What is Marketing? What is Marketing?

-Marketing – a set of business practices designed to plan for and present an organization’s products or

services in ways that build effective customer relationships

-Good marketing is not a random activity; it requires thoughtful planning with an emphasis on the

ethical implications of any of those decisions on consumers and society in general

-Marketer’s responsibility – Marketers must address the ethical implications of their actions on society

in general

Core 1: Marketing is About Satisfying Customer Needs and Wants

-Need – a person feeling physiologically deprived of basic necessities, such as food, clothing, shelter

-Want – the particular way in which a person chooses to satisfy a need, which is shaped by a person’s

knowledge, culture, and personality

-Target market – the customer segment or group to whom the firm is interested in selling its products

and services

-Ex. Crest provides a wide variety of dental care products to deliver the desired benefits

Core 2: Marketing Entails Value Exchange

-Exchange – the trade of things of value between the buyer and the seller so that each is better off as a

result

-Can be an exchange of information for convenience

-Ex. When you purchase a new Justin Bieber CD, you are engaging in a marketing exchange. You get the

song, and the exchange partners get money and information about you

Core 3: Marketing Requires Product, Price, Place, and Promotion Decisions -Marketing mix (four Ps) – Product, price, place, and promotion – the controllable set of activities that a

firm uses to respond to the wants of its target markets

-A company’s marketing activities are shaped by factors that are both internal to the firm and external

to the firm

-External forces such as cultural, demographic, social, technological, economic, and political and legal

changes shape a company’s marketing activities

Product: Creating Value

-The fundamental purpose of marketing is to create value for both the firm and customer

-Goods – items that can be physically touched

-Services – intangible customer benefits that are produced by people or machines

-Ideas – include thoughts, opinions, philosophies, and intellectual concepts

Price: Transacting Value

-Price is everything the buyer gives up in exchange for the product – money, time, energy

Place: Delivering Value

-All activities necessary to get the product to the right customer when that customer wants it

-Supply chain management – the field that examines these activities

-Ex. Home Depot – “You can’t sell it if it’s not on the shelf”

Promotion: Communicating Value

-The communication activities of marketing

-Used to inform, persuade, influence and remind potential buyers

-Ex. Advertising, personal selling, coupons

Core 4: Marketing can be Performed by Both Individuals and Organizations

-B2B – Wholesaling is often only business to business

-B2C – All retailing is business to consumer selling

-C2C – swap meets, Ebay, yard sales, etc.

-Social media is quickly becoming an integral part of marketing and communication strategies

Core 5: Marketing Occurs in Many Settings -Both profit and non-profit entities

-Ex. Hospitals, theatres, charities, museums, etc.

-Marketing can jump-start the economies of less developed countries by putting buyers and sellers

together to create a new market

-Marketing is often designed to benefit an entire industry, which can help many firms simultaneously

Core 6: Marketing Helps Create Value

-The production-oriented era took place around the turn of the 20th century, when most firms believed a

good product would sell itself

-In the sales-oriented era, production and distribution techniques improved and supply outpaced

demand. Firms found an answer to overproduction by focusing on sales

-In the market-oriented era, the focus was on what customers wanted

-Now, we are in the value-based era, which maintains the market orientation but also includes a focus

on giving greater value than the competition

-Firms must offer customers something in excess of that being offered by the competitors

-Firms must understand how each aspect of their product/service creates value for customers

-Different customers value different things and it’s not always necessarily different customers

What is Value-Based Marketing?

-Value-based marketing – focuses on providing customers with benefits that far exceed the cost (money,

time, effort) of acquiring and using a product or service while providing a reasonable return to the firm

-The ability to collect, store, and classify customer data has been a primary contributor to the growth of

value-based marketing

How Firms Become Value Driven?

-Sharing information

-Balancing benefits and cost – understand key benefits as perceived by customers

-Building relationships with customers – take a long term view of customer relationships

-Customer Relationship Management (CRM) – a business philosophy and set of strategies, programs,

and systems that focus on identifying and building loyalty among the firm’s most valued customers

Why is Marketing Important?

-Marketing expands firms global presence

-Marketing is pervasive across the organization – the marketing department works seamlessly with

other functional areas of the company to design, promote, price and distribute products

-Marketing is pervasive across the supply chain – each step in the supply chain involves marketing

-Marketing enriches society – charities

-Marketing makes life easier – provides us with product and service choices and information about these

choices

-Marketing provides career opportunities – creative side (artists), analytical side (market researchers)

-Marketing can be entrepreneurial – though important to large firms, marketing is equally important to

the success of small ventures – especially new ventures

Developing a Marketing Plan and Marketing Strategies The Marketing Plan

-A written document that acts as a guidebook of marketing activities for the marketing manager

-Provides a basis for comparison of actual and expected performance

-Provides clearly stated activities that help employees work toward common goals

-The three major phases of the marketing plan are planning, implementation and control

-Planning phase – where marketing executives and other top managers define the mission and

objectives of the business, and evaluate the situation by assessing how various players both inside and

outside the organization, affect the firm’s potential for success

-Implementation phase – where marketing managers identify and evaluate different opportunities by

engaging in a process known as segmentation, targeting, and positioning. They then develop and

implement the marketing mix by using the four Ps

-Control Phase – the part of the strategic marketing planning process when managers evaluate the

performance of the marketing strategy and take any necessary corrective actions

Step 1: Define the Business Mission and Objectives

-Mission statement – a broad description of a firm’s objectives and the scope of activities it plans to

undertake; attempts to answer two main questions: What type of business is it? And What does it need

to do to accomplish its goals and objectives? – always refer back to mission statement

-Sustainable competitive advantage – something the firm can persistently do better than its competitors

-Ex. McDonald’s competitive advantages: low prices, quick fast food, consistency across all restaurants

-Sustainable competitive advantage:

-Customer excellence:

-Retaining loyal customers

-Ex. Rogers vs. Primus customer service

-Operational excellence:

-Efficient operations Excellent supply chain management

-Product excellence:

-Achieving effective branding and positioning deterrent to other competitors that look

to enter the market.

-Ex. Strong brand recognition - Coach

-Ex. Looking for brands when shopping - Kleenex

-Locational excellence:

-The three most important things in retailing are location, location, location

-Some grocers buy property just so their competitors cannot get it – Ex. Sobeys

Step 2: Conduct a Situation Analysis

-Situation analysis – uses a SWOT analysis that assesses both the internal environment with regard to its

strengths and weaknesses and the external environment in terms of its opportunities and threats

-The firms should assess the opportunities and uncertainties of the marketplace due to changes in

cultural, demographic, social, technological, economic, and political forces (CDSTEP)

-A SWOT analysis is designed to help the firm determine areas in which it is strong and can compete

effectively and areas where it is weak and vulnerable to competitive attack

Step 3: Identify and Evaluate Opportunities by Using STP (Segmentation, Targeting &

Positioning) -STP – the processes of segmentation, targeting, and positioning that firms use to identify and evaluate

opportunities for increasing sales and profits

-The firm first divides the marketplace into subgroups or segments, determines which of these segments

it should pursue or target, and finally decides how it should position its products and services to best

meet the needs of those chosen targets

-Ex. Disneyworld – different worlds, to apply to different people – families with young kids, singles and

couples, and adults

Segmentation

-Market segment – a group of consumers who respond similarly to a firm’s marketing efforts

-Market segmentation – the process of dividing the market into distinct groups of customers where each

individual group has similar needs, wants, or characteristics

Targeting

-Target marketing/targeting – the process of evaluating the attractiveness of various segments and then

deciding which to pursue as a market

Positioning

-The firm must determine how it wants to be positioned within these segments

-Market positioning - involves the process of defining the marketing mix variables so that target

customers have a clear, distinct, desirable, understanding of what the product does

Step 4: Implement Marketing Mix and Allocate Resources

-If they don’t know about the product, they won’t buy it

-Firms attempt to develop products and services that customers perceive as valuable enough to buy

-A firm provides a product or a service, or some combination thereof, and in return it receives money

-The firm must make the product or service readily accessible when and where the customer wants it

-Marketers must consider which are the most efficient & effective methods to communicate with

customers

-Marketing managers must develop schedules: timelines for each activity

-Ex. Home Depot was looking for a sustainable competitive advantage. They went to his company and

asked for something new – came up with crack resistance - $0.05 more to produce, charged $6.95 as

opposed to $3.95

Step 5: Evaluate Performance by Using Marketing Metrics

-A metric is a measuring system that quantifies a trend, dynamic, or characteristic

-Metrics are used to explain why things happened and to project the future

-Dog – low market share, might get rid of it

-Question mark – might be growing, not sure what will happen with it

-Stars – starting to take off (fairly new products)

-Cash cows – high market share but not growing

-At each level of an organization, the business unit and its manager should be held accountable only for

the revenues, expenses, and profits that they can control

-One approach is to compare a firm’s performance over time or to competing firms

Growth Strategies -Market penetration strategy – a growth strategy that employs the existing marketing mix and focuses

the firm’s efforts on existing customers – current product/current market

-Market development strategy – a growth strategy that employs the existing marketing offering to reach

new market segments, not currently served by the firm

-International expansion is generally riskier than domestic expansion because firms must deal

with differences in government regulations, cultural traditions, and language

-new market/current market

-Product development strategy – a growth strategy that offers a new product or service to a firm’s

current target market – new product/current market

-Diversification strategy – a growth strategy whereby a firm introduces a new product or service to a

market segment that it does not currently serve – new product/new market

-Downsizing – exiting market, reducing product portfolios, or closing certain store/plant

locations

Analyzing the Marketing Environment A Marketing Environment Analysis Framework -Marketers who understand and manage the changes in their marketing environments are able to adapt

their product and service offerings to meet new challenges and opportunities

Microenvironmental Factors

Company Capabilities

-The first factor that affects the consumer is the firm itself

Competition

-Greater competition means more choices for consumers which influences their buying decisions

-Competitive intelligence (CI) – used by firms to collect and synthesize information about their position

with respect to their rivals; enables companies to anticipate changes in the marketplace rather than

merely react to them

-The strategies to further CI can range from simply sending a retail employee to a competitive store to

check merchandise, prices, and foot traffic to more involved methods such as,

-Reviewing public materials, including websites, press releases, industry journals, annual

reports, etc.

-Interviewing customers, suppliers, partners or former employees

-Analyzing a rival’s marketing tactics, distribution practices, pricing, and hiring needs

Corporate Partners

-Other businesses you work with

-Firms must work together to create a seamless system that delivers goods and services to customers

when and where they want them. Many attribute a key reason for Walmart’s success as their close

relationships with their suppliers

-Few firms operate in isolation – Ex. Car company relies on a sheet metal, tire manufacturer companies

Macroenvironmental Factors

-Macroenvironmental factors – aspects of the external environment – culture, demographics, social

trends, technological advances, economic situation, and political/legal environment (CDSTEP) – that

affect companies

Culture

-The shared meanings, beliefs, morals, values, and customs of a group of people

-Our various cultures influence what, why, how, where, and when to buy

-Regional differences can make curry flavoured potato chips a hit in Vancouver but not in Saskatoon

-Country culture – the easy-to-spot visible nuances that are particular to a country, such as dress

symbols, ceremonies, language, colours, and food preferences

-Canadian culture = polite, diverse, etc.

-The region in which people live in a particular country affects the way they react to different cultural

rituals or even how they prefer a particular product category

-Ex. A resident of Quebec is 25% less likely to buy a hot prepared or re-heatable meal than a resident of

Ontario

Demographics

-Provides an easily understood snapshot of the typical consumer in a specific target market

-Descriptor for a segment of a population

-Generational cohorts – tweens, seniors, gen Y, Baby Boomers, Gen X

-Characteristics differ from one another

-Generational differences: tech savvy, accepting of differences, socially responsible, adaptable

-Income cohorts

-Upper class consumers are more affluent, and their spending patterns are not influenced by

economic conditions – Income > $70 000

-Middle class earn between $30 000 - $70 000

-Working class earn between $20 000-$30 000 barely sufficient income to cover their basic

needs

-Under class earn less than $20 000 and often rely on assistance to cover their basic needs

-Educational cohorts

-Education is related to income, which determines spending power

-Lifelong learning of new skills and new knowledge has become key to survival in the global

economy

-Higher education = higher income

-Gender cohorts

-Male/female roles have been shifting

-Marketing has changed to reflect these shifts

-There will be more women in the work place in our time

Social

-Social trends: greener consumers, privacy concerns, time-poor schedules

-Green consumers – customers who appreciate the efforts of companies to supply them with

environmentally friendly merchandise

-Privacy concerns – loss of privacy, identity theft, do not call, do not e-mail

-Time-poor society - in the majority of families, most parents work; consumers have many more choices

regarding leisure time; many consumers multitask

-More and more of our time is being taken up

-Ex. Work phones make the border between work and family time blurred

-Marketing to children: children are highly impressionable and advertisers must now market food in

reasonably proportioned sizes

Technological Advances

-Technology has impacted every aspect of marketing: net products, new forms of communication, new

retail channels

-On the retail side, firms are able to track an item from the moment it is manufactured, through the

distribution system, to the retail store, and to the hands of the final customer through an RFID chip

Economic Situation

-Foreign currency fluctuations combined with inflation and interest rates affect a firm’s ability to market

goods and services

-Inflation – refers to the persistent increase in the prices of goods and services

-Foreign currency fluctuations – changes in the value of a country’s currency relative to the currency of

another country

-Interest rates – represent the cost of borrowing money

-Recession – a period of economic downturn when the economic growth of the country is negative for at

least a couple of consecutive quarters

Political/Legal Environment

-Political/legal environment – comprises political parties, government organizations, and legislation and

laws that promote or inhibit trade and marketing activities

-Organizations must fully understand and comply with and legislation regarding fair competition,

consumer protection, or industry-specific regulation

-Legislation has been enacted to protect consumers in a variety of ways

-No false or misleading advertising is allowed, manufacturers are required to identify and remove any

harmful or hazardous material, and organizations must adhere to fair and reasonable business practices

when they communicate with consumers

-Ex. Can’t say ‘This is 8 servings’ if you don’t say what a serving is

-Competitors are the ones who tell them its mislabelled

What factors in Kobo’s microenvironment do you think are responsible for Kobo’s success?

-Specific to task (reading)

-Strong partners (Indigo)

-More choice compared to competitors

Identify and describe the macroenvironmental factors that could influence the success of Kobo’s

business.

-Tech savvy generation Y

-Green initiative

-Erases step of having to go to bookstore (time poor society), its immediate

-Economic – save money – download from library

Marketing Research Marketing Research

-Consists of a set of techniques and principles for systematically collecting, recoding, analyzing and

interpreting data that can aid decision makers involved in marketing goods, services or ideas

-When marketing managers attempt to develop their strategies, marketing research can provide

valuable information that will help them make segmentation, positioning, product, place, price and

promotion decisions

-Ongoing market research can identify emerging opportunities and new and improved ways of satisfying

customer needs and wants from changes in the external environment

-Because research is both expensive and time consuming, it is important to establishing advance exactly

what information if required to answer specific research questions and how that information should be

obtained

Step 1: Defining the Objectives and Research Needs

-What information is needed to answer specific research questions?

-How should that information be obtained?

Step 2: Design the Research Project

-In this step, researchers identify the type of data needed and determine the type of research necessary

to collect it

-Secondary data – pieces of information that have already been collected from other sources and usually

are readily available

-Syndicated data – data available for a fee from commercial research firms such as SymphonyIRI

Group, National purchase Diary Pane, Nielsen, and Leger Marketing

-Marketers must pay close attention to how the secondary data were collected

-Primary data – data collected to address specific research needs

-Can be tailored to fit the research questions

-Reliability – the extent to which the same result is achieved when a study is repeated under

identical situations

-Validity – the extent to which a study measures what it is supposed to measure

-Sample – a segment or subset of the population that adequately represents the entire

population of interest

-Generally, larger samples tend to yield more reliable results up to a certain point

Type Examples Advantages Disadvantages

Secondary Research

-Census data -Sales invoices -Internet information -Books -Journal articles -Syndicated data

-Saves time in collecting data because they are readily available -Reduces data collection costs

-Information may not be precisely relevant to information needs -Information may not be as timely as needed -Sources may not be original; therefore, usefulness is an issue -Methodologies for collecting data may not be relevant or may contain bias in the subject matter

Primary Research

-Observed customer behaviour -Focus groups -In-depth interviews -Surveys -Experiments

-Is specific to the immediate data needs and topic at hand -Offers behavioural insights generally not available from secondary research

-Information is usually more costly to collect -Data typically takes longer to collect -It often requires more sophisticated training and experience to design and collect unbiased, valid, and reliable data

Step 3: Collect Data

-Exploratory research – attempts to begin to understand the phenomenon of interest; also provides

initial information when the problem lacks any clear definition

-Conclusive research – provides the information needed to confirm preliminary insights, which

managers can use to pursue appropriate courses of action

-Conclusive research enables researchers to test their hypothesis

-Hypothesis – a statement or proposition predicting a particular relationship among multiple variables

that can be tested through research

Exploratory (Qualitative) Research Methods

Observation

-Observation – an exploratory research method that entails examining purchase and consumption

behaviours through personal or video camera scrutiny

In-Depth Interviews

-In-depth interview – a research technique in which trained researchers ask questions, listen to and

record the answers, and then pose additional questions to clarify to expand on a particular issue

Focus Group

-Focus group – a research technique in which a small group of persons (usually 8 to 12) comes together

for an in-depth discussion about a particular topic, with the conversation guided by a trained moderator

using an unstructured method of inquiry

Projective Technique

-Projective technique – a type of qualitative research in which subjects are provided a scenario and

asked to express their thoughts and feelings about it

Social Media

-Booming source of data for marketers

Conclusive (Quantitative) Research Methods

Survey Research

-Widely used to study consumers’ attitudes, preferences, behaviours, and knowledge about products

and brands

-Survey – a systematic means of collecting information from people that generally uses a questionnaire

-Questionnaire – a form that features a set of questions designed to gather information from

respondents and thereby accomplish the researcher’s’ objectives; questions can be either unstructured

or structured

-Unstructured questions – open-ended questions that allow respondents to answer in their own words

-Structured questions – closed-ended questions for which a discrete set of response alternatives, or

specific answers, is provided for respondents to evaluate

-Web surveys have steadily grown as a percentage of all quantitative surveys – Ex. Survey Monkey

Experimental Research

-Experimental research- a type of quantitative research that systematically manipulated one or more

variables to determine which variable has a causal effect on another variable

Scanner Research

-Scanner research – a type of quantitative research that uses data obtained from scanner readings of

UPC codes at checkout counters

Panel Research

-Panel research – a type of quantitative research that involves collecting information from a group of

consumers (the panel) over time; data collected may be from a survey of a record of purchases

Step 4: Analyzing Data

-Data – raw numbers or other factual information of limited value

-Information – data that has been organized, analyzed, interpreted, and converted into a useful form for

decision makers

-The purpose of converting data to information is to describe, explain, predict, and/or evaluate a

particular situation

-Data helps marketing managers make decisions

-It is important for market researchers to analyze and interpret the data in an objective manner

-They should not try to hide or colour-coat findings that are different from what they had hoped for

Step 5: Presenting Results

-Executive summary

-Body

-Conclusions

-Limitations

-Supplements: tables, figures, appendixes

-Do it in the form of a report

The Ethics of Using Customer Information

-Unauthorized sharing of customer data with third parties or for purposes other than legitimate

company business is a serious breach of customer trust

-Marketers must take every step possible to protect customer data from security breaches from hackers

and other unauthorized individuals

-In the event of a security breach, the company must quickly notify its affected customers and state

clearly what steps it is taking to protect their data and privacy

-It is extremely important to adhere to ethical practices when conducting marketing research

-The Canadian Marketing Associated provides three guidelines for conducting marketing research: (1) it

prohibits selling or fundraising under the guide of conducting research, (2) it supports maintaining

research integrity by avoiding misrepresentation or the omission of pertinent research data, and (3) it

encourages the fair treatment of clients and suppliers

-Bottom line: marketing research should be used only to produce unbiased, factual information

Leading Indicator

-An economic indicator that changes before the sales of a product has changed. Examples of leading

indicators include building permits, employment insurance claims, money supply, inventory changes,

and stock prices

-Look for things that will help them forecast their product

-Ex. Home appliances use new home construction as leading indicators because if new homes are going

up they will need new appliances

-Ex. Cars – gas prices, economy as a whole, oil prices

Consumer Behaviour The Consumer Decision Process

-Represents the steps that consumers go through before, during, and after making purchases

-Consumer decision process: need recognition information search alternative evaluation

purchase decision post-purchase evaluation

Step 1: Need Recognition

-The consumers must recognize they have an unsatisfied need and want to go from their actual, needy

state to a different, desired state

-Need recognition – the beginning of the consumer decision process; occurs when consumers recognize

they have an unsatisfied need and want to go from their actual needy state to a different, desired state

-Ex. Your stomach telling you, you are hungry

-Functional needs- pertain to the performance of a product or service

-Psychological needs – pertain to the personal gratification consumers associate with a product or

service

-Ex. Red hot shoes make you attractive

Step 2: Information Search

-The consumer searches for information about the various options that exist to satisfy the need

-The length and intensity of the search are based on several factors, including the degree of perceived

risk associated with purchasing the product or service and the importance of the product to the

consumer

-Internal search for information – occurs when the buyer examines his or her own memory and

knowledge about the product or service, fathered through past experiences

-External search for information – occurs when the buyer seeks information outside his or her personal

knowledge base to help make the buying decision

Factors Affecting Consumers’ Search Processes

-The perceived benefits vs. perceived costs of search – is it worth the time and effort to search for

information about a product or service? Ex. You would spend the time for a car, but not for a tank top

-The locus of control

-Internal locus of control – refers to when consumers believe they have some control over the

outcomes of their actions, in which case they generally engage in more search activities

-External locus of control – refers to when consumes believe that fate or other external factors

control all outcomes – ‘why bother?’

-Actual or perceived risk – the higher the risk, the more likely the consumer is to engage in an extended

search

-Performance risk – involves the perceived danger inherent in a poorly performing product

-Financial risk – risk associated with a monetary outlay; includes the initial cost of the purchase

as well as the costs of using the item or service

-Social risk- involves the fears that consumers suffer when they worry others might not regard

their purchases positively

-Physiological (safety) risk- risk associated with the fear of an actual harm should the product

not perform properly

-Psychological risk- associated with the way people will feel if the product of service does not

convey the right image

-Type of product or service

-Specialty goods/services- products or services toward which the customer shows a strong

preference and for which he or she will expend considerable effort to search for the best

suppliers

-Shopping goods/services- products or services, such as apparel, fragrances, and appliances, for

which consumers will spend time comparing alternatives

-Convenience goods/services – products or services for which the consumer is not willing to

spend any effort to evaluate prior to purchase

Step 3: Alternative Evaluation

-Once consumers have recognized a problem and explored the possible options, they must sift through

the choices available and evaluate the alternatives

-Evaluative criteria – a set of important attributes about a product such as price, looks, popularity

-To simplify the potentially complicated decision process, consumers use shortcuts such as determinant

attributes and consumer decision rules

-Determinant attributes – product features that are important to the buyer that differentiate competing

brands or stores such as low gas mileage or shape, colour of a car, or store location

-Consumer decision rules- the set of criteria consumers use consciously or subconsciously to quickly and

efficiently select from among several alternatives

-Decision heuristics- mental shortcuts that help consumers narrow down choices; examples include

price, brand, and product presentation

-Marketers may even provide free samples or trials of their products which may enable consumers to

compare the actual products

-Universal – include all possible choices for a product category – all products

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-Retrieval – are those brands or stores that can be easily brought forth from memory – ones you

remember

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-Evoked – the alternative brands or stores that the consumer states he or she would consider

when making a purchase decision

Step 4: Purchase Decision

-Once consumers have considered the possible alternative and evaluated the pros and cons of each,

they can move toward a purchase decision

-After consumers purchase the product or service, they usually consume it, or “put it to the test”

-Ritual consumption- refers to a pattern of behaviours tied to life events that affect what and how

people consume

-Additional factors that affect whether the purchase decision is made immediately or later, such as store

atmospherics, shopping situation, and temporal states

Step 5: Post-purchase

-Involves actual customers NOT potential

-Three possible post-purchase outcomes:

Customer Satisfaction

-Marketers should take the following steps to ensure satisfaction:

-Build realistic expectations

-Demonstrate correct product use

-Stand behind the product by offering money back guarantees and warranties

-Encourage consumer feedback

-Periodically make contact with customers and thank them for their support

Postpurchase Cognitive Dissonance

-Postpurchase dissonance – an internal conflict that arises from an inconsistency between two beliefs,

or between beliefs and behaviour; buyer’s remorse

-It is a feeling of regret, guilt, or grave uneasiness which generally occurs when a consumer questions

the appropriateness of a purchase after his or her decision made

Consumer Loyalty

-Consumers loyalty develops over time with multiple repeat purchases of the product or brand from the

same marketer

-Marketers attempt to build and nurture a loyal relationship with their customers from the very first

purchase and with each subsequent purchase

Undesirable Consumer Behaviour

-Passive consumers are those that don’t repeat purchase or fail to recommend the products to others

-Negative word of mouth – occurs when consumers spread negative information about a product,

service, or store to others

Factors Influencing Consumer Buying Decisions

Factors Influencing the Consumer Decision Process

-Psychological factors – motives, attitudes, perceptions, learning, lifestyle

-Motives – a need to want that is strong enough to cause the person to seek satisfaction – Ex.

Safety needs, love, esteem needs, self-actualization needs

-Attitude – a person’s ensuring evaluation of his or her feelings about and behavioural

tendencies

toward an object or idea

-Perception – the process by which we select, organize, and interpret information to form a

meaningful picture of the world – now it’s a way to express yourself

-Learning – refers to a change in a person’s though process or behaviour that arises from

experience and takes place throughout the consumer decision process

-Lifestyle – refers to the way consumers spend their time and money to live

-Situational factors – purchase situation, shopping situation temporal state

-Purchase – usual influences may be overridden due to special purchase situation

-Shopping – store atmosphere, crowding, sales people, promotions, packaging, in store

demonstrations

-Temporal state – state of mind due to time or life event

-Social factors – family, culture, reference groups

-Family – helps make purchase decisions or we make purchase decisions with them in mind

-Culture – shared meanings, beliefs, morals, values and customs of a group of people

-Reference groups – one or more persons an individual uses as a basis for comparison regarding

beliefs, feelings and behaviours

Involvement and Consumer Buying Decisions

-Involvement- the consumer’s degree of interest or concern in the product or service

-A low-involvement customer will likely process the same advertisement in a less thorough manger –

such a consumer might pay less attention to the key elements of the message

Extended Problem Solving

-Extended problem solving- a purchase decision process during which the consumer devotes

considerable time and effort to analyzing alternatives; often occurs when the consumer perceives that

the purchase decision entails a great deal of risk

Limited Problem Solving

-Limited problem solving- occurs during a purchase decision that calls for, at most, a moderate amount

of effort and time

-Limited problem solving usually relies on past experience more than on external information

-A common type of limited problem solving is impulse buying

-Impulse buying- a buying decision made by customers on the spot when they see the merchandise

-Habitual decision making – a purchase decision process in which consumers engage with little conscious

effort

Business-to-Business Marketing B2B Markets

Business-to-business (B2B) marketing – the process of buying and selling goods or services to be used in

the production of other goods and services, for consumption by the buying organization, or for resale by

wholesalers and retailers

-Firms focus their efforts on serving specific types of customer markets to create value for those

customers

-Many firms find is more productive to focus their efforts on key industries or market segments rather

than on ultimate consumers

Manufacturers or Producers

-Some of the biggest B2B buyers are manufacturers and producers

-Buy raw materials, components or parts

Resellers

-Resellers- marketing intermediaries that resell manufactured products without significantly altering

their form

Institutions

-Institutions such as hospitals or schools also purchase all kinds of goods and services for the people

they serve

-In most countries, the central government tends to be one of the largest purchasers of goods

Key Challenges of Reaching B2B Clients

-Identify the right persons or decision makers within the organizations who can authorize or influence

purchases

-Marketers must understand the buying process of each of its potential clients

-Identify the factors that influence the buying process of each of its potential clients

-To address the complexity of B2B markets, many companies have salespeople or a sales team

dedicated to specific clients – Ex. The Office

Differences Between B2B and B2C Markets

Market Characteristics -Demand for business products is derived -Fewer customers, more geographically concentrated, and orders are larger -Demand is more inelastic, fluctuates more, and more frequently

Product Characteristics -Products are technical in nature and purchased based on specifications -Mainly raw and semi-finished goods are purchased -Heavy emphasis is placed on delivery time, technical assistance, after-sale service, and financing assistance

Buying Process Characteristics -Buying decision is more complex -Buying may involve competitive bidding, negotiated pricing and complex financial arrangements -Buying involves qualified, professional buyers who follow a more formulized buying process -Buying criteria and objective are specified -Multiple people with varied interests participate in purchase decisions -Reciprocal arrangements exist, and negotiations between buyers and sellers are common -Buyers and sellers usually work closely to build close long-term relationships -Online buying over the Internet is common

Marketing Mix Characteristics -Direct selling is the primary form of selling and physical distribution is often essential -Advertising is technical in nature and promotions emphasize personal selling -Price is often negotiated, inelastic, frequently affected by trade and quantity discounts.

B2B Classification System and Segmentation

-North American Industry Classification System (NAICS) codes- a classification scheme that categorizes

all firms into a hierarchical set of six-digit codes

-The NAICS system can be quite useful to B2B marketers for segmenting and targeting markets

-Marketers may segment B2B markets in several other ways, including geographic location, firm size,

account size, and types of products purchased

The B2B Buying Process

Stage 1: Need Recognition

-The buying organization recognizes, through either internal or external sources, that it has an unfulfilled

need

-Sources for recognizing new needs: suppliers, salespeople, competitors

Stage 2: Product Specification

-After recognizing the need, the organization considers alternative solutions and comes up with

potential specifications that suppliers might use to develop their proposals to supply the product

Stage 3: RFP Process

-Request for proposal – a common process through which buying organizations invite alternative

suppliers to bid on supplying their required components

Stage 4: Proposal Analysis, Vendor Negotiation and Selection

-Often several vendors are negotiating against each other due to RFP

-Considerations other than price play a role in final selection

-Firms apply different strategies for vendor selection: Some always choose the lowest price, whereas

others apply more complicated selection criteria

Stage 5: Order Specification

-Firm places the order

-The exact details of the purchase are specified

-All terms are detailed influencing payment

Step 6: Vendor Performance Assessment Using Metrics

-Firms analyze their vendors’ performance so they can make decisions about their future purchases

1. The buying team develops a list of issues that it believes are important to consider in the evaluation of

the vendor – column 1

2. To determine how important each of these issues is, the buying team assigns an importance score to

each – column 2

3. The buying team assigns numbers that reflect its judgments about how well the vendor performs

using a 5 point scale, where 1 equals “poor performance” and 5 equals “excellent performance” –

column 3

4. To get the overall performance of the vendor, the team combines the importance of each issue and

the vendor’s performance scores by multiplying them together – column 4

Factors Affecting the B2B Buying Process

The Buying Centre

-Buying centre – the group of people typically responsible for the buying decisions in large organizations

-6 different buying roles: initiator, influencer, decider, buyer, user, gatekeeper

-Initiator – person that initiates the buying process – Ex. Doctor

-Influencer – person who influences decision, could be sales person or advisors – Ex. Medical device

supplier

-Decider – person who make actual decision – Ex. The Hospital

-Buyer – person who writes the purchase order – Ex. Hospital’s material manger

-User – person who uses the product – Ex. Patient

-Gatekeeper – person who controls access to others – Ex. The Insurance Company

Organizational Culture

-Organizational culture- reflects the set of values, traditions, and customs that guide a firm’s employee’s

behaviour

-Could be demographic, autocratic, consultative, consensus

-Autocratic buying centre – a buying centre in which one person makes the decision alone

-Democratic buying centre- a buying centre in which the majority rules in making decisions

-Consultative buying centre- a buying centre in which one person makes the decision, but he or she

solicits input from others before doing so

-Consensus buying centre – a buying centre in which all members of the team much reach a collective

agreement that they can support a particular purchase

Buying Situations

-New buy:

-Buying for the first time

-Likely to be quite involved

-The buying centre will probably use all six steps in the buying process

-Modified rebuy

-Purchasing a similar product but changing specifications

-Current vendors have an advantage

-Straight rebuy

-Buying additional units or products that have been previously purchased

-Most B2B purchase fall into this category

-Buyer is only member involved in the process

-These varied types of buying situations call for very different marketing and selling strategies

Role of the Internet in B2B Marketing

-The Internet has become the communication mode of choice, and sometimes of necessity, for

connecting divisions and employees located in disperse locations

-Another increasingly common use of the Internet involves virtual trade shows

-Private exchange- occurs when a specific firm (either buyer or seller) invites others to participate in

online information exchanges and transactions

-Manufacturers and suppliers can use the Internet to work together to design better products

-B2B transactions have increasingly turned to online auctions

-English auction – goods and services are simply sold to the highest bidder

-Reverse auction- the buyer provides specifications to a group of sellers, who then bid down the price

until the buyer accepts a specific bid

Segmentation, Targeting, and Positioning Step 1: Establish Overall Strategy or Objectives

-Articulate the mission and the objectives of the company’s marketing strategy clearly

-The segmentation strategy must be consistent with and derived from the firm’s mission and objectives,

as well as its current situation – it’s strengths, weaknesses, opportunities and threats (SWOT)

Step 2: Segmentation Bases

Segmentation Base Sample Segments

Geographic Country, province, city, urban, rural, climate, continent

Demographic Age, gender, income, education, occupation, ethnic background, religion, family life cycle

Psychographic Lifestyles, values, personality, self-concept

Behavioural Benefits sought, usage rates, user status, loyalty

Geographic Segmentation

-Geographic segmentation- the grouping of consumers on the basis of where they live

-Ex. Marketing Lays Wasabi in diverse cities like Vancouver and Toronto

Demographic Segmentation

-Demographic segmentation – the grouping of consumers according to easily measured, objective

characteristics such as age, gender, income, and education

Psychographic Segmentation

-How consumers describe themselves:

-Self values – goals for life

-Self-concept – image a person has of themself

-Lifestyles – the way a person lives life to achieve goals

VALS Framework

-Classifies consumers into eight segments: Innovators, thinkers, believers, achievers, strivers,

experiencers, makers, or survivors

-VALS enables firms to identify target segments and their underlying motivations

-It shows correlations between psychology and lifestyle choices

What is VALS used for?

-Segments adults ages 18 years and older on the basis of psychological traits that correlate with

purchase behaviour and key demographics

-Enabling users to understand not just what, but why consumers exhibit certain preferences and

attitudes. Marketers, strategic planners, new-product designers and others use VALS to:

-Segment their customers and prospects

-Select targets

-Position brands, products, and even policies to the targets

-Develop communications that resonate with and motivate targets to take action

Behavioural Segmentation

-Behavioural segmentation – groups consumers based on the benefits they derive from products or

services, their usage rate, their user status, and their loyalty

-Benefits sought -Users status

-Usage rate – Ex. Internet providers -Loyalty – Ex. Shopper’s Optimum card

-Loyalty segmentation- strategy of investing in loyalty initiatives to retain firm’s most profitable

customers

Using Multiple Segmentation Methods

-Geo-demographic segmentation – the grouping of consumers on the basis of a combination of

geographic, demographic, and lifestyle characteristics

-PSYTE clusters- the grouping of all neighbourhoods in Canada into 60 different lifestyle clusters

Step 3: Evaluate Segment Attractiveness

-Identifiable, reachable, substantial and profitable, and responsive

Identifiable

-Firms must determine who is within their market to be able to design products or services to meet their

need

-It is important to ensure that the segments are distinct from one another

Reachable

-Potential customer has to know if the product exists, what the product can do, and how they can buy it

Responsive

-Customers must:

-react positively to firm’s offering

-move toward the firm’s product/services

-accept the firm’s value proposition

Substantial and Profitable

-Once the firm has identified is potential target markets, it needs to measure their size and growth

potential

-If a market is too small or its buying power insignificant, it won’t generate sufficient profits or be able to

support the marketing mix activities

-Key factors to keep in mind: market growth, market competitiveness, and market access

-A hot segment today may not last long enough to make it worth investment

-Ex. Wheelies market

Segment profitability = (Segment size x Segment adoption percentage x purchase behaviour x

profit margin percentage) – Fixed costs

Segment size = number of people in the segment

Segment adoption percentage = percentage of customers in the segment who are likely to adopt

the product/service

Purchase behaviour = Purchase price x number of times the customer would buy the product or

service during a given time period

Profit margin percentage = (Selling price – variable costs) / selling price

Fixed costs = Advertising expenditure, rent, utilities, insurance, admin, salaries

Step 4: Select Target Market

-The key factor likely to affect this decision is the marketer’s ability to pursue such an opportunity or

target segment

Undifferentiated Segmentation Strategy, or Mass Marketing

-Undifferentiated segmentation strategy (mass marketing) – used when the product offers the same

benefits to everyone

-If the product or service is perceived to provide the same benefits to everyone, there simply is no need

to develop separate strategies for different groups

Differentiated Segmentation Strategy

-Differentiated segmentation strategy- several market segments with a different offering for each

-Firms embrace differentiated segmentation because it helps them obtain a bigger share of the market

Concentrated (Niche) Segmentation Strategy

-Concentrated (or niche) segmentation strategy – a marketing strategy of selecting a single, primary

target market and focusing all energies on providing a product to fit that market’s needs

Micromarketing

-Micromarketing (one-to-one) marketing –tailors a product or service an individual customer’s wants or

needs

-Mass customization- the practice of interacting on a one-to-one basis with many people to create

custom-made products or services; providing one-to-one marketing to the masses

Step 5: Identify and Develop Positioning Strategy

-Positioning- the mental picture that people have about a company and its products or services relative

to competitors

-Preference is when consumers want a company’s brand and will not accept competitors’ substitutes

-Effective positioning is about letting consumers know what the company’s unique value proposition is

and for whom it is intended

-Positioning steps:

1. Determine consumers’ perceptions and evaluations in relation to competitors’

2. Identify competitor’s positions

3. Determine consumer preferences

4. Select the position

5. Monitor the positioning strategy

Value

-Among the most important considerations for consumers when they make a purchase decision

-The relationship of price to value

-Different consumers = different values

Product Attributes

-Focus on product leadership, emphasizing dimensions such as innovation, quality, performance design,

and reliability

Benefits and Symbolism

-Emphasizes the benefits of the brand as well as the psychological meaning of the brand to consumers

-Symbols can be used as a positioning tool

-Simple makes it easy to remember

Competition

-Position against an entire product classification or position against a specific competitor

-Firms that lack market leadership often position themselves in contrast with the leader to demonstrate

that they offer the same (or better) service and quality – Ex. “We’re number 2 so we have to work

harder”

Market Leadership

-Market leaders may emphasize their leadership position within their industry

-Ex. eBay, Google – each of these companies is the leader in their industry and so consumers often

perceive them as setting the standards of their industry

Positioning by Using Perceptual Mapping

-Perceptual map- displays, in two or more dimensions, the position of products or brands in the

consumer’s mind

-To derive a perceptual map:

1. Determine consumers’ perceptions and evaluations of the product or service in relation to

competitors’

2. Identify competitors’ positions

3. Determine consumer preferences

4. Select the position

5. Monitor the positioning strategy

Repositioning

-Brand repositioning- a strategy in which marketers change a brand’s focus to target new markets or

realign the brand’s core emphasis with changing market preferences

-Companies should reposition their brands to keep up with changes in the marketplace or to put a fresh

spin on their stale and stodgy brand

-A major advantage of successful repositioning is that it strengthens the brand in the marketplace

-New marketing opportunities also may spur firms to reposition their brands

Positioning Statement

-Positioning statement- expresses how a company wants to be perceived by consumers

-For (target customer)

-Who (Statement of the need or opportunity)

-The product name) is a (product category)

-That (statement of the key benefit – that is compelling reason to buy)

-Unlike (primary competitive alternative)

-Our product (Statement of primary differentiation)

Ex. Tim Hortons:

FOR people who are looking for healthy fast food

WHO are looking for value

TIM HORTONS is a COFFEE SHOP

THAT offers low price consistency

UNLIKE Starbucks

OUR PRODUCT offers quality at a low price

You have been asked to identify various strategies for segmenting a market. List and discuss each of the

overall strategies that can be used to develop a segmentation approach. Provide an example of each of

the four strategies the sporting goods shop might use.

-With an undifferentiated or mass marketing, strategy the sporting goods shop would assume its

products appear to everyone and attempt to market its goods to as broad a population as possible,

without regard to any differentiation based on different customer attributes

-If it were to use a differentiated strategy, the sporting goods shop might try to target casual recreation

sports enthusiasts and more professional athletes by offering products of different calibre or quality

-A concentrated strategy selects a single, primary target market and focuses all energies on providing a

product to fit that market’s needs. In this case, the sporting goods shop might focus on a single sport,

such as lacrosse, and focus all of its efforts on meeting the needs of high school- and college-level

lacrosse players

-When a firm tailors a product or service to suit an individual customer’s wants or needs, it is engaging

in micromarketing; the sporting goods shop might offer custom-made, tailored baseball uniforms to

individual customers