Chapter 1 Marketing: Creating and Capturing Customer

Value
What is marketing?
-

Marketing is an activity, a set of institutions and processes for creating,

communicating, delivering and exchanging offerings that have value for
customers, clients, partners and society at large
Marketing is a social and managerial process by which individuals and
organisations obtain what they need and want through creating and
exchanging value with others.
In a narrower business context, marketing involves building profitable, valueladen exchange relationships with customers
The goal of marketing is to attract new customers by promising superior
value and to keep current customers by delivering satisfaction
The marketing process

Understand the
marketplace
and customer
need, wants,
and demands

Design a
customerdriven
marketing
strategy

Construct an
integrated
marketing
program that
delivers
superior value

Build profitable
relationships
and create
customer
delight

Capture value
from customers
to create
profits and
customer
equity

o By creating value for consumers, organisations in turn capture value

from consumers in the form of sales, profits and long-term customer
equity

Understanding the marketplace and customer needs

Customer needs, wants and demands

- Needs are states of felt deprivation
o Can be physical, social or individual
- Wants are the form taken by human needs as they are shaped by culture and
individual personality
o When backed by buying power, wants become demands
o Consumers view products as bundles of benefits
- Marketers go to great lengths to learn about and understand their customers
o Conduct qualitative research to ascertain if there are unmet needs,
wants & demands
o Conduct quantitative research to ascertain magnitude of the unmet
needs, wants & demands
o Seek customer insights when they examine their databases for hidden
patterns
o Observe & interview customers about their likes & dislikes
Market offerings: Goods, services and experiences
- Market offering is a product that is some combination of goods, services and
experiences that can be offered to a market to satisfy a need or want
o Anything that satisfies a need can be a product
o Marketers distinguish between products that have physical form and
those that dont using the terms goods and services/experiences

o Could substitute terms satisfier, resource, offer

Sellers make mistake of paying more attention to attributes rather than
benefits of product
o Sell product rather than solution to a need
o So taken with products that they only focus on existing wants and lose
sight of underlying customer needs
o Known as marketing myopia
Products create brand experiences for customers

Customer value and satisfaction

- Customer perceived value is the difference between the values the customer
gains from owning and using a product and the costs of obtaining the product
o Customers often judge products on perceived value
- Customer satisfaction depends on a products perceived performance in
delivering value relative to a buyers expectations
o Satisfied customers make repeat purchases
o Must match customer expectations with company performance
Exchanges, transactions and relationships
- Exchange is the act of obtaining a desired object from someone by offering
something in return
o In the broadest sense, the marketer tries to bring about a response to
some market offering
o Is the core concept of marketing
- A transaction consists of a trade of values between two parties
o Is marketings unit of measurement
- Marketing consists of actions taken to build and maintain desirable
exchange relationships with target audiences involving a product, service,
idea or other object
o Marketers aim to build strong relationships by consistently delivering
superior customer value
- Exchange & transactions are interrelated core marketing concepts
o Several conditions must be satisfied for these to take place
At least two parties must participate
Each must have something of value to the other
Each party must want to deal with the other party
Each party must be free to accept or reject the others offer
Each party must be able to communicate and deliver
o These conditions make it possible, but occurrence depends on parties
coming to an agreement
Therefore, act of exchange must make them better off
o Therefore, exchange creates value as it gives people more consumption
possibilities
Markets
- Market is the set of actual and potential buyers of a product
- Consumers do marketing when they obtain information to make their
purchases
- Therefore, marketers must effectively deal with customer-managed
relationships

Marketing involves serving a market of final consumers in the face of

competitors
All parties in the system are affected by major environmental forces
o Each party in the system adds value for the next level
o Therefore, a companys success at building profitable relationships
depends not only on its own actions but also on how well the entire
system serves the needs of final consumers

Designing a customer-driven marketing strategy

Marketing management is the analysis, planning, implementation and
control of programs designed to create, communicate and deliver value to
customers, and facilitate managing customer relationships in ways that enable
the organisation to meet its objectives and those of its stakeholders
o AKA art and science of choosing target markets and building profitable
relationships with them
- To design a winning strategy, marketer must ask two important questions
o What customers will we serve? (who is our target market?)
o How can we serve these customers best? (what is our value
proposition?)
Selecting customers to serve
- Necessary to select the customers they can serve well and profitably
- At times, may be necessary to seek fewer customers and reduce demand
- Marketing management concerned with finding, increasing, as well as
changing or reducing demand
- Demarketing is marketing where the task is to temporarily or permanently
reduce demand
- Different types of demand
o Negative demand
Dislike products/price paid to avoid it
o No demand
Consumers unaware/uninterested
o Latent demand
Demand for products that do not exist yet to satisfy wants/needs
o Declining demand
Self explanatory
o Irregular demand
Demand that varies on certain bases, such as seasonally
o Full demand
-

 Occurs when organisations satisfied with volume of business

o Overfull demand
When demand is higher than organisations can or want to handle
o Unwholesome demand
Products which attract organised efforts to discourage their
consumption
- Demand comes from repeat and new customers
- Past meant the leaky bucket approach could be used keep getting new
customers, dw about old ones
o New marketing realities based on demographics and market conditions
make it more important to retain customers
- Marketers must ensure that there is an experiential element a sense of
excitement associated with market offering/communication is used
o Excitement is customer engagement through experiential and emotional
involvement with sellers
o the key to creating excitement is involvement and interactivity
Choosing a value proposition
- How will the organisation differentiate and position itself in the market?
- The value proposition is the set of benefits or values it promises to deliver to
consumers to satisfy their needs
Marketing management orientations
- 5 concepts which organisations may conduct marketing activities
o Production concept
Holds that consumers will favour products that are available and
highly affordable
Management should focus on improving production and
distribution efficiency
Useful when
Demand exceeds supply
Cost is too high and productivity needed to bring it
down
o Product concept
Holds that consumers will favour products that offer the most
quality, performance and innovative features
Management should focus on making continuous product
improvements
Can lead to marketing myopia
o Selling concept
Holds that consumers will not buy enough of the firms products
unless it undertakes a large-scale selling and promotion effort
Typically practised with unsought goods
Track down prospects and sell them on product benefits
Carries high risks
Focuses on transactions rather than relationships
o Marketing concept
Holds that achieving organisational goals depends on determining
the needs and wants of target markets and delivering the desired
satisfaction more effectively and efficiently than competitors
Selling concept takes an inside-out perspective, but marketing
concept takes an outside-in perspective

Customer driven companies research customers to learn about

their desires, gather new product and service ideas and test
proposed product improvements
When customers do not know what they want, use customer-driving
marketing
Understanding customer needs better than they do
o Societal marketing concept
Questions whether the pure marketing concept overlooks possible
conflicts between short run wants and long run welfare
Should improve both consumer and societys wellbeing
Calls for sustainable marketing socially and environmentally
responsible marketing
Companies should balance three considerations in marketing
strategies
Company profits
Consumer wants
Societys interests

Preparing an integrated marketing plan and program

-

Marketing strategy outlines which customers will be served

Integrated marketing program actually delivers the intended value to target
customers
o Builds customer relationships by transforming the marketing strategy
into action
o Consists of the firms marketing mix, which is the set of marketing tools
the firm uses to implement its marketing strategy
The set of tools marketers employ have developed most recently from the
knowledge gained in business-to-business marketing and in marketing services
o These tools are the extended marketing mix
To deliver on value proposition, needs to be a product, price, place and
promotion

Building customer relationships

Customer relationship management

- CRM is the overall process of building and maintaining profitable customer
relationships by delivering superior customer value and satisfaction
o Deals with all aspects of acquiring, keeping and growing customers
Relationship building blocks: Customer value and satisfaction
- Key to building lasting customer relationships is to create superior customer
value and satisfaction
- Customer value
o A customer buys from the firm that offers the highest customerperceived value
- Customer satisfaction
o Customer satisfaction depends on the products perceived
performance relative to a buyers expectations
o Seek to deliver high customer satisfaction relative to competitors, but
not maximise it
- Customer relationship levels and tools
o Company with many low-margin customers seeks to develop basic
relationships with them
o Company with few customers and high margins involves creating full
partnerships

o Frequency marketing programs reward customers who buy frequently

or in large amounts
o Club marketing programs offer members special benefits and create
member communities
The changing nature of customer relationships
- Companies are now building more direct and lasting relationships with more
carefully selected customers
- Relating with more carefully selected customers
o Few firms practise true mass marketing nowadays
o Companies target more profitable customers as a part of selective
relationship management
o Companies use customer profitability analysis to weed out losing
customers and pamper winning ones
- Relating more deeply and interactively
o Customer-managed relationships are where customers empowered by
todays new digital technologies interact with companies & with each
other to shape their relationships with brands
o Companies can no longer rely on marketing by intrusion
o Must practise marketing by attraction
o Creation of dialogues between marketers and consumers through online
social networks
o As opposed to intruding, companies are inviting customers to play a
more active role in shaping brand messages and ads
o Consumer generated marketing involves brand exchanges created by
consumers themselves, both invited and uninvited, where consumers are
playing an increasing role in shaping their own brand experiences and
those of other consumers
Partner relationship management
- In addition to good CRM, need to have good partner relationship
management
- Partners inside the organisation
o Every functional area of organisations can interact with customers now,
especially electronically
- Partners outside the organisation
o The supply chain describes a channel stretching from raw materials to
components to final products that are carried to final buyers
o Through supply chain management, many companies today are
strengthening their connections all along the supply chain
Capturing value from customers
- Creating customer value leads to customer loyalty and retention, growing
share of customer, building customer equity and building relationships with the
right customers
- Creating customer loyalty and retention
o CRM aims to create customer delight rather than just customer
satisfaction
o Focus on customer lifetime value, which is the value of the entire
stream of purchases that the customer would make over a lifetime of
patronage
- Growing share of customer
o Share of customer is the portion of the customers purchasing that a
company gets in its product categories
o Offer greater variety, cross-sell, up-sell and leverage relationships to
improve

Building customer equity

o Customer equity is the total combined customer lifetime values of all
the companys customers
o This is the ultimate aim of CRM
Building the right relationship with the right customers
o Butterflies
High profitability, short term customers
Strategy: promotional blitzes, profitable transactions, then no
investment til next time
o True friends
High profitability, long term customers
Strategy: continuous relationship investments
o Barnacles
Low profitability, long term customers
Strategy: create drag, so either fire them or improve profitability
o Strangers
Low profitability, short term customers
Strategy: do not invest

The changing marketing landscape

- Six major developments shaping the landscape
The uncertain world economy
- Marketers are now emphasising the value in their value propositions due to
this
Measuring marketings contribution to organisational performance
- Question of which objective/subjective performance measures to use in
assessing performance
o Mostly use sales/growth, market share and profit contribution
o Positive relationship between focus on needs, competitor activities and
organisation performance
The growth of not-for-profit marketing
- Not-for-profit marketing is practised by a variet of organisations whose aim is
to make surpluses so as to continue their operations, but who do not seek to
make profits for shareholders
The digital age
- Traditional physical marketing is not disappearing, but rather powerful new
tools are becoming available to implement new relationship building strategies
through online marketing
Rapid globalisation
- Difference between global and domestic marketing
- Many goods are hybrids with production taking place in different places
offshoring, outsourcing, supply chains
Sustainable marketing: The call for more social responsibility
- Rise of corporate ethics
- Ethics and environmental movements are placing even stricter demands on
companies over time

Chapter 2: Company and Marketing Strategy: Partnering

to Build Customer Relationships
Company-wide strategic planning: Defining marketings
role
-

Strategic planning is the process of developing and maintaining a strategic

fit between the organisations goals and capabilities and its changing
marketing opportunities

Defining the
company
mission

Setting company
objectives and
goals

Designing the
business
portfolio

Planning
marketing and
other functional
strategies

- See the strategic planning process above

Defining a market-oriented mission
- A mission statement is a statement of the organisations purpose what it
wants to accomplish in the larger environment
- Mission statements should be market-oriented and defined in terms of
satisfying basic customer needs
o Should focus on customers and the customer experience the organisation
seeks to create
Setting company objectives and goals

Strategic business units (SBUs) are the key businesses that make up a
company
a broad mission leads to a hierarchy of both business and marketing objectives

Designing the business portfolio

Management must plan its business portfolio using the organisations
mission statement and objectives as a guide
o The business portfolio is the collection of businesses and products that
make up a company
o Company must analyse its current business portfolio and decide which
businesses should receive more, less or no investment
It must then shape the future portfolio by developing strategies
for growth and downsizing
Analysing the current business portfolio
- The major activity in strategic planning is business portfolio analysis, which
is the process by which management evaluates the products and businesses
that make up the company
- First, identify the SBUs that make up the company
- Second, assess the attractiveness of each SBU and decide how much
support each deserves
- The purpose of strategic planning is to find ways in which the company can
best use its strengths to take advantage of attractive opportunities in the
environment
- Most standard portfolio analysis methods evaluate SBUs on two important
dimensions
o The attractiveness of the SBUs market or industry
o The strength of the SBUs position in that market or industry
- The Boston Consulting Group (BCG) approach
o Uses the growth-share matrix, a portfolio planning method that
evaluates a companys SBUs in terms of its market growth rate and
relative market share
Star
Question
Market Growth Hig
h
Mark
Rate
Lo
Cash
Dog
w
Cow
High
Low
Relative Market Share
-

Stars are high growth, high share businesses/products

Often need heavy investments to finance rapid growth
Will eventually turn into cash cows
Cash cows are low growth, high share businesses/products
Need less investment to hold market share
Question marks are low share, high growth businesses/products
Require a lot of investment to hold let alone increase share
Management has to consider which QMs to make stars and
which to phase out
Dogs are low growth, low share businesses/products
May generate enough to maintain themselves
Do not promise to be large sources of cash/profitability
o Once company has classified SBUs, must determine what roles each will
play in the future
Can invest more to build its share

Can invest just enough to hold its share

Can harvest it to milk its short term cash flow regardless of long
term effect
Can divest it by selling/phasing it out and using the resources
elsewhere
o Over time, SBUs, change position in the matrix
Start out as QMs and become stars then CCs if successful
- Problems with matrix approaches
o Centralised approaches (eg BCG) can be difficult, time consuming and
costly to implement
Focus on classifying SBUs but provide little advice for future
planning
o Many companies use more customised approaches that better suit
specific situations
Developing strategies for growth and downsizing
- The companys objective is to manage profitable growth
- Identifying growth opportunities can be through the product/market
expansion grid
Existing products
New Products
Market penetration
Product development
Existing markets
Market development
Diversification
New markets
o Company can improve its market penetration through marketing mix
improvements
This will lead to more sales without changing its original product
lines
o Company can improve market development by identifying & developing
new markets for its products
Could review new demographic markets
o Company can improve product development by offering modified or
new products to current markets
o Company can improve diversification by starting up or buying
businesses outside of its current products and markets
Must be careful not to overextend the brands positioning
- Develop strategies for both downsizing and growing business portfolios

Planning marketing: Partnering to build customer

relationships
-

Marketing plays a key role in the companys strategic planning

o Provides a guiding philosophy the marketing concept which
suggests that company strategy should revolve around building profitable
relationships with important consumer groups
o Provides inputs to strategic planners to help identify attractive market
opportunities and by assessing the firms potential to take advantage of
them
o Provides strategy designs for reaching individual business units
objectives
In addition to CRM, must also practice partner relationship management in
order to form an effective internal value chain
Must form a competitively superior external value delivery network

Partnering with other company departments

- Each company department is a link in the companys internal value chain
o That is, each department carries out value creating-activities to design,
produce, market, deliver and support the firms products
o A value chain is only as strong as its weakest link
- A companys departmental relations are often full of conflicts and
misunderstandings
Partnering with others in the marketing system
- Firm needs to look beyond its own internal value chain and into that of
suppliers, distributors & customers
- Companies therefore partner with other members of the supply chain to
improve the performance of the customer value delivery network
o This is the network made up of companies, suppliers, distributors, and
customers who partner with each other to improve the performance of
the entire system

Marketing strategy and the marketing mix

The marketing strategy is the marketing logic by which the company hopes
to create customer value and achieve profitable relationships
o Guided by this strategy, company designs an integrated marketing mix
consisting of factors under its control, including product, price, people,
process, physical evidence, placement logistics and promotion
o To find the best strategy/mix, company engages in marketing analysis,
planning, implementation and control
Customer-driven marketing strategy
- Market segmentation
o Involves dividing a market into distinct groups of buyers who have
different needs, characteristics or behaviours, and who might require
separate products or marketing products
o A market segment consists of consumers who respond in a similar way
to a given set of marketing efforts
- Market targeting
o Involves evaluating each market segments attractiveness and selecting
one or more segments to enter
o Should target segments which company can profitably generate the
greatest customer value and sustain it over time
- Market differentiation and positioning
o Positioning is arranging for a product to occupy a clear, distinctive and
desirable place relative to competing products in the minds of consumers
o Differentiation is actually differentiating the companys market
offering so that it creates superior customer value
Developing an integrated marketing mix
- Extended marketing mix and the 7 Ps
o Product
The goods-and-services combination the company offers to the
target market
o Price
The amount of money customers must pay to obtain the product
o Placement logistics
Company activities that make products available to target
customers and end-consumers
o Promotion
Activities that communicate the merits of the product and persuade
customers to buy it
-

o People
The last three are the extended marketing mix, first 4 are the
normal marketing mix
o Process
Process of engaging with the company
o Physical evidence
Depends on the type of product in its necessity can be very
effective
The Ps might be better described in Cs from the buyers perspective
o Customer solution
o Customer cost
o Convenience
o Communication

Managing the marketing effort

This requires the four marketing management functions of analysis,

planning, implementation and control
Marketing analysis
- The marketer should conduct a SWOT analysis
Marketing planning
- Involves deciding on marketing strategies that will help the company attain its
overall strategic objectives
- Typical marketing plan consists of
o Executive summary
o Current marketing situation
Market description
Product review
Review of competition
Review of distribution
o Threats and opportunities analysis
o Objectives and issues
o Marketing strategy
o Action programs
o Budgets
o Controls
Marketing implementation
- The process that turns marketing strategies and plans into marketing actions
in order to accomplish strategic marketing objectives
- Important to both do things right (implementation) and do the right things
(strategy)
Marketing department organisation
- The chief marketing officer (CMO) heads up the companys entire marketing
operation
- Modern marketing departments can be arranged in several ways
o Functional organisation
Different marketing activities are headed by a functional specialist
o Geographic organisation
Company that sells across the country or internationally
Sales and marketing people are assigned specific countries, regions
and districts
o Product management organisation
Often created by companies with many very different products or
brands
-

Product manager develops and implements a complete strategy

and marketing program for a specific product or brand
o Market/customer management organisation
Used by companies that sell one product line to many different
types of markets and have customers that have different needs and
preferences
Market managers are responsible for developing marketing
strategies and plans for their specific markets or customers
o Marketers usually employ a combination of these organisation
forms
Marketing control
- The process of measuring and evaluating the results of marketing strategies
and plans and taking corrective action to ensure that objectives are achieved
- Has four steps
o Set specific marketing goals
o Measure performance in the marketplace
o Evaluate the causes of any differences between expected and
actual performance
o Take corrective action to close gaps between goals and
performance
- Operating control involves checking ongoing performance against the annual
plan and taking corrective action when necessary
o Aims to ensure the company achieves its goals set out in its annual plan
o Also determines profitability of certain dimensions
- Strategic control involves looking at whether the companys basic strategies
are well matched to its opportunities

Measuring and managing return on marketing

investment
-

Marketers are developing better measures of marketing ROI

o Marketing ROI is the net return from a marketing investment divided
by the costs of the marketing investment
o Measures the profits generated by investments in marketing activities
Main problem is figuring out what specific measures to use and obtaining good
data on these measures
Company can assess return on marketing investment in terms of standard
marketing performance measures such as brand awareness, sales or market
share
o Companies are assembling these measures into marketing dashboards
Marketers are using customer centred measures of marketing impact
nowadays
o Capture both current and future marketing performance which result
from stronger customer relationships

Chapter 3 Analysing the Marketing Environment

The companys microenvironment

The company
- Marketing managers make decisions within the strategies and plans made by
top management
Suppliers
- Suppliers are an important link in the companys overall customer value
delivery system
- Strong supplier relationships contribute significantly to business performance
Marketing intermediaries

Marketing intermediaries help the company to promote, sell and distribute

its products to final buyers
o Resellers are distribution channel firms that help the company find
customers or make sales to them
o Physical distribution firms help the company to stock and move goods
from their points of origin to their destinations
o Marketing services agencies are the marketing research firms,
advertising agencies, media firms and marketing consulting firms that
help the company target and promote its products to the right markets
o Financial intermediaries include banks, credit companies, insurance
companies and other businesses that help finance transactions or insure
against the risks associated with the buying and selling of goods
- Work with intermediaries as partners rather than channels
Competitors
- The marketing concept states that to be successful, a company must provide
greater customer value and satisfaction than its competitors do
o Marketers must therefore gain strategic advantage by positioning their
offerings strongly against competitors offerings in the minds of
consumers
Publics
- A public is any group that has an actual or potential interest in or impact on
an organisations ability to achieve its objectives
- There are seven types of publics
o Financial publics
Influences the companys ability to obtain funds
o Media publics
Carries news, features and editorial opinion
o Government publics
Developments in regulations must be taken into account
o Citizen-action publics
Decisions may be questioned by consumer organisations,
environmental groups, minority groups and others
o Local publics
Includes local residents and community organisations
o General public
The publics image of the company affects its buying
o Internal publics
Includes workers, managers, volunteers and the board of directors
Positive internal publics lead to positive external publics
Customers
- Customers are the most important actors in the companys microenvironment
- The aim of the entire value delivery system is to serve target customers and
create strong relationships with them
- Five types of customer markets
o Consumer markets
Consist of individuals that buy goods and services for personal
consumption
o Business markets
Buy goods and services for further processing or for use in their
production process
o Reseller markets
Buy goods and services to resell at a profit
o Government markets
-

Made up of government agencies that buy goods and services to

produce public services or transfer the goods and services to those
who really need them
o International markets
Consist of buyers in other coutnries

The companys macro environment

- Consists of the broader forces that affect the actors in the microenvironment
- Six main forces in a companys macroenvironment
Demographic environment
- Demography is the study of human populations in terms of size, density,
location, age , gender, race, occupation and other statistics
- Changing age structure of the population
o The single most important demographic trend in Australasia is the
changing age structure of the population
o Baby boomers, Gen X, Gen Y -> bs lol
- Generational marketing
o Dates may be too restrictive market based on lifestyle instead
- The changing family
o Marketers must increasingly consider the special needs of non-traditional
households which are growing more rapidly than traditional households
- Geographic shifts in population
o Period of great migratory movements and people moving houses across
cities & retirement
- A better-educated, more white-collar, more professional population
o Job growth is now strongest for professional workers and weakest for
manufacturing workers
o Rising education leads to rising demand for quality products
- Increasing diversity
o Countries vary in their ethnic, racial, sexuality, disabled diversity levels
Economic environment
- The economic environment consists of factors that affect consumer
purchasing power and spending patterns
- Nations vary in their levels and distribution of income
o Industrial economies constitute rich markets for many different kinds
of goods
o Subsistence economies consume most of their own agricultural and
industrial output and offer few market opportunities
o Developing economies offer outstanding marketing opportunities for
the right kinds of products
- Changes in income and spending
o Lots of spending in AUS due to economic good fortune
o High levels of debt in GFC
o Consumers adjust lifestyles and shopping habits to accommodate for
economic conditions
o Value marketing involves looking for ways to offer todays more
financially cautious buyers greater value, rather than offering high
quality and high price or low quality at lower prices
o Marketers must also pay attention to income distribution as well as
income levels
Has created a tiered market
- Changing consumer spending patterns
o Ernst Engel studied how people shifted their spending as their income
rose

Percentage spent on food declines

Percentage spent on housing remains about constant (except for
utilities, which decrease)
Percentage spend on most other categories and savings increase
o Known as Engels laws
Natural environment
- The natural environment involves the natural resources that are needed as
inputs by marketers or that are affected by marketing activities
- Must be aware of natural environment trends
o Growing shortages of raw materials
o Increased pollution
o Increased government intervention in natural resource
management
- Enlightened companies now go beyond what government regulations dictate
and practice environmental sustainability
o Environmental sustainability is developing strategies and practices
that create a world economy that the planet can support indefinitely
Technological environment
- The technological environment is the forces that create new technologies,
creating new products and market opportunities
- New technology replaces an older one companies find products outdated
- Investment in RnD will be crucial for companies to make profits in the future
- Make practical and affordable versions of the products both commercial and
technical challenge
Political and social environment
- The political environment consists of laws, government agencies and
pressure groups that influence or limit various organisations and individuals in
a given society
- Legislation regulating business
o Governments can develop public policy to guide commerce
o Increasing legislation
Protects companies from each other
Protect consumers from unfair business practices
Protect the interests of society against unrestrained business
behaviour
o Changing government agency enforcement
Competition and Consumer Act 2010
ACCC, ASIC, FSANZ
Business executive must monitor these developments when
planning their products and marketing programs

Increased emphasis on ethics and social responsible actions

o Socially responsible behaviour
Socially responsible firms actively seek out ways to protect the
long-run interests of their consumers and the environment
AANA (Australian Association of National Advertisers) developed a
code to guide advertisers in the way they communicate with
children
Online privacy issues
o Cause-related marketing
Companies are now linking themselves to worthwile charities
Has become a primary form of corporate giving

cause-exploitative marketing strategy for selling rather than

giving
Effective marketing tool, builds more positive public image
Greater visibility and new sources of funding
Cultural environment
- The cultural environment is made up of institutions and other forces that
affect a societys basic values, perceptions, preferences and behaviours
- Persistence of cultural values
o Core beliefs and values are passed on from parents to children,
reinforced by society
o Secondary beliefs and values are more open to change
Marketing seeks to change these
- Shifts in secondary cultural values
o Cultural swings take place, used to spot new opportunities/threats
o Peoples views of themselves
People vary in their emphasis on serving themselves versus serving
others
Sharers and joiners versus individualists; personal pleasure
versus self-realisation
o Peoples views of others
New wave of cocooning or nesting return to traditional values
o Peoples views of organisations
People are willing to work for organisations and expect them to
carry out societys work
o Peoples views of society
Patriotism, etc influence consumption patterns, level of savings,
attitude to marketplace
Take care when responding to emotions
o Peoples views of nature
Love of natural things has created a lifestyles of health and
sustainability (LOHAS) market, where consumers seek out green
products
o Peoples views of the universe
Religious beliefs searching for inner purpose
Affects consumers in everything they do, including what they
buy

Responding to the marketing environment

-

Passive vs proactive stance towards the marketing environment

o Do not change it vs take aggressive actions to affect publics and forces
Marketers cannot always control environmental forces
o Still better to be proactive than reactive

Chapter 4 Managing Marketing Information to Gain

Customer Insights
Marketing information and customer insights
-

Companies need fresh and deep insights into what customers need and want
Marketing managers are overloaded with data and overwhelmed by it
o Dont need more information, they need better info and to make better
use of it
o Real value of marketing research/info lies in how it is used in the
customer insights it provides

Customer insights are fresh understandings of customers and the

marketplace derived from marketing information that become the basis for
creating customer value and relationships
o Assists company in creating more value for its customers
Companies must be careful not to go too far and become customer controlled
o Dont satisfy all the wants, satisfy all the needs
A marketing information system consists of people and procedures for
assessing information needs, developing the needed information, and helping
decision makers to use the information to generate and validate actionable
customer and market insights
o Interacts with end users to assess information needs
o It then interacts with marketing environment to develop needed
information
o It helps users analyse and use the information to develop customer
insights

Assessing marketing information needs

-

A good MIS balances the information users would like to have against what
they really need and what is feasible to offer
o Too much is as harmful as too little info
MIS must monitor the marketing environment in order to provide decision
makers with information
They should have in order to better understand customers and make key
marketing decisions

Developing market information

Internal data
- Many companies build extensive internal databases which are electronic
collections of consumer and market information obtained from data sources
within the company network
o Can often be accessed more quickly and cheaply than other information
sources
o Since internal information was often collected for other purposes, it may
be incomplete or in the wrong form for making marketing decisions
o Data ages quickly
o Information must be well integrated and readily accessible so that
managers can find it easily and use it effectively
Competitive marketing intelligence
- Is the systematic collection and analysis of publicly available information about
consumers, competitors and developments in the marketing environment
- Its goal is to improve strategic decision making by understanding the
consumer environment, assessing and tracking competitors actions and
providing early warnings of opportunities and threats
- Includes monitoring, observing, quizzing, benchmarking, researching, lurking
and rooting
- Sentiment analysis can help to determine attitude
- Need to actively monitor competitor activities
- The web is an invaluable source of competitive intelligence
- Most companies are also taking steps to protect their information
- Growing use of marketing intelligence raises ethical issues

Marketing research
-

Marketing research is the systematic design, collection, analysis and

reporting of data relevant to a specific marketing situation facing an
organisation

Qualitative research is studies involving a small number of individuals, such

as focus groups or in depth one on one interviews
o The primary research tool in qualitative research is the focus group
Quantitative analysis are studies involving a lot of people, and uses
statistical average techniques to analyse data

Defining the
problem and
research
objectives

Developing
the research
plan for
collecting
information

Implementing
the research
plan collecting and
analysing the
data

Interpreting
and reporting
the findings

The marketing research process has four steps

Defining the problem and research objectives
o A marketing research project may have one of three types of objectives
o Exploratory research gathers preliminary information that will help
define the problem and suggest hypotheses
o Descriptive research describes things
o Causal research tests hypotheses about cause and effect relationships
Developing the research plan
o Outlines sources of existing data
o Spells out specific research approaches to be used to gather new data
o Research objectives must be translated into specific information needs
o Should be presented in a written proposal
o Can call for gathering secondary or primary data, or both
Secondary data consists of information that already exists
somewhere, having been collected for another purpose
Primary data is information collected for the specific purpose at
hand
o Gathering secondary data
Commercial online databases are computerised collections of
information available from online commercial sources or via the
internet
Marketing researches can conduct their own searches of
secondary data sources using this
Web search engines can help locating secondary info sources
Can be frustrating and inefficient
Other forms of secondary data sources include
Internal sources
Government publications
Periodicals and books
Problems include needing to make sure that the secondary info is
Relevant, accurate, current and impartial
o Gathering primary data
Research approaches
Observational research

o Involves gathering primary data by observing relevant

people, actions and situations
Ethnographic research
o Involves sending trained observers to watch and
interact with consumers in their natural habitat
Survey research
o Involves asking people questions about their
knowledge, attitudes, preferences and buying
behaviour
o Best suited for descriptive information, and is very
flexible
Experimental research
o Involves selecting matched groups of subjects, giving
them different treatments, controlling related factors
and checking for differences in group responses
o Best suited to causal information
Contact methods
Mail, telephone and personal interviewing
o Telephone interviewing introduces interviewer bias
o Different levels of flexibility
o Use of focus group interviewing personal
interviewing that involves inviting a small group to
gather for a few hours with a trained interviewer to talk
about a product/service/organisation
o Can also use immersion groups (no group moderator
present)
Online marketing research
o Done through internet surveys, online focus groups,
web-based experiments or tracking consumers online
behaviour
o Internet especially well suited to quantitative research
o Can also be used for qualitative purposes, especially
recently
Eg online focus groups
o Issues of consumer privacy
Sampling plan
A sample is a segment of the population selected for
marketing research to represent the population as a whole
Designing the sample requires three decisions
o Who is to be studied? (what sampling unit)
o How many people should be included? (what sample
size)
o How should the people in the sample be chosen? (what
sampling procedure)
Probability vs nonprobability samples
Research instruments
Questionnaires
o Can used closed and open ended questions
o Useful in exploratory research
Mechanical instruments
o People meters, checkout scanners etc
o Neuromarketing

o Implementing the research plan

Involves collecting, processing and analysing information
Should be watched to ensure it is implemented correctly
Isolate important information and insight
o Interpreting and reporting the findings
Interpretation should not only be left to the researchers
Can use marketing managers and others
Avoid bias

Analysing and using marketing information

CRM
- Smart companies capture information at every possible customer touch point
- CRM involves managing detailed information about individual customers and
carefully managing customer touch points in order to maximise customer
loyalty
- CRM consists of sophisticated software and analytical tools that integrate
customer information from all sources analyse it in depth, and apply the results
to build stronger customer relationships
o Provides a 360 view of customer relationships
- CRM analysts develop data warehouses and data mining techniques to unearth
riches in customer data
- Companies can provide higher levels of customer service and develop deeper
customer relationships
- CRM is just is a part of an effective overall customer relationship management
strategy
Distributing and using marketing information
- Information distribution involves entering info into databases and making it
available in a timely and user friendly manner
- Can use intranets or extranets

Other marketing information considerations

Marketing research in small businesses and non-profit organisations

- Start up businesses need information about their potential customers,
industries, competitors, unfilled needs, and reaction to new market offers
- Can obtain good marketing insights through observation or informal surveys
using small convenience samples
- Must recognise biases
International marketing research
- Intnl marketers deal with diverse markets in many countries
- Difficulty of finding secondary data in certain countries
- Must collect own primary data
- Cultural differences from country to country cause problems for researchers
language barriers
o Attitudes towards marketing research nonresponse problems
Public policy and ethics in marketing research
- Intrusions on consumer privacy
o Consumers attitudes to marketing research
o Social media issues
- Codes of practice
o International Chamber of Commerces International Code of Marketing
and Social Research Practice outline researchers responsibilities to
respondents and to the general public (US)
o European International Code of Marketing and Social Research regulates
professional activities of marketing researchers

o CPO chief privacy officer exists in many companies

Misuse of research findings
o Research is little more than vehicles for pitching sponsor products

Chapter 5 Understanding Consumer and Business Buyer

Behaviour
Consumer buyer behaviour refers to the buying behaviour of final
consumers
o All these final consumers make up the consumer market
Model of consumer behaviour
- Consumer buying decisions are the focal point of the marketers effort
- Consumers often do not know exactly what influences their purchases
- How do consumers respond to various marketing efforts?
o First point of call is the stimulus-response model of buyer behaviour
o Marketing and other stimuli enter the consumers black box and produce
certain responses
o Marketers must figure out what is in the buyers black box
Buyers characteristics influence how he or she perceives and
reacts to the stimuli
Buyers decision process affects the buyers behaviour
Characteristics affecting consumer
- Cultural factors
o Culture
The basic cause of a persons wants and behaviour
The set of basic values, perceptions, wants and behaviours learned
by a member of society from family and other important institutions
Marketers are trying to spot cultural shifts to discover new
products that might be wanted
o Cultural group
A group of people with shared value systems based on common life
experiences and situations
Targeting of mature consumers as they control large proportion of
wealth
o Social class
Relatively permanent and ordered divisions in a society whose
members share similar values, interests and behaviours
- Social factors
o Groups and social networks
A group is two or more people who interact to accomplish
individual or mutual goals
Groups that have a direct influence and to which a person belongs
are called membership groups
Reference groups are direct or indirect points of comparison or
reference in forming a persons attitudes or behaviour
Aspirational groups are those to which the individual wishes to
belong
Marketers must figure out how to reach opinion leaders, who are
those within a reference group who, because of special skills,
knowledge, personality or other characteristics, exert social
influence on others
Influential or leading adopters
Marketers use buzz marketing by enlisting or creating opinion
leaders to serve as brand ambassadors
-

Online social networks are online communities where people

socialise or exchange information and opinions
Users control the content though, so social media marketing
attempts can easily backfire
o Family
The most important consumer/buying organisation in society
o Roles and status
A persons position in each group can be defined in terms of both
their role and status
A role consists of the activities people are expected to perform
according to the persons around them
Personal factors
o Age and life-cycle stage
People change the g/s they buy over their lifetimes
Marketers often define their target markets in terms of life cycle
stage and develop appropriate products and marketing plans for
each stage
o Occupation
o Economic situation
o Lifestyle
Lifestyle is a persons pattern of living as expressed in his or her
activities, interests and opinions (psychographics)
Involves measuring consumers major AIO dimensions above
Can help marketers understand changing consumer values and
how they affect buying behaviour
Consumers do not just buy products, they buy the values and
lifestyles those products represent
o Personality and self concept
Personality is the unique psychological characteristics that
distinguish a person or group
Brand personality is a specific mix of human traits that may be
attributed to a particular brand
Sincerity, excitement, competence, sophistication and
ruggedness
Marketers use a persons self concept, where peoples possessions
contribute to and reflect their identities
Psychological factors
o Motivation
A motive is a need that is sufficiently pressing to direct the person
to seek satisfaction
Sigmund Freud assumed people are largely unaware of the real
psychological forces shaping their behaviour
His theory suggests that a persons buying decisions are
affected by subconscious motives that even the buyer might
not fully understand
Motivation research refers to qualitative research to probe
consumers hidden subconscious motivations
Marketers which use touchy feely approaches, sometimes called
interpretive consumer research
Maslows hierarchy of needs
Physiological, safety, social, esteem and self-actualisation
needs

The
-

People try to satisfy the most important need that is not

satisfied yet

o Perception
Perception is the process by which people select, organise and
interpret information to form a meaningful picture of the world
How a person acts is influenced by their perception of the
situation
Three perceptive processes affect perception
Selective attention is the tendency for people to screen out
most of the information to which they are exposed
o Marketers must work especially hard to attract
consumers
Selective distortion is the tendency for people to interpret
information in a way that will support what they already
believe
o Marketers must try and understand the mindsets of
consumers
Selective retention is the tendency for consumers to
remember good points made about a brand they favour and
to forget good points made about competing brands
o Explains use of drama and repetition
Consumers worried about subliminal advertising
Research has found little to no link between this and
consumer behaviour
o Learning
Learning describes changes in an individuals behaviour arising
from experience
Drive is a strong internal stimulus that calls for action
A drive becomes a motive when it is directed towards a particular
stimulus object
Cues are minor stimuli that determine when where and how the
person responds
Learning theory means marketers can build demand for a product
by associating it with strong drives, using motivating cues and
providing positive reinforcement
o Beliefs and attitudes
Belief is a descriptive thought that a person has about something
Attitude describes a persons relatively consistent evaluations,
feelings and tendencies towards an object or idea
Difficult to change
buyer decision process
Need recognition
o Can be triggered by internal or external stimuli
Information search
o If consumers drive is strong and satisfying product is near at hand,
consumer likely to buy
o If not, the consumer may store the need in memory or undertake an
information search
o Can obtain info from various source
Personal, commercial, public and experiential sources
o Commercial sources usually inform, personal usually legitimise/evaluate
Evaluation of alternatives

o Careful calculations, logical thinking, impulse, intuition

Purchase decision
o Factors can come between purchase intention and decision
Attitudes of others
Unexpected situational factors
Post purchase behaviour
o Relationship between expectations and perceived performance
o Cognitive dissonance is discomfort caused by post-purchase conflict,
and occurs after almost all major purchases
Every purchase involves compromise
o Customer satisfaction key to building profitable relationships with
consumers
o Company should measure customer satisfaction regularly as a result
encourage complaints
Roles in the buying process
o Initiator
One who first suggests/thinks of idea to buy a particular product
o Influencer
Someone whose views carry weight in making the buying decision
o Decider
Person who ultimately makes a buying decision
o Buyer
Person who makes the purchase
o User
The person who consumes the product

The buyer decision process for new products

-

A new product is a good, service or idea that is perceived by some potential

customers as new
The adoption process is the mental process through which an individual
passes from first learning about an innovation to final adoption
o Adoption is the decision by an individual to become a regular user of the
product
Stages of adoption process
o Awareness
o Interest
o Evaluation
o Trial
o Adoption
Individual differences in innovativeness
o Five groups of adopters have been identified
Innovators are venturesome - try new ideas at risk
Tend to be younger, better educated, higher income, less
brand loyal, take advantage of promotions
Early adopters are guided by respect opinion leaders and adopt
new ideas early but carefully
Early majority are deliberate rarely leaders, adopt before
average person
Late majority are sceptical adopt only when majority have tried
it
Laggards are tradition bound suspicious of changes, adopt when
it is a tradition
Influence of product characteristics on rate of adoption

o Characteristics influencing an innovations rate of adoption

Relative advantage
Degree to which innovation appears superior to existing
products
Compatibility
Degree to which innovation fits the values & experiences of
potential customers
Complexity
Degree to which innovation is difficult to understand or use
Divisibility
Degree to which innovation may be tried on a limited basis
Communicability
Degree to which the results of using innovation can be
observed/decribed

Business markets and business buyer behaviour

Business buyer behaviour refers to the buying behaviour of the
organisations that buy goods and services for use in the production of other
products and services that are sold, rented or supplied to others
- In the business buying process, business buyers determine which products
and services their organisations need to purchase then find, evaluate and
choose among alternative suppliers and brands
- B2B marketers must understand business markets and business buyer
behaviour
Business markets
- Many business purchases are made for one set of consumer purchases
- Business marketing includes resellers and manufacturers
- Main differences between business and consumer markets is market structure
and demand, nature of the buying unit and types of decisions and the decision
process involved
- Market structure and demand
o Business marketer normally deals with far fewer but far larger buyers
than the consumer marketer does
Creates great dependencies and relationships
o Business demand is derived demand
o Many business markets have inelastic demand
Total demand for many business products is not affected much by
price changes, especially in the short run
o Business markets have more fluctuating demand
Demand for many business goods and services changes more
quickly than for consumer
Small increase in consumer demand can cause large increases in
business demand
- Nature of the buying unit
o Business purchase usually involves more decision participants and
more professional purchasing effort
o More complex the purchase, more likely that more people in decision
making process
- Types of decisions and the decision process
o Business buyers face more complex buying decisions than consumer
buyers
-

Involve large money amounts, complex technical and economic

considerations and interactions at many levels of the buyer
organisation
o More formalised decision process
o Businesses often lease products
Lessee: Conserves capital, get latest products, better service, tax
advantages
Lessor: higher net income and deal with more customers
o Buyer and seller are much more dependent on each other
Work closely with each other
Short run, sales go to suppliers who meet buyers immediate
product and service needs
Long run, B2B keep customers sales and create customer value by
meeting current needs and by partnering with customers to help
them solve their problems
o Practising supplier development
Systematic development of networks of supplier-partners to ensure
an appropriate and dependable supply of products and materials
for use in making products or reselling them to others
Business buyer behaviour
- Business activity consists of two main parts
o Buying centre made up of all the people involved in the buying decision
o Buying decision process
These two factors are influenced by internal organisational,
interpersonal and individual factors as well as external
environmental factors
- Main types of buying situations
o Straight rebuy
Fairly routine decision
Buyer reorders something without any modifications
Based on past buying satisfaction
o New task
May call for thorough research
A situation where the buyer purchases a product or service for the
first time
o Modified rebuy
May require some research
Buyer wants to modify product specifications, prices, terms or
suppliers
o Systems/Solutions selling
Where business ceebs, prefer to buy a complete solution to a
problem from a single seller instead of buying separate products
from several suppliers and putting them together
Avoids all separate decisions involved in a complex buying situation
- Participants in the business buying process
o The decision making unit of a buying organisation is its buying centre
This is all the individuals and units that play a role in the purchase
decision making process
Not a fixed and formally identified unit within the buying
organisation
Set of buying roles assumed by diff ppl for diff purchases

Business marketer must therefore learn who participates in the

decision, their relative influence, and their evaluation criteria
o Many business buying decisions result from the complex interactions of
ever changing buying centre participants
- The main influences on business buyers
o Some assume main influences are economic
o Most recognise emotion plays a role
o Little basis for strictly rational choice suppliers generally lead to same
goal
When products are different, higher accountability
o Heavily influenced by overall environmental factors
o Organisational factors organisational structure and compatibility
o Interpersonal factors
o Individual factors
The business buying process
- Problem recognition
o When someone in the company recognises a problem/need that can be
met by acquiring a specific product or service
- General need description
o Describes characteristics and quantity of the needed items or solutions
- Product specification
o Value analysis is the approach to cost reduction where the company
carefully analyses a product or services components to determine if they
can be redesigned and made more effectively and efficiently to provide
greater value
Decide on best characteristics and specify accordingly
- Supplier search
o Used to find the best vendors
- Proposal solicitation
o Buyer invites qualified suppliers to submit proposals
- Supplier selection
o Consider supplier attributes, relative importance, review proposals and
select suppliers
- Order routine specification
o Includes final order with chosen supplier
o Many buyers have a vendor managed inventory, where they turn
ordering and inventory responsibilities over to suppliers
- Performance review
o Buyer assesses suppliers performance and provides feedback
- ACTUAL PROCESS USUALLY MUCH MORE COMPLEX
o In modified rebuy or straight rebuy, some of these stages are compressed
or skipped
o Different buying centre participants involved at different stages of the
process
o Steps done out of order or repeated
o Customer relationship might involve many different types of purchases
ongoing at a given time at different stages of the buying process
E-procurement: Buying on the internet
- E-procurement is purchasing through electronic connections between buyers
and sellers, usually online
- Can conduct reverse auctions, where purchasing requests are put online and
invite suppliers to bid

Can engage in online trading exchanges where companies work collectively

to facilitate trading process
Can set up company buying sites
Can create extranet links with key suppliers or partners
E-procurement for B2B yields many benefits
o Reduces transaction costs, more efficient purchasing
o Reduces time between order and delivery
o Eliminates paperwork, more organisation, resources freed up
Problems with e-procurement
o Erodes old customer-supplier relationships
o Can create security disasters

Chapter 6 Customer-Driven Marketing Strategy:

Creating Value for Target Customers
Customer-driven marketing strategy
-

Move away from mass marketing and towards target marketing

o Identifying market segments, selecting one or more, and developing
products and marketing programs tailored to each
Four main steps in customer driven marketing strategy
o Market segmentation involves dividing a market into smaller segments
of buyers with distinct needs, characteristics or behaviours that might
require separate marketing strategies or mixes
o Market targeting is evaluating each market segments attractiveness
and selecting one or more market segments to enter
o Differentiation is differentiating the firms market offering to create
superior customer value
o Positioning consists of arranging for a market offering to occupy a clear
distinctive and desirable place relative to competing products in the
minds of target consumers

Market segmentation

Segmenting consumer markets

- Geographic segmentation
o Dividing the market into different geographical units such as nations,
regions, states, counties cities or neighbourhoods
o Localisation of products
- Demographic segmentation
o Dividing the market into segments based on variables such as age,
gender, family size, family life cycle, income, occupation, education,
religion, race, generation and nationality
o Most popular bases for segmenting customer groups
o Needs want and usage rates vary closely with demographic variables
o Easy to measure
- Age and life-cycle stage
o Careful to guard against stereotypes
- Gender
o A neglected gender segment can offer new opportunities in markets
- Income segmentation
o Target affluent customers
o Conspicuous consumption
- Psychographic segmentation
o Divide byers into different segments based on social class, lifestyle or
personality characteristics
o Segment on consumer lifestyles and lifestyle appeals

o Personality variables
Behavioural segmentation
o Divide buyers into segments based on their knowledge, attitudes, uses or
responses to a product
o Best starting point for building market segments
Occasions
o Dividing the market into segments according to occasions when the
buyers get the idea to buy, actually purchase or use the purchased item
Benefits sought
o Benefit segmentation requires finding the main benefits people look for
in the product class, the kinds of people who look for each benefit, and
the main brands that deliver each benefit
User status
o Segment into nonusers, ex-users, potential users, first-time users and
regular users of a product
o Reinforce/retain regulars, attract targeted nonusers, reinvigorate
relationships with ex users
Usage rate
o Segment into light, medium and heavy product users
Loyalty status
o Consumers can be completely, somewhat or not loyal

Using multiple segmentation bases

o Ie segment within segments aka segmentception
Segmenting business markets
- Business marketers use some additional variables to consumer marketers
o Operating characteristics, purchasing approaches, situational factors,
personal characteristics
- Most companies serve at least some business markets
- Many companies set up separate systems for dealing with larger/multilocation
customers
- With given target industry/customer size, company can segment by purchase
approaches and criteria
o Buying behaviour and benefits provide the best basis for segmenting
business markets
Segmenting international markets
- Segment by geographic location
- Segment by economic factors
- Segment by political and legal factors
- Segment by cultural factors
- Use intermarket segmentation, which is forming segments of consumers
who have similar needs and buying behaviour even though they are located in
different countries
Requirements for effective segmentation
- To be useful, market segments must be
o Measurable
Size, purchasing power and profiles of segments can be measured
o Accessible
Segments can be effectively reached and served
o Substantial
Segments are large or profitable enough to serve
o Differentiable
-

Segments are conceptually distinguishable and respond differently

to different marketing mix elements and programs
o Actionable
Effective programs can be designed for attracting and serving the
segments

Market targeting

Evaluating market segments

- Must consider three factors
o Segment size and growth
Relative matter
o Segment structural attractiveness
Consider competitors, substitute products, power of buyers and
suppliers
o Company objectives and resources
Can dismiss segments that are not compatible with these
Selecting target market segments
- A target market is a set of buyers sharing common needs or characteristics
that the company decides to serve
- Undifferentiated/mass marketing
o A market-coverage strategy where a firm decides to ignore market
segment differences and go after the whole market with one offer
o Focuses on what consumers have in common rather than what is
different
o Strong doubts about this strategy trouble competing with focused firms
- Differentiated/segmented marketing
o Firm decides to target several market segments and designs separate
offers for each
o Increases costs of doing business
Must weigh increased sales against increased costs
- Concentrated marketing
o Instead of going after a small share of a large market, goes after large
share of one or few smaller segments or niches
o Achieves strong market position due to greater knowledge of consumer
needs in the niches it serves and the special reputation it acquires
o Niching lets smaller companies focus limited resources on serving
niches that may be unimportant or overlooked by larger competitors
o As markets develop, megamarketers develop niche products to create
sales growth
o Low cost of set up on internet means easy to serve miniscule niches
o Can involve higher than normal risks
- Micromarketing
o The practice of tailoring products and marketing programs to suit the
tastes (needs and wants) of specific individuals and locations (local
customer segments)
o Local marketing
Involves tailoring brands and promotions to the needs and wants of
local customer groups cities, neighbourhoods and even specific
stores
Can drive up costs and create logistic problems fragmented
markets
o Individual marketing

Tailoring products and marketing programs to the needs and

preferences of individual customers
Has mad relationships more important interactive marketing
- Choosing a targeting strategy
o Consider various factors
Company resources
Product variability
Products life cycle stage
Market variability
Competitors marketing strategies
Socially responsible target marketing
- Issue of targeting vulnerable or disadvantaged consumers with controversial or
potentially harmful products
- Issue is not who is targeted, but how and for what

Differentiation and positioning

-

Company must decide on the value proposition

A products position is the way the product is defined by consumers on
important attributes
o The place the product occupies in consumers minds relative to
competing products
o The complex set of perceptions, impressions and feelings that consumers
have for the product compared with competing products
Positioning maps
- Preparation of perceptual positioning maps, which show consumer
perceptions of their brands versus competing products on important buying
dimensions
Choosing a differentiation and positioning strategy
- Three steps
o Identify a set of differentiating competitive advantages upon which to
build a position
o Choose the right competitive advantage
o Select an overall positioning strategy
- Identifying possible value differences and competitive advantages
o To the extent a company can differentiate and position itself as providing
superior customer value, it gains competitive advantages
o Through product differentiation, brands can be differentiated on
features, performance or style and design
o Channel differentiation allows competitive advantage through the way
the channels coverage, expertise and performance is designed
o Use people differentiation by hiring better people
o Image differentiation perceive difference based on the brand
- Choosing the right competitive advantages
o How many differences to promote
Some believe in development of unique selling proposition
Others say to position themselves on more than one differentiator
o Which differences to promote
The difference must be
Important
Distinctive
Superior
Communicable

 Preemptive (cannot easily copy the difference)

Affordable
Profitable
- Selecting an overall positioning strategy
o The value proposition is the full positioning of a brand the full mix of
benefits upon which it is differentiated and positioned
o Weigh benefits less, the same or more against price less, the same
or more
o Successful value propositions
More for more
More for the same
More for less
The same for less
Less for much less
o Developing a positioning statement
Follow the form of
To (target segment and need) our (brand) is (concept) that
(point of difference)
Communicating and delivering the chosen position
- To build a position, you must first deliver it
- Often easier to come up with a good positioning strategy rather than to
implement it

Chapter 7 Products, Services and Brands: Building

Customer Value
What is a product?

A product is anything that can be offered to a market for attention,

acquisition, use or consumption that might satisfy a want or need
- Services are a form of product that consists of activities, benefits or
satisfactions offered for sale that are essentially intangible and do not result in
the ownership of anything
Products, services and experiences
- Product is a key element in the overall market offering
o The offering may be a pure tangible good or pure service, or a
combination
o Many companies are moving to a new level though, to create and manage
customer experiences
Levels of products and services
- Think about the levels which add customer value
- The first is core customer value
- The second level is planning to turn the core benefit into an actual
benefit/product
- The product planners must finally build an augmented product by offering
additional services/benefits
Product and service classifications
- Consumer products
o Products and services bought final consumers for personal consumption
o Convenience products are consumer products and services that
customers usually buy frequently, immediately and with a minimum of
comparison and buying effort
o Shopping products are less frequently purchased consumer products
and services that customers compare carefully on suitability, quality,
price and style
-

o Specialty products are consumer products and services with unique

characteristics or brand identification for which a significant group of
buyers is willing to make a special purchase effort
o Unsought products are consumer products that the consumer either
does not know about or knows about but does not normally think of
buying
Industrial products
o Products bought by individuals and organisations for further processing
or for use in conducting a business
o Materials and parts include raw materials and manufactured materials
and parts
o Capital items are industrial products that aid in the buyers production
or operations
o Supplies and services are the convenience products of the industrial
field (supplies) and services are often advisory
Organisations, persons, places, events and ideas
o Organisation marketing consists of activities undertaken to create,
maintain or change the attitudes and behaviour of target consumers
towards an organisation
o Person marketing towards particular people
o Place marketing towards particular places
o Events and experiences marketing is often linked to other market
offerings
o Ideas can be marketed
Social marketing is the use of commercial marketing concepts
and tools in programs designed to influence individuals behaviour
to improve their well-being and that of society

Product and service decisions

Individual product and service decisions

- Product and service attributes
o Product quality
Characteristics of a product or service that bear on its ability to
satisfy stated or implied customer needs
Total quality management is an approach where all the
companys people are involved in constantly improving the quality
of products, services and business processes
Performance quality is ability of product to perform its functions
Conformance quality is freedom from defects and consistency of
performance
o Product features
o Product style and design
Style is simply the appearance of a product
Design contributes to a products usefulness and looks
- Branding
o A brand is a name/term/sign/symbol/design or combination of these that
identifies the maker or seller of a product or service
- Packaging
o Involves designing and producing the container or wrapper for a product
o Must attract attention, describe product, make the sale product safety
concerns too
- Labelling
o Identifies the product or brand

o May describe the product or promote the brand

o Use of unit pricing, open dating, nutritional labelling
- Product support services
o Survey customers periodically to assess value of current services
o Then take steps to fix problems and add new services
Product line decisions
- A product line is a group of products that are closely related because they
function in a similar manner, are sold to the same customer groups, are
marketed through the same types of outlets, or fall within given price ranges
- Main product line decision involves product line length - the number of items
in the product line
- Product line filling involves adding more items within the present range of
the line
- Product line stretching occurs when a company lengthens its product line
beyond its current range
o Can stretch upward or downward
Product mix decisions
- A product mix is the set of all product lines and items that a particular seller
offers for sale
o Mix width is the number of different product lines the company carries
o Mix length is the total number of items the company carries within its
product lines
o Mix depth is the number of versions offered of each product in the line
o Mix consistency is how closely related the various product lines are in
some way

Services marketing

Nature and characteristics of a service

- Service intangibility means services cannot be seen/tasted/felt/heard/smelled
before they are bought
o Service providers task to create tangibility to send signal about quality
evidence management
- Service inseparability means the services cannot be separated from their
providers
- Service variability means the quality of services depends on
who/how/when/where they are provided
- Service perishability means that services cannot be stored for later sale or
use
The service-profit chain
- Has five links
o Internal service quality
o Satisfied and productive service employees
o Greater service value
o Satisfied and loyal customers
o Healthy service profits and growth
- Service marketing requires
o Internal marketing, which is orienting and motivating customercontact employees and supporting service people to work as a team to
provide customer satisfaction
o Interactive marketing, which means that service quality depends
heavily on the quality of the buyer seller-interaction during the service
encounter
Training service employees to interact with customers to satisfy
their needs

Service companies face three main marketing tasks

o Increase service differentiation, service quality, service productivity
Managing service differentiation
- Solution to price competition is to develop a differentiated offer, delivery and
image
- Managing service quality
o Differentiate by delivering consistently higher quality than its
competitors provide
o Hard to define and judge
o Service recovery can turn angry customers into loyal ones
- Managing service productivity
o Avoid pushing productivity so hard that it reduces quality

Branding strategy: Building strong brands

Brand equity
- A powerful brand has high brand equity
o Brand equity is the differential effect that knowing the brand name has
on customer response to the product and its marketing
- Young and Rubicams measures brand strength along four consumer
perception dimensions
o Differentiation
o Relevance
o Knowledge
o Esteem
- Brand valuation is the process of estimating the total financial value of a
brand
- Customer equity is the fundamental asset underlying brand equity
o This is the value of the customer relationships the brand creates
Building strong brands
Brand
positioning
Attributes
Benefits
Beliefs and
values
-

Brand name
selection
Selection
Protection

Brand
sponsorship
Manufacturer's
brand
Private brand
Licensing
Co-branding

Brand
development
Line extensions
Brand extensions
Multibrands
New brands

Brand name selection

o Should suggest something about the products benefits and qualities
o Easy to pronounce, recognise and remember
o Should be extendable
o Should be distinctive
o Should translate easily into foreign languages
Brand sponsorship
o National brand/manufacturers brand vs private/store/distributor/home
brand
o Creating licensed brands using anothers brand for a fee
o Cobranding - practice of using established brand names of two
companies on same product
Brand development

o Line extensions occur when a company extends existing brand names to

new forms, colours, sizes, ingredients or flavours of an existing product
category
o Brand extensions extend an existing brand name to new product
categories
o Multibrands offer a way to establish different features that appeal to
different segments
o New brands used when the existing brand is waning
Using megabrand strategies only invest in the top brands
Managing brands
- Brand position must be continuously communicated to consumers
- Brands are not maintained by advertising but by brand experiences
o Must take care to manage the touch points as much as advertising
o Must train employees to be customer centred
- Companies must periodically audit brand strengths and weaknesses

Chapter 8 Developing New Products and Managing the

Product Life Cycle
New-product development strategy
-

A business can obtain new products in two ways

o Acquisition and new product development
o New product development is the development of original products,
product improvements, product modifications and new brands through
the companys own R&D efforts
Identify successful products and find out what they have in common

The new-product development process

Idea
-

Idea

Companies must carry out a strong new product development process for
finding and growing new products
generation
This is the systematic search for new product ideas external or internal idea
sources
Internal idea sources
o Company can find new ideas through R&D or employees
o Intrapreneurial programs encourage employees to think/develop new
product ideas
External idea sources
o Distributors and suppliers can contribute ideas
Distributors are close to the market and can pass along info about
consumer problems and new product possibilities
Suppliers can tell the company about new concepts, techniques and
materials to use to develop new products
o Competitors can be a good source
Watch ads, purchase products, analyse and decide whether to enter
market
o Seek help of new product consultancies and design firms
o Most important source of new ideas is customers themselves
Analyse customer feedback to find new products that better solve
consumer problems
o Work WITH customers as well to develop new ideas
Careful not to rely too much on customers especially for technical
problems
screening

Screening new product ideas in order to spot good ideas and drop poor ones
ASAP
- Real, win, worth it screening framework
Concept development and testing
- Attractive idea must be developed into a product concept
- A product idea is an idea for a possible product that the company can see
itself offering to the market
- A product concept is a detailed version of the idea stated in meaningful
consumer terms
- A product image is the way consumers perceive an actual or potential
product
- Concept development
o Develop a series of different concepts
- Concept testing
o Calls for testing new product concepts with a group of target consumers
to find out if the concepts have strong consumer appeal
o Will help decide which concept has strongest appeal
Marketing strategy development
- Designing an initial marketing strategy for a new product based on the product
concept
- Marketing strategy statement consists of three parts
o First part describes target market, planned value proposition and sales,
market share and profit goals for the first few years
o Second part outlines the products planned price, distribution and
marketing budget for first year
o Third part describes planned long run sales, profit goals and marketing
mix strategy
Business analysis
- A review of the sales, costs and profit projections for a new product to find out
whether they satisfy the companys objectives
o If they do, product can move to product development stage
o Estimate minimum and max sales to assess risk
Product development
- If product concept passes the business test, it moves into product
development
o This is a strategy for promoting company growth by offering modified or
new products to current market segments and developing the product
concept into a physical product to ensure that the product idea can be
turned into a workable product
- Requires a large jump in investment
- Testing involved product must have required functional features and also
convey they intended psychological characteristics
Test marketing
- If product passes concept and product tests, it is then test marketing
o The stage of new product development in which the product and
marketing program are introduced into more realistic market settings
o Allows company to test entire marketing program + product
o Occurs when the risks are high or high investment required, or
marketing not sure of product
- Costs outweighed by probability of major mistake
Commercialisation
- Introducing the new product into the market
- Company will face high costs may need to build manufacturing facility
o May need to market extensively

Must decide on introduction timing

Managing new-product development

Customer-centred new-product development

- Focuses on finding new ways to solve customer problems & create more
customer satisfying experiences
- Most successful products are differentiated, solve major consumer problems,
have good value prop.
Team-based new-product development
- The above described process is the sequential product development
approach
o Each stage is completed before the next
- In order to get new products to market more quickly, companies use teambased new-product development approach
o An approach where the company departments work together in crossfunctional teams, overlapping the steps in the product development
process to save time and increase effectiveness
o Similar to agile development/waterfall in INFS1602
Systematic new-product development
- Ensure that development process is holistic & systematic rather than
compartmentalised & haphazard
- To avoid problems, company can install innovation management system to
collect, review, evaluate and manage new-product ideas
o Appoint respected senior to be innovation manager
o Use tech to encourage all workers to get involved
- Helps to create innovation oriented company culture and yield a larger number
of new product ideas

Product life-cycle strategies

The product life-cycle is the course of a products sales and its profits during
its lifetime
- It involves five distinct stages
o Product development
o Introduction
o Growth
o Maturity
o Decline
- Not all products follow this life cycle
- PLC can describe a product class, product form or product brand
- Can also be applied to styles, fashions and fads
o Style is a basic and distinctive mode of expression
Style may last for generations, passing in and out of vogue
Has periods of renewed interest
o Fashion is a currently accepted or popular style in a given field
o Fads are temporary periods of unusually high sales driven by consumer
enthusiasm and immediate product or brand popularity
a fashion that enters quickly, is adopted with great zeal, peaks
early, quickly declines
- Using PLC to forecast product performance is problematic as it is difficult to
forecast sales levels, stage length and shape of the curve
- Marketers should not blindly push through PLC
Introduction
- The stage in the PLC when the new product is first distributed and made
available for purchase
- Takes time, sales growth is usually slow
-

A company must choose a launch strategy consistent with intended product

positioning
Growth stage
- The stage in the PLC when a products sales start climbing quickly
- New competitors enter the market
- Profit increases, new market segments and distribution channels are entered
etc
- Tradeoff between high market share and high current profit
Maturity stage
- The stage in the PLC when sales growth slows or levels off
- Most products are in this stage - greater competition leads to lower prices
- Marketers should consider modifying the market, product and marketing mix
o Modify the market to increase consumption by finding new users and
market segments for its brands
o Modify the product by changing characteristics such as quality,
features, style or packaging to attract new users and to inspire more
usage
o Modify the marketing mix by changing one or more of the marketing
mix elements to increase sales lots of options, bs
Decline stage
- The stage in the PLC when a products sales decline
- Occurs for many reasons can be very costly to a firm
- Companies must pay attention to their ageing products
- Can maintain the brand without change and hope competitors leave the
industry
- Can harvest the product by reducing various costs and hoping sales hold up
- Can drop the product from the line

Additional product and service considerations

Product decisions and social responsibility
- Minimise monopolies
- Comply with laws regarding quality and safety
- Product liability lawsuits have led to large product liability insurance premiums
International product and services marketing
- Figure out what products to introduce in what countries
- Decide how to standardise or adapt products for world markets
- Standardisation lowers costs and helps develop consistent worldwide image
o However, consumer markets differ markedly throughout the world
- Packaging challenges due to cultural differences
- Service industry issues
o Languages and geographical problems
o Advent of technology
- Retailers are among the latest service businesses to go global
o Click and mortar style strategies

Chapter 9 Pricing to Capture Customer Value

What is a price?
-

Price is the amount of money charged for a product or service

o Is also the sum of the values consumers exchange for the benefits of
having or using the product or service
The only element in the marketing mix that produces revenue all other
elements represent costs
One of the most flexible marketing mix elements

Major pricing strategies

-

The ceiling for prices is set by customers perception of the products value

- The floor for prices is set by product costs

Customer value-based pricing
- Uses buyers perceptions of value rather than the sellers cost as the key to
pricing
- Price is considered along with the other marketing mix elements before the
marketing program is set
- Cost based pricing is often product driven
o Company designs the product, adds the costs of making the product, sets
price that covers costs plus a target profit
- Value based pricing involves assessing customer needs and value perceptions
first
o Target price is then set based on customer perceptions of value
- Good value is not the same as low price
- Difficult to measure the value customers attach to products
- Good-value pricing
o Offering just the right combination of quality and good service that
customers want at a fair price
o Every day low pricing involves charging a constant everyday low price
with few or no temporary price discounts
o High-low pricing involves charging higher prices on an everyday basis
but running frequent promotions to lower prices temporarily on selected
items
- Value-added pricing
o Challenge is to build the companys pricing power its power to escape
price competition and to justify higher prices and margins
o To do this, companies adopt value-added pricing strategies
Rather than cutting prices to match competitors, marketers
adopting this strategy attach value-added features and services to
differentiate their offerings and this supports higher prices
Cost-based pricing
- Involves setting prices based on the costs for producing, distributing and
selling the product, plus a fair rate of return for its effort and risk
- Types of costs
o Fixed/overhead costs are costs that do not vary with production or
sales level
o Variable costs vary directly with the level of production
o Total costs are the sum of the fixed and variable costs for any given level
of production
o Company is at competitive disadvantage if costs are high - prices will be
higher or profits smaller
- Cost-plus pricing
o The simplest pricing method adding a standard markup to the cost of
the product
o Methods that ignore consumer demand and competitor prices is not
likely to lead to best price
o Popular since
Sellers are more certain about costs than demand
Prices tend to be similar when all firms use this method,
minimising price competition
Many people feel that cost-plus pricing is fair to both buyers and
sellers
o Another cost oriented pricing approach is break-even pricing/targetreturn pricing

Involves setting the price to break even on the costs of making and
marketing a product or to make the desired profit
Fails to consider customer value and relationship between price
and demand
Price increases, demand decreases
Competition-based pricing
- Involves setting prices based on competitors strategies, costs, prices and
market offerings
- Consumers will evaluate value on the prices that competitors charge
- Benchmark costs and value against that of competitors and use as starting
point for own prices
- When assessing competitors pricing strategies
o How does the companys market offering compare with competitors in
customer value?
o How strong are current competitors and what are their current pricing
strategies?
o How does the competitive landscape influence customer price sensitivity?

Other internal and external considerations affecting price

decisions
Overall marketing strategy, objectives and mix
- A firm can set prices to attract new customers or to profitably retain existing
ones
- Price decisions must be coordinated with product design, distribution and
promotion decisions to form a consistent and effective integrated marketing
program
- Target costing reverses the usual process of first designing a new product,
determining its cost and then asking whether it can be sold at that price
o Starts with an ideal selling price based on customer-value considerations
and then targets costs that will ensure that the price is met
- Other companies deemphasise price and create nonprice positions
- Some position products on high prices
Organisational considerations
- Must decide who should set prices in the organisation
- Small companies top management
- Large companies divisional or product line managers
- Where pricing is a key factor, companies have pricing departments
The market and demand
- Pricing in different types of markets
o Pure competition
Little role for marketing
o Monopolistic competition
o Oligopolistic competition
Sellers highly responsive to each other
o Pure monopoly
Free to set the market price to whatever might not for various
reasons
- Analysing the price-demand relationship
o Demand curve lol do u even yr 11 eco brah
o Demand curve shows the number of units the market will buy in a given
time period at different prices
- Price elasticity of demand
o Price elasticity lol do u even micro brah
o A measure of the sensitivity of demand to changes in price

The economy
- Economic conditions have impact on firms pricing strategies lol no shit
Sherlock
- Companies now shifting marketing focus to affordable products in their
product mixes
o Need to offer GREAT VALUE FOR MONEY
Other external factors
- How will resellers react?
- Government
- Social concerns
- Pricing structure to cover different items in its line

New-product pricing strategies

Market-skimming pricing
- Involves setting a high price for a new product to skim maximum revenue from
the segments willing to pay the high price the company makes fewer but
more profitable sales
- Get revenues layer by layer progressively lower the price
- Makes sense only under certain conditions
o Products quality & image must support higher price & enough buyers
must want it at that price
o Costs of producing smaller volume cant be so high that they cancel
advantage of charging more
Market-penetration pricing
- Low initial price for a new product in order to attract a large number of buyers
and a large market share
- High sales volumes result in falling costs, allowing for further cuts in price
- Conditions
o Market must be highly price sensitive so low price produces more market
growth
o Low price must keep out competition and company must maintain low
price position

Product-mix pricing strategies

Product-line pricing
- Management must decide on the price steps to set between the various
products in a line
- Involves setting prices across an entire product line
- Price steps should take into account cost differences between products
Optional-product pricing
- Involves pricing optional or accessory products along with their main product
- Problem of pricing what to include in base, what to include as option
Captive-product pricing
- Making products that must be used along with a main product
- Find the balance between main product and captive pricing
- Also known as two part pricing fixed fee and variable usage rate
By-product pricing
- The company seeks a market for by-products to help offset the costs of
disposing of them and to help make the price of the main product more
competitive
- Can be profitable in some cases
Product-bundle pricing
- Sellers combine several of their products and offer the bundle at a reduced
price

Price-adjustment strategies

Discount and allowance pricing

- Companies adjust their basic price to reward customers for certain responses
- Discounts are a straight reduction in price on purchase during a stated period
of time or when purchasing larger quantities
o Cash discount is price reduction to those who pay bills promptly
o Quantity discount is price reduction to buyers who buy in bulk
o Functional/trade discount offered to trade-channel members who
perform certain functions
o Seasonal discount is price reduction to buyers who buy out of season
- Allowances are promotional monies paid by suppliers to retailers in return for
an agreement to feature the suppliers products in some way
o Trade in allowances
o Promotional allowances are payments to reward dealers for
participating in ad/sales support
Segmented pricing
- A company sells a product or service at two or more prices, even though the
difference in price is not based on differences in costs
- Customer-segment pricing sees diff customers paying diff prices for same
product
- Product-form pricing sees different versions of the product priced differently
but not according to differences in costs
- Location-based pricing sees charging different prices for different locations,
but no diff in cost
- Time-based pricing sees firms varying price based on the month, day or hour
- Known as revenue/yield management
- Conditions
o Must be possible to segment market
o Segments must show different levesl of demand
o Cost of segmenting and watching the market cannot exceed extra
revenue from price difference
o Segmented pricing should be legal
o Should reflect real differences in perceived value
Psychological pricing
- Seller considers the psychology of prices and not simply the economics
- Reference prices are prices that buyers carry in their minds & refer to when
looking at a given product
- Most consumers do not have the skill/info to know if they are paying a good
price in most purchases
Promotional pricing
- A company temporarily prices its product below list price, and sometimes even
below cost to create buying excitement and urgency
- Can take the form of discounts, special-event pricing or cash rebates
- Can also include low-interest financing, longer warranties or free
maintenance
- Can have adverse effects
o Can create deal prone customers or erode brands value
Geographical pricing
- FOB-origin pricing means goods are placed free on board a carrier, shipping
costs are for customer
- Uniform-delivered pricing is the opposite of FOB
o Company charges same cost plus freight to all customers regardless of
location
o Easier to administer and advertise

Zone pricing is between FOB and uniform pricing

o Sets up zones to classify pricing
o Problem of one customer paying for another
- Basing-point pricing selects given city as a basing point to calculate freight
from that city
o If all companies used the same basing point city, no freight price
competition
o Set up multiple basing points to improve competitiveness
- Freight-absorption pricing means seller absorbs some or all of the freight
charges
o Used for market penetration and to hold on to increasingly competitive
markets
Dynamic pricing
- Prices are adjusted continually to meet the characteristics and needs of
individual customers and situations
- Web allows sellers to use real-time pricing
- Offers many advantages
o Can mine databases to gauge shoppers desires, tailor product prices
accordingly
o Monitor inventories, costs and demand to adjust prices
o Consumers can use comparison sites to get the best deal can negotiate
lower prices
o Can negotiate prices at online auction sites and exchanges
- Can be controversial amazon
- Do not damage customer relationships
-

International pricing
- Companies can charge worldwide price
- Companies charge in a country based on many factors, including marketing
objectives
- Costs play a key role in international prices
- Price escalation may result from differences in selling strategies or market
conditions
o Important consideration in emerging markets

Price changes

Initiating price changes

- Initiating price cuts
o Situations may lead to a firm cutting price
Excess capacity
Falling demand in the face of strong price competition/weak
economy
May lead to price wars, however
May also cut to dominate market through lower costs
- Initiating price increases
o A successful price increase can greatly improve profits
o Major factor in price increases is cost inflation
Another factor is over-demand
o Must avoid being seen a sprice gouger
o Must maintain a sense of fairness surrounding price increases
Should be supported by company communications telling
customers why prices are being raised
Low visibility price moves is a good technique

o Where possible, find a way to meet higher costs or demand without

raising prices
Cost effective ways of distribution
Unbundle market offering
- Buyer reactions to price changes
o A price increase/decrease may have some positive/negative meanings for
buyers
- Competitor reactions to price changes
o Most likely to react when number of firms small, product uniform and
buyers are well informed
o The company must try to guess each competitors likely reaction
Responding to price changes
- Must consider several questions
o Why did the competitor change the price?
o Is the price change temporary or permanent?
o What will happen to the companys market share and profits if it does not
respond?
o Are other competitors going to respond
- If company decides that effective action can and should be taken, can be any of
four responses
o Could reduce its price to match the competitors
Would lose too much market share
Will reduce profits in the short run
o Could maintain price and raise perceived value of its offer
o Could improve quality and increase price
o Could launch a low price fighter brand
Ie adding a lower price item to the line or creating a separate lower
price brand

Public policy and pricing

-

In setting prices, companies are not usually free to charge whatever prices
The most important piece of legislation affecting prices is the Trade Practices
Act
o Now the Competition and Consumer Act 2010
o ACCC plays a major role in investigating possible breaches of the Act
Pricing within channel levels
- Legislation on price fixing states that sellers must set prices without talking to
competitors
- Sellers are also prohibited from using predatory pricing, which is setting
below cost with the intention of punishing a competitor or gaining higher longrun profits by putting competitors out of business
- Selling below cost to clear inventory is not predatory, but to drive out
competitors is
- Mens rea issues olol
Pricing across channel levels
- TPA prevents unfair price discrimination by ensuring that sellers offer the
same price terms to customers at a given level of trade
o Retailers entitled to same price terms from a given manufacturer
o Only legal if costs are different when selling to diff retailers
o Also different qualities of same product to diff retailers
- Law also prohibits retail/resale price maintenance
o Manufacturer cannot require dealers to charge a specified retail price for
its product

o Can propose a SUGGESTED retail price, but cannot refuse to sell to

dealer who takes independent price action
Deceptive pricing occurs where a seller states prices or price savings that
mislead consumers or are not actually available to consumers
o Could involve bogus pricing high prices, sale prices close to original
prices
o Comparison pricing claims are legal if they are truthful
o Other issues include scanner fraud and price confusion
Former is complaints of retailers overcharging their customers
Intentional overcharges occur in other cases, especially in price
confusion
Price confusion results when firms employ pricing methods
that make it difficult for consumers to understand just what
price they are really paying

Chapter 10 Placement: Customer Value Fulfilment

Marketing logistics networks describe a system of efficiently and effectively
making and getting products to end-users
- Physical distribution is a term used to indicate moving goods between the
vendor marketing organisation and its intermediaries
o It is the tasks involved in planning, implement and controlling the
physical flow of materials and final goods from points of origin to points
of use to meet the needs of customers at a profit
o Choose warehouses/stocking points to minimise costs
o Cross-docking involves adding value by picking up shipments received
from suppliers then reloading them onto transport without any storage in
a warehouse
- Management focus has broadened from physical distribution to logistics of
making and distributing goods and services, embraced by the term marketing
logistics network management
o Includes procuring the right inputs, efficiently converting them into
finished products and conveying them to their final destinations/point of
use
Marketing logistics networks
- Marketing logistics is the process of planning, implementing and controlling
effective flow of storage of materials, in-process inventory, finished goods and
related information from point of origin to point of consumption for the
purpose of conforming to customer requirements
o The modern marketing logistics network might also be a value delivery
network
- INFS play a critical role in managing marketing logistics networks
- Marketing logistics network management involves several activities
o Forecasting
o Production plans indicate materials purchasing department must order
o Materials arrive through inbound transportation and stored in raw
material inventory
o Raw materials are converted into finished goods
Finished goods inventory is the link between the customers
orders and the companys manufacturing activity
Customer orders draw down this inventory, manufacturing builds it
up
o Then packaged, all the other stuff needed to get it to the customer
- Marketing logistics network management program is the managing of the
network of players providing customer fulfilment, ranging from providers of
-

inputs to conversion operations, and including marketing channel

intermediaries and those involved in physical movement of product
o Can attract additional customers through logistics improvements
- Services marketing logistics involves coordinating non-material activities
needed to provide a service in a cost effective way and with the quality
expected
- More than any other marketing function, logistics affect the enviro/enviro
sustainability efforts
Marketing logistics network goals
- Marketing logistics trade-offs occur because management seeks an optimal
result in terms of achieving a customer service level acceptable to the
customer at a cost that gives an optimal profit and cashflow result to the
company
- Marketing logistics networks typically add value through the following
decisions
o Cycle time reductions
o Conversion operations location
o Purchasing decisions to make or buy or vertically integrate or network
with suppliers
o Manufacturing and operations process decisions (eg producing in bulk)
o Order processing and costs
o Warehouse numbers and costs
o Inventory levels and costs (reduce inventory through cross docking)
o Transport type and costs
o Restructuring the marketing channels used to place products within easy
reach of buyers and end-users
- There is ultimately a tradeoff between lower cost and better customer service
textbook is shit lol
o No logistics network can maximise customer service and minimise
distribution costs
- Goal of marketing logistics should be to provide a targeted level of customer
service at the least cost
o Objective is to maximise profits, not sales
Major logistics functions
- Warehousing
o Company must decide on how many, what types, where for warehouses
o Can use storage warehouses or distribution centres
Storage warehouses store goods for moderate to long periods
Distribution centres are designed to move goods rather than just
store them
Large and highly automated warehouses designed to receive
goods from various plants and suppliers, take orders, fill
them efficiently, and delivery goods to customers as quickly
as possible
- Inventory management
o Greatly reduced inventories and related costs through just-in-time
logistics networks
o Could be improved through RFID in the future
Allows companies to know exactly where a product is in the supply
chain
- Transportation

o Choice of transportation carries affects the pricing of products, delivery

performance and the condition of the goods when they arrive, which all
affect customer satisfaction
o Can use
Trucks
Efficient for short hauls of high value merchandise
Railroads
One of the most cost effective methods for large amounts of
bulk products
Sea carriers
Low cost, but slow and affected by weather
Pipelines
Specialised means for petroleum, natural gas and chemicals
Air
Costly, but speedy and can travel far
o The internet carries digital products
o Shippers can use intermodal transportation, which is combining two
or more modes of transportation
Piggyback, fishyback, trainship, airtruck
Logistics information management
o Channel partners link up to share information and make better joint
logistics decisions
o Most sharing takes place through tradition/internet-based electronic
data exchange
o Set up vendor managed inventory or continuous inventory
replenishment systems
Sees customer share real time data on sales/inventory levels with
supplier
Supplier takes full responsibility for managing
inventories/deliveries

The nature and importance of marketing channels

How
-

A marketing channel is a network of interdependent organisations

intermediaries involved in the process of making goods and services available
for use or consumption by the consume or business user
marketing channel members add value
Suppliers lack financial resources to carry out direct marketing
o Customers want personal interaction before buying large ticket items
o Only marketing intermediaries can do this
Direct and online marketing would require many suppliers to set up companymanaged networks of intermediaries for their producers if they wished to
achieve the mass distribution economies their current marketing channels offer
o Makes it easier to work through a network of third party distributors and
retailers
Intermediaries are more efficient in making goods available to the market
o Can allow for suppliers to earn greater return by increasing their
investment in their business
Intermediaries reduce the amount of work to be done by suppliers to
sell/distribute product and for customers to buy it
o Less interaction required
Role of intermediaries economically is to transform assortment of products
made by produces into assortments wanted by consumers

o Using marketing intermediaries allows customers to have greater

control/choice
o Coordinate supply and demand
How marketing channels add value
- Value added when goods moved from producers and suppliers to consumers
- Overcomes time, placement and possession gaps when suppliers cannot
coordinate supply and demand
- Perform many key functions
o Information
Gathering and distributing marketing research and intelligence
information about actors and forces in the marketing environment
needed for planning and aiding exchange
o Promotion
Developing and spreading persuasive communications about an
offer
o Contact
Finding and communicating with prospective buyers
o Matching
Shaping and fitting the offer to the buyers needs
o Negotiation
Reaching an agreement on price and other terms of the offer so
that ownership or possession can be transferred
o Physical distribution
Transporting and storing goods
o Financing
Acquiring and using funds to cover the costs of the channel work
o Risk taking
Assuming the risks of carrying out the channel work
- All functions use scarce resources, can often be performed better
through specialisation and can be transferred to other channel
members
- When functions are shifted to intermediaries, producers costs and prices are
lower, but intermediaries must charge extra
Number of channel levels
- Channel levels are a layer of intermediaries who perform some work in
brining the product and its ownership closer to the final buyer
- The number of intermediary levels indicates the length of a channel
- A direct marketing channel has no intermediary levels
- Institutions in channels are connected by several flows
o Product flow of g/s
o Flow of ownership
o Payment flow
o Information flow
o Promotion flow
Channels in the service sector
- Must determine agencies and locations for reaching a widely spread population

Channel behaviour and organisation

Channel behaviour
- Marketing channel consists of dissimilar firms that have banded together for
common good
- Channel conflict is disagreement among marketing channel members on
goals and roles, on who should do what and for what rewards

o Horizontal conflict is conflict between firms at the same level of the

channel
Competitive concerns
o Vertical conflict refers to conflict between different levels of the same
channel
o Some conflict is healthy competition, some damages it
Channel organisation
- Conventional marketing networks
o Conventional distribution channels are loose collections of
independent companies, showing little concern for overall channel
performance
- Vertical marketing networks
o Conventional marketing channel is one or more independent producers
or suppliers trying to maximise its profits
o Vertical marketing networks are distribution channel structures in
which producers, wholesalers and retailers act as a unified network
One channel member owns the others, has contracts with them, or
wields so much power that they all cooperate
Came into being to control channel behaviour and manage
channel conflict
- Corporate VMNs
o Combine successive stages of production and distribution under single
ownership
- Contractual VMNs
o Consist of independent firms at different levels of production &
distribution who join together through contracts to obtain more
economies or sales impact than they could achieve alone
o Three forms of contractual VMNs
Wholesaler-sponsored voluntary chains are networks in which
wholesalers organise voluntary chains of independent retailers to
help them compete with large chain organisations
Retailer cooperatives are networks in which retailers organise a
new jointly owned business to carry on wholesaling and possibly
production
Franchise organisations are where a channel member called a
franchisor links several stages in the production-distribution
process
There are three forms of franchises
o Manufacturer-sponsored retailer franchise
networks
License people to sell the product
o Manufacturer-sponsored wholesaler franchise
networks
License large companies of the same kind to sell
product
o Service-firm-sponsored retailer franchise networks
Service firm licenses network of retailers to
provide service
- Administered VMNs
o Coordinate successive stages of production and distribution not
through common ownership or contractual ties but through the size and
power of one of the dominant channel members
- Horizontal marketing networks

o A channel arrangement in which two or more companies at one level join

together to follow a new marketing opportunity
o May be temporary or permanent, or new company
o Allows companies to gain impact, scale and flexibility not achieved alone
Hybrid marketing channel networks/multichannel networks
o Multichannel distribution system where a single firm sets up two or more
marketing channels to reach one or more customer segments
o Can allow sales gains but risk offending existing customers

Retailing

Retailing is all the activities involved in selling goods or services directly to

final consumers for their persona, non-business use
Types of retailers
- Retailers are businesses whose sales come primarily from retailing
- Methods of classifying retailers below
- Amount of service
o Different product lines need different amounts of service and customer
service preferences vary
o Self-service retailers are those that provide few or no services to
shoppers; shoppers perform their own locate-compare-select process to
save money
o Limited-service retailers provide limited but technically competent
sales assistance because they carry shopping goods about which many
customers need less information
o Full-service retailers may be distinguished by the fact that salespeople
assist customers in every phase of the shopping process
o Also note digital retailers
- Product line
o Specialty stores carry narrow product lines with deep assortments
within that line
o Combination stores are a combined grocery and general merchandise
store
o Department stores are retail organisations that carry wide varieties of
product lines, typically clothing, home furnishings and household goods
Each line is operated as a separate department managed by
specialist buyers or merchandisers
o Supermarkets are large, low-cost, low-margin, high-volume, self-service
stores that carry wide varieties of food, laundry and household products
o Convenience stores are small stores located near residential areas,
open long hours seven days a week, carrying a limited line of highturnover convenience goods
o Mass merchants carry a large assortment of merchandise such as
hardware, electrical goods or personal and health care
o Superstores are stores almost twice the size of a regular supermarket
carrying a large assortment of routinely purchased food and non-food
items, and offering such services as dry cleaning, photo developing,
cheque cashing, bill paying, car care and pet care
o Hypermarkets are huge stores that combine supermarket, discount and
warehouse retailing; in addition to food, it carries furniture, appliances,
clothing and many other items
o Service businesses are those where the product line is a service, such
as hotels
- Relative prices
-

o Discount stores sell standard merchandise at lower prices by accepting

lower margins and selling at a higher volume
o Off-price retailers buy at less than regular wholesale prices & charge
consumers less than retail
DFOs are owned and operated by manufacturers and retailers alike
and may carry the manufacturers or retailers surplus, or
discontinued or irregular goods
Independent off price retailers are owned and run by
entrepreneurs or are divisions of larger retail corporations
Warehouse clubs sell a limited selection of brand name grocery
items, appliances, clothing and a hodgepodge of other goods at
deep discounts to members who pay an annual membership fee
- Organisational approach
o Chain stores are two or more outlets that are commonly owned and
controlled, employ central buying and merchandising and sell similar
lines of merchandise
Corporate chains are larger chain stores
o Voluntary chains are wholesaler-sponsored groups of independent
retailers that engage in group buying and common merchandising
o Retailer cooperatives are contractual vertical marketing networks
where independent retailers organise a new, jointly owned wholesale
business
o Franchise is a contractual association between a manufacturer,
wholesaler or service organisation (franchisor) and independent business
people (franchisees) who buy the right to own and operate one or more
units in the franchise system
Retailer marketing decisions
- Segmentation, targeting, differentiation and positioning decisions
o Retailers must first define target markets and how they will position
themselves
- Product and service assortment decision
o Must decide on three main product variables
Retailers product assortment should differentiate retailer while
matching expectations
Retailers services mix help to differentiate between each other
Superior store atmosphere invites customer to spend
- Price decision
o Price policy must fit retailers target market and positioning, product and
service assortment and competition
Seek either high markups on lower volume or low markups on high
volume
- Promotion decision
o Must decide how to use any or all of the promotion tools to reach
consumers
- Placement decision
o Location location location
o Central business districts are the are of business at the heart of a city
or town
o Shopping centres - a group of retail businesses planned, developed,
owned & managed as unit
Parra Westfield the home of PARRABOIZ aka me
o Strip shopping centres are a group of retail businesses located along
an arterial road

o Other
Retail clusters in commercial buildings or around major hotels
DIY retail parks HOMEBASE PROSPECT ESHAAAYYZZZZZZZZZ
Entertainment centres darling harbour
Arcades and conversion of historical buildings
People, processes and physical evidence decisions
o Store atmosphere must suit target market and move customers to buy
o Experiential retailing to transport consumers into unusual, exciting
shopping environments
Retailing trends and developments
o Chronic overcapacity
o Changing consumer demographics, lifestyles and spending patterns
o Slowdown in population growth
o Quickly rising costs and need for more efficient retailing leads to
increased importance of tech
o Life cycle of new retail forms is getting shorter
o Tech allows retailers to connect with consumers better
o Wheel of retailing concept explains many retailing innovations
Holds that many new types of retailing forms begin as low-margin,
low-price, low-status operations
o Some retailers are kindling community spirit

Wholesaling

Wholesaling includes all activities involved in selling goods and services to

those buying for resale or business use
- Wholesalers are firms engaged primarily in wholesaling activities
- Differ from retailers in that
o Pay less attention to promotions since deal with business customers
o Cover large trade areas and have larger transactions
o Face different legal regulations and taxes
- Wholesalers buy mostly from producers and sell mostly to retailers and other
wholesalers
- Why should producers use wholesalers?
o Selling and promoting
o Buying and assortment building
o Bulk breaking
o Warehousing
o Transportation
o Financing
o Risk bearing
o Market information
o Management services and advice
Types of wholesalers
- Wholesalers fall into three main groups
o Merchant wholesalers
Largest group
Independently owned business that takes title to the merchandise it
handles
Distinction between full-service and limited-service
wholesalers
o Brokers and agents
Brokers bring buyers and sellers together and assist in negotiation
Does not take title to goods
-

Agents represent buyers or sellers on a more permanent basis

Perform only a few functions and does not take title to goods
o Manufacturers sales branches and offices
Wholesaling by sellers or buyers themselves rather than through
independent wholesalers
Wholesaler marketing decisions
- Segmentation, targeting, differentiation and positioning decision
o Must define their target markets and position themselves effectively
o Choose by size of customer, type of customer, need for service or other
factors
Within target group, identify more profitable customers & build
relationships with them
- Marketing mix decisions
o Must decide on product assortment and ancillary services, prices,
promotion and placement
o Must decide on price
o Promotions can be critical to success, but most wholesalers are not
promotion-minded
o Placement is important location, facilities, website
o People, processes and physical evidence are also just as important
- Wholesaling trends and developments
o Need for greater efficiency
o Economic conditions
o Consolidation will reduce the number of firms in the industry
o Geographical expansion will require learning how to compete over
diverse areas
o Rising costs putting squeeze on profits

Chapter 11 Communicating Customer Value:

Advertising and Public Relations
The promotion mix
-

A companys total promotion mix/marketing communications mix is the

specific blend of advertising, public relations, personal selling, sales promotion
and direct marketing tools that the company uses to persuasively communicate
customer value and build customer relationships
The five main promotions tools are
o Advertising
Any paid form of non-personal presentation and promotion of ideas,
goods or services by an identified sponsor
o Sales promotion
Short-term incentives to encourage the purchase or sale of a
product or service
o Personal selling
Personal presentation by the firms salesforce for the purpose of
making sales and building customer relationships
o Public relations
Building good relations with the companys various publics by
obtaining favourable publicity, building up a good corporate image,
and handling or heading off unfavourable rumours, stories and
events
o Direct marketing

Direct connections with carefully targeted individual consumers to

both obtain an immediate response and cultivate lasting customer
relationships
Marketing communication goes beyond all these promotion tools to
communicate something to buyers
Entire marketing mix must be coordinated for greatest communicative impact

Integrated marketing communications

The new marketing communications landscape

- Consumers are changing
o More informed and communications empowered
- Marketing strategies are changing
o Marketers are developing focused marketing programs to build close
relationships with customers in more narrowly defined micromarkets
- Changes in communications technology
o Changing the way companies and consumers communicate with each
other
The shifting marketing communications model
- Less broadcasting, more narrowcasting
- Doom and gloom chaos scenario predicted, where old mass-media
communications will collapse entirely
- New technologies will let marketers reach smaller groups of consumers in
more interactive and engaging ways mainly digital media
- Others see gradual shift to new marketing communications model
- Key is to find the mix of media that best communicates the brand message and
enhances customers brand experience
The need for integrated marketing communications
- Consumers do not distinguish between message sources like marketers
- Conflicting messages from different sources can cause confused company
images, brand positions and customer relationships
- Companies are therefore adopting the concept of IMC
o The careful integration of a companys many communications channels to
deliver a clear, consistent and compelling message about the
organisation and its brands
- IMC calls for recognising all touch points
- Each brand contact will deliver a message, and the company wants to deliver
a consistent and positive message with each contact
- IMC leads to a total marketing communications strategy aimed at building
strong customer relationships by showing how the company and its
products help customers solve their problems
- Different media have different roles in attracting, informing and persuading,
and must coordinate them using IMC
- To assist IMC, companies adopt a marketing communications director who has
overall responsibility for the companys communications efforts
o Helps produce more communications consistency and greater sales
impact

Shaping the overall promotion mix

The nature of each promotion tool
- Advertising
o Can reach masses of geographically dispersed buyers and low cost per
exposure
o Large scale advertising says something positive about size, popularity
success

o Can build up long term image and create quick sales, and legitimise the
product in consumer eyes
o However, is very impersonal and cannot be very directly persuasive
Can also only carry a one way audience
- Personal selling
o Most effective tool at certain stages of buying process
o Allows effective building of customer relationships
o Buyer feels greater need to listen and respond
o However, requires greater long term commitment and is the most
expensive promotion tool
- Sales promotion
o Attract attention, offer incentives to purchase, dramatise offers
o Invite and reward quick response
o Not effective in long run and in building relationships
- Public relations
o Believable and reaches those which avoid other promotion mix tools
o Tend to be underused
- Direct marketing
o Less public, immediate and customised and interactive
o Builds relationships and helps in targeted marketing efforts
Promotion mix strategies
- Push strategy
o A promotional strategy using the salesforce and trade promotions to push
the product through marketing channels to final consumers
o Producer promotes the product to channel members, who in turn
promote it to final consumers
- Pull strategy
o The producer directs its marketing activities (primarily advertising and
consumer promotion) towards final consumers to induce them to buy the
product
- Some companies use only push or pull, but most large companies use both
- Consider various factors when designing promo mix strategies
o Type of product/market
o PLC stage
o More pull in consumer marketing
o More push in business marketing

Advertising
-

Used by all sorts of firms

Marketing management must make four important decisions when developing
an advertising program
Setting advertising objectives
- Should be based on past decisions about target market, positioning and
marketing mix
- An advertising objective is a specific communication task to be accomplished
with a specific target audience during a specific period of time
o Information advertising is used heavily when introducing a new
product category
Build primary demand
o Persuasive advertising becomes more important as competition
increases
Build selective demand
o Comparative/attack advertising involves directly or indirectly
comparing company brand with one or more other brands

 Should use with caution

o Reminder advertising is important for mature products
Helps maintain customer relationships and keep consumers
thinking about the product
- Advertising aims to help consumers move through the buying process
o Aim for either immediate action or building long term relationships
Change how customers feel about the brand
Setting the advertising budget
- Advertising budget is the dollars & other resources allocated to
product/company advertising program
- Affordable method
o The promotion budget is set at the level the company can afford
o Ignores effect of promotion on sales and makes long term planning
difficult
- Percentage of sales method
o The promotion budget is set at a certain percentage of current or
forecast sales
o Simple to use and helps management consider relationship between
promotion spending, selling price and profit per unit
o However, wrongly views sales as the cause of promotion rather than the
result
Effect and cause, not cause and effect
o Still based on availability of funds rather than opportunities
o Does not provide basis for choosing percentage
- Competitive parity method
o Promotion budget it set to match competitors outlays
o Competitors budgets represent wisdom of industry and helps prevent
promo wars
o However, no grounds for believing competition has better idea what
company should spend on
o No evidence that it prevents promo wars
- Objective and task method
o Most logical method
o Promotion budget is set by defining specific objectives and determining
the promotional tasks required to achieve these objectives
o Budget is set to cover the costs of these tasks
o Entails
Defining specific promo objectives
Determining the tasks needed to achieve these objectives
Estimating the costs of performing these tasks
Sum of these costs is the proposed promo budget
o Advantage is that it forces mgmt to spell out assumptions about the
relationship between dollars spent and promotion results
o Problem is that it is the most difficult method to use
o Easiest to cut advertising in hard times, but causes long term damage to
brand image and market share gain competitive advantage if increasing
advertising while competitors are decreasing
- Developing advertising strategy
o Advertising strategy
Consists of two main elements: creating advertising messages and
selecting advertising media
In the past, often viewed media planning as secondary to message
creation

 Increased importance now of media selection

o Creating the advertising message
Advertising can only succeed if it gains attention and
communicates well
Breaking through the clutter
Advertisers can no longer force feed same messages through
traditional media
Need to have better planning
Merging advertising and entertainment
Done to break through the clutter
Aim of advertainment is to make advertisements
entertaining or useful so that people will want to watch them
Branded entertainment/brand integrations involves
making the brand an inseparable part of some other form of
entertainment
o Product placement however, threatens the same
clutter as before
Message strategy
First step in creating effective advertising messages is to plan
a message strategy
o Decide what general message will be communicated to
consumers
Ideally message will follow from broader positioning &
customer value strategies
Advertiser must develop a compelling creative concept
o A big idea that will bring the message strategy to life
in a distinctive and memorable way
o Simple message ideas become great ad campaigns
o Creative concept could be anything
Advertising appeals should have three characteristics
o Meaningful, believable, distinctive
Message execution
Any message can be presented in different execution styles
o These are the approach, style, tone, words and format
chosen for executing the message
o Slice of life style
Shows typical people using the product
o Lifestyle
Shows how product fits in with particular lifestyle
o Fantasy
Creates fantasy around product or its use
o Mood or image
Builds a mood or image around the product
o Musical
Shows people singing about the product
o Personality symbol
Creates a character that represents the product
o Technical expertise
Shows companys expertise in making the
product
o Scientific evidence

 Presents evidence brand is better

o Testimonial evidence or endorsement
Features believable source endorsing the product
Advertiser must also choose tone for the ad
Must use attention-getting and memorable words in the ad
Must use format elements to maximise impact in its goal
Copy (main block of text) must be simple, strong convincing
All these elements must work TOGETHER
Consumer generated messages
Crowdsourcing bs
Have to be careful can also be dangerous without
moderation
Extremely beneficial
o Little expense, great ideas and fresh perspectives
o Boost consumer involvement and relationships
o Selecting advertising media
Advertising media are the vehicles through which advertising
messages are delivered to their intended audiences
Deciding on reach, frequency and impact
Reach is a measure of the percentage of people in the target
market exposed to the campaign in a given period of time
Frequency is how many times the average person is exposed
to the message
Impact is the qualitative value of a message exposure
through a given medium
Advertiser wants to choose media that will engage consumers
Choosing among the main media types
Each media has advantages and limitations
Choose media that effectively and efficiently presents the
advertising message
Media mix must be re-examined regularly
Use of narrowcasting to target market segments
Ads can be anywhere nowadays
Rapid growth of media multitaskers people who absorb >1
medium at once
Selecting specific media vehicles
Choose the best media within each general media type
Must calculate the cost per thousand persons reached by a
vehicle
Must consider costs of producing ads for different media
Balance media cost against media effectiveness
o Evaluate audience quality
o Evaluate audience engagement
o Evaluate editorial quality
Deciding on media timing
Some do only seasonal advertising, but most engage in it
Choose pattern of ads
o Continuity is scheduling ads evenly
o Pulsing is scheduling ads unevenly
Sacrifices depth of advertising communications,
however

Evaluating advertising effectiveness and return on advertising investment

- Return on advertising investment is the net return on advertising
investment divided by the costs of that advertising investment
- Measuring the communication effects of an ad tells us whether theyre
communicating the message well
o Pre and post evaluations of communication effects
- Sales and profit effects of advertising are difficult to measure
o Can compare past sales and profits with past advertising expenditures, or
use experiments
o Reliance on judgment + quantitative analysis to assess advertising
performance
Other advertising considerations
- Organising for advertising
o Advertising agencies are marketing services businesses that assist
companies in planning, preparing, implementing and evaluating all or
portions of their advertising programs
Often perform ad tasks better than companys staff can
Bring an outside view and experience with them
- International advertising decisions
o Issue is the degree to which global advertising should be adapted to
unique market characteristics
o Popularity of social networks & video sharing has increased need for
advertising standardisation
o Standardisation has many benefits
Lower costs, greater advertising coordination and more consistent
worldwide image
o Also has drawbacks
Ignores that country markets differ in cultures, demographics and
economic conditions
o Develop global advertising strategies, then adapt advertising programs
for each market
o Problems include
Differences in advertising media costs and availability
Differences in advertising regulations

Public relations
-

PR is building good relations with the companys various publics by obtaining

favourable publicity, building up a good corporate image and handling or
heading off unfavourable rumours, stories & events
Publicity is activity to promote a company or its products by obtaining
coverage in media not paid for by the sponsor
PR performs any of the following functions
o Press relations or press agency
Creating and placing newsworthy information in the news media to
attract attention to a person, product or service
o Product publicity
Publicising specific products
o Public affairs
Building and maintaining national or local community relations
o Lobbying
Building & maintaining relationships with legislators & government
officials to influence legislation & regulation
o Investor relations

Maintaining relationships with shareholders and others in the

financial community
o Development
PR with donors/members of non-profit organisations to get
financial/volunteer support
role and impact of public relations
PR can have a strong impact on public awareness at a much lower cost than
advertising can
Pays for staff to develop and circulate info and to manage events
PR is sometimes described as a marketing stepchild because of its often limited
and scattered use
o Often handled in corporate headquarters or by third party agency
o PR programs to support product marketing objectives may be ignored
o Marketing managers and PR practitioners do not always speak the same
language (figuratively)
Although PR only captures small portion of overall marketing budgets, PR can
be a powerful brand building tool
main public relations tools
News, speeches, special events, fielding questions from media
Written materials to influence target markets audiovisual materials as well
Corporate identity materials help create corporate identity the public
immediately recognises
Public service activity contribution improves public goodwill
Using buzz marketing campaigns to generate excitement take advantage of
social networking process
o Consumers spread info about product to others
Companys website is important PR vehicle, as people use it as first port of call
for information

The
-

The
-

Chapter 12 Personal Selling and Sales Promotion

Personal selling
The nature of personal selling
- Personal selling is personal presentation by the businesss salesforce for the
purpose of making sales and building customer relationships
- Most salespeople are well-educated, well-trained professionals who add value
for customers and maintain long-term customer relationships
- Best salespeople are good at one on one contact and create loyalty in
customers
- A salesperson is an individual representing a company to customers by
performing one or more of the following activities: prospecting,
communicating, selling, servicing, information gathering and relationship
building
o Can be an order taker at one extreme behind the counter
o Can be an order getter at the other demands creative selling and
relationship building
The role of the salesforce
- Personal selling is the interpersonal arm of the promotion mix
o Can be more effective than advertising in more complex selling situations
- Role of personal selling varies from company to company
o Some have no salespeople at all
o Others, it plays major role
- Linking the company with its customers
o Salespeople serve the seller and the buyer
o They represent the company to customers

Find and develop new customers and communicate info about the
companys product and services
Sell products, provide customer service and carry out market
research/intelligence
o At the same time, they represent customers to the company
Manage the buyer-seller relationship and relay concerns about
company products ot those who can handle them
o To many, the salesperson is the company the only touch point
Customers may become loyal to salespeople salesperson owned
loyalty
Coordinating marketing and sales
o Salesforce and firms other marketing functions should work together
closely to create value for both customers and the company
Integrate together, otherwise blame game occurs
o To integrate better
Increase communications, joint assignments and objectives,
rewards system, marketing sales liaisons, appoint chief
revenue/customer officer to oversee marketing/sales

Managing the salesforce

Salesforce management is the analysis, planning, implementation and

control of salesforce activities
o Includes designing salesforce strategy and structure, and recruiting,
selecting, training, compensating, supervising and evaluating the firms
salespeople
Designing salesforce strategy and structure
- Salesforce structure
o Territorial salesforce structure
Each salesperson is assigned to an exclusive geographic area and
sells the companys full line of products or services to all customers
in that territory
Clearly defines each salespersons job and fixes accountability
Increases desire for salesperson to build relationships and improve
effectiveness
Supported by many levels of sales management positions
Territory sales representatives
Territory managers
Regional managers
Director of sales
o Product salesforce structure
Salespeople specialise in selling only a portion of the companys
products or lines
Problematic if single large customer buys many different company
products
Leads to extra costs
o Customer/market salesforce structure
Salespeople specialise in selling only to certain customers or
industries
Separate salesforce for different industries or large customers
Helps build closer relationships with important customers
o Complex salesforce structures
Use a combination to maximise effectiveness
-

Good sales structure can mean difference between success and

failure
- Salesforce size
o Salespeople are one of the most companys most productive and
expensive assets
o Use some form of workload approach
Group accounts into different classes according to size, account
status or other factors
Then determines number of salespeople needed to call on each
class of accounts the desired number of times
- Other salesforce strategy and structure issues
o Outside and inside salesforces
Outside/field salesforce is the people who travel to or call on
customers in the field
Inside salesforce is the salespeople who conduct business from
their offices by telephone, the internet or visits from prospective
buyers
Inside salesforce can assist outside salesforce
Technical sales support people, sales assistants
Other inside salespeople do more than just support
Telemarketers and websellers find new leads to sell to
o Team selling
Involves using teams of people from sales, marketing, engineering,
finance, technical support and even upper management to service
large, complex customer accounts
Move to team selling mirrors similar changes in customers buying
organisations
Competition between salespeople could be problematic and
overwhelming
Difficulty of evaluating individual contributions
Recruiting and selecting salespeople
- Poor selection is costly turnover
- Salesforce with many new people is less productive and disrupts customer
relationships
- Best salespeople possess four key talents important to select salesforce with
maximum talent of these
o Intrinsic motivation and disciplined work style
o Ability to close a sale and build customer relationships
Training salespeople
- Can spend anywhere from few weeks to a year or more in training salespeople
- Training can be expensive but can improve returns significantly
- Training programs have several goals
o Teach salespeople about different types of customers + needs, buying
motives, buying habits
o Must teach how to sell effectively and basics of the selling process
o Must teach to identify with the company, its products and competitors
- Use of elearning in sales training programs nowadays to cut costs and make it
on-demand
Compensating salespeople
- Compensation composed of fixed amount, variable amount, expenses and
fringe benefits
- Decide what mix of these elements makes the most sense for each sales job
- Compensation can motivate and direct activities

Companies are designing plans that reward building customer relationships

and long run value of customers
Supervising and motivating salespeople
- Goal of supervision is to help salespeople work smart by doing the right
things in the right ways
o Variation exists in how salespeople are monitored
o Can use
Call plan to show which customers & prospects to call on & what
activities to carry out
Time and duty analysis to spend time travelling, waiting, taking
breaks, admin chores
o Development of salesforce automation systems
Computerised, digitised salesforce operations that let salespeople
work more effectively anytime, anywhere
o Allows for better time mgmt, improved customer service, lower sales
costs, higher sales perf.
- Selling and the internet
o Sales 2.0 is the merging of innovative sales practices with Web 2.0
technologies to improve salesforce effectiveness and efficiency
Brings together customer-focused methodologies and productivity
enhancing technologies that transform selling from an art to an
interactive science
o Internet helps conserve time, lower costs, new vehicle for selling
o However, customers now know as much as products as salespeople
though
More control to customers
Sales 2.0 takes advantage of these environment changes
o Allows organisations to
Generate lists of prospective customers from online databases
Monitor interactions between customers about how they would like
to buy, how they feel about a vendor and what it would take to
make a sale
o Ultimately, allows customers online behaviour to dictate communication
- Goal of motivation is to encourage salespeople to work hard and energetically
towards salesforce goals
o Enable salespeople to reach full potential
o Some do their best without urging, but for some can be frustrating
o Organisational climate is the feeling that salespeople have about their
opportunities, value and rewards for a good performance
If salespeople are not treated as important, performance suffers
accordingly
o Sales quotas are standards stating the amount a salesperson should sell
and how sales should be divided among the companys products
Compensation often related to how well quotas are met
o Also use positive incentives to increase effort
Social meetings or sales contests for example
Evaluating salepeople and salesforce performance
- The process of management communicating what salespeople should be doing
and motivating them requires good feedback
- Information obtained in several ways
o Sales reports include work plans and longer term territory marketing
plans

o Call reports log completed activities & expense reports for what they
are partly/wholly repaid
o Monitor profit performance in salespersons territory
o Other info from personal observation, customer surveys and discussions
with other salespeople
Mgmt can thus evaluate members of the salesforce and provide them with
constructive feedback
Mgmt should evaluate performance of salesforce as a whole
o Are objectives being met?
o Is salesforce working well with the company organisation departments?
o Are salesforce costs in line with outcomes?
o Company must measure return on sales investment

The personal selling process

The selling process is the steps that a salesperson follows when selling
The steps focus on getting new customers and obtaining orders from them, but
most salespeople spend lots of time maintaining existing accounts and building
customer relationships
Steps in the selling process
- Prospecting and qualifying
o Prospecting is where the salesperson or company identifies qualified
potential customers
o Salesperson often approaches many prospects to get just a few sales
o Best source of prospects is referrals
o Qualifying leads is how to identify good prospects and screen out poor
ones
Use financial ability, volume of business, special needs, location,
possibilities for growth
- Pre-approach
o Pre-approach is the step in the selling process where the salesperson
learns as much as possible about a prospective customer before making a
sales call
For an organisation, learn what it needs, who is involved in buying
For its buyers, learn their characteristics and buying styles
o Set call objectives to qualify the prospect, to gather information or to
make an immediate sale
Also decide on the best approach and timing
Ultimately determine an overall sales strategy for the account
- Approach
o The approach is where the salesperson meets the customer for the first
time
o Should know how to get relationship off to a good start
Involves appearance, opening lines and follow-up remarks
- Presentation and demonstration
o Presentation is where the salesperson tells the value story to the
buyer, showing how the companys offer solves the customers problems
o The customer-solution approach fits better with todays relationship
marketing focus
o Before presenting solutions, must develop them
o Many companies organise entire salesforce around customer-solutions
selling
o Qualities buyers hate are
Pushy, late, deceitful, unprepared, disorganised
-

o Qualities buyers value are

Good listening, empathy, honesty, dependability, thoroughness and
follow-through
o Plan presentation methods
Goal is to deliver clear, concise and consistent message to
prospects about product and brand and why it is better than
competition
Use of advanced presentation technologies to allow for full
multimedia presentations
Handling objections
o Handling objections is where the salesperson seeks out, clarifies and
overcomes customer objections to buying
o Salesperson should use a positive approach, seek out hidden objections,
clarify objections, take objections as opportunities to provide more info
and turn objections into reasons for buying
Closing
o Closing is where the salesperson asks the customer for an order
o Some salespeople are bad at this need to recognise closing signals and
using closing techniques
o Offer special reasons to close such as lower price or extra for free

Follow-up
o Follow-up is where the salesperson follows up after the sale to ensure
customer satisfaction and repeat business
o Schedule follow up call, ensure proper servicing, and ascertain any
problems since the sale
o Complete orders, purchase terms and other matters
Personal selling and managing customer relationships
- The steps in the selling process are transaction oriented
- Company may not be seeking a sale build a mutually profitable relationship
- Large customers favour suppliers who can work with them over time to deliver
a coordinated set of products and services to many locations
- Short term business can be obtained through low prices
- Companies want to practice value selling
o Demonstrating and delivering superior customer value and capturing a
return on that value that is fair for both the consumer and the company
-

Sales promotion

Sales promotion consists of short-term incentives to encourage the purchase

or sale of a product or service
- Advertising provides a reason to buy the product, sales promotion offers a
reason to buy NOW
- Wide variety of promo tools used to stimulate an earlier or stronger market
response
Rapid growth of sales promotion
- Sales promo tools are targeted towards
o Final buyers (consumer promos)
o Retailers and wholesalers (trade promos)
o Business customers (business promos)
o Members of the salesforce (salesforce promos)
- Several factors have contributed to the rapid growth of sales promos, espesh in
consumer markets
o Product managers inside the company face greater pressures to increase
current sales and promotion is viewed as an effective short run sales tool
-

o The company faces more competition externally and competing brands

are less differentiated, meaning competitors are using sales promos to
help differentiate their offers
o Advertising efficiency has declined because of rising costs, media clutter
and legal restraints
o Consumers have become more deal oriented and sales promos help
attract frugal consumers
- Growing use of sales promos has resulted in promo clutter
Sales promotion objectives
- Use consumer promos to urge short term consumer buying or enhance
customer brand involvement
- Trade promos aim to get retailers to carry new items, more inventory, buy
ahead or promote companys products and give them more shelf space
- For the salesforce, objectives include getting more salesforce support for
current or new products or getting salespeople to sign up new accounts
- Sales promos should help reinforce products position & build long-term
customer relationships
- Marketers should avoid quick fix, price only promos in favour of promos
designed to build brand equity
o Eg use promos such as loyalty cards
Major sales promotion tools
- Consumer promotions
o Consumer promos are used to boosts short-term customer buying &
involvement or enhance long-term customer relationship
o Samples are offers of a trial amount of a product
Most effective and expensive way to intro new product or create
excitement
o Coupons are certificates that give buyers a saving when they purchase
specified products
Coupon clutter means fewer issues and more targeted coupons
Mobile coupons are now prominent - no paper, minimises costs
o Cash refunds/rebates are like coupons, but discount is after the
purchase
o Price packs (cents-off deals) offer consumers savings off the regular
price of a product
Discount is marked on the label or package woolies discount
section!
o Premiums are goods offered either free or at low cost as an incentive to
buy a product
o Advertising specialties/promotional products are articles imprinted
with an advertisers name/logo/message that are given as gifts to
consumers clayton utz whiteboard!
o Point of purchase (POP) promos include displays & demos that take
place at the point of sale
o Contests, sweepstakes and games give consumers the chance to win
something
Contest is timomatic comp, sweepstakes is raffle, game is burger
rings 10k thing
o Event marketing/sponsorships are creating a brand marketing event
or servicing as a sole or participating sponsor of events created by others
- Trade promotions
o Trade promos persuade resellers to carry a brand, give it shelf space,
promote it in advertising and push it to consumers

o Many of the tools used for consumer promos can also be used as trade
promos
o Straight discount off list price for a stated period of time (price-off,
off-invoice, off-list)
o Allowances are a certain amount off per case in return for retailers
agreement to feature the manufacturers products in some way
Compensates retailers for advertising the product
Display allowance compensates them for using special displays
o Free goods may be offered to resellers who buy certain quantity or
feature certain flavour/size
o Push money is cash or gifts to dealers or their salesforces to push the
manufacters goods
o Free specialty advertising items can be given
- Business promotions
o Business promos are used to generate business leads, stimulate
purchases, reward customers and motivate salespeople
o Include many of the tools used for consumer/trade promos
o Convention and trade shows can be used to show products to the
industry at a trade show
o Sales contests are contests for salespeople/dealers to motivate them to
increase their sales performance over a given period of time
Developing the sales promotion program
- Many other decisions must be made by marketers in designing the full sales
promo program
o Decide the size of the incentive
o Set the conditions for participation
o Decide how to promote and distribute the promo program itself
o Decide on the length of the promotion
o Must finally evaluate
Necessary to measure returns on sales promo investments and ask
whether the customer relationship is improved

Chapter 13 Direct and Digital Marketing: Building Oneto-One Customer Relationships

The direct marketing model
-

Direct marketing is an interactive system of marketing which use one or

more advertising media to effect a measureable response and/or transaction at
any location

Growth and benefits of direct marketing

Benefits for buyers

- Is convenient, easy and private
- Buyers have ready access to wealth of products - direct marketing not
restricted by physical boundaries
- Direct marketing gives buyers access to lots of comparative info on companies,
products & competitors
- Interactive and immediate
- Gives consumers a greater measure of control
Benefits for sellers
- Marketers can target small groups or individual consumers and promote their
offers through personalised communications
- Low-cost, efficient, speedy alternative for reaching markets B2B, B2C
- Lower costs, improved efficiencies and speedier handling of channel and
logistics functions

Greater flexibility in making adjustments to marketing efforts

Gives sellers access to buyers not reachable through other channels

Digital marketing: Internet and mobile marketing

Internet/World Wide Web is a vast public web of computer networks that

connects users of all types all around the world to each other and to an
amazingly large information repository
- Digital marketing entails interaction with known customers and others in the
marketing channel, on a one-to-one basis, often in real time, to maintain valueladen relationships and to generate a measurable response and/or transactions
using electronic network tools and technologies
- Marketing organisations around the world have changed as a result of three
entwined factors:
o Digitisation, globalisation and deregulation
o They have turned to the net to grow market/revenue base or for
productivity reasons
- Other business aims are stimulating use of the web
o Wanting to gain a global presence
o Establishing and maintaining a competitive edge
o Making cost savings
o Gaining a research advantage
- Originally envisaged that businesses would use web for B2C, but use in B2B &
B2G is bigger atm
- Roles for the web in terms of CRM and so its use in B2C has grown
- FTA TV and PayTV are also digital marketing channels
- Digital marketing fits more closely with direct response marketing than mass
marketing due to interactivity in real time
- Digital marketing can be used in one to many and many to one, but main role is
one-to-one
From marketing communication to transacting and relationship
management
- Digital marketing is often done by communicating offer using an approach or
using the net to generate a self-perpetuating face to face campaign involving
email or SMS, or a combo of off/online approaches
- The task remains of reaching the target market with reasons why the
company/brand website should be visited and revisited
o Requires interactivity and vividness
-

Customer database use in direct and digital marketing

The customer database defined

- A customer database is an organised collection of comprehensive data about
individual customers or prospects, including geographic, demographic,
psychographic and behavioural data
- Direct and digital database marketing entails development and
maintenance of electronic databases to interact with past, present and/or
potential customers and others in the marketing channel, on a one-to-one
basis, often in real time, and where the databases are used to maintain valueladen relationships and to generate a measurable response and/or
transactions through the integrated use of electronic network tools and
technologies
- Database technology aimed with engaging in one-to-one dialogue & eliciting
dat measureable response
- A list is simply contains names and contact details of qualified potential
customers
- A database may take one of three forms

o Hierarchical
Allow access of info but not easy extraction of data relating to
market segmentation and the tailoring of offers
o Network
Similar to above, but with multiple access points to data, making
them more flexible
o Relational
Most commonly used in marketing, data often entered through Web
and accessed by marketing management via company
intranets/extranets
Has links between attributes available
o Large firms use SAP/Oracle
o Medium sized businesses use Linux-based PostgresSQL/MySQL
o Small businesses use Microsoft Access/FoxPro
- Relational databases enable easy monitoring of purchases/profitability of
individual customers so that their customer lifetime value can be monitored
- Privacy guidelines indicate that companies must disclose the purposes for
which they are gathering customer info and must be prepared and able to show
individuals the info they hold on them
Using a database in direct and digital marketing
- B2B are heavy users of direct/digital marketing databases, but so are B2C
o Databases especially useful to service organisations
- FMCG marketers find it useful for purposes such as loyalty programs
- Marketing organisations use their databases in a number of ways
o Identifying prospects
Use response features of ads to build databases and identify
prospects
o Deciding which customers should receive a particular offer
Helps identifying the profile of ideal customer for an offer
o Deepening customer loyalty
Build interest/enthusiasm by remembering preferences and
sending appropriate info
o Reactivating customers purchases
Helps make attractive offers of product replacements, upgrades or
complementary products at the time when customers may be ready
to act
o Data mining
Entails checking databases for patterns and trends that are
hypothesised to exist or to find new relationships such as
Associations association between sales of two product
categories
Classes makes connection between data in different fields
easier
Clusters searching known data clusters to identify market
segments + others
Sequences incidence of this happened then that happened
patterns

Forms of direct and digital marketing

Direct and digital marketing tools and technologies

- Direct print and reproduction
- Direct-response television and radio

o Basically infomercials there needs to be way to respond, such as call

number
- Telemarketing
o Inbound and outbound
- Telesales
o Diff from telemarketing in that it deals with calls routinely made to
regular customers
- Electronic dispensing and kiosks
- Direct selling
o Selling door to door
- Electronic shopping
- Direct and digital database marketing
Setting up an online marketing presence
- Online marketing is company efforts to market products and services and
build customer relationships over the internet
- Can be conducted by
o Creating a search engine-optimised website
o Engaging in search engine marketing
o Setting up or participating in online social networks
o Using email
- Creating a search engine-optimised website
o Types of websites
Corporate and/or brand website
Designed to build customer goodwill, collect customer
feedback and supplement other sales channels RATHER than
selling the companys products directly
Provide variety of info to answer customer questions and
build relationships
Relies on guessability of the URL
Marketing websites
Designed to engage consumers in an interaction that will
move them closer to a direct purchase or other marketing
outcome
Online shopping? Doesnt specify, probs
o Designing effective websites
Must convince people to visit the site
Promotion in offline print aim to engage
Challenge is to make it attractive on first view and encourage
repeat visits
Not hard for attracting visitors for some products
Pay attention to the seven Cs of effective website design
Context
Content
Community
Customisation
Communication
Connection
Commerce
Need to embrace another C constant change
Ensure that search engine position is high
- Search engine marketing and placing online ads

o Search engine marketing is marketing effort to gain prominence for a

website on search engine listings, with the aim of attracting visitors who
search on keywords via their favourite search engine, portal or directory
to this website
o This marketing activity is designed to use search engine optimisation
to optimise and match web users information needs in keyword search
output
Both naturally (algorithmic) or paid (pay-per-click or CPM)
o Search categories include
Paid listings ads on the side of a search for specific keywords
Contextual search ads in article based on context of content
Paid inclusion guarantees inclusion in search results
Site optimisation website modifications made to ensure bots
and spiders improve ranking in searches
o Use of metadata
o Websites must be professional, but ultimately must be useful
o Placing ads and promotions online
Online advertising is advertising that appears while consumers
are surfing the web, including display ads, search-related ads,
online classifieds and other forms
o Forms of online advertising
Banner advertising
Interstitials
Online display ads that appear between screen changes on a
website
Pop-ups
Pop-unders
Rich media online display ads
Search-related ads/contextual advertising (paid listings)
o Other forms of online promotion
Content sponsorship
Alliances and affiliate programs
Work with other companies to promote each other, online and
offline
Pass-it-on/viral marketing
Creating or participating in social media interaction
o Social media networks are online social communities where people
socialise or exchange information and opinions
o Social media networks
Marketers can engage online communities by participating in
existing web communities or setting up their own
Online social networks are new and hard to measure
Must make brand part of consumers lives, not muscle their way in
o Using email
Email accounts for 1% of expenditure on digital marketing in AU
Many use it for follow-up customer service
Main use is in B2B
Email includes banner ads, links or advertiser sponsorships that
appear in email newsletter, email marketing campaigns and other
commercial email communications
Explosion of spam has produced consumer irritation and
frustration

Unsolicited, unwanted commercial email messages

Therefore, now using permission-based or opt-in email
marketing

Mobile marketing
- Mobile marketing is conducted over the internet but accessed via datacapable mobile phone networks
- More and more features means finding more and more novel ways to reach out
to and hold customers
- Can greatly enrich buyer experience with promotions - can also be used to
transact
Consumer-to-consumer interaction
- Consumer-to-consumer interaction is where consumers can buy or exchange
goods or information directly with one another
o May involve interchange of info thru net forums that appeal to specific
special interest groups
Eg blogs can have substantial influence
Companies now using blogs to target consumers creating their
own + other stuff
Consumer-to-business interaction
- Consumer-to-business interaction is where consumers communicate with
companies
o Can be initiated by the company or consumer
The promise and challenges of digital marketing
- To ensure success of digital marketing, must employ direct marketing first
- Will probs remain just one approach to the marketplace that works alongside
others in a fully integrated marketing mix

Evaluating direct and digital marketing results

Evaluating direct marketing

- Direct and digital marketing organisations use a variety of performance
measures for both individual and integrated campaigns
- Programs to allow later monitoring of such measures such as
o Sales lead generation
o Database generation
o Fulfilment response
Order processing, delivery response times and accuracy of delivery
must be considered when responding to product orders
o Product inquiries
o Sales response
o Profitability
o ROI made in programs and campaigns
o Lifetime customer value
Evaluating digital marketing
- Digital marketing communication performance
o Those using web in IMC seek to measure both effectiveness and
efficiency
o Best way to track individual behaviour allows only subscriber access
Effective for B2B and B2G, but not B2C
o Web-centric measures
Eg analysis of hits, page impressions (one PI=1 view) & computer
log files, IP tracking,
o Audience-centric measures
Now favoured by many organisations
Use of cookies used by many smaller online marketers

o Network centric measures

Analysis of network traffic using aggregate data from ISPs to get
info
Clickstream analysis enabled analysis of the path followed by
website visitors
Hitwise arrangements allow for interpretation of extended user
demographic info
- Digital marketing channel performance
o Web is a digital marketing channel or can be used to supplement
traditional marketing channels
o Used as a means of customer fulfilment using information
o Easy to assess performance outcomes from the expenditure involved eg
adsense
o Coordination of value-adding tasks within organisations and between
allegiance partners involves internet and intra/extra net guises
o Digital marketing channels judged in the same way as traditional direct
marketing
Fulfilment response
- Relationship management performance and customer lifetime value
o DB marketing makes it easy to calculate what response rate is required
to breakeven
o Can be used to calculate customer lifetime value, which is the amount
by which revenues from a customer over time exceed the companys
costs of attracting, selling & servicing that customer
o Lifetime value model states it is more valuable to achieve qualified
upfront and retain them rather than search for new ones
o Ultimate aim of DB marketing is to be able to open dialogue with the
target accounts that make up the database and build a profile of the
accounts for the DB in various dimensions
o Make sure to use up to date list with no duplicates
o DB marketing requires special investment to reap value
Evaluating customer database performance
- Profitable use of a database requires customer relationship management and
keeping track of sales
o Enables prediction of future sales levels more accurately
- Mail order giants have identified the three criteria to use
o Recency of purchase
o Frequence of purchase
o Monetary value of purchase
- Can use scoring models to eventually do what if analyses to become more
accurate in predicting purchase behaviour by account
- Breakeven and profitability are determined by the relationship between
o Contribution to selling cost, overhead and profit associated with an
average order
o Selling cost per thousand/advertisement
o Response rate

Public policy issues in direct marketing

Irritation, unfairness, deception and fraud

- Direct marketing excesses may annoy or offend consumers
- Some direct marketers have been accused of taking unfair advantage of
impulsive or less-sophisticated buyers especially infomercials
o Inflame buyers who have low sales resistance
- Internet fraud includes identity theft and financial scams

o These activities extend to phishing, snooping on online transactions,

picking up personal info, or intercepting credit and debit card numbers
o Can include release of harmful viruses, spyware and malware
o Phishing uses deceptive emails & fraudulent websites to fool users into
divulging personal data
- Consumers worry about online security viruses and co.
- Another concern is access by vulnerable or unauthorised groups minors
and porn olol
Privacy
- Cross-referencing of data is where individuals personal info is
interconnected & used w/o permission
o Eg bad credit rating
- Unwanted post mail and email
o Best spolution is to ask people which product categories they would like
to receive info on
o Spamming still threatens usefulness of internet, and clogs IP system, but
IPv6 bitches
Is despite introduction of Australian Spam Act 2003

Chapter 14 Sustainable Marketing: Social

Responsibility, Ethics and Legal Compliance
Sustainable marketing
-

Sustainable marketing calls for socially and environmentally responsible

actions that meet the present needs of consumers and businesses while also
preserving or enhancing the ability of future generations to meet their needs
The marketing concept recognises that organisations thrive from day to day
by determining the current needs and wants of target group customers and
fulfilling those needs and wants more effectively and efficiently than
competitors do
o Focuses on short term goals
Societal marketing concept considers the future welfare of consumers
Strategic planning concept considers future company needs
Marketing
Strategic
No
concept
planning
Needs of
w
concept
consumers
Societal
Sustainable
Fut
marketing
marketing
ure
concept
concept
Now
Future
Needs of business
Truly sustainable marketing require a smooth-functioning marketing system in
which consumers, companies, public policymakers and others work together to
ensure socially and environmentally responsible marketing actions

Social criticisms of marketing

Marketings impact on individual consumers

- High prices
o Critics argue marketing system makes prices higher than under a more
sensible system
o High costs of distribution

Marketing intermediaries mark up prices beyond the value of their

services
Too many intermediaries, they are inefficient
Argued that intermediaries do work that would otherwise have to
be done by manufacturers or consumers
Argued that markups reflect additional services consumers want
longer hours etc
o High advertising and promotion costs
Accused of pushing up prices to finance heavy advertising and
sales promos
Differentiated products include promo costs that can add to 40% to
manufacturer price
Adds cost, but adds value by informing potential buyers of
availability & merits of brand
Consumers can buy cheaper products, but willing to pay more for
psychological benefits
Advertising may be necessary to match competitor efforts
o Excessive markups
Most businesses try to deal fairly with consumers to build customer
relationships
Most consumer abuses are unintentional
Most consumers do not know rationale behind high markups
Deceptive practices
o Deceptive pricing is falsely advertising factory/wholesale prices or a
large price reduction from a fake high retail list price
o Deceptive promotion is misrepresenting the products
features/performance or luring customers to store for product that is out
of stock
o Deceptive packaging includes exaggerating package contents through
design/labelling/etc
o Legislation protects consumers
Sale of Goods Act/Fair Trading Act sees the Act set out
consumer rights and remedies when purchasing from all manner of
vendors
Competition and Consumer Act 2010 protects consumers by
focusing on preventing restrictive practices of corporations
ACCC enforces these laws and publishes additional guidelines

o Problem is what constitutes deceptive practice?

Use of puffery and alluring imagery to exaggerate, when not to be
taken literally
o Argued that most companies avoid deceptive practices as they hurt the
company in long run
High pressure selling
o Persuading people to buy goods they had no thought of buying
o Marketers have little to gain from high pressure selling
No relationships built
Shoddy, harmful or unsafe products
o Products not made well and do not perform well
o Products deliver little benefit, could be harmful
o Product safety concerns due to company indifference, increasing product
complexity & poor quality control Choice magazine

o Most manufacturers want to produce quality goods to improve brand

equity and CRM
- Planned obsolescence
o Causing products to become obsolete before they actually should need
replacement
o Using low quality products
o Changing consumer concepts of acceptable styles to encourage more
frequent buying
o Marketers say consumers like the changes or want the newest
innovations
o No one has to buy the new product
o Companies do not design products to break down earlier to not lose
customers to other brands
- Poor service to disadvantaged consumers
o Eg subprime mortgage rates to blacks in America
o Better marketing systems need to be built to service disadvantaged
consumer
If not filled by businesses, filled by governments
Marketings impact on society as a whole
- False wants and too much materialism
o Marketing system urges too much interest in material possessions and is
not sustainable
o Marketers stimulate desires for goods and create materialistic models of
the good life
Endless cycle of consumption
o Argued that such criticisms overstate the power of business to create
needs
People have strong defences against marketing
Marketing most effective when they appeal to existing wants
People are informed
Wants and values influenced not only by marketers but by those
around us
Consumption patterns and attitudes subject to larger forces
- Too few social goods
o Overselling of private goods at the expense of public goods
o Need to balance public/private goods
Make producers bear social cost of operations
Make consumers pay social costs
- Cultural pollution
o Our senses are constantly assaulted by marketing and advertising
o Marketers argue
They hope ads reach primary audience, but mass marketing makes
it hard
Ads make TV and radio free to users and keep down costs of
magazines/newspapers
Todays consumers have alternatives to avoid ads
Marketings impact on other businesses
- Acquisitions of competitors
o Competition is reduced in acquisitions
o Can be good as companies gain economies of scale and lower
prices/costs
- Marketing practices that create barriers to entry

o Some barriers are the natural result of advantages of doing business on a

large scale
o Drive out competitors and minimise competition
Unfair competitive marketing practices
o Intention of hurting other firms by setting prices below cost regulation
by ACCC & C&CA

Consumer actions to promote sustainable marketing

Consumerism
- Consumerism is an organised movement of citizens and government agencies
to improve the rights and power of buyers in relation to sellers
- Traditional sellers rights include
o Right to intro any product in any size/style, provided it is not hazardous
to personal health/safety or if it is, to include appropriate warnings and
controls
o Right to charge any price for the product, provided no discrimination
between similar buyers
o Right to spend any amount to promo the product, provided it is not unfair
competition
o Right to use any product message, provided it is not misleading/dishonest
in content/execution
o Right to use any buying incentive programs, provided they are not
unfair/misleading
- Traditional buyer rights include
o Right not to buy a product that is offered for sale
o Right to expect the product to be safe
o Right to expect the product to perform as claimed
- Many feel balance of power is with the seller, so advocates call for additional
consumer rights
o Right to be well informed about important aspects of the product
o Right to be protected against questionable products and marketing
practices
o Right to influence products and marketing practices in ways that will
improve the quality of life
o Right to consume now in a way that will preserve the world for future
generations of consumers
- Consumers have the right and responsibility to protect themselves instead of
leaving it to someone else
- Consumers have several remedies available to them bs
- Consumers should also make good consumption choices
Environmentalism
- Environmentalism is an organised movement of concerned citizens,
businesses and government agencies to protect and improve peoples current
and future living environment
- Environmentalists simply want operation with more care for the environment
o Marketing systems goal should not be to maximise consumption, choice
or satisfaction
Should be to maximise life quality (NOT QOL)
- First environmentalism wave driven by environmental groups/concerned
consumers in 60s/70s
- Second environmental wave driven by government in 70s/80s using laws to
regulate industrial practices
- The first two waves have now merged into the third wave where companies are
accepting more responsibility for doing no harm to the environment

Environmental sustainability is a management approach that involves

developing strategies that both sustain the environment and produce profits for
the company
o Some companies do only what is needed, others take proactive action
Inter
Pollution
New Clean
nal
Prevention
Technology
Exter
Product
Sustainability
nal
Stewardship
Vision
Today: Greening
Tomorrow: Beyond
Greening
- Pollution prevention is eliminating or reducing waste before it is created
- New clean technology is developing new sets of environmental skills and
capabilities
- Product stewardship is minimising environmental impact throughout the
entire PLC
o Design for environment and cradle to cradle practices
Involves thinking ahead and designing more environmentally
friendly products
- Sustainability vision is creating a strategic framework for future
sustainability
- Environmentalism creates challenges for global marketers
o International trade barriers
o Environmental policies vary from country to country
Public actions to regulate marketing
- Legal issues include
o Selling, product, packaging, price decisions
o Advertising decisions
o Channel decisions
o Competitive relations decisions
-

Business actions towards sustainable marketing

Sustainable marketing principles

- Consumer oriented marketing
o Holds the company should view & organise marketing activities from
consumers point of view
- Customer-value marketing
o Holds the company should put most of its resources into customer-valuebuilding marketing investments
o Create value for consumers, capture value from consumers
- Innovative marketing
o Holds that the company seeks real product and marketing improvements
- Sense-of-mission marketing
o Holds that company should define mission in broad social rather than
narrow product terms
o Creates a sense of direction
o Having the double bottom line of values and profits is difficult to do sim
- Societal marketing
o Holds that company should make marketing decisions by considering
consumers wants, the organisations requirements and the long term
interests of consumers and society
Hig Salutary
Desirable
h
products
products
Long-run
Lo
Deficien
Pleasing
consumer
w
t
products
benefit

o
o
o
o
o

products
Low
High
Immediate satisfaction
Deficient products have neither immediate appeal nor long-run benefits
Pleasing products give high immediate satisfaction but may hurt
consumers in the long run
Salutary products have low immediate appeal but may benefit
consumers in the long run
Desirable products give both high immediate satisfaction and high long
run benefits
Companies should turn all their products into desirable products

The role of ethics in marketing

Marketing ethics
- Companies need to develop corporate marketing ethics policies
o These are broad guidelines that everyone in the organisation must follow
o Should cover distributor relations, advertising standards, customer
service, pricing, product development and general ethical standards
o Cannot resolve all the difficult ethical situations marketers face
- Principles that should guide companies on issue of ethics and social
responsibility
o Issues are decided by the free market and legal system
o Put responsibility in hands of individual companies and managers have
social conscience
- Dealing with ethical and social issues helps build strong customer relationships
- Ethical marketing is an approach where firms recognise that the task of
marketing is to be enlightened to societys views and ethical in their approach
to society as a whole, as well as to customers
o Present special challenges for international marketers
o Companies should make a commitment to a common set of standards
worldwide
The sustainable company
- Sustainable marketing goes beyond caring for needs and wants of buyers
o Need to have concern for tomorrows customers to ensure survival and
success of business

Legal compliance in marketing

-

Best way to ensure that an organisation acts ethically and legally is to have a
culture of good ethical practice and a legal compliance program
- Legal compliance programs are systems designed to identify, manage and
reduce the risk of breaking the law
o Can also be a strategic asset should be fostered by a senior manager
o Can provide a competitive advantage
o Ensures that marketers are legally literate
Putting a compliance program in place: Australian Standard AS3806-2006
- Establishes requirements for
o Positive commitment to compliance at board and CEO level
communicated to staff
o Positive promotion of compliance by all managers
o Continuous monitoring and improvement of all compliance procedures
o Integration of compliance procedures into firms day-to-day operations,
systems & documents
o Adequate senior staff with high status and sufficient clout to take
responsibility for compliance

o Ongoing education and training of all staff

- A compliance program provides guidance on the principles of effective
management of organisations compliance with legal obligations, principles of
good governance & community and ethical norms
- Not binding law, but can help prevent a breach of the law
Legal education
- Where a compliance program exists, it must be updated
- Education programs cover four sets of relationships that needed to be
monitored
o Relationship with competitors avoid market rigging etc
o Relationships with suppliers avoid resale price maintenance etc
o Relationships with other parties such as patent licensees avoid
infringing IP rights
o Relationship with industry itself avoid using trade associations etc
Coverage of a legal compliance program
- Competition law
o Prohibits anticompetitive conduct
- Contract and consumer law
o Governs sales of goods and services
o Unconscionability
New guidelines covering consumer as well as B2B activities
deemed unconscionable
o Estoppel
Preventing a person from departing from promise made
o Consumer protection
Enhanced remedies for enforcement of consumer laws
o Complaints handling
More assistance to help companies identify and remedy
weaknesses in current schemes
o Tendering, outsourcing and partnering
Legal reforms governing tendering and outsourcing
o Electronic commerce
Reforms to cover ecommerce no shit sherlock what a shitty
textbook
- Standards
o Need to standardise legal requirements between countries
- Product liability
o Class actions need to dealt with adequately textbook is getting lazier and
lazier
- Marketing communication
o Need to consider legal implications of promo tools used at different
stages
Pre-transaction
Point of sale
Post transaction
o Anything beyond transaction can be contractually binding
o Marketers have been proactive in developing codes of conduct for good
ethical/legal practice
A Code of Practice has been developed by ADMA and binds all
members
o Breaches of the Code enables ACC to impose sanctions
Requiring formal apology for breach

Requiring corrective advertising or withdrawal of offending

advertisements or statements
Requiring correction or deletion of relevant records and personal
info
Recommending a refund or replacement of g/s where appropriate
Requiring member to take remedial action to correct breach and
avoid reoccurrence
Seeking a written undertaking from the member that the breach
will not be repeated
Recommending to the CEO that membership be revoked

Spam
Spam Act 2003 (Cth) designed to ensure that commercial
emessages are sent only when recipient has opted in and has
opportunity to be removed from such lists
Do Not Call Register
Do Not Call Register Act 2006 enabled register to be set up so
individuals who did not want to receive telemarketing calls could
register for it
Organisations required to check telephone lists against the register
There are many exceptions, leading to problems
Sales and after-sales finance
Should credit be extended to consumers and the nature this will
occur
Employee education is vital here to know the C&CA or Consumer
Credit Code
Franchising
Special legal knowledge required, due to exclusive rights and
obligations granted under a franchise agreement
Franchising Code of Conducty exists under C&CA enforced by
ACCC
Intellectual property
IP law involves copyright, trademarks, patents, designs, trade
secrets, domain names, etc
Rapidly becoming a most important asset
IP laws are constantly changing and vary among countries
Necessary to have training in this area of legal compliance at
national & corporate levels
Copyright protects individual ideas as expressed in various
permanent forms
Design is the overall appearance of a product resulting from one
or more visual features of the product
Trademarks are any sign capable of being represented graphically
to distinguish goods or services
Patent protection is a means of legal protection given to the
invention of a device, substance, method or process that is
considered useful
Australian development of the innovation patent for smaller
inventions due to long processing time and expense of normal
ones
Circuit Layouts Act 1989 protects the owners of computer-chip
circuitry for 20 years

Confidential information is IP that can only be protected by

keeping it secret
C&CA comes into play in many IP marketing cases
Marketing management people are likely to be protected under
common law rights, enabling them to sue employer for breach of
contract
Can also sue under statute
Courts may be more likely to look at implied terms
Employees must not be seen as unemployable due to
willingness to litigate
Legal compliance program must overall be constantly reviewed, audited and
updated to keep abreast of important changes in the ethical and legal
environment of business