MARKETING

TERMINOLOGY
MARKETING MANAGEMENT
1. Defining Marketing for the 21st Century
What is Marketing?
Marketing is an organizational function and a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit the organization and its
stake holders
What is Marketing Manageent?
It is the process of planning and executing the conception, pricing, promotion, and distribution of ideas,
goods and services to create exchanges that satisfy individual and organizational goals.
What is Markete!?
Marketing people are involved in marketing 1" types of entities: goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas.
Who Markets?
A marketer is someone who seeks a response attention, a purchase, a vote, a donation! from another
party, called the prospect.
Nee!s# Wants# $ Dean!s
Nee!s are the basic human re"uirements. #eople need food, air, water, clothing, and shelter to survive.
#eople also have strong needs for recreation, education, and entertainment.
$e can distinguish among fi%e types of needs:
&tate! nee!s the customer wants an inexpensive car!.
Rea' nee!s the customer wants a car whose operating cost, not its initial price, is low!.
(nstate! nee!s the customer expects good service from the dealer!.
De'ight nee!s the customer would like the dealer to include an onboard navigation system!.
&e)ret nee!s the customer wants to be seen by friends as a savvy consumer!.
%hese needs become *ants when they are directed to specific ob&ects that might satisfy the need. An
American needs food but may want a hamburger, 'rench fries, and a soft drink.
Dean!s are wants for specific products backed by an ability to pay. Many people want a Mercedes(
only a few are willing and able to buy one.
+ Dean! states in the arket
Negati%e !ean! ) *onsumers dislike the product and may even pay a price to avoid it.
None,istent !ean! ) *onsumers may be unaware or uninterested in the product.
-atent !ean! ) *onsumers may share a strong need that cannot be satisfied by an existing
product.
De)'ining !ean! ) *onsumers begin to buy the product less fre"uently or not at all.
Irregu'ar !ean! ) *onsumer purchases vary on a seasonal, monthly, weekly, daily, or even
hourly basis.
.u'' !ean! ) *onsumers are ade"uately buying all products put into the marketplace.
/%erfu'' !ean! ) More consumers would like to buy the product than can be satisfied.
(n*ho'esoe !ean! ) *onsumers may be attracted to products that have undesirable social
conse"uences.
Key )ustoer arkets
*onsumer markets
+usiness markets
,lobal markets
-on profit . ,overnmental markets
Market0'a)e# arkets0a)e $ etaarket
%he marketplace is physical, as when you shop in a store( marketspace is digital, as when you shop on
the Internet. Metamarket to describe a cluster of complementary products and services that are closely
related in the minds of consumers but are spread across a diverse set of industries. %he automobile
metamarket consists of automobile manufacturers, new car and used car dealers, financing companies,
insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto
ads in newspapers, and auto sites on the Internet.
/rientations
#roduction orientation
#roduct orientation
/elling orientation
Marketing orientation
1o'isti) arketing
%he holistic marketing concept is based on the development, design, and implementation of marketing
programs, processes, and activities that recognizes their breadth and inter)dependencies. 'our
components of holistic marketing are relationship marketing, integrated marketing, internal marketing, and
performance marketing.
Integrate! arketing
Marketing i,
.our 2s .our Cs
#roduct *ustomer solution
#rice *ustomer cost
#lace *onvenience
#romotion *ommunication
2. De%e'o0ing Marketing &trategies $ 2'ans
The 3a'ue Chain
Michael #orter proposed the value chain as a tool for identifying ways to create more customer value. %he
value chain identifies nine strategically relevant activities that create value and cost in a specific business
Marketing 2'an
%he arketing 0'an is the central instrument for directing and coordinating the marketing effort. %he
marketing plan operates at two levels: strategi) and ta)ti)a'.
%he strategi) arketing 0'an lays out the target markets and the value proposition that will be offered,
based on an analysis of the best market opportunities. %he ta)ti)a' arketing 0'an specifies the
marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and
service.
&trategi) Market 2'anning
/trategic market planning is the managerial process that entails analysis, formulation and evaluation of
strategies that would enable an organisation to achieve its goals by developing and maintaining a
strategic fit between the organisation0s capabilities and the threats and opportunities arising from its
changing environment. %he /trategic Market #lanning #rocess involves:
Ana'ysis
o 1nvironmental analysis /$2% Analysis!
o *ompetitor and industry analysis
o *ustomer and market analysis, firm internal analysis
The foru'ation an! e%a'uation of a'ternati%e strategies
The se'e)tion of a strategy, and
The !e%e'o0ent of !etai'e! 0'ans for i0'eenting
The &trategi) 2'anning Ga0
Intensi%e Gro*th
*orporate management3s first course of action should be a review of opportunities for improving existing
businesses. Ansoff proposed a useful framework for detecting new intensive growth opportunities called a
40ro!u)t4arket e,0ansion gri!4
Integrati%e Gro*th
A business3s sales and profits may be increased through backward, forward, or horizontal integration
within its industry.
Di%ersifi)ation Gro*th
5iversification growth makes sense when good opportunities can be found outside the present
businesses. A good opportunity is one in which the industry is highly attractive and the company has the
right mix of business strengths to be successful.
&trategi) 2'anning Te)hni5ues6
7i8 9oston Consu'ting Grou0s 79CG8 Gro*th : &hare Matri,6
%he techni"ue entails assigning each individual product /+6! of an organisation to one of four possible
cells in a simple matrix according to the relative market share and rate of market growth associated with
that particular product 7 business.
7ii8 GE Matri,6
&trategi) .oru'ation6
2orter;s Generi) &trategies6
Michael #orter has proposed three generic strategies that provide a good starting point for strategic
thinking: o%era'' )ost 'ea!ershi0, !ifferentiation, and fo)us.
<. Gathering Inforation $ &)anning the En%ironent

Mo!ern Marketing Inforation &ystes
/ome firms have developed marketing information systems that provide management with rich detail
about buyer wants, preferences, and behavior.
The Marketing Inte''igen)e &yste
A marketing intelligence system is a set of procedures . sources marketing managers use to obtain
everyday information about developments in the marketing environment. Marketing managers collect
marketing intelligence by reading books, newspapers, . trade publications( talking to customers,
suppliers, . distributors( monitoring 8social media9 on the Internet via online discussion groups( e)mailing
lists . blogs( . meeting with other company managers.
I!entifying the Ma=or .or)es
*ompanies and their suppliers, marketing intermediaries, customers, competitors, and publics all operate
in a macroenvironment of forces and trends that shape opportunities and pose threats. %hese forces
represent 4noncontrollables,4 which the company must monitor and to which it must respond. $ithin the
rapidly changing global picture, the firm must monitor six ma&or forces: demographic, economic, social)
cultural, natural, technological, and political)legal.
Natura' En%ironent
%he deterioration of the natural environment is a ma&or global problem. %here is great concern about
8greenhouse gases9 in the atmosphere due to the burning of fossil fuels( about the depletion of the ozone
layer due to certain chemicals . global warming( . about growing shortages of water. +ut people vary in
their environmental sensitivity. %he :oper survey breaks consumers into five groups known as
;Consuer en%ironenta' segents0 based on their degree of environmental sensitivity.
True 9'ue Greens 7<">86 %rue +lues are the environmental leaders . activists. %hey are
characterized by a strong knowledge of environmental issues. %hey are more likely than the
average consumer to engage in environmentally conscious behavior, such as recycling.
Green?a)k Greens 71">86 ,reenbacks do not have the time or inclination to behave entirely
green. <owever, they are more likely to purchase green.
&0routs 72@>86 /prouts are environmental fence sitters. %hey feel some environmental issues
are worth supporting, but not others. %hey will purchase an environmentally conscious product,
but only if it meets their needs.
Grousers 71A>86 ,rousers believe that their individual behavior cannot improve environmental
conditions. %hey are generally uninvolved . disinterested in environmental issues.
A0atheti)s 71+>86 Apathetics are not concerned enough about the environment to do anything
about it. %hey also believe that environmental indifference is mainstream.
B. Con!u)ting Marketing Resear)h $ .ore)asting Dean!
Marketing resear)h
Marketing research is defined as the systematic design, collection, analysis, and reporting of data and
findings relevant to a specific marketing situation facing the company.
Marketing Resear)h 2ro)ess6
5efinition of the problem . research ob&ectives
5etermination of information needs
5evelopment of research plan7 design
DATA &/(RCE& se)on!ary !ata, 0riary !ata, or both.
RE&EARC1 MET1/D/-/GIE& #rimary data can be collected in five main ways: through
observation, focus groups, surveys, behavioral data, and experiments
1. Des)ri0ti%e resear)h 7Cuantitati%e8
&ur%ey Resear)h *ompanies undertake surveys to learn about people3s knowledge,
beliefs, preferences, and satisfaction, and to measure these magnitudes in the
general population.
2. E,0'oratory resear)h 7Cua'itati%e8
.o)us Grou0 Resear)h A focus group is a gathering of six to ten people who are
carefully selected based on certain demographic, psychographic, or other
considerations and brought together to discuss at length various topics of interest.
C'assifi)ation of .o)us Grou0s
o E,0'oratory 4 1xploratory focus groups are commonly used in the initial
phase of the marketing research process to define the problem in a
accurate manner.
o C'ini)a' 4 %he moderator, who has to be a trained psychologist attempts
to understand sub)conscious feelings.
o E,0erien)ing 4 %his method enables a client to observe and listen as to
how a customer thinks and feels about the product.
&tages of grou0 !e%e'o0ent6 'orming, /torming, -orming, #erforming
Inter%ie*s
o In4!e0th6 2pening, =uestioning, #robing, *losing
o E,0ert6 2pening, *losing
o Inter)e0t
9eha%iora' Data *ustomers leave traces of their purchasing behavior in store
scanning data, catalog purchases, and customer databases. Much can be learned by
analyzing these data. *ustomers3 actual purchases reflect preferences and often are
more reliable than statements they offer to market researchers.
E,0erienta' Resear)h %he most scientifically valid research is experimental
research. %he purpose of experimental research is to capture cause)and)effect
relationships by eliminating competing explanations of the observed findings.
1xperiments call for selecting matched groups of sub&ects, sub&ecting them to
different treatments, controlling extraneous variables, and checking whether
observed response differences are statistically significant.
2ro=e)ti%e te)hni5ues #ro&ective techni"ues can be incorporated in both interviews
and focus groups to encourage communication or they can be used on their own.
%hese are techni"ues that obtain information in ways other than verbal response.
Wor! asso)iation is simply asking for a participant0s first response to a name, photo
or event. %he idea is to get emotional responses, rather than intellectual thoughts,
about a company, brand name or product. Cartoons can also be implemented. %he
cartoon will usually consist of two characters with speech bubbles over their heads
similar to comic books. 'or example, one character might be saying, ;<i Ahmad, I
was thinking of shopping at /am0s. $ant to go>0 /urvey participants will then put their
own answers into the second character0s speech bubble.
/?ser%ationa' Resear)h 'resh data can be gathered by observing the relevant
actors and settings
Ethnogra0hy 1thnographic research studies the daily lives of participants. %he
research can be conducted where participants live, where they shop and where they
work.
Groun!e! theory Most research studies start with analyzing the cause of a problem.
A researcher will have a theory on why consumers are behaving in the way that they
do in regard to a purchase or the use of a product. %here is no hypothesis, rather a
research methodology is designed to study this behavior. Instead of a researcher first
establishing a theory and an hypothesis and then asking "uestions to determine if
they are correct, a researcher will observe this behavior to determine a theory.
<. Causa' resear)h
If a company wants to study the effect a change in its product will have on consumer purchasing
or the possible success of a new promotional campaign, it should use causal research. *ausal
research is conducted to discover whether the change a company is planning to make will have a
positive or negative effect on consumers.
RE&EARC1 IN&TR(MENT& Marketing researchers have a choice of three main research
instruments in collecting primary data: "uantitative measures through "uestionnaires, "ualitative
measures, and mechanical devices.
Cuantitati%e Measures through Cuestionnaires A "uestionnaire consists of a set
of "uestions presented to respondents. +ecause of its flexibility, the "uestionnaire is
by far the most common instrument used to collect primary data. 5ifferent s)a'es
used in a "uestionnaire are
O The noina' s)a'e Male and female
O /r!ina' easureent s)a'e :ank your favorite types of pizza
O The inter%a' s)a'e #izza was very delicious, delicious, good, all right, or
inedible.
O The ratio s)a'e A ratio scale has given start and end points that already exist
and are not created by researchers. A consumer0s weight is an example of a
ratio scale, as no person0s weight can be zero pounds. %here is also an
upper limit on what a human can weigh and still survive. 2n a ratio scale
there is also the ability to measure exactly the difference between units. A
person who weighs ?@@ pounds is exactly twice as heavy as a person who
weighs A@@ pounds.
Me)hani)a' De%i)es Mechanical devices are occasionally used in marketing
research. 'or example, galvanometers can measure the interest or emotions aroused
by exposure to a specific ad or picture.
&AM2-ING 2-AN After deciding on the data sources, research methodologies and instruments,
the marketing researcher must design a sampling plan.
2ro?a?i'ity %ersus non0ro?a?i'ity sa0'ing
#robability sampling uses techni"ues that result in an ability to calculate exactly the probability of
a single person in a sampling frame being chosen to participate. %his probability is based on the
number of total people in that sample divided by the number of total people in the population. If
the population is a known number this is "uite easy to calculate. A survey that includes ?B@
people, out of a population of A,@@@, means that every individual in the population has a ?B per
cent probability of being included.
&a0'ing for a 5uantitati%e resear)h
&a0'ing for 5ua'itati%e resear)h
Con%enien)e sa0'ing *onvenience sampling is used when researchers choose any
willing and available individuals as participants. %his method can be implemented when it
is known that a specific location tends to attract the type of individual needed for that
research study.
&no*?a''ing Another method of choosing participants is called ;snowball0 sampling. $ith
this method researchers choose the first participant to match the participant profile. %his
participant then refers others with similar characteristics. %he theory for using this system
is that the first participant is more likely to know someone like themselves than the
researchers. %his method is appropriate when the research calls for participants who may
be from psychographic or ethnic groups that are very different to those of the
researchers.
2ur0osi%e sa0'ing %he research "uestion will define the characteristics of the
participant profile. It is important that the participants chosen match this profile so that
they have the necessary common experiences which will result in useful research data. If
input is needed from more than one type of research sub&ect, then more than one
participant profile should be developed and two groups of potential sub&ects will need to
be recruited.
C/NTACT MET1/D& 2nce the sampling plan has been determined, the marketing researcher
must decide how the sub&ect should be contacted: mail, telephone, personal, or online interview.
Mai' Cuestionnaire
Te'e0hone Inter%ie*
2ersona' Inter%ie*
/n'ine Inter%ie*
Data collection
Analysis and interpretation
#resentation of findings
5ecision making
%he managers who commissioned the research need to weigh the evidence. If their confidence in
the findings is low, they may decide against introducing the product or service. If they are
predisposed to launching the product or service, the findings support their inclination. %hey may
even decide to study the issues further and do more research. %he decision is theirs, but
hopefully the research provided them with insight into the problem.
A growing number of organizations are using a marketing decision support system to help their
marketing managers make better decisions. MI%3s Cohn Dittle defines a arketing !e)ision
su00ort syste 7MD&&8 as a coordinated collection of data, systems, tools, and techni"ues with
supporting software and hardware by which an organization gathers and interprets relevant
information from business and environment and turns it into a basis for marketing action
Cuantitati%e Too's (se! in Marketing De)ision &u00ort &ystes
Errors in the arketing resear)h
&a0'ing errors
%he data obtained from asking a sample of a population can never provide as accurate an answer as a
census of everyone. A professor who wants to learn how many students study at night could ask all of his
students. <owever, if the same professor only asks ten out of the E@ students enrolled in his class, there
is the possibility that the answers provided are not representative of everyone. %his is called sampling
error.
Nonsa0'ing errors
2ther types of errors that result from using a sample are called nonsampling errors. %hese errors do not
result from the fact that a sample was used instead of a census. Instead those designing and conducting
the research cause these errors. +ecause they are caused by human error, nonsampling errors can be
controlled.
2o0u'ation s0e)ifi)ation errors
#opulation specification errors occur when an ina00ro0riate 0o0u'ation is chosen for obtaining data for
the research study. 'or example, if the ob&ective of a research study is to determine what ?ran! of !og
foo! people buy for their pets, . the research draws a sample from a population that consists
predominantly of )at o*ners, a population specification error is induced into the study.
&a0'ing frae errors
A sampling frame is a !ire)tory of 0o0u'ation e?ers fro *hi)h a sa0'e is selected. A sampling
frame error occurs when the sample is drawn from an inaccurate sampling frame. 'or example, if a
researcher interested in finding the reasons why some people have 0ersona' )o0uters in their homes
selects the sample from a list of subscribers to 2C Wor'!, he or she is inducing a sampling frame error
into the study.
&e'e)tion errors
/election errors occur when the correct population has been chosen, but the sa0'e taken from the
population is not re0resentati%e of the entire population. 'or example, a university may decide to ask
students who are enrolled in art classes what additional classes they should offer. A selection error occurs
when the students who are asked are still not representative of the whole student population. 'or
example, a young a'e stu!ent employed to conduct the survey might view the task as a good
opportunity to chat up 'ots of young *oen. As a result, a much larger population of women than men
will be included in the sample. If women want different types of classes than men, this could result in the
survey returning inaccurate information due to selection error.
&urrogate inforation error
/urrogate information error is the difference or variance between the inforation re5uire! for a
marketing research study . the inforation ?eing sought by the researcher. %he famous or rather
infamous! -ew *oke tests are a classic example of surrogate information error. %he researchers in that
case were seeking information regarding the taste of the -ew *oke versus 2ld *oke, but the study
should have determined consumer0s attitudes toward a change in the product . not &ust their taste
preferences.
Measureent error
Measurement error is the difference between or the variation between the inforation sought by a
researcher for a study . the inforation generate! by a particular measurement procedure employed
by the researcher. Measurement error can occur at any stage of the measurement process, from the
development of an instrument the data analysis . interpretation stage. 'or example, if a researcher
interested in the in!i%i!ua' in)oe of the respondent words the "uestions as annua' househo'!
in)oe, a measurement error is being induced into the research study.
.ore)asting an! Dean! Measureent
.ore)asting Metho!s
Cua'itati%e Te)hni5ues
Cuantitati%e Te)hni5ues
o Regression or )ausa' ana'ysis 4 6ses factors that have affected sales in the past and
implements them in a mathematical model.
o Tie series te)hni5ues 4 6se historical data ordered in time to pro&ect the trend and
growth rate of sales e.g. Moving Averages, 1xponential /moothing
A. Creating Custoer 3a'ue# &atisfa)tion $ -oya'ty
3a'ue
Falue G +enefits 7 *osts G 'unctional benefits H 1motional benefits! 7 Monetary costs H %ime costs H
1nergy costs H #sychic costs!
3a'ue 2ro0osition
%he value proposition consists of the whole cluster of benefits the company promises to deliver( it is more
than the core positioning of the offering. 'or example, Folvo3s core positioning has been 4safety,4 but the
buyer is promised more than &ust a safe car( other benefits include a long)lasting car, good service, and a
long warranty period
Cua'ity
=uality is the totality of features and characteristics of a product or service that bear on its ability to satisfy
stated or implied needs
Tota' 5ua'ity anageent 7TCM8
%otal "uality management %=M! is an organization)wide approach to continuously improving the "uality
of all the organization3s processes, products, and services
Custoer 'ifetie %a'ue 7C-38
*ustomer lifetime value *DF! describes the net present value of the stream of future profits expected
over the customer3s lifetime purchases
Custoer E5uity
*ustomer e"uity is the total of the discounted lifetime values of all of the firm3s customers. Demon
distinguish three drivers of customer e"uity: %a'ue e5uity, ?ran! e5uity, and re'ationshi0 e5uity
"@. Ana'yDing Consuer Markets
.a)tors inf'uen)ing ?uyer ?eha%ior6
Cu'tura' .a)tors6 *ulture, subculture nationalities, religions, racial groups, and geographic
regions!, social class
&o)ia' .a)tors6 :eference groups, family, social roles and statuses.
2ersona' .a)tors6 Age and stage in the life cycle( occupation and economic circumstances,
personality and self)concept, lifestyle, values
2sy)ho'ogi)a' .a)tors6 Motivation, #erception, Dearning, +elief, Attitudes
o MA&-/WE& T1E/RF Abraham Maslow sought to explain why people are driven
by particular needs at particular times. $hy does one person spend considerable
time and energy on personal safety and another on pursuing the high opinion of
others> Maslow3s answer is that human needs are arranged in a hierarchy, from
the most pressing to the least pressing.
Mas'o*;s 1ierar)hy of nee!s
The 9uying De)ision 2ro)ess6 The .i%e4&tage Mo!e'
#roblem :ecognition
Information /earch
1valuation of Alternatives
#urchase 5ecision
#ostpurchase behavior
"G. Ana'yDing 9usiness Markets
What Is /rganiDationa' 9uying?
$ebster and $ind define organizational buying as the decision)making process by which formal
organizations establish the need for purchased products and services and identify, evaluate, and choose
among alternative brands and suppliers.
9uying &ituations 4 straight rebuy, modified rebuy, and new task.
The 9uying Center
$ebster and $ind call the decision)making unit of a buying organization the buying center. It is
composed of 4all those individuals and groups who participate in the purchasing decision)making process,
who share some common goals and the risks arising from the decisions.4 %he buying center includes all
members of the organization who play any of seven roles in the purchase decision process.

Initiators
(sers
Inf'uen)ers
De)i!ers
A00ro%ers
9uyers
Gatekee0ers. #eople who have the power to prevent sellers or information from reaching
members of the buying center. 'or example, purchasing agents, receptionists, and telephone
operators may prevent salespersons from contacting users or deciders.
9uying Inf'uen)es
E)onoi) 9uying Inf'uen)e6 ,ives final approval to buy( one person or set of people.
'ind 1+ early and demonstrate the bottom line impact
(ser 9uying Inf'uen)es6 Make &udgements about the potential impact of your
product7service on their &ob performance( there may be several 6+
Te)hni)a' 9uying Inf'uen)es6 /creen out possible suppliers( make recommendations
based on how well the product meets a variety of ob&ective specifications( can0t give a
final yes, buy they can and often do! give a final no.
Coa)h6 leads you to buyers and provides information you need in order to position
yourself effectively with each
The &a'es .unne'
H &tages in the 9uying 2ro)ess
#roblem :ecognition.
,eneral need description
#roduct specification.
/upplier /earch.
1)#rocurement.

#roposal /olicitation I :'# . :'=
/upplier /election.
2rder :outine /pecification.
#erformance :eview.
+. I!entifying Market &egents $ Targets
&egentation 4 /electing a well)defined group of potentially profitable customers.
Targeting 4 'ocusing marketing resources on ac"uiring, developing, and retaining profitable
customers.
2ositioning 4 5eveloping a distinctive value proposition.
Ni)he Marketing
A niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers
usually identify niches by dividing a segment into subsegments. 'or example, #rogressive, a *leveland
auto insurer, sells 4nonstandard4 auto insurance to risky drivers with a record of auto accidents, charges a
high price for coverage and makes a lot of money in the process.
&egenting Consuer Markets6
Geogra0hi) &egentation6 -ations, states, regions, counties, cities, or neighborhoods
Deogra0hi) &egentation6 Age . stage of life cycle, gender, generation, social class 7 income
2sy)hogra0hi) segentation6 Dife style, personality, values
9eha%iora' &egentation6 +ehavioral variables like occasions, benefits, user status, usage rate,
loyalty status, buyer)readiness stage, and attitude
-oya'ty &tatus 6 <ard)core loyals, /plit loyals, /hifting loyals, /witchers
Attitu!e 6 1nthusiastic, #ositive, Indifferent, -egative, <ostile
Effe)ti%e &egentation Criteria6 Measura?'e# &u?stantia'# A))essi?'e# Differentia?'e# A)tiona?'e
&e'e)ting the Market &egents6 /ingle)segment concentration, /elective specialization, #roduct
specialization, Market specialization, 'ull market coverage4Darge firms can cover a whole market in two
broad ways: through un!ifferentiate! arketing or !ifferentiate! arketing.
In undifferentiated marketing, the firm ignores segment differences and goes after the whole market with
one offer. It designs a product and a marketing program that will appeal to the broadest number of buyers.
In differentiated marketing, the firm operates in several market segments and designs different products
for each segment.
Megaarketing
Megamarketing is the strategic coordination of economic, psychological, political, and public relations
skills, to gain the cooperation of a number of parties in order to enter or operate in a given market. #epsi
used megamarketing to enter the Indian market.
H. Dea'ing *ith Co0etition
Market -ea!er &trategies6
+eing the leader calls for action on three fronts:
%he firm must find ways to e,0an! tota' arket !ean!
%he firm must 0rote)t its )urrent arket share through good !efensi%e an! offensi%e actions
%he firm can try to in)rease its arket share, even if market size remains constant
Defen!ing Market &hare
Market4Cha''enger &trategies
A market challenger must first define its strategic ob&ective. Most aim to increase market share. %he
challenger must decide whom to attack:
It can attack the market leader
It can attack firms of its own size that are not doing the &ob and are underfinanced
It can attack small local and regional firms
,iven clear opponents and ob&ectives, available attack options are :
Market4.o''o*er &trategies
'our broad strategies can be distinguished:
C/(NTER.EITER %he counterfeiter duplicates the leader3s product and package and sells it on the
black market or through disreputable dealers. Music record firms, Apple *omputer, and :olex have been
plagued with the counterfeiter problem, especially in Asia
C-/NER %he cloner emulates the leader3s products, name, and packaging, with slight variations. 'or
example, :alcorp <olding Inc., sells imitations of name)brand cereals in lookalike boxes. Its %asteeos,
'ruit :ings, and *orn 'lakes sell for nearly JA a box less than the leading name brands.
IMITAT/R %he imitator copies some things from the leader but maintains differentiation in terms of
packaging, advertising, pricing, or location. %he leader does not mind the imitator as long as the imitator
does not attack the leader aggressively. 'ernandez #u&als grew up in 'ort Dauderdale, 'lorida, and took
5omino3s home delivery idea to /pain, where he borrowed JK@,@@@ to open his first store in Madrid. <is
%ele#izza chain now operates almost A,@@@ stores in 1urope and Datin America.
ADA2TER %he adapter takes the leader3s products and adapts or improves them. %he adapter may
choose to sell to different markets, but often the adapter grows into the future challenger, as many
Capanese firms have done after adapting and improving products developed elsewhere.
Market4Ni)her &trategies
An alternative to being a follower in a large market is to be a leader in a small market, or niche. /maller
firms normally avoid competing with larger firms by targeting small markets of little or no interest to the
larger firms. <ere is an example.
1". Creating 9ran! E5uity
9ran!
+rand as 4a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods
or services of one seller or group of sellers and to differentiate them from those of competitors.4
9ran!ing
+randing is endowing products and services with the power of a brand
9ran! 0roise or ?ran! essen)e or ?ran! antra
+rand promise is the marketer3s vision of what the brand must be and do for consumers
9ran! e5uity
+rand e"uity is the customer3s sub&ective and intangible assessment of the brand, above and beyond its
ob&ectively perceived value. +rand e"uity is the added value endowed to products and services. %his
value may be reflected in how consumers think, feel, and act with respect to the brand, as well as the
prices, market share, and profitability that the brand commands for the firm.
9ran! a*areness
+rand awareness is consumers3 ability to identify the brand under different conditions, as reflected by their
brand recognition or recall performance.
9ran! kno*'e!ge or ?ran! asso)iation
+rand knowledge or brand association consists of all the thoughts, feelings, images, experiences, beliefs,
and so on that become associated with the brand.
9ran! iage
+rand image is the perceptions and beliefs held by consumers, as reflected in the associations held in
consumer memory.
9ran! 0ersona'ity
+rand personality is the human characteristics or traits that consumers can attribute to a brand. $e can
measure it in different ways. #erhaps the simplest . most direct way is to solicit open)ended responses to
a probe such as the following:
If the brand were to come alive as a person, what would it be like>
$hat would it do>
$here would it live>
$hat would it wear>
$ho would it talk to if it went to a party and what would it talk about!>
9ran! )onta)t
+rand contact can be defined as any information)bearing experience a customer or prospect has with the
brand, the product category, or the market that relates to the marketer3s product or service
9ran! !i'ution
+rand dilution occurs when consumers no longer associate a brand with a specific product or highly
similar products and start thinking less of the brand
9ran! E5uity Mo!e's
9RAND A&&ET 3A-(AT/R M/DE- 79A38 %here are four key components or pillars of brand e"uity,
according to +AF:
Differentiation measures the degree to which a brand is seen as different from others,
Re'e%an)e measures the breadth of a brand3s appeal
Estee measures how well the brand is regarded and respected.
Kno*'e!ge measures how familiar and intimate consumers are with the brand.
5ifferentiation and :elevance combine to determine 9ran! &trength. %hese two pillars point to the
brand3s future value, rather than &ust reflecting its past. 1steem and Lnowledge together create 9ran!
&tature, which is more of a 4report card4 on past performance
AAKER M/DE-
9ran! E5uity Mo!e'
'ormer 6*)+erkeley marketing professor 5avid Aaker views brand e"uity as a set of five categories of
brand assets and liabilities linked to a brand that add to or subtract from the value provided by a product
or service to a firm and7or to that firm3s customers. %hese categories of brand assets are:
9ran! 'oya'ty,
9ran! a*areness,
2er)ei%e! 5ua'ity,
9ran! asso)iations, and
/ther 0ro0rietary assets such as patents, trademarks, and channel relationships.
According to Aaker, a particularly important concept for building brand e"uity is ?ran! i!entityMthe
uni"ue set of brand associations that represent what the brand stands for and promises to customers.

It
helps establish a relationship between the brand . the customer by generating a value proposition
involving functional, emotional . self)expressive benefits.

Aaker sees brand identity as consisting of 12 !iensions organized around B 0ers0e)ti%es:
9ran!4as40ro!u)t product scope, product attributes, "uality7value, uses, users, country of
origin!(
9ran!4as4organiDation organizational attributes, local versus global!(
9ran!4as40erson brand personality, brand)customer relationships!( and
9ran!4as4sy?o' visual imagery7metaphors and brand heritage!
9ran! I!entity Mo!e'
Aaker also conceptualizes brand identity as including a core and an extended identity. %he )ore i!entity
Mthe central, timeless essence of the brand, is most likely to remain constant as the brand travels to new
markets and products. %he e,ten!e! i!entity includes various brand identity elements, organized into
cohesive and meaningful groups. %ake the example of Amul for this sake
9RANDI Marketing research consultants Millward +rown and $## have developed the model of brand
strength, at the heart of which is the +rand5ynamics pyramid. According to this model, brand building
involves a se"uential series of steps, where each step is contingent upon successfully accomplishing the
previous step. %he ob&ectives at each step, in ascending order, are as follows:
2resen)e. 5o I know about it>
Re'e%an)e. 5oes it offer me something>
2erforan)e. *an it deliver>
A!%antage. 5oes it offer something better than others>
9on!ing. -othing else beats it.
9RAND RE&/NANCE %he brand resonance model also views brand building as an ascending,
se"uential series of steps, from bottom to top:
KA2.ERER;& 9RAND IDENTITF 2RI&M
9ui'!ing 9ran! E5uity6
9ran! e5uity !ri%ers
A. %he initial choices for the brand elements or identities making up the brand e.g., brand names, 6:Ds,
logos, symbols, characters, spokespeople, slogans, &ingles, packages, and signage!.
?. %he product and service and all accompanying marketing activities and supporting marketing
programs.
E. 2ther associations indirectly transferred to the brand by linking it to some other entity e.g., a person,
place, or thing!.
9ran! E'eent Choi)e Criteria6 memorable, meaningful, likeability, transferability to new products,
adaptable7updatable with time, legally protectable against copying
Measuring 9ran! E5uity6
9ran! 3a'ue Chain
It is a structured approach to assessing the sources . outcomes of brand e"uity . the manner by which
marketing activities create brand value.
&te0s for Measuring 9ran! E5uity
&te0 16 9ran! E5uity Charter
'ormalize the firm0s view of brand e"uity into a document, the brand e"uity charter, that provides
relevant branding guidelines to marketing managers
&te0 26 9ran! Au!it
A brand audit is a consumer)focused exercise that involves a series of procedures to assess the
health of the brand, uncover its sources of brand e"uity, and suggest ways to improve and
leverage its e"uity. +rand audits consist of two steps: the brand inventory and the brand
exploratory.
o 9RAND IN3ENT/RF %he purpose of the brand inventory is to provide a current,
comprehensive profile of how all the products and services sold by a company are
marketed and branded. #rofiling each product or service re"uires identifying all
associated brand elements as well as the supporting marketing program %he brand
inventory helps to suggest what consumers3 current perceptions may be based on
o 9RAND EJ2-/RAT/RF is research activity conducted to understand what consumers
think and feel about the brand and its corresponding product category to identify sources
of brand e"uity.
&te0 <6 9ran! Tra)king
%racking studies collect information from consumers on a routine basis over time. %racking
studies typically employ "uantitative measures to provide marketers with current information as to
how their brands and marketing programs are performing on the basis of a number of key
dimensions
&te0 B6 9ran! E5uity Re0ort
Assemble results of tracking survey . other relevant outcome measures into a brand e"uity
report to be distributed on a regular basis to provide descriptive information as to what is
happening with a brand as well as diagnostic information as to why it is happening
&te0 A6 Esta?'ishent of a i0'eentation !e0artent
1stablish a person or a department to oversee the implementation of the brand e"uity charter .
brand e"uity reports to make sure that, as much as possible, product . marketing actions across
divisions . geographic boundaries are done in a way that reflects the spirit of the charter . the
substance of the report so as to maximize the long)term e"uity of the brand
9ran! e,tensions
-ine e,tension
#arent brand extended to a new product that targets a new segment like new flavors of ice
cream, new packaging like Difebuoy li"uid soap!
Category e,tension
#arent brand used for a different product category like <M% watches, %F/ printersN.!
9ran! 2ortfo'io
%he specific roles brands can play as part of a brand portfolio are :
.-ANKER 'lanker or 4fighter4 brands are positioned with respect to competitors3 brands so that more
important and more profitable! flagship brands can retain their desired positioning. #rocter . ,amble
markets Duvs diapers in a way that flanks the more premium positioned #ampers.
CA&1 C/W& /ome brands may be kept around despite dwindling sales because they still manage to
hold on to a sufficient number of customers and maintain their profitability with virtually no marketing
support.
-/W4END ENTRF4-E3E- %he role of a relatively low)priced brand in the brand portfolio often may be to
attract customers to the brand franchise. :etailers like to feature these 4traffic builders4 because they are
able to 4trade up4 customers to a higher)priced brand
1IG14END 2RE&TIGE %he role of a relatively high)priced brand in the brand family often is to add
prestige and credibility to the entire portfolio
11. Crafting the 9ran! 2ositioning
Differentiation strategies6 #roduct, /ervices, #ersonnel, *hannel . Image differentiation
&te0s in 0ositioning resear)h
Identify the relevant set of competitive products and brands which satisfy the same customer
need
2btain demographic and other descriptive information to ascertain perceptual differences by
segments.
Analyze the data and present the results using simple representations such as: semantic
differential plots, "uadrant maps, importance7performance profiles, or use perceptual mapping
techni"ues such as: specialized multidimensional scaling procedures, discriminant analysis,
factor analysis, correspondence analysis.
2rofi'e ana'ysis
#rofile analysis of a beer brand images
2erforan)e ana'ysis
Inter0retation
*oncentrate here
Leep with the good work
Dow priority
#ossible overkill
A!%antages
%his is a relatively low cost techni"ue and easily understood by information users, it can provide
management with a useful focus for developing marketing strategies.
.a)tor Ana'ysis
It is a class of techni"ues used to reduce and summarize data. %he ob&ective is to represent a set of
variables in terms of a smaller number of hypothetical, underlying and unknown dimensions called
factors. Det us take an example of life insurance policy provided by banks.

5escribes
completely A ? E O B
5oes not
describe at
all P
A
will not cancel policy because of age7 minor
problem
? tries to handle claim e"uitably
E difficult to do business with
O provides excellent recommendations
B
does not pay attention to policy holder
problems
P explains policies clearly
Q raises premium without reason
K policies better than others for older
R renewable for life
A@ long time to settle claims
AA "uick service
A? good citizen
A, K , R or ?, O, P, AA, A? or E, B, Q, A@ may prove to be similar factors
:elavance for older people
<umanistic approach
C'uster Ana'ysis
It is a class of techni"ues used to separate ob&ects into groups so that each ob&ect is more like others in
the group than outside ones. /eeks to describe natural groupings
Mu'ti!iensiona' &)a'ing 7MD&8
A set of techni"ues to transform dissimilarities and preferences among ob&ects into distances by placing
them in a multi)dimensional space. It creates a spatial representation of dissimilar data. It allows
embedding ideal)points and property)vectors in the spatial representation, and estimating weights for
individual differences. An example of multidimensional scaling is perceptual mapping.
2er)e0tua' Ma00ing
2ne basis for analyzing the positioning of each competitive brand is the perceptual mapping of similarities
and preferences based on the Multidimensional scaling study. %he data are obtained through interviews
with a sample of ?@@ individuals.
&eanti) &)a'ing
<ow sweet is your ideal cola>
<ow important is it to you that a cola have the proper sweetness>
<ow closely does brand S match to your ideal sweetness>
FeryGO /omewhatGE -ot muchG? -ot at allGA
Con%entiona' Ma00ing
&nake Chart
Con=oint Ana'ysis
*on&oint analysis is concerned with measurement of psychological &udgements such as preferences.
6tility of each stimuli is inferred from consumer0s overall estimation of the stimuli. :espondents are shown
different hypothetical offers formed by combining varying levels of the attributes, then asked to rank the
various offers.
Det us consider ? dimensions I #rice . Tears of warranty for a car, then the offers can be ranked in the
following way
Targeting &trategies
Dire)t hit ) /ingle product ;right on0
9ra)keting ) multiple products ;surround0
T*eeners ) /ingle product ;splitting the difference0 to induce a new segmentation
2ro!u)t -ife4Cy)'e Marketing &trategies
Intro!u)tion &tage6
*auses for the slow growth are:
o 5elay in the expansion of production capacity.
o %echnical problems.
o 5elays in obtaining ade"uate distribution through retail outlets.
o *ustomer reluctance to change established behaviour.
o #roduct complexity for some products!.
#rofits are negative or low in this stage because of low sales and heavy distribution and
promotional expenses.
#rices are high because of high cost due to relatively low output rates, technological
problems in production
-ew product launch may be set high or low level for each marketing variable O#s!.
*onsidering only price and promotion, management can pursue one of four strategies.
o Ra0i! skiing K <igh price and high promotion since potential market is unaware of
the product and are eager to have it and will pay at the asking price.
o &'o* skiing K <igh price and low promotion since market is limited in size, market is
aware of the product . buyers are willing to pay a high price.
o Ra0i! 0enetration K Dow price and heavy promotion as when market is large, the
market is unaware, most buyers are price sensitive, there is strong potential competition,
. unit cost will fall with company0s scale of production and experience.
o &'o* 0enetration K Dow price and low promotion as when market is large, market is
highly aware of product, is price sensitive and there is some potential competition.
2ioneer A!%antage
Gro*th &tage6
%his stage is marked by rapid climb in sales. 1arly adopters . other consumers start buying it.
-ew *ompetitors enter attracted by the opportunities. %hey introduce new product features and
expand distribution.
#rices remain where they are or fall slightly depending on how fast demand increases.
*ompanies maintain their promotional expenditures at the same or at a slightly increased level to
meet competition . to educate the market.
#rofits increase during this stage as promotion costs are spread over a larger sales and
manufacturing cost falls faster owing to learning 7 experience effect.
5uring this stage the strategies the firm uses to sustain rapid market growth are :
o Improve product "uality, add new features and improve styling.
o Add new models . flanker products of different sizes, flavours to protect the main
product!.
o 1nter new segments.
o Increase . enter new distribution channels.
o /hifts product awareness advertising to product preference advertising.
o Dower prices to attract the next layer of price ) sensitive buyers.
Maturity &tage6
%he rate of sales growth will be slow, and the product will enter a stage of relative maturity. %his
stage lasts longer than the previous stages . poses challenges to marketing management.
%his stage divides into three phases: gro*th, sta?'e and !e)aying aturity. 'irst phase, the
sales growth rate starts to decline. In the second phase, sales flatten. Most consumers have tried
the product, sales are governed by population growth and replacement demand. In the third
phase, decaying maturity, the absolute level of sales starts to decline . customers begin
switching to other products . substitutes.
/ales slowdown creates over capacity in the industry leading to intensified competition.
*ompetitors engage in fre"uent markdown.
%hey increase advertising . trade and consumer promotion.
%hey increase : . 5 budgets to develop product improvements and the extensions.
/hake out begins . weaker competitors withdraw.
5ominating the industry are a few giants firms ) perhaps a "uality leader, a service leader . a
cost leader ) that serve the whole market . make their profits mainly through high volume . lower
costs. /urrounding them are market nichers, including market specialists, product specialists and
customising firms.
Market Mo!ifi)ations
o *onvert non users.
o 1nter new market segments.
o $in competitors customers
2ro!u)t Mo!ifi)ation
Cua'ity I0ro%eent
.eature I0ro%eents
&ty'e I0ro%eent
Marketing 4 Mi, Mo!ifi)ations
o #rice.
o 5istribution.
o Advertising.
o /ales #romotion.
o #ersonal /elling.
o /ervices.
De)'ine &tage6
%he decline may be slow, may plunge to zero, they may petrify at a low level.
/ales decline for a number of reasons, including technological advances, shifts in consumer
tastes, increase domestic . foreign competition. All lead to over capacity, increased price cutting,
profit erosion.
%hose firms in market place may withdraw from smaller segment, weak trade channels, cut their
promotional budget and further reduce prices.
'ailing to eliminate weak products delay the aggressive search for replacement products.
%he lower the exit barriers, the easier it is for firms to stay and attract the withdrawal firms0
customers.
*ompany /trategies in declining industries :
o Increasing the firm3s investment to dominate the market or strengthen its competitive
position!.
o Maintaining the firm3s investment level until the uncertainties about the industry are resolved.
o 5ecreasing the firm3s investment level selectively, by dropping unprofitable customer groups,
while simultaneously strengthening the firm3s investment in lucrative niches.
o <arvesting 4milking4! the firm3s investment to recover cash "uickly.
o 5ivesting the business "uickly by disposing of its assets as advantageously as possible.
12. &etting 2ro!u)t &trategy
2ro!u)t -e%e's6 The Custoer 3a'ue 1ierar)hy
1. Core 0ro!u)t6 (se4?enefit# 0ro?'e4so'%ing ser%i)e
%he fundamental level is the core benefit: the service or benefit the customer is really buying. A
hotel guest is buying 4rest and sleep.4
2. Generi) 0ro!u)t6 9asi) %ersion of the 0ro!u)t
At the second level, the marketer has to turn the core benefit into a basic product. %hus a hotel
room includes a bed, bathroom, towels, desk, dresser, and closet.
<. E,0e)te! 0ro!u)t6 &et of attri?utes an! )on!itions that ?uyers nora''y e,0e)t
At the third level, the marketer prepares an expected product, a set of attributes and conditions
buyers normally expect when they purchase this product. <otel guests expect a clean bed, fresh
towels, working lamps, and a relative degree of "uiet. +ecause most hotels can meet this
minimum expectation, the traveler normally will settle for whichever hotel is most convenient or
least expensive.
B. Augente! 0ro!u)t6 Consists of a!!itiona' ser%i)es an! ?enefits that !istinguish the
)o0any;s offer fro that of the )o0etition
A. 2otentia' 0ro!u)t6 2ossi?'e augentations an! transforations that this 0ro!u)t ight
u'tiate'y un!ergo in future
<ere is where companies search for new ways to satisfy customers and distinguish their offer
2ro!u)t4Mi, 2ri)ing
2R/D(CT4-INE 2RICING *ompanies normally develop product lines rather than single products and
introduce price steps. 1.g. Intel
/2TI/NA-4.EAT(RE 2RICING Many companies offer optional products, features, and services along
with their main product
CA2TI3E42R/D(CT 2RICING /ome products re"uire the use of ancillary, or captive products.
Manufacturers of razors, digital phones, and cameras often price them low and set high markups on razor
blades and film, respectively. A%.% may give a cellular phone free if the person commits to buying two
years of phone service.
TW/42ART 2RICING /ervice firms often engage in two)part pricing, consisting of a fixed fee plus a
variable usage fee.
9F42R/D(CT 2RICING %he production of certain goodsMmeats, petroleum products, and other
chemicalsMoften results in by)products. If the by)products have value to a customer group, they should
be priced on their value. Any income earned on the by)products will make it easier for the company to
charge a lower price on its main product if competition forces it to do so.
2R/D(CT49(ND-ING 2RICING /ellers often bundle products and features. 2ure ?un!'ing occurs
when a firm only offers its products as a bundle. Michael 2vitz3s former company, Artists Management
,roup, would sign up a 4hot4 actor if the film company would also accept other talents that 2vitz
represented directors, writers, scripts!. %his is a form of tied)in sales. In i,e! ?un!'ing, the seller offers
goods both individually and in bundles. $hen offering a mixed bundle, the seller normally charges less for
the bundle than if the items were purchased separately. An auto manufacturer might offer an option
package at less than the cost of buying all the options separately.
1<. Designing $ Managing &er%i)es
&er%i)e
A service is any act or performance that one party can offer to another that is essentially intangible and
does not result in the ownership of anything. Its production may or may not be tied to a physical product.
Manufacturers, distributors, and retailers can provide value)added services or simply excellent customer
service to differentiate themselves.
Distin)ti%e Chara)teristi)s of &er%i)es
/ervices have four distinctive characteristics that greatly affect the design of marketing programs:
intangibility, inseparability, variability, and perishability.
E,ten!e! Marketing Mi, for &er%i)es6 #eople, #rocess, #hysical 1vidence
1B. De%e'o0ing 2ri)ing &trategies $ 2rogras
&etting the 0ri)ing strategy
%he pricing ob&ective could be one of the three: sur%i%a', a,iu )urrent 0rofit, a,iu arket
share.
*ompanies select a pricing method that includes one or more of these three considerations. $e will
examine si, 0ri)e4setting etho!s: arku0 0ri)ing# target4return 0ri)ing# 0er)ei%e!4%a'ue 0ri)ing#
%a'ue 0ri)ing 71i4'o or ED-28# going4rate 0ri)ing# an! au)tion4ty0e 0ri)ing.
A!a0ting the 2ri)e
7i8 Geogra0hi)a' 2ri)ing 7Cash# Countertra!e# 9arter8
In geographical pricing the company decides how to price its products to different customers in different
locations and countries
9arter. %he direct exchange of goods, with no money and no third party involved.
Co0ensation !ea'. %he seller receives some percentage of the payment in cash and the rest in
products. A +ritish aircraft manufacturer sold planes to +razil for Q@ percent cash and the rest in
coffee.
9uy?a)k arrangeent. %he seller sells a plant, e"uipment, or technology to another country and
agrees to accept as partial payment products manufactured with the supplied e"uipment. A 6./.
chemical company built a plant for an Indian company and accepted partial payment in cash and
the remainder in chemicals manufactured at the plant.
/ffset. %he seller receives full payment in cash but agrees to spend a substantial amount of the
money in that country within a stated time period. 'or example, #epsi*o sells its cola syrup to
:ussia for rubles and agrees to buy :ussian vodka at a certain rate for sale in the 6nited /tates.
7ii8 2ri)e Dis)ounts an! A''o*an)es
Cash Dis)ount
Cuantity Dis)ount
.un)tiona' Dis)ount6
5iscount also called tra!e !is)ount! offered by a manufacturer to trade)channel members if
they will perform certain functions, such as selling, storing, and recordkeeping. Manufacturers
must offer the same functional discounts within each channel.
&easona' Dis)ount

A''o*an)e
7iii8 2rootiona' 2ri)ing
-oss4'ea!er 0ri)ing
&0e)ia'4e%ent 0ri)ing6 /ellers will establish special prices in certain seasons to draw in more
customers. 1very August, there are back)to)school sales.
Cash re?ates
-o*4interest finan)ing
-onger 0ayent ters
Warranties an! ser%i)e )ontra)ts
2sy)ho'ogi)a' !is)ounting
7i%8 Differentiate! or Dis)riinatory 2ri)ing
#rice discrimination occurs when a company sells a product or service at two or more prices that do not
reflect a proportional difference in costs.
In first4!egree 0ri)e !is)riination, the seller charges a separate price to each customer depending
on the intensity of his or her demand. In se)on!4!egree 0ri)e !is)riination, the seller charges less to
buyers who buy a larger volume. In thir!4!egree 0ri)e !is)riination, the seller charges different
amounts to different classes of buyers, as in the following cases:
Custoer4segent 0ri)ing
2ro!u)t4for 0ri)ing
Iage 0ri)ing
Channe' 0ri)ing
-o)ation 0ri)ing
Tie 0ri)ing
%he airline and hospitality industries use yield management systems and yie'! 0ri)ing, by which they
offer discounted but limited early purchases, higher)priced late purchases, and the lowest rates on unsold
inventory &ust before it expires.
Res0on!ing to Co0etitorsE 2ri)e Changes
Maintain 0ri)e. %he leader might maintain its price and profit margin, believing that A! it would
lose too much profit if it reduced its price, ?! it would not lose much market share, and E! it could
regain market share when necessary. <owever, the argument against price maintenance is that
the attacker gets more confident, the leader3s sales force gets demoralized, and the leader loses
more share than expected. %he leader panics, lowers price to regain share, and finds that
regaining its market position is more difficult than expected.
Maintain 0ri)e an! a!! %a'ue. %he leader could improve its product, services, and
communications. %he firm may find it cheaper to maintain price and spend money to improve
perceived "uality than to cut price and operate at a lower margin.
Re!u)e 0ri)e. %he leader might drop its price to match the competitor3s price. It might do so
because A! its costs fall with volume, ?! it would lose market share because the market is price
sensitive, and E! it would be hard to rebuild market share once it is lost. %his action will cut
profits in the short run.
In)rease 0ri)e an! i0ro%e 5ua'ity. %he leader might raise its price and introduce new brands
to bracket the attacking brand.
-aun)h a 'o*40ri)e fighter 'ine. It might add lower)priced items to the line or create a separate,
lower)priced brand.
1A. Designing $ Managing Integrate! Marketing Channe's
3a'ue Net*orks
A supply chain view of a firm sees markets as destination points and amounts to a linear view of the flow.
%he company should first think of the target market, however, and then design the supply chain backward
from that point. %his view has been called demand chain planning.
An even broader view sees a company at the center of a %a'ue net*orkMa system of partnerships and
alliances that a firm creates to source, augment, and deliver its offerings. A value network includes a firm3s
suppliers and its suppliers3 suppliers, and its immediate customers and their end customers
Channe' -e%e's
Why Do &oe En! (sers 2refer Distri?utors?
5istributors *an
#rovide fast delivery
#rovide segment)based product assortment
#rovide local credit
#rovide product information
Assist in buying decisions
Anticipate needs
Why Do &oe &u00'iers 2refer Distri?utors?
+uy and hold inventory
*ombine manufacturers0 outputs
/hare credit risk
/hare selling risk
'orecast market needs
#rovide market information
#roducers vary greatly in skill in managing distributors. Channe' 0o*er can be defined as the ability to
alter channel members3 behavior so that they take actions they would not have taken otherwise.
Manufacturers can draw on the following types of power to elicit cooperation:
Coer)i%e 0o*er6 A manufacturer threatens to withdraw a resource or terminate a relationship if
intermediaries fail to cooperate. %his power can be effective, but its exercise produces
resentment and can generate conflict and lead the intermediaries to organize countervailing
power.
Re*ar! 0o*er6 %he manufacturer offers intermediaries an extra benefit for performing specific
acts or functions. :eward power typically produces better results than coercive power, but can be
overrated. %he intermediaries may come to expect a reward every time the manufacturer wants a
certain behavior to occur.
-egitiate 0o*er6 %he manufacturer re"uests a behavior that is warranted under the contract.
As long as the intermediaries view the manufacturer as a legitimate leader, legitimate power
works.
E,0ert 0o*er6 %he manufacturer has special knowledge that the intermediaries value. 2nce the
expertise is passed on to the intermediaries, however, this power weakens. %he manufacturer
must continue to develop new expertise so that the intermediaries will want to continue
cooperating.
Referent 0o*er6 %he manufacturer is so highly respected that intermediaries are proud to be
associated with it. *ompanies such as I+M, *aterpillar, and <ewlett)#ackard have high referent
power.
Channe' Integration an! &ystes6
3erti)a' Marketing &ystes
A conventional marketing channel comprises an independent producer, wholesaler s!, and retailers!.
1ach is a separate business seeking to maximize its own profits, even if this goal reduces profit for the
system as a whole. -o channel member has complete or substantial control over other members.
A vertical marketing system FM/!, by contrast, comprises the producer, wholesalers!, and retailers!
acting as a unified system. 2ne channel member, the channel captain, owns the others or franchises
them or has so much power that they all cooperate. %he channel captain can be the producer, the
wholesaler, or the retailer. -otable producer channel captains are *oca)*ola with soft drinks, ,illette with
shaving products, and #rocter . ,amble with detergents.
C/R2/RATE 3M& A corporate FM/ combines successive stages of production and distribution under
single ownership. 'or example, /herwin)$illiams makes paint but also owns and operates ?,@@@ retail
outlets. ,iant 'ood /tores operates an ice)making facility, a soft)drink bottling operation, an ice cream
plant, and a bakery that supplies ,iant stores with everything from bagels to birthday cakes.
ADMINI&TERED 3M& An administered FM/ coordinates successive stages of production and
distribution through the size and power of one of the members. Manufacturers of a dominant brand are
able to secure strong trade cooperation and support from resellers. %hus Lodak, ,illette, and *ampbell
/oup are able to command high levels of cooperation from their resellers in connection with displays,
shelf space, promotions, and price policies.
%he most advanced supply)distributor arrangement for administered FM/s involve !istri?ution
0rograing, which can be defined as building a planned, professionally managed, vertical marketing
system that meets the needs of both manufacturer and distributors. %he manufacturer establishes a
department within the company called !istri?utor4re'ations 0'anning. Its &ob is to identify distributor
needs and build up merchandising programs to help each distributor operate as efficiently as possible
C/NTRACT(A- 3M& A contractual FM/ consists of independent firms at different levels of production
and distribution integrating their programs on a contractual basis to obtain more economies or sales
impact than they could achieve alone. Cohnston and Dawrence call them 4%a'ue4a!!ing 0artnershi0s4
FA#s!.
*ontractual FM/s now constitute one of the most significant developments in the economy. %hey are of
three types:
A. Who'esa'er4s0onsore! %o'untary )hains ) $holesalers organize voluntary chains of independent
retailers to help them compete with large chain organizations. %he wholesaler develops a program in
which independent retailers standardize their selling practices and achieve buying economies that
enable the group to compete effectively with chain organizations.
?. Retai'er )oo0erati%es ) :etailers take the initiative and organize a new business entity to carry on
wholesaling and possibly some production. Members concentrate their purchases through the retailer
co)op and plan their advertising &ointly. #rofits are passed back to members in proportion to their
purchases. -onmember retailers can also buy through the co)op but do not share in the profits.
E. .ran)hise organiDations ) A channel member called a franchisor might link several successive stages
in the production)distribution process.)'ranchising has been the fastest)growing retailing development
in recent years. Although the basic idea is an old one, some forms of franchising are "uite new
%he traditional system is the anufa)turer4s0onsore! retai'er fran)hise. 'ord, for example, licenses
dealers to sell its cars. %he dealers are independent businesspeople who agree to meet specified
conditions of sales and services. Another is the anufa)turer4s0onsore! *ho'esa'er fran)hise. *oca)
*ola, for example, licenses bottlers wholesalers! in various markets who buy its syrup concentrate and
then carbonate, bottle, and sell it to retailers in local markets. A newer system is the ser%i)e4fir4
s0onsore! retai'er fran)hise. A service firm organizes a whole system for bringing its service efficiently
to consumers. 1xamples are found in the auto)rental business <ertz, Avis!, fast)food)service business
Mc5onald3s, +urger Ling!, and motel business <oward Cohnson, :amada Inn!.
1oriDonta' Marketing &ystes
Another channel development is the horizontal marketing system, in which two or more unrelated
companies put together resources or programs to exploit an emerging marketing opportunity. Many
supermarket chains have arrangements with local banks to offer in)store banking
Me)haniss for effe)ti%e )onf'i)t anageent
i. A!o0tion of su0eror!inate goa's. *hannel members come to an agreement on the
fundamental goal they are &ointly seeking, whether it is survival, market share, high "uality, or
customer satisfaction.
ii. Co4o0tation is an effort by one organization to win the support of the leaders of another
organization by including them in advisory councils, boards of directors, and the like.
iii. Di0'oa)y takes place when each side sends a person or group to meet with its counterpart to
resolve the conflict.
i%. Me!iation means resorting to a neutral third party who is skilled in conciliating the two parties3
interests.
%. Ar?itration occurs when the two parties agree to present their arguments to one or more
arbitrators and accept the arbitration decision
%i. /ometimes, when none of these methods proves effective, a company or a channel partner may
choose to file a 'a*suit
1@. Managing Retai'ing# Who'esa'ing $ -ogisti)s
Retai'ing
:etailing includes all the activities involved in selling goods or services directly to final consumers for
personal, nonbusiness use
Ty0es of Retai'ers
&0e)ia'ty store6 -arrow product line. Athlete3s 'oot, %all Men, %he Dimited, %he +ody /hop.
De0artent store6 /everal product lines. /ears, C*#enney, -ordstrom, +loomingdale3s.
&u0erarket6 Darge, low)cost, low)margin, high)volume, self)service store designed to meet total
needs for food and household products. Lroger, Cewel, 'ood 1mporium.
Con%enien)e store6 /mall store in residential area, often open ?O7Q, limited line of high)
turnover convenience products plus takeout. Q)1leven, *ircle L.
Dis)ount store6 /tandard or specialty merchandise( low)price, low)margin, high)volume stores.
$al)Mart, Lmart, *ircuit *ity, *rown +ookstores.
/ff40ri)e retai'er6 Deftover goods, overruns, irregular merchandise sold at less than retail.
'actory outlets, independent off)price retailers. 'ilene3s +asement, %.C. Maxx, warehouse clubs
/am3s *lubs, #rice)*ostco, +C3s $holesale.
&u0erstore6 <uge selling space, routinely purchased food and household items, plus services
laundry, shoe repair, dry cleaning, check cashing!. *ategory killer deep assortment in one
category! such as #etsmart, /taples, <ome 5epot( combination store such as Cewel, 2sco(
hypermarket huge stores that combine supermarket, discount, and warehouse retailing!, such as
*arrefour in 'rance, #yrca in /pain, and Mei&er3s in the -etherlands.
Cata'og sho*roo6 +road selection of high)markup, fast)moving, brand)name goods sold by
catalog at discount. *ustomers pick up merchandise at the store. Inside 1dge /ki and +ike.
Cor0orate retai'ing falls into four ma&or categories:
A. Cor0orate Chain &tore6 %wo or more outlets commonly owned and controlled, employing central
buying and merchandising, and selling similar lines of merchandise. %heir size allows them to buy
in large "uantities at lower prices, and they can afford to hire corporate specialists to deal with
pricing, promotion, merchandising, inventory control, and sales forecasting. 1xamples: %ower
:ecords, ,A#, #ottery +arn.
?. 3o'untary Chain6 A wholesaler)sponsored group of independent retailers engaged in bulk buying
and common merchandising. 1xamples: Independent ,rovers Alliance I,A!, %rue Falue
<ardware.
E. Retai'er Coo0erati%e6 Independent retailers who set up a central buying organization and
conduct &oint promotion efforts. 1xamples: Associated ,rocers, A*1 <ardware.
O. Consuer Coo0erati%e6 A retail firm owned by its customers. In consumer coops residents
contribute money to open their own store, vote on its policies, elect a group to manage it, and
receive patronage dividends.
B. .ran)hise organiDation6 *ontractual association between a franchisor and franchisees, popular
in a number of product and service areas. Mc5onald3s, /ubway, #izza <ut, Ciffy Dube, Q)1leven.
P. Mer)han!ising )ong'oerate6 A corporation that combines several diversified retailing lines and
forms under central ownership, with some integration of distribution and management. Allied
5ome" #D* with 5unkin3 5onuts and +askin):obbins, plus a number of +ritish retailers and a
wine and spirits group.
2ri%ate -a?e's
A growing trend and ma&or marketing decision for retailers concerns private labels. A 0ri%ate 'a?e' ?ran!
also called rese''er# store# house# or !istri?utor ?ran!! is one retailers and wholesalers develop.
:etailers such as +enetton, %he +ody /hop, and Marks and /pencer carry mostly own)brand
merchandise.
1G. Designing $ Managing Integrate! Marketing
Couni)ations
%he marketing communications mix consists of six ma&or o!es of )ouni)ation:
A. A!%ertising ) Any paid form of nonpersonal presentation and promotion of ideas, goods, or services
by an identified sponsor.
?. &a'es 0rootion ) A variety of short)term incentives to encourage trial or purchase of a product or
service.
E. E%ents an! e,0erien)es ) *ompany)sponsored activities and programs designed to create daily or
special brand)related interactions.
O. 2u?'i) re'ations an! 0u?'i)ity ) A variety of programs designed to promote or protect a company3s
image or its individual products.
B. Dire)t arketing ) 6se of mail, telephone, fax, e)mail, or Internet to communicate directly with or
solicit response or dialogue from specific customers and prospects.
P. 2ersona' se''ing ) 'ace)to)face interaction with one or more prospective purchasers for the purpose of
making presentations, answering "uestions, and procuring orders.
%here are eight steps in developing effective communications.
Designing the Couni)ations
ME&&AGE &TRATEGF In determining message strategy, management searches for appeals, themes, or
ideas that will tie into the brand positioning and help to establish points)of)parity or points)of)difference.
CREATI3E &TRATEGF *reative strategies are how marketers translate their messages into a specific
communication. *reative strategies can be broadly classified as involving either 4informational4 or
4transformational4 appeals.
Esta?'ishing the Tota'
Marketing Couni)ations 9u!get
A../RDA9-E MET1/D Many companies set the promotion budget at what they think the company can
afford. %he affordable method completely ignores the role of promotion as an investment and the
immediate impact of promotion on sales volume. It leads to an uncertain annual budget, which makes
long)range planning difficult
2ERCENTAGE4/.4&A-E& MET1/D Many companies set promotion expenditures at a specified
percentage of sales either current or anticipated! or of the sales price. Automobile companies typically
budget a fixed percentage for promotion based on the planned car price. 2il companies set the
appropriation at a fraction of a cent for each gallon of gasoline sold under their own label
C/M2ETITI3E42ARITF MET1/D /ome companies set their promotion budget to achieve share)of)voice
parity with competitors. %wo arguments are made in support of the competitive)parity method. 2ne is that
competitors3 expenditures represent the collective wisdom of the industry. %he other is that maintaining
competitive parity prevents promotion wars. -either argument is valid. %here are no grounds for believing
that competitors know better. *ompany reputations, resources, opportunities, and ob&ectives differ so
much that promotion budgets are hardly a guide. 'urthermore, there is no evidence that budgets based
on competitive parity discourage promotional wars.
/9LECTI3E4AND4TA&K MET1/D %he ob&ective)and)task method calls upon marketers to develop
promotion budgets by defining specific ob&ectives, determining the tasks that must be performed to
achieve these ob&ectives, and estimating the costs of performing these tasks. %he sum of these costs is
the proposed promotion budget
1+. Managing Mass Couni)ations6 A!%ertising# &a'es
2rootions# E%ents $ E,0erien)es# $ 2u?'i) Re'ations
AMs of A!%ertising
An a!%ertising goa' 7or o?=e)ti%e8 is a specific communications task and achievement level to be
accomplished with a specific audience in a specific period of time.
Inforati%e a!%ertising aims to create brand awareness and knowledge of new products or new
features of existing products.
2ersuasi%e a!%ertising aims to create liking, preference, conviction, and purchase of a product or
service.
Rein!er a!%ertising aims to stimulate repeat purchase of products and services.
Reinfor)eent a!%ertising aims to convince current purchasers that they made the right choice.
Automobile ads often depict satisfied customers en&oying special features of their new car.
2rofi'es of Ma=or Me!ia Ty0es
De)i!ing on Rea)h# .re5uen)y# an! I0a)t
%he main task is to find out how many exposures, 1 will produce a level of audience awareness of A. %he
effect of exposures on audience awareness depends on the exposures3 reach, fre"uency, and impact:
Rea)h 7R86 %he number of different persons or households exposed to a particular media schedule at
least once during a specified time period.
.re5uen)y 7.86 %he number of times within the specified time period that an average person or
household is exposed to the message.
I0a)t 7I86 %he "ualitative value of an exposure through a given medium thus a food ad in ,ood
<ousekeeping would have a higher impact than in 'ortune magazine!.
Tota' nu?er of e,0osures 7E86 %his is the reach times the average fre"uency( that is, 1 G :U'. %his
measure is referred to as the gross rating points ,:#!. If a given media schedule reaches K@ percent of
the homes with an average exposure fre"uency of E, the media schedule is said to have a ,:# of ?O@
K@ x E!
Weighte! nu?er of e,0osures 7WE86 %his is the reach times average fre"uency times average impact,
that is $1 G :U'UI.
2-ACE AD3ERTI&ING #lace advertising, also called out)of)home advertising, is a broadly defined
category that captures many different alternative advertising forms. /ome of the options available include
billboards, public spaces, product placement, and point)of)purchase
9i''?oar!s have been transformed over the years and now use colorful, digitally produced graphics,
backlighting, sounds, movement, and unusualMeven three)dimensionalMimages
2u?'i) &0a)es A!%ertisers are placing traditional %F and print ads in unconventional places such as
movies, airlines, and lounges, as well as classrooms, sports arenas, office and hotel elevators, and other
public places.
2ro!u)t 0'a)eent has expanded from movies to all types of %F shows. Marketers pay fees of JB@,@@@
to JA@@,@@@ and even higher so that their products make cameo appearances in movies and on
television. %he exact sum depends on the amount and nature of the brand exposure. /ometimes
placements are the result of a larger network advertising deal, but other times they are the work of small
product placement shops that maintain close ties with prop masters, set designers, and production
executives
A!%ertoria's are print ads that offer editorial content that reflects favorably on the brand and is difficult to
distinguish from newspaper or magazine content. Many companies include advertising inserts in monthly
bills. /ome companies mail audiotapes or videotapes to prospects
2ther firms are exploring ?ran!e! entertainent such as online mini)films. 'or its American 1xpress
client, 2gilvy and 5igitas are creating a series of three) to five)minute 4$ebisodes4 starring its pitchman,
Cerry /einfeld, in 4%he Adventures of /einfeld and /uperman,4 and also using teaser %F spots
De)i!ing on Me!ia Tiing an! A''o)ation
In choosing media, the advertiser faces both a macroscheduling and a microscheduling problem. %he
a)ros)he!u'ing 0ro?'e involves scheduling the advertising in relation to seasons and the business
cycle. /uppose Q@ percent of a product3s sales occur between Cune and /eptember. %he firm can vary its
advertising expenditures to follow the seasonal pattern, to oppose the seasonal pattern, or to be constant
throughout the year.
%he i)ros)he!u'ing 0ro?'e calls for allocating advertising expenditures within a short period to
obtain maximum impact. /uppose the firm decides to buy E@ radio spots in the month of /eptember.
In launching a new product, the advertiser has to choose among continuity, concentration, flighting,
and pulsing.
Continuity is achieved by scheduling exposures evenly throughout a given period. ,enerally,
advertisers use continuous advertising in expanding market situations, with fre"uently purchased
items, and in tightly defined buyer categories.
Con)entration calls for spending all the advertising dollars in a single period. %his makes sense
for products with one selling season or holiday.
.'ighting calls for advertising for a period, followed by a period with no advertising, followed by a
second period of advertising activity. It is used when funding is limited, the purchase cycle is
relatively infre"uent, and with seasonal items.
2u'sing is continuous advertising at low)weight levels reinforced periodically by waves of heavier
activity. #ulsing draws on the strength of continuous advertising and flights to create a
compromise scheduling strategy. %hose who favor pulsing believe that the audience will learn the
message more thoroughly, and money can be saved
E%a'uating A!%ertising Effe)ti%eness
C/MM(NICATI/N4E..ECT RE&EARC1 *ommunication)effect research seeks to determine whether
an ad is communicating effectively. *alled )o0y testing, it can be done before an ad is put into media
and after it is printed or broadcast. %here are three ma&or methods of pretesting. %he )onsuer
fee!?a)k etho! asks consumers for their reactions to a proposed ad. 2ortfo'io tests ask consumers
to view or listen to a portfolio of advertisements. *onsumers are then asked to recall all the ads and their
content, aided or unaided by the interviewer. :ecall level indicates an ad3s ability to stand out and to have
its message understood and remembered. -a?oratory tests use e"uipment to measure physiological
reactionsMheartbeat, blood pressure, pupil dilation, galvanic skin response, perspirationMto an ad( or
consumers may be asked to turn a knob to indicate their moment)to)moment liking or interest while
viewing se"uenced material. %hese tests measure attention)getting power but reveal nothing about
impact on beliefs, attitudes, or intentions. As we noted in *hapter O, marketers have begun to explore
various neural research methods to study how the brain evaluates different types of ad messages. %he
table below describes some specific advertising research techni"ues.
&A-E&4E..ECT RE&EARC1 $hat sales are generated by an ad that increases brand awareness by ?@
percent and brand preference by A@ percent> Advertising3s sales effect is generally harder to measure
than its communication effect. /ales are influenced by many factors, such as features, price, and
availability, as well as competitors3 actions. %he fewer or more controllable these other factors are, the
easier it is to measure effect on sales. %he sales impact is easiest to measure in direct)marketing
situations and hardest to measure in brand or corporate image)building advertising.
*ompanies are generally interested in finding out whether they are overspending or underspending on
advertising. 2ne approach to answering this "uestion is to work with the formulation shown in the figure
given below.
A company3s share of a!%ertising e,0en!itures produces a share of %oi)e proportion of company
advertising of that product to all advertising of that product! that earns a share of )onsuersE in!s and
hearts and, ultimately, a share of arket.
-ega' $ &o)ia' Issues
Advertisers and their agencies must be sure advertising does not overstep social and legal norms. #ublic
policy makers have developed a substantial body of laws and regulations to govern advertising.
Criti)iss of A!%ertising *ith regar! to &o)iety $ Cu'ture
,ender /tereotyping
#ortrayal of $omen to :eflect %heir *hanging :ole in /ociety
#ortrayal of $omen As /ex 2b&ects
#ortrayal of %he 1lderly
1thnic /tereotyping7:epresentation of Minorities
&a'es 2rootion

/ales promotion, a key ingredient in marketing campaigns, consists of a collection of incentive

tools, mostly short term, designed to stimulate "uicker or greater purchase of particular products
or services by consumers or the trade.
Ma=or Consuer42rootion Too's
&a0'es6 2ffer of a free amount of a product or service delivered door)to)door, sent in the mail,
picked up in a store, attached to another product, or featured in an advertising offer.
Cou0ons6 *ertificates entitling the bearer to a stated saving on the purchase of a specific
product: mailed, enclosed in other products or attached to them, or inserted in magazine and
newspaper ads.
Cash Refun! /ffers 7re?ates86 #rovide a price reduction after purchase rather than at the
retail shop: consumer sends a specified 4proof of purchase4 to the manufacturer who 4refunds4
part of the purchase price by mail.
2ri)e 2a)ks 7)ents4off !ea's86 2ffers to consumers of savings off the regular price of a
product, flagged on the label or package. A reduced)price pack is a single package sold at a
reduced price such as two for the price of one!. A banded pack is two related products banded
together such as a toothbrush and toothpaste!.
2reius 7gifts86 Merchandise offered at a relatively low cost or free as an incentive to
purchase a particular product. A with)pack premium accompanies the product inside or on the
package. A free in)the)mail premium is mailed to consumers who send in a proof of purchase,
such as a box top or 6#* code. A self)li"uidating premium is sold below its normal retail price to
consumers who re"uest it.
.re5uen)y 2rogras6 #rograms providing rewards related to the consumer3s fre"uency and
intensity in purchasing the company3s products or services.
2riDes 7)ontests# s*ee0stakes# gaes86 #rizes are offers of the chance to win cash, trips, or
merchandise as a result of purchasing something. A contest calls for consumers to submit an
entry to be examined by a panel of &udges who will select the best entries. A sweepstakes asks
consumers to submit their names in a drawing. A game presents consumers with something
every time they buyMbingo numbers, missing lettersM which might help them win a prize.
2atronage A*ar!s6 Falues in cash or in other forms that are proportional to patronage of a
certain vendor or group of vendors.
.ree Tria's6 Inviting prospective purchasers to try the product without cost in the hope that they
will buy.
2ro!u)t Warranties6 1xplicit or implicit promises by sellers that the product will perform as
specified or that the seller will fix it or refund the customer3s money during a specified period.
Tie4in 2rootions6 %wo or more brands or companies team up on coupons, refunds, and
contests to increase pulling power.
Cross42rootions6 6sing one brand to advertise another noncompeting brand.
2oint4of42ur)hase 72/28 Dis0'ays an! Deonstrations6 #2# displays and demonstrations
take place at the point)of)purchase or sale
Ma=or Tra!e42rootion Too's
2ri)e4/ff 7off4in%oi)e or off4'ist86 A straight discount off the list price on each case
purchased during a stated time period.
A''o*an)e6 An amount offered in return for the retailer3s agreeing to feature the manufacturer3s
products in some way. An advertising allowance compensates retailers for advertising the
manufacturer3s product. A display allowance compensates them for carrying a special product
display.
.ree Goo!s6 2ffers of extra cases of merchandise to intermediaries who buy a certain "uantity
or who feature a certain flavor or size.
Ma=or 9usiness an! &a'es .or)e 2rootion Too's
Tra!e &ho*s an! Con%entions6 Industry associations organize annual trade shows and
conventions. +usiness marketers may spend as much as EB percent of their annual promotion
budget on trade shows. 2ver B,P@@ trade shows take place every year, drawing approximately K@
million attendees. %rade show attendance can range from a few thousand people to over Q@,@@@
for large shows held by the restaurant or hotel)motel industries. #articipating vendors expect
several benefits, including generating new sales leads, maintaining customer contacts,
introducing new products, meeting new customers, selling more to present customers, and
educating customers with publications, videos, and other audiovisual materials.
&a'es Contests6 A sales contest aims at inducing the sales force or dealers to increase their
sales results over a stated period, with prizes money, trips, gifts, or points! going to those who
succeed.
&0e)ia'ty A!%ertising6 /pecialty advertising consists of useful, low)cost items bearing the
company3s name and address, and sometimes an advertising message that salespeople give to
prospects and customers. *ommon items are ballpoint pens, calendars, key chains, flashlights,
tote bags, and memo pads.
-ea! tie $ &e''4in tie

-ea! tie is the time necessary to prepare the program prior to launching it: initial planning,
design, and approval of package modifications or material to be mailed or distributed( preparation
of advertising and point)of)sale materials( notification of field sales personnel( establishment of
allocations for individual distributors( purchasing and printing of special premiums or packaging
materials( production of advance inventories in preparation for release at a specific date( and,
finally, the distribution to the retailer. &e''4in tie begins with the promotional launch and ends
when approximately RB percent of the deal merchandise is in the hands of consumers

Marketing 2u?'i) Re'ations

Many companies are turning to marketing public relations M#:! to support corporate or product
promotion and image making. M#:, like financial #: and community #:, serves a special
constituency, the marketing department. %he old name for M#: was 0u?'i)ity, which was seen
as the task of securing editorial spaceMas opposed to paid spaceMin print and broadcast media
to promote or 4hype4 a product, service, idea, place, person, or organization.
Ma=or Too's in Marketing 2R
2u?'i)ations6 *ompanies rely extensively on published materials to reach and influence their
target markets. %hese include annual reports, brochures, articles, company newsletters and
magazines, and audiovisual materials.
E%ents6 *ompanies can draw attention to new products or other company activities by
arranging special events like news conferences, seminars, outings, trade shows, exhibits,
contests and competitions, and anniversaries that will reach the target publics.
&0onsorshi0s6 *ompanies can promote their brands and corporate name by sponsoring
sports and cultural events and highly regarded causes.
Ne*s6 2ne of the ma&or tasks of #: professionals is to find or create favorable news about the
company, its products, and its people, and get the media to accept press releases and attend
press conferences.
&0ee)hes6 Increasingly, company executives must field "uestions from the media or give talks
at trade associations or sales meetings, and these appearances can build the company3s image.
2u?'i)4&er%i)e A)ti%ities6 *ompanies can build goodwill by contributing money and time to good
causes.
I!entity Me!ia6 *ompanies need a visual identity that the public immediately recognizes. %he
visual identity is carried by company logos, stationery, brochures, signs, business forms, business
cards, buildings, uniforms, and dress codes
2". Intro!u)ing Ne* Market /fferings
Ty0es of Ne* 2ro!u)ts6
True Inno%ation6 %his category represents the type of product that is new to the market.
A!a0ti%e Re0'a)eent6 %his type of new product represents a significant adaptation and
improvement of an existing product in the market.
Me4too 0ro!u)t 7Iitati%e 0ro!u)t86 %his product is new to firm that is marketing the item but
not new to the market.
Managing the De%e'o0ent 2ro)ess6
i. I!entifying arket o00ortunities
-#5 begins with assessing opportunities in the market. /everal methods can be used to uncover
significant product opportunities.
2er)e0tua' Ma00ing 6 %his method relies on consumer perceptions of brands currently
available in a product category.
9enefit ana'ysis 6 2ne important influence on consumer behaviour and choice is the pursuit
of benefits provided by purchase and use of a brand.
2ro?'e &o'ution 6 In some cases a firm may discover that no brand currently available
addresses a particular problem experience by consumers until the development of the new
products which solves the consumers problems.
ii. I!ea Generation
After the market opportunity is identified, a firm then tries to generate ideas for new products that are
consistent with the opportunity identified. -ew product ideas can come from customers, :.5,
employees, competitors, channel members, top management, consultants, ad agencies etc.
PROCTER & GAMBLE
To develop its Cover Girl Outlast all-day lip color, P&G tested the product on nearly 30,000 women: t
invited !00 o" them to come to its la#s each mornin$ to apply the lipstic%, record their activities, and return
ei$ht hours later so it could measure remainin$ lip color. The activities, du##ed &torture tests& #y P&G,
ran$ed "rom eatin$ spa$hetti to %ic%#o'in$ to showerin$. The product comes with a tu#e o" $lossy
moisturi(er that women can reapply on top o" their color)without havin$ to loo% at a mirror. The
#loc%#uster product *uic%ly #ecame the mar%et leader+
ISTOCKPHOTO
The stoc% photo$raphy industry once consisted o" lar$e companies such as Getty and Cor#is that
licensed their hi$h-end photos and ima$es to ad a$encies and other customers "or hundreds or
thousands o" dollars per photo. Then Cal$ary, Canada, photo$rapher ,ruce -ivin$stone #e$an $ivin$ his
photos away online. Once users #e$an tradin$ photos via the site, -ivin$stone decided to sell the ima$es
"or a small "ee and o""er photo$raphers .0/ royalties. i0toc%photo has #een enormously success"ul, #oth
as a company and as a tool "or "reelance photo$raphers li%e -isa Ga$ne: n 1002, Ga$ne #ecame the
"irst i0toc%photo photo$rapher to sell over !00,000 ima$es, and she now ma%es si' "i$ures yearly. Getty
recently decided to purchase the company "or 3!0 million rather than compete with it.+
KARMALOOP
4armaloop is one o" the most success"ul retailers o" &ur#an, streetwear, rave, and #outi*ue clothin$.& ts
#rands include Triple 5ive 0oul, 0piewa0oul, 4itchen Oran$e, and 6oo 7or%. One o" the %eys to its
success is that 4armaloop has developed a way "or its lead users to spot "ashion trends, model
4armaloop clothin$, ta%e on 4armaloop8s $uerrilla mar%etin$, and even create their own clothin$ desi$ns.
Throu$h 4armaloop8s 4as#ah 9-mar%etplace, launched in 1002, under$round and un%nown desi$ners
can sell their wares. &0ome o" these $uys are ma%in$ stu"" with their own printin$ presses. 7ou can8t $et
any closer to the $round than that,& says 4armaloop "ounder Gre$ 0el%oe, who wor%s closely with his
three-person T team to %eep the in"rastructure o" 4as#ah evolvin$ as *uic%ly as customers8 new ideas
#u##le up. To ma%e sure the company is seen as le$itimate, the site sells limited *uantities and turns
merchandise over *uic%ly to %eep o""erin$s e'clusive+
LEH BERRY
-eh ,erry, a drin% #ased on sea#uc%thorn, a deciduous shru#, which is said to contain over :00 natural
nutrients includin$ essential vitamins, amino acids, & minerals, was developed #y the ndian ;e"ense
<esearch & ;evelopment Or$ani(ation =;<;O> "or the ndian army, especially "or soldiers deployed at
hi$h-altitude areas. This technolo$y was then trans"erred "or civilian & commercial use. The product is
presently mar%eted as a health drin%, o""erin$ re"reshin$ & re?uvenatin$ #ene"its, ideal "or children asa
well as adults.+
iii. I!eas &)reening
After ideas with potential are identified, there are general criteria that are used to &udge new product
possibilities. A DR/24error occurs when the company dismisses an otherwise good idea. A G/4error
occurs when *ompany permits a poor idea to move into development and commercialisation
FRIENDS
The @,C situation comedy 5riends en?oyed a :0-year run "rom :AA. to 100. as a perennial ratin$s
powerhouse. ,ut the show almost didn8t see the li$ht o" the day. Bccordin$ to an internal @,C research
report, the pilot episode was descri#ed as &not very entertainin$, clever, or ori$inal& and was $iven a
"ailin$ $rade, scorin$ .: out o" :00. ronically, the pilot "or an earlier hit sit-com, 0ein"eld, also was rated
as &wea%,& althou$h the pilot "or the medical drama 9< scored a healthy A:. Courtney Co'8s Conica was
the 5riends character that scored #est with test audiences, #ut characters portrayed #y -isa 4udrow and
Catthew Perry were deemed to have mar$inal appeal, and the <achel, <oss, and Doey characters scored
even lower. Bdults 3! and over in the sample "ound the characters as a whole, &smu$, super"icial, and
sel"-a#sor#ed+
i%. Con)e0t De%e'o0ent $ Testing
A 0ro!u)t i!ea is a possible product that the company might offer to the market.
A 0ro!u)t )on)e0t is an elaborated version of the idea expressed in meaningful consumer terms.
Con)e0t testing is a system to redefine, reshape and coalesce ideas to arrive at a basic concept for
a product that has good chances of market acceptance. *oncept tests are conducted to "ualitatively
assess relative appeal, provide information for further product development and advertising . indicate
potential segments
Con)e0t s)reening test is conducted to to get a feel of market acceptance, to identify potential ideas
for further development
Con)e0t E%a'uation tests are )onducted after initial screening and modification of concepts for
assessment of market potential, identification of market strengths and weaknesses . indicate
potential market segments
A 0ro!u)t iage is the particular picture that consumers ac"uire of an actual or potential product
#roduct concepts are tested with an appropriate group of target consumers, then getting those
consumers reactions. #roduct %esting provides a critical measure of a new product3s market potential.
1xtremely important in 'M*, *os.
Ra0i! 2rototy0ing I design products on computer I then produce plastic models of each.
3irtua' Rea'ity I they use computers and sensory devices to simulate reality.
Consuer Dri%en Engineering ) is an engineering effort that attaches high importance to
incorporating customer preferences in the final design.
#roduct testing is done for four purposes
Against )o0etition6 which of the alternatives offered is preferred relative to competition
2ro!u)t i0ro%eent6 whether an improved formula could replace the current product
Cost sa%ing6 whether a less expensive product could replace the current one
Con)e0t fit6 whether the product variant resembles the selling message
2ro!u)t testing 0ro)e!ures
+lind vs +randed test
+lind test
-o brand name as yet
+randed test
2ro!u)t Testing etho!o'ogies
Mona!i) 4 designs where a consumer evaluates one product, having no other product for
comparison
Co0arison 4 *onsumer rates ? or more products
&e5uentia' ona!i) 4 rates one product and then is given a second product rated!
independently then compared
2rotoona!i) 4 rates one product, is given a second product and compares both
2aire! )o0arison 4 directly compares two products
Re0eat40aire! )o0arison 4 consumer is given two or more sets of products to compare
against each other at two different points of time
Roun! ro?in 4 tests where a series of products is tested against each other
Triang'e !esigns 4 is given ? samples of one product and one sample of another to identify
the one that differs
Duo4trio 4 a standard product is given and asked to determine which of the other two!
products are similar
Differen)e 4 asked to determine if one product is different from the other
C/NL/INT ANA-F&I& *onsumer preferences for alternative product concepts can be measured through
con&oint analysis, a method for deriving the utility values that consumers attach to varying levels of a
product3s attributes.

:espondents are shown different hypothetical offers formed by combining varying
levels of the attributes, then asked to rank the various offers.
%. Marketing &trategy De%e'o0ent 6
%he marketing strategy plan consists of three parts: %he first part describes
%he target market size, structure and behaviour, the planned product positioning, and the
sales, market share, and profit goals in the first few years.
%he second part of the marketing strategy outlines the product0s planned price, distribution
strategy and marketing budget for the first year.
%he third part of the marketing strategy plan describes the long I run sales and profit goals
and marketing I mix strategy over time.
%i. 9usiness Ana'ysis
1valuates the proposal0s business attractiveness by preparing sales, cost and profit pro&ections to
determine whether it satisfies the company0s ob&ectives.
1stimating total sales
o 2ne time purchased product
o Infre"uently purchased product
o 're"uently purchased product
1stimating *osts . #rofits
o +reak even analysis
o :isk analysis
%ii. 2ro!u)t De%e'o0ent
%he &ob of translating target customer re"uirements into a working prototype is helped by a set of
methods known as "uality function deployment ='5!. %he methodology takes the list of desired
customer attributes *As! generated by market research and turns them into a list of engineering
attributes 1As! that the engineers can use.
BOEING
,oein$ desi$ned its EEE aircra"t on a totally di$ital #asis. 9n$ineers, desi$ners, and more than !00
suppliers desi$ned the aircra"t on a special computer networ% without ever ma%in$ a #lueprint on paper.
ts partners were connected #y an e'tranet ena#lin$ them to communicate, share ideas, and wor% on the
desi$n at a distance. B computer-$enerated &human& could clim# inside the three-dimensional desi$n on-
screen to show how di""icult maintenance access would #e "or a live mechanic. 0uch computer modelin$
allowed en$ineers to spot desi$n errors that otherwise would have remained undiscovered until a person
#e$an to wor% on a physical prototype. Bvoidin$ the time and cost associated with #uildin$ physical
prototypes reduced development time and scrap-pa$e and rewor% #y 20 to A0 percent+
.(NCTI/NA- TE&T& $hen the prototypes are ready, they must be put through rigorous functional tests
and customer tests. A'0ha testing is the name given to testing the product within the firm to see how it
performs in different applications. After refining the prototype further, the company moves to ?eta testing
with customers.
C/N&(MER TE&T& *onsumer tests can take a variety of forms from bringing consumers into a
laboratory to giving them samples to use in their homes, free trials, test drives etc. *onsumer preferences
can be measured in several ways. /uppose a consumer is shown three itemsMA, +, and *, such as
three cameras, three insurance plans, or three advertisements.
The rank4or!er etho! asks the consumer to rank the three items in order of preference.
%he consumer might respond with AV+V*. Although this method has the advantage of
simplicity, it does not reveal how intensely the consumer feels about each item nor whether
the consumer likes any item very much. It is also difficult to use this method when there are
many ob&ects to be ranked.
The 0aire!4)o0arison etho! calls for presenting pairs of items and asking the consumer
which one is preferred in each pair. %hus the consumer could be presented with the pairs A+,
A*, and +* and say that she prefers A to +, A to *, and + to *. %hen we could conclude that
AV+V*. #eople find it easy to state their preference between two items, and this method
allows the consumer to focus on the two items, noting their differences and similarities.
The ona!i)4rating etho! asks the consumer to rate liking of each product on a scale.
/uppose a seven)point scale is used, where A signifies intense dislike, O indifference, and Q
intense like. /uppose the consumer returns the following ratings: AGP, + G B, *GE. $e can
derive the individual3s preference order i.e., AV+V*!, and even know the "ualitative levels of
the person3s preference for each and the rough distance between preferences.
SHAW INDUSTRIES
Bt 0haw ndustries, temps are paid 3! an hour to pace up and down "ive lon$ rows o" sample carpets "or
up to F hours a day, lo$$in$ an avera$e o" :. miles each. One re$ular reads three mysteries a wee%
while pacin$ and shed .0 pounds in two years. 0haw ndustries counts wal%ers8 steps and "i$ures that
10,000 steps e*ual several years o" avera$e wear.+
APPLE COMPUTERS
Bpple Computer assumes the worst "or its Power,oo% customers and su#mits the computers to a #attery
o" indi$nities: t drenches the computers in Pepsi and other sodas, smears them with mayonnaise, and
#a%es them in ovens at temperatures o" :.0 de$rees or more to simulate conditions in a car trun%.+
GILLETTE
Bt Gillette, 100 volunteers "rom various departments come to wor% unshaven each day, troop to the
second "loor o" the company8s 0outh ,oston manu"acturin$ and research plant, and enter small #ooths
with a sin% and mirror. There they ta%e instructions "rom technicians on the other side o" a small window
as to which ra(or, shavin$ cream, or a"tershave to use, and then they "ill out *uestionnaires. &Ge #leed so
you8ll $et a $ood shave at home,& says one Gillette employee.+
%iii. Market Testing
After management is satisfied with functional and psychological performance, the product is ready to
be dressed up with a brand name and packaging, and put into a market test. %he new product is
introduced into an authentic setting to learn how large the market is and how consumers and dealers
react to handling, using, and repurchasing the product.
C/N&(MER G//D& MARKET TE&TING <ere are four ma&or methods of consumer)goods market
testing, from the least to the most costly.
&a'es4Wa%e Resear)h In sales)wave research, consumers who initially try the product at no cost are
reoffered the product, or a competitor3s product, at slightly reduced prices. %hey might be reoffered
the product as many as three to five times sales waves!, with the company noting how many
customers selected that product again and their reported level of satisfaction. /ales)wave research
can also expose consumers to one or more advertising concepts to see the impact of that advertising
on repeat purchase.
&iu'ate! Test Marketing /imulated test marketing calls for finding E@ to O@ "ualified shoppers and
"uestioning them about brand familiarity and preferences in a specific product category. %hese people
are then invited to a brief screening of both well)known and new commercials and print ads. 2ne ad
advertises the new product, but it is not singled out for attention. *onsumers receive a small amount
of money and are invited into a store where they may buy any items. %he company notes how many
consumers buy the new brand and competing brands. %his provides a measure of the ad3s relative
effectiveness against competing ads in stimulating trial.
Contro''e! Test Marketing In this method, a research firm manages a panel of stores that will carry
new products for a fee. %he company with the new product specifies the number of stores and
geographic locations it wants to test. %he research firm delivers the product to the participating stores
and controls shelf position( number of facings, displays, and point)of)purchase promotions( and
pricing. /ales results can be measured through electronic scanners at the checkout. %he company
can also evaluate the impact of local advertising and promotions.
Test Markets %he ultimate way to test a new consumer product is to put it into full)blown test
markets. %he company chooses a few representative cities, and the sales force tries to sell the trade
on carrying the product and giving it good shelf exposure. %he company puts on a full advertising and
promotion campaign similar to the one it would use in national marketing. %est marketing also permits
testing the impact of alternative marketing plans by varying the marketing program in different cities: A
full)scale test can cost over JA million, depending on the number of test cities, the test duration, and
the amount of data the company wants to collect.
i,. Coer)ia'isation
If test marketing has fine tuned the appropriate marketing strategy, and the firm has sufficient confidence
and knowledge, it should launch and commercialise the product on a full scale basis.
W1EN 7TIMING8 In commercializing a new product, market)entry timing is critical. /uppose a company
has almost completed the development work on its new product and learns that a competitor is nearing
the end of its development work. %he company faces three choices:
1. .irst entry 4 %he first firm entering a market usually en&oys the 4first mover advantages4 of locking up
key distributors and customers and gaining leadership. +ut if the product is rushed to market before it is
thoroughly debugged, the first entry can backfire.
2. 2ara''e' entry 4 %he firm might time its entry to coincide with the competitor3s entry. %he market may
pay more attention when two companies are advertising the new product.
<. -ate entry 4 %he firm might delay its launch until after the competitor has entered. %he competitor will
have borne the cost of educating the market, and its product may reveal faults the late entrant can avoid.
%he late entrant can also learn the size of the market.
RADIO RAY
@e#ras%a rancher Gerald Gohl8s innovation was to create a remote-controlled spotli$ht so he wouldn8t
have to roll down the window o" his pic%up truc% and stic% out a handheld #eacon to search "or cattle on
"ri$id ni$hts. ,y :AAE, he held a patent on the <adio<ay, a wireless version o" his spotli$ht that was
mounted on suctions cups or #rac%ets and could rotate 320 de$rees. 0ellin$ "or 3100, <adio<ay
attracted attention "rom ranchers, #oaters, hunters, and police)even Gal-Cart8s 0am8s Clu# chain. Gohl
re?ected the retailers8 overtures, however, "earin$ that it mi$ht see% lower prices that would an$er his
distri#utors. 0hortly therea"ter, 0am8s Clu# #e$an to sell its own wireless, remote-controlled spotli$ht that
was nearly identical to the <adio<ay e'cept "or a small plastic part restrictin$ the li$ht8s rotation to sli$htly
less than 320 de$rees and its price)320. Gohl success"ully sued "or patent in"rin$ement in 1000, #ut still
could "ace an appeal+
W1ERE 7GE/GRA21IC &TRATEGF8 %he company must decide whether to launch the new product in a
single locality, a region, several regions, the national market, or the international market.
PHILIPS
Philips, the ;utch electronics company, recently launched Pronto, an &ntelli$ent <emote Control& to
replace all other devices that receive in"rared si$nals. ts Ge# address, www.pronto.philips.com, contains
several "eatures: B#out Pronto, B Hirtual Tour, Ghere to ,uy, Pronto @ews, Pronto Communities, and
5BIs and Contacts. This is much richer in"ormation than any ad could o""er.+
T/ W1/M 7TARGET4MARKET 2R/&2ECT&8 $ithin the rollout markets, the company must target its
initial distribution and promotion to the best prospect groups.
1/W 7INTR/D(CT/RF MARKET &TRATEGF8 %he company must develop an action plan for
introducing the new product into the rollout markets.
The Consuer4A!o0tion 2ro)ess
Inno%ators also known as Te)hno0hi'es are technology enthusiasts( they are venturesome
and en&oy tinkering with new products and mastering their intricacies. In return for low prices,
they are happy to conduct alpha and beta testing and report on early weaknesses.
Ear'y a!o0ters also known as 3isionaries are opinion leaders who carefully search for new
technologies that might give them a dramatic competitive advantage. %hey are less price
sensitive and willing to adopt the product if given personalized solutions and good service
support.
Ear'y a=ority also known as 2ragatists are those who adopt the new technology when
its benefits are proven and a lot of adoption has already taken place. %hey make up the
mainstream market.
-ate a=ority also known as Conser%ati%es are skeptical conservatives who are risk
averse, technology shy, and price sensitive.
-aggar!s are tradition)bound and resist the innovation until they find that the status "uo is no
longer defensible.
1H. Managing 2ersona' Couni)ations6 Dire)t $ Intera)ti%e
Marketing# Wor! of Mouth# $ 2ersona' &e''ing
Dire)t Marketing
5irect marketing is the use of consumer)direct *5! channels to reach and deliver goods and services to
customers without using marketing middlemen. %hese channels include direct mail, catalogs,
telemarketing, interactive %F, kiosks, $eb sites, and mobile devices.
Dire)t Mai'
5irect)mail marketing involves sending an offer, announcement, reminder, or other item to a person.
6sing highly selective mailing lists, direct marketers send out millions of mail pieces each yearMletters,
flyers, foldouts, and other 4salespeople with wings.4
5irect)mail marketing has passed through a number of stages:
MCar0et ?o?ing.M 5irect mailers gather or buy as many names as possible and send out a
mass mailing. 6sually the response rate is very low.
Data?ase arketing. 5irect marketers mine the database to identify prospects who would
have the most interest in an offer.
Intera)ti%e arketing. 5irect marketers include a telephone number and $eb address, and
offer to print coupons from the $eb site. :ecipients can contact the company with "uestions.
%he company uses the interaction as an opportunity to up)sell, cross)sell, and deepen the
relationship.
Rea'4tie 0ersona'iDe! arketing. 5irect marketers know enough about each customer to
customize and personalize the offer and message.
-ifetie %a'ue arketing. 5irect marketers develop a plan for lifetime marketing to each
valuable customer, based on knowledge of life events and transitions.
TARGET MARKET& AND 2R/&2ECT& 5irect marketers need to identify the characteristics
of prospects and customers who are most able, willing, and ready to buy. Most direct
marketers apply the :)')M formula re)en)y, fre5uen)y, onetary aount! for rating and
selecting customers. 'or any proposed offering, the company selects customers according to
how much time has passed since their last purchase, how many times they have purchased,
and how much they have spent since becoming a customer. 5irect marketers can use a
number of channels to reach individual prospects and customers: direct mail, catalog
marketing, telemarketing, %F and other direct)response media, kiosk marketing, and e)
marketing.

Cata'og Marketing

In catalog marketing, companies may send full)line merchandise catalogs, specialty

consumer catalogs, and business catalogs, usually in print form but also sometimes as *5s,
videos, or online. C*#enney and /piegel send general merchandise catalogs. Fictoria3s
/ecret and /aks 'ifth Avenue send specialty clothing catalogs to the upper)middle)class
market. %hrough their catalogs, Avon sells cosmetics, $ :. ,race sells cheese, and IL1A
sells furniture
Te'earketing
%elemarketing is the use of the telephone and call centers to attract prospects, sell to existing customers,
and provide service by taking orders and answering "uestions
In fact, companies carry out four types of telemarketing:
Te'esa'es6 %aking orders from catalogs or ads and also doing outbound calling. %hey can cross)
sell the company3s other products, upgrade orders, introduce new products, open new accounts,
and reactivate former accounts
Te'e)o%erage6 *alling customers to maintain and nurture key account relationships and give
more attention to neglected accounts.
Te'e0ros0e)ting6 ,enerating and "ualifying new leads for closure by another sales channel.
E Custoer ser%i)e an! te)hni)a' su00ort6 Answering service and technical "uestions.
Intera)ti%e Marketing
*learly, all companies need to consider and evaluate e)marketing and e)purchasing opportunities. A key
challenge is designing a site that is attractive on first viewing and interesting enough to encourage repeat
visits.
2'a)ing A!s an! 2rootions /n'ine
A company chooses which forms of interactive marketing will be most cost)effective in achieving
communication and sales ob&ectives.
WE9 &ITE& *ompanies must design $eb sites that embody or express their purpose, history, products,
and vision. A key challenge is designing a site that3s attractive on first viewing and interesting enough to
encourage repeat visits. :ayport and Caworski have proposed that effective $eb sites feature seven
design elements that they call the GCs
Conte,t. Dayout and design.
Content. %ext, pictures, sound, and video the site contains.
Counity. <ow the site enables user)to)user communication.
CustoiDation. /ite3s ability to tailor itself to different users or
to allow users to personalize the site.
Couni)ation. <ow the site enables site)to)user, user)to)site, or two)way communication.
Conne)tion. 5egree that the site is linked to other sites.
Coer)e. /ite3s capabilities to enable commercial transactions
MICR/&ITE& A microsite is a limited area on the $eb managed and paid for by an external
advertiser7company. Microsites are individual $eb pages or cluster of pages that function as supplements
to a primary site. %hey3re particularly relevant for companies selling low)interest products. #eople rarely
visit an insurance company3s $eb site, but the company can create a microsite on used)car sites that
offers advice for buyers of used cars and at the same time a good insurance deal. /ome microsites have
become huge online hits.
BURGER KING'S SUBSERVIENT CHICKEN
To compete with Cc;onald8s wholesome, "amily-"riendly ima$e, ,ur$er 4in$ adopted a youth"ul,
irreverent personality and menu-driven positionin$ via its lon$time &Jave t 7our Gay& slo$an. To promote
its TenderCrisp sandwich, ad a$ency Crispin, Porter & ,o$us%y created a Ge# site "eaturin$ a
Ksu#servient chic%en,& an actor dressed in a chic%en costume who per"ormed a wide ran$e o" wac%y
actions #ased on a user8s typed commands-dust "urniture, play air $uitar, or, naturally, lay an e$$ l The
site employed prerecorded "oota$e #ut loo%ed li%e an interactive Ge#cam. Githin a wee% o" launch, a#out
!. million people had chec%ed out the chic%en "or an avera$e o" ei$ht minutes. This pro$ram was
desi$ned not only to entertain and connect with tar$et mar%et :.-to 1!-year-olds, #ut to help rein"orce the
#rand8s customi(ation messa$e and contemporary ima$e. 0aid one ,ur$er 4in$ e'ecutive, &Ge8re really
tryin$ to do somethin$ di""erent and not ?ust $ive consumers a strai$ht ad over and over.
VIRGIN MOBILE
n a campai$n that received the top pri(e at the 100. Cannes -ion awards, Hir$in Co#ile created a
wireless phone service campai$n in Bustralia to sell !-cent te't messa$in$ that com#ined TH and outdoor
ads and a Ge# pa$e, all #ased on Garren, a "ictitious, love-hun$ry character. Outdoor ads with Garren8s
te't address and photo read &,e my te't %itten& and &Tell me your "avorite te't position.& ;urin$ the :0-
wee% campai$n, Garren $ot 200,000 te't responses, and the Ge# site $ot 3 million hits. 0ales increased
#y over 3! percent month-on-month with e'istin$ users ma%in$ :! percent more calls and sendin$ 10
percent more te't messa$es+
&EARC1 AD& A hot growth area in interactive marketing is paid)search or pay)per)click ads, which
represent O@W of all online ads. %hirty)five percent of all searches are reportedly for products or services.
%he search terms serve as a proxy for the consumer3s consumption interests and trigger relevant links to
product or service offerings alongside search results from ,oogle, M/-, and TahooX.
DI&2-AF AD& 5isplay ads or banner ads are small, rectangular boxes containing text and perhaps a
picture that companies pay to place on relevant $eb sites. %he larger the audience, the more the
placement costs. /ome banners are accepted on a barter basis. In the early days of the Internet, viewers
clicked on ?W to EW of the banner ads they saw, but that percentage "uickly plummeted and advertisers
began to explore other forms of communication.
INTER&TITIA-& Interstitials are advertisements, often with video or animation that pop up between
changes on a $eb site. Ads for Cohnson . Cohnson3s %ylenol headache reliever would pop up on brokers3
$eb sites whenever the stock market fell by A@@ points or more. +ecause consumers found pop)up ads
intrusive and distracting, many computer users such as A2D installed software to block these ads.OP
INTERNET4&2ECI.IC AD& AND 3IDE/& $ith user)generated content sites such as Tou%ube, My/pace
Fideo, and ,oogle Fideo, consumers and advertisers can upload ads and videos to be shared virally by
millions of people.
BMW FILMS
n @orth Bmerica, ,CG is positioned as the &Lltimate ;rivin$ Cachine& on the #asis o" its dual #ene"its o"
lu'ury and hi$h per"ormance. ,e$innin$ in 100:, it created &The Jire& series, ei$ht short "ilms #y "amous
action movie directors such as Dohn Goo, Guy <itchie, and Bn$ -ee and starrin$ actors such as Cic%ey
<our%e and Cadonna. 9ach was less than :0 minutes lon$ and could #e downloaded only "rom a
corporate Ge# site, www. #mw"ilms.com and viewed on the nternet. Gith a #ud$et o" 33 million per "ilm,
the "ilms were cinematic in loo%, #ut also desi$ned to showcase the uni*ue *ualities o" di""erent ,CG
models. To #uild tra""ic to the site, ,CG used television spots that mirrored movie trailers. The response
was overwhelmin$. Bccordin$ to ,CG8s ad a$ency, !!.: million people viewed &The Jire& series, and
tremendous P< #u(( resulted. Cany "ilm critics even $ave the "ilms rave reviews. Bnd #y havin$ visitors
re$ister #e"ore downloadin$ the "ilms, ,CG was a#le to collect contact in"ormation "or a lar$e num#er o"
potential #uyers, many o" whom were youn$er and not necessarily as well represented in ,CG8s prior
mar%etin$ e""orts.+
&2/N&/R&1I2& Many companies get their name on the Internet by sponsoring special content on $eb
sites that carry news, financial information, and so on. /ponsorships are best placed in well)targeted sites
that offer relevant information or service. %he sponsor pays for showing the content and in turn receives
acknowledgment as the sponsor of that particular service on the site.
A--IANCE& $hen one Internet company works with another, they end up advertising each other through
alliances and affiliate programs. A2D has created many successful alliances. Amazon has almost one
million affiliates that post its banners on their $eb sites. *ompanies can also undertake guerrilla
marketing actions to publicize their site and generate word of mouth. $hen TahooX started its 5enmark
site, it distributed apples at the country3s busiest train station with the message that in the next hours a
trip to -ew Tork could be won on the TahooX site. It also managed to get the offer mentioned in 5anish
newspapers. *ompanies can offer to push content and ads to targeted audiences who agree to receive
them and are presumably more interested in the product or product category.
/N-INE C/MM(NITIE& Many companies sponsor online communities whose members communicate
through postings, instant messaging, and chat discussions about special interests related to the
company3s products and brands. %hese communities can provide companies useful. hard)to)get
information. $hen ,laxo/mithLline prepared to launch its first weight)loss drug, Alli, it sponsored a
weight)loss community. %he firm felt the feedback it gained was more valuable than what it could have
received from traditional focus groups. Lraft learned from its online group that members really wanted the
ability to control how much they ate, giving rise to A@@)calorie bags and JA@@ million in sales. A key for
success of online communities is to ereY ate individual and group activities that help form bonds among
community members.B@
E4MAI- 1)mail uses only a fraction of the cost of a 4d)mail,4 or direct mail, campaign, Microsoft spent
approximately JQ@ million a year on paper)driven campaigns. It switched to sending out ?@ million pieces
of e)mail every month at a significant savings.
M/9I-E MARKETING %he 6nited /tates has been relatively late to pick up on the trend of mobile phone
marketing. Capanese carrier -%% 5o*oMo Inc. began posting ads on mobile $eb sites in ?@@@ and
displayed A.B billion ads in ?@@P.
Wor! of Mouth
/ocial networks. such as My/pace and 'acebook, have become an important force in both business)to)
consumer and business)to)business marketing. A key aspect of social networks is word a7mouth and the
number and nature of conversations and communications between different parties.