Definitions vary because

[a] Social science, no one right answer. [b] Observed rather than invented

[c] Definitions gained complexity as understanding has deepened.

Definitions are difficult because marketing is

[a] Not always about management

[b] Not always about profit[c] Not a single process

Good Points about Kotler's definition

[a] Involves, exchange value, needs and wants

Why so many definitions? “A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.” (Kotler et al 2008)

V1.2

MARKETING PROCESS

Model is simplistic Useful as a learning tool

Stage 1 Understanding marketplaces

and customers

(Demands, Market offerings,

Value & Satisfaction, exchange,

relationships, markets)

Stage 2 Developing Marketing strategy

(Choosing customers,

value Proposition,

guiding philosphy)

Stage 3 Developing

programmes to deliver value

(The 4 Ps)

Stage 4 Building

relationships through delight

(CRM)

Outputs Capturing value from customers

(Customer loyalty, share,

equity)

UDDBC

Stage 1 Understanding

marketplaces andcustomers

Value and satisfaction

Exchange, transactions and relationships

Needs wants and demands

Market Offerings

Markets

VENMM

Customer Value (Kotler et al 2008)“The consumers’ assessment of the products overall capacity to satisfy his or her needs.” Customer Satisfaction (Kotler et al 2008)“The extent to which a products performance matches a buyers expectations”

Example of Different Needs Same Product. Student buys a bike to satisfy needs of transport, cost. A professor buys a bike because he is getting a bit overweight.

STAGE 1 UM&C – VALUE AND SATISFACTION

Exchange ‘The act of obtaining something that is desired by offering something in return.’ Kotler et al (2008)

Transaction ‘Marketing’s unit of measurement. A single exchange with a short beginning and end.’ Kotler et al (2008)

Customer Relationship Management “The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction” Kotler et al (2008)

Transaction vs. RM. RM is different because it infers many linked exchanges over a period of time with social and financial benefits.

STAGE 1 UM&C – EXCHANGE TRANSACTIONS AND RELATIONSHIPS

STAGE 1 UM&C– NEEDS WANTS AND DEMANDS

Needs: State of felt deprivation - !REMEMBER! Marketers don’t create needs they are a property of the person.

Wants: Form that a need takes when its shaped by factors such as culture, upbringing and previous experience. Unlimited wants, finite needs.

Demands: Wants backed with the money to make purchases.

Maslow (1943) Hierarchy of Needs. As you satisfy each level of need the state of felt deprivation moves to the next level. Limitations. Western orientated. (PSLES)

Marketing Myopic. (Levitt 1960) Concept: An industry is a customer-satisfying process, not

a goods-producing process. Businesses will do better in the end if they concentrate on meeting customers’ needs rather than on selling products. Example: Concentrating on Drill Bit rather than the hole.

Concept: Companies stop growing because of a failure in management, not because the market is saturated but because of MYOPIA. Example: Railroads declined because they were railroad orientated rather than transport orientated. Example. Encyclopaedia Britannia. Book. CD. Online.

Product. ‘anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need’ (Kotler 2008) Can be a Good (mainly tangible), service (mainly

intangible), information or experience. A PRODUCT DOES NOT HAVE TO BE TANGIBLE THEY

LIE ON A CONTINUUM OF TANGIBLITY (Shostack 1977)

Value Proposition – (Kotler et al 2008) ‘A set of benefits that promise consumers to satisfy their needs’

STAGE 1 UM&C – MARKET OFFERINGS (MPV)

STAGE 1 UM&C – MARKETS

Markets. ‘The set of actual and potential buyers of a market offering.’ (Kotler 2008)

STAGE 2 DEVELOPING MARKETING STRATEGY CUSTOMER-DRIVEN MARKETING (SUC) Selecting Customers to

serve. (Segmenting)

Understanding the guiding philosophy

Choosing a value proposition

STAGE 2 CUSTOMER-DRIVEN MARKETING – PHILOSOPHIES (PMS PSS MIX)

Production Concept. (Making things cheap) Example. Ryanair, cutting all the corners

Product Concept. (Product improvements) Personal Example. School improvement rather than just adding features.

Selling Concept. (Convince customers) Discussion Example. Recruitment agencies

Marketing Concept. (Know Customers needs) Example. Nintendo Wii. Nintendo understood the market place, new market segments wanted a

group experience were people could move around.

Societal Marketing Concept (Balance consumer and society needs) Example. Food and drink industry needs to help out with obesity, the governments Change4Life

scheme (July 2011) suggests that the food and drink industry should pay to facilitate consumers making better making better choices.

Counter Example. Marks and Spenser Lingerie Ad (November 2011) overtly sexual and would be seen by children.

Sustainable Marketing Concept (Balance consumer and future generations) Example. Marks and Spenser Plan A sustainability plan http://plana.marksandspencer.com/ includes

180 commitments to be met by 2015 ranging from recycling hangers to educating consumers about how to cook waste free.

Organisations are likely to hold a mix of philosophies. Example. “One Child One Laptop” is a scheme to provide every child in the developing

world with a laptop, this scheme is partly sustainable (Teaching children for the future), partly societal (providing the disadvantaged a chance) partly marketing (fulfilling the education need of India) partly production (making the laptop very cheap)

STAGE 3 CONSTRUCTING AN INTEGRATED MARKETING PLAN

http://www.bbc.co.uk/schools/gcsebitesize/business/marketing/marketingmixvid.shtml

http://www.bbc.co.uk/schools/gcsebitesize/business/marketing/productlifecyclevid.shtml

• Product – What is it?• Discussion Example. Angel

Solutions Perspective satisfying the need for school improvement.

• Price – How much? Positioning.• Example. Angel Solutions

Perspective Pricing Strategies.• Promotion – Attracting and

Explaining.• Example. Beetles and Harris

(2004) thoughts on nudity.• Place – Where is it displayed.

Channels.• Example Angel Solutions

Perspective distribution channels

Stage 4

Building Customer Relationships (SV)

Subjective Value and Satisfaction. Perception is important. Example. Toyota Prius Example. Diary milk (The

gorilla) and Guinness adverts (Good things come to those who wait) create illusions.

Variable Relationship Depth. High Example. Tennis

Coach Low Example Call Centre.

STAGE 5 OUTCOMES CAPTURING VALUE (SELL)

Share Growth. ‘The share of the customers purchasing that a company gets in its product categories.’ (Kotler 2008) Example. Reggae-Reggae sauce rose from

nothing in 2007 to sell large quantities in retail stores and pub chains.

Equity. ‘The total lifetime values of all the companies customers.’ (Kotler 2008)

Loyalty Creation Gerpott et al (2000) work on

telecommunications treats concepts separately. (SLR)

Satisfaction. Loyalty. Retention

Lifetime value of a customer (Kotler et al 2008) “The lifetime value of the entire stream of purchases that a customer would make over a lifetime of patronage” Business Example. Angel Solutions and Cegos,

NCER, repeat customer Consumer Example. Consumers rarely change

banks.

CHANGING MARKETING LANDSCAPE

Future of marketing Example. Tesco are creating virtual shops in Korea on mobile phones. Changes

logistics, buying behaviour and so on. Electronic marketplace

Example Amazon Books store online Not For Profit Marketing.

Example UK Government Think! Don’t drink and drive Global marketplace

Example Gap sources clothes from china, which are cheaper. They also have a strategy for child labour.

Sustainability Abel and Cole and Naked Wines investing in local suppliers.

FENGS

To be strategic marketing needs to be planned.

Types of planning The strategic plan The marketing plan

3 Types of plan

Annual plans include ‘the current situation, company objectives, the strategy for the year, the action programme, budgets and controls’ (Kotler 2008)

Long Range plans describe ‘The principle factors and forces affecting the organisation during the next several years, including long term objectives , the chief marketing strategies used to attain them and the resources required’ (Kotler 2008)

Strategic planning is ‘a plan that describes how a firm will adapt to take advantage of opportunities in its constantly changing environment, thereby maintain a strategic fit between the firms goals and capabilities and its changing marketing opportunities’ (Kotler 2008)

Planning can involve different business units or even teams.

Planning Stages (APIC)

Analysis: Understand situation Planning:

Strategic: What do business units do? Marketing: What strategies fit goals?

Implementation: Carry out plan Control: Measure, Evaluate, Adjust

Strategic plans (MSSS PG)

Mission statements Strategic objectives Strategic audits SWOT Analysis Portfolio Analysis Growth Strategies

Strategic plans: Mission Statements

Mission statements: ‘A statement of the organisations purpose – what it wants to accomplish in the wider environment’ (Kotler 2008) (CRAC) Should be Customer orientated. Levitt

(1960). Should periodically Review Ask 4 questions (ANDI)

Customer Needs Identify customers. E.g. Government and

students University customers. What are out Aims. Profit, growth, social etc? What is the Domain or niche of the business?

Mission Statements should be. Realistic, Specific, based on Core Competencies (Prahalad and Hamel 1990), motivating

Vision Statements are a more of a guide E.g. Virgin ‘Making Flying Fun’

Strategic plans:

Strategic Objectives

Market Objectives. E.g. retention percentage or sales

Competitive Position. E.g. Market share or number of relationships

Financial. E.g. Profit, ROCE Social. E.g. Helping community

Strategic Audits

External: ‘A detailed examination of the markets, competition, business and economic environments in which the firm operates’ (Kotler 2008)

Internal: ‘An evaluation of the firms entire value chain’ (Kotler 2008) Porter (1985) value chain in split in to 4

support (procurement) and 5 primary (operations) activities

Strategic plans: SWOT. ‘A distillation of the findings of the internal and external audits which draws attention to the critical organisational strengths and weaknesses and the opportunities and threats facing the company.’ (Kotler 2008)

Can be used alongside a PEST analysis to examine environment

Piercy and Giles (1989) thoughts

SWOT can fail if vague, multiple focus SWOTs required

Customer orientated model Internal strengths and weaknesses External opportunities and threats

Strategies. Move weaknesses to strengths Move threats to opportunities Matching opportunities with strengths

Weaknesses Focus on compiling lists rather than thinking. No prioritisation Limited information displayed – simplistic Hill and Westbrook (1997) ague it can harm

performance

Humphrey (1960s) developed SWOT

Piercy and Giles (1989)

A portfolio is ‘the collection of businesses and products that make up the company’ Kotler (2008)

Portfolio Analysis is ‘a tool by which management identifies and evaluates the various businesses that make up the company’ (Kotler 2008)

First step is to separate the company into SBU. SBUs include division, product, brand defined ‘units of the company that has a separate mission and objectives and that can be planned independently from other company business’ (Kotler 2008)

Portfolio Analysis Tools

Boston Box GE Grid

Limitations

1. Link between market share and profit is not assured.

2. Promotes growth, as such neglects declining markets

3. Ignores factors such as risk of entering markets with no experience.

4. Market growth can be easily misinterpreted. It is unclear if it is the growth of the market, the growth of market share or if the company can affect the growth of the market. (For example Apple ‘expanding’ the phone market by producing the smart phone at an affordable price.)

5. Difficult to define SBUs and the scales6. SBUs are assumed to be independent when

often they are not.

Boston Consulting Group (1970s)Classification

(i) the rate of growth in that market(ii) the relative market share

NB. Rate of growth is the same as market attractiveness. Size of circle indicates size of SBU

Categories

Stars. High growth and share. Require Investment. Growth will slow as they become cash cows.Cash Cows. Low growth, high share. Less investment. Produce cash to fund other SBUs.Question Marks. Low share, high growth. Need cash to maintain position. Decide if to make star by invest or to make dog and perhaps divest.Dogs. Low share, low growth. May break even limited promise.

Strategies

Invest to build market share.Invest to hold market share.Harvest for gainDivest to sell or close.

McKinsey / GE Grid (1970s)

Classification

(i) Market attractiveness(ii) SBU strength

NB. Similar to Boston Box however. More robust measure of attractiveness.NB. Size of circle indicates size of market and size of slice the SBU share.

3 Zones

Top Left: Strong attractiveness – harvest or growDiagonals: Medium attractiveness – consider investingBottom Right: Low attractiveness – consider divesting

Limitations Similar to BCG

• Difficult to define SBUs• Ignores factors such as risk• Difficult to define SBUs• Tendency towards optimism• Ignores Core Competencies (Prahalad and

Hamel 1990)• Ignores links between SBUs

Ansoff (1957) Growth Strategies grid.

Classification

(i) New or existing products(ii) New or established markets

NB. Each growth strategy has a different level of risk.

4 Zones (Me Mp Pe D)

Market Penetration. Increasing sales in current markets with current products (Manipulate the marketing mix)Product Development. New products to current markets.Market Development. New markets with existing products. E.g. Geography Diversification. New products to new customers. Can be acquisitions.

Limitations Similar to BCG

- Doesn’t include divestment strategies- Assessment of risk is immature. E.g. a

British company would probably find it easier investing in Ireland than China.

Strategic Marketing Plan For Each SBU. (EA SOS MIBC)

1. Executive summary.

2. Marketing Audit. ‘A comprehensive systematic, independent and periodic examination of a companies environment, objectives, strategies and activities to determine problem areas and oppurtunities and to recommend a plan of action to improve the companies marketing performance’ (Kotler 2008)

1. Macroenvironment (demographic/political trends)2. Task environment (market/customer)3. Marketing strategy (mission/objectives)4. Marketing organisation (structures)5. Marketing systems (planning/control)6. Productivity (Profit and cost)7. Marketing function (Marketing mix)

3. SWOT (Humphrey 1960s, Piercy and Giles 1989)

4. Objectives. SWOT should identify objectives in line with goals (social, financial)

5. Marketing Strategy. The marketing logic by which the SBU hopes to achieve its marketing objectives.

1. Segmenting, targeting, differentiation and positioning.

6. Marketing Mix. Product, Price, Promotion and Place.

7. Marketing Implementation. ‘The process that turns marketing strategies and plans into marketing actions in order to accomplish strategic marketing objectives.’ (Kotler 2008)

8. Marketing Budgets. Establishing a budget could be gauged on ‘return on market investment’

9. Marketing Controls. Measure, evaluate and correct because things can go wrong.

The Marketing Environment

Microenvironment

Macroenvironment

Marketing Function

Market environment

Marketing Environment: ‘the actors and forces that affect marketing management’s ability to develop and maintain successful relationships with its target customers.’ (Kotler 2008)

Macroenvironment ‘the larger societal forces that affect the whole microenvoronment’ (Kotler 2008)e.g. think PEST but Kotler has an alternative categorisation

Microenvironment ‘the actors close to the firm that affect its ability to serve its customers, markets, competitors and publics’ (Kotler 2008)e.g. suppliers and publics

MICROENVIRONMENT (MSC CCP) Marketing Intermediaries: ‘firms that help the company

to promote, sell and distribute its goods to final buyers.’ (Kotler 2008) Resellers, Distribution, Marketing agencies, financial

intermediaries. Suppliers: ‘Firms and individuals that provide resources’

(Kotler 2008) Company: Management, Finance, R & D, Purchasing,

Operations, Accounting.

Customers. Consumer, Business, Reseller, Institutional (Hospitals), Government, International

Competitors. Direct (same product), Indirect (substitute) see Porters (1979) 5 forces

Publics. Financial, Media, Government, Citizen (e.g. environmental), Local (Neighbourhood watch), General Public, Internal

Forces that affect the profitability of the industry.

New Entrants Threat Barriers to entry (economies of scale, differentiation, capital

requirements, cost disadvantages, government policy, access to distribution )

Retaliation Buyers Bargaining Power

Powerful if. [a] Large orders [b] undifferentiated [c] what its buying doesn’t save money

Price Sensitivity Number of buyers Can drive down prices, demand higher quality

Suppliers Bargaining Power Powerful if. [a] Small number of providers [b] unique traits [c]

doesn’t content with substitutes [d] Can integrate forward [e] Supplier is not dependent on the industry

Example: Drinks companies raising prices squeezed profits for bottling companies

Supplier Concentration Substitutes Threat

Switching costs Competitor Intensity

Concentration e.g. Hirschman’s Concentration Index (1945) Large Number of firms increases rivalry Slow market growth causes firms to fight High Fixed costs results in economies of scale Storage Costs Switching costs

Limitations Underestimates Core

Competencies. (Prahalad and Hamil 1990)

Assumes no collusion in the industry

Doesn’t consider possibility of making a new market.

Could be further forces e.g. Compliments

Presents a static situation when its changing.

Simplistic Glosses over relationships

Porters (1979) 5 Forces. Industry Analysis. Should a firm enter a new industry? Can use with SWOT.

Publics. ‘Any group that has an actual or potential interest in or impact on an organisations ability to achieve its objectives’ (Kotler 2008)

Citizen-Action – Neighbourhood watch General - Everyone Government – UK Government

Financial – Banks and credit agencies Internal - Staff Local – Residents near firm. Media - BBC

CGG FILM

Macorenvironment (PC DENT - Lobbies)

Political. ‘Laws, government agencies, and pressure groups that influence or limit various organisations and individuals in a given society.’ (Kotler 2008) e.g. needed to make there systems more compatible with other MP3 players.

Cultural. ‘Institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviours’ (Kotler 2008) Cultural values manifest in individuals views. Inlcuding. Self Perception, View of

others, view of organisations (e.g. distrust in banks), view of society, view of nature, view of universe.

Demographic. ‘The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.’ (Kotler 2008) e.g. Population Growth, Changing age, Changing Household, Migration, Diversity (gay community tends to be wealthier)

Economic. ‘Factors that affect consumer purchasing power and spending patterns’ (Kotler 2008) e.g. Make up of EU, Income distribution (Royals Royce target affluent), spending patterns change as income rises.

Natural. ‘The natural resources that are needed as inputs by marketers or that are affected by marketing activities’ (Kotler 2008) e.g. Shortage of raw materials, increased energy costs, climate change regulation, government intervention

Technological. ‘Forces that create new technologies, creating new product and market opportunities’ (Kotler 2008). E.g. the internet, skype.

Lobby: Some companies passively accept the environment whilst others lobby for change. Example. UK has an obesity issue the Change4Life scheme (July 2011) was affected by retailers to reduce its power.

PEST Political e.g. Tax policy etc Economic. E.g. demand for

electricity Socio-Cultural e.g. Attitude to

nuclear power Technological e.g. Improving

safer technology PESTEL

Environmental e.g. climate change

Legal e.g. Employment law

Always contrast the factors, determine which are the most important.

Can be classified into opportunities and threats of a SWOT analysis.

Lesson 4

Buyer Behaviour

Consumer Buyer Behaviour. ‘The buying behaviour of final consumers – individuals and households who buy goods and services for personal consumption’ (Kotler 2008)

Marketing and Other stimuli

Marketing MixMarketing environment

Buyer’s Black Box

Buyers Characteristics(C PSP)

CulturalSocial

PersonalPsychological

Buyers Decision Process

Buyers Responses

Product ChoiceBrand ChoiceDealer Choice

Purchase TimingPurchase amount

Characteristics Affecting Buyer Behaviour – Cultural (CSS-Shift)

Culture ‘The set of basic values, perceptions, wants and behaviours learned by a member of society from family and other important institutions.’ (Kotler 2008)

Subculture. EXAMPLE: Those with French descent tend to enjoy a

glass of red.

Social class. EXAMPLE: The Irish are seen as well educated and elite :D

There can be shifts in culture EXAMPLE The Irish used to be persecuted

Characteristics Affecting Buyer Behaviour - Social. (PDF Reference)

Using EXAMPLE what wine club to join

Position within Group. Role and status. EXAMPLE. Mother sks Dad to join wine club

Decision making unit; Initiator, Influencer, Decider, Buyer, User EXAMPLE. Mother haven taken a liking for the red stuff was

the initiator, dad is the buyer, the sons are the drinkers. Family. Children can pester, Husbands and Wives can

influence each others tastes. EXAMPLE. The sons like a regular delivery

Reference groups and Opinion Leaders. Example Jamie Oliver likes Naked Wines apparently and

Healthy eating at schools.

Characteristics Affecting Buyer Behaviour- Personal: (FLOPI)

Family Life Cycle EXAMPLE. Drink more wine when the kids

come to relieve stress. Life Style (Psychographics) ‘A

technique of measuring lifestyles and developing lifestyle classifications’ (Kotler 1008) Activities. Mother likes drinking Interests. Mother is learning French Opinions. Mother thinks red is best.

Occupation EXAMPLE. Dad is a teacher and needs to

drink to relieve stress. Personality and self concept

EXAMPLE. Dad gets a bad temper when drinking so mother throws it away, Dad buys more.

Income EXAMPLE. Dad is lowly paid as a teacher and

can only afford cheap wine.

Characteristics Affecting Buyer Behaviour – Psychological (BL PM or I Learned to Perceive that motivation is about belief.)

Beliefs. ‘A descriptive thought that a person has about something’. Attitude, ‘a persons relatively consistent evaluations, feelings and tendencies toward an object or idea’ (Kotler 2008) EXAMPLE: Mother thinks new-world wines are for the masses

Learning. ‘Changes in an individuals behaviour arising from experience’ (Kotler 2008) EXAMPLE: Mother tried a new-world wine and found that it

was fruity and full of flavour. Perception. ‘The process by which people select,

organise and interpret information to form a meaningful picture of the world’ (Kotler 2008). NB selective listening, retention and distortion. EXAMPLE: Mother was told by a wine expert that not all new-

world wines were the same but she wouldn’t listen. Motivation. ‘A need that is sufficiently pressing to seek

satisfaction of the need’ (Kotler 2008) EXAMPLE: Mother needs a drink to unwind! Locke (1690) we seek pleasure and avoid pain. Freud (nd. 18?? – 19??) the unconscious plays a large role Maslow (1970) Human needs are in a hierarchy

High Involvement

Low Involvement

Significant differences between brands

Complex Buying Behaviour

Variety Seeking Buying behaviour

Few differences between brands

Dissonance reducing buying behaviour

Habitual Buying Behaviour

Involvement and Differentiation

Habitual. No searching Buying based on familiarity. EXAMPLE. We always bind the same brand of rock salt.

Dissonance. Highly involved with, infrequent or risky purchase with little perceived difference in products. Customers may encounter post purchase dissonance after a sale. EXAMPLE. Time to buy a new car.

Complex. Consumer may be highly involved when the product is expensive, risky, purchased infrequently and self expressive EXAMPLE. Time to buy a new house

Variety Seeking. Low involvement but significant perceived differentiation. EXAMPLE. Chocolate bars next to the counter. Dairy milk, mars and flake stand out right!

Consumer buyer Behaviour(HD CV)

Consumer Buyer Decision Process – Known Products - NIEPP

Need Recognition. Internal Stimulus e.g. Hunger. External Stimulus e.g. Smell from restaurants

Information Search. The amount of searching will vary depending upon the type of purchase. Example. What restaurants are available?

Evaluation. Form purchase intention Example. I think I fancy Fish and Chips from the Lobster pot.

Purchase Decision. Attitudes of others. No queue at the Lobster pot a little

queue at Chipmonk, Chipmonk must serve better chips. Unexpected events. Hit by a taxi crossing the road.

Post Purchase. Rats should I really have bought fish and chips they will make the office smell

Need Recognitio

n

Information

Search

Evaluationof

Alternatives

PurchaseDecision

Post PurchaseDecision

Consumer Buyer Decision Process – New Products (AIETA Movement CP) 5 stages when adopting a new product - AIETA

Awareness. Knows but lacks interest. Interest. Seeks knowledge Evaluation. Considers product Trial. Tries the product. Adoption. Full and regular use

Movement through stages (rate of adoption) affected by

Consumer readiness. Innovators, Early Adopters, Early Majority, Late Majority and laggards - IEELL

Product characteristics. Relative Characteristics, Compatibility, Complexity, Divisibility, Communicability - RCCDC

Awareness

Interest Evaluation Trial Adoption

Diffusion of innovation curve (Summarised by Rogers 1962)

Defences between business and consumer markets (Model - MNC)

Overall – Both business buyer behaviour and consumer buyer behaviour can be represented as a stimulus response model. However the influences and process are very different.

Market Structure and demand (F-DIG) Fewer larger buyers in business Business demand is derived from consumer

demand Business demand is more inelastic Business markets are more often

geographically concentrated. Nature of Buying Unit

Complex, more people involved Complexity of buying

Consumer less complex. In business markets the buyer and seller are often dependent

Business Buyer Behaviour. ‘The buying behaviour of the organisations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.’ (Kotler 2008)

The Environment

Marketing MixMacroenviron

ment

Buying Firm Buyer Responses

Product Choice

Supplier ChoiceOrder

QuantityDelivery terms

Service Terms

Buying Centre

Buying Decision Process

Buying Influence Strategies (Leonidou 2005) Study of Greek industrial buyers. (RELIC R)

Business EXAMPLE: Naked Wines provides expert advice to suppliers.Criticism. Naked Wines provides finance for suppliers for new suppliers although this category comes under reward, it is interesting to note that this is a lessor category in Leonidou’s work

Legalistic Coercive Reward Expert Referent Informational

All 1 1 1

Straight Rebuy

2 1 1

Modified Rebuy

1 2

New Buy Influence strategies least used in new buy situations

Participants in Buying Process – (BIDUG)

Decision making unit. ‘All the individuals and units that participate in the business decision-making process’ (Kotler 2008) Buyers

Example. Purchasing dept. of music chain suggests new technology for customers to listen to tracks in store.

Influencers Example. Staff at store

Deciders Example. Head Office

Users Example. Customers at store.

Gate Keepers. Example. Finance

Department.

Major Influences on Business Buyers (IE IO)

EXAMPLE. Buying desks for a new office

Interpersonal Authority, Status, Empathy, Persuasiveness EXAMPLE. Senior management won’t want junior management to

spend time because it’s a trivial decision. Junior management might see it as an opportunity to show that they are responsible by striking a good deal, but need to invite the supplier into the office.

Environmental Economic, Natural, Technological, Political, Competitive and

Cultural. EXAMPLE. Are the desks sourced from sustainable locations?

Individual Age, Income, Education, Job Position, Personality, Risk Attitudes EXAMPLE. Is the purchaser willing to buy desks from an untried

firm? Organisational

Objectives, Policies, Structures, Systems EXAMPLE. Do desks need to satisfy design or health and safety

requirements set forth from the company?

ProblemRecognition

Internal or external stimuli

prompts someone to recognise a

need

EXAMPLEWe have new staff where

are they going to work?

GeneralNeed

Description

Company describes the

general characteristics and quantity

needed

EXAMPLEWe need 5 work

stations

ProductSpecification

Decide what product

characteristics are needed. Might use

value analysis

EXAMPLE4 medium

quality desks1 high quality

desk5 chairs

SupplierSearch

Find the best vendors

EXAMPLE2 online vendors1 local vendor

ProposalSolicitation

Invite certain suppliers to submit bids

EXAMPLEEach vendors offer

is put forward in terms of price and

quality

SupplierSelection

Review, Select, Negotiate.

May have more than one supplier.

EXAMPLEEach offer compared

Order-routineSpecification

Buyer writes final order with

characteristics specified

EXMAPLEFinal details confirmed.

PerformanceReview

Buyer rates satisfaction with

its suppliers

EXAMPLEAre the chairs

comfy?

The Business Buying Decision Process - (PG PS PS OP)

‘The decision-making process by which business buyers establish the need for purchased products and services, and identify, evaluate and choose among alternative brands and suppliers’ (Kotler 2008)

Positioning

Segmenting

Targeting

Differentiating

Select Customers

Value Proposition

Segmentation. ‘Dividing large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively’ (Kotler 2008)

Types of Segmentation (GD PB Gd)

- Geographic- Example. Mobile hairdresser only covers certain regions.

- Demographic- Age, Gender, Income- Example. Top Shop separates on age, gender and income.

- Psychographic- Social Class, Lifestyle, Personality- Example. Huggies segment on lifecycle targeting those

who want children- Behavioural

- Buying Inclination, when will they buy.- User type. Ex, potential, first time or regular - Usage. Heavy, Medium Light- Customer Loyalty

- Geo-demographic- ACORN, MOSAIC, IDACI, PIN etc

Marketers will often use multiple segmenting techniques

Additional Business Marketing Segmenting Techniques (COSP)

Operating characteristics Technology usage, user status, customer

capabilities. Example. Customers who use sage.

Purchasing Approaches Existing relationships, policies.

Situational Factors Urgency of needs, order size. Example. Agency will lease contractors or

source permanent staff depending on urgency of need or length of duration.

Company Characteristics Buyer-Seller similarities, attitudes to risk,

environment and so on. Example. Mando and Angel are both socially

responsible.

International Markets Many techniques. Religion and Prosperity.

Example car owners. Markets can be split across regions and

countries.

Effective Segmentation

Measurable. Size, profile, purchasing power.

Accessible. Segments can be reached and served.

Substantial. Large enough or make a profit.

Differentiable. Conceptually different and respond to marketing mix differently.

Actionable. Its possible to make a plan to attract and serve.

MASDA

Segmentation. ‘Segmentation is about reducing the number of entities we have to deal with, into a manageable number of groups that share well defined characteristics’ (Dexter 2002)

Challenges in segmenting business markets (VCDM)

• Coping with variation in types of business• Bigger firms have buying power• Majority of firms are small• Structure of business market is

changing• Classification – hard to find useful

techniques• Retailer and antiques shop have similar

profiles but are entirely different.• Size has issues. Consider a barrister

earning £250 grand vs. a manufacturing firm earning the same with 10 employees

• Decision Making and Attitudes - Personal vs. Organisational. Larger businesses tend to be more logical (see diagram)

• Dealing with mass and niche markets. Segmenting 200 global businesses is very different to segmenting 1000s of small businesses.

Targeting. ‘directing a companies marketing effort towards serving one or more groups of customers sharing common needs or characteristics’ (Kotler 2008)

Evaluating (UMA)

Up to date sales information Match segments to

capabilities and products Consider structural factors that

affect attractiveness. Porters 5 forces (1979) – strong

suppliers, aggressive competitors

Targeting Strategies. Once customers are segmented, we should decide who should be targeted and how many targets.

Targeting Strategies (UDCM)

Undifferentiated. ‘a market coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer’ (Kotler 2008). Focuses on what is common between customers. Appropriate for products such as water. Can be undermined by organisations targeting niches.

Differentiated. ‘a market coverage strategy in which a firm decides to target several market segments and designs separate offers for each’ Airlines. First class, Business and Economy.

Concentrated. ‘a market coverage strategy in which a firm goes after a large share or a few sub markets’ Good if resource limited, can be profitable Vulnerable

Micromarketing ‘A form of target marketing in which companies tailor their marketing programmes to the needs and wants of narrowly defined geographic, demographic, psychographic or behavioural segments’ Local Marketing. Targeting to local groups. E.g. Greggs sell stotties in the north east Individual Marketing. IPhone users can configure there phones downloading applications

Undifferentiated

(mass)Marketing

Differentiated(segmented)

Marketing

Concentrated(niche)

Marketing

Micromarketing

Local and Individual

Target Broadly Target Narrowly

Factors affecting the choice of targeting strategy (MP CCP) Market Variation. How will

customers react to marketing? If it’s the same use undifferentiated.

Product Variation. E.g. Undifferentiated for uniform products such grapefruits.

Competitors Marketing Strategies. If a competitor is using differentiated then using undifferentiated might not work.

Company Resources. E.g. Concentrated when limited

Product Life Cycle. E.g. In early stages, one version with undifferentiated of concentrated marketing.

Differentiation & Positioning. Decide on the value proposition.

Positioning ‘arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers’ (Kotler 2008)

• Perceptions. Customers have limited time to evaluate so they gain perceptions about products.

• Position Map. Describes how customers perceive brands • (axis can be any 2

dimensions but typically cost vs. luxury)

Choosing Differentiation and Positioning Strategies

Identify value differences and competitive advantages. (Easy for Royals Royce its luxury. Other firms may need reorganisation) Product Differentiation Service Differentiation Channel Differentiation People Differentiation Image Differentiation

Choosing competitive Advantages. Some products have a USP others a

mix. Differentiators should be. Important, Distinctive, Superior,

Communicable, Pre-emptive, Affordable, Profitable.

Select Position Strategy Value Proposition. ‘the full mix of

benefits upon which the brand is positioned’ (Kotler 2008)

More for more More for the same Same for less Less for much less More for less

More Price

Same Price

Less Price

More Benefits

More for More

PremiumHotel

More for the

same

Naked Wines

More for less

Wii

Same Benefits

Marginal value

proposition

The same for

less

Easy jet

Less Benefits

Less for much less

Ryanair or Pound

land

Positioning Statement and Communication. ‘A statement that summaries company or brand positioning’ (Kotler 2008).

Format: To <targets> our <brand> is <concept> that <usp>

Example: To busy, mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to data, people and resources while on the go, easily and reliably – more so than competing technologies.

Strong communication required to help embed positioning in the minds of customers.

LESSON 6 ------- PRODUCTS ------------

Product. ‘anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need’ (Kotler 2008)

Service ‘activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything’ (Kotler 2008)

Three levels of product

Core ‘the core problem solving services or benefits that consumers are really buying when they obtain a product’ e.g. Transportation.

Actual ‘a products parts, quality level, features, design, brand name, packaging, and other attributes that combine to deliver core product benefits’. E.g. Packaging

Augmented ‘additional customer services and benefits built around the core of an actual product’ e.g. Warrantee

Augmented

Core Product

Actual Product

Product Types

Consumer Products Convenience. E.g. Milk Shopping. E.g. Clothes Speciality. E.g. Legal services Unsought. E.g. Life insurance

Industrial Products Materials and parts. E.g. Oil Capital items. E.g. Manufacturing machines Supplies and services. E.g. Car repair

Unusual products Organisations. E.g. Skoda was turnaround Person Marketing. Barack Obama Place Marketing. Ireland has nice lakes Ideas. Global Warming

Product Decisions (PALP-B)

Packaging. Inner and outer, serves to help attract customers.

Attributes Quality. Defined from a customers point of view. Features. What features add value relative to cost. Style and Design. How will the customer interact. IPad

Labelling. Identifies, descries, promotes product Product-Support. Services that augment e.g.

Warrantee Brand. ‘A name, term, sign, symbol, or design, or

a combination of these, that identifies the goods or services of one seller or group and differentiates them from those of competitors’ (Kotler 2008)

Product Line Decisions. (Length and Fill)

Product Line ‘a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges’ (Kotler 2008)

Length Decisions. Monitor the line and add or remove items to

improve profit. Cross-selling – complimentary products Protection – economic conditions change Product line stretching. Downward, Upwards

or Two-way stretch. Based on quality and price.

Line-Filling Decisions ‘increasing the product line by adding more items within the present range of the line’ (Kotler 2008) Too many products in a line can lead

customers to feel that there is no differentiation.

Product Mix Decisions (Dimensions and strategies)

Product Mix. ‘The set of all product lines and items that a particular seller offers for sale to buyers’ (Kotler 2008)

4 Dimensions (WCLD) Width. Number of product lines Length. Total number of items in product lines Depth. Number of versions in each line. Consistency. How related are the product lines,

distribution, use, etc.

Strategies New product lines widening the mix Lengthen product lines Add more versions to deepen the mix Change consistency

Example Michelin (Slightly dumbed down)

Product line. Michelin supplies tires for road cars

Product mix widening. Michelin started a new line when it started to supply tires to formulae one in 2001

Product line lengthening. Michelin improves the quality of its tires through intensive research each year.

Product depth. There are versions such as soft or hard tire.

Product line consistency. There is consistency and inconsistency in its lines. Tires for road cars and bikes use different types of rubber compound. However they are both used in the same way.

Kotler et al’s (2008) 9 stage model of New Product Development (NIIC M BP TC)

New product strategy. Gives direction to team, planning, integration, delegation.

Idea Generation ‘Systematic search for new product ideas’. (Kotler 2008) Internal and external sources.

Idea Screening. Reduce the volume of ideas to a manageable amount.

Concept Development and Testing. Producing a more established product from the concept and testing it with user groups.

Marketing Strategy Development. Creating an initial strategy split into 3 parts. Target market Short run marketing mix Long run marketing mix

Business Analysis. Similar to an investment appraisal.

Product development. Making the product

Test Marketing. Trial the product without experience of full introduction Consumers

Standard. – Small number of cities. Can be costly and open to competitors Controlled – research firms carry the product for a fee. E.g. ACNielsen’s Scantrack Simulated - shopping environment. – Customers shown adverts and allowed to shop. Less

accurate because of sample size Business

Trial usage, Trade shows, Display rooms, limited introduction

Commercialisation. ‘Introducing the new product into the market’ (Kotler 2008). When, Where, Whom, How.

New Product Strategy

Idea Generatio

n

Idea Screening

Concept Development and testing

Marketing strategy

Business Analysis

Product Developm

ent

Test Marketing

Comercialisation

EXAMPLE. General Management Admission Council. (2011) Asked for ideas from students on management courses to improve the standard of education in universities. that included an outline of the marketing strategy.

Managing New Product Development (CTS)

Customer centred. ‘finding new ways to solve customer problems and create more customer-satisfying experiences’

Team based. ‘an approach to developing new product in which various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness’

Systematic ‘is needed to facilitate in minimising the risk of new product failure, companies should install an innovation management system to collect, review, evaluate and manage new-product ideas‘

Product Life-Cycle strategies.(DIG the MD)

Product Development. No sales Introduction. Slow growth, no

profits Basic Product Building awareness Low prices

Growth. Increasing sales and profits Product extensions Warrantee

Maturity. Slower growth. Diversify Change mix

Decline. Sales drop. Phasing out weak items Cutting price and advertising

Not all products follow this cycle. Example, Angel sells products before it has made them. Example some die when introduced.

Lesson 7 Price

‘The amount of money charged for a product or the sum of all the values that consumers exchange for the benefits of having or using the product or service’

The only marketing mix element concerned with revenue.

Price is very important but not always the most important factor.

Setting Prices Ceiling and Floor

Ceiling. Customer Perception.

Other considerations. Marketing strategy, objectives and mix Nature of demand Competitors

Floor. Costs

Two models of pricing

Product Cost Price Value Customers

Customers Value Price Cost Product

Cost based Pricing

Value based Pricing ‘setting price based on buyers’ perceptions of product values rather than cost’ (Kotler 2008) Price considered at the same time as the other marketing mix variables. Customers don’t care about manufacturing costs

Two ways to measure value.

Good-value pricing ‘offering just the right combination of quality and good service at a fair price’ (Kotler 2008) e.g. every day low pricing which is less for less or high low pricing which is high prices with frequent promotions.Value –Added Pricing ‘attracting value added services to differentiate offers and thus support higher prices’ (Kotler 2008)

Company and Product Costs

Fixed, Variable, Total costs, determine the price floor.

Company should know how cost varies with production and experience

Cost reduction pricing. Looking to drive down production costs. Vulnerable to competitor

competition or technology Cost plus pricing. Cost plus

desired profit Ignores demand and competition. Simple to work out.

Breakeven pricing. Revenue = costs

Costs in the middle – What else influences price

Positioning. Marketing Mix Strategy

Profit Maximisation Customer Retention Social Pricing

Pricing department Market Type

Pure Competition Monopolistic Competition Oligopolistic Competition Pure Monopoly

Elasticity Competitor Pricing strategy External Factors e.g. Economic conditions

New Product Pricing Strategies

Market Skimming ‘setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price’ (Kotler 2008) e.g. fastest computer chip sold at very high prices.

Market Penetration ‘setting a low price for a new product in order to attract large numbers of buyers and a large market share’ (Kotler 2008)

Product Mix Pricing Strategies. Firms look to maximise profit on the mix of products rather than a single product

Product Line Pricing ‘setting the price steps between the various products in a line based on cost differences between the products, customer evaluations of different features and competitor prices’ (Kotler 2008)

Optional-product pricing ‘the pricing of optional or accessory products along with a main product’ (Kotler 2008)

Captive-product pricing. ‘setting a price for products that must be used along with a main product’ (Kotler 2008)

By Product Pricing ‘setting a price for by-products in order to make the main product’s price more competitive.’ (Kotler 2008)

Product Bundle Pricing ‘combining several products and offering the bundle at a reduced price’ (Kotler 2008)

Price Adjustment Strategies

Discount and allowance pricing Cash, Buyers who pay promptly Quantity. Buyers who buy large volumes Functional. Trade discount Seasonal. Buyers out of season. Trade-in. Promotional. Participation in a sales event

Segmented Pricing Customer Segment. Same product different prices for different customer groups. Product Form Pricing. Different versions and prices same production cost. Location Pricing.. Different price by location Time Pricing. E.g. On and Off Peak rail fare.

Psychological Pricing. The price can infer quality. Promotional Pricing. E.g. 2 for 1. Some customers will wait for offers Geographical Pricing.

Free on board pricing. Customer pays freight to destination. Uniform delivered pricing. Average cost taken Zone pricing. Prices varies with zones Basing point pricing. Designated city is case price, charges increase with

distance from the city. Freight absorption pricing. Seller absorbs

Dynamic Pricing. Price changes per customer International Pricing. Local markets taken into consideration,

competitor pricing etc

Price Changes

Initiating Price Changes Reducing. Customers may feel quality is reduced,

the price will fall further or that it’s a good deal. Increasing. Customers may feel the item has

become fashionable or that the company is greedy.

Competitors may have a view on price changes Responding to price changes

Consider adjusting price, quality or adding a new product

PROMOTION

Promotion Mix Integrated Marketing Communications Effective Communications What is communication Promotion Budget Social implications and constraints of

promotion

Promotion links with the other Ps to assist with relationship marketing

Marketing Communication System and Audiences. Companies communicate with intermediaries, customers, publics and customers communicate with each other.

Promotion Mix

Advertising. Sales Promotion. E.g. 2 for 1 Public relations. E.g. BP oil spill Personal Selling. Presentation

by the sales force for the purpose of making sales and

Direct Marketing. Cold calling

Various media used for each mix item. TV, radio, catalogue.

Other types of communication include. Product design, packaging. Price. Stores its sold in.

Integrated marketing communication ‘The concept under which a company carefully

integrates and coordinates its many marketing channels to deliver a clear, consistent and compelling message about the organisation and its brands’ (Kotler 2008)

Ensures promotion tools are coordinated and consumers see consistent messages. This is important because markets are fragmented. Technology affects fragmentation.

The Communication Process

Marketers are moving towards communication covering pre to post purchase rather than concentrating on awareness.

Technology is helping to gauge how effective communication is with customers

Sender, Encoding, Message, Media, Decoding, Receiver, Response, Feedback, Noise

Effective Communication

Identify Target Audience Objectives related to buyer readiness states

Awareness Knowledge Liking Preference Conviction Purchase Equivalent to Learn>Do>Feel rather than

Do>Feel>Learn Designing a message

AIDA. Attention, Hold Interest, Arouse Desire, Obtain Action

Message Content. 3 types of appeals Rational, Emotional, Moral

Message Structure. Weather or not to include conclusions.

Message Format. What designs, graphics or body language to use

Choosing Media. Personal Communication channels. E.g. Face to face Nonperson. E.g. Media, atmospheres and events Choosing the right face for the media e.g. a celebrity.

Collating Feedback Determining how effective the message was. Do they

remember it how they felt abo it.

4 ways to set Promotion Budget

Affordable Method. Neglects effect of promotion, simple.

Percentage of sales. Similar to affordable, implies sales

causes promotion. Competitor Parity.

Set promotion level to the same as competitors.

No basis to suggest that competitors have got it right.

Objective Task Method. Promotion budget related to goals

and promotion costs relating to achieving each goals.

Might be hard to define goals and costs.

Setting Promotion Mix

Organisations should consider using integrated marketing communications to ensure the promotion mix is consistent.

3 issues influencing choice of promotion mix

Nature of Promotion tools Advertising. Can reach many at low cost per customer. Its impersonal. Sales Promotion. Tend to be short lived Personal selling. Takes investment. Public relations. Can reach those who avoid advertisement if its seen as news. Direct Marketing. Takes many forms e.g. telephone. It is [a] non-public [b]

immediate [c] customisable [d] interactive. Promotion mix strategies

Push. Convincing intermediaries to take on the product and market it. Pull. Convincing consumers that they want it. Customers demand the product from

intermediaries. Contextual Factors

Consumer or Business. Pull strategies led by advertisement is generally more important in Consumer markets, whilst push strategies led by personal selling is generally more important in business markets.

Buyer Readiness stages. E.g. Advertising and public relations are good to improve awareness and knowledge. Liking, preference and conviction affected by personal selling. (NB. This is ‘guiding’ rather than fact)

Product Life Cycle. E.g. Advertising in growth stage. Sales promotion in maturity.

Social Responsible marketing

Laws and regulations exist to prevent deceptive advertisement to avoid bait and switch advertisement.

Place (Marketing Channels)

Value Delivery Network. ‘A network made up of the company, suppliers, distributers, and customers who partner with each other to improve the performance of the entire system’ . (Kotler 2008)

These systems are often complex with numerous interacting parties

Examples Abel and Cole and NakedWines have relationships with there customers (Downstream) and they invest in their suppliers (Upstream).

How Channel Members Add Value Economies can occur if a member can

take products from multiple suppliers. Intermediaries act as a buffer between

customers who want small batches and produces who produce large batches.

Important Functions. Information, promotion, contact, marketing, negotiation, physical distribution, financing, risk taking.

Example Ikea

How many Channel Members should there be? Complexity is proportional to the number of

levels. Direct marking has no intermediary levels

Channel Behaviour. Firms should cooperate because they have a common interest. However firms may act in the own interest. Chanel Conflict. ‘disagreement amongst

marketing channel members on goals and roles, who should do what for what rewards’ (Kotler 2008)

Horizontal. Firms at the same level. Vertical. Conflict. Firms at different levels.

Channel Organisation. Firms may be organised informational or there may be a defined structure, there may be dominant members. Conventional Marketing System Vertical Marketing System

Corporate Vertical Marketing System. Single ownership of multiple levels established through common ownership.

Contractual Vertical marketing system. Contractual ties E.g. Franchise

Administered Vertical Marketing System. Ownership through power and size. E.g. Tesco

Horizontal marketing System. ‘A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity’ (Kotler 2008) EXAMPLE: Apple and Starbucks 2007

Multichannel distribution System. ‘A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments’ (Kotler 2008) EXAMPLE Tesco has retail outlets and an online presence

Disintermediation. Technology is helping producers to remove levels from the chain. Example Amazon Books

Channel Design Decisions

Analysing Company Needs. Feasibility of Cost. Setting Channel Objectives. Stated in terms of

targeted customer service level. Identifying Major alternatives.

Types of channel alternatives. Sales Force Agencies Retailers. ‘all the activities involved in selling products or

services directly to final consumers for their personal, non-business use’ (Kotler 2008) retailers vary in size and service level. E.g. Supermarket vs. Corner shop

Intermediaries ‘distribution channel firms that help the company make sales to them, including wholesalers and retailers that buy and resell goods’ (Kotler 2008) e.g. Wholesalers

Merchant. Independently owned Broker. Brings buyers and sellers together Agent. Represents buyers or sellers

Number of Marketing intermediaries Responsibilities of Channel members. Terms include

Price, Territory and Roles Evaluating the main channel alternatives

Economic. Number of sales etc Control. Can the company regain control. Adaptive. Can the channel change if required.

Channel Management

Selecting Chanel Members. Some companies may have few members to choose between, criteria should be determined.

Motivating. Partnerships are important

Evaluating. Criteria may include sales quotas or average inventory levels.

Logistics. ‘the tasks involved in planning, implementing and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit’ (Kotler 2008)

Logistic types Outbound. Products to customer. Inbound. Inputs from suppliers Reverse. Defective products

Goal. Cost and specified customer value. Logistic Functions.

Warehousing. Movement towards automation Inventory Management. Buffer vs. JIT Transportation. Road, rail, water, pipelines, air,

internet Integrated Logistic Management. ‘A logistics

concept that emphasizes teamwork, both inside the company and among all the marketing channel organisations. To maximise the performance of the entire distribution system.’ (Kotler 2008) Improve their own logistics. Ensure strategy and improvements happen across

the chain. Example IKEA supplier standards Consider outsourcing logistics Example Amazon

uses various carriers such as Royal Mail and DHL

Services vs. Goods

- Variable. Quality depends on who carries it out- Intangible. Service can’t be seen or smelt.

Customers look for other indicators of quality.- Perishable. Difficult is demand fluctuates Inseparable. The machines or people must be

present to carry them out. ‘The customer themselves affects the process’ Berry

(1984). EXAMPLE. Some restaurants have dress codes.

More Ps

Person. Training is important. Customers gather opinions from the staff. Treating staff like customers may improve customer service.

Physical Evidence. The more intangible the product the more need for physical queues of quality. EXAMPLE Entrance to a restaurant.

Process. The process the customer goes through is important. INDIRECT EXAMPLE. Rollersigns (Featured on dragons

den) shows advertisements to customers whilst queuing.

Criticism of 4 Ps

McCarthy (1960) 4 Ps Boom and Bitner (1981) 7 Ps for services Rafiq and Ahmed (1996) survey of UK and

Eurpean academics 7 Ps should be replace the 4ps to provide the

generic marketing mix 7 Ps Positives Comprehensive, refined and

detailed. Additional important variables People, Process, Physical Evidence.

7 Ps Negatives. Complex 4 Ps Negatives considered inadequate for

services. Not for profit and industrial marketing. Generally not broad enough, lack of relationship marketing.

4 Ps Positives simple, good introduction to marketing.

Webster (1984) 4ps not suited to industrial products

Levitt (1981) ‘everybody sells intagibles in the market place no matter what is produced in the factory’

Shostack (1977) Products are on a tangible, intangible continuum.

Brunner’s 4Cs (1989) – similar to 4ps (Concept, Costs, Channels, Communications). However Brunner’s Cs are not generally under the control of the marketer, e.g. Information gathering.

Relationship Marketing. Background

Organisations must be customer centric Total customer value ‘the total of the entire product, services,

personnel and images that a buyer receives from a marketing offer’ (Kotler 2008)

Buyers measure product value on 4 axis. Product Services Image Personnel

Total customer costs ‘the total of all the monetary, time , energy and psychic costs associated with a marketing offer’ (Kotler 2008)

Customer Delivered value. ‘The difference between total customer value and total customer cost of a marketing offer – “profit” to the customer’ (Kotler 2008)

The greater the difference the higher the probability of purchase

Satisfaction depends upon product performance relative to buyers expectations, which are formed by past experience, opinions of friends ad so on. Delight comes from exceeding expectations by a long way.

Tracking Customer satisfaction and dissatisfaction

Complaint suggestion system. Example suggestion box.

Customer Satisfaction surveys. Example, Software Consumers gain points towards Microsoft Partnership if they complete surveys.

Ghost Shoppers. Example, my boss will often contact the complain desk.

Lost Customer Analysis. Exit interviews.

Delivering customer value and satisfaction

Two frameworks to conceptualise user value Value Chain Total Quality Management

Porter’s (1985) Value Chain ‘Major tool for identifying customer value’ (Kotler 2008)

9 cost bases that create value. The value is not the same as the cost nor is it always proportional

5 primary activities IS OMO 4 support activities HP FT

Comparing each activity with customers can reveal competitive advantages.

Coordinating areas can help to maximise value,

• 4 areas of coordination (PICO)• Product development processes• Inventory Management• Customer service• Order-to-Payment

Looking at the areas across organisations can help to maximise value.

Margin is related to profit.

Total Quality Management (Rooted in work by Deming 1950s)‘programmes designed to constantly improve the quality of products, services and marketing processes’ (Kotler 2008). All members of the organisation pitch in to improve value for the customer.

Six Sigma. Defect reduction DMAIC (Define, Measure, Act, Improve, Control)

Quality ‘The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs’

Performance Quality. Level at which a product performs.

Conformance Quality. Freedom from defects and the consistency with which a product delivers a specified level of performance.

Value of customers

Profitable customer ‘A person, household or company whose revenues over time exceed, by an acceptable amount, the companies cost of attracting, selling and servicing that customer’ (Kotler 2008)

Lifetime values. Retention, identify and mitigate.

Treat staff like customers

Relationship Management

‘The process of creating, maintaining and enhancing strong value-laden relationships with customers and other stakeholders’

Relationship levels Basic (No follow up) Reactive (Customer can contact) Accountable (Contact after purchase) Proactive (Periodic Contact) Partnership (Regular Contact)

Practicality of managing Data Data is kept in a customer

relationships management system such as ACT (http://www.act.com/)

Common Value Building Approaches

• Financial Benefits• Social Benefits• Structural ties

Kotler's Recommended Approach

• Identify key customers• Assign relationship manager• Developing job descriptions• Having plans drawn up for each• Appointing overall manager

Selective Relationships

Sleeping Giants. Lots of profit, the best customers.

Power Traders. High revenue, high maintenance.

Pets. Low revenue, low maintenance. Delinquents. Low revenue, high

maintenance.

Low Relationship Cost

HighRelationship Cost

High Revenue Sleeping Giants Power Traders

Low Revenue Pets Delinquents

8 Cs Competitive Domain Framework

Highlights a range of relationships that an organisation may have. Competitors Challengers. Acquiring small companies Collaborators Commodities. E.g. Oil Components Customers Consumers

Limitations. Ignores organisation – staff relationships Ignores Governments, Regulatory bodies, Publics

Möller and Halinen (2000) Relationship marketing has two roots that act as a

continuum for markets to lie within Market based, consumer orientation (Simple relationships)

Many customers Market perspective Switching easy

Network based - Inter organisation orientation (complex relationships e.g. more actors)

Fewer potential partners Network perspective Switching hard

Four Areas Service Marketing Database and Direct Marketing Marketing Channels Business marketing

They see relationship marketing as a disjoint collection of theories and practices, rather than a grand theory.

They examine the roots to test their hypothesis. They see relationship marketing as a complement to

traditional Grönroos (1994) argues mainstream marketing ignores

that longer term relationships with customers. And that it is transaction based rather than buyer-sellor relationship

WORK BY HARRIS Customer: Harris (2008) in interviews with shop floor staff

about customer returns and how customers defraud, Harris found some evidence that customers wishing to defraud may enter at closing time because staff are more likely to go home or on a Saturday because staff are the most busy, another interview reveals that staff are more likely to accept returns if the customer is assertive but not rude.

Promotion: Beetles and Harris (2004) on their work about the acceptability of nudity in promotion, reveal Images are deemed more acceptable when the picture contains

the opposite sex of the viewer Images are deemed more acceptable by men, gay women and

gay men, and least acceptable by straight women. Images are deemed more acceptable if you can the models face

with the face looking toward the camera Market Orientation: Harris (pub 1999 written 1998) in

his work on organisational structure blocking a market orientated view finds empirical evidence for a number of factors being favourable for a market orientated approach. Including Connectedness, Centralisation and Formalisation Service and Cost focus Communication systems, Integration devices and marketing

function controlled devices.

Authors Ansoff (1957) Growth Strategies grid. McCarthy (1960) 4 Ps Levitt (1960) Marketing Myopia Humphrey (1960s) - SWOT inventor Rogers (1962) Diffusion of innovation curve Shostack (1977) Tangible-Intagible continuum Porters (1979) 5 Forces. Industry Analysis. Boom and Bitner (1981) 7 Ps for services Levitt (1981) Everyone sells intangibles Berry (1984) The customer affects the process Webster (1984) 4ps not suited to industrial products Piercy and Giles (1989) - SWOT refiner Brunner’s 4Cs (1989) – similar to 4ps (Concept, Costs, Channels,

Communications). Prahalad and Hamel ( 1990) Core Competencies Rafiq and Ahmed (1996) survey of UK and Eurpean academics -

7ps should replace 4ps Hill and Westbrook (1997) - SWOT criticizer Gerpott et al (2000) work on telecommunications Dexter (2002) Challenges in segmenting business markets Leonidou (2005) Buying Influence Strategies - Study of Greek

industrial buyers. RELIC R Kotler et al (2008)

Beautiful Examples http://one.laptop.org/ amazing scheme

Bizarre Examples: Hotmail & Gmail

Free service with advertisement for revenue. Personalisation directing advertisement to certain demographics.

BMW Celebrities and Film makers. A series of eight high-cost, high-production short films released on BMW’s website. The films were produced and directed by such

acclaimed filmmakers as David Fincher and Guy Richie and starred actors such as Don Cheadle, Clive Owen, and even Madonna. Within the first four months of release, the films attracted over 11 million views and sent BMW sells up 12% in 2001 alone. The success of the BMW series has prompted many other car manufacturers such as Nissan to adopt a similar internet-based strategy.

Wii Case. Understanding customer needs and wants. Expanding the market to create a segment, older users and women. First time users

Burberry Segment the market into men's, women's Burberry check is a brand.

Blendtec ‘will it blend’ campaign Use of high profile goods campaign

Naked Wines – Customer Choice – Customer Perceived value Instead of sending bottles every month that the customer has not chosen, customer s can choose their wine by building up money in

an account. Unethical advertisement. A large minority of customers did not wish to pay 20 a month and were upset to see money coming from

their account. Dairy Milk (2007) Phil Collins Dairy Milk advert

Example of brand preference. YouGov indicated that 20% more people looked favourably on the brand after the campaign that saw 6 million views on YouTube and more on TV.

Example of joint companies. Amended version shown at Rugby world cup Honda. (2008) Released a video live with sky divers spelling out their name. The ‘exclusivity’ of the live advertisement

creating brand favour. Viral Form of Advertisement

Office Max. (2007) Sells office furniture and stationary. http://www.officemax.com/ Example. They published ‘elf yourself’ a video where you could change the faces of your characters to you and your friends to whom you would send it,

doing the advertisement work for them. Clover field (2008) Film didn’t say the name of the film in the advertisement it just showed the website, fictional characters and

companies had their own myspace pages created. Lonely Island (2008) Jizz in my pants. Featured on Saturday night live (US TV show) and youtube with millions of views. They

managed to sell over 80000 copies of their CD The best Job In the world. (Australian Government) Generated tourism for Australia (Example is about none product

none …) Tesco - Loyalty card Virgin -Points Myopia. C programming language was all about speed. Java was all about productivity.

Command words http://www.bized.co.uk/reference/studyskills/command.htm

Angel Solutions Segmentation. Targeting Differentiation Pricing

Primary Secondary Children Centre

Myopia (Also marketing Focus) Product focus adding new features, rather than looking

at customer needs. Relationship depth with the NCER Life time value of a customer school (huge)