MKT 521

At the end of this presentation, you should be able to :
1. Know what marketing is and why you should learn about it.
2. Understand the difference between marketing and macro-marketing.
3. Know the marketing functions and why marketing specialistsincluding
intermediaries and collaboratorsdevelop to perform them.
4. Understand what a market-driven economy is and how is adjusts the macromarketing system.
At the end of this presentation, you should be able to:
5. Know what the marketing concept isand how it should guide a firm or
nonprofit organization.
6. Understand what customer value is and why it is important to customer
satisfaction.
7. Know how social responsibility and marketing ethics relate to the marketing
concept.
8. Understand the important new terms.
satisfaction.
concept.
Summary Overview
Many people are surprised when they realize how many different ideas and
activities are included in the term marketing.
Key Issues
Most people think that marketing involves selling and advertising.
Think about a manufacturer of bicycles:
many brand names;
many different bicycles;
many types of bicycles with various features;
prices range from low to very high.
Discussion Question: Why are there so many varieties of bicycles?

Summary Overview
By focusing on the many tasks involved in producing a bicycle, it is possible to get a
feel for the wider range of marketing activities.
Key Issues
Among the different things a manager must do in producing a bicycle, he/she must:
Analyze the needs of people for various models of bicycles;
Predict the types of bicycles consumers will want and decide which consumers
to satisfy;
Estimate the number of bicycle riders and how many bicycles they might buy;
Determine where the consumers will be and how to get bicycles to them;
Estimate the price consumers are willing to pay for a bicycle, and if that price
will result in a profit for the firm;
Decide what kinds of promotion should be used to inform consumers about the
firm and its bicycles;
Estimate the impact of competition from other bicycle producers;
Determine how to provide customer service if a customer has a problem after
purchasing a bike.
Discussion Question: How many of these activities are marketing
activities?
Summary Overview
Production and marketing are both fundamental economic activities. However, some
people misunderstand the relationship between them. Thus, it helps to have a clear
picture of how production and marketing interact with each other.
Key Issues
Production involves: making goods or performing services.
Discussion Question: Is it true that a good product is the only thing that
makes a business a success? What is needed in addition to the product?
Products do not sell themselves!
Marketing:
makes sure that the right goods and services are produced;
creates customer satisfaction: the extent to which an organization
fulfills a customers needs, desires, and expectations.
Discussion Question: If you were buying a bicycle, what needs would you
have? How would your desires or wants be different from your needs?
What expectations would you have about the bicycle you were
purchasing?
Summary Overview
Marketing is a pervasive activity. It is something that eventually touches everyone,
and it dramatically affects peoples daily lives. The principles learned in marketing
courses are directly and immediately applicable to students daily lives.
Key Issues
Marketing is important to every consumer.
People bear the costs of marketing via price.
Everyone buys or uses a product or service.
People shop, are exposed to advertising, and provide information to

businesses.
Marketing is important to your job.
Selling your ideas.
Marketing offers career opportunities.
Organizations exist to satisfy customers; marketing contributes to

success.
Marketing is important to your next job.
People have to market themselves.
Discussion Question: How would a knowledge of marketing benefit an

accountant? A computer system designer? An attorney? A physician?
Marketing affects innovation and the standard of living.
Stimulates research and innovation.
Creates new/improved products.
Generates a higher standard of living.
Marketing stimulates the development of innovations. This ad for the

Whirlpool Duet washer and dryer shows how marketing not only generates
completely new products, but improvements to mature productssuch as
major appliances.
Video Operation:
Use the onscreen player controls to operate the video.
To view the video at Full Screen, right-click the video and choose Full Screen.
To go back to your presentation you can either hit the Escape key, right-click
on the video and uncheck Full Screen, or type Alt+Enter. You can do this at
anytime during the video playback.
Under certain circumstances, the video may not fill the video player window.
To restore, right- click the video player object and select Zoom 200%.
The videos will only play in Slide Show View. Macros must be enabled in order
to play the videos from within PowerPoint.
Summary Overview
Marketing is more than selling and advertising, but it also possible to define
marketing too broadly. In defining marketing, there are really two alternative views
a micro view and a macro view.
Key Issues
The micro view of marketing includes activities that:
anticipate customer needs;
direct flows of goods and services to customers;
are performed by individual organizations.
The macro view of marketing includes a social process that:
accomplishes the objectives of society;
effectively matches supply and demand;

is concerned with how marketing activities affect society, and vice
versa.
Discussion Question: Why is it important for marketers to understand both

the micro and macro views of marketing?
Summary Overview
Marketing stimulates new ways to identify customers needs.
Key Issues
Creative marketing managers are always looking for innovative ideas for
products that really meet customers needs.
This ad for Help Remedies offers a dirt-simple solution that many

customers were looking for.
Marketers must look for new ideas to stay ahead of competition.
Discussion Question: Can you think of other industries or product/service

categories in which marketers have been particularly innovative over the
past few years? What are some of these innovations? Why are these
industries more innovative? Students might note that innovation is more
common where there is more competition, consumer needs are rapidly
changing, or new technology changes costs.
Summary Overview
Managerial marketing is done by organizations; beyond that general definition,
there are several specific aspects of marketing that marketers should consider.
Key Issues
Marketing:
applies to both profit and nonprofit organizations;

more than persuasion.
Discussion Question: What are some of the marketing activities other than
persuasion?
begins with customer needs not the production process;
does not do it alone or take the place of other business activities;
involves exchanges consumers exchange something of value to acquire

something of value;
builds a relationship with the customer that will lead to repeat purchase.
Summary Overview
In this ad, Panasonic explains how important it is to maintain ongoing relationships
with customers.
Key Issues
In todays highly competitive markets, firms that adopt the marketing

concept and seek better ways to build relationships with customers have the
edge.
Panasonic developed the rugged Toughbook 29 laptop that can withstand

drops, bangs, dust, and moisture.
Discussion Question: Can you think of other ways in which an organization

can work to satisfy its customers?
Summary Overview
Macro-marketings emphasis is on how the whole marketing system works.
Key Issues
Every economy needs a macro-marketing system, because:
it helps to match supply and demand;

different producers in a society have different objectives, resources,
and skills;
every consumer has a different set of needs;
system must effectively match consumers and producers.
Functions of an effective macro-marketing system:
delivering the goods and services that consumers want and need;
getting products to them at the right time, in the right place, and at a
price theyre willing to pay;
keeping the consumers satisfied after the sale, and bringing them
back to purchase again when they are ready.
Discussion Question: Which countries macro-marketing systems might be

viewed by Americans as unfair or ineffective? Which countries citizens
might think that the American macro-marketing system is unfair or
ineffective? Try to think of specific mismatches between customer needs
and the outputs of producers.
Summary Overview
Marketing is needed to overcome the difference between maximizing production
efficiency and the preferences people have for consuming products and services.
Key Issues
Economies of scale lower cost.
As production increases, the cost of each unit of the product

decreases.
Marketing helps companies find more outlets for products.
Discussion Question: How does marketing find more outlets (consumers)

for products?
Effective marketing links producers and consumers.
Consumers needs and patterns of consumption differ from how

production facilities operate effectively.
Marketing activities create more efficient links between consumers

and producers.
Marketing functions narrow the gap.
The universal marketing functions helps to narrow the gap.

How these functions are performed and by whom may differ among
economic systems.
Summary Overview
Effective marketing provides consumers with a variety of ways to meet their unique
needs. Most companies have few locations, but would like to purchase world-wide.
Key Issues
Marketing helps to bring producers and consumers together.
DirecTV uses satellite television to provide marketing functions that help

overcome separations of:
space,
time,
and information between producers and consumers.
Discussion Question: Try to think of a product or service category in which

consumers tend to expectand receivemore choices over time. How
have marketers responded to these needs?
Summary Overview
Discrepancies of quantity and discrepancies of assortment complicate exchange
between producers and consumers.
Key Issues
Production sector: Specialization and division of labor result in

heterogeneous supply capabilities.
Consumption sector: Heterogeneous demand for different goods and

services and when and where they need to be to satisfy needs and wants.
Discrepancies of quantity: Producers prefer to produce and sell in large

quantities. Consumers prefer to buy and consume in small quantities.
Discrepancies of assortment: Producers specialize in producing a narrow

assortment of goods and services. Consumers need a broad assortment.
Spatial separation: Producers tend to locate where it is economical to

produce, while consumers are located in many scattered places.
Separation in time: Consumers may not want to consume goods and

services at the time producers would prefer to produce them, and time may
be required to transport goods from producer to consumer.
Separation of information: Producers do not know who needs what, where,

when, and at what price. Consumers do not know what is available from
whom, where, when, and at what price.
Separation in values: Producers value goods and services in terms of costs

and competitive prices. Consumers value them in terms of satisfying needs
and their ability to pay.
Separation of ownership: Producers hold title to goods and services that

they themselves do not want to consume. Consumers want goods and
services that they do not own.
Summary Overview
The universal marketing functions help the macro-marketing system overcome
separations and discrepancies between those wishing to participate in an exchange.
The fulfillment of these functions in a particular country or culture varies widely, but
all the functions are needed in any macro-marketing system.
Key Issues
Buying: looking for and evaluating goods and services.
Selling: promoting the product to prospective buyers.

Transporting: moving the goods from place to place.
Storing: holding an inventory of goods until needed by customers.
Standardization and grading: sorting products by size and quality.
Discussion Question: Can you think of products that have to be sorted or
evaluated before you can purchase them? Hint: think about agriculture.
Financing: providing necessary cash and credit to produce, transport, store,
promote, sell, and buy products.
Risk taking: assuming responsibility for uncertainties.
Discussion Question: What are some examples of the risks taken in
business enterprise?
Market information: the collection, analysis, and distribution of all the information
the marketer needs to plan, implement, and control need-satisfying marketing
activities.
Summary Overview
Individuals and organizations perform marketing functions. It is often easiest to
think of producers, such as manufacturers of tangible products and providers of
intangible services. However, there are many other marketing performers.
Key Issues
Intermediaries: firms that specialize in trade rather than production and execute
tasks related to buying and selling.
Collaborators: firms that aid in the exchange process and provide marketing
functions other than buying and selling.
advertising agencies, marketing research firms;
independent product-testing laboratories;
Internet service providers (ISPs); transporting firms, etc.
Universal functions of marketing need to be performed by someone.
There can be specialization in the performance of these functions.
Functions can also be shared and shifted among the marketing performers.
Discussion Question: Why doesnt each of the organizations or individuals

in a macro-marketing system perform all of the marketing functions?
Summary Overview
Every society needs an economic system: the way an economy organizes to use
scarce resources in production and consumption. Depending upon the type of
economic system, decisions about resource allocation are made differently.
Key Issues
Command economy (also called planned economy):
government officials make decisions about production and distribution;
can work well:
in simple economies
when the variety of goods and services is small
under adverse conditions.
Market-directed economy: individuals govern resource allocation, production

and consumption.
Characteristics of market-directed economies include:
Adjusts itself.
Price is a measure of value:
consumers pay what they think things are worth;
producers try to meet those price expectations.
Greatest freedom of choice:
less intervention from government planners;
more choices are available to producers and consumers.
The role of government is to ensure fairness and the common good.

Public interest groups and consumers spread the news
In many Western economies, public interest groups and

consumers provide an additional check on a market-directed
economy.
Discussion Question: What are examples of things government officials

compel consumers to buy, even in a largely market-directed economy?
Summary Overview
The American economy and most other Western economies are mainly marketdirected but not completely. Society assigns supervision of the system to the
government.
Key Issues
Government tries to be sure that property is protected, contracts are

enforced, individuals are not exploited, no group unfairly monopolizes
markets, and producers deliver the kinds and quality of goods and services
they claim to be offering.
The effectiveness and fairness of a particular macro-marketing system must

be evaluated in terms of that societys objectives.
All nations dont share the same objectives.
Whether a system is judged fair or effective depends on the objectives of

the society.
Summary Overview
Early producers for the market made products that were needed by
themselves and their neighbors.
Key Issues
Simple trade era a time when families traded or sold their surplus
output to local distributors.
Production era a time when a company focuses on production of a few

specific productsperhaps because few of these products are available in the
market.
Sales era a time when a company emphasizes selling because of

increased competition.
Marketing department era a time when all marketing activities are

brought under the control of one department to improve short-run policy
planning and to try to integrate the firms activities.
Marketing company era a time when, in addition to short-run

marketing planning, marketing people develop long-range planssometimes
five or more years aheadand the whole company effort is guided by the
marketing concept.
Summary Overview
The cornerstone of the marketing-oriented company is the marketing concept.
Key Issues
Production orientationmaking whatever products are easy to produce and

then trying to sell them.
Marketing orientationdesigning marketing programs that will meet

customer needs.
Marketing concept:
customer satisfaction guides the whole organization;

all individuals work together to accomplish this goal;
Discussion Question: What can managers do to motivate everyone in the
organization to satisfy customer needs?
requires that the company be profitable
Organizations consider the triple bottom line which measures an

organizations economic, social, and environmental outcomes
Summary Overview
This ad from Little Remedies demonstrates that the company attempts to create
customer satisfaction by catering to parental needs.
Key Issues
Offers infants and children products that are free of unnecessary additives
such as saccharin, alcohol, artificial flavors, dyes, and harmful preservatives.
Meets the needs of the people who want specific medical care for their
infants and children.
Offers everything infants/children need, nothing they dont.
Summary Overview
Adoption of the marketing concept has varied by type of organization, but the
concept continues to penetrate organizations of all types. Exhibit 1-4. It
shows some differences in outlook between adopters of the marketing
concept and typical production-oriented managers. As the exhibit suggests,
the marketing concept forces the company to think through what it is doing
and why.
Key Issues
Consumer product companies were first to accept the marketing concept.
Service industries are catching up.
Redneck Bank is an example of a service firm adopting the marketing

concept.
It is easy for firms to slip back into a production orientation. It is often

difficult to:
keep up with changing customer needs;
beat aggressive competitors to the punch;
find the right focus;
offer customers superior value.
Discussion Question: Considering Redneck Banks ad, what challenges will

it face in continuing to meet customer needs?
Summary Overview
Adoption of the marketing concept has varied by type of organization, but the
concept continues to penetrate organizations of all types.
Key Issues
Consumer product companies were first to accept the marketing concept.
Service industries are catching up.
FedEx is an example of a service firm adopting the marketing concept.

It is easy for firms to slip back into a production orientation. It is often
difficult to:
keep up with changing customer needs;
beat aggressive competitors to the punch;
find the right focus;
offer customers superior value.
Discussion Question: Considering FedExs ad (serving more European

destinations), what challenges will it face in continuing to meet customer
needs?
Summary Overview
To better understand what it takes to satisfy a customer, its useful to take the
customers point of view.
Key Issues
Customer value is the difference between the benefits a customer sees
from a marketing offering and the costs of obtaining those benefits.
Different customers may see the benefits and costs in different ways.
The customer may not always dwell on value as a key determinant of buying
behavior.
Discussion Question: Can you give examples of firms that provide you with
superior customer value? Do other consumers view this value in the same
way?
A consumer is more satisfied when the customer value is higher

benefits exceed costs by a larger margin.
Where does competition fit?

Customer value builds relationships.
Summary Overview
A consumer is likely to be more satisfied when the customer value is higherwhen
benefits exceed costs by a larger margin. On the other hand, a consumer who sees
the costs as greater than the benefits isnt likely to become a customer.
The objective of this exercise is to show a graphical example illustrating the concept
of customer value, using eight different brands of vacuum cleaners. They are
positioned against each other based on: (a) the benefit ratings they received as a
result of an independent lab test, and (b) their retail prices.
Working through the exercise, the students will learn:
How to use the available information to compute a price index and

benefit index for each brand;
How to compute a customer value index for each brand;
How the judgments about value differ depending on the type of index
used and the total number of brands considered.
For complete information and suggestions on using this Interactive

Exercise, please refer to the Notes on the Interactive Exercise section
for this chapter in the Multimedia Lecture Support Package to Accompany
Basic Marketing. That same information is available as a Word document
in the assets folder for the PowerPoint file.
Summary Overview
This model summarizes the important ideas presented to this point.
Key Issues
In a firm that has adopted the marketing concept, everyone focuses on

customer satisfaction.
The organization offers superior customer value.

Value, in turn, helps attract customers and keeps them satisfied after they buy.
This satisfaction then leads to repeat purchase and most likely purchases of
other products offered by the firm.
In this way, the firm builds profitable relationships with its customers.
Discussion Question: If a firms customers are already satisfied with the
firms offerings, why does the firm need to look for new and better ways
to provide customer value?
Adopting the marketing concept is a win-win situation for marketers and

consumers!
Summary Overview
Adoption of the marketing concept has brought focus to the U.S. Postal Service, a
government agency, in the face of increased competition from more traditional
profit-oriented delivery and transportation service firms.
Key Issues
The United States Postal Service is promoting its services:
to firms that are trying to target personalized communications;
to help develop closer customer relationships.
Discussion Question: What obstacles will the Postal Service have to

overcome in persuading businesses to use the Postal Service as the
vehicle for direct mail promotional campaigns? Are these obstacles
related to the differences between profit and nonprofit organizations?
Summary Overview
The marketing concept is also applicable to nonprofit organizations such as
museums, libraries, charities, and political parties.
Key Issues
Nonprofit organizations are relative newcomers to marketing.
Nonprofit organizations often have a different idea of support and satisfied
customers than do business firms.
Nonprofits often exist to accomplish a goal unrelated to traditional

customer satisfaction.
Many nonprofits raise money from non-customer groups and then

spend it on other customers.
They may not have a traditional bottom line economic measure of success.
Discussion Question: What is the profit for a political party? A library? A
museum? A symphony orchestra? A blood bank?
Nonprofit organizations may not be organized for marketing.
Nonprofit organizations have been slower to adopt the marketing concept than
consumer product companies. However, many have now integrated the marketing
concept into their operations.
(video length: 1:42)
Video Operation:

To view the video at Full Screen, right-click the video and choose Full Screen. To go
back to your presentation you can either hit the Escape key, right-click on the video
and uncheck Full Screen, or type Alt+Enter. You can do this at anytime during the
video playback.
Under certain circumstances, the video may not fill the video player window. To
restore, right- click the video player object and select Zoom 200%.
The videos will only play in Slide Show View. Macros must be enabled in order to
play the videos from within PowerPoint.
Summary Overview
What is good for some firms and consumers may not be good for society as a whole.
Key Issues
Environmental organizations try to promote preservation of the environment

as a societal goal.
Discussion Question: How do the needs of the individual conflict with

societal benefits of the environment?
While society might benefit from having more open spaces, this could slow
economic growth. It may also harm individuals who want to use their land as
they see fit.
These are not easy questions to resolve.
Summary Overview
Organizations implement the marketing concept in the broader context of society.
There are times when the societys needs conflict with the needs of a particular
individual or group, creating the micro-macro dilemma.
Key Issues
Social responsibilityan obligation to improve the organizations
positive effects on society.
Businesses must strive to reach acceptable balances.
Should all consumer needs be satisfied?
Some products that many people use are not good for them.
Marketers must rely on legal and ethical standards in making

decisions.
Do all marketers act responsibly?
Sometimes firms or individuals advance their own short-term interests

at the expense of customers.
When products are complicated, consumers may be vulnerable to

unscrupulous sellers.
What if profits suffer?
Some marketers are adopting a longer-term view.
Customer satisfaction goes beyond fulfilling an immediate need.
Discussion Question: It is possible for an organization to be truly

consumer-oriented and intentionally act in an unethical manner? Why or
why not?
The marketing concept guides marketing ethics:
focuses the organization on the needs of consumers;
many organizations have developed codes of ethics;
marketers should take criticisms of marketing seriously.
Today, companies are increasingly expected to create high quality products

and demonstrate a commitment to bettering society. In this ad, Exxon Mobil
is delivering a message that while it is here to help supply consumers with
energy (which in obtaining some sources deplete the earth of certain
resources), it is also searching for ways to supply that energy to us with an
eye toward cleaner solutions.
The ad relates a childs dream of the Olympics as dream today, achieve

tomorrow to the companys dream of cleaner energy today and achieving
that dream tomorrow. The tagline "Taking on the world's toughest energy
problems" reinforces the social responsibility conveyed in the ad.
Video Operation:
You should now be able to :

1. Know what marketing is and why you should learn about it.
2. Understand the difference between marketing and macro-marketing.
3. Know the marketing functions and why marketing specialistsincluding
intermediaries and collaboratorsdevelop to perform them.
4. Understand what a market-driven economy is and how it adjusts the macromarketing system.
You should now be able to:
satisfaction.
concept.
9. Summary Overview
10.These are additional key terms.
11.Key Issues
12.Production: making goods or performing services.
13.Customer satisfaction: the extent to which a firm fulfills a customers needs,
desires, and expectations.
14.Innovation: the development and spread of new ideas, goods, and services.
15.Marketing: the performance of activities that seek to accomplish an
organizations objectives by anticipating customer or client needs and
directing a flow of need satisfying goods and services from producer to
customer or client.
16.Pure subsistence economy: when each family unit produces everything it

consumesthere is no need to exchange goods and services and no
marketing is involved.
17.Macro-marketing: a social process that directs an economys flow of goods
and services from producers to consumers in a way that effectively matches
supply and demand and accomplishes the objectives of society.
18.Economies of scale: as a company produces larger numbers of a particular
product, the cost of each unit of the product goes down.
19.Universal functions of marketing: buying, selling, transporting, storing,
standardization and grading, financing, risk taking, and market information.
20.Buying function: looking for and evaluating goods and services.
21.Selling function: promoting the product.
22.Transporting function: the movement of goods from one place to another.
23.Storing function: holding goods until customers need them.
24.Standardization and grading: sorting products according to size and quality.
25.Financing: the necessary cash and credit to produce, transport, store,
promote, sell, and buy products.
26.Risk taking: bearing the uncertainties that are part of the marketing process.
27.Market information function: the collection, analysis, and distribution of all
the information needed to plan, carry out, and control marketing activities,
whether in the firms own neighborhood or in a market overseas.
28.Intermediary: someone who specializes in trade rather than production
plays a role in the exchange process.
29.Collaborators: firms that facilitate or provide one or more of the marketing
functions other than buying or selling.
30.E-commerce: exchanges between individuals or organizationsand activities
that facilitate these exchangesbased on applications of information
technology.
31.Economic system: the way an economy organizes to use scarce resources to
produce goods and services and distribute them for consumption by various
people and groups in the society.
32.Summary Overview
33.These are additional key terms.

34.Key Issues
35.Command economy: government officials decide what and how much is to be
produced and distributed by whom, when, to whom, and why.
36.Market-directed economy: the individual decisions of the many producers and
consumers make the macro-level decisions for the whole economy.
37.Simple trade era: a time when families traded or sold their surplus output
to local distributors.
38.Production era: a time when a company focuses on production of a few
specific productsperhaps because few of these products are available in the
market.
39.Sales era: a time when a company emphasizes selling because of increased
competition.
40.Marketing department era: a time when all marketing activities are brought
under the control of one department to improve short-run policy planning and
to try to integrate the firms activities.
41.Marketing company era: a time when, in addition to short-run marketing
planning, marketing people develop long-range planssometimes five or
more years aheadand the whole company effort is guided by the marketing
concept.
42.Marketing concept: means an organization aims all its efforts at satisfying its
customersat a profit.
43.Production orientation: when managers make whatever products are easy to
produce and then try to sell them.
44.Marketing orientation: means trying to carry out the marketing concept (try
to offer customers what they need).
45.Triple Bottom Line: measures an organizations economic, social, and
environmental outcomes
46.Customer value: the difference between the benefits a customer sees from a
market offering and the costs of obtaining these benefits.
47.Micro-macro dilemma: what is good for some firms and consumers may not
be good for society as a whole.
48.Social responsibility: a firms obligation to improve its positive effects on
society and reduce its negative effects.
49.Marketing ethics: the moral standards that guide marketing decisions and
actions.

1. Understand what a marketing manager does.
2. Know what marketing strategy planning isand why it is the focus of the
book.
3. Understand target marketing.
4. Be familiar with the four Ps in a marketing mix.
5. Know the difference between a marketing strategy, a marketing plan, and a
marketing program.
6. Understand what customer lifetime value and customer equity are and why
marketing strategy planners seek to increase them.
7. Be familiar with the texts framework for marketing strategy planning.
8. Know four broad types of marketing opportunities that help in identifying new
strategies.
9. Understand why strategies for opportunities in international markets should
be considered.
Summary Overview
The marketing management process refers to the planning, implementation, and
control of marketing activities. These activities are continuous, and decisions made
in the past in one area can have implications on the other areas as well.
Key Issues
Planningrequired because marketing managers must seek new

opportunities.
Implementationthe process of putting marketing plans into action.
Discussion Question: Which is more importantgood planning or good

implementation? Explain.
Controlassessing and evaluating marketing performance.
When performance falls short of expectations, the marketing manager

must take corrective action.
Strategic (management) planningdeveloping and maintaining a match

between an organizations resources and its market opportunities.
It is a top management job.
It includes planning for marketing, production, finance, human

resources, and other areas.
Though, marketing strategies are not whole-company plans, company

plans should be market-oriented.
The marketing plan sets the tone and direction for the whole company.
Summary Overview
Marketing strategy planning means finding opportunities and developing profitable
marketing strategies that the company can use to capitalize on the opportunities.
Key Issues
Marketing strategyspecifies a target market and a related marketing

mix; provides a big picture of what the firm will do.
Target marketa fairly homogeneous (similar) group of customers to

whom a company wishes to appeal.
Marketing mixthe controllable variables the company puts together

to satisfy the target market.
The customer is surrounded by the controllable variables that we call

the marketing mix.
Discussion Question: Why does the target market appear in the center of
the diagram of a marketing strategy?
Summary Overview
The difference between target marketing and mass marketing is directly linked to
the concept of a marketing strategy, because a marketing strategy specifies some
particular target customers.
Key Issues
Target marketingtailoring the marketing mix to meet the needs of a

specific group of target customers.
It can be considered as rifle approach.
Mass marketingoffering a single marketing mix combination to everyone.
It can be considered as shotgun approach.
It assumes that everyone is the same.
It considers everyone to be a potential customer.
Mass marketing and mass marketers do not mean the same thing.
Mass marketers like Kraft Foods and Walmart are aiming at

clearly defined target markets.
Their target markets are large and spread out.
Discussion Question: Why are organizations moving in the direction of

target marketing as opposed to mass marketing?
Target marketing can mean big markets and profits
Target marketing is not limited to small market segmentsonly to

fairly homogeneous ones.
The basic reason to focus on some specific target customers is so that

you can develop a marketing mix that satisfies those customers
specific needs better than they are satisfied by some other firm.
Production-oriented manager sees everyone as basically similar and practices

mass marketing
Marketing-oriented manager sees everyone as different and practices target

marketing
Summary Overview
This ad for BWI airport is an example of target marketing, because BWI is promoting
application-specific distribution facilities.
Key Issues
BWI can meet all storage/distribution needs.
BWI saves time with its efficient distribution centers.
The ad copy states that BWI can handle air, port, and rail connections.
BWI serves the shipper, no matter what their needs.
Discussion Question: How are consumers shipping needs different from

the customers BWI is trying to attract in this ad? How does the marketing
mix (product, place, promotion, price) for FedEx or UPS differ from that of
BWI?
Summary Overview
Marketers have to make many decisions in developing a marketing mix that will
satisfy their target customers. All of these variables making up the marketing mix
can be reduced to four basic categories.
Key Issues
The four Ps make up a marketing mix:
product;
place;
promotion;
and price.
These Four Ps are combined in differing ways to match the needs and
wants of different target markets.
The C stands for some specific customers the target market.
Product: concerned with developing the right product for the target market.
Place: concerned with all the decisions involved in getting the right product to
the target markets place.
Promotion: concerned with telling the target market or others in the channel of
distribution about the right product.
Price: concerned with the kind of competition in the target market and the cost of
the whole marketing mix.
Discussion Question: The customer is not part of the marketing mix. Why?
Summary Overview
Newell Rubbermaid is a global marketer of consumer and commercial products.
Key Issues
New Rubbermaid collapsible containers can be collapsed with the lid on and
they are only one inch high for storage.
The size of the container can be changed once it is filled, so there is less air
in the container, which keeps food fresh for longer time.
The collapsing feature is easy to use.
The containers take lesser space in the shelves or drawers.
Discussion Question: What are the tangible elements of the New

Rubbermaid collapsible containers promoted in this ad?
Product considerations include:
physical characteristics;
warranties;
new product development.
Summary Overview
The objective for the place, or distribution, element of the marketing mix is to get
the right product, to the right consumer, in the right place, at the right time, in the
right quantity, and in the right condition, hopefully all at a reasonable cost.
Key Issues
Channel of distributionany series of firms or persons used to move

goods from producers to final users. Channels can be:
short;
complex.
Marketers must:
find the best kinds and types of channels for the product;
effectively manage the channel.
Discussion Question: What are some of the reasons why marketers are
paying increased attention to their distribution strategies and tactics?
Hint: Think about what happens when distribution does not work as it
should.
Summary Overview
Promotion involves telling the target market about the product and selling the
product to the target customer. There are three main types of promotion.
Key Issues
Personal sellingdirect spoken communication between sellers and potential
customers. Sometimes this involves customer servicea personal communication
between a seller and a customer who wants the seller to resolve a problem with a
purchase.
Mass sellingcommunicates with large numbers of customers at the same time.
Advertisingany paid form of nonpersonal presentation of ideas,

goods, and services by an identified sponsor.
Publicityunpaid, nonpersonal presentation of ideas, goods, or

services. It also includes creating and placing content on the web for
customers to find or pass along to others.
Discussion Question: An old adage in marketing is that Advertising is

paid for, publicity is prayed for. What is meant by this statement? What
implications does the statement have for the marketing manager?
Sales promotionpromotion activitiesother than advertising, publicity, and
personal sellingthat stimulate interest, trial, or purchase.
Summary Overview
Price is the revenue-generating function of the marketing mix. In setting the right
price, marketing managers must consider many factors, all of which combine to
make pricing a combination of science and art.
Key Issues
Marketers can choose from several different pricing objectives and policies.
Among the policies are:
price flexibility;
how price changes over the product life cycle;
various allowances, discounts;
geographic terms that affect the final price; and
competition.
A manager must try to estimate customer reaction to possible prices.
The manager must know current practices as to markups, discounts, and

other terms of sale.
Discussion Question: Can you think of examples of products, introduced in

the last few years, whose prices changed significantly the longer they
were in the market? Is the age of the product the only factor in these price
changes?
Summary Overview
Price is the revenue-generating function of the marketing mix. In setting the right
price, marketing managers must consider many factors, all of which combine to
make pricing a combination of science and art.
Key Issues
Marketers can choose from several different pricing objectives and policies.
Among the policies are:
price flexibility;
how price changes over the product life cycle;
various allowances, discounts;
geographic terms that affect the final price; and
competition.
A manager must try to estimate customer reaction to possible prices.

The manager must know current practices as to markups, discounts, and
other terms of sale.
Discussion Question: Can you think of examples of products, introduced in

the last few years, whose prices changed significantly the longer they
were in the market? Is the age of the product the only factor in these price
changes?
Summary Overview
A marketing plan is a written statement that fills out the marketing strategy by
specifying the time-related details for carrying out the strategy.
Key Issues
A marketing strategy, as we have already discussed, includes a target market and a
marketing mix.
When time related details are added to the marketing strategy, you have a
marketing plan. Marketing plans should make clear the following:
What marketing mix will be offered, to whom, and for how long.
What company resources will be needed at what rate.
What results are expected (this should also specify some means of
control).
The plan should also include some control proceduresso that

whoever is to carry out the plan will know if things are going wrong.
Adding together more than one marketing plan results in a firms marketing
program.
Marketing program: blends all of the firms marketing plans into one
big plan.
ANSWER: D
Checking your knowledge (answer explanation):
In the question, the teenager has developed a description of the target

market, their needs, and a general outline of the business (marketing
strategy). Because she has not yet identified the time-related details of
carrying out this strategy, she has not yet developed a marketing plan.
Selection D is the best option because the teenager has developed a
marketing strategy so far. (p. 33)
ANSWER: B
A marketing program blends all of the firms marketing plans into one big plan .
Selection B is the best option because by trying to integrate all of the different
marketing plans, the president needs a marketing program. (p. 42)
Summary Overview
Customer Lifetime Value is the total stream of purchases that a customer could
contribute to the company over the length of the relationship.
Key Issues
Recall from chapter 1 that developing relationships with satisfied customers leads
them to buy more over time. Over a customers lifetime, this can add up.
Consider a customer of fast food restaurant Taco Bell. If their parents go to Taco
Bell even just once a month during their youth, this person could purchase $600
worth of fast Mexican food before they turn 18. This assumes about $4 per visit,
leading to about $50 for 12 years a year from age 6 18. At age 18, consumption
could double or triple or more, as college students tend to eat more cheap, fast
food. Possibly resulting in purchases of $150 a year during that time another $600
over four years. Later as an adult consumption may increase if this person has
children and takes them to Taco Bell.
The point here is to recognize that while a single transaction at Taco Bell may be
small, a single satisfied customer might be worth thousands of dollars. This is
customer lifetime value and reinforces the importance of satisfying customers.
Summary Overview
Customer equity is the expected earnings stream or the profitability of a firms
current and prospective customers over time. Marketing strategy planning should
guide the firm to increasing customer equity.
Key Issues
Top management expects marketing strategy planners to help identify
opportunities that will lead to an increase in the firms customer equity.
Customer equity directs managers to focus on long-term profits.
Summary Overview
Strategy decisions dictate what business a company is in and what strategies it
follows. Marketing strategy planning is emphasized in this presentation because
strategy decisions usually determine success and failure.
Strategy decisions should evolve to adapt to changing customer needs.
Key Issues
Case historythe auto industry
Henry Ford built an assembly line to produce his durable and practical Model T.
The line helped him make cars for much less than his competitors.
By the early 1920s the Model T sold for just $290; the price helped the car appeal
to larger market.
By the mid-1920s, Ford faced increased competition.

Ford realized it had to become more market orientedProduced the
new Model A, which came in more than 20 different styles.
By the mid-1950s, the company needed a new line of cars positioned

between its economical and the more upscale models Launch of
Edsel was a failure.
In 1961 Ford saw an opportunity for a sporty carMustang launched in 1964 was
an instant hit.
In the 1970s when gas prices spiked and the U.S. government
mandated that cars pollute less, Ford struggled to find a marketing
strategy to appeal to customers.
Ford has been more successful in the highly profitable truck and SUV
segments.
Ford invested in gas-electric hybrid technology to gain greater fuel economyIn

2004 Escape, first hybrid SUV, was launched.
Ford and Microsoft has cooperated to develop the SYNC in-car communications
and entertainment system.
Ford used a hybrid marketing campaign in the United States to launch the Fiesta
subcompact, donating 100 to existing YouTube personalities, who then chronicled
their experiences with the cars
The case history demonstrates that changes in the market are always
occurring and that planning must be ongoing.
Summary Overview
Proactively satisfying the needs of customers means that marketers need to engage
in a search for opportunities.
Key Issues
Breakthrough opportunity: one that helps innovators develop hard-tocopy marketing strategies that will be profitable for a long time.
Competitive advantage: a firm has a marketing mix that the target

market sees as being better than a competitor's mix. Competitive advantage:
has to be viewed from the customer's perspective, not the firm's

perspective;
can be achieved through excellence in any area of the four Ps or

because of the firm's other resources.
Discussion Question: Think about the pizza business, and major national
chains such as Dominos, Little Caesars, Pizza Hut, and Papa Johns. What
is the competitive advantage for each chain?
Marketers must avoid hit-or-miss marketing by:
following a logical marketing strategy planning process;
basing the process on sound marketing research.
This ad for SlimFast bars pokes fun at the typical fast food snack. However,
serious marketing research really is the foundation for the marketing strategy
planning process and for the promotion element of the marketing mix. The ad
is clearly aimed at white collar males who are often challenged by the need
to satisfy their hunger quickly. The selection of an appropriate target market
and the development of a marketing mix that fit the needs of the target
market both require good information gained through research.
Video Operation:
To restore, right click the video player object and select Zoom 200%.
Summary Overview
The marketing strategy planning process guides the selection of a target market
and the development of a marketing mix.
Key Issues
Marketing strategy planning begins by gathering information about the

market and company.
Marketing strategy planning narrows down from broad opportunities to

specific strategy.
Screening criteria makes it clear why you select a strategy.
Segmentation helps pinpoint the target.
Narrow down to a superior marketing mix.
S.W.O.T. analysis highlights advantages and disadvantages.
The purpose of this exercise is to help students extend their conceptual

knowledge of the strategic marketing planning process, specifically as it
relates to the broad types of strategies that a firm might choose to pursue.
For each of the four strategic opportunities (market penetration, market

development, product development, and diversification), students are shown
statements describing marketing actions undertaken in the context of specific
brands. Students are expected to select the statement description that best
illustrates the particular type of strategic opportunity that is under
consideration.

Exercise, please refer to the Notes on the Interactive Exercise
section for this chapter in the Multimedia Lecture Support Package
to Accompany Basic Marketing. That same information is available
as a Word document in the assets folder for the PowerPoint file.
ANSWER: B
Selection B is the best option because the university is trying to increase

enrollment (sales) by selling established summer-school program classes
(present products) to students at home for the summer (new markets). This
is the definition of market development. (p. 50)
Summary Overview
Starbucks Corporations corporate sales program is a good example of market
penetration. Starbucks practices market penetration in this ad by attempting to
increase sales of the firms present products in its present markets. The company is
also attempting to take customer relationship management to the next level.
Key Issues
The Starbucks Card which can be given away as a token of appreciation is an

attempt to further penetrate the corporate market.
In doing so, it strengthens its relationship with its customers and increases
the frequency of usage.
The card carrier can be personalized with a custom message.
Discussion Question: Can a company pursue a market penetration

strategy and simultaneously pursue other types of opportunities (market
development, product development, or diversification)?
Summary Overview
Tylenol offers an improved product for its existing marketsTylenol Extra Strength
Rapid Release Gels.
Key Issues
Tylenol Extra Strength Rapid Release Gels work faster than Tylenol Arthritis
Pain 650mg Caplets and contains only 500mg of pain reliever.
It starts working within 5 minutes. This can be attributed to the laser holes
that are drilled into the side of each capsule so the capsule doesn't have to
dissolve first.
Manufacturers, such as McNeil Consumer Healthcare, have ongoing newproduct development processes to meet emerging needs.
Many manufacturers have accelerated their new-product development in

recent years, including new packaging for improved customer convenience.
Service firms also practice product development, by offering new services.
Discussion Question: Can you provide an example of a service firm that

practices product development?
Summary Overview
In the ever-increasing interdependency of the global economy, marketing managers
should consider international opportunities.
Key Issues
The world is getting smaller:
Traditional barriers to international trade are improving in favor of more

trade.
Telecommunications infrastructure is rapidly improving and expanding.
Competitive advantage: Successful expansion into international markets can

help drive down per unit manufacturing costs.
Getting an early start in a new international market may be the key to
long-term success for many firms.
Marketers may also find better trends in international markets, because there
may be more favorable combinations of variables affecting how well a firm
competes.
Risks are high in foreign markets.
Discussion Question: The percentage of cigarette smokers in the U.S.
population has declined dramatically in the past several years. However,
there is still industry growth in international markets. Why?
1. Understand what a marketing manager does.
2. Know what marketing strategy planning isand why it is the focus of the
book.
3. Understand target marketing.
4. Be familiar with the four Ps in a marketing mix.
5. Know the difference between a marketing strategy, a marketing plan, and a
marketing program.
6. Understand what customer lifetime value and customer equity are and why
marketing strategy planners seek to increase them.
7. Be familiar with the texts framework for marketing strategy planning.
8. Know four broad types of marketing opportunities that help in identifying new
strategies.
9. Understand why strategies for opportunities in international markets should
be considered.
11.Summary Overview
12.These are key terms you should be familiar with based upon the material in
this presentation.
13.Key Issues
14.Marketing management process: the process of (1) planning marketing
activities, (2) directing the implementation of the plans, and (3) controlling
these plans.
15.Strategic (management) planning: the managerial process of developing and

maintaining a match between an organizations resources and its market
opportunities.
16.Marketing strategy: specifies a target market and a related marketing mix.
17.Target market: a fairly homogeneous (similar) group of customers to whom a
company wishes to appeal.
18.Marketing mix: the controllable variables the company puts together to
satisfy this target group.
19.Target marketing: a marketing mix that is tailored to fit some specific target
customers.
20.Mass marketing: the typical production-oriented approachvaguely aims at
everyone with the same marketing mix.
21.Channel of distribution: any series of firms (or individuals) that participate in
the flow of products from producer to final user or consumer.
22.Personal selling: direct spoken communication between sellers and potential
customers.
23.Customer service: a personal communication between a seller and a
customer who wants the seller to resolve a problem with a purchase.
24.Mass selling: communicating with large numbers of customers at the same
time.
25.Advertising: any paid form of nonpersonal presentation of ideas, goods, or
services by an identified sponsor.
26.Publicity: any unpaid form of nonpersonal presentation of ideas, goods, or
services.
27.Sales promotion: promotion activitiesother than advertising, publicity, and
personal sellingthat stimulate interest, trial, or purchase by final customers
or others in the channel.
28.Marketing plan: a written statement of a marketing strategy and the timerelated details for carrying out the strategy.
29.Implementation: putting marketing plans into operation.
30.Operational decisions: short-run decisions to help implement strategies.
31.Marketing program: blends all of the firms marketing plans into one big
plan.
32.Customer equity: the expected earnings stream (profitability) of a firms

current and prospective customers over some period of time.
33.Summary Overview
34.These are additional key terms you should be familiar with based upon the
material in this presentation.
35.
36.Key Issues
37.Breakthrough opportunities: opportunities that help innovators develop hardto-copy marketing strategies that will be very profitable for a long time.
38.Competitive advantage: when a firm has a marketing mix that the target
market sees as better than a competitors mix.
39.S.W.O.T. analysis: an aid which includes and lists the firms strengths and
weaknesses and its opportunities and threats.
40.Differentiation: the marketing mix is distinct from and better than what is
available from a competitor.
41.Market penetration: trying to increase sales of a firms present products in its
present marketsprobably through a more aggressive marketing mix.
42.Market development: trying to increase sales by selling present products in
new markets.
43.Product development: offering new or improved products for present
markets.
44.Diversification: moving into totally different lines of businessperhaps
unfamiliar products, markets, or even levels in the production-marketing
system.

1. Know the variables that shape the environment of marketing strategy
planning.
2. Understand why company objectives are important in guiding marketing
strategy planning.
3. See how the resources of a firm affect the search for opportunities.
4. Know how to conduct a competitor analysis and how different types of

competition affect strategy planning.
5. Understand how the economic and technological environments can affect
strategy planning.
6. Know how elements of the political and legal environment affect marketing
strategy planning.
7. Understand the cultural and social environment and how demographic trends
affect strategy planning.
8. Understand how to screen and evaluate marketing strategy opportunities.
9. Understand the important new terms
Summary Overview
Specific aspects of the external market environment, company, and competitors aid
the firm in evaluating opportunities. From these opportunities, the best
opportunities can be selected.
Key Issues
Each company has objectives it wants to accomplish, and specific resources

at its disposal.
When looking at its competitors, firms must include not only its current
competitors, but potential (future) ones as well.
The external market environment is made up of: the economic environment, the
technological environment, the political and legal environment, and the cultural and
social environment.
Opportunity evaluation is aided by several screening criteria, or proscriptive
planning grids, covered in the chapter. Often, firms must plan for multiple products
simultaneously.
Once all the above are considered, and firm should be able to identify the best
opportunities to pursue.
Discussion Question: Think of a firm that is identified with one major
product. Who are its current competitors? Who are its potential
competitors?
Summary Overview
The narrowing-down process should consider the important elements of the market
environment and how they are shifting.
Key Issues:
The marketing strategy planning process requires:
Narrowing down to the best opportunities;
Developing a strategy that:
Gives the firm a competitive advantage;
Provides target customers with superior customer value.
Summary Overview
The five basic areas of the marketing environment are shown in this diagram.
Marketers should consider each area and how each area interacts with the others
when planning strategies.
Key Issues
Direct market environment: customers, the resources and objectives of the

company, and the firms competitors.
External market environment: the economic environment, the technological

environment, the political and legal environment, and the cultural and social
environment.
Marketers make decisions about the 4Ps in the context of the environment.
Discussion Question: How is it that a marketer can influence, but not

directly control, the environment? Give an example.
Marketers must continually scan the environment and search for potential
opportunities and threats.
Summary Overview
The three general objectives provide guidelines. A firm should develop its own
objectiveswhich usually reflect a companys mission statement and objectives.
Key Issues
A mission statement helps set the course. It sets out the organizations basic
purpose for being.
The whole firm and each functional area should work toward the same
objectives.
Company objectives provide the larger framework for setting marketing

objectives.
Marketing objectives guide the development of objectives for each element of the
marketing mix.
Knowing the objectives for a specific element of the marketing mix then guides
more specific objectives.
For example, marketing objectives drive promotion objectives.

And then promotion objectives will drive objectives for each element
of the promotion blend.
Objectives should be explicitquantified and related to time deadlines.

Discussion Question: What does it mean to say that objectives should be
quantified? Why are quantified objectives preferable to objectives that
are not quantified?
Summary Overview
It is important to evaluate how realistic each opportunity is in relation to the specific
capabilities of the company.
Key Issues
Key areas that limit the search for opportunities are:
Financial strengthsome opportunities require significantly more capital

than others.
For example, developing a drug to cure cancer might require a very

large investment in research development.
Producing capability and flexibilitya company must decide if it has the

production capacity and skills needed to pursue a particular opportunity.
As production increases, the cost of producing each unit decreases.
Making changes can be costly and take time.
Marketing strengthscompetitive advantages, such as:
familiar brand;
strong channel relations;
creative brand advertising;
industry-leading sales forces.
The knowledge of people at the firm can also be a unique resource.

By analyzing successes or failures in relation to the firms resources,
management can discover why the firm was successfulor why it failedin
the past.
Discussion Question: Several years ago, Frito-Lay, a leading producer of

snack foods, added cookies to its traditional line of salty snacks. What
marketing strengths could Frito-Lay bring to bear in this extension of its
product line?
Summary Overview
A major marketing strength for many companies is a familiar brand name like
Aveeno.
Key Issues
Major thrust of this ad is the promotion of New Aveeno Daily Moisturizing

Body Wash.
New Aveeno Daily Moisturizing Body Wash replenishes skins natural

moisture.
Aveeno brand has been recommended by dermatologists for 60 years.

This ad highlights the main benefits of the product: Soft, smooth, and
healthy skin all day.
Discussion Question: What other marketing strengths does Aveeno have,

in addition to a strong brand name?
Summary Overview
The competitive environment affects the number and types of competitors the
marketing manager must face and how they may behave. Prudent managers
choose strategies that avoid head-on competition and/or plan for competition when
it is inevitable.
Key Issues
Marketers should understand the differences among types of market situations:
Monopoly: one company serves the entire customer base. Competitor-free
environments are rare.
Monopolistic competition: a number of different firms offer marketing mixes that

at least some customers see as different. Monopolistic competition is typical, and a
challenge.
Oligopoly: a small number of firms controls the market. Barriers to competitive
entry are high.
Pure competition: a large number of firms compete with essentially similar
(commodity) products. Price is typically the determining factor in making a
purchase.
Discussion Question: Can you think of an example for each of the four
types of competitive situations? For which market situation(s) is it easiest
to think of an example? For which type is it hardest to think of an
example? Why?
Summary Overview
There are few producers of Mini Waterless Vaporizer. SudaCare is one of them.
Key Issues
In monopolistic competition, the firm attempts to monopolize its own target

market, but competition still exists.
As the ad indicates, SudaCare Mini Waterless Vaporizer attempts to avoid

head-on competition by providing the following benefits to the customers:
Contains a blend of aromatic ingredients, including menthol and

eucalyptus
Helps comfortably relieve congestion; easy-to-replace refill pads last

up to 8 hours
Convenient and simple to usejust plug in!
Continuous 8-hour release
Discussion Question: How can SudaCare be innovative when dealing in an

competitive product-market against other vaporizers? What types of
issues might be important to customers buying SudaCare Mini Waterless
Vaporizer from a medical or a departmental store?
Most product-markets head toward pure competitionor oligopolyover the long
term. In these situations, competitors offer very similar products. Thus, it is up to
marketing managers to differentiate their products from those of the competition.
This can be done in many ways. For example, in this ad, Shell Oil is attempting to
differentiate itself from its competitors by encouraging people concerned with
protection and physical well-being to write for a free book: Learn How To Avoid
Drivings Most Dangerous Distractions.
Video Operation:
video playback.
restore, right- click the video player object and select Zoom 200%.
Summary Overview
Marketing managers must understand the competitive environment.
Key Issues
Competitor analysis: an organized approach for evaluating the strengths and
weaknesses of current or potential competitors' marketing strategies. Marketers do
this by gathering information on the competitors from a variety of internal and
external sources.
Competitive rivals: the firms that will be the closest competitors.
Marketing managers must anticipate future competition.
Successful marketers naturally attract competition.
Competitor matrix: a useful organized table that compares the strengths and
weaknesses of a company with those of its competitive rivals.
Search for sustainable competitive advantage: a marketing mix that customers
see as better than a competitors mix and cannot be quickly or easily copied.
Discussion Question: Think about a major grocery store chain that serves
your area. What are the competitive rivals for this chain? Are these rivals
the only relevant competitors? Why or why not?
Summary Overview
Marketing managers should seek out information on competitive practices.
Key Issues
The search for information raises ethical issues.
Discussion Questions:
How would you answer the following questions?
Should people who go to work for their former competitors use

information they gained from their previous employers?
Is there anything wrong with having computer hackers break into a

competitors computer system to access information?
ANSWER: D
In the above question, there are three different jewelry stores discussed (lowend, moderately-priced, and super-premium). Each store differs on pricing,
quality of merchandise, and services. In monopolistic competition, a number
of different firms (at least three different jewelry stores mentioned) offer
marketing mixes that at least some customers see as different. This question
is an example of monopolistic competition. D is the best answer selection.
ANSWER: C
In his competitor analysis, Chris has identified three national chain

restaurants that are already in his area and have established clientele. The
existence of these restaurants is a condition that may make it difficult for
Chris proposed restaurant to compete. The best answer selection is C.
Chilis, TGI Fridays, and Applebees are competitive barriers for entry into
this market with a restaurant of Chris description.
Summary Overview
The economic environment affects the way firms and the whole economy use
resources. The economic environment is affected by the interactions of all the
elements of the macro-economic system.
Key Issues
The economic environment can change very rapidly. In periods of rapid business
decline, even a well-planned marketing strategy may fail.
Discussion Question: Can you name a major world event that changed the
economic environment and drastically altered the business practices of a
major industry?
Marketing strategies change in a recession.
Due to recession, consumers tend to spend less in many categories

that are not necessities.
Therefore marketing managers found ways to adapt their marketing

strategies and lessen the impact of the recession.
Interest rates and inflation affect consumer buying processes.
Interest rates can go up sharply in times of high inflation.
Buying power declines during high inflation.
The global economy is increasingly connected.
Competition can come from almost anywhere.
Global trade is affected by exchange rates.
Summary Overview
Technology is the application of science to convert an economys resources to
output. Technology affects marketing in two basic ways: opportunities for new
products and opportunities for new processes. In modern economies, the rate of
technological change is very rapid.
The video clip highlights the extensive use of the bar code technology in
manufacturing, retailing, wholesaling, transportation, and medical industries.
Key Issues
Technology often leads to breakthrough opportunities.
Internet technologies are reshaping marketing.
The Internet changes based on the way consumers shop and marketers
market.
Discussion Question: In what other ways has the Internet affected

marketing? Hintthink about each of the 4Ps.
Technology poses challenges.
Sometimes, new technological breakthroughs are rushed to market.

Technology also speeds up obsolescence.
Technology has raised ethical issues about the privacy of personal

information, ecological concerns, and the intrusiveness of telemarketing and
Internet advertising.
(Video clip length: 1:54)

For video playing assistance, please see notes on slide 13.
Summary Overview
The political environment refers to the way societies order their governments and to
the attitudes of the government and people toward business.
Lets talk about two examples of different characteristics of the political
environment.
Key Issues
Nationalism is an emphasis on a countrys interests before anything else.
Nationalism can be limiting in international markets, by reducing sales

and blocking marketing activity.
Regional economic groupings are becoming more important.
The European Union has unified European markets.

The North American Free Trade Agreement (NAFTA) is building trade
cooperation in North America.
Discussion Question: Are regional groupings a form of nationalism?

Explain.
Summary Overview
The legal environment refers to the rules and laws that set standards for conduct
that are enforced by legal power. Starting in 1890, the United States Congress
passed a series of laws designed to encourage competition. Each of these laws
regulates different aspects of the marketing mix.
Key Issues
There is also a relationship between antimonopoly laws and marketing mix

planning.
For example, the Sherman Act prohibits monopoly or conspiracy to

control a product, distribution channels, or prices.
Prosecution is serious and can lead to a variety of penalties, including heavy

fines and jail terms.
Discussion Question: In light of all of the legislation prohibiting

anticompetitive behavior and deceptive practices, why do you think we
still see false advertising claims or deceptive prices?
Summary Overview
This slide provides a description of some important Federal regulatory agencies,
many of which deal with consumer protection.
Key Issues
Consumer protection is not new.
Food and drugs are controlled by the Food and Drug Administration (FDA).
The Consumer Product Safety Act of 1972 empowers its

commission to remove unsafe products from the market.
State and local laws may vary widely.
One major initiative of the FDA is the development of standards

for nutritional labeling.
Product safety is also controlled.
Sellers are required to be truthful, meet contracts, and stand

behind their products.
For example, every state has different automotive franchise

legislation governing the retailing of new vehicles.
Laws and enforcement differ across countries:
Because legal environments are closely tied to national

governments, laws and enforcement vary significantly around
the world.
Discussion Question: What are some areas of consumer protection that

are of current interest to the courts and to political leaders?
ANSWER: D
Changes in the economy are often accompanied by changes in the interest rate. In
the above question, the changes in the housing market (because of changing
interest rates) are trends within the economic environment. The best answer
selection is D.
ANSWER: A
Advances in the technological environment have made possible an explosion of
high-tech products. The development of Bluetooth technology in vehicles is clearly
an example of this. The best answer selection is A.
ANSWER: A
State-appointed commissions that oversee business practices of utilities and other
industries that serve the public interest effect companies in these industries. This is
part of the legal environment. The best answer selection is A.
Summary Overview
The cultural and social environment affects how and why people live and behave as
they do.
Key Issues
The cultural and social environment affects how and why people live and
behave as they do.
This includes demographic trends in population trends and income
This ad shows how Farmland Dairies is attempting to provide products that

will meet the needs of consumers who are concerned about fat and
cholesterol in their diets.
Video Operation:
Summary Overview
Just 50 years ago, about two-thirds of the worlds population lived in rural areas.
Today about half live in urban areas. The worlds population as a whole is changing
regionally as well
Key Issues
There has been a movement of the population from rural areas to urban
areas.
There has and will be drastic changes in population for different regions,
both increases and decreases
All of these changes create different needs and purchase patterns.
Summary Overview
In order to have a market, consumers must have money. Two popular measures of
national income are:
Key Issues
Gross domestic product (GDP) - The total market value of all goods and
services provided in a countrys economy in a year by both residents and
nonresidents of that country.
GDP includes foreign income.
Gross national income (GNI) is similar to GDP, but GNI does not include
income earned by foreigners who own resources in that nation.
Marketers should examine GDP, GNI and other measures in order to

get a complete picture of income.
GNI and GDP do not indicate how much money is in the hands of
individuals in a country.
GNI per-capita: dividing GNI by the nations population size is a measure of

individual income.
It gives some idea of the income level of people in the country.

The large number of countries with low GNI per capita is a stark
reminder that much of the worlds population lives in extreme poverty.
Discussion Question: Can you think of any products or services that might
be attractive to consumers in countries with low per capita income rates?
There might be considerable potential, and less competition, in areas

where per capita income is low.
Summary Overview
Technology affects the world around us.
Key Issues
Two technology indicators that impact marketing strategy:
Data on cell phone
Internet usage
The adoption of these technologies may have their greatest impact in

developing countries.
As adoption of these technologies speeds ahead, marketing managers will

need to adjust their marketing strategies accordingly.
Summary Overview
Turning to key characteristics of the United States market, the first is the overall
distribution of the population in the various states. Exhibit 3-6 shows that current
population and population growth vary a lot in different regions of the country.
Key Issues
Marketing managers will find growth opportunities in states and regions of

the country which are growing.
Summary Overview
The age distribution in the U.S. has a big impact on marketing managers. Here we
highlight a few of the major trends across different age cohorts.
Key Issues
The graying of America: Boomers have had a big effect on marketing all their
lives. The growth of rock and- roll in the 1960s and 1970s was driven by
record-buying teenage baby boomers.
Discussion Question: How will marketing to senior citizens--those over
65-- be different ten years from now?
Generation X, sometimes called Gen X, refers to the generation born immediately
following the baby boomfrom 1965 to 1977.
By 2010, this group fell mostly in the 3044 age group and the 6.1
percent decline in its numbers between 2000 and 2010 was the result
of the baby bust.
Generation Y, sometimes called Millenials, refers to those born from 1978 to

1994.
This group emerged from the echo boom and is generally larger in
number than Generation X.
This group grew up with technology.
ANSWER: E
The Federal Trade Commission investigates unfair methods of competition.

This governmental body operates in the legal environment. E is the best
answer selection.
The purpose of this exercise is to help students extend their conceptual

knowledge of the external marketing environment and the manner in which
trends or occurrences within these environments present opportunities or
threats. Set in the context of The Wheel of Opportunity, students are shown
hypothetical or actual trends pertaining to the technological, economic,
social, and legal-political environments. Competitive factors are not discussed
in the context of this exercise. For each environmental trend or event,
students are challenged to identify the product category or industry for which
that trend represents the strongest opportunity.
For complete information and suggestions on using this Interactive Exercise,

please refer to the Notes on the Interactive Exercise section for this chapter
in the Multimedia Lecture Support Package to Accompany Basic Marketing.
That same information is available as a Word document in the assets folder
for the PowerPoint file.
Summary Overview
Successful, innovative firms have strong programs for evaluating opportunities that
they identify as a result of scanning the environment. These techniques help them
select the opportunities most appropriate for the firms particular competitive
position.
Key Issues
Marketers must develop and apply screening criteria.
Quantitative criteria include sales, profit, and return on investment goals.
Qualitative criteria summarize what businesses to be in and what strengths and

trends to use as a base.
The whole marketing plan should be evaluated against these criteria.
Summary Overview
A marketing manager using the total profit approach estimates potential sales and
costs during the life of a plan. These graphs provide one such estimate for two
different products. Product A represents the estimates for a much improved
product. And Product B shows a me-too product. Product B involves lower
initial costs and is profitable more quickly while Product A is not profitable until year
3.
Discussion Question: Consider the graph shown in the slidewhich one is
the better opportunity for the firm to pursue? Is it Product A or Product B?
Why?
A total profit approach can help evaluate possible plans.
Product A has high start-up costs.
Product B earns profits within one year.
If the firm can afford the start-up costs and delayed profits, the long
term profit potential for Product A is greater.
Summary Overview
Graphical planning grids help managers summarize the interaction of several key
factors identified by the company to be important to successful business ventures.
Key Issues
General Electric strategic planning grid: positions opportunities according to

industry attractiveness and business strengths.
Industry attractivenesscharacteristics such as size, growth,

and competitive structure.
Discussion Question: What characteristics of an industry would be

attractive?
Business strengthsresources of the organization like people

skills, technological position, growth, market share or
profitability, among others.
Using industry attractiveness and business strengths, a manager can show

where any opportunity appears on this grid.
Opportunities occupying the green area of this matrix are

growth opportunities and should be pursued. Such opportunities
occur in more attractive industries and better fit with the
companys strengths.
Opportunities falling in the red area are ones that the firm should avoid. Such
opportunities are perhaps in low growth industries and do not play to the companys
strengths.
In the middle, the yellow areas are borderline opportunities that the firm needs to
analyze more fully in order to determine if they are worthwhile. A company may be
able to develop a marketing strategy that offsets the lack of strength or low
attractiveness in an industry.
Summary Overview
In addition to planning grids, there are other tools available for evaluating
opportunities. The more products and services a firm offers, the greater the task.
Key Issues
Siemens is an example of a multiproduct firm. Strategy planning for firms

like Siemens is a complex task.
The idea of a strategic business unit (SBU) may helpan organizational subunit of a larger company that focuses on some product-markets and is
treated as a separate profit center.
Some firms use portfolio managementtreats each SBU like stock in an

investors portfolio. Some SBUs warrant greater investment, some should be
dropped or sold.
The main weakness of this approach is that it encourages management to

take a short run view of financial returns.
Discussion Question: How might financial returns and the marketing

concept be at odds with each other?
Summary Overview
Planning grids and portfolio analysis also apply to international opportunities as
well. However, it might be more difficult to be completely familiar with all of the
environmental variables at work in foreign countries. The farther one goes from
familiar territory, the greater the risk of making big mistakes.
Key Issues
Marketers must evaluate the risks.
Risk assessment varies from market to market.

International markets may be evaluated according to the
likelihood of drastic political changes.
Risks tend to vary along a continuum of environmental sensitivity.
Most industrial products are relatively insensitive to their environment. Industrial

firms may find it easier to use the same marketing mix they use in a domestic
market in a new international market.
Consumer products closely linked to other social or cultural variables are very
sensitive to their environments. For example, when Disney opened a theme park in
France, the parks failed to consider local French customssuch as serving wine with
meals. The Euro Disney initially failed to meet its sales goals, but after adding local
touches, the park has been more successful.
Basic commodity-type products may have some sensitivity to the environment
so a marketing mix may require minor changes.
If the risks of an international opportunity are hard to judge, it may be wise

to look first for opportunities that involve exporting.

1. Know the variables that shape the environment of marketing strategy
planning.
2. Understand why company objectives are important in guiding marketing
strategy planning.
3. See how the resources of a firm affect the search for opportunities.
4. Know how to conduct a competitor analysis and how different types of
competition affect strategy planning.
5. Understand how the economic and technological environments can affect
strategy planning.
6. Know how elements of the political and legal environment affect marketing
strategy planning.
7. Understand the cultural and social environment and how demographic trends
affect strategy planning.
8. Understand how to screen and evaluate marketing strategy opportunities.
9. Understand the important new terms
10.Summary Overview
11.These are key terms you should be familiar with based upon the material in
this presentation.
12.Key Issues
13.Mission statement: sets out the organization's basic purpose for being.
14.Competitive environment: the number and types of competitors the
marketing manager must face, and how they may behave.
15.Competitor analysis: an organized approach for evaluating the strengths and
weaknesses of current or potential competitors' marketing strategies.
16.Competitive rivals: a firm's closest competitors.
17.Competitor matrix: an organized table that compares the strengths and
weaknesses of a company with those of its competitive rivals
18.Competitive barriers: the conditions that may make it difficult, or even
impossible, for a firm to compete in a market.
19.Economic environment: affects the way firmsand the whole economyuse
resources.
20.Technology: the application of science to convert an economy's resources to
output.
21.Nationalism: an emphasis on a country's interests before everything else.
22.North American Free Trade Agreement (NAFTA): lays out a plan to reshape the
rules of trade among the U.S., Canada, and Mexico.
23.Cultural and social environment: affects how and why people live and behave
as they do.
24.Gross domestic product (GDP): the total market value of all goods and
services provided in a countrys economy in a year by both residents and
nonresidents of that country.
25.Senior citizens: people over the age of 65.
26.Baby boomers: those born between 1946 and 1964are now creating new
opportunities in industries such as tourism, health care, and financial services
all of which are more important to the middle-aged and retired.
27.Generation X: generation born immediately following the baby boomfrom
1965 to 1977.
28.Generation Y: those born from 1978 to 1994.
29.Sustainability: the idea that its important to meet present needs without
compromising the ability of future generations to meet their own needs.

1. Know about defining generic markets and product-markets.
2. Know what market segmentation is and how to segment product-markets into
submarkets.
3. Know three approaches to market-oriented strategy planning.
4. Know dimensions that may be useful for segmenting markets.
5. Know a seven-step process to market segmentation that you can do yourself.
6. Recognize how some computer-aided methods are used in segmenting.
7. Know what positioning is and why it is useful.
Segmentation
Defining markets
Dimensions to use
Identifying segments
Identifying segments to target
Segmentation approaches
Positioning
Understanding customers view
Positioning techniques
Evaluating segment preferences
Differentiating the marketing mix
Relationship between
positioning & targeting
Summary Overview
La-Z-Boy has designed more fashionable chairs to tap into new market segments.
Key Issues
Prior to introducing a product, however, a firm such as La-Z-Boy has to have

a good understanding of the target market.
It also needs to assess the current state of competition, including how

consumers perceive the differences and similarities among alternative
brands.
Should the organization then decide to proceed with the development of a

marketing mix to serve a particular target market, it must differentiate its
offering.
From this ad, it appears that La-Z-Boy also thinks that gender provides a
good way to segment its market.
This presentation will cover how marketers can use market segmentation,
differentiation, and positioning to take advantage of opportunities in the
marketplace.
Summary Overview
Strategy planning is a narrowing-down process.

Key Issues
What is a companys market?
Market is a group of potential customers with similar needs who are

willing to exchange something of value with sellers offering various
goods or servicesthat is, ways of satisfying those needs.
Dont just focus on the product
The product oriented approach ignores customers.
Customers make a market!
Generic markets to product-markets
A generic market is a market with broadly similar needsand

sellers offering various, often diverse, ways of satisfying those needs.
A product-market is a market with very similar needs and sellers

offering various close substitute ways of satisfying those needs.
Broaden market definitions to find opportunities
Broader market definitionsincluding both generic market

definitions and product-market definitionscan help firms find
opportunities.
Too broad a definition makes the companys efforts and resources

seem insignificant.
Summary Overview
A complete product-market and generic market definition includes the following
parts.
Key Issues
Managers need to think about more than the product they already produce and sell.
This can be done by naming product markets with a four-part description.
The product typethe type of good and/or service offered. It should meet
customer needs.
Customer needsrefers to the needs of the customer (user) that are being
met by the product.
Customer typesidentify who specifically is using the product.
Geographic areaidentifies where the market is located.
In defining product-markets, marketers provide names for each level of

definition.
Discussion Question: What are the components of the product-market

definition for Skippy peanut butter?
In defining generic markets, there is no product type; the definition consists of
the customer needs, customer type, and geographic area.
The purpose of this exercise is to help students see the product-market definitions
behind products that are advertised. Print ads are provided for different products;
students are challenged to identify the correct components of the product-market
definition for each one.
Exercise, please refer to the Notes on the Interactive Exercise section
for this chapter in the Multimedia Lecture Support Package to Accompany
Basic Marketing. That same information is available as a Word document
in the assets folder for the PowerPoint file.
This ad demonstrates the benefits of an iDVD from Apple. From what you see in the
ad, try to define the product-market for this product, in terms of:
product type (video editor, DVD recorder);
customer need (recording, archiving, and distributing video);
customer type (young adults);
geographic area (in the world).
Video Operation:
video playback.
restore, right click the video player object and select Zoom 200%.
Summary Overview
Market segmentation is a two-step process. This process fails too often because
beginners start with the whole mass market and try to find one or two demographic
characteristics to divide up (segment) this market.
Key Issues
The steps in market segmentation are:
Naming broad product-markets, or disaggregating. Marketers must break

apart all possible needs into some generic markets and broad productmarkets in which the firm may be able to profitably operate.
Segmenting is an aggregating processclustering people with similar needs into

a market segment.
Market segment: a relatively homogeneous group of consumers who

will respond to a marketing mix in a similar way.
Summary Overview
Market segmentation is a two-step process. This process fails too often because
marketers do not realize the complexities of consumer behavior and they attempt to
categorize a market around too few consumer-related variables of distinction.
Key Issues
All customer needs: Marketers should break apart or disaggregate all customer
needs.
Generic market: a market with broadly similar needs and sellers offering various
ways of satisfying those needs.
Defining the market broadly can help the marketer to uncover some potential
new opportunities. The marketer can then narrow down to specific product-markets.
Product-market: a market with very similar needs and sellers offering various
close substitute ways of satisfying those needs.
Segmenting: the next step is an aggregating processthe marketer groups
together people with similar needs into a market segment. Here we look for
similarities.
Discussion Question: Using Exhibit 4-3 as a guide, think of the generic

market for transportation and the broad product-market of customers for
motorcycles. Can you segment the broad product market into several
submarkets?
After defining the market, marketers can select a particular target market
approach.
Summary Overview
Market segmentation groups customers with similar needs.
The first step in effective market segmentation involves naming a broad

product market of interest to the firm.
Market grid is a visual aid to market segmentation.
Segmenting is an aggregating process.
Key Issues
Here we can see five different submarkets for the broad product-market of bicycle
riders.
Discussion Question: What are the primary needs for each of these
submarkets for bicycles?
Summary Overview
As shown in this exhibit, one can segment a market into any number of segments,
(three segments, exhibit 4-5A and six segments, exhibit 4-5B) but how far should
a marketer go in aggregating similar consumers into target markets?
Key Issues
Criteria for segmenting:
Homogeneous (similar) withinthe customers in a market segment should

be as similar as possible with respect to their likely responses to marketing
mix variables and their segmenting dimensions.
Heterogeneous (different) betweenthe customers in different segments

should be as different as possible with respect to their likely responses to
marketing mix variables and their segmenting dimensions.
Substantialthe segment must be big enough to be profitable.
Discussion Question: Some firms, like Dell Computer, are able to market
directly to individuals and to customize products and services to their
unique needs. What advancements make this mass customization
possible?
Operationalthe segmenting dimensions should be useful for identifying

customers and deciding on marketing mix variables.
Summary Overview
Market-oriented strategies refine the segmentation process into actionable
submarkets.
Key Issues
Single target market approachthe marketer segments the market and

picks one of the homogeneous segments as the firms target market.
Multiple target market approachthe marketer segments the market,

chooses two or more segments, and then treats each segment as a separate
target market needing a different marketing mix.
Discussion Question: Suppose you are an entrepreneur who is preparing

to start a small business. Would you be more likely to select a single or
multiple target market approach? Why?
Combined target market approachthe marketer combines two or more
submarkets into one larger target market as a basis for one strategy.
Seeks economies from having one effort serve more than one market.
Segmenters aim at one or more homogeneous segments and try to

develop a different marketing mix for each segment.
They hope to increase sales by getting a much larger share of the

business in the market(s) they target.
Summary Overview
There are many factors that affect the choice between being a segmenter and a
combiner.
Key Issues
Combiners try to increase the size of their target markets by combining two or
more segments.
Too much combining is risky, because an innovative segmenter may chip away
at the various segments of the combined target market.
Discussion Question: What companies that you are familiar with have
suffered because segmenters have chipped away pieces of their target
markets?
Segmenters aim at one or more homogeneous segments and try to develop a
different marketing mix for each segment.
Segmenters try to satisfy customers very well.
Segmenting may produce bigger sales, if the segmenter can capture a

large share of a smaller market segment.
Many consumers are willing to pay more in order to satisfy their needs
more precisely.
Segment or combine? Depends on:
firms resources;
competition in the various segments;
similarity of customer needs, attitudes, and buying behavior.
Profit is often the balancing point, because the profit potential often dictates how
specialized a marketing mix can be.
ANSWER: C
The neighborhood restaurant has combined two or more submarkets (American,
Italian, Chinese, German, Thai, and Indian) into one larger target market as a basis
for one strategy. This is the definition of the combined target market approach.
Selection C is the best option.
Summary Overview
Market segmentation forces a marketing manager to decide which product-market
dimensions might be useful for planning marketing strategies. The dimensions
should help guide marketing mix planning.
Key Issues
The exhibit shows the basic kinds of dimensions and their probable effect on the
four Ps.
Behavioral needs and attitudes for example can influence Product decisions
for example packaging, product line assortment and branding as well as
Promotion for example what do potential customers need to know about a
product and what appeals should be used.
On the other hand, the urgency to get a need satisfied and willingness to
shop influences decisions about Place like where products are distributed
and Price for example how much of a premium will customers pay to
address the need for urgency.
Geographic location and other demographic characteristics can affect the
size of Target markets (by suggesting the market potential), Place (where
should products be made available) and Promotion (where and to whom will
promotion efforts be addressed).
Summary Overview
Segmenting dimensions guide marketing mix planning. Market segmentation forces
marketing managers to decide which product-market dimensions might be useful
for planning marketing strategies. A product-market may be described by
behavioral segmentation dimensions.
Key Issues
Needsfor example, customer needs could be economic, functional, or

psychological.
Benefits sought tend to be situation specificfor example a car buyer could be

looking for good gas mileage or the ability to seat seven people.
Thoughtsbuyers may be grouped by whether they have favorable or

unfavorable attitudes or beliefs about the brand or product category.
Rate of usesome customers may be heavy, medium, light or even non-users.
Purchase relationshipcustomers could be segmented by whether they have

an ongoing relationship, intermittent use, or a bad relationship.
Brand familiaritymight vary from insisting on a brand to nonrecognition or

rejection.
Kind of shoppingrefers to whether buyers do comparison shopping or perhaps
buy on a convenience basis.
Buyers might use different problem solving approachesand could be

grouped in this way.
Or buyers may have different information needssome customers want a lot of

information while others need little.
Discussion Question: What benefits do consumers seek in purchasing and
using toothpaste? How do these benefits affect segmentation among
consumers of toothpaste?
Summary Overview
Geographic dimensions are often used for segmentation. There may be different
languages or laws in different countriesor a business may only be located in a
certain geography.
Key Issues
Region of the world or countryfor example, North America versus Europe,

or New Zealand versus Japan.
Region in a countryfor example in the United States, the Rocky Mountain

Region, Southeast, or Northeast may provide a basis for segmentation.
The size of a city may also be useful for segmentation.
Summary Overview
In addition to behavioral and geographic dimensions, there are also demographic
segmentation dimensions.
Key Issues
Income provides one basisa marketing mix may appeal most to families with a
particular income.
Sex and age provide another demographic base of segmentation.
Family size or family life cycle stage. Family life cycle stages include young
singles, young married with no children, families with young children, divorced,
empty nesters, or seniors.
Occupation and education can also be used for segmentation.
Finally, social classlower, middle, or upper.
And ethnicityfor example: Hispanic, Asian, Native American, white, or

multiracial.
Discussion Question: Considering the demographic variables of age and
education levels, can you provide examples of products or services that
are targeted to college students?
Summary Overview
There are also many possible segmentation dimensions in the business or
organizational market.
Key Issues
Among these dimensions are:
Kind of relationship between buyer and sellerrelationships might range from
weak loyalty to strong loyalty to a vendor.
Type of customercustomers may be segmented by whether they are service
producers, a government agency, or a manufacturer.
Demographics variables include geographic locations, size of the company, or
industry.
How the customer will use the productwill the product being sold be used in an
installation, as a component or as a raw material.
Type of buying situationsome characteristics of the buying situation might
include the number of people involved in the purchase or whether the buying
process is centralized or decentralized.
Purchasing methods refer to factors like whether the buyer uses bids, vendor
analysis, e-commerce websites, or other methods of buying.
Summary Overview
This ad from Baldor shows how business-to business marketers incorporate
segmenting dimensions in their marketing tactics.
Key Issues
For example, this ad is targeted at a particular type of customerfirms that

have large vehicle fleets and a need for industrial electric motors.
The type of buying situation is also relevant.
It most likely represents a modified rebuy purchaseif the fleet buyer

is considering alternative sources for replacement parts.
Summary Overview
This ad from Sun Pharmaceuticals incorporates segmenting dimensions in
marketing tactics.
Key Issues
For example, this ad is targeted at a particular type of customerParents

buying sunblock specifically for their childrens use.
1. The pastor of a new church decides to start prospecting for new members.
He focuses first on people who live within a mile radius of the church, and
contacts them via mail and by visiting them door-to-door. He then moves on
to people who live from one to two miles away from the church, then two to
three miles away, and so on, up to a limit of ten miles away. The pastor
appears to be focusing on a __________ segmenting dimension.
2. A.
Behavioral
3. B.
Demographic
4. C.
Benefit
5. D.
Geographic
6. E.
Relationship
ANSWER: D
The pastor is segmenting potential church members based on physical
location in proximity to the church. This proximity to the church is a
geographic segmenting dimension; therefore, selection D is the best option.
Summary Overview
To select the important segmenting dimensions, think about two different types of
dimensions: qualifying and determining.
Key Issues
Qualifying dimensions are those relevant to including a customer type in a

product-market.
Help identify the core features that must be offered to

everyone in a product-market.
Determining dimensions are those that actually affect the customers purchase of
a specific product or brand in a product-market.
Can be further segmented into groups.
Discussion Question: Can you describe a qualifying dimension and a

determining dimension that help to define a product-market?
Summary Overview
Several factors affect the specificity and use of determining and qualifying
dimensions in segmenting markets.
Key Issues
Determining dimensions may be very specific, depending on whether the
marketer is concerned with a general product type or a specific brand.
Determining dimensions may change over time, because needs may change
or because competitors enter the market.
Qualifying dimensions are important, too, because they help identify the
core features that must be offered to everyone in a product-market.
Within a broad product-market, there may also be different dimensions for

different submarkets.
Discussion Question: Think about the various submarkets of bicycle riders

exercisers, off-road adventurers, environmentalists, etc. Can you
describe how the determining and qualifying dimensions differ from
submarket to submarket?
Summary Overview
Along with the segmenting dimensions, there are other considerations for marketers
in market segmentation.
Key Issues
Ethical issues: some critics argue that target marketing:
exploits consumers;
makes them want things they dont need;
may even cause physical, emotional, or financial harm.
Discussion Question: What types of companies are criticized the most for
exploiting particular target markets?
Success in international marketing requires even more segmenting, because

there are so many countries, languages, and unique cultures.
However, segmenting international markets adds just one step to the whole
process of segmentation. First, marketers must segment by country or region,
and then proceed with the same basic segmentation approaches already
discussed.
Summary Overview
This ad illustrates some qualifying and determining dimensions for jewelry.
Key Issues
A jewel enhances feminine beauty.
Beldas mall selection includes pieces you won't find anywhere else, with
prices to matchbut it's a refreshing change from the garnet- and amberstuffed jewelry stores elsewhere.
Belda's history is a long one, and its unique, well-crafted goods are
testament to its creativity and style.
Summary:
Its often unclear where to start or how to fit the ideas together; this introduces a
logical seven-step approach to market segmentation.
1. Decide what broad product-market the firm wants to be in.
2. Identify and write down as many relevant needs as you canconsidering
all of the potential customers in the broad product-market.
Brainstorming
3. Assume that some people have different needs than others; form different
submarkets based on each submarkets specific needs.
4. Review the list of need dimensions for each possible segment and identify the
determining dimensions.
5. Review the determining dimensionsmarket by marketand name (nickname)
each one based on the relative importance of the determining dimensions.
6. Think about what else you know about each segment to see how and why
these markets behave the way they do.
7. Try to tie our product-markets to demographic dataor other customer-related
characteristicsto make it easier to estimate the size of these markets.
seven-step approach to market segmentation

1. Select the broad product-market
2. Identify potential customers needs
3. Form initial homogeneous submarkets
4. Identify determining dimensions
5. Name the possible product-markets
6. Evaluate product- market segment behaviors
7. Estimate the size of each product- market segment
Summary:
Example of the market grid generated by the seven-step market segmenting steps.
Hotel/motel Example:
Market dimensions suggest a good mix: After following the seven steps,
outline the kinds of marketing mixes that would appeal to the various
markets. Facility use can vary between weekends and weekdays, type of
traveler, and so forth.
For example, consider some of the needs for family vacationers: comfort,
security, privacy, family fun, child care and snacks. These customers are
likely to be couples and single parents with children who wan ta fun family
experience, young, active, and energetic.
Compare that with the resort seeker who also wants comfort, security and
privacy suggesting these are qualifying needs while others are determining
needs. Resort seekers also want relaxation perhaps with golf, and a hot
tub, also fine dining, fun and concierge services to arrange for theater or
touring possibilities. These customers are sophisticated adults who have
time to relax and seek adult fun. They also have discretionary income.
Consider these other market segments. What types of needs is each
segment likely to have? Describe each customer?
Improve the marketing mix for current customers: There are several
approaches provide a basis for identifying new ways to serve existing
customers and strengthen the relationship with them. Technology can make
old services and strategies stagnate; the need for reevaluation is constant.
Targeting a segment of one: Many luxury hotel chains adapt a marketing mix
to an individual customer. First-time guests personal preferences are saved
in a database for future visits.
ANSWER: B
Qualifying dimensions are those relevant to including a customer type in a productmarket. In the above question, after the father narrowed his search to within two
miles from Disney World, the qualifying dimension was a hotel offering suites. After
he selected hotels offering suites, he made his decision based on the availability of
the complementary breakfast. The breakfast offering is a determining dimension. It
was the one that actually affected the customers purchase (reservation) of a
specific product (hotel) in a product-market (p. 99). Therefore, selection B is the
best option.
Summary Overview
Computer-aided methods afford marketers additional help in segmenting markets.
The ability of the computer to record, sort, recombine, and analyze a great many
variables relating to consumer behavior at the same time allows marketers to
develop much more sophisticated market segments.
Key Issues
Among the techniques are as follows:
Clustering techniques: try to find similar patterns within sets of data.
Customer relationship management (CRM):
Sophisticated modeling techniques can predict the types of products

or services an individual customer might want, based on the
information stored in the database.
Anticipation of emerging needs helps a marketer to maintain a longterm relationship with customers.
Summary Overview
Cluster analysis is used by firms such as Impact Media.
Key Issues
In this example, the firm is marketing its capabilities in finding clusters of

consumers.
Once the clusters are identified, the consumers within the clusters can
receive free samples of products that Impact Medias clients wish to promote.
Summary Overview
Marketers can differentiate the marketing mix in order to meet customer needs
better than competitors and build a competitive advantage.
Key Issues
Differentiation:
How the marketer tries to distinguish her or his offering in the

marketplacehow it is set off from the competition.
What really matters is that the consumer perceives the marketers

product to be different.
Positioning:
How customers think about proposed and/or present brands in a

market.
Marketing research techniques are designed to collect information

about consumer perceptions and determine differences among
competing products in the mind of the consumer.
Firms often use promotion to help position how a marketing mix meets target
customers specific needs.
The Rolex ad showcases the Rolex Oyster Perpetual Sea-Dweller DEEPSEA

Men's Watch.
Rolex is one of the most prolific Swiss wristwatch manufacturing companies

in the world.
With their sheer elegance and uncompromising attention to detail, Rolex is

the largest luxury watch brand worldwide.
Summary Overview
This diagram shows the output of a computer program that does positioning
analysis.
Key Issues
Two attributes of soap that account for the greatest difference in consumer
perceptions:
degree to which the soap is a deodorant soap.
degree to which the soap is a moisturizing soap.
The closer that any two dots are to each other, the more similar those brands are
in the minds of consumers.
Each segment may have its own preferences. The circles refer to the size of
market attracted to a combination of attributes.
Discussion Question: What is the largest segment in the diagram? What
brands serve that segment best?
Positioning may also lead to combining instead of segmenting, if a firm can
successfully appeal to several segments with the same product.
Therefore, positioning studies can be part of a broader analysis because they:
identify important attributes of the product offerings in a market;
identify what offerings are likely to appeal to segments;
provide a basis for changing the marketing mix, should a marketer decide to
reposition a product.
Summary Overview
The positioning statement provides marketing managers with a strategic direction.
Here is a template and example application.
Key Issues
Marketing managers often develop a positioning statement to concisely identify the
firms target market, product type, points of differentiation, and the main reasons a
customer should buy a product.
Summary Overview
The positioning statement provides marketing managers with a strategic direction.
Here is a template and example application.
Key Issues
Lets look at an example for Mountain Dew.
The brands target market is young adults males who identify with
excitement, adventure, and fun.
This might differ from a market segment that is older, and more healthconscious.
Branding and marketing would almost certainly avoid serious or conservative
themes.
Product logos, ad typeface choices, and sponsorships would reflect the same
excitement, adventure, and fun theme.
Discussion question: How did marketing managers for Mountain Dew
decide on this positioning statement? [probably through market research
with the target market]
Discussion question: Given this positioning statement, how could
Mountain Dew promote its drinks? [perhaps with ads showing their target
demographic engaging in extreme sports, or sponsoring events such as
the X Games.]
1. Know about defining generic markets and product-markets.
2. Know what market segmentation is and how to segment product-markets into
submarkets.
3. Know three approaches to market-oriented strategy planning.
4. Know dimensions that may be useful for segmenting markets.
5. Know a seven-step process to market segmentation that you can do yourself.

6. Recognize how some computer-aided methods are used in segmenting.
7. Know what positioning is and why it is useful.
Summary Overview
These are key terms you should be familiar with based upon the material in this
presentation.
Key Issues
Market: a group of potential customers with similar needs who are willing to
exchange something of value with sellers offering various goods and/or services
that is, ways of satisfying those needs.
Generic market: a market with broadly similar needsand sellers offering various
and often diverse ways of satisfying those needs.
Product-market: a market with very similar needsand sellers offering various close
substitute ways of satisfying those needs.
Market segmentation: a two-step process of: (1) naming broad product-markets and
(2) segmenting these broad product-markets in order to select target markets and
develop suitable marketing mixes.
Segmenting: an aggregating process that clusters people with similar needs into a
market segment.
Market segment: a relatively homogeneous group of customers who will respond to
a marketing mix in a similar way.
Single target market approach: segmenting the market and picking one of the
homogeneous segments as the firm's target market.
Multiple target market approach: segmenting the market and choosing two or more
segments, then treating each as a separate target market needing a different
marketing mix.
Combined target market approach: combining two or more submarkets into one
larger target market as a basis for one strategy.
Combiners: firms that try to increase the size of their target markets by combining
two or more segments.
Segmenters: aim at one or more homogeneous segments and try to develop a

different marketing mix for each segment.
Qualifying dimensions: the dimensions that are relevant to including a customertype in a product-market.
Determining dimensions: the dimensions that actually affect the customer's
purchase of a specific product or brand in a product-market.
Clustering techniques: approaches used to try to find similar patterns within sets of
data.
Customer relationship management (CRM): an approach in which a seller fine-tunes
the marketing effort with information from a customer database.
Positioning: an approach that refers to how customers think about proposed and/or
present brands in a market.

1. Describe how economic needs influence the buyer decision process.
2. Understand how psychological variables affect an individuals buying
behavior.
3. Understand how social influences affect an individuals buying behavior.
4. Explain how characteristics of the purchase situation influence consumer
behavior.
5. Explain the process by which consumers make buying decisions.
6. Understand important new terms.
Summary Overview
The texts comprehensive model is referenced to indicate where we are, and what is
covered in the following discussion.
Key Issues
This chapter explores the influences on final consumers and their buying
behavior.
Summary Overview
Specific aspects of the customers, both final consumers and organizational

customers, are considered in Chapters 5 and 6.
This chapter focuses on the buying behavior of final consumers (CB).

Key Issues
This chapter looks at three key determinants of consumer behavior:
(1) Individual consumer factors including: economic needs, psychological
variables, social influences, and the purchase situation.
(2) External influences on consumer behaviorlike marketing mixes and other
stimuli.
(3) The problem-solving and decision-making processes consumers go through.
Summary Overview
Economics and psychology are often cited as key sources of marketing thought, but
marketing also derives a great deal of knowledge about consumer behavior from
sociology, anthropology, and other social sciences. The basic model of consumer
behavior shown here integrates many of these influences.
Key Issues
Economic buyers: people who know all the facts and logically compare
choices to get the greatest satisfaction from spending their time and money.
Economic needs: those needs that are concerned with the consumer making
the best use of his or her time and money.
1. Economy of purchase or use.

2. Efficiency in operation or use.
3. Dependability in use.
4. Improvement of earnings.
5. Convenience.
Psychological variables: things that are going on in the mind of the consumer
that affect purchase.
Examples: attitudes, personality, learning processes, trust and

perceptions.
Social influences: have to do with the associations that the buyer might have
with other people.
Examples: culture, social class, and family influences.
Purchase situation factors: reason for the purchase, time pressure involved,
and surroundings of the purchase.
Discussion Question: How might your purchase of a product be different if
you have little time to make your purchase decision as opposed to having
unlimited time?
Marketing mixes affect this process.
All other stimuli and influences have an impact on the problem solving
process.
Outcome of the process might or might not be a purchase.
Economic conditions affect consumer confidence and spending.
Summary Overview
Economic needs help marketers to understand the who, what, when and where of
many aspects of consumer buying behavior. However, economic needs often dont
tell the full story. So marketers have turned to other behavioral sciences in order to
consider the full range of buying influences.
Key Issues
Consumers sometimes behave in ways that are consistent with the

economists idea of an economic buyera consumer who has all the facts
and make logical choices to purchase goods and services that will best fulfill
their needs.
Customers incomes are likely to affect their needs how much money does
a customer have available drives their buying behavior.
For many marketers, they need to determine their target markets

discretionary income what is left of income after paying taxes and paying
for necessities.
It is certainly true that economic needs affect many buying decisions. Many
consumers face budget constraints, and even when they dont they usually
pay attention to factors such as the cost to acquire and use a product,
dependability, convenience, how long it will last, and the like.
In explaining the behavior of individual consumers, the economic and/or

rational view is useful, but probably too simplistic. This ad for Subaru, for
example, focuses on safety. Automobile safety relates to several important
economic needs, including the dollar costs associated with injuries. On the
other hand, safety also relates to fear and other behavioral factors that
influence consumer decisions..
Discussion Question: How does the purchase of a car for an individuals

private use differ from the purchase of a car by a business outfitting its
fleet of company cars? In which case would economic or rational needs
be more important? Why?
Marketers who follow the marketing concept are concerned with satisfying the
needs of consumers, but what exactly are needs, and what types of needs are
there?
Key Issues
Needs: basic forces that motivate consumers to do something.
Wants: learned needs; that is, they are needs expressed as a desire for a
particular need-satisfier.
Discussion Question: What are some of the possible underlying needs and
wants for a.) deodorant; b.) a television; c.) a tax preparation service?
Drive: a strong internal stimulus that encourages action to reduce a need.
Consumers seek benefits to meet their needs.
Summary Overview
Many different levels of needs can appeal to or motivate a person. The PSSP
pyramid shown here helps apply motivation theory to the particular needs of
consumers and marketing managers trying to develop marketing mixes to meet
those needs.
Key Issues
Physiological needs: the most basic needs people experience.
Examples: biological needs for food, liquid, rest, and sex.
Safety needs: concerned with protection and physical well-being.
Examples: health, medicine, exercise, and security.
Social needs: derived from a persons interactions with others.
Examples: love, friendship, status, esteem, and connecting with

others.
Personal needs: concerned with an individuals need for personal

satisfaction, unrelated to what others do.
Examples: personal satisfaction, accomplishment, fun, freedom, and

relaxation.
Discussion Question: Can you provide an example of products or services

whose marketing mixes attempt to fulfill the four types of needs?
NOTE: Some products may try to satisfy only one type of need, while
others may attempt to satisfy more than one type.
Answer: C
Personal needs are concerned with an individuals need for personal satisfaction
unrelated to what others think or do. Examples include self-esteem,
accomplishment, fun, freedom, and relaxation. In the above question, the best
answer selection is C. The ad is an appeal to the consumers personal needs (fun).
Summary Overview
Perception refers to how people gather and interpret information from the world
around them. Marketers are very much interested in the processes people use to
handle incoming marketing mix stimuli, because people cant process all the
information to which they are exposed on a daily basis. The volume is too great.
Key Issues
Selective exposure means that consumers seek out and notice only the
information that interests them.
Selective perception means that people screen out or modify ideas, messages,
and information that conflict with previously learned attitudes and beliefs.
Selective retention means that consumers remember only what they really
want to remember.
Discussion Question: When you read a newspaper, do you: a.) start on

page 1 and read every article and ad, in order, until you finish at the last
page; or do you: b.) skip around, reading some things and not others?
Option b.) is more typicalis that selective exposure, perception, or
retention?
If you read an advertisement for a product that you have used before, do
you: a.) accept the ad at face value; or b.) evaluate itperhaps even
dismiss itin reference to your past experience? Option b.) is more typical
is that selective exposure, perception, or retention?
Do you remember: a.) the details of any product or service you have ever
used; or b.) remember some and not othersparticularly the ones with
which your experiences were really bad or really good? Option b.) is more
typicalis that selective exposure, perception, or retention?
Summary Overview
Marketers understand that virtually all of consumer behavior is learned, so they are
very interested in how they can positively affect the learning process.
Key Issues
Learning is a change in a persons thought processes caused by prior

experience.
As mentioned previously, a drive is a strong internal stimulus that

encourages action to reduce a need.
Cues are stimuli in the environment that trigger a drive or response.

A response is an effort to satisfy a drive.
Reinforcement occurs when the response is followed by satisfaction, which
reduces the drive.
Discussion Question: On major highways, there are often billboards
containing nothing more than the name or logo of a restaurant and a
statement such as, Exit 3210 miles. What is happening here in terms
of cues, drives, response, and reinforcement?
Marketers often try to identify positive cues or images that have positive
associations from some other situation and relate them to their marketing
mix.
Many needs are culturally learned.
Summary Overview
An attitude is a persons point of view about something. Attitudes tend to be
learned. They shape information processing in the consumers mind.
Attitudes also relate to buying decisions consumers make. Therefore,
marketers do a lot of attitude research.
Key Issues
Beliefs: opinions people have about something.
Green attitudes and beliefs change marketing mixes.
A growing number of consumers believe that they can have a positive effect on
the environment if they buy from companies that can help them make greener
choices.
Discussion Question: Think about the following statements: I like that
LED track light fixture. It use less electricity than the compact fluorescent
version. Which statement is the attitude, and which one is the belief?
Most marketers work with existing attitudes.
Consumer attitudes tend to be enduring; its usually more economical

for marketers to work with them than try to change them.
Changing negative attitudes is probably the most difficult job

marketers face.
Ethical issues may arise if marketers promote inaccurate or false beliefs.

Expectations: outcomes or events that a person anticipates.
Understanding and meeting expectations are both important in order

to build long-term relationships with customers.
Building consumer trust builds sales.
Trust is the confidence a person has in the promises or actions of

another person, brand, or company.
Trust drives expectations, because when people trust, they expect the
other party to fulfill promises or perform capably.
Trust can be very important in some purchase situations.
Summary Overview
Personality and lifestyles are other psychological variables that affect consumer
behavior.
Key Issues
Personality affects how people see things.
Marketers have found it difficult to incorporate personality into the

marketing mix.
Psychographics or lifestyle analysis:
Activities: identify what people doobjectively observable.

Interests: tend to create stronger drives that may pinpoint market
opportunities.
Opinions: the ways in which people feel about things.
By combining opinions with interests and activities, marketers can develop a

robust view of certain target market segments.
Discussion Question: It is often said that lifestyle analysis paints a more

human picture of the target consumer than does a simple demographic
description. Why would this be the case?
Summary Overview
Relationships with other family members influence many aspects of

consumer behavior.
The exhibit shows a summary of stages in the family life cycle.
Key Issues
The traditional family life cycle flow from young and single, to getting married,
adding children who grow up and later leave home.
Increasingly, many Americans are choosing not to have children.
Another growing family life cycle pattern involves divorce.
Young people and families accept new ideas.
Reallocation for teenagers.
Increasing singles market
Selling to the empty nesters.
Empty nesterspeople whose children are grown and who are now
able to spend their money in other ways.
Summary Overview
Psychological variables are not the only influences on consumer behavior. Relations
with other peoplesocial influencesare also important. For example, relationships
within a family and/or peers may have an impact.
Key Issues
Some parents (and school systems) worry that kids are too concerned about
what clothing is in fashion and about the social influence of peer pressure
(that is, how other kids will react to what they wear).
To avoid this type of peer pressure, many schools now specify a simple
"uniform" that all students must wear.
French Toast is taking advantage of this growth opportunity.
It believes in dressing kids for success.
Discussion Question: Can you provide an example of how a family

consideration may influence one family member to subordinate his/her
preferences in a purchase and instead buy a product that seems to better
satisfy the family as a whole?
Summary Overview
Perceived and actual social standing have powerful influences on consumers. It is
important to remember when considering these influences that the person chosen
or appointed to fill each social influence role is largely determined by the social
class to which the consumer belongs.
Key Issues
Social Influences
Social class: a group of people who have approximately equal social position
as viewed by others in the society.
What do these classes mean?
In the U.S., income is not the main determinant of social class.
People with similar incomes can be in different social classes because

of their occupation, education, and type or location of housing.
Discussion Question: How might differences in social classes translate

into: a.) differences in buying behavior and b.) different marketing mix
tactics?
Summary Overview
There are other key social influences on buying behavior.
Key Issues
Reference group: the people to whom an individual looks when forming
attitudes about a particular topic.
Discussion Question: Can you provide some examples of reference groups
to which you belong now or wish to belong in the future?
Opinion leaders: people who influence others.
Their influence matters because of some characteristic they have.
Can provide important word-of-mouth advertising, if marketers reach

the opinion leaders who are buyers.
Marketers can use opinion leaders as official endorsers for their

market offerings.
Culture: the whole set of beliefs, attitudes, and ways of doing things of
a reasonably homogeneous group of people.
Culture varies in international markets.

Marketers are placing even more emphasis on marketing research
capabilities in the international arena.
Summary Section:
People from different ethnic groups may be influenced by very different cultural
variables. Ethnic groups deserve special attention when analyzing markets.
Key Issues
Cultural stereotypes are common pitfalls; they are misleading.
The number of ethnic consumers is growing at a much faster rate than the
overall society.
Hispanics are the largest and fastest growing ethnic group in the
United States. (the above ads focus on marketing to Hispanic
consumers)
Asian Americans have the highest median family income ($64,308) of

the major ethnic groups.
International Cultural issues require care and attention.
Answer: D
A reference group is the people to whom an individual looks when forming attitudes
about a particular topic. Consumers may take values from these reference groups
and make buying decisions based on what the group might accept. In the above
question, an anime convention capitalizes on reference group influences. The best
answer selection is D.
Summary Overview
The particular situation a consumer is in during or around the time of purchase can
also have significant effects on the actual purchase.
Key Issues
Among the key situational influences are:
The purchase reason can vary. Why a consumer makes a purchase can affect
buying behavior.
Time available for the purchase also affects what happens.
Physical surroundings of the purchase affect buying, as do the emotional
responses they elicit or encourage.
Discussion Question: Have you ever been in a store known for its
sophisticated use of surroundings to enhance sales, such as The Disney
Store or Victorias Secret? How do these retailers manipulate the
surroundings, or atmospherics, as a key part of their overall marketing
strategy?
Summary Overview
It is often useful to view the purchase itself as the culmination of several decision
steps that solve a problem for the consumer. These steps are affected by the
economic, psychological, social, and situational influences already discussed.
Key Issues
Awareness: In this stage, consumers become aware ofor interested ina

need, or a problem, and in ways to satisfy the need.
If the consumer has faced the same problem in the past and been satisfied with a
solution, that solution may be routinely selected again without much thought.
Alternatively, the problem-solving decision-process may be more extensive.
Problem Solving. Problem solving often involves gathering memories or
searching for information from friends, the Web, stores or other sources. This helps
the consumer identify alternative ways of meeting a needand also decide what
factorsdecision criteriaare important in making a decision. Then the consumer
evaluates the alternatives and decides which purchase decision would be best.
Purchase Decision. This decision entails purchasing a product, or perhaps,

deciding to postpone a decision and, for now, forgo a purchase.
Evaluating the Decision: After purchasing a product, the consumer assesses

the experience of his or her decision based on the experience.
Discussion Question: Can you provide an example of a recent purchase
you made and what happened at each step of the purchase process?
Summary Overview
The time, effort, and source of information used in making a purchase can be
influenced by the relative level of involvement the consumer experiences.
Key Issues
In extensive problem solving, a consumer attempts to satisfy a

completely new or important need.
Much information is needed.
The consumer has no experience.
The decisionand risk of making a wrong decisionare important.
These purchases are often referred to as high involvement purchases.
In limited problem solving, the consumer is willing to put forth some

effort, perhaps to update or add to previous experience or because the
problem is moderately important.
In routinized response behavior, a consumer resorts to habit to solve a
problem.
These purchases are often referred to low-involvement purchases that

have little importance or relevance to the consumer.
The idea of a decision process does not imply that consumers always apply
rational processes in their buying decisions.
The consumer problem-solving process doesnt always lead to a purchase.
Summary Overview
To meet the needs of its target market, DHC has developed a deep cleansing
oil with natural ingredients.
It removes waterproof make-up, without leaving any residue on the skin.
Key Issues
Discussion Question: Is this ad aimed at limited or extensive problem
solving consumers?
It would depend on:
the effort the consumer would be willing to expend; and
previous consumer experience in using a cleansing oil.
The classification of a purchase decision as extensive problem solving,

limited problem solving, or routinized response behavior is something that
takes place in the mind of the consumernot in the mind of the marketer.
Discussion Question: Think about three purchases you have made

involving extensive problem solving, limited problem solving, and
routinized response behavior, respectively. How did the purchase process
differ across the three purchases?
Summary Overview
Many new product concepts require an adoption process. In these situations,
consumers may pass through a series of steps used to investigate and evaluate,
and ultimately accept or reject, an idea or product as a solution to their problem.
Key Issues
In the awareness stage, the potential customer first learns about the existence of
a product but may lack more details.
If the interest stage is reached, the consumer will gather general information and
facts about the product.
Discussion Question: Would selective processes (described earlier) have
an impact on whether or not the consumer reaches the interest stage?
Explain.
In evaluation, the consumer gives the product a mental trial, applying it to his or
her own personal situation.
In trial, the consumer may buy the product to experiment with it in use.
The consumer ultimately makes a decisionon either adoption and continued
use, or rejection of the product from further consideration.
After the decision, there is confirmation. Here the adopter continues to rethink
the decision and searches for further support that it was correct.
Dissonance may set in after the decisiontension caused by uncertainty about
the rightness of a decision.
Summary Section
The less a marketing manager knows about the specific social and intrapersonal
variables that shape the behavior of target customers, the more likely it is that
relying on intuition or personal experience will be misleading.
Key Issues
This photo helps illustrate the cultural issues that McDonalds addressed
when expanding into the Saudi Arabian market; customers are segregated by
sex.
Failure to understand local cultural factors can be the difference between

success and failure.
Some cultural factors are as subtle as they are fundamental.
Answer: A
Dissonance is the feeling of uncertainty experienced by the consumer about
whether the correct decision was made. In the above question, the coupon and the
congratulatory note sent by the dealership are tactics to reduce the dissonance. A
consumer could experience dissonance after a large purchase like car. The best
answer selection is A.
1. Describe how economic needs influence the buyer decision process.
2. Understand how psychological variables affect an individuals buying
behavior.
3. Understand how social influences affect an individuals buying behavior.
4. Explain how characteristics of the purchase situation influence consumer
behavior.
5. Explain the process by which consumers make buying decisions.
Summary Overview
presentation.
Key Issues
Economic buyers: people who know all the facts and logically compare choices to
get the greatest satisfaction from spending their time and money.
Economic needs: needs concerned with making the best use of a consumer's time
and moneyas the consumer judges it.
Discretionary income: what is left of income after paying taxes and paying for
necessities.
Needs: the basic forces that motivate a person to do something.
Wants: needs that are learned during a person's life.

Drive: a strong stimulus that encourages action to reduce a need.
Physiological needs: biological needs such as the need for food, drink, rest, and sex.
Safety needs: needs concerned with protection and physical well-being.
Social needs: needs concerned with love, friendship, status, and esteemthings
that involve a person's interaction with others.
Personal needs: an individual's need for personal satisfaction unrelated to what
others think or do.
Perception: how we gather and interpret information from the world around us.
Selective exposure: our eyes and minds seek out and notice only information that
interests us.
Selective perception: people screen out or modify ideas, messages, and information
that conflict with previously learned attitudes and beliefs.
Selective retention: people remember only what they want to remember.
Learning: a change in a person's thought processes caused by prior experience.
Cues: products, signs, ads, and other stimuli in the environment.
Response: an effort to satisfy a drive.
Reinforcement: occurs in the learning process when the consumer's response is
followed by satisfactionthat is, reduction in the drive.
Attitude: a person's point of view toward something.
Belief: a person's opinion about something.
Safety needs: needs concerned with protection and physical well-being.
Social needs: needs concerned with love, friendship, status, and esteemthings
that involve a person's interaction with others.
Personal needs: an individual's need for personal satisfaction unrelated to what
others think or do.
Perception: how we gather and interpret information from the world around us.
Selective exposure: our eyes and minds seek out and notice only information that
interests us.
Selective perception: people screen out or modify ideas, messages, and information
that conflict with previously learned attitudes and beliefs.
Selective retention: people remember only what they want to remember.
Learning: a change in a person's thought processes caused by prior experience.
Cues: products, signs, ads, and other stimuli in the environment.
Response: an effort to satisfy a drive.
Reinforcement: occurs in the learning process when the consumer's response is
followed by satisfactionthat is, reduction in the drive.
Attitude: a person's point of view toward something.
Belief: a person's opinion about something.
Summary Overview
presentation.
Key Issues
Expectation: an outcome or event that a person anticipates or looks forward to.
Trust: is the confidence a person has in the promises or actions of another person,
brand, or company.
Psychographics: the analysis of a person's day-to-day pattern of living as expressed
in that person's Activities, Interests, and Opinionssometimes referred to as AIOs or
lifestyle analysis.
Lifestyle analysis: the analysis of a person's day-to-day pattern of living as
expressed in that person's Activities, Interests, and Opinionssometimes referred
to as AIOs or psychographics.
Empty nesters: people whose children are grown and who are now able to spend
their money in other ways.
Social class: a group of people who have approximately equal social position as
viewed by others in the society.
Reference group: the people to whom an individual looks when forming attitudes
about a particular topic.
Opinion leader: a person who influences others.
Culture: the whole set of beliefs, attitudes, and ways of doing things of a reasonably
homogeneous set of people.
Extensive problem solving: the type of problem solving consumers use for a
completely new or important needwhen they put much effort into deciding how to
satisfy it.
Limited problem solving: when a consumer is willing to put some effort into deciding
the best way to satisfy a need.
Routinized response behavior: when consumers regularly select a particular way of
satisfying a need when it occurs.
Low-involvement purchases: purchases that have little importance or relevance for
the customer.
Dissonance: tension caused by uncertainty about the rightness of a decision.
Adoption process: the steps individuals go through on the way to accepting or
rejecting a new idea.
At the end of this lecture, you should be able to:
1. Describe who the business and organizational buyers are.
2. See why business and organizational purchase decisions often involve
multiple influences.
3. Understand the problem-solving behavior of organizational buyers, and how
they get market information.
4. Understand the different types of buyer-seller relationships and their benefits
and limitations.
5.
Know about the number and distribution of manufacturers and why they are an
important customer group.
6. Know how buying by service firms, retailers, wholesalers, and governments is
similar toand different frombuying by manufacturers.
Summary Overview
Specific aspects of organizational customers are considered in this chapter.
Key Issues
In Chapter 5, we focused on buying by final consumers.
Chapter 6 examines the buying behavior of business and organizational

customers.
In this chapter, we explore the important ways that organizational buying

tends to be different from buying by final consumers. We look at five factors
that define differences between organizational customers & final consumers.
We also examine the key characteristics of four specific types of

organizational customers.
Discussion Question: Can you think why the study of organizational

customers is so different from that of final consumers?
Summary Overview
Individual people make purchases to satisfy their needs, but so do organizations. In
fact, the organizational market is actually bigger than the final consumer market, at
least in terms of the number of purchases made. Thus, it presents significant
opportunities for marketers.
Key Issues
The organizational consumer market is often referred to as the industrial

market, or the business-to-business (B2B) market.
What type of customers are involved?
Business and organizational customers buy for resale or to produce

other goods and services. There are four main categories of these
customers:
Producers of goods and services: manufacturers, farmers, real
estate developers, etc.
Discussion Question: What types of products might a

manufacturer buy?
Intermediarieswholesalers and retailers.

Government units, at the federal, state, and local levels, as well as foreign
governments.
Nonprofit organizations, including both national and local organizations.
Summary Overview
Marketers frequently aim their advertising and promotion at specific segments of
the B2B market, as illustrated in this ad from Kyocera.
Key Issues
The ads message highlights the fact that the printing costs can be a
headache for small businesses.
It also emphasizes a $2,000 rebate, which helps small business customers.
Discussion Question: How might the printing needs for a small business be
different than the needs of a large company?
During the current economic downturn, watching marginal costs has become
more important.
Summary Overview
There are important differences between how businesses and organizations make
purchase decisions and how individual consumers make those decisions.
Key Issues
Most organizations buy for a basic purpose: they buy goods and services that
will help them meet the demand for the goods and services that they in turn
supply to their markets.
Basic purchasing needs are economic. Organizational buyers are usually less
emotional in their buying behavior than are final consumers. They usually
focus on economic needs, such as increasing sales, when making buying
decisions. In todays online shopping environment, intelligent search tools
can help online sellers improve sales.
Promotion to organizational buyers often focuses on economic factors. This

Applied Discovery ad, targeted at data aggregators, promises to double a
customers productivity by reducing risks and offering uniquely customizable
e-discovery solutions.
Small differences are important. Every organization has a unique identity and
the differences between organizations are important. Marketers must never
assume that a marketing mix that is successful for one company will
automatically fit the needs of other companieseven in the same industry.
Discussion Question: Salespeople in companies that are successful at

marketing to organizations are often trained to detect and authorized to
act on subtle company differences when making on-site visits. If you were
a sales representative calling on a B2B customer, how might you observe

these small differences?
There are good opportunities to serve business customers in different

countries. Business customers are often willing to work with distant suppliers
who have developed superior marketing mixes.
Summary Overview
Unlike the individual consumer market, organizational buyers tend to focus more on
quality and exacting purchase specifications.
Key Issues
Purchasing specificationswritten or electronic descriptions of what the firm
wants to buy.
The specifications describe the needs that organizational buyers have.
Specifications may be fairly simple, or they may be very detailed.
Discussion Question: How can specifications help a buyer to distinguish

among the offerings of various potential suppliers when doing a vendor
analysis?
Organizational buyers often concentrate on quality certification in making
purchases.
ISO 9000 is a way for a supplier to document its quality procedures

according to internationally recognized standards.
Summary Overview
Organizations differ from individual consumers in their buying behavior.
Key Issues
Purchasing managers are specialists in buying activities for their employers.

Multiple buying influence: several people play a part in making a purchase
decision.
The collection of these influences is a buying center:
Buyersthe purchasing managers who are responsible for working with suppliers
and arranging for the terms of the sale.
Usersthe people who will actually use the product. They may be production
workers or support staff.
Influencerspeople whose expertise is used to help determine which products
are needed. Influencers are often technical people who help write specifications.
Gatekeeperspeople in key positions in the organization who control
the flow of information. Gatekeepers can include receptionists,
secretaries, researchers, and others.
Discussion Question: Why is it important for marketers to establish a good
rapport with gatekeepers when selling or marketing to organizations?
Decidersthe people in the organization who have the power to select or
approve the supplier.
Marketers must identify and market to every buying center member.

The members of the buying center may change from purchase to
purchase.
1. Consuela Velasquez is a receptionist for a group of seven physicians. As she

controls the calendars for the physicians, any sales representatives from
pharmaceutical companies wanting to call on the physicians have to go
through Consuela. As a result, it is very important for sales reps to cultivate a
good relationship with her. In the buying center, Consuela would be best
described as a:
2. A.
buyer.
3. B.
user.
4. C.
influencer.
5. D.
gatekeeper.
6. E.
decider.
ANSWER: D
In the above question, Consuela is best described as a gatekeeper a person who
controls the flow of information within the organization. The best answer selection is
D.
1. Ahmed Jamison is a purchasing specialist for a large company. He has the

authority to execute purchase orders or amounts up to $100,000. On a
purchase order for a higher amount, Ahmed arranges the terms of sale, but
the transaction has to be approved by the company president. In the buying
center for a purchase in excess of $100,000, Ahmed is a _________ and the
president is a _________:
2. A.
buyer; influencer.
3. B.
influencer; buyer.
4. C.
buyer; decider.
5. D.
gatekeeper; decider.
6. E.
user; influencer.
7. ANSWER: C
8. Checking your knowledge (answer explanation):
9. The buyer is the purchasing manager(s) who has the responsibility for
working with suppliers and arranging the terms of the sale. The decider is
the person in the organization who has the power to select or approve the
supplier. In the above question for purchases in excess of $100,000, Ahmed
would be considered the buyer and the company president would be
considered the decider since he/she makes the final approval on the sale. The
best answer selection is C.
Summary Overview
Although most buyers in organizational markets are professionals, a comprehensive
vendor analysis considers all influences on purchase decisions.
Key Issues
Vendor analysis is a formal rating of suppliers on all relevant areas of
performance.
The goal of a vendor analysis is to lower the total costs of a purchase.
A buyers behavioral needs are relevant, too.
Example: if a buyers main contact with the supplier is through a sales

representative who is uncooperative, the supplier is less attractive to
the buyer.
Ethical conflicts may arise in buyer-supplier relationships.
Some organizations have provisions in their codes of conduct

governing these interactions.
Discussion Question: Is there anything wrong with a buyer accepting a gift

from a potential supplier while a vendor analysis is underway? Is there a
difference between accepting a lunch invitation and accepting an
expensive watch?
Purchasing may also be centralized in many organizations by concentrating the
purchasing for all branches at one location.
This may help the buying organization to manage spending or achieve

economies of scale.
Requisition: a request to buy something; it eventually becomes a

purchase order. Electronic requisitions are becoming more popular.
Summary Overview
A sellers marketing mix should satisfy both the needs of the customer company
and the needs of individuals who influence the purchase.
Key Issues
When making buying decisions, buyers focus on company needs for innovation,
survival, growth and profit.
On the other hand, buyers are people working in organizations. They are
also concerned about their own careers and personal interests.
A sellers marketing mix should satisfy both the needs of the company and
the needs of the individual buyers.
Summary Overview
Like individual consumers, organizational buyers are problem-solvers. In
organizational problem-solving, three kinds of buying processes are useful.
Key Issues
New-task buying occurs when a customer organization has a new need and
wants a great deal of information. New-task buying often involves:
setting product specifications;
evaluating sources of supply; and
establishing an order routine to follow in the future.
A straight rebuy is a routine repurchase that uses existing suppliers to fill a

standard order.
A modified rebuy is the in-between process. Some review of the buying process is
done but not as much as in a new-task buy.
Discussion Question: If you were selling to an organization, which of the
three buying processes would present the easiest opportunity to make a
sale? Why? Which buying process would present the greatest challenge?
Why?
Straight rebuys often use e-commerce order systems.
New-task buying requires information.
Summary Overview
A new-task buy starts with a user who becomes aware of a need and begins
researching solutions. This exhibit lists the sources available for the business
buyers.
Even though a wide variety of information sources are available business buyers will
use the sources they trust. To build trust, a marketer must make sure its
information is reliable.
Key Issues
One source of information comes from the marketing firm. This includes
personal information that comes from talking to the selling firms personnel.
In addition, the firm produces information that appears in print form on paper
or online.
Buyers will also turn to sources of information outside the direct control of the
seller. These can be personal sources or
Impersonal sources.
Summary Overview
New-task buying situations provide a good opportunity for a new supplier to make
inroads with a customer.
Key Issues
Search engines a first step to gather information.
Buyers want sites with useful content.
Buyers share experiences in online communities.
Buyers ask for competitive bids to compare offerings:
When buyers in B2B markets have identified potential suppliers, they

might ask them to submit a competitive bid the terms of sale offered
by the supplier in response to the purchase specifications posted by a
buyer.
Buyers make important decisions about how to deal with one or more
suppliers.
A buyer might want to rely on competition among all available vendors to

get the best price on each and every order it places.
A buyer might just routinely buy from one vendor with whom it already has a
good relationship.
1. Nikita Jackson, a sales representative for an industrial supply house, calls on

a prospective business customer. The customer has an established
relationship with another supplier, but says that there have been some
reliability problems with deliveries. Nikita seizes the opportunity to describe
her companys state-of-the-art logistics and transportation system that
provides outstanding delivery reliability at low shipping costs. Nikita is
encouraged because her customer seems to be in a ___________ situation.
2. A.
straight rebuy
3. B.
modified rebuy
4. C.
new-task
5. D.
extensive problem-solving
6. E.
limited problem-solving
ANSWER: B
In the above question, Nikitas customer appears to be in a modified rebuy
situation. A modified rebuy is in-between new-task buying and a straight rebuy. It is
a process where some review of the buying situation is donethough not as much
as in new-task buying. This modified rebuy situation appears to be an opportunity
for Nikita. Although the customer has been purchasing from another supplier, the
buyer is now receptive to information from Nikita. The best answer selection is B.
1. Auto parts wholesaler Fixem, Inc. decides to invest in a new data

management system to increase the efficiency of its warehouse operations.
Previously, all record-keeping was done via printed documents, but now all
transactions will be electronic. This change will require Fixem to expend a
significant amount of money for hardware, software, and training. However,
in the long run, the cost savings should exceed the up-front investment.
Fixem has arranged for presentations to be made by three different vendors.
Fixem seems to be facing a ______________ buying situation.
2. A.
straight rebuy
3. B.
modified rebuy
4. C.
new-task
5. D.
extensive problem-solving
6. E.
limited problem-solving
ANSWER: C
New-task buying occurs when an organization has a new need and the customer
wants a great deal of information. In the above question, Fixem is investing in a
new data management system (a new need) and they want to hear presentations
from three different vendors. Fixem appears to be facing a new-task buying
situation. The best answer selection is C.
Summary Overview
Relationships between buyers and sellers in the B2B market may be casual, arms
length relationships, or they can be close, long-lasting partnerships. Marketers
should know the degree of closeness that is appropriate for a given relationship.
Key Issues
Close relationships between buyers and sellers may produce mutual

benefits.
The best relationships involve real partnerships where theres mutual

trust and a long-term outlook.
Closely tied firms often share tasks at lower total cost than would be
possible working at arms length.
Discussion Question: What factors would contribute to the development of

a close partnership between a buyer and seller in the B2B market?
Close relationships may not make sense.
They can reduce a buyers flexibility and leverage.
Some purchases are simply too small or too infrequent.
Some purchases require so much special attention that the

relationship would never be profitable for the seller.
Summary Overview
There are several key dimensions that characterize a close working relationship
between organizational buyers and sellers.
Key Issues
Cooperation treats problems as joint responsibilities.
The buyer and seller work together to achieve both mutual and
individual objectives.
Both sides are involved in problem resolution.
Both the supplier and the buyer benefit when they can share
information. Types of shared information may include:
It is fast and easy to update the information.
It saves time.
It includes the exchange of proprietary cost data, discussion of

demand forecasts, and joint work on new product designs.
It can lead to better decisions, reduced uncertainty about the future,

and better planning.
Even though shared information is useful, it may be risky if there is

a possibility that one of the partners will misuse it.
Discussion Question: If you represented an organizational buyer, what

types of information might you be reluctant to share with a supplier? If
you represented a supplier, what types of information might you be
reluctant to share with a buyer?
Summary Overview
Aside from cooperation and information sharing, there are other key dimensions of
close buyer-seller relationships in the B2B market.
Key Issues
Operational linkages are direct ties between the internal

operations of the buyer and seller firms. These linkages usually
involve ongoing coordination of activities between the firms.
Just-in-time delivery: reliably getting products there just before the

customer needs them.
This arrangement reduces inventory and carrying costs, especially for

the buyer.
Discussion Question: Wal-Mart, a major retailer, has a direct computer

connection to Procter and Gamble, a manufacturer, to speed up order and
delivery of P&Gs products. How does this move the relationship toward a
straight rebuy situation?
Legal bonds, such as contracts, spell out the obligations of each

party in the relationship.
Negotiated contract buying: agreeing to a contract that allows for

changes in the purchase arrangements.
This method is preferred when it is difficult or impossible to specify all

that is needed on a particular project in advance.
Relationship-specific adaptations invest in the relationship.
These adaptations involve changes in a firms product or procedures

that are unique to the needs or capabilities of a relationship partner.
Specific adaptations are usually made when the buying organization

chooses to outsourcecontract with an outside firm to produce goods
or services rather than to produce them internally.
1. Gotcha! is a chain of trendy stores catering to the urban contemporary

market. As part of its close relationship with suppliers, Gotcha! has an
Internet site that is accessible only by suppliers, and it provides up-to-the
minute point-of-sale information from all of the Gotcha! stores. Suppliers can
see how their products are doing at retail during any time of the day or night.
In the relationship between Gotcha! and its suppliers, the Gotcha! supplier
site is an example of:
2. A.
information sharing.
3. B.
legal bonds.
4. C.
reciprocity.
5. D.
operational linkages.
6. E.
negotiated contracts.
ANSWER: A
Some relationships involve open sharing of information. This might include
exchanges of proprietary cost data, discussion of demand forecasts, etc. The
relationship between Gotcha! and its suppliers is one in which information is shared
via the Gotcha! Internet site. The best answer selection for this question is A.
Dynamics of Buyer-Seller Relationships

Summary Overview
In addition to the five main dimensions of buyer-seller relationships in the B2B

market, there are other dynamics that can affect the overall relationship.
Key Issues
There may be an imbalance of power favoring one of the partners.
A powerful customer may control the relationship
Although a marketing manager may want to work in a cooperative

partnership, that may be impossible with large customers who have
the power to dictate how the relationship will work.
Buyers may still use several sources to reduce their risk.
Buyers often look for several dependable sources of supply to protect

themselves from unpredictable events.
Variations in buying by customer type.
Summary Overview
Manufacturers are important organizational buyers because a relatively small
number account for a large proportion of organizational buying.
Key Issues
In the U. S. and in other countries, there are relatively few manufacturers

compared to the number of final consumers.
There are not many big ones.
In the U. S., over half of the manufacturers have less than 10 workers.
Discussion Question: Why would it make sense for marketers to segment

manufacturing consumers by size?
Customers cluster in geographic areas.
In the U. S., manufacturers are concentrated in the big metropolitan

areasespecially in New York, Pennsylvania, Ohio, Illinois, Texas, and
California.
There is concentration by industry too.
Business data often classifies industries.
The products an industrial customer needs to buy depend on the

business it is in.
Because of this, sales of a product are often concentrated among

customers in similar businesses.
Marketing managers must focus their marketing mixes on prospective

customers who exhibit characteristics similar to their current
customers.
North American Industry Classification System (NAICS) codes: groups

of firms in similar lines of business.
Summary Overview
This exhibit contains an example of how the NAICS codes apply to the apparel
industry.
Key Issues
The broadest category is the general industry category. Manufacturing, for

example, has a two-digit NAICS code of 31.
Adding a digit to the manufacturing code narrows the industry definition to

apparel code 315.
The industry definition gets narrower if another digit is added to the code, in this
case, cut and sew apparel, code 3152.
Adding still another digit reduces the category to womens and girls cut and sew
apparel, NAICS code 31523.
Finally, a sixth digit narrows the industry definition to blouses, NAICS code
315232.
Knowing the appropriate NAICS code for an industry opens the door to a
wide range of government and privately compiled information, such as lists of
companies, trade publication articles, and industry-wide statistics.
Summary Overview
Service producers are more geographically dispersed than are manufacturers. In
the U. S., this segment of the economy is large and growing fast.
Key Issues
There are about 4.6 million service firms in the U. S.
Some of these firms have names that are widely recognized.
Many of the service providers are quite small.
These service firms are also dispersed over a wide geographic area.
Because of their small size, many service firms have buying that may
not be as formal as in larger organizations.
Many of these buyers need more help in making their purchases than
do the purchasing managers in a large company.
Small service customers like Internet buying.
Discussion Question: What types of products or services might be

purchased by the types of service providers illustrated on this slide?
Summary Overview
Retailers and wholesalers see themselves as purchasing agents for their target
customers. Retailers buy what they think they can profitably sell to final consumers.
Key Issues
Committee buying assigns the buying decision to a committee that reviews

reports submitted by the buyer.
Committee buying is impersonal.
Computers track inventory, sales, and prices. Buyers watch this computer output
closely.
Many reorder decisions are made automatically via computer links to suppliers.
Reorders are straight rebuys.
Discussion Question: What types of valuable information could a

salesperson give a buyer?
Summary Overview
Government buyers typically use competitive bidding and approved supplier lists,
and put legal constraints on the latitude of individual buyers.
Key Issues
The size and diversity of the government market make it an attractive target.
Government buyers are restrained by purchasing regulations, and competitive
bids may be required.
Discussion Question: What is the objective in requiring competitive bids
and exacting specifications?
For routine purchases, a government unit can prepare an approved supplier list.
Government publications help marketers to learn what government wants to buy.
In dealing with foreign governments, information is less available, and there may
be significant obstacles that favor a domestic supplier.
Is it unethical to buy help in dealing with foreign governments?
Not in some countries.
In the U. S., the Foreign Corrupt Practices Act (FCPA) prohibits U.S. firms from
paying bribes to foreign officials.
1. Describe who the business and organizational buyers are.
2. See why business and organizational purchase decisions often involve
multiple influences.
3. Understand the problem-solving behavior of organizational buyers, and how
they get market information.
4. Understand the different types of buyer-seller relationships and their benefits
and limitations.
5. Know about the number and distribution of manufacturers and why they are
an important customer group.
6. Know how buying by service firms, retailers, wholesalers, and governments is
similar toand different frombuying by manufacturers.
8. Summary Overview
9. These are key terms you should be familiar with based upon the material in
this presentation.
10.Key Issues
11.Business and organizational customers: any buyers who buy for resale or to
produce other goods and services.
12.Purchasing specifications: a written or electronic description of what a firm
wants to buy.
13.ISO 9000: a way for a supplier to document its quality procedures according
to internationally recognized standards.
14.Purchasing managers: buying specialists for their employers.
15.Multiple buying influence: several people share in making a purchase
decision--perhaps even top management.
16.Buying center: all the people who participate in or influence a purchase.
17.Vendor analysis: formal rating of suppliers on all relevant areas of
performance.
18.Requisition: a request to buy something.
19.New-task buying: when an organization has a new need and the buyer wants
a great deal of information.
20.Straight rebuy: a routine repurchase that may have been made many times
before.
21.Modified rebuy: the in-between process where some review of the buying
situation is done though not as much as in new-task buying or as little as
in straight rebuys.
22.Competitive bid: terms of sale offered by different suppliers in response to
the buyer's purchase specifications.
23.Just-in-time delivery: reliably getting products there just before the customer
needs them.
24.Negotiated contract buying: agreeing to a contract that allows for changes in
the purchase arrangements.
25.Outsource: contract with an outside firm to produce goods or services rather
than to produce them internally.
26.North American Industry Classification System (NAICS) codes: codes used to
identify groups of firms in similar lines of business.
27.Foreign Corrupt Practices Act: a law passed by the U.S. Congress in 1977 that
prohibits U.S. firms from paying bribes to foreign officials.

1. Discuss marketing information systems.
2. Understand the scientific approach to marketing research.
3. Know about methods for collecting secondary and primary data.
4. Understand the role of observing, questioning, and using experimental methods
in marketing research.
5. Understand the challenges to interpreting marketing research data.
6. Recognize how market research information aids marketing planning in
international markets.
Summary Overview
The texts comprehensive model is referenced to indicate where we are, and what is
covered in the following discussion.
Key Issues
Marketing information is needed to inform managers about all decisions

made in the development of marketing strategy
Marketing managers may want to gather information about any of the

elements in our marketing strategy planning model. For example, in
developing strategy, a marketing manager may find it useful to learn more
about customer attitudes toward the companys brand name. Or a marketing
manager may want to know the prices being charged by competitors.
A marketing manager might want to test whether the use of advertising on

television, in magazines, or on the Internet would be most effective in
building awareness with a particular target market. Or the marketing
manager may want to know how well a particular product is selling through
each of the companys primary channels of distribution.
So the marketing manager may be interested in gathering information about

any of the elements in our marketing strategy planning model.
Marketing information systems
Accessing multimedia data
Data warehouse
Decision support systems
Marketing models
Marketing Research
Role of research specialist
Scientific method
Steps in marketing research

1. Define problem
2. Analyze situation
3. Gather problem-specific data

4. Interpret the data
5. Solve the problem
Summary Overview
Two major elements relating to marketing information are: marketing
information systems and marketing research.
Key Issues
Marketing information systems, and their components, ensure the

availability and accessibility of information, as well as the tools to analyze the
information.
Many firms rely on marketing research, whether in-house or contracted, to

get answers to specific questions.
Discussion Question: Have you ever participated in a marketing research

study? What questions do you think the sponsor was trying to get answers
to?
Summary Overview
Many different individuals and organizations are involved in marketing research.
Key Issues
Some large organizations have their own internal marketing research

departments.
Most organizations needing marketing research use external suppliers, such

as custom marketing research firms, or firms that specialize in Focus Groups,
like the ad here. These firms can either be very general in their approach or
they can be very specialized.
Discussion Question: Why might a large company that has its own
marketing research department also want to use an external research
supplier?
As this ad shows, many firms rely on outside specialists like FocusVision to

provide marketing information about their current and potential customers.
Many of these firms also offer ongoing training.
The use of marketing research is not limited to business firmsgovernment

agencies and nonprofit organizations are also adopting a more researchdriven approach to making decisions.
Summary Overview
Good marketing research requires cooperation between researchers and marketing
managers.
Key Issues
Sometimes developing a good relationship is difficult, because the marketing

manager and the researcher come from somewhat different professional
worlds.
Marketing managers need research because they have problems they want
to solve, but they sometimes have trouble explaining what they need to a
researcher.
On the other hand, researchers who are very skilled in the technical aspects
of marketing research may not completely understand the decision
situation facing the manager.
Discussion Question: How can marketing managers and researchers come

to understand and work with each other in a productive way?
The bottom line? Cooperation between the researcher and the manager is
absolutely necessary if the research effort is going to be successful.
Most large companies have a separate marketing research department to

plan and manage research projects.
Summary Overview
Marketing managers need information about: customers and their responses to the
marketing mix; targeting and segmentation; competitors; and the marketing
environment. They also need information that will allow them to do detailed cost
analysis for the purposes of implementation and control. Marketing information
systems (MIS) help make this information available and accessible.
Key Issues
Big Data Explosion Businesses today are awash in data sets too large to
work with using conventional database management tools.
An MIS allows a manager to get more information, faster and easier, by

making it readily available in an easy-to-use format.
An MIS organizes incoming data in a data warehouse.
Discussion Question: What advantages would an organization have over
its competitors if it had a superior marketing information system?
Intranet: a system for linking computers within a company that works like the
Internet. An intranet is easily accessible and is also easy to update.
Summary Overview
This diagram of a typical MIS shows how its key components fit together to meet a
managers information needs.
Key Issues
Information sources for an MIS may include formal marketing research

studies, as well as previously published internal or external data. This
information is collected and stored in a
Data warehouse: a place where databases are stored so that they are available
when needed.
Some MISs have a decision support system (DSS) that puts managers online.
From the data warehouse, other elements of the MIS allow marketing
managers to ask questions and seek answer.
DSS: a computer program that makes it easy for a marketing manager to get and
use information while he or she is making decisions.
Marketing dashboard: computer display of up-to-the-minute marketing data

in an easy-to-read format customized to the managers area of responsibility.
Marketing model: a statement of relationships among marketing variables. It

allows a manager to see how answers to questions might change in various
what-if situations.
All of this information feeds into the decisions that marketing managers
make, and ultimately
influences important outcomes of the decisions which become feedback to
the process. The database is continually refreshed with new information,
making it an up-to-the-minute management tool.
Summary Overview
The growth in the popularity of marketing information systems has had a
tremendous impact on the decision-making capabilities in many organizations.
Key Issues
Information for planning, implementation, and control.
The more managers use an MIS, the more possible applications they
see.
Advancements in technology will make the MIS even more of a

necessity.
Many firms are not there yet, either because they dont have an MIS, or dont
know how to fully use the one they have.
A major problem is that many managers are used to doing it the old
wayand they dont think through what information they need.
Discussion Question: Why might there be problems with managers not

fully utilizing the power of an existing MIS within their organization?
Marketing research is a set of procedures to develop and analyze new information to

help marketing managers make decisions. Marketing researchers get facts that
arent available in the MIS. This ad from Quiznos, though humorous, illustrates the
importance of marketing research and how flawed research can lead to inaccurate
conclusions.
Summary Overview
An MIS or DSS typically makes use of regularly collected recurring information, but
marketing research develops unique information to solve a new problem.
Key Issues
Scientific method: a decision-making approach that is objective and orderly

in testing ideas before accepting them.
Hypotheses: educated guesses about likely causes and effects that can be
measured objectively to help eliminate unnecessary risk taking.
Marketing research process: a five-step application of the scientific method:
Step 1 is defining the problem: the manager and the researcher determine
the key decision issues requiring information.
Step 2 is analyzing the situation: an informal study of information that is already

available in the problem area.
Step 3 is getting problem-specific data: the collection of data that is customized
to the decision makers unique needs.
Step 4 is interpreting the data: the process of getting meaning from the collected
data; it is a transformation of raw data to useful information.
Step 5 is solving the problem: the delivery of recommendations to the marketing
manager, who is ultimately responsible for implementing the recommendations.
The process may move in the step by step process outlined hereor as the
feedback arrows show, the researcher may learn something in the process that
moves them back to an earlier step in the process.
The marketing manager may find that at any step, a solution might be identified
the early identification of a solution can save time and money.
Discussion Question: How does an approach like the marketing research
process help research to be systematic (well-planned), objective, and
oriented toward the needs of managers?
Good marketing research requires cooperation between researchers and

marketing managers.
Researchers must be sure their research focuses on real problems.
Summary Overview
This is the most important and often the most difficult step in the research process.
Often, the researcher must help the manager to flesh out the real problem facing
the organization and the types of information needed to solve the problem.
Key Issues
Finding the right problem level almost solves the problem, in many cases.
In order to find the right problem, the marketing strategy planning

framework can be useful.
Dont confuse problems with symptoms.
Key performance indicators in marketing may be symptoms of other

more fundamental problems.
Discussion Question: Suppose a firm experiences a sudden sales decline.

Is this decline a symptom or a problem? Why?
Setting research objectives may require more understanding.
The researcher and manager can develop a list of research questions

that are most important.
A single research project may not be adequate for answering all of the
questions.
Summary Overview
Situation analysis is basically an informal study in answer to the question,

What information do we already have in the problem area.
Key Issues
Situation analysis helps educate a researcher, by providing background about
unfamiliar problem areas.
The situation analysis may uncover information that leads to an early

identification of a solution, or it may help to determine what other types of
information are really necessary.
Answer: B
In the above question, Edna is investigating information already available in the
customer satisfaction field. She is engaged in the situation analysis (an informal
study of what information is already available in the problem area) stage of the
marketing research process. The best answer selection is B.
Summary Overview
A situation analysis usually incorporates secondary data, which may provide the
answers, or at least some background, relevant to the research problem.
Key Issues
Secondary data: information that has already been collected or published.
Primary data: information specifically collected to solve a current problem.
We will start our discussion with a focus on secondary data sources before
moving into a discussion of primary data.
Much secondary data is available.
Examples of secondary data sources from inside the company might

be data from the MIS, financial information from the accounting
department, or reports from the field sales force.
Information from outside the company might include government

information, trade association studies, or information available in
magazines or journal articles.
Search the Internet for information.
Search engines may miss important databases available on the Internet.
Special interest discussion groups or newsgroups on the Web share

information on topics of specific interest.
Government data is inexpensive and available in digital or printed form. Most

countries with advanced economies have government agencies that help
researchers get the data they need.
Discussion Question: Why does it make sense to examine secondary data

first, before gathering primary data?
Primary data may be obtained through observation or questioning. We will look
at these sources of data in more detail next.
Summary Overview
Many private research organizations, as well as advertising agencies, newspapers,
and magazines, regularly compile and publish data.
Key Issues
Simmons provide their clients with consumer behavior data, which offers a
better understanding of their customers and prospects.
According to the ad, Simmons is the leading force of high quality

research and single-source measurement of the brand preferences,
lifestyle, and attitudes.
Such information is useful in knowing where and how to advertise

most effectively.
Many trade organizations also provide information about their members.
The Encyclopedia of Associations is an excellent source listing

hundreds of these organizations.
As with government data, much private information is available electronically

as well as in print.
Discussion Question: Why would it be important to evaluate the quality of

the secondary information available from a private source? What types of
things would a researcher want to consider in evaluating the quality of
secondary data?
Summary Overview
Regardless of the source, it makes sense to examine secondary information before
collecting more customized primary data, because secondary data tends to be
relatively inexpensive and easy to acquire. Therefore, situation analysis yields a

lot, for very little.
Key Issues
The small amount of time and money spent on reviewing secondary data may
actually solve the research problem, or:
it can help to establish research priorities;
focus the research objectives more precisely; or
suggest additional issues for examination.
The outcome of a situation analysis is a listing of the research questions that

remain unanswered.
At this point, the researcher can determine what else is needed and how to get it.
Research proposal: a plan that specifies what information will be obtained and
how.
The research proposal helps to keep a research project on track and on

budget.
Discussion Question: Other than control over budgeting and project

scheduling, what other advantages does a research proposal provide for
both researchers and managers?
Summary Overview
In getting problem-specific data, marketers collect primary data that is customized
to their unique needs. In most cases, researchers try to learn what customers think
about a particular topic, or they try to see how they behave under certain
conditions.
Key Issues
There are two basic methods of collecting primary data:
Observing
Questioning
It can range from qualitative to quantitative research.
Qualitative research seeks in-depth, open-ended responses, not yes or no

answers. The researcher tries to get people to share their thoughts on a topic
without giving them many directions or guidelines about what to say.
The depth of the qualitative approach gets at the detailseven if the

researcher needs a lot of judgment to summarize it all.
Discussion Question: If the depth of responses is a key advantage of

qualitative questioning, what might be a disadvantage?
Summary Overview
One of the most popular forms of qualitative questioning is the focus group.
Key Issues
Focus group interview: involves interviewing 6 to 10 people in an informal

group setting. A skilled moderator leads the discussion, asking open-ended
questions on topics of interest and taking advantage of group dynamics to
pursue comments in-depth. Sessions are usually videotaped, or they may be
broadcast via Internet or satellite.
As this ad shows, FocusVision Worldwide is one of an increasing number of

firms that can broadcast live focus groups anywhere in the world. Thus, the
focus groups are readily accessible to researchers who can analyze the
information. Managers can also observe.
Focus group interviewing can be relatively inexpensive, and it can be

conducted quickly. However, the conclusions drawn from a focus group
depend on who watches it. Focus groups involve so few people as
participants that they may not be representative of the entire target market.
Focus groups can also be overused and mistaken for market facts.
Sometimes, they generate more questions than answers. As a result, many
researchers use focus groups as preparation for more formal quantitative
research utilizing a larger, scientifically selected group of respondents.
Discussion Question: Have you ever participated in a focus group?

Describe your experience.
Structured Questioning Gives More Objective Results
Quantitative Research
Faster response & analysis
Seeks structured responses
Can be summarized in numbers
Summary Overview
If the collection of primary data is standardized, there are several advantages for
researchers. They can use identical questions and response alternatives across a
large, representative sample of respondents. They can also summarize the
information using a variety of statistics.
Key Issues
Quantitative research seeks structured responses that can be summarized

in numbers, such as percentages, averages, or other statistics.
Fixed responses speed answering and analysis. For example, a common approach
is to have consumers indicate how much they agree or disagree with a statement
on a survey.
Discussion Question: If you were trying to decide whether or not to
execute a $30 million advertising campaign, would you rather base your
decision on qualitative or quantitative research? Why?
Summary Overview
There are several different types of surveys. The choice of the right survey depends
on the research objectives and constraints such as time and money.
Key Issues
Mail and online surveys are common and convenient. Advantages of these types
of surveys include: the ability to ask an extensive set of questions; convenience for
the respondent; anonymity; and a greater willingness by the respondent to provide
personal information.
The main disadvantage is a low response ratethe percentage of people

contacted who complete the survey. It may also take a long time to get the
results. Recently, more researchers have been delivering surveys faster
online.
Discussion Question: How might online survey respondents be different

than the population in general? What impact would these differences have
on the results of a survey and the conclusions that a research might draw
from it?
Telephone surveys are fast and effective. Researchers can gather data more
quickly and prepare it for analysis faster than with a mail survey, and there is an
opportunity for researchers to probe respondents for details. However, telephone

surveys are more costly and may inconvenience respondents.
Personal interview surveys can be in-depth, and give the interviewer the chance
to explain complex issues. Interviewers must be well trained to avoid biasing the
respondents answers. Consumer interviews are often done in shopping malls or
retail stores, but interviews are even more expensive than telephone surveys.
Answer: A
Mail surveys are particularly useful when you intend to contact a large number of
consumers. In the above question, the researcher would like to contact 1,000
consumers and wants to gather personal and sensitive information. This is best
handled through a mail questionnaire since it can be completed anonymously. The
best answer selection is A.
1. A researcher wants to study 1,000 consumers and needs information about a
lot of personal and sensitive issues. Which of the following would be the best
way to gather this information?
2. A.
Mail survey
3. B.
Focus group
4. C.
Telephone survey
5. D.
Face-to-face interview
6. E.
Experiment
Summary Section
There are several other options for market research, each with pluses and minuses.
A market research online community (MROC) Online communities are

recruited to fit a desired psychographic, lifestyle, or demographic profile and
may be comprised of 50 to several hundred members. Members spend
months, possibly years, online together brainstorming ideas and conversing
with other customers and the firms marketing managers.
Questioningwhether qualitative or quantitativehas its limitations.

Respondents sometimes give answers that they think the questioner wants to
hear, or they may not accurately recall past events.
With the observation method, researchers try to see or record what the
subject does wihout influenceing the subjects behavior.
Ethnographic research has its roots in anthropology, which studies different
cultures by observing participants in their natural habitat: in their homes or
at work.
Summary Overview
Observing is another way to collect primary data. It focuses on a well defined
problem.
Sometimes the best way to observe a customer is for a marketing manager to
become a customer.
Key Issues
In observation research, researchers try to see or record the behaviors of people.
Most observation is done without the knowledge of the people being observed,
because researchers do not want to influence the things people do. Observation can
be done by humans or by machines.
Observation methods are common in advertising research.
Nielsen Media Research gathers data on television viewership by using

people meters that record the channels watched by a selected
sample of consumers.
Web site analysis software allows marketing managers to observe customer

behavior at a firms Web site.
Discussion Question: The data for developing TV ratings used to be
collected exclusively via diariespaper-and-pencil logs in which
consumers recorded the programs they watched. Would you expect to see
differences between what people recorded in a viewing diary compared to
what a people meter might show? What types of differences?
Checkout scanners see a lot, as well, when it comes to shopping behavior.
This information helps retailers to manage their inventories and adjust

their merchandise selections.
Consumer panels are groups of consumers who provide information to research

firms on a continuing basis.
This information is made available to clients for a fee.
Summary Overview
Questioning and observing might also be used in a different way by incorporating
them into an experimental method, in which researchers compare the responses of
two or more groups that are similar, except on the characteristic being tested.
Key Issues
Suppose a researcher wants to compare the effectiveness of two different

versions of an ad. The effectiveness could be measured by the response of
consumers to a question about their interest in the advertised product.
In step 1: researchers select a representative group of consumers.
In step 2: researchers then randomly split the group in two, and each group sees
a different ad.
In step 3: researchers ask consumers to rate their level of interest in the product
advertised. So, lets say the group viewing Ad #1 has an average interest in the
productafter watching the adof 3.2 on a 5-point scale with 5 indicating very
interested.
And the people who saw Ad #2 had a more favorable impression. This
group rated their interest in the product as 4.6 on the 5-point scale.
Discussion Question: What conclusions can be drawn from this research?
The researchers conclude that the higher rated ad causes people to

have greater interest in the product than does the lower rated ad.
Test marketing is another way to experiment. Researchers can select

geographic areas in which they vary a products marketing mix in some way,
and then they compare the results across the geographic areas. For
example, a candy company might compare two different packages for a new
candy bar. The company could introduce one package design in Syracuse,
New York, and a second package design in Omaha, Nebraskaand then
compare the sales in the two test markets.
Syndicated research shares data collection costs.
A combination of research methods may be needed.
Understand the costs and benefits of research.
Summary Overview
Data analysis and interpretation follow data collection, and it answers the question,
What does it really mean? Quantitative analysis is facilitated by the use of
statistical packageseasy-to-use computer programs that analyze data.
Key Issues
Data analysis can be either simple or complex. One of the most popular
analytical approaches is cross-tabulation. An example of a cross-tabulation
appears in this slide.
The table shows the combined responses for two questions:
What is your household income? and
Does your home have broadband Internet service?
Among people with a household income of more than $75,000, 72.4 percent
have broadband Internet service.
Among people with a household income less than $30,000, the percentage
of people with broadband Internet service is only 23.7 percent.
Therefore, the cross-tab analysis shows that households with higher incomes
are much more likely to have broadband Internet service.
Summary Overview
Certain basic issues are critical in assessing the quality of a research project.
Key Issues
The first question a marketing researcher must answer is, Is your sample
really representative of the population?
Population: the total group of interest to the researcher or marketing

manager.
Sample: a smaller group selected to represent the population.
The key here is to ensure that the sample selected represents the
larger population.
Discussion Question: Is a metropolitan areas telephone directory a

complete list of that areas population? Why or why not? What
implications are there for researchers who want to select samples of
consumers from the telephone book?
Chatter on the Internetnot representative but can be useful.
Research results are not exact.
Confidence interval: the range on either side of an estimate that is

likely to contain the true population value.
Validity problems can destroy research.
Validity: the extent to which data measures what it is intended to

measure.
Poor interpretation can also destroy research.

Problems can arise if the researcher does not understand the management
problem, so the marketing manager and researcher should work together
closely.
Ethics involved in interpreting and presenting results.
The most common ethical issues concern decisions to withhold certain

information about the research.
1. A sales training firm wants feedback on the quality of its classes and training
services. The firm planned to send mail surveys to CEOs of its client
companies to get the needed information. However, one executive objected
to the survey plan, saying, CEOs dont attend our classes. How will they
know if the classes are any good? Another executive added, If the survey
isnt relevant to the CEOs, it will be thrown away and well get no data. It
appears that the research design presents problems with:
2. A.
response rate.
3. B.
relevance of population.
4. C.
validity.
5. D.
improper statistical analysis.
6. E.
both A and B.
ANSWER: E
Low response rate is a common problem in mail surveys. Response rates are likely
to be even lower if people who receive the questionnaire are not interested in or
knowledgeable about the questions. This research design is marked with at least
two problems: (1) low response rate and (2) relevance of the population (if the CEOs
dont even attend the classes). The best answer selection is E because both A
and B are problems.
The objective of this exercise is to show a graphical example illustrating how the
results of a marketing research study can change as the sample characteristics
change. The exercise contains hypothetical results from a question that is often
asked on surveys: How satisfied are you overall with the quality of the service you
have received from XYZ Company? People in the survey responded to a scale from
0 (not at all satisfied) to 10 (completely satisfied).
Working through the exercise, the students will learn:
How the distribution of sample results affects the confidence interval

around the average satisfaction score;
How the sample size affects the confidence interval;
How marketers make tradeoffs regarding the cost and quality of
marketing research.
A marketing research firm conducted a telephone survey for a consumer

products company. It provided new and interesting information about brand
image, the competition, and other topics. At the end of the research
companys results presentation, the sales manager commented, This is all
interesting information, but it doesnt tell me why our market share is
declining among 18 to 34 year old women, nor does it offer me any
suggestions about actions I can take to deal with the situation. The sales
managers complaint suggests that the research suffers from problems with:
A.
a lack of action implications for management.
B.
of the project.
poor planning by the researcher and managers at the outset
C.
poor sampling.
D.
a low response rate.
E.
both A and B.
ANSWER: E
The sales manager is left with questions because the research (1) lacked proper
planning at the outset of the project to correctly define the problem and (2) didnt
result in actionable implications for management. The best answer selection is E
because both A and B describe problems with the current situation.
Summary Overview
Marketing research contributes to international marketing success. Customer

needs and interests, as well as segmenting dimensions and other
environmental factors, may be considerably different in foreign markets.
Decisions made without sound marketing research are laden with risk.
Key Issues
In many countries it is difficult for a foreigner to gather accurate information.
Marketers dealing in international markets would be well advised to avoid
mistakes by using local researchers.
Discussion Question: Why is it advisable to use overseas market
researchers in investigating foreign markets?
If a firm is engaged in similar research projects in various overseas markets,
some coordination and standardization makes sense.

1. Discuss marketing information systems.
2. Understand the scientific approach to marketing research.
3. Know about methods for collecting secondary and primary data.
4. Understand the role of observing, questioning, and using experimental methods
in marketing research.
5. Understand the challenges to interpreting marketing research data.
6. Recognize how market research information aids marketing planning in

international markets.
Summary Overview
presentation.
Key Issues
Marketing research: procedures to develop and analyze new information to help
marketing managers make decisions.
Marketing information system (MIS): an organized way of continually gathering,
accessing, and analyzing information that marketing managers need to make
decisions.
Big Data: Data sets too large and complex to work with typical database
management tools.
Data warehouse: a place where databases are stored so that they are available
where needed.
Intranet: a system for linking computers within a company.
Decision support system (DSS): a computer program that makes it easy for
marketing managers to get and use information as they are making decisions.
Marketing dashboard: a computer display of up-to-the-minute marketing data in an
easy-to-read format customized to the managers area of responsibility.
Marketing model: a statement of relationships among marketing variables.
Scientific method: a decision-making approach that focuses on being objective and
orderly in testing ideas before accepting them.
Hypotheses: educated guesses about the relationships between things or about
what will happen in the future.
Marketing research process: a five-step application of the scientific method that
includes: (1) defining the problem, (2) analyzing the situation, (3) getting problemspecific data, (4) interpreting the data, and (5) solving the problem.
Summary Overview
These are additional key terms.

Key Issues
Quantitative research: seeks structured responses that can be summarized in
numberslike percentages, averages, or other statistics.
Response rate: the percent of people contacted in a research sample who complete
the questionnaire.
Market research online community (MROC): An online group of participants who are
joined together by a common interest, and who participate in ongoing research.
Consumer panels: a group of consumers who provide information on a continuing
basis.
Experimental method: a research approach in which researchers compare the
responses of two or more groups that are similar except on the characteristic being
tested.
Statistical packages: easy-to-use computer programs that analyze data.
Population: in marketing research, the total group you are interested in.
Sample: a part of the relevant population.
Confidence interval: the range on either side of an estimate from a sample that is
likely to contain the true value for the whole population.
Validity: the extent to which data measures what it is intended to measure.
Situation analysis: an informal study of what information is already available in the
problem area.
Secondary data: information that has been collected or published already.
Primary data: information specifically collected to solve a current problem.
Research proposal: a plan that specifies what marketing research information will be
obtained and how.
Qualitative research: seeks in-depth, open-ended responses, not yes or no answers.
Focus group interview: an interview of 6 to 10 people in an informal group setting.
1. Understand what Product really means.

2.
Know the key differences between goods and services.
3.
planning.
Understand what branding is and how to use it in strategy
4. Understand the importance of packaging in strategy planning.

5. Understand the role of warranties in strategy planning.
6. Know the differences among various consumer and business product classes.
7. Understand how product classes can help a marketing manager plan
marketing strategies.
Summary Overview
Having looked at a numbers of critical factors in the development of marketing
strategy, we now look at the first of the four Ps: Product.
Key Issues
Once a firm has examined its external market environment, company,

competitors and customers, and understands its segmentation, targeting,
differentiation and positioning, it is ready to start developing its marketing
mix.
Here, we start with Product.
Summary Overview
Chapter 8 introduces Product Planning, while Chapter 9 will cover Product
Management & New-Product Development.
Key Issues
What is a product? Product means the need-satisfying offering of a firm.
Discussion Question: Why should the main focus of the product area be on
consumers?
The product idea encompasses many attributes of a physical good or service: its
features, benefits, and quality level, as well as its accessories, installation
requirements, and instructions. Any product must also be positioned relative to the
other offerings of the organization in its product line.
Branding is a key product strategy area. Marketers need to decide what

types of brands they wish to produce.
The package is more than just a means of protecting the product. It can help
to promote the product or enhance its use.
Marketers must decide if they want to offer product warranties, and if they
do, how extensive the warranties will be.
The type of consumer (product class) that will use it determines if a product
is a consumer or business product.
Summary Overview
From a marketing perspective, quality means a products ability to satisfy a
customers needs or requirements.
Key Issues
Quality may be absolute or relative, but in all cases the customers

expectations for quality in a given product form the basis for determining how
to achieve customer satisfaction.
When Volkswagen introduced its environmentally friendly Bluemotion

Technology cars, the idea that it can be fun to do the right thing was
showcased.
The fun/doing the right thing idea is then tied to Volkswagens green
technology, and eco-friendly cars.
Discussion Question: Is Volkswagens Bluemotion Technology add quality

to the product if a consumer doesnt really care about fuel efficiency or
the environment?
Summary Overview
A product can be a physical good or an intangible service, or it can be a blend of

both.
Key Issues
This diagram shows how one can position products in terms of their physical
good emphasis or their service emphasis.
Some products, such as canned soup, steel pipe, and paper towels, have an
emphasis that is almost completely physical.
Other products have a significant service component, such as a restaurant

meal, a cellular phone, or an automobile tune-up.
Still other products have an emphasis mainly on the service component,

such as an satellite radio, a hair stylist, or a postal service.
Consumers are increasingly demanding more services with the goods they
buy. Both the physical good and the service make up the total product the
customer buys.
Discussion Question: Why does the increased demand for more service
make product management more difficult?
Summary Overview
Since both products and services make up the total product, a distinction between
them is not usually necessary. But in fine-tuning a products position, recognizing
the differences between physical products and pure services can aid marketers in
planning. This ad, run in an Advertising Age Marketing to Hispanics Special Report,
is for Zubi Advertising. Zubi is not attempting to sell a product, but a service. Key
questions marketers must answer about services include:
Key Issues
How tangible is the product? Goods have a physical existence (tangible).

Services are deeds performed for a customer (intangible).
Where the product is produced? Goods are typically mass-produced in a

factory far away from the customer. A service is usually produced in person
where the customer is locatedafter the customer has committed to buy.
Quality consistency: Quality control measures are in place at most factory

locations. Satisfaction of customers and whether they recommend a service
to their friends is often influenced by interactions with the service firms
employees.
How perishable is it? Services cannot be stored or transported to another

location for sale.
Discussion Question: How does perishability influence the promotion and

pricing of residential service providers, such as chimney sweeps and
painting contractors, who have highly seasonal businesses?
Summary Overview
There are many different product arrangements within organizations, depending
upon the number of products offered and how diverse the offerings are.
Key Issues
A product assortment is the set of all product lines and individual products
that a firm sells.
In this ad, Artic is advertising a wide product assortment.
A product line is a set of individual products that are closely related.
They may be related because they are produced or operate in a

similar way.
They may be sold to the same target market, through similar types of
outlets, or they may be similarly priced.
An individual product is a particular product within a product line.
It is usually differentiated by brand, level of service offered, price, or

some other characteristic.
Each individual product and target market may require a separate

strategy.
Discussion Question: Think about Sony, an electronics manufacturer. Can

you describe its: a.) product assortment; b.) product lines; and c.)
individual products?
Dunkin Donuts product assortment is the set of all the product lines and individual
products that the firm sells. Its product lines include donuts and coffees. An
individual product is a particular product within a product line, for example each
size, flavor, and type of coffee. Dunkaccino is an individual product, within the
coffee product line, which is part of Dunkin Donuts product assortment.
Summary Overview
What is branding? Branding means the use of a name, term, symbol, or design to
identify a product. Some companies use a combination of some or all of these when
branding. This exhibit shows many familiar brands.
Key Issues
A brand name is a word, letter, or a group of words or letters.

A trademark includes only those words, symbols, or marks that are legally
registered for use by a single company.
A service mark is a trademark that refers to a service offering.
Discussion Question: Can you provide other examples of brand names,

trademarks, or service marks?
Brands meet needs. For example, brands make shopping easier, because
consumers can identify levels of quality with specific products and shorten
the time needed for information search.
Branding also helps marketers, because it can:
reduce selling time and cost;
improve the companys image.
Summary Overview
There are several conditions favorable to successful branding.
Key Issues
The product is easy to label and identify by brand or trademark.
The product quality is easy to maintain and is the best value for the price.
Dependable and widespread availability is possible.
Demand is strong enough that the market price can be high enough to make
the branding effort profitable.
There are economies of scale. If branding is really successful, costs should
drop and profits should increase.
Favorable shelf locations or display space in stores will help.

In general, these conditions are less common in less-developed economies.
Discussion Question: Consider a product category that has popular, easyto-recall brand names (such as soft drinks, computers, or automobiles),
compared to a product category for which brand names are difficult to
remember (file folders, nails, electric extension cords, or something
similar). How do the two product categories match up on the six
conditions favorable to successful branding?
Summary Overview
Brand familiarity means how well customers recognize and accept a companys
brand.
Key Issues
Five levels of brand familiarity are useful for strategy planning:

Brand rejection means that potential customers wont buy a brand unless its
image is changed.
Brand nonrecognition means final consumers dont recognize a brand at all, even
though middlemen may use it for identification and inventory control.
Brand recognition means that customers remember the brand.
Discussion Question: A supermarket may hold 20,000 different products
and many varieties of a single type of product. In this environment, why is
it so critical to achieve brand recognition?
Brand preference means that target customers usually choose the brand over
other brands.
Brand insistence means customers insist on a firms branded product and are
willing to search for it.
Summary Overview
It takes time and money to build brand awareness.
Key Issues
Dunkin' Donuts is an international donut and coffee retailer.
It is a major player in the food and beverage industry.
It is one of the world's largest coffee and baked goods chain.
Summary Overview
There are several characteristics of a good brand name. Some successful brand
names are exceptions to all or many of these guidelines, but many of them
originated when they faced little competition.
Key Issues
Among the characteristics of a good brand name are the following:
Short and simple.
Easy to spell and read.
Easy to recognize and remember.
Easy to pronounce.
Can be pronounced in only one way.
Can be pronounced in all languages.
Suggests product benefits.
Adapts to packaging and labeling needs.
No undesirable imagery.
Always timely.
Adapts to any advertising medium.
Legally available.
Discussion Question: Think of a popular brand name. How does it measure

up on these characteristics of a good brand name?
A respected name builds brand equitythe value of the brands overall strength in
the market.
Summary Overview
Registering brand names and trademarks is important because it means that no one
else can use them without specific authorization from the owner.
Key Issues
U. S. common law and civil law protect the rights of trademark and brand
name owners.
The Lanham Act (1946) spells out what kinds of marks (including brand
names) can be protected and the exact method of protecting them.
A brand can be a real asset to a company, but each company must protect its
own.
If a brand becomes a generic descriptive word for a product category,

protection is lost and the brand becomes public property.
Discussion Question: Why do the makers of Kleenex, Q-Tips, Band-Aids,

and other widely used brand names refer to their products as, for
example, Band-Aid brand adhesive bandages, instead of just Band-Aids?
Even if brands are registered, counterfeiting is accepted in some cultures,
especially in developing nations. Many popular branded products, such as Levis
jeans and Rolex watches, have been copied without authorization. Weak regulation
in many developing countries makes it difficult for companies to protect their
brands from counterfeits.
Summary Overview
In addition to the type of brand, the brands creation and ownership are also part of
the overall product strategy.
Key Issues
Manufacturer brands are brands created by producers.
Manufacturer brands are sometimes called national brands because of

their wide appeal.
Dealer brands are also called private brands.
Intermediaries, such as wholesalers and retailers, create these brands.
The battle of the brands is a competition between manufacturer and dealer

brands.
Many retailers have expanded the lines of products sold under their
store brands, while reducing the amount of space given to
manufacturer brands.
Discussion Question: Think about a recent trip you made to a grocery

store or discount drugstore. Can you think of specific ways in which
dealers position their brands against comparable manufacturer brands?
Whos winning the battle of brands? The big winner is the consumer, who
benefits from greater choice and more intense price competition.
1. Targets Cherokee brand of mens clothing is available only at Target stores.

The brand provides a low-cost alternative to other mens fashions available at
department stores and via catalogs. The Cherokee brand is a(n):
2. A.
manufacturer brand.
3. B.
dealer brand.
4. C.
licensed brand.
5. D.
national brand.
6. E.
generic brand.
ANSWER: B
Dealer brands are brands created by intermediaries. The Cherokee brand available
only at Target stores is an example of the dealer brand. The best answer selection is
B.
Summary Overview
Packaging involves promoting, protecting, and enhancing the product. Good
packaging makes products easier to identify and promotes the brand.
Key Issues
Packaging can enhance the product. Packaging can do more than contain
and protect the product. The package can make the product easier to use or
safer to use. Packaging can deter shoplifting and it can also be designed to
achieve ecological objectives.
Packaging sends a message. Creative use of design in packaging can visually
help to tie the product to other elements of the promotion mix. Packages also
convey information, such as the nutritional information on food products. The
package can also promote the brand at the point of purchase or in use.
Packaging may lower distribution costs. Good packages save space and
weight so they are easier to transport, handle, and display. In helping
distributors and end-sale retailers, good packages are more welcome by
these intermediaries.
Discussion Question: Do you have any favorite products that never seem
to get scanned at a checkout counter? How much more time does it take
to hand enter the code? Could time savings lead to lower costs? How can
packages be re-designed to make them easier to scan?
Summary Overview
Good packaging makes products easier to identify and promotes the brand at the
point of purchase and even in use.
Key Issues
Few factors to be considered are:
Promoting
Link product to promotion
Branding at point of purchase or consumption
Product information
Protecting
For shipping and storing
From tampering
From shoplifting
From spoiling
Enhancing
The environment
Convenience in use
Added product functions
Summary Overview
In determining what is socially responsible packaging, marketers are helped
somewhat by the clarity of legal regulations. However, other issues require them to
make ethical judgments.
Key Issues
Packaging can hurt the environment. Ecological concerns are becoming more
prominent in packaging decisions.
Producers have been criticized for developing packages that harm the
environment.
Others contend that manufacturers do not disclose all of the possible

harmful effects of their products.
The Federal Fair Packaging and Labeling Act (1966) requires that consumer goods
be clearly labeled in easy-to-understand terms, to give consumers more
information. The law also calls on industry to try to reduce the number of package
sizes and to make labels more useful.
Ethical issues remain, and examples of such issues are easy to find.
Some companies have been accused of designing packages that

conceal downsized products.
Dealer-branded products are often packaged to look very similar to

manufacturer brands.
Discussion Question: Have you ever purchased products and thought that
the packaging wasted resources? Which ones?
1. Heinz has a new ketchup bottle that has the cap on the bottom, instead of
the top. The bottle uses gravity to help the consumer get every last drop of
ketchup out of the bottle. The cap is also designed to pour cleanly, so that
dried ketchup does not accumulate around the opening. This new bottle
demonstrates how packaging can:
2.
A.
promote product.
3.
B.
protect the product.
4.
C.
lower distribution costs.
5.
D.
incorporate UP codes.
6.
E.
enhance product usage.
ANSWER: E
In the above question, Heinz has redesigned the ketchup bottle to enhance product
usage. The placement of the cap on the bottom allows for a clean pour and
complete usage of all the product (little waste left in the bottle). The best answer
selection is E.
Summary Overview
A warranty puts the sellers promises about a product in writing. A marketing

manager should decide whether to offer a warranty and if so, what the
warranty will cover and how it will be communicated to target customers.
Key Issues
The Magnuson-Moss Act (1975) says that producers must provide a clearly
written warranty if they choose to offer any warranty. The warranty does not have to
be strong.
Warranties may improve the marketing mix. A warranty says that the company
stands behind the product.
This fact is reassuring to customers and can make a big difference in

whether customers buy the product, especially if the product is
complex or expensive.
Discussion Question: For which products would the terms of the warranty
be a key factor in determining whether or not you would buy the product?
Do marketers of these products emphasize their warranties in promotion?
Backing up a product or service with service guarantees helps consumers focus
on specific levels of satisfaction and expectations.
Service guarantees are becoming more common but theres more risk
in offering a service guarantee than a warranty on a physical product.
1. McDonalds announced that at select locations, if drive-through customers do

not get exactly what they want within two minutes of placing the order, their
next meal will be free. This promise by McDonalds is a good example of a(n):
2. A.
service guarantee.
3. B.
warranty.
4. C.
unit price.
5. D.
limited warranty.
6. E.
no-fault insurance policy.
ANSWER: A
McDonalds promise of a two-minute delivery time in the drive-through is a service
guarantee. If the food is not delivered correctly within two minutes of placing the
order, the next meal is free. The best answer selection is A.
Summary Overview
Developing product strategies is simplified somewhat because some product
classes require similar marketing mixes. Understanding the product classes is a
useful strategic starting point.
Key Issues
Consumer products are products meant for the final consumer.
Business products are products meant for use in producing other products.
It is possible that some products might be in both groups.
Discussion Question: Have you ever been to a warehouse club, such as

Sams or Costco? Business and final consumers often purchase the same
items there. How might their purchases be different?
Selling the same product to final consumers and business customers requires
(at least) two different strategies.
Summary Overview
Consumer product classes are based on how consumers think about and shop for
products:
Key Issues
Convenience products are purchased quickly with little effort. They may be
inexpensive, bought often, require little service or selling, and bought by
habit.
Staples are bought often, routinely, and without much thought. Branding is
used for many staples to make them easier to remember and find.
Impulse products are bought quickly, as unplanned purchases, because of a

strongly felt need. They may be strongly affected by the immediate situation.
Emergency products are purchased immediately when the need is great.

Consumers dont shop around for these products or ask how much they cost.
Shopping products are compared with competing products.
Homogeneous shopping products are ones that the customer sees as

basically the same and wants at the lowest price.
Heterogeneous shopping products are seen as different in quality and/or

suitability.
Specialty products are ones that the consumer really wants, because there are no
acceptable substitutes. They are characterized by the consumers willingness to
search.
Unsought products need promotion; they are those that customers dont want yet
or dont know that they can buy.
New unsought products represent ideas potential customers dont

know about yet.
Regularly unsought products are ones that dont motivate customers to seek
them out, even though they may need them.
Discussion Question: Can you provide an example of each product class?
Summary Overview
It is possible that consumers may see a single product in several ways.
Key Issues
This fish could be a convenience good for someone as wealthy as Bill Gates
who has a salt water aquarium in his outer office or waiting room.
The fish could be a shopping good for the owner of a salt water aquarium
who is on a tighter budget.
Discussion Question: Under what circumstances would the fish be: a.) a
homogeneous shopping good; b.) a heterogeneous shopping good?
The fish could be a specialty good for a salt water aquarium that must have
this particular type of fish and will accept no substitute.
Like so many other concepts in marketing, product classes need to be

viewed from the standpoint of the consumer, not of the manager.
Summary Overview
This next series of slides is adapted from a similar exercise in the no longer
produced Learning Aid. Consumer product classes are based on the way people
think about and buy products. However, different groups of potential customer may
have different needs and buying behavior for the same product. That same product
could be placed in two or more product classes depending on the needs and
behavior of target customers. This exercise will give students practice in using
consumer product classes. It emphasizes that the product classes only have
meaning related to specific target markets.
The slide is set up such that the first click removes some of the alternatives. This
could allow the questions to be used with clickers with five alternatives
remaining.
The scenarios each consider the purchase of a Kodak disposable camera.
Question: Read the scenario and decide which product class best fits this
situation.
Answer: Heterogeneous shopping product
Reason: Customer spends time and effort to compare quality and features, has little
concern for brand, and is not too concerned about price as long as it's within her
budget.
Related definitions


suitability.
Summary Overview
See description of the exercise on the first slide in this series.
remaining.
situation.
Answer: Homogeneous shopping product
Reason: Customer apparently views all products with the features described in the
case as homogeneous commodities--i.e., there is no perceived difference in quality
or performance. Demand is very elastic, and the customer is willing to shop for the
brand with the lowest price.
Related definitions:


suitability.
Summary Overview
remaining.
situation.
Answer: Specialty product
Reason: Customer displays brand insistence and a willingness to spend
considerable time and effort searching for the product. Price is not critical, and
customer will not accept substitutes.
Related definitions:
Specialty products are ones that the consumer really wants, because there
are no acceptable substitutes. They are characterized by the consumers
willingness to search.
Summary Overview
remaining.
situation.
Answer: Emergency convenience product
Reason: Customer has immediate need for product: price and perhaps even
quality are of small concern. Demand is inelastic and place is important.
Relevant definitions:
Emergency products are purchased immediately when the need is great.

Consumers dont shop around for these products or ask how much they cost.
Summary Overview
remaining.
situation.
Answer: Unsought product (probably regularly unsought
Reason: This is a tricky question for students. A serious camera enthusiast would
probably want high-quality equipment--perhaps with a larger negative format. He
probably would not consider buying a Kodak disposable camera--unless an
additional promotion theme was used (e.g., promote the camera as a handy spare
or for his wife or kids to use).
Relevant definitions:
Unsought products need promotion; they are those that customers dont want
yet or dont know that they can buy.
New unsought products represent ideas potential customers dont know

about yet.
Regularly unsought products are ones that dont motivate customers to seek
them out, even though they may need them.
Summary Overview
remaining.
situation.
Answer: Impulse convenience products
Reason: Customer has decided to buy on sight--an unplanned purchase. She is
unwilling to search for a better buy. Place and price are important, as is advertising
in this case.
Relevant definition:
Impulse products are bought quickly, as unplanned purchases, because of a

strongly felt need. They may be strongly affected by the immediate
situation.
ANSWER: D
Homogeneous shopping products are products the customer sees as basically the
same and wants at the lowest price. In the above question, Jack sees all the brands
as the same and selects the store brand based on the price. The best answer
selection for this question is D.
Summary Overview
Many factors affect strategy planning for business products.
Key Issues
Derived demand means that the demand for business products derives from
the demand for the final consumer products they are used to make.
Discussion Question: How might one derive an estimate of the demand for
steel?
This means that total industry demand tends to be inelastica change in

price doesnt have much effect on the quantity ordered.
As a result, price increases might not reduce the quantity purchased.
However, the demand facing individual business suppliers may be extremely

elastica situation approaching pure competition.
Tax treatments affect buying, too. An expense item is deducted as a business

expense in the year it is bought.
A capital item lasts for years and is depreciated over its life, and is
often very expensive.
Customers pay for the capital item in the year it is purchased,

but for tax purposes, the cost is spread over several years,
reducing the cash available for other purchases.
Summary Overview
Business product classes are based on how buyers see products and their uses:
Key Issues
Installations are important capital items. One-of-a-kind installations such as

office buildings and custom-made equipment require special negotiations for
each sale. Installations are a boom-or-bust business. Economic upturns spur
expansion while downturns cause sales of installations to fall off sharply.
Suppliers sometimes include special services with an installations at no extra
cost.
Accessories are important but short-lived capital items, such as tools and
production equipment.
Raw materials are unprocessed expense items that become a physical part of a
physical good the firm makes and are expense items. Farm products are grown or
raised by farmers. Natural products are those that occur in nature, such as timber
and mineral ores.
Components are processed expense items that become part of a finished
product. Component parts are finished or nearly finished products that go into
other products. Component materials require more processing before becoming
part of the final product. Both component parts and materials must meet the
specifications of the buyer.
Supplies for maintenance, repair, and operating (MRO) are another category.
Maintenance supplies include products like paint and light bulbs. Repair supplies are
parts needed to fix worn or broken equipment. Operating supplies include things
needed to do work, like copier toner and paper clips.
Professional services are specialized services firms pay for in order to get them
done. They support a firms operations, such as consulting services might.
1. Understand what Product really means.
2.
Know the key differences between goods and services.
3.
planning.
Understand what branding is and how to use it in strategy
4. Understand the importance of packaging in strategy planning.

5. Understand the role of warranties in strategy planning.
6. Know the differences among various consumer and business product classes.
7. Understand how product classes can help a marketing manager plan
marketing strategies.
Summary Overview
presentation.
Key Issues
Product: the need satisfying offering of a firm.
Quality: a product's ability to satisfy a customer's needs or requirements.
Product assortment: the set of all product lines and individual products that a firm
sells.
Product line: a set of individual products that are closely related.
Individual product: a particular product within a product line.
Branding: the use of a name, term, symbol, or designor a combination of these
to identify a product.
Brand name: a word, letter, or a group of words or letters.
Trademark: those words, symbols, or marks that are legally registered for use by a
single company.
Service mark: those words, symbols, or marks that are legally registered for use by
a single company to refer to a service offering.
Brand familiarity: how well customers recognize and accept a company's brand.
Brand rejection: potential customers won't buy a brand unless its image is changed.
Brand nonrecognition: final customers don't recognize a brand at alleven though
intermediaries may use the brand name for identification and inventory control.
Brand recognition: customers remember the brand.
Brand preference: target customers usually choose the brand over other brands,
perhaps because of habit or favorable past experience.
Brand insistence: customers insist on a firm's branded product and are willing to
search for it.
Brand equity: the value of a brand's overall strength in the market.
Lanham Act: a 1946 law that spells out what kinds of marks (including brand
names) can be protected and the exact method of protecting them.
Summary Overview
Key Issues
Family brand: a brand name that is used for several products.
Licensed brand: a well-known brand that sellers pay a fee to use.
Individual brands: separate brand names used for each product.
Generic products: products that have no brand at all other than identification of
their contents and the manufacturer or middleman.
Manufacturer brands: brands created by producers.
Dealer brands: brands created by intermediariessometimes referred to as private
brands.
Private brands: brands created by intermediariessometimes referred to as dealer
brands.
Battle of the brands: the competition between dealer brands and manufacturer
brands.
Packaging: promoting and protecting the product.
Federal Fair Packaging and Labeling Act: a 1966 law requiring that consumer goods
be clearly labeled in easy-to-understand terms.
Warranty: what the seller promises about its product.
Magnuson-Moss Act: a 1975 law requiring that producers provide a clearly written
warranty if they choose to offer any warranty.
Consumer products: products meant for the final consumer.
Business products: products meant for use in producing other products.
Convenience products: products a consumer needs but isn't willing to spend much
time or effort shopping for.
Staples: products that are bought often, routinely, and without much thought.
Impulse products: products that are bought quickly as unplanned purchases
because of a strongly felt need.
Summary Overview
Key Issues
Emergency products: products that are purchased immediately when the need is
great.
Shopping products: products that a customer feels are worth the time and effort to
compare with competing products.
Homogeneous shopping products: shopping products the customer sees as basically
the same and wants at the lowest price.
Heterogeneous shopping products: shopping products the customer sees as
different and wants to inspect for quality and suitability.
Specialty products: consumer products that the customer really wants and makes a
special effort to find.
Unsought products: products that potential customers don't yet want or know they
can buy.
New unsought products: products offering really new ideas that potential customers
don't know about yet.
Regularly unsought products: products that stay unsought but not unbought forever.
Derived demand: demand for business products derives from the demand for final
consumer products.
Expense item: a product whose total cost is treated as a business expense in the
period it's purchased.
Capital item: a long-lasting product that can be used and depreciated for many
years.
Installations: important capital items such as buildings, land rights, and major
equipment.
Accessories: short-lived capital itemstools and equipment used in production or
office activities.
Raw materials: unprocessed expense items such as logs, iron ore, and wheat that
are moved to the next production process with little handling.
Farm products: products grown by farmers, such as oranges, sugar cane, and cattle.
Natural products: products that occur in nature such as timber, iron ore, oil, and
coal.
Components: processed expense items that become part of a finished product.
Supplies: expense items that do not become part of a finished product.
Professional services: specialized services that support a firm's operations.

MKT 521

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MKT 521

Uploaded by

Copyright:

Available Formats

At the end of this presentation, you should be able to :

Most people think that marketing involves selling and advertising.

Think about a manufacturer of bicycles:

many brand names;

many different bicycles;

many types of bicycles with various features;

prices range from low to very high.

Discussion Question: Why are there so many varieties of bicycles?

Production involves: making goods or performing services.

Products do not sell themselves!

People bear the costs of marketing via price.

Everyone buys or uses a product or service.

People shop, are exposed to advertising, and provide information to

Marketing is important to your job.

Selling your ideas.

Marketing offers career opportunities.

Organizations exist to satisfy customers; marketing contributes to

Marketing is important to your next job.

People have to market themselves.

Discussion Question: How would a knowledge of marketing benefit an

Stimulates research and innovation.

Creates new/improved products.

Generates a higher standard of living.

Marketing stimulates the development of innovations. This ad for the

Use the onscreen player controls to operate the video.

The micro view of marketing includes activities that:

anticipate customer needs;

direct flows of goods and services to customers;

are performed by individual organizations.

The macro view of marketing includes a social process that:

accomplishes the objectives of society;

effectively matches supply and demand;

Discussion Question: Why is it important for marketers to understand both

This ad for Help Remedies offers a dirt-simple solution that many

Marketers must look for new ideas to stay ahead of competition.

Discussion Question: Can you think of other industries or product/service

applies to both profit and nonprofit organizations;

involves exchanges consumers exchange something of value to acquire

In todays highly competitive markets, firms that adopt the marketing

Panasonic developed the rugged Toughbook 29 laptop that can withstand

Discussion Question: Can you think of other ways in which an organization

it helps to match supply and demand;

every consumer has a different set of needs;

system must effectively match consumers and producers.

Functions of an effective macro-marketing system:

Discussion Question: Which countries macro-marketing systems might be

As production increases, the cost of each unit of the product

Discussion Question: How does marketing find more outlets (consumers)

Consumers needs and patterns of consumption differ from how

Marketing activities create more efficient links between consumers

Marketing functions narrow the gap.

The universal marketing functions helps to narrow the gap.

Marketing helps to bring producers and consumers together.

DirecTV uses satellite television to provide marketing functions that help

and information between producers and consumers.

Discussion Question: Try to think of a product or service category in which

Production sector: Specialization and division of labor result in

Consumption sector: Heterogeneous demand for different goods and

Discrepancies of quantity: Producers prefer to produce and sell in large

Discrepancies of assortment: Producers specialize in producing a narrow

Spatial separation: Producers tend to locate where it is economical to

Separation in time: Consumers may not want to consume goods and

Separation of information: Producers do not know who needs what, where,

Separation in values: Producers value goods and services in terms of costs