costs of producing a smaller volume cannot be so high that they cancel the
advantage of charging more. Finally, competitors should not be able to enter the market easily
and undercut the high price

Market-skimming pricing strategy sets high initial prices to “skim” revenue layers from the
market.
• Product quality and image must support the price.
• Buyers must want the product at the price.
Market-penetration pricing
involves setting a low price for a new product in order to
ü attract a large number of buyers
ü and a large market share

Rather than setting a high initial price to skim off small but profitable market segments, some
companies use market-penetration pricing.
The high sales volume results in falling costs, allowing companies to cut their prices even
further.

Week 6
*lectures
Place - Distribution

 Read Kotler Chapter 12 (pp 342-348, 352-353)

 Read Kotler Chapter 13 (pp 374-385)
Promotion – Communication

 Read Kotler Chapter 14 (pp 408-421)

During this week we will learn the fundamentals of Distribution strategy ("P" for
Place) and the key tools and steps for an effective Communication Plan ("P" for
Promotion)

1. Explain what marketing channels are and why are they important
 2. Explain the main types of channel (direct, indirect, multichannel) and its actors.
3. Explain the role of retailers in the distribution channel and describe the major
types,  including the trend of online retail
4. Defining the key promotional tools for communicating customer value
5. Explain the 5 steps of an effective Communications process

Communication

Integrated marketing communication: Carefully integrating and coordinating the

company’s many communication channels to deliver a clear, consistent and
compelling message about the organization and its products/services

Integrated marketing communications calls for recognizing all touch points where the customer
may encounter content about the company and its brands. Each contact with the brand will
deliver a message.  Integrated marketing communications ties together all of the company’s
messages and images. Its television and print ads have the same brand message as its email and
personal selling communications, and its PR materials are consistent with website, online, social
media, and mobile marketing content.

Communication process
Encoding is the process of putting thought into symbolic form.
The message is the set of symbols the sender transmits.
Media refer to the communications channels through which the message moves from sender to
receiver.
Decoding is the process by which the receiver assigns meaning to the symbols.( receivers
intrepertation)
The receiver is the party receiving the message sent by another party.
A response is the reaction of the receiver after being exposed to the message.
Feedback is the part of the receiver’s response communicated back to the sender.
Noise is the unplanned static or distortion during the communication process which results in the
receiver getting a different message than the one the sender sent.

Steps in Developing Effective Marketing Communication

Step 1: Identify the target audience The audience may be current users or potential buyers,
those who make the buying decision or those who influence it.

Step 2: Determine the communication objectives

 Help build customer-brand relationships and guide customers through the five As of
the customer journey.
− Awareness: I know about the product/service
− Appeal: I like the product/service
− Ask: I want to know more about the product/service and engage
− Act: I’m buying and relating to the product/service
− Advocacy: I’m telling others about the product/service

Step 3: Design the message

Message Content
The marketer has to figure out an appeal or theme that will produce the desired response. There
are three types of appeals: rational, emotional, and moral.
Message Structure
Marketers must also decide how to handle three message structure issues. The first is whether to
draw a conclusion or leave it to the audience
Message Format
The marketing communicator also needs a strong format for the message. In a print ad, the
communicator has to decide on the headline, copy, illustration, and colors.
A I D A Model for effective messaging
• Get Attention
• Hold Interest
• Arouse Desire
• Obtain Action
In practice, few messages take the consumer all the way from awareness to purchase, but the
AIDA framework suggests the desirable qualities of a good message.

Step 4: Choose the media to send the message

Two types of communication channels:
− Personal communication channels( consumer advocates, bloggers, family etc—
making statements to buyers)
− Nonpersonal communication channels(channels are media that carry messages
without personal contact or feedback, including major media, atmospheres, and
events.  marketers often use nonpersonal communication channels to replace or
stimulate personal communications by embedding consumer endorsements or
word-of-mouth testimonials in their ads and other promotions.)

Step 5: Select message source and collect feedback  The message’s impact depends on how
the target audience views the communicator.
Messages delivered by highly credible sources are more persuasive. Thus, many food companies
promote to doctors, dentists…
 Collecting feedback involves the communicator understanding the effect on the target
audience by measuring behavior resulting from the content.

The promotion mix is the specific blend of promotion tools that the company uses to
persuasively communicate customer value and build customer relationships.

Advertising refers to any paid form of nonpersonal presentation and promotion of ideas, goods,
or services by an identified sponsor. Advertising includes broadcast, print, online, mobile,
outdoor, and other forms.
Sales promotion is a short-term incentive to encourage the purchase or sale of a product or
service.
• Discounts
• Coupons
• Displays
Personal selling is the personal interaction by the firm’s sales force for the purpose of engaging
customers, making sales, and building customer relationships.
Public relations involves building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image, and handling or heading off
unfavorable rumors, stories, and events.
Direct and digital marketing involves engaging directly with carefully targeted individual
consumers and customer communities to both obtain an immediate response and build lasting
customer relationships.
Integrating The Promotional Mix
The company must take steps to see that each promotion mix element is smoothly integrated.
To achieve an integrated promotion mix, all of the firm’s functions must cooperate to jointly plan
communications efforts. Many companies even include customers, suppliers, and other
stakeholders at various stages of communications planning. Scattered or disjointed promotional
activities across the company can result in diluted marketing communications impact and
confused positioning. By contrast, an integrated promotion mix maximizes the combined effects
of all a firm’s promotional efforts

Marketers can choose from two basic promotion mix strategies: push promotion or pull
promotion.

Figure 14.4 contrasts the two strategies.

A push strategy involves “pushing” the product through marketing channels to final consumers.
The producer directs its marketing activities (primarily personal selling and trade promotion)
toward channel members to induce them to carry the product and promote it to final consumers.

Using a pull strategy, the producer directs its marketing activities (primarily advertising and
consumer promotion) toward final consumers to induce them to buy the product. If the pull
strategy is effective, consumers will then demand the brand from retailers, who will in turn
demand it from the producer. Thus, under a pull strategy, consumer demand “pulls” the product
through the channels.

Supply Chains and Value Delivery Networks

Producing a product or service and making it available to buyers requires building relationships
not only with customers but also with key suppliers and resellers in the company’s supply chain.
This supply chain consists of upstream and downstream partners

Upstream partners
are firms that supply raw materials, components, parts, information, finances, and expertise
needed to create a product or service

Downstream partners
include the marketing channels or distribution channels that look toward the customer,
including retailers and wholesalers.--> Marketers have traditionally focused on the
downstream marketing channel partners

Marketing channel (distribution channel)

is a set of interdependent organizations that help make a product or service available for use
or consumption by the consumer (or business user).
A company’s channel decisions directly affect every other marketing decision. Pricing depends
on whether the company works with national discount chains, uses high-quality specialty stores,
or sells directly to consumers online. Whether a company develops or acquires certain new
products may depend on how well those products fit the capabilities of its channel members.

Many companies have used imaginative distribution systems to gain a competitive advantage
Amazon.com forever changed the face of retailing and became the Walmart of the internet

Members of the marketing channel perform many key functions.

Information: Gathering and distributing marketing research and intelligence information about
actors and forces in the marketing environment needed for planning and aiding exchange.
Promotion: Developing and spreading persuasive communications about an offer.
Contact: Finding and communicating with prospective buyers.
Matching: Shaping and fitting the offer to the buyer’s needs, including activities such as
manufacturing, grading, assembling, and packaging.
Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or
possession can be transferred.
Physical distribution: Transporting and storing goods.
Financing: Acquiring and using funds to cover the costs of the channel work.
Risk taking: Assuming the risks of carrying out the channel work.

The question is not whether these functions need to be performed—they must be—but rather
who will perform them. To the extent that the manufacturer performs these functions, its costs go
up; therefore, its prices must be higher. . When some of these functions are shifted to
intermediaries, the producer’s costs and prices may be lower, but the intermediaries must charge
more to cover the costs of their work. In dividing the work of the channel, the various functions
should be assigned to the channel members who can add the most value for the cost.

Figure 12.2 Consumer and Business Marketing Channels

Each layer of marketing intermediaries that performs some work in bringing the product and its
ownership closer to the final buyer is a channel level. Because both the producer and the final
consumer perform some work, they are part of every channel.

The number of intermediary levels indicates the length of a channel. Channel 1, called a direct
marketing channel, has no intermediary levels. The remaining channels in Figure 12.2A are
indirect marketing channels, containing one or more intermediaries.

Although consumer and business marketing channels with even more levels can sometimes be
found, these are less common. From the producer’s point of view, a greater number of levels
means less control and greater channel complexity.

Figure 12.3 Comparison of Conventional Distribution Channel with Vertical Marketing

System
Distribution channels are more than simple collections of firms tied together by various flows.
They are complex behavioral systems in which people and companies interact to accomplish
individual, company, and channel goals. Some channel systems consist of only informal
interactions among loosely organized firms. Others consist of formal interactions guided by
strong organizational structures. Moreover, channel systems do not stand still—new types of
intermediaries emerge and whole new channel systems evolve.

Ideally, because the success of individual channel members depends on the overall channel’s
success, all channel firms should work together smoothly. They should understand and accept
their roles, coordinate their activities, and cooperate to attain overall channel goals.
However, Cooperating to achieve overall channel goals sometimes means giving up individual
company goals. Although channel members depend on one another, they often act alone in their
own short-run best interests. They often disagree on who should do what and for what rewards.
Such disagreements over goals, roles, and rewards generate channel conflict.

Horizontal conflict occurs among firms at the same level of the channel. complaints may involve
overcharging or giving poor service, hurting the overall image of the channel members.

Vertical conflict, conflict between different levels of the same channel, is even more common

Multichannel distribution systems

are systems in which a single firm sets up two or more marketing channels to reach one or more
customer segments.
Figure 12.4 shows a multichannel marketing system. In the figure, the producer sells directly to
consumer segment 1 using catalogs online channels etc, and reaches consumer segment 2
through retailers. It sells indirectly to business segment 1 through distributors and dealers and to
business segment 2 through its own sales force.

Multichannel distribution systems offer many advantages to companies facing large and complex
markets. With each new channel, the company expands its sales and market coverage and gains
opportunities to tailor its products and services to the specific needs of diverse customer
segments.
But such multichannel systems are harder to control, and they can generate conflict as more
channels compete for customers and sales.

Changing Channel Organization

Disintermediation
is the cutting out of marketing channel intermediaries by producers
or the displacement of traditional resellers by new intermediaries

Changes in technology and the explosive growth of direct and online marketing are having a
profound impact on the nature and design of marketing channels For example, online music
download services such as iTunes and Amazon MP3 have pretty much put traditional music-
store retailers out of business
Like resellers, to remain competitive, product and service producers must develop new channel
opportunities, such as the internet and other direct channels. However, developing these new
channels often brings them into direct competition with their established channels, resulting in
conflict. To ease this problem, companies often look for ways to make going direct a plus for the
entire channel.
Number of Marketing Intermediaries
• Intensive distribution
• Exclusive distribution
• Selective distribution

Companies must determine the number of channel members to use at each level.
Three strategies are available:
Producers of convenience products and common raw materials typically seek intensive
distribution—a strategy in which they stock their products in as many outlets as possible.
Some producers purposely limit the number of intermediaries through exclusive distribution, in
which the producer gives only a limited number of dealers the exclusive right to distribute its
products in their territories. Exclusive distribution is often found in the distribution of luxury
brands.
Between intensive and exclusive distribution lies selective distribution—the use of more than
one but fewer than all of the intermediaries who are willing to carry a company’s products. Most
consumer electronics, furniture, and home appliance brands are distributed in this manner.

Retailing
includes all the activities in selling products or services directly to final consumers for their
personal, nonbusiness use. most retailing is done by retailers, businesses whose sales come
primarily from retailing.
the concept of shopper marketing, using point-of-purchase promotions and advertising to
extend brand equity to “the last mile” and encourage favorable point-of-purchase decisions.
Shopper marketing involves focusing the entire marketing process—from product and brand
development to logistics, promotion, and merchandising—toward turning shoppers into buyers at
the point of sale.

Omni-channel retailing : creates a seamless cross-channel buying experience that integrates in-
store, online, and mobile shopping, creating a single shopping experience.

Omnichannel involves using all available media channels and is centered around the
customer, while multichannel means using more than one channel and is centered
around the product or service.
The channel interactivity operates independently in multi channel marketing whereas in
Omni channel marketing it works together. Omni channel marketing also adapts to the
customers behaviour and has the customer in focus

Product Line Classifications

Specialty stores, like shoe stores, carry narrow product lines with deep assortments
within those lines.

Department stores carry a wide variety of product lines(de bijenkorf)

Supermarkets are the most frequently visited type of retail store. Today, however, they
are facing slow sales growth because of slower population growth and an increase in
competition from discounters (Walmart, Costco, and Dollar General) on the one hand
and specialty food stores (Whole Foods Market, Trader Joe’s, Sprouts) on the other.

Convenience stores are small stores that carry a limited line of high-turnover
convenience goods.(gas station, ah to go)

Superstores are much larger than regular supermarkets and offer a large assortment of
routinely purchased food products, nonfood items, and services. (Walmart, Target)

superstores that are actually giant specialty stores, the so-called category killers (Best
Buy, Home Depot)

Week 7
*lectures
3. Advertisement

c. Read Kotler Ch 15 (pp 434-456)

Sales Promotion

d. Read Kotler Ch 16 (pp 479-485)

4. Digital Marketing

b. Read Kotler Ch 17:

o pp 493-495 (Digital Marketing transformation cases)
o pp 498-510 (Digital Marketing tools overview)

table 15.1 of the textbook (p 438)

This final week we will finish learning the keys about Communication, and apply them
to different business situations. You will learn to:

1. Define the role of advertisement in the promotional mix..

2. Describe the role of PR in the promotional mix.
3. Understand the role of Sales Promotions and Personal Selling as part of the
Promotional mix.
4. Explain the critical role of digital development in the overall context of
marketing.

Advertising refers to any paid form of nonpersonal presentation and promotion of ideas, goods,
or services by an identified sponsor. Advertising includes broadcast, print, online, mobile,
outdoor, and other forms.

Advertising clutter: Today’s consumers can easily skip, mute, or block TV and digital content
they don’t want to watch. And, increasingly, they are choosing not to watch ads.

Setting Advertising Objectives

Informative advertising is used when introducing a new product category to build primary
demand.
Persuasive advertising is important with increased competition to build selective demand.
Reminder advertising is important with mature products to help maintain customer
relationships and keep customers thinking about the product

Advertising’s goal is to help move consumers through the buying process. Some advertising is
designed to move people to immediate action.
Public relations involves building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image, and handling or heading off
unfavorable rumors, stories, and events.

The Role and Impact of P R

• Lower cost than advertising
• Stronger impact on public awareness than advertising
• Has power to engage consumers and make them part of the brand story

Sales Promotions – short term incentive to encourage purchase

Setting sales promotion objectives includes using:
• Consumer promotions – urge short term customer buying and enhance customer
relationships
• Trade promotions – encourage retailers to carry more product, buy in advance, stimulate
purchases
• Business promotions – used to general leads and stimulate purchases towards businesses
• Sales force promotions – motivate salespeople to support new product, garner new
accounts

Consumer sales promotional tools

Samples offer a trial amount of a product.
Coupons are certificates that give buyers a saving when they purchase specified products.
Rebates are similar to coupons except that the price reduction occurs after the purchase.
Price packs offer consumers savings off the regular price of a product.
Premiums are goods offered either for free or at a low price.
Advertising specialties are useful articles imprinted with the advertiser’s name, logo, or
message that are given as gifts to consumers.
Point-of-purchase promotions include displays and demonstrations that take place at the point
of sale
Contests, sweepstakes or games – give a chance to win something

Trade promotions can persuade resellers to carry a brand, give it shelf space, promote it in
advertising, and push it to consumers. Shelf space is so scarce these days that manufacturers
often have to offer price-offs, allowances, buy-back guarantees, or free goods to retailers and
wholesalers to get products on the shelf and, once there, to keep them on it.

Manufacturers use several trade promotion tools. Many of the tools used for consumer
promotions—contests, premiums, displays—can also be used as trade promotions. Or the
manufacturer may offer:
• a straight discount off the list price on each case purchased during a stated period of time
(also called a price-off, off-invoice, or off-list).
• allowances (usually so much off per case) in return for the retailer’s agreement to feature
the manufacturer’s products in some way. For example, an advertising allowance
compensates retailers for advertising the product, whereas a display allowance
compensates them for using special displays.
• free goods, which are extra cases of merchandise, to resellers who buy a certain quantity
or who feature a certain flavor or size.
• push money—cash or gifts to dealers or their sales forces to “push” the manufacturer’s
goods.
• specialty advertising items that carry the company’s name, such as pens, calendars,
memo pads, flashlights, and tote bags.

Companies spend billions of dollars each year on promotion geared toward industrial customers.
Business promotions are used to generate business leads, stimulate purchases, reward
customers, and motivate salespeople. Business promotions include many of the same tools used
for consumer or trade promotions. Here, we focus on two additional major business promotion
tools: conventions and trade shows and sales contests.

Many companies and trade associations organize conventions and trade shows to promote their
products. Vendors at these shows receive many benefits, such as opportunities to find new sales
leads, contact customers, introduce new products, meet new customers, sell more to present
customers, and educate customers with publications and audiovisual materials. Trade shows also
help companies reach many prospects that are not reached through their sales forces.

Sales contests motivate and recognize good company performers, who may receive trips, cash
prizes, or other gifts. Some companies award points for performance, which the receiver can turn
in for any of a variety of prizes. Sales contests work best when they are tied to measurable and
achievable sales objectives (such as finding new accounts, reviving old accounts, or increasing
account profitability).
Digital Marketing* benefits

For buyers, direct and digital marketing are convenient, easy, and private. They give buyers
anywhere, anytime access to an almost unlimited assortment of goods and a wealth of product
and buying information.
a place to share brand information and experiences with other brand fans.

Example of Digital and Physical touchpoints along Customer Journey

Using social media presents advantages and challenges.

Because consumers have so much control over social media content, even the seemingly most
harmless social media campaign can backfire. With social media, “you’re going into the
consumer’s backyard. This is their place,” warns one social marketer. “Social media is a pressure
cooker,” says another. “The hundreds of thousands, or millions, of people out there are going to
take your idea, and they’re going to try to shred it or tear apart and find what’s weak or stupid in
it.”

Social media marketing also presents challenges. For example, such social networks are largely
user controlled. The company’s goal in using social media is to make the brand a part of
consumers’ conversations and their lives. However, marketers can’t simply muscle their way into
consumers’ digital interactions—they need to earn the right to be there. Rather than intruding,
marketers must become a valued part of the online experience by developing a steady flow of
engaging content.

Also, because consumers have so much control over social media content, even a seemingly
harmless social media campaign can backfire.