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204 Cards in this Set

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New-Product Development
The development of original products, product improvements, product modifications, and new brands through the firm's own product development efforts (very expensive and risky)
Why do new products fail?
-overestimation of market size
-incorrectly positioned, priced, or advertised
-pushed by high level executive despite poor market research findings
-excessive development costs
Major stages in New-product development
Idea generation
Idea screening
Concept development & testing
Marketing strategy development
Business analysis
Product development
Test marketing
Commercialization
Idea Generation
the systematic search for new product ideas
-Internal sources: company employees at all levels
-External sources: customers, competitors, distributors & suppliers, outsourcing (design firms, product consultancies, online collaborative communities)
Idea Screening
-process used to spot good ideas & drop poor ones
-evaluated against a set of company criteria for new products, such as: is there a need for the product? does the product offer a competitive advantage? does it offer sufficient profit potential?
Concept development & testing
-Product concept: detailed version of the new product idea stated in meaningful consumer terms
-Concept development: develop alternate product concepts for testing
-Concept testing: testing new product concepts with groups of target consumers to find out if the concepts have strong consumer appeal
Marketing Strategy Development
-Part One (short term): describes the target market, planned value proposition, and short term profit goals
-Part Two (pricing and distribution): outlines the product's planned price, distribution, and marketing budget
-Part Three (long term): describes the planned long run sales and profit goals, marketing mix strategy
Business Analysis
-involves a review of the sales, costs, and profit projections to assess fit with company objectives
-if results are positive, project moves to the product development phase
Product Development
-develops concept into a physical product
-calls for a large jump in investment
-prototypes are made for testing
Prototypes
-must have correct physical features and convey psychological characteristics
-subjected to physical tests
Test Marketing
-product and marketing program are introduced in a more realistic market setting
-not needed for all products
-can be expensive and time consuming, but better than making a major marketing mistake
Importance of test marketing
Test marketing is appropriate when a large investment is required, when the risk is high, or when management is not sure of the product or marketing program
Commercialization
-must decide on timing (when to introduce the product)
-must decide on where to introduce the product (single location, state, region, nationally, internationally
-must develop a market rollout plan
Successful product development requires:
-a customer centered approach, not a product-centered approach
-a team based approach--not a top-down, managerially-driven approach; various company departments work closely together
-a systematic approach--not a trial and error approach; innovation management systems collect, review, evaluate, and manage new-product ideas
Marketing in action
Some products die quickly, while others stay in the mature stage for a long, long time
The PLC can be applied to:
-a product class (automobiles)
-a product form (SUVs)
-a brand (Ford Escape)
-style (colonial homes)-a basic and distinctive mode of expression
-fashion (business casual attire)-a popular style in a given field
-fads (pet rock)-a temporary period of unusually high sales driven by consumer enthusiasm; fads decline quickly
Practical problems of PLC
-when used carefully, the PLC may help develop good marketing strategies
-however in practice, it is difficult to: forecast sales level, length of each stage, and shape of PLC; develop marketing strategy because strategy is both a cause and result of the PLC
Introduction Stage of PLC
-sales: low
-costs: high cost per customer
-profits: negative or low
-customers: innovators
-competitors: few
-marketing objective: create product awareness and trial
Introduction Stage of PLC-Marketing Strategies
-product: offer a basic product
-price: use cost-plus pricing
-distribution: build selective distribution
-advertising: build product awareness among early adopters and dealers
-promotion: use heavy promotion to entice product trial
Growth Stage of PLC
-sales: rapidly rising
-costs: average cost per customer
-profits: rising profits
-customers: early adopters
-competitors: growing number
-marketing objective: maximize market share
Growth Stage of PLC-Strategies
-product: offer product extensions, service, warranty
-price: price to penetrate the market
-distribution: build intensive (wide) distribution
-advertising: build awareness and interest in the mass market
-promotion: reduce to take advantage of heavy consumer demand
Maturity Stage of PLC
-sales: peak sales
-costs: low cost per customer
-profits: high profits
-customers: majority
-competitors: stable number beginning to decline
-marketing objective: maximize profits while defending market share
Maturity Stage of PLC-Strategies
-product: diversify brand and models
-price: match or best competitors
-distribution: build more intensive (wide) distribution
-advertising: stress brand differences and benefits
-promotion: increase to encourage brand switching
Strategies used to manage the PLC during maturity
-modifying the market-increase consumption of the current product by looking for new users and market segments, repositioning the brand to appeal to larger or faster-growing segment
-modifying the product-changing characteristics such as quality, features, or style to attract new users and to inspire more usage by improving durability, reliability, speed, taste, styling, attractiveness, and adding new features
-modifying the promotion and price-improving sales by changing one or more marketing mix elements, cutting prices, launching a better ad campaign
Decline Stage of PLC
-sales: declining sales
-costs: low cost per customer
-profits: declining profits
-customers: laggards
-competition: declining number
-marketing objective: reduce expenditures and milk the brand
Decline Stage of PLC-Strategies
-product: phase out weak items
-price: cut price
-distribution: go selective-phase out unprofitable outlets
-advertising: reduce to level needed to retain hard-core loyals
-promotion: reduce to minimal level
Price
-the amount of money charged for a product or service
-the sum of all of the values that consumers give up in order to gain the benefits of the product or service (can also include time and effort)
Price vs. Value
-price can effect perceived value, and vice versa; this can affect strategy
-price reductions can cut profits and initiate price wars or cheapen perceptions of brand quality
-marketers should strive to convince consumers that price is justified by value provided
Three Major Pricing Strategies
1. Customer Value-Based Pricing
2. Cost-Based Pricing
3. Competition-Based Pricing
Customer Value-Based Pricing
Setting prices based on buyers' perceptions of value rather than the seller's cost (start at price ceiling).
When using a value-based pricing strategy, marketers first assess customer needs and value perceptions, then set the product's price. Then the vendor considers their value-based pricing strategy: good value pricing, value-added pricing.
Good-value pricing and Value-added pricing
Good-value pricing: offering just the right combination of quality and good service at a fair price (no add-ons)
Value-added pricing: attaching value-added features and services to differentiate a company's offers and charging higher prices (add-ons included)
Cost-Based Pricing
Setting prices based on the cost of producing, distributing, and selling product at a fair rate of return (start at price floor). Costs set the floor for the price that the company can charge.
Types of costs to consider:
-fixed costs: do not vary with production or sales level
-variable costs: vary directly with the level of production
Types of cost-based pricing
-Cost-plus (markup) pricing: adding a standard markup to the cost of the product (50% on cost)
-Break-even pricing (target-return): first, set price to break even on the costs of making and marketing a product (revenues=expenses); second, target return may be set on top of break-even price
Competition-Based Pricing
Setting prices based on competitors' strategies, costs, prices, and market offerings (less focus on price floor or ceiling). Assumes consumers base their judgements of a product's value on the prices charged by competitors for similar products.
Assessing competitors' pricing strategies: how does your firm's offerings compare? how strong are competitors? what are their pricing strategies? where are you positioned?
Competition-Based Pricing focuses on...
-internal factors: overall marketing strategy, marketing mix
-external factors: market, demand
Four types of markets
-pure competition (commodities)
-monopolistic competition (shoes)
-oligopoly (movie studios)
-pure monopoly (post office)
Pure Competition
A market structure in which a very large number of firms sell a standardized product into which entry is very easy in which the individual seller has no control over the product price and in which there is no non-price competition.
Monopolistic Competition
A market structure in which many firms sell a differentiated product into which entry is relatively easy in which the firm has some control over its product price and in which there is considerable non-price competition.
Oligopoly
A market structure in which a few firms sell either a standardized or differentiated product into which entry is difficult, in which the firm has limited control over product price because of mutual interdependence, and in which there is typically some non-price competition
Pure Monopoly
A market structure in which one firm sells a unique product into which entry is blocked in which the single firm has considerable control over product price and in which indirect, non-price competition may or may not be found.
Price elasticity of demand
-refers to how responsive changes in demand will be to a change in price
-small demand change=inelastic demand (caffeine-there are no substitutes)
-large demand change=elastic demand (microwave dinners-many substitutes)
New Product Pricing
-Market-skimming pricing
-Market-penetration pricing
Market-Skimming Pricing
Setting a high price for a new product to "skim" revenues layer-by-layer from those willing to pay the high price. Company makes fewer, but more profitable sales (XBox)
When to use a market-skimming strategy
-product's quality and image must support its higher price
-costs of low volume cannot be so high they cancel out the benefit of higher price
-competitors should not be able to enter market easily and undercut price
Market-Penetration Pricing
Setting a low initial price in order to "penetrate" the market quickly and deeply. Attract a large number of buyers quickly and win a large market share (IKEA in China).
When to use a market-penetration pricing strategy
-market is highly price sensitive so a low price produces more growth
-costs fall as sales volume increases
-competition must be kept out of the market or the effects will be only temporary
Product Mix Pricing
Firm looks to set prices that maximize the profits of the total product mix. Five strategies:
1. Product line pricing-setting prices across an entire product line
2. Optional-product pricing-pricing optional or accessory products sold with the main product
3. Captive-product pricing-pricing products that must be used with the main product
4. By-product pricing-pricing low-value by-products to get rid of them
5. Product bundle pricing-pricing bundles of products sold together
Price Adjustments
Price adjustments are necessary to account for customer differences and changing situations.
Discount and allowance pricing: reducing prices to reward customer responses such as paying early or promoting the product
Segmented pricing: adjusting prices to allow for differences in customers, products, or locations
Psychological pricing: adjusting prices for psychological effect
Promotional pricing: temporarily reducing prices to increase short run sales
Geographical pricing: adjusting prices to account for the geographic location of customers
Dynamic pricing: adjusting prices continually to meet the characteristics and needs of individual customers and situations
International pricing: adjusting prices for international markets
Discounting
A planned reduction in price during certain periods or for certain quantities. For ex. theme parks and hotels often use seasonal pricing to help manage their capacity.
Allowances
Promotional money paid to retailer in exchange for retailer featuring the product. Ex. end cap-a display for a product placed at the end of an aisle-it is perceived to give a brand a competitive advantage.
Promotional Pricing
Temporarily pricing products below the list price, and sometimes even below cost, to increase short run sales. Firms offer promotional prices to create buying excitement and urgency. Ex. special events, low interest financing, etc.
Geographical Pricing
-FOB-origin pricing: based on distance from factory
-Uniform-delivered pricing: based on uniformity
-Zone pricing: based on geographical zones
-Basing-point pricing: based on a specific point, such as a major city, and priced more expensively as the retailer gets farther away
Dynamic Pricing
Adjusting prices continually to meet the characteristics and needs of individual customers and situations (Megabus)
International pricing
Adjusting prices for international markets based on perceived value of exported product (Levi's, Gucci)
Public Policy and Pricing
Firms must be careful when setting their prices. The following pricing strategies are considered illegal:
-Price fixing: in collusion with competitors (cartels like OPEC)
-Predatory pricing: selling below cost to punish competitors
-Price discrimination: selling at different prices in an unfair discriminatory manner
-Retail price maintenance: manufacturers requiring retailers to sell at a certain price
-Deceptive pricing: inaccurately listing manufacturer's suggested retail price
Supply Chain
A system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer.
Supply Chains and the Value Delivery Network
Producing and making products available to buyers requires building relationships with "upstream" and "downstream" supply chain partners.
-Upstream: suppliers of raw materials, components, parts, and other elements necessary to create a good
-Downstream: marketing channel partners that link the firm to the customer, such as retailers
Marketing Channels
A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business users (retailers). Marketing efforts must be shared along the supply chain. Goes beyond simply moving the product.
Marketing channel decisions
-affect other marketing decisions, such as pricing or product design
-can lead to competitive advantage-cheaper and less time-consuming than selling directly to consumers
How channel members add value
The use of intermediaries results from their greater efficiency in making goods available to target markets.
Key functions performed by channel members
-promoting the product
-contact potential buyers
-negotiating with buyers
-distributing the product
-taking on some of the risk of moving products
Number of marketing channel levels
-Direct marketing channels: have no intermediary levels between the manufacturer and the customer; two levels
-Indirect marketing channels: contains one or more intermediaries
Channel Behavior and Organization
Types of channel relationships:
-Horizontal relationships exist among firms at the same level of the channel (retailer to retailer)
-Vertical relationships exist between different levels of the same channel (wholesaler to retailer)
Four types of marketing/distribution systems
-Conventional marketing channel
-Vertical marketing system-corporate, contractual
-Horizontal marketing system
-Multichannel distribution system
Conventional distribution channel
Consists of one or more independent producers, wholesalers, and retailers, each a separate business, seeking to maximize its own profits even at the expense of profits for the system as a whole.
Vertical Marketing System
A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the other, has contracts with them, or has so much power that they all cooperate.
Types of vertical marketing systems
-Corporate VMS: single ownership
-Contractual VMS: franchise organization
-Unofficial VMS: Wal Mart
Horizontal Marketing Systems
Two or more companies at one level join together to follow a new marketing opportunity.
Ex. McDonalds in Wal Marts
Multichannel Distribution System
-occurs when a single firm sets up two or more marketing channels to reach one or more customer segments
-also called hybrid marketing channel system
-common amongst large companies
-allows firms to expand sales and market coverage while tailoring products to diverse needs of market segments
Disintermediation
Occurs when product and service producers cut out traditional intermediaries or displace resellers with radical new types of intermediaries.
In order to design effective marketing channels, firms must...
1. Analyze consumer needs
2. Set channel objectives
3. Identify and evaluate major alternatives
Analyze consumer needs
-Location: do consumers want to buy from nearby locations or are they willing to travel?
-Channel: do they want to buy in person, by phone, or online?
-Assortment: do they value breadth of assortment or do they prefer specialization?
-Add-ons: do consumers want many add-on services?
-Refer back to targeting and positioning
Set channel objectives
-Level of customer service
-Distribution of products
-Specialization of products
-Think: are these objectives realistic?
-Channel objectives are influenced by: cost, the firm's products, marketing intermediaries, competitors, and environment
Identify and evaluate alternatives
1. What type of intermediaries are available? Retailers, "value-added" retailers, independent distributors, dealers, etc.
2. How many intermediaries should we use? Intensive (broad), selective, or exclusive distribution.
3. What are the responsibilities of channel members? Price policies, conditions of sale, territories and services to be performed.
Marketing Channel Management
-Selecting channel members
-Managing and motivating channel members
-Evaluating channel members on an ongoing basis
-Handling public policy issues
Public Policy and Distribution Decisions
-Laws affecting channel decisions seek to prevent exclusionary tactics. Some firms might use these tactics to keep others from using a desired channel.
-Situations with the potential to violate the Clayton Act (which aimed to stop anticompetitive tactics) include: exclusive distribution, exclusive territorial agreements, and tying agreements.
Tying Agreements
Tying is the practice of making the sale of one good (the tying good) to the customer conditional on the purchase of a second distinctive good (the tied good). Tying is illegal under the Clayton Act.
Supply Chain Management
Suppliers--Company--Resellers--Customers
Marketing Logistics and Supply Chain Management
Supply chain management=logistics
Major logistics functions:
-inventory management
-warehousing
-transportation
-logistics information management
Inventory Management
-Balance between too much and too little inventory.
-Just-in-time logistics systems (JIT): a production strategy, largely created by Toyota, that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. To meet JIT objectives, the process relies on signals between different points in the process, which tell production when to make the next part.
Warehousing & Transportation alternatives
Warehousing
-how many, what types, and where?
-storage warehouses
-distribution centers
Transportation alternatives
-trucks/railroads
-pipelines
-air carriers
-water carriers
-internet
Wholesaling
All activities involved in selling goods and services to those buying for resale or business use.
Wholesalers=distributors. However, wholesalers often do more than distribute.
Functions performed by wholesalers
Selling and promoting
Buying and assortment building
Bulk-breaking
Warehousing
Transportation
Financing
Risk bearing
Market information
Management services and advice
Merchant Wholesaler
Operates in the chain between producer and retail merchant. Some wholesale merchants only organize the movement of goods rather than move the goods themselves. Large group of wholesalers. Account for 50% of wholesaling.
Two broad categories:
-full-service wholesalers
-limited-service wholesalers
Brokers & Agents
Brokers bring buyers and sellers together. Brokers=unbiased 3rd party.
Agents represent a buyer or seller on a more permanent basis. Manufacturers' agents are the most common type of agent wholesaler--They represent manufacturers as the deal with suppliers upstream and retailers downstream.
Manufacturers' Sale Branches and Offices
Involves wholesaling by manufacturers themselves rather than through independent wholesalers.
Factory outlet stores represent a retail venture of a manufacturer. In order to operate this type of store, the manufacturer must also manage wholesaling.
Wholesaler Marketing Strategies
Wholesale strategy-wholesale segmentation and targeting, differentiation and service positioning
Wholesale marketing mix-product and service assortment, wholesale prices, promotion, distribution (location)
Wholesaler Strategy
Segmentation-size & type of customers (CVS only)
Targeting-city of suburbs; established neighborhoods or up-and coming neighborhoods; restaurants or small markets
Differentiation and positioning-speed of delivery, affordability, product variety
Wholesaler Marketing Mix
Product Assortment and services-a few big brands (Coors, Miller); many smaller brands (Yeungling, Victory)
Price-depends on brand positioning
Promotion-does the distributor help with discounts?
Distribution (locations)-which cities? which neighborhoods?
Retailing
All activities involved in selling goods or services directly to the final consumers for their personal, non-business use. Most retailing is done by physical retailers. But nonstore retailing has recently grown by leaps and bounds. Nonstore retailing includes sales made via the internet, direct mail, catalogs, telephone, and other direct sales methods.
Types of Retailers based on..
1. The amount of service they offer
2. The breadth and depth of product lines
3. The relative prices charged
4. How they are organized
Types of Retailers-Amount of service
Classification: operation costs of personnel
-Self-service retailers (Wal-Mart): serve customers who are willing to perform their own "locate-compare-select" process to save money; carry convenience goods and potentially shopping goods
-Limited-service retailers (Sears): provide more sales assistance in "locate-compare-select" process; carry more shopping goods
-Full service retailers (Tiffany): provide most sales assistance in "locate-compare-select" process; customers often desire advice; carry more specialty goods
Product Mix Dimensions
Width: number of different product lines the company carries
Length: number of items within the product lines
Depth: number of versions offered of each product in the line
Consistency: how closely related various lines are
Types of retailers-Length and depth
Classification: diversification of assortments
-Specialty stores (Radio Shack): feature narrow product lines with deep assortments
-Department stores (Macys): offer a wide, long, and inconsistent variety of clothing, home furnishings, household goods
-Supermarkets (Kroger, Safeway): usually carry a relatively wide, consistent variety of low cost, low-margin groceries and consumables
-Service Retailer (hotels): product line is primarily a service; generally narrow, deep and consistent mix
Types of retailers-length and depth
Classification by length and breadth of their product assortments:
-Convenience stores (7-Eleven): carry a narrow, short, shallow, but consistent line of high turnover convenience goods
-Superstores (Wal-Mart Supercenter): offer a wide, long, deep and inconsistent assortment of routinely purchased food goods, nonfood items, and services
-Category Killers (Best Buy): a giant specialty store that offers a narrow, long and deep assortment of a specific line
Types of retailers-prices
Relative prices classification:
-Standard pricing stores: department store
-Discount stores (Wal-Mart): sell standard merchandise at lower prices and margins, in return for higher volume
-Off-price retailers (Overstock.com): lowest prices; merchandise is bought at less-than-regular wholesale prices; goods include overruns, irregulars, and leftovers; includes factory outlets and warehouse clubs
Types of retailers-organization
Major types of retail organizations:
-Corporate chain stores (CVS): two or more outlets that are commonly owned and controlled
-Franchise organization (Subway): contractual association between a franchisor and franchisees
-Voluntary chain (True Value): wholesaler-sponsored group of independent retailers engaged in group buying and merchandising
-Retailer cooperative (Ace Hardware): group of independent retailers who set up a central buying organization and conduct joint promotion efforts
Types of retailers-other
-Brick and Mortar: traditional physical location
-eBusiness: online only presence
-Brick and click: a business model by which a company integrates both offline (bricks) and online (clicks) presences
Retail Marketing Strategies
Retail strategy: retail segmentation and targeting; store differentiation and positioning
Retail marketing mix: product and service assortment, retail prices, promotion, distribution (location)
Retailer Strategy
Segmentation and targeting; store differentiation and positioning (Target vs. Wal-Mart)
Retail marketing mix (4 p's): retailers cannot make meaningful decisions related to the retail marketing mix until they first define and profile their target market.
Retailer Marketing Mix
-Product and service assortment: which products does the retailer buy?
-Retail prices: MSRP or discount price?
-Promotion: does the retailer let the manufacturer promote, or does the retailer help with promotions?
-Distribution (location): where can you reach target market? this impacts product, price, and promotion
Retail Marketing Mix
-Product assortment is important, but services may be even more important
-Services mix can help differentiate one retailer from another (Home Depot's "how to" classes for DIY)
-Store atmosphere is important as a unique store experience can move customers to buy. Experiential retailing is growing in popularity.
Price Decisions
The price policy must fit with the target marketing and positioning, the product and service assortment, and the competition. Every retailer must choose high markups on low volume OR low markups on high volume (every day low prices or discounts and sales).
Promotion Decisions
Does the retailer take this responsibility or the manufacturer?
Retailers can use any or all of the promotion tools-advertising, personal selling, sales promotion, public relations, and direct marketing-to reach consumers.
Place (Distribution) Decisions
Location is the key to success (McDonalds owes much of their success to real estate). The retailer should first decide on their target markets, then decide on location.
Retail Trends & Developments
1. Slowed economy and tightened consumer spending. Discounters like Costco and high-end chains like Saks are doing well. Middle ground chains like Macys, JC Penney, and Gap are mostly flat.
2. Growth of non-store retailing
3. Growing importance of retail technology
4. Global expansion of major retailers
Promotion Mix
Specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships. Also referred to as marketing communications mix.
Five Tools of the Promotion Mix
Advertising-paid, nonpersonal
Sales promotion-short term incentives
Personal selling-personal presentation; purpose is to make sale and build relationships
Public relations-build good relations with publics; publicity and corporate image management
Direct marketing-direct connections with consumers; purpose is to obtain immediate response and build relationships
Integrated Marketing Communications (IMC)
Carefully integrating and coordinating the company's many communication channels to deliver a clear, consistent, and compelling message about the organization and its products.
-Consumers, marketing strategies, and communication technology are constantly changing.
-These factors have shifted the marketing communications model so that firms are doing less broadcasting and more narrowcasting.
-A strong need for integrated marketing communications exists. Conflicting messages from different sources can create confusion or blur brand perceptions.
Shaping the Overall Promotion Mix-Advertising
Positives:
-reaches geographically dispersed buyers
-low cost per exposure
-enables repeat messages
-very expressive tool
Negatives:
-impersonal
-not directly persuasive
-one-way communication
-costly
Shaping the Overall Promotion Mix-Personal Selling
Positives:
-most effective at building preferences, convictions, and actions
-two-way communications
-customer relationships are formed
Negatives:
-requires long-term commitment to sales force
-most expensive promotion tool
Shaping the Overall Promotion Mix-Sales Promotion
Positives:
-attract consumer attention
-offer strong incentives to purchase
-reward quick response
Negatives:
-short-lived
-often not effective in long-run brand preference
Shaping the Overall Promotion Mix-Public Relations
-believable
-reach prospects who avoid salespeople and ads
-can be dramatic
Shaping the Overall Promotion Mix-Direct Marketing
-less public
-immediate
-customized
-quick
-interactive
Advertising Objectives Setting
A specific communication task to be accomplished with a specific target audience during a specific period of time.
Informative Advertising Objectives
-communicating customer value
-building a brand and company image
-telling the market about a new product
-explaining how a product works
-suggesting new uses for a product
-informing the market of a price change
-describing available services and support
-correcting false impressions
Persuasive Advertising Objectives
-building brand preference
-encouraging switching to a brand
-changing customer's perception of product value
-persuading customers to purchase now
-persuading customers to receive a sales call
-convincing customers to tell others about the brand
Reminder Advertising Objectives
-maintaining customer relationships
-reminding consumers that the product may be needed in the near future
-reminding consumers where to buy the product
-keeping the brand in customer's mind during off-seasons
Decide on budget decisions
-Affordable Method
-Percentage-of-sales method
-Competitive-party method: advertising-expense budgeting method based on what a brand's or firm's competitors are estimated to be spending. This method assumes the other firms have the same marketing objectives and know what they are doing.
-Objective-and-task method
Decide on Message Decisions
Developing advertising strategy:
-Creating advertising messages: message strategy and message execution must break through the clutter; advertising is often merged with entertainment.
-Planning the message strategy: identify customer benefits that can be used as advertising appeals; develop compelling creative concept (the "big idea"); chose an ad advertising appeal that is meaningful, believable, and distinctive.
Consumer-generated messages
-tapping consumers for message ideas or actual ads
-can be used to help with the "big idea"
-benefits: collects new ideas/perspectives at relatively little expense; boosts consumer involvement and gets consumers talking and thinking about the brand
Message Execution Styles
Slice of life
Lifestyle
Fantasy
Mood or image
Musical
Personality symbol
Technical expertise
Scientific evidence
Testimonial evidence or endorsement
Decide on Media Decisions
Develop advertising strategy:
-Selecting advertising media:
1. Set reach, frequency, and impact goals
2. Choose among major media types
3. Select specific media vehicles
4. Decide on media timing
Media Decisions
Deciding on reach, frequency, impact:
-Reach: percentage of people exposed to ad campaign in a given time period
-Frequency: number of times a person is exposed to advertisement
-Media Impact: the qualitative value of a message exposure through a given medium
Media Decisions
Deciding on media vehicles: specific media within each general media type, such as Newsweek.
Factors to consider when choosing vehicles: cost, audience quality, audience engagement, editorial quality.
Deciding on media timing: scheduling the advertising over the course of a year (options include follow seasonal pattern, oppose seasonal pattern, same coverage all year).
Choose the pattern of the ads: continuity (even scheduling), pulsing (uneven scheduling).
Evaluate Advertising and Return on Advertising Investment
-Return on advertising investment (ROAI): the net return on advertising investment divided by the costs of the advertising investment (quantitative).
-Evaluating advertising also involves: measuring the communication effects of an ad or campaign through pre- and post-consumer evaluations (qualitative).
Other Advertising Considerations
1. Should the firm use an advertising agency? Ad agencies have expertise and can offer an outside point of view.
2. To what degree should global advertising be adapted to various countries? Specific advertising programs are usually adapted to local cultures.
Public Relations
Building good relations with the firm's various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.
Public Relations Functions
Press Relations-aim for favorable press
Product publicity-aim to increase awareness of products
Public affairs-aim to improve opinions amongst publics (investor relations)
Lobbying-influence legislation/governing decisions
Public Relations Role and Impact
-may strongly impact public awareness at a lower cost than advertising
-can yield spectacular results
-due to increasing communication channels (online, smart phones), PR is beginning to play an increasingly important brand-building role
Major Public Relations Tools
News
Speeches
Special events
Audiovisual materials
Viral videos
Corporate identity materials
Public service activities
Buzz marketing & social networking
Company web site
Personal Selling
Personal presentation by the firm's sales force for the purpose of making sales and building customer relationships.
Role of Sales Force
Personal selling:
-interpersonal interactions between sales people and individual customers occur: face-to-face, by telephone, through video or web conferences, or by other means
-personal selling is more effective than advertising in complex selling situations
Salesperson
An individual representing a company to customers by performing the following: prospecting, communicating, selling, servicing, information gathering, relationship building
Nature of Personal Selling
The term salesperson covers a wide range of positions:
-from order taker: department store clerk
-to order getter: demands creative selling and relationship building
Role of Sales Force
The sales force serves as a critical link between the company and its customers. They represent the firm to the customers; they represent the customers to the firm. Goal=customer satisfaction and firm profit.
Major Steps in Sales Force Management
Designing sales force strategy and structure
Recruiting and selecting salespeople
Training salespeople
Compensating salespeople
Supervising salespeople
Evaluating salespeople
Sales Force Management
The analysis, planning, implementation, and control of sales force activities.
Types of sales force structures
Territorial: salesperson is assigned to an exclusive geographic territory in which that salesperson sells the company's full line
Product: salespeople specialize in selling only a portion of the company's products or lines
Customer: salespeople specialize in selling only to certain customers or industries
Complex: combination of several types of structures
Decide on Sales Force Size
-may range in size from only a few salespeople to tens of thousands
-increasing sales force size will increase both costs and sales
Decide on Sales Force Strategy
Outside sales force: travels to call on customers in the field
Inside sales force: conducts business from their offices via telephone or the internet, or visits from prospective buyers
Team selling: using teams of people from sales, marketing, engineering, finance, technical support and even upper management to service large, complex accounts
Team Selling
Advantages:
-can find problems, solutions, and sales opportunities that no single salesperson could alone
Disadvantages:
-team selling can confuse or overwhelm customers
-some people have trouble working in teams
-difficult to evaluate individual contributions
Goals of Training Programs
-customer knowledge
-selling process
-company, product, and market knowledge
Compensation Elements
Fixed amount: salary=stable income
Variable amount: commissions or bonuses=performance reward
Expenses: repays for job-related expenditures
Fringe benefits: vacations, sick leave, pension, etc
Sales Force Evaluation
Reports: sales reports, call reports, and expense reports
Standards: clear standards for judging performance
Feedback: providing constructive feedback to the sales people that can motivate them to perform
Return on Sales Investment (ROSI) should be assessed for the sales force as a whole.
Personal Selling Process-transaction oriented
1. Prospecting and Qualifying: identifying qualified potential customers
2. Preapproach: learning as much as possible about a prospective customer before making a sales call
3. Approach: meeting the customer for the first time
4. Presentation and demonstration: telling the "value story" to the buyer, showing how the firm's offer solves problems
5. Handling objections: seeking out, clarifying, and overcoming customer objections to buying
6. Closing: asking the customer for an order
7. Follow-up: following up after the sale to ensure customer satisfaction and repeat business
Sales Promotion
Short-term incentives to encourage the purchase or sale of a product or service. Some marketers use the term promotions to refer to sales promotion. Can be targeted toward:
-final buyers-consumer promotions
-retailers and wholesalers-trade promotions
-business customers-business promotions
-members of the sales force-sales force promotions
Factors that have contributed to the rapid growth of sales promotion
-more pressure to increase their current sales
-more competition from less differentiated brands
-advertising efficiency has declined
-consumers have become more deal oriented
Sales Promotion Objectives
-Consumer promotions: urge short term sales; attempt to enhance customer brand involvement
-Trade promotions: attempt to get retailers to carry new items and more inventory; to buy ahead; to promote the firm's brand; and to give the company more shelf space
-Sales force promotions: attempt to gain more sales force support for current or new products; or get salespeople to sign up new accounts
Consumer Sales Promotion Tools
Samples
Coupons
Cash refunds
Price packs
Premiums
Advertising specialties
Point of purchase promotions
Contests
Sweepstakes
Games
Event marketing (event sponsorships)
Trade Promotions
More sales promotion dollars are directed toward retailers and wholesalers than to the final consumers. Several trade promotion tools exist:
-Discounts
-Allowances
-Free goods
-Specialty advertising items
Sales Force Promotion
Objectives: motivate salespeople, generate business leads, stimulate purchases, reward customers
Promotion tools: conventions, trade shows, sales contests and incentives
Direct Marketing
Connecting directly with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.
The New Direct Marketing Model
Most firms use direct marketing as a supplemental channel/medium (Lexus). Some firms employ the direct model as their only approach (Amazon, eBay). For many companies, direct marketing constitutes a new and complete model for doing business.
Growth of Direct Marketing
Fastest growing promotional tool. Direct marketing continues to become more web-oriented as internet marketing is the fast-growing form of direct sales.
Benefits of Direct Marketing
Benefits to buyers: convenient, easy to use, private, ready access to wealth of comparative information, immediate, interactive.
Benefits to sellers: powerful tool for building customer relationships; offers a low cost, speedy and efficient way to reach markets, including business markets; offers greater flexibility; gives access to new buyers that could not be reached through other channels, such as those in other countries.
Forms of Direct Marketing
Online Marketing
New digital technologies
Kiosk marketing
Direct response television marketing
Telemarketing
Catalog marketing
Direct-mail marketing
Direct-mail Marketing
Involves sending an offer to a person or particular address-includes email. Largest direct marketing medium (accounts for 29% of direct marketing sales). Very efficient, however, it can be perceived as "junk mail".
Direct Mail Marketing: Email Marketing
Use of traditional forms has declined as marketers switch to email marketing. Permission-based email marketing is key. Permission based email marketing can produce an ROI 40-50% higher than other forms of direct mail marketing.
Catalog Marketing
Direct marketing through print or digital catalogs that are mailed to select customers, made available in stores, or presented online.
Catalog Marketing Trends
-More and more catalogs are going digital. Minimizes costs, and web space is unlimited. Allows real-time merchandising.
-However, print catalogs are still the primary medium. Drives web traffic and can create an emotional connection to the consumer.
Telephone Marketing (telemarketing)
Accounts for 17% of all direct marketing driven sales. Used in both consumer and B2B markets. Marketers use outbound and inbound calls (outbound-sell directly to consumer; inbound-toll-free ordering or order faxing). Do-not-call legislation has impacted the telemarketing industry. Many telemarketers have shifted to other forms of direct marketing (perhaps for the better).
Direct-Response TV Marketing
Shopping channels
Infomercials
Direct-response advertising (DRTV)-TV spots that are 60 or 120 seconds long
Kiosk Marketing
Information and ordering machines generally found in stores, airports, and other locations. (Redbox)
Mobile Phone Marketing
Efficient-able to contact consumers at almost all times. However, similar to email, can also be viewed as spam.
New Digital Direct Marketing Technologies
-Podcasts (streaming radio)
-Vodcasts (streaming video)
Online Marketing
Company efforts to market products and services and build customer relationships over the internet via: websites, display ads, search engine marketing, and social media. Fastest growing form of direct marketing.
Click-Only Companies
"Dot-coms", which operate only online without any brick-and-mortar presence. Four types:
E-tailers (Amazon): online shops
Search engines and portals (Google): search for info on other sites
Transaction sites (eBay): consumers transact with each other
Content sites (ESPN): primarily information-based sites
Click-and-Mortar Companies
Traditional brick-and-mortar companies that have added online marketing to their operations.
Online Marketing Domains-added connectivity enables new consumer driven domains
B2C (business to consumer): initiated by business, targeted to consumers
B2B (business to business): initiated by business, targeted to businesses
C2C (consumer to consumer): initiated by consumer, targeted to consumers
C2B (consumer to business): initiated by consumer, targeted to businesses
Business to Consumer Online Marketing
Business to consumer online marketing: Businesses selling goods and services online to final consumers. Brick and mortar stores are still most popular but this is changing.
Trends: internet influences 35% of total retail sales, 50% of US households shop online, B2C consumers differ from offline consumers because customers control the internet exchange process
Business to Business Online Marketing
Most major B2B marketers offer online product information, purchasing, and support. Replacing phone and in-person sales, especially for simple purchases. Many firms use the internet to build stronger customer relationships. In B2B the internet has led to less meetings but potentially better relationships because more connectivity=quicker resolutions.
Consumer to Consumer Online Marketing
Exchanges of goods and information between final consumers enabled via the internet. Two basic forms:
Auction sites, such as eBay, offer marketplaces to buy or exchange goods.
Blogs and forums facilitate information and interchanges. Marketers are tapping into blogs as a medium for reaching carefully targeted innovators. By reaching innovators, firms can push-start a product through the PLC.
Consumer to Business Online Marketing (reverse auction)
Online exchanges in which consumers search out sellers, learn about their offers, and initiate purchases, sometimes even driving transaction terms. Ex. Priceline.com, which allows users to bid for airline tickets and hotel rooms. Again, somewhat impossible domain without the internet.
Types of Web Sites
Corporate (brand) web sites: designed to build customer goodwill, collect customer feedback, and supplement other sales channels, rather than to sell the company's products directly; builds brand.
Marketing web sites: a web site that engages consumers in interactions that move them closer to a direct purchase or other marketing outcome; sells products.
Online Marketing-Display Ads
Interactive ads that appear on the web next to content on web pages or web services. Includes interstitials (ads in between pages), banner ads, pop-up ads, rich media ads.
Online Marketing-SEM, SEO, PPC
Search engine marketing (SEM): increasing website visibility in search engine results pages (SERPs) through SEO and PPC.
Search engine optimization (SEO): the process of improving the visibility of a website or a web page in a search engine's natural or organic search results.
Pay per click (PPC): used to direct traffic to websites, where advertisers pay the publisher (generally a search engine) when the ad is clicked. With search engines, advertisers typically bid on keyword phrases relevant to their target market.
Search Engine Marketing (SEM) Steps
1. Research your target audience.
2. Set your online goals and key performance indicators.
3. Build an initial list of important keywords that represent your current and most relevant content and potential content.
4. Validate your keywords by testing and refining them with your keyword selector tools.
5. Check your current ranking.
6. Optimize the website by improving your web design, architecture, and web page content.
7. Pursue link-building and partnerships.
8. Colonize the web by publishing and circulating it in wiki, blogs, and video and picture sites.
9. Get in the news such as Google News with RSS feeds.
10. Install good tracking software, and track and analyze your performance for better results.
Online Marketing-Social Media
A group of internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content. Includes social networks (Facebook, Myspace, etc.), blogs, and videos. Social media marketing is driven by word-of-mouth (WoM). This makes it more believable but less controllable.
Public Policy and Ethical Issue in Direct Marketing
Perhaps more than any other medium, ethics comes into play online. Safety, deception, and fraud are the major concerns:
Direct marketing has been accused of taking unfair advantage of impulsive or less sophisticated buyers (infomercials). Internet fraud is a growing concern. Internet shoppers have online security concerns.
Invasion of privacy is also a concern. Database marketing allows customers to receive offers closely matched to their interests. However, critics worry whether marketers know too much about consumers.
Global Marketing Opportunities & Threats
Opportunities: profitability viewpoint
-faster communication, transportation, and financial flows
-access to more customers
-economies of scale (becoming a global firm)
Threats: interventional viewpoint
-global competition is intensifying
-financial risks
-government intervention
Global Firm
A firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors. No longer instantly associated with a given country. Similar to economies of scale concept (cost advantages due to size).
Six Major International Marketing Decisions
1. Looking at the global marketing environment
2. Deciding whether to go global
3. Deciding which markets to enter
4. Deciding how to enter the market
5. Deciding on the global marketing program
6. Deciding on the global marketing organization
Step One: Looking at the Global Marketing Environment
First, understand what restrictions exist in the International Trade System: Restrictions exist on trade between nations-tariffs, quotas, embargos, and lack of trade agreements (blocs).
A tariff is a tax on imports/exports in and out of a country.
An import quota is a limit on the quantity of a good that can be produced abroad and sold domestically.
An embargo is the partial or complete prohibition of commerce and trade with a particular country, in order to isolate it.
World Trade Organization (WTO) and General Agreement on Tariffs and Trade (GATT)
-help trade by reducing tariffs and other international trade barriers
-set global standards for trade
-WTO enforces GATT rules by mediating disputes and enforcing trade sanctions
-153 participating nations
Key Economic Communities (Blocs)
-European Union (EU)
-North American Free Trade Agreement (NAFTA)
-Central American Free Trade Agreement (CAFTA)
-Union of South American Nations (UNASUR)
Economic Factors to Consider in Determining a Country's Market Attractiveness
Income Distribution: wealth is well-distributed in industrialized nations; strong middle class
Industrial Structure
Policial legal environments
Cultural environment
Four Industrial Structures
Subsistence Economy: only possesses enough goods to be used by a particular nation to maintain its existence and provides little to no surplus for other investments (Belize, Somalia).
Raw Material Exporting Economy: a developing economy that seeks to obtain wealth by finding a niche in the world economy for a certain type of export (Saudi Arabia, China, Brazil).
Emerging Economy: nations with social or business activities in the process of rapid growth and industrialization (BRICS-Brazil, Russia, India, China, South Africa).
Industrial Economy: one that is present in highly developed nations according to measurements such as GDP and quality of life (US, Canada).
Nations' Political Legal Environments Vary By..
-attitudes toward international buying
-government bureaucracy
-political stability
-monetary regulations
Cultural Environment
Sellers must examine the ways consumers in different countries think about and use products (coffee is not an everyday drink in China). Language must be adhered to. "Americanization" and a loss of individual country identity is of concern, resulting in backlash. Firms must adapt to local cultural values and traditions.
Step 2: Deciding Whether to Go Global
Reasons to consider going global:
-existing customers may be expanding globally
-foreign markets may offer growth opportunities when domestic market is stagnant
-foreign attacks on domestic markets may be countered by counterattacks abroad
Step 3: Deciding Which Markets to Enter
Before going abroad, the company should try to define its international marketing objectives and policies. What volume of foreign sales is desired? How many countries to market in? What types of countries to enter? The markets with the greatest long-run ROI should be chosen.
Step 4: Deciding How to Enter a Market
Exporting: indirect, direct
Joint venturing: licensing, contract manufacturing, management contracting, joint ownership
Direct investment: assembly facilities, manufacturing facilities
Exporting
Entering a foreign market by selling goods produced in the company's home country, often with little modification.
Indirect: working through independent international marketing intermediaries.
Direct: company handles its own exports.
Joint Venturing
Entering foreign markets by joining with foreign companies to produce or market a product or service.
Licensing
Management contracting
Joint ownership
Licensing
A method of entering a foreign market in which a company enters into an agreement with a license in a foreign market.
Management Contracting
A joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital. The domestic firm exports management services rather than products.
Joint Ownership
A joint venture in which a company joins investors in a foreign market to create a local business in which the firm shares joint ownership and control.
Direct Investment
Entering a foreign market by developing foreign-based assembly or manufacturing facilities.
Advantages: lower long term costs due to cheap labor or raw materials, firm may improve image in host country, firm keeps full control over the investment
Disadvantages: currency risks, market failure, government change; potential lack of knowledge about new nation; higher short term costs
Step 5: Deciding on the Global Marketing Program-Global Strategies
Straight Extension: using basically the same marketing strategy, marketing mix, and product mix in all international markets.
Communication adaptation: adjusting the marketing strategy (new positioning) and promotion elements to each international target market, but keeping the products the same.
Product adaptation: adapting a product to meet local conditions or wants in foreign markets, but keeping the same marketing strategies and promotions.
Dual adaptation: adjusting the marketing strategy, promotions, and product mix to each international target market.
Global Pricing Strategies
International prices tend to be higher than domestic prices because of price escalation. Caused by transportation and other additional costs. Reputation (Levi's) can also cause escalation. However, some global firms create simpler or smaller versions of products to sell abroad.
Global Distribution Channels
International firms must take a whole-channel view of distributing products to final consumers and consider including channels between nations and channels within nations.
Whole Channel Concept for International Marketing
International Seller-channels between nations-channels within nations-final user/buyer
While the additional channel members may seem cumbersome, placement opportunities may exist.
Step 6: Deciding on the Global Marketing Organization
International marketing efforts can be managed in three different ways:
-organizing an export department-minimal investment
-creating international divisions-geographical organizations
-becoming a global organization-borderless but centralized organizations