CHAPTER 1: DEFINING MARKETING FOR THE 21ST CENTURY

THE SCOPE OF MARKETING

What is marketing?
 Marketing: identifying and meeting human and social needs
o A societal process by which individuals and groups obtain what they need and want through
creating, offering, and freely exchanging products and services of value with others
 Marketing management: the art and science of choosing target markets and getting, keeping, and
growing customers through creating, delivering, and communicating superior customer value

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

Who markets?
 Marketer: someone who seeks a response (attention, a purchase, a vote, a donation) from another party
 Prospect: a prospective client from whom a purchase, a vote, or a donation is sought
 Demand states:
o Negative demand: consumers dislike the product and may even pay to avoid it
o Nonexistent demand: consumers may be unaware or uninterested in the product
o Latent demand: consumers may share a strong need that cannot be satisfied by an existing
product
o Declining demand: consumer begin to buy the product less frequently or not at all
o Irregular demand: consumer purchases vary on a seasonal, monthly, weekly, daily, or even
hourly basis
o Full demand: consumers are adequately buying all products put into the marketplace
o Overfull demand: more consumers would like to buy the product than can be satisfied
o Unwholesome demand: consumer may be attracted to products that have undesirable social
consequences
 Market: various groups of customers
o Markets in a modern exchange economy: resource, consumer, intermediary, manufacturer, and
government
 Brand image: the perceptions and beliefs held by consumers, as reflected in the associations held in
consumer memory
 Key customer markets:
o Consumer markets
o Business markets
o Global markets
o Nonprofit and governmental markets
 Marketplace – physical
 Marketspace – digital
 Metamarket – a cluster of complementary products and services closely related in the minds of
consumers, but spread across a diverse set of industries
o Ex: automobile metamarket consists of automobile manufacturers, new and used car dealership,
financing companies, insurance companies, mechanics, auto magazines, etc.

CORE MARKETING CONCEPTS

Needs, wants, and demands
 Needs: basic human requirements
o Ex: air, food, water, clothing, shelter
 Wants: needs become wants when they are directed to specific objects that might satisfy the need
o Ex: needs food but may want to eat pancakes with maple syrup
 Demands: wants for specific products backed by an ability to pay
 Five types of needs:
o Stated needs: what they say they want
 Ex: wants an inexpensive car
 o Real needs: what they actually need
 Ex: want a car whose operating cost, not initial price, is low
o Unstated needs: needs that are not mentioned
 Ex: expects good service from the dealer
o Delight needs: desire for luxuries
 Ex: would like the dealer to include an onboard GPS
o Secret needs: needs that consumers are reluctant to admit
 Ex: wants friends to see him or her as a savvy consumer
 Marketers don’t create needs, they influence wants

Target markets, positioning, and segmentations

 Segmentation: divides the market into segments
 Target market: the part of the qualified available market the company decides to pursue
 Positioning: the act of designing a company’s offering and image to occupy a distinctive place in the
minds of the target market

Offerings and brands

 Value proposition: the whole cluster of benefits the company promises to deliver
 The intangible value proposition is made physical by an offering, which can be a combination of
products, services, information, and experiences
 Brand: a name, term, sign, symbol, or design, or a combination of them, intended to identify the
goods/services of one seller or group of sellers and to differentiate them from those of competitors

Value and satisfaction

 Value: a combination of quality, service and price
o Value perception increase with quality and service but decrease with price
 Satisfaction: a person’s feelings of pleasure or disappointment resulting from comparing a product’s
perceived performance or outcome with his or her expectations

Marketing channels
 To reach a target market, three kinds of channels are used:
o Communication channels: delivers and receive messages from target buyers
o Distribution channels: display, sell, or deliver the physical product or service to the buyer
o Service channels: includes warehouses, transportation companies, banks

Supply chain
 A channel stretching from raw materials to components to finished products carried to final buyers
 Each company captures only a certain percentage of total value generated by the supply chain’s value-
delivery system
 When a company acquires competitors or expands upstream or downstream, its aim is to capture a
higher percentage of supply chain value

Marketing environment
 Task environment: the actors engaged in producing, distributing, and promoting the offering
o The company, suppliers, distributors, dealers, and target customers
 Broad environment: demographic, economic, social-cultural, natural, technological, and political-legal
environment
o Must pay close attention to the trends and developments in these and adjust marketing
strategies as needed

THE NEW MARKETING REALITIES

 Major society forces in creating new marketing behaviours, opportunities, and challenges:
o Network information technology o Globalization
o Deregulation o Privatization
o Heightened competition o Industry convergence
o Retail transformation o Disintermediation
o Consumer buying power o Consumer information
 o Consumer participation o Consumer resistance
 New set of capabilities to help companies cope and respond:
o Marketers can use the internet as a powerful information and sales channel
o Marketers can collect fuller and richer information about markets, customers, prospects, and
competitors
o Marketers can tap into social media to amplify their brand message
o Marketers can facilitate and speed external communication among customers
o Marketers can send ads, coupons, samples, and information to customers who have requested
them or given the company permission to send them
o Marketers can reach consumers on the move with mobile marketing
o Companies can make and sell individually differentiated goods
o Companies can improve purchasing, recruiting, training, and internal and external
communications
o Companies can facilitate and speed up internal communication among their employees by using
the internet as a private intranet
o Companies can improve their cost efficiency by skillful use of the internet

Marketing in practice
 Most important innate qualities of a CMO:
o Risk taker
o Willingness to make decisions
o Problem-solving ability
o Change agent
o Results-oriented
 Most important learned qualities of a CMO:
o Global experience
o Multichannel expertise
o Cross-industry experience
o Digital focus
o Operational knowledge

COMPANY ORIENTATION TOWARD THE MARKETPLACE

 Production concept: holds that consumers prefer products that are widely available and inexpensive
o Managers focus on achieving high production efficiency, low costs, and mass distribution
 Product concept: proposes that consumers favour products offering the most quality, performance, or
innovative features
o Might commit the “better mousetrap” fallacy, believe that a better product will by itself lead
people to beat a path to their door
 Selling concept: holds that customers and businesses, if left alone, won’t buy enough of the
organization’s products
o Practiced most aggressively with unsought goods – goods buyers don’t normally think of buying,
such as cemetery plots and insurance
 Marketing concept: involves finding not the right customers for your products, but the right products for
your customer
o Customer-centred, sense-and-respond philosophy
 Holistic marketing concept: based on the development, design, and implementation of marketing
programs, processes, and activities that recognizes their breadth and interdependencies
o Recognizes and reconciles the scope and complexities of marketing activities
 Relationship marketing: building mutually satisfying long-term relationships with key parties, in order
to earn and retain their business
o Key constituents: customers, employees, marketing partners, and members of the financial
community
o Marketing network: the company and its supporting stakeholders, with whom it has build
mutually profitable business relationships
 Integrated marketing: mixing and matching marketing activities to maximize individual and collective
efforts
o Two key themes:
 Many different marketing activities to create, communicate, and deliver value
  Marketers should design and implement any one marketing activity with all other
activities in mind
o Choose communication options that reinforce and complement each other
 Each must also deliver a consistent brand message at every contact
o Must also develop an integrated channel strategy
 Should assess each channel option for its direct effect on product sales, and brand
equity, and its indirect effect through interactions with other channel options
 Internal marketing: an element of holistic marketing, it is the task of hiring, training, and motivating able
employees who want to serve customers well
o Ensures that everyone in the organization embraces appropriate marketing principles
o Requires vertical alignment with senior management and horizontal alignment with other
departments, so that everyone understands, appreciates, and supports the marketing effort
 Performance marketing: understanding the financial and nonfinancial returns to business and society
from marketing activities and programs
o Considers the legal, ethical, social, and environmental effects of marketing activities and
programs
o Preserving or enhancing consumers’ and society’s long-term well-being

UPDATING THE FOUR Ps

 The four Ps: product, price, place, promotion
 Modern marketing management four Ps:
o People
 Employees are critical to marketing success
 Marketers must view consumers as people to understand their lives more broadly, not
just how they shop for and consume products and services
o Processes
 All the creativity, discipline, and structure brought to marketing management
 Avoid ad hoc planning and decision making and ensure the state-of-the-art marketing
ideas and concepts play an appropriate role in all they do
o Programs
 All of the firm’s consumer-directed activities
o Performance
 To capture the range of possible outcome measure that have financial and non-financial
implications, and implications beyond the company itself

MARKETING MANAGEMENT TASKS

 Developing marketing strategies
o Identify potential long-run opportunities, given its market experience and core competencies
 Capturing marketing insights
o Closely monitor its marketing environment so that it can continuously assess market potential
and forecast demand
 Connecting with customers
o Consider how to best create value for its chosen target markets and develop strong, profitable,
long-term relationships with customers
o Needs to understand consumer markets
 Building strong brands
 Shaping the market offerings
 Delivering value
 Communicating value
 Creating successful long-term growth
CHAPTER 2: DEVELOPING MARKETING STRATEGIES AND PLANS
MARKETING AND CUSTOMER VALUE
The value-delivery process
 Places marketing at the beginning of planning
 Can be divided into three phases:
o Choosing the value
 Segmentation, positioning, targeting
o Providing the value
 Must determine specific product features, prices, and distribution
o Communicating the value
 Utilizing the sales force, sales promotion, advertising, and other promotional tools to
inform and promote the product

The value chain

 Value chain: a tool for identifying ways to create more customer value
o Examine its costs and performance in each value-creating activity and look for ways to improve
 Every firm is a synthesis of activities perform to design, produce, market, deliver, and support its
product
 Nine activities that create value and cost:
o Primary activities
 Inbound logistics, or bringing materials into the business
 Operations, or converting materials into final products
 Outbound logistics, or shipping out final products
 Marketing, which includes sales
o Support activities
 Procurement
 Technology development
 Human resources management
 Firm infrastructure
 Should estimates its competitors; cost and performances as benchmarks
 Core business processes:
o Market-sensing process
 Activities involved in gathering market intelligence, disseminating it within the
organization, and acting on the information
o New offering-realization process
 Activities involved in researching, developing, and launching new high-quality offerings
quickly and within budget
o Customer-acquisition process
 Activities involved in defining target markets and prospecting for new customers
o Customer relationship management process
 Activities involved in building deeper understanding with, relationships with, and
offerings to individual customers
o Fulfillment management process
 Activities involved in receiving and approving orders, shipping the goods on time, and
collecting payment
 Value-delivery network (supply chain): a company’s supply chain and how it partners with specific
suppliers and distributors to make products and bring them to markets

Core competencies
 Own and nurture the resources and competencies that make up the essence for the business
 Core competencies: a capability that distinguishes you from your competitors
o Tend to refer to areas of special technical and production expertise
 Has three characteristics:
o Attribute that is a source of competitive advantage in that it makes a significant contribution to
perceived customer benefits
o Has applications in a wide variety of markets
o Is difficult for competitors to imitate
  Distinctive capabilities: tend to describe excellence in broader business process
o Ex: Sick Kids Hospital
 Business realignment may be necessary to maximize core competencies
o Has three steps:
 (Re) defining the business concept or “big idea”
 (Re) shaping the business scope
 (Re) positioning the company’s brand identity

A holistic marketing orientation and customer value

 One view of holistic marketing is as “integrating the value exploration, value creation, and value-
delivery activities with the purpose of building long-term, mutually satisfying relationships and co-
prosperity among key stakeholders
 Holistic marketing framework is designed to address three key management questions:
o Value exploration
 How can a company identify new value opportunities?
o Value creation
 How can a company efficiently create more promising new value offerings?
o Value delivery
 How can a company use its capabilities and infrastructure to deliver the new value
offerings more efficiently?

The central role of strategic planning

 Strategic planning calls for action in three key areas:
o Managing a company’s businesses as an investment portfolio
o Assessing each business’s strength by considering the market’s growth rate and the company’s
position and fit in that market
o Establishing a strategy
 Most companies consist of four organizational levels:
o Corporate – responsible for designing a strategic plan to guide the enterprise
o Division – establishes a plan to allocate the funds to each business with the division
o Business-unit – develops strategic plan to carry business into profitable future
o Product – develops marketing plan to achieve objects
 Marketing plan: written document that summarizes what the marketer has learned about the
marketplace, indicates how the firm plans to reach its marketing objectives, and help direct and
coordinate the marketing effort
 Strategic marketing plan: lays out target markets and the value proposition that will be offered, based
on analysis of the best market opportunities
 Tactical marketing plan: lays out marketing tactics, including product features, promotions,
merchandising, pricing, sales channels, and service

CORPORATE AND DIVISION STRATEGIC PLANNING

 All corporate headquarters undertake four planning activities:
o Defining the corporate mission
o Establishing strategic business units (SBUs)
o Assigning resources to each SBUs
o Assessing growth opportunities

Defining the corporate mission

 Mission statements: statements that organizations develop to share with managers, employees, and
customers
o Provides a shared sense of purpose, direction, and opportunity
 Good mission statements have five characteristics:
o They focus on a limited number of goals
o They stress the company’s major policies and values
o They define the major competitive spheres within which the company will operate
o They take a long-term view
o They are as short, memorable, and meaningful as possible
Establishing strategic business units
 Strategic business units (SBUs): a single business or collection of related businesses that can be planned
separately from the rest of the company, with its own set of competitors and a manager who is
responsible for strategic planning and profit performance
 Has three characteristics:
o It is a single business or collection of related businesses that can be planned separately from the
rest of the company
o It has its own set of competitors
o It has a manger who is responsible for strategic planning and profit performance and who
controls most of the factors affecting profit
 Ex: Liz Claiborne puts more emphasis on some of its younger business, such as Juicy Couture, Lucky
Brand Jeans, and Kate Spade, while selling businesses without the same buzz (Ellen Tracy, Laundry)

Assigning resources to each SBU

 Management can decide to grow, “harvest”, or draw cash from, or hold on to the business
 Newer methods rely on shareholder value analysis, and whether the market value of a company is
greater with an SBU or without it (whether it is sold or spun off)

Assessing growth opportunities

 Involves planning new businesses, downsizing, or terminating older businesses
 Three options:
o Intensive opportunities – identify opportunities to achieve further growth within current
businesses
 In terms of current and new products and markets
 First considers the market-penetration strategy, market-development strategy, product-
development strategy, and then diversification strategy
o Integrative opportunities – identify opportunities to build or acquire business that are related to
current businesses
o Diversification opportunities – identify opportunities to add attractive businesses that are
unrelated to current businesses
 A good opportunity is when the industry is highly attractive and the company has the
right mix of business strengths to be successful

Organization and organizational culture

 Organization: a company’s structures, policies, and corporate culture
 Corporate culture: the shared experiences, stories, beliefs, and norms that characterize an organization
o Hard to change but is often the key to successfully implementing a new strategy

Marketing innovation
 Scenario analysis: developing plausible representations of a firm’s possible future that make different
assumptions about forces driving the market and include different uncertainties

BUSINESS UNIT STRATEGIC PLANNING

SWOT analysis
 External environment (opportunity and threat) analysis
o Monitor key macro environment forces (demographic-economic, natural, technological,
political-legal, and social-cultural) and significant microenvironment actors (customers,
competitors, suppliers, distributors, dealers) that affects its ability to earn profit
o Marketing opportunity: the area of buyer need and interest in which there is a high profitability
that a company can profitably satisfy that need
 Three sources of market opportunity:
 Supply something in short supply
 Supply an existing product or service in a new or superior way
o Problem-detection method – ask consumer for their suggestions
o Ideal method – ask consumer to imagine an ideal version of the product
 o Consumption-chain method – ask consumers to chart their steps in
acquiring, using, and disposing of a product
 New product or service
o Market opportunity analysis (MOA): determines the attractiveness and probability of success
 Can the benefits involved in the opportunity be articulated convincingly to a defined
target market(s)?
 Can the target market(s) be located and reached with cost-effective media and trade
channels?
 Does the company possess or have access to the critical capabilities and resources
needed to deliver the customer benefits?
 Can the company deliver the benefits better than any actual or potential competitors?
 Will the financial rate of return meet or exceed the company’s required threshold for
investment?
o Environmental threat: a challenge posed by an unfavourable trend or development that would
lead to lower sales or profit
 Internal environment (strengths and weaknesses) analysis

Goal formulation
 Goal formulation: the process of developing specific goals for the planning period
 Most business units pursue a mix of objectives, including profitability, sales growth, market share
improvement, risk containment, innovation, and reputation
 The business unit sets these objectives and then manages by objectives (MBO)
 For an MBO system to work, the unit’s objectives must meet four criteria:
o They must be arranged hierarchically, from the most to the least important
o Objectives should be stated quantitatively whenever possible
o Goals should be realistic
o Objectives must be consistent

Strategy formulation
 Strategy: a company’s game plan for achieving its goals
 Every business must design a strategy for achieving its goals, consisting of a marketing strategy, and a
compatible technology strategy and sourcing strategy
 Porter’s generic strategies:
o Overall-cost leadership
o Differentiation – achieving superior performance and customer benefit
o Focus – focus on one or more narrow market segments
 Strategic group: firms pursuing the same strategy directed to the same target market
 Perceived value: the value promised by the company’s value proposition and perceived by the customer
 Strategic alliances
o Need strategic partners if they hope to be effective
o Four categories:
 Product or service alliances – one company licenses another to produce its product, or
two companies jointly market their complementary products or a new product
 Ex: Bell Canada and Microsoft – Sympatico/MSN
 Promotional alliances – one company agrees to carry a promotion for another
company’s product or service
 Ex: Aeroplan rewards and Home Hardware
 Logistics alliances – one company offers logistical services for another company’s
product
 Ex: Warner Music Group and Sub Pop Records – Alternative Distribution
Alliance (ADA)
 Pricing collaborations – one or more companies join in a special pricing collaboration
 Ex: hotel and rental car companies
o Partner relationship management (PRM): activities the firm undertakes to build mutually
satisfying long-term relations with key partners, such as suppliers, distributors, ad agencies, and
marketing research suppliers
Program formulation and implementation
 Seven elements in successful business practice:
o “Hardware”
 Strategy
 Structure
 Systems
o “Software”
 Style – company and employees share a common way of thinking and behaving
 Skills – employees have the skills needed to carry out the company’s strategy
 Staffing – company has hired able people, trained them well, and assigned them to the
right jobs
 Shared values – employees share the same guiding values

PRODUCT PLANNING: THE NATURE AND CONTENTS OF A MARKETING PLAN

 Marketing plan: a written document that summarizes what the marketer has learned about the
marketplace and indicates how the firm plans to reach its marketing objectives
o Contains tactical guidelines for marketing programs and financial allocations over the planning
period
o Provides direction and focus for a brand, product, or company
 Contains the following sections:
o Executive summary and table of contents
o Situational analysis – SWOT
o Marketing strategy
o Financial projections
 Break-even analysis: estimates how many units of the product the company would have
to sell to break even with the given price and cost structure
 Risk analysis: a method by which possible rates of returns and their probabilities are
calculated by obtaining estimates for uncertain variables affecting profitability
o Implementation controls
CHAPTER 4: CONDUCTING MARKET RESEARCH
THE MARKETING RESEARCH SYSTEM
 Marketing insights: diagnostic information how and why we observe certain effects in the marketplace,
and what that means to marketers
 Marketing research: the systematic design, collection, analysis, and reporting of data and findings
relevant to a specific marketing situation facing the company
 Three categories of marketing research firms:
o Syndicated-service research firms – they gather and trade information, which they sell for a fee
o Custom marketing research firms – hired to carry out specific projects
o Specialty-line marketing research firms – provide specialized research services

THE MARKETING RESEARCH PROCESS

1. Define the problem, the decision alternatives, and the research objectives
o Must be careful not to define the problem too broadly or too narrowly
o Some research are:
 Exploratory – its goals is to shed light on the real nature of the problem and to suggest
possible solutions or new ideas
 Descriptive – it seeks to quantify demand
 Causal – its purpose is to test a cause-and-effect relationship
2. Develop the research plan
o Methods to use:
 Data sources
 Primary data, secondary data, or both
 Research approaches
 Observational research – gather fresh data by observing the relevant actors and
settings unobtrusively as the actors shop or consume products
o Ethnographic research: uses concepts and tools from anthropology and
other social science disciplines to provide deep cultural understanding
of how people live and work
 Focus group: a gathering of six to ten people who are carefully selected based
on certain demographic, psychographic, or other considerations and brought
together to discuss various topics of interest
 Survey research – asses people’s knowledge, beliefs, preferences, and
satisfaction and to measure these in the general population
 Behavioural research – customers leave traces of their purchasing behaviour in
store scanning data, catalogue purchases, and customer databases
 Experimental research: the most scientifically valid research, designed to
capture cause-and-effect relationships by eliminating competing explanations of
the observed finding
 Research instruments
 Questionnaires: a set of questions presented to respondents
o Close-end questions are easier to interpret and tabulate
o Open-end questions often reveal more about how people think
 Qualitative measures
o Relatively unstructured measurement approaches that permit a range
of possible responses
o Useful first step in exploring consumers’ brand and product perceptions
o Some approaches:
 Word associations
 Projective techniques – an incomplete stimulus and ask them
complete it, or give them an ambiguous stimulus and ask them
to make sense of it
 Visualization
 Brand personification
 Laddering – a series of increasingly more specific “why”
questions
 Technological devices
 o Can use skin sensors, brain wave scanners, and fully body scanner to get
consumer response
 Sampling plan
 Three decisions:
o Sampling unit – whom should we survey?
o Sampling size – how many people should we survey?
o Sampling procedure – how should we choose the respondents?
 Contact methods
 Mail contacts – mail questionnaire
 Telephone contacts – telephone interviewing
 Personal contacts
o Arranged interviews
o Intercept interviews
 Online contacts – internet-based questionnaire and focus groups
o Pros: inexpensive, fast, tendency to be more honest and thoughtful,
versatile
o Cons: samples can be small and skewed, online panels can suffer from
excessive turnover, technological problems and inconsistency
3. Collect the information
o Generally the most expensive and most prone to error
4. Analyze the information
o Extract findings by tabulating the data and developing summary measures
o May test different hypotheses and theories, applying sensitivity analysis to test assumptions and
the strength of the conclusions
5. Present the findings
o Present findings relevant to the major marketing decisions facing management
6. Make the decision
o Marketing decision support system (MDSS): a coordinated collection of data, systems, tools, and
techniques, with supporting software and hardware, by which an organization gathers and
interprets relevant information from business and environment and turns it into a basis for
marketing action

Seven characteristics of good marketing research

 Scientific method – careful observation, formulation of hypotheses, prediction, and testing
 Research creativity
 Multiple methods
 Interdependence of models and data
 Value and cost of information
 Healthy skepticism
 Ethical marketing

MEASURING MARKETING PRODUCTIVITY

 An important task of marketing research is to assess the efficiency and effectiveness of marketing
activities
 Brand awareness: consumers’ ability to identify the brand under different conditions, as reflected by
their brand recognition or recall performance
 Two approaches:
o Marketing metrics
 Marketing metrics: the set of measures that helps them quantify, compare, and interpret
their marketing performance
 Must give priority to measuring and reporting marketing performance through
marketing metrics
 Short-term results – often reflect profit-and-loss concerns as shown by sales
turnover, shareholder value, or combination of the two
 Changes in brand equity – could include customer awareness, attitudes, and
behaviours; market share; relative price premium; number of complaints;
 distribution and availability; total number of customers; perceived quality; and
loyalty and retention
o Marketing-mix modeling
 Analyze data from a variety of sources to understand more precisely the effects of
specific marketing activities
 Three shortcomings:
 Focuses on incremental growth instead of baseline sales or long-term effects
 Integration of important metrics into marketing-mix modeling is limited
 Generally fails to incorporate metrics related to competitors, the trade, or the
sales force
 Marketing dashboards – structured way to disseminate the insights from the two approaches
o Customer-performance scorecard – records how well the company is doing year after year on
such customer-based measures
o Stakeholder-performance scorecard – the satisfaction of various constituencies who have a
critical interest in and impact on the company’s performance: employees, suppliers, banks,
distributors, retailers and stockholders
CHAPTER 11: COMPETITIVE DYNAMICS
COMPETITIVE STRATEGIES FOR MARKET LEADERS
 Market leader, market challengers, market follower, market nichers
 To stay number one, the firm must find ways to expand total market demand, then protect its current
share through good defensive and offensive actions, and increase market share

Expanding total market demand

 When the total market expands, the dominant firm usually gains the most
 New customers
o Every product class has the potential to attract buyers who are unaware of the product or are
resisting it because of price or lack of certain features
o Can search for new users among three groups:
 Market-penetration strategy – those who might use it but do not
 New-market segment strategy – those who have never used it
 Geographical-expansion strategy – those who live elsewhere
 More usage
o Can sometimes boost the amount through packaging or product redesign
o Increasing frequency of consumption requires either:
 Addition opportunities to use the brand
 Communicate the appropriateness and advantages of using the brand
 Consumers’ perceptions of their usage differ from reality
o Ex: razors – replace more often
 New ways to use the brand
 Increase frequency of consumption is to identify completely new and different
applications
o Ex: baking soda as a refrigerator deodorant
 Protect market share
o Proactive marketing
 Three kinds of proactive marketing:
 Responsive – find a stated need and fills it
 Anticipative – looks ahead to needs customers may have in the near future
 Creative – discovers solutions customers did not ask for but to which they
enthusiastically respond
 A company needs two proactive skills:
 Responsive anticipation – to see the writing on the wall
o Ex: when IBM changed from a hardware producer to a service business
 Creative anticipation – to devise innovation solutions
 Proactive firms:
 Are ready to take risks
 Have a vision of the future and of investing in it
 Have the capabilities to innovate
 Are flexible and non-bureaucratic
 Have many managers who think proactively
o Defensive marketing
 Aim is to reduce the probability of attack, divert attacks to less-threatened areas, and
lessen their intensity
 Six defense strategies:
 Position defense – occupying the most desirable market space in consumers’
minds
 Flank defense – market leader should erect outposts to protect a weak front or
support a possible counterattack
 Pre-emptive defense – a more aggressive maneuver is to attack first, perhaps
with guerrilla action across the market – hitting one competitor here, another
there – and keeping everyone off balance
 Counteroffensive defense – the market leader can meet the attacker frontally
and hit its plank, or launch a pincer movement so it will have to pull back to
defend itself
  Mobile defense – the leader stretches its domain over new territories through
market broadening and market diversification
o Market broadening – shifts the company’s focus from the current
product to the underlying generic need
o Market diversification – shifts the company’s focus into unrelated
industries
 Contraction defense – sometimes large companies can no longer defend all their
territory so in planned contraction (strategic withdrawal), they give up weaker
markets and reassign resources to stronger ones
 Increasing market share
o Gaining increased share does not automatically produce higher profits
o The cost of buying higher market share through acquisition may far exceed its revenue value
o A company should consider four factors first:
 The possibility of provoking antitrust action
 Frustrated competitors are likely to cry “monopoly” and seek legal action from
the Canadian Competition Bureau if a dominant firm makes further inroads
 Economic cost
 Profitability might fall with market share gains after some level
 Cost of gaining further market share might exceed the value if holdout
customers dislike the company, are loyal to competitors, have unique needs, or
prefer dealing with small firms
 The danger of pursuing the wrong marketing activities
 Companies that attempt to increase market share by cutting prices more deeply
than competitors typically don’t achieve significant gains, because rivals met the
price cuts or offer other values so buyers don’t switch
 The effect of increased market share on actual and perceived quality
 Having too many customers can put a strain on the firm’s resources, hurting
product value and service delivery

OTHER COMPETITIVE STRATEGIES

 Market-challenger strategies
o Defining the strategy objective and opponent(s)
 Must first define its strategic objective, usually to increase market share
 Must decide whom to attack:
 The market leader
o High-risk but potentially high pay-off strategy and makes good sense if
the leader is not serving the market well
 Firms its own size that are not doing the job and are underfinanced
 Small local and regional firms
o Choosing a general attack strategy
 Which attack options:
 Frontal attack – the attacker matches its opponent’s product, advertising, price,
and distribution
o The principle of force says the side with the greater resources will win
o A modified frontal attack, such as cutting price, can work if the market
leader doesn’t retaliate, and if the competitor convinces the market its
product is equal to the leader’s
 Flank attack - identifying shifts that are causing gaps to develop, and then
rushing to fill the gaps
o Attractive o challenger with fewer resources and can be more likely to
succeed than frontal attacks
o Serve uncovered market needs
 Encirclement attack – attempts to capture a wide slice of territory by launching
a grand offensive on several fronts
o Makes sense when the challenger commands superior resources
 Bypass attack – bypass the enemy altogether to attack easier markets
o Three lines of approach:
  Diversifying into unrelated products
 Diversifying into new geographical markets
 Leapfrogging into new technologies – patiently researches and
develops the next technology, shifting the battleground to its
own technology where it has an advantage
 Guerrilla attack – small, intermittent attacks, conventional and unconventional,
including selective price cuts, intense promotional blitzes, and occasional legal
action to harass the opponent and eventually secure permanent footholds
o Choosing a specific attack strategy
 Market-follower strategies
 A strategy of product imitation might be as profitable as a strategy of product
innovation
o In innovative imitation, the innovator bears the expense of developing
the new product, getting it into distribution, and informing and
educating the market
 The reward is normally market leadership
o The imitator can copy or improve on the new product
 Probably will not overtake the leader but can achieve high
profits because it did not bear any of the innovation expense
 Four broad strategies:
o Counterfeiter – duplicates the leader’s product and packages and sells it
on the black market or through disreputable dealers
o Cloner – emulates the leader’s products, name, and packaging, with
slight variations
o Imitator – copies some things from the leader but differentiates in
packaging, advertising, pricing, or location
o Adapter – takes the leader’s products and adapts or improves them
 Market-nicher strategies
 Firms with low shares of the total market can become highly profitable through
smart niching
o Tend to offer high value, charge a premium price, achieve lower
manufacturing costs, and shape a strong corporate culture and vision
 ROI for businesses in smaller markets tends to exceeds that in larger market
 Market nicher knows the target customers so well, it meets their needs better
than other firms selling to them casually
 Achieves high margin, whereas the mass marketer achieves high volume
 Has three tasks: creating, expanding, and protecting niches

PRODUCT LIFE-CYCLE (PLC) MARKETING STRATEGIES

 PLC assert four things:
o Products have a limited life
o Product sales pass through distinct stages, each posing different challenges, opportunities, and
problems to the seller
o Profits rise and fall at different stages of the PLC
o Products require different marketing, financial, manufacturing, purchasing, and human
resources strategies in each life-cycle stage
 Four stages:
o Introduction – a period of slow sales growth as the product
is introduced in the market
 Profits are non-existent because of the heavy
expenses of product introduction
o Growth – a period of rapid market acceptance and
substantial profit improvement
o Maturity – a slowdown in sales growth because the product
has achieved acceptance by most potential buyers
 Profits stabilize or decline because of increased
competition
o Decline – sales show a downward draft and profits erode
  Three common alternative patterns:
o Growth-slump-maturity pattern – sales grow rapidly when the product is first introduced and
then fall to a “petrified” level sustained by late adopters buying the product for the first time and
early adopters replacing it
o Cycle-recycle pattern – aggressively promotes a new product, producing the first cycle; later,
sales starts declining, and another promotional push produces a second cycle (usually of smaller
magnitude and duration
o Scalloped pattern – sales pass through a succession of life cycles based on the discovery of new-
product characteristics, uses, or users

o
 Three special categories of PLC:
o Styles – a basic and distinctive mode of expression appearing in a field of human endeavor
 Appears in homes, clothing, and art
 Can last for generations and go in and out of vogue
o Fashions – a currently accepted or popular style in a given field
 Four stages: distinctiveness, emulation, mass fashion, and decline
o Fads – fashion that come quickly into public view, are adopted with great zeal, peak early, and
decline very fast
 Tend to attract only a limited following who are searching for excitement or want to
distinguish themselves from others
 Fail to survive because they don’t normally satisfy a strong need

Marketing strategies: introduction stage and the pioneer advantage

 Sales growth tends to be slow in the introduction stage
 Profits are negative or low, and promotional expenditures are at their highest ratio to sales because the
need to inform potential consumers, induce product trial, and secure distribution in retail outlets
 The market pioneer gains the greatest advantage
 Inventor – first to develop patents in a new-product category
 Product pioneer – first to develop a working model
 Market pioneer – first to sell in the new-product category

Market strategies: growth stage

 Marked by rapid climb in sales; early adopters like the product and additional consumers start buying it
 New competitors enter, attracted by the opportunities
o They introduce new product features and expand distribution
 Prices stabilize or fall slightly, depending on how fast demand increases
 To sustain rapid market share growth now, the firm:
o Improves product quality and adds new features and improved styling
o Adds new models and flanker products to protect the main product
o Enters new market segments
o Increases its distribution coverage and enters new distribution channels
o Shifts from awareness and trial communications to preference and loyalty communications
o Lower prices to attract the next layer of price-sensitive buyers

Marketing strategies: maturity stage

 Divides into three phases:
 o Growth
 Sales growth starts to slow
 There are no new distribution channels to fill
 New competitive forces emerge
o Stable
 Sales per capita flatten because of market saturation
 Most potential consumers have tried the product, and future sales depend on
population growth and replacement demand
o Decaying maturity
 Sales slowdown creates overcapacity in the industry, which intensifies competition
 Weaker competitors withdraw and a few giants dominate

Marketing strategies: decline stage

 Sales decline might be slow but can plunge to zero or petrify at a low level
 As sales and profits decline over a long period of time, some firms withdraw
 Those remaining may reduce the number of products they offer, withdraw from smaller segments and
weaker trade channels, cutting marketing budgets, and reducing prices further

MARKETING IN AN ECONOMIC DOWNTURN

 Explore the upside of increasing investment
 Get close to customers
 Review budget allocations
 Put forth the most compelling value proposition
 Fine-tune brand and product offerings
CHAPTER 5: CREATING LONG-TERM LOYALTY RELATIONSHIPS
BUILDING CUSTOMER VALUE, SATISFACTION, AND LOYALTY
 Managers who believe that the company’s only true “profit centre” consider the traditional organization
chart (a)
 Successful marketing companies invert the chart (b)
o Managers at every level must be personally involved in knowing, meeting, and serving
customers

Customer-perceived value and applying value concepts

 Customer-perceived value (CPV): the difference between the prospective customer’s evaluation of all
the benefits and costs of an offering and the perceived alternatives
 Total customer benefit: the perceived monetary value of the bundle of economic, functional, and
psychological benefits customers expect from a given market offering because of the product, service,
people, and image
 Total customer cost: the perceived bundle of costs customers expect to incur in evaluating, obtaining,
using, and disposing of the given market offering, including monetary, time, energy, and psychological
costs
 Can increase the value to the customer offering by raising economic, functional, or emotional benefits
and/or reducing one or more costs
 Customer value: total customer benefit minus total customer cost
 Customer value analysis: report of the company’s strengths and weaknesses relative to various
competitors
o Steps:
1. Identify the major attributes and benefits customer value
a. Ask customers what attributes, benefits, and performance levels they look for
2. Assess the quantitative importance of the difference attributes and benefits
a. Customers rates the importance of different attributes and benefits
b. If their ratings diverge too much, marketers should cluster them into different
segments
3. Assess the company’s and competitors’ performances on the different customer values
against their rated importance
a. Customers describe where they see the company’s and competitors’
performances on each attribute and benefit
4. Examine how the customers in a specific segment rate the company’s performance
against a specific major competitor on an individual attribute or benefit basis
a. If company A exceeds company B on all important attributes and benefits,
company A can charge a higher price (earn higher profits) or charge the same
price to gain more market share
5. Monitor customer values over time
a. Must periodically redo its studies because the economy, technology, and
features change

Choice processes and implications

  Three possibilities if customer choose company B’s product over company A’s:
1. The buyer might be under orders to buy at the lowest price
2. The buyer will retire before the company realizes the product is more expensive to operate
3. The buyer enjoys a long-term friendship with the product’s salesperson
 Buyers operate under various constraints and occasionally make choices that give more weight to their
personal benefit than to the company’s benefit
 CPV suggests that the seller must assess the total customer benefit and total customer cost associated
with each competitor’s offer to know their rates in the buyer’s mind
 Implies that the seller at a disadvantage has two alternatives: increase total customer benefit or
decrease total customer cost

Delivering high customer value

 Loyalty: a commitment to rebuy or repatronize a preferred product/service in the future despite
situational influences and marketing efforts having the potential to cause switching behaviour
 Value proposition: the whole cluster of benefits the company promises to deliver; it is more than the
core positioning of the offering
o A promise about the experience customers can expect from the company’s market offering and
their relationship with the supplier
o Ex: Volkswagen core positioning is “safety” but buyer receive other benefits like good
performance, design, and safety for the environment
 Value-delivery system: all the experiences the customer will have on the way to obtaining and using the
offering

Total customer satisfaction

 Satisfaction: a person’s feelings of pleasure or disappointment that result from comparing a product’s
perceived performance or outcome with their expectations
 The company must try to deliver a high level of customer satisfaction subject to also delivering
acceptable levels to other stake holders, given its total resources
 The link between customer satisfaction and customer loyalty is not proportional
o Fairly satisfied customers still find it easy to switch when a better offer comes along

Customer complaints
 Not all customers complain, those who don’t tend to stop buying
 Up to 95% of those who complaint will do business with the company again if their complaint was
resolved quickly
 Procedures to recover customer goodwill:
o Set up a toll-free hotline to receive and act on customer complaints
o Contact the complaining customer ASAP
o Accept responsibility for the customer’s disappointment
o Use customer service people who are more empathic
o Resolve the complaint swiftly and to the customer’s satisfaction

Product and service quality

 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: the level at which the product’s primary characteristics operate
 Conformance quality: the degree to which all the produced units are identical and meet the promised
specifications
 Higher levels of quality result in higher levels of customer satisfaction, which support higher prices and
(often) lower costs
 High correlation between relative product quality and company profitability

Maximizing customer lifetime value

 80-20 rule: 80% or more of the company’s profits come from the top 20% of its customers
 Not always the company’s largest customers, who can demand considerable service and deep discount,
who yield the most profit
 o Midsize customers who receive good service and pay nearly full price are often the most
profitable

MAXIMIZING CLV
Customer profitability and analysis
 Profitable customer: a person, household, or company that overtime yields a revenue stream that
exceeds by an acceptable amount the company’s cost stream of attracting, selling, and serving that
customer
o Emphasis on the lifetime stream of revenue and cost, not the profit from a particular transaction
 Useful type of profitability analysis:
o Each cell contains a symbol representing the profitability of selling that product to that
customer

o
 Customer profitability analysis (CPA): a means of assessing and ranking customer profitability through
accounting techniques such as activity-based costing (ABC)
 Activity-based costing: accounting procedures that can quantify the true profitability of different
activities by identifying their actual costs
o Costs should include the cost of making and distributing the products and services and all the
company’s resources that go into serving that customer (ex: taking phone calls from the
customer)

Measuring clv
 Customer lifetime value (CLV): the net present value of the stream of future profits expected over the
customer’s lifetime purchases
 CLV calculations provide a formal quantitative framework for planning customer investment and help
marketers adopt a long-term perspective

CULITVATING CUSTOMER RELATIONSHIPS

Customer relations management
 Customer relations management (CRM): the process of carefully managing detailed information about
individual customers and all customer “touch points” to maximize loyalty
 Customer touch point: an occasion on which a customer encounters the brand and product – from actual
experience to personal or mass communications to causal observation
 Enables companies to provide excellent real-time customer service through the effective use of
individual account information

Personalizing marketing
 All about making sure the brand and its marketing are as relevant as possible to as many customers as
possible
 Those looking to attract and retain customers are discovering that personalization goes beyond creating
customized information
 Thoughtful companies turn their customers into clients
o Customers may be nameless to the institution, served as part of the mass or as part of larger
segments, and by anyone who happens to be available
o Clients cannot be nameless, served on an individual basis and by professional assigned to them
 Permission marketing: the practice of marketing to consumers only after gaining their expressed
permission
 o Based on the premise that marketers can no longer use “interruption marketing” via mass
media campaigns
o Anticipated, personal, and relevant
 One-to-one marketing - works best for firms that normally collect a great deal of individual customer
information and carry a lot of products that can be cross-sole, need periodic replacement or upgrading,
and offer high value
o Four-step framework:
1. Identify your prospects and customers; don’t go after everyone
2. Differentiate customers in terms of their needs and their value to your company
3. Interact with individual customers to improve your knowledge about their individual
needs and to build stronger relationships
4. Customize products, services, and messages to each other

Customer reviews and recommendations

 An increasingly important decision factor is “recommendations from consumers”
o Increasing mistrust of some companies and their advertising, online customer ratings and
reviews play an important role
 Negative reviews can be helpful
o Some purchase the product despite negative reviews because they felt that the comments
reflected personal tastes and opinions that differed from their own

Reducing defection
 Customer churn = defection
 To reduce the defection rate, the company must do the following:
o Define and measure its retention rate
o Distinguish the causes of customer attrition and identify those that can be managed better
o Compare the lost CLV with the costs of reducing the defection rate

Retention dynamics
 Main steps in attracting and retaining customers:

o
 Marketing funnel: identifies the percentage of the potential target market at each stage in the decision
process, from merely aware to highly loyal
 Calculate conversion rates – percentage of customers at one stage who move to the next – to identify any
barrier to building a loyal customer franchise

Managing the customer base

 Improve the aggregate value of the customer base by:
o Reducing the rate of customer defection
o Increasing the longevity of customer relationship
o Enhancing the growth potential of each customer through “share of wallet”, cross-selling, and
up-selling
o Making low-profit customers more profitable or terminating them
o Focusing disproportionate effort on high-profit customers
Building loyalty
 Interacting with customers
 Developing loyalty programs
o Frequency programs (FPs): designed to provide rewards to customers who buy frequently and
in substantial amounts
o Club membership programs: programs open to everyone who purchases a product or service, or
limited to an affinity group of those willing to pay a small fee
 Creating institutional ties

CUSTOMER DATABASES AND DATABASE MARKETING

 Customer database: an organized collection of comprehensive information about individual customers
or prospects that is current, accessible, and actionable for lead generation, lead qualification, sale for
product or service, or maintenance of customer relationships
o Different from a customer mailing list: a set of names, addresses, and telephone numbers
o May contain past purchases, psychographics, mediagraphics, and other info
 Database marketing: the process of building, maintaining, and using customer databases and other
databases to contact, transact, and build customer relationships
 Business database: complete information about business customers’ past purchases, volumes, prices,
and profits
 Data warehouse: a collection of current data captured, organized, and stored by a company’s contact
centre
 Data mining: the extracting of useful information about individuals, trends, and segments from the mass
of data
 Companies can use their databases in five ways:
o To identify prospect
o To decide which customers should receive a particular offer
o To deepen customer loyalty
o To reactivate customer purchases
o To avoid serious customer mistakes

Downside of database marketing and crm

 Five main problems can prevent a firm from effectively using CRM:
o Some situations are just not conductive to database management
 Such as when products is a once-in-a-lifetime purchase (a grand piano), unit sale is very
small (a candy bar), no direct contact between the seller and ultimate buyer, to
expensive to gather info
o Building and maintain a database requires a large, well-placed investment in computer
hardware, database software, analytical programs, communication links, and skilled staff
o It may be difficult to get everyone in the company to be customer oriented and use the available
information
o Not all customers want a relationship with the company
o The assumptions behind CRM may not always hold true