local marketing and individual marketing.

local marketing and individual marketing.

Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, and even specific stores. Local marketing has drawbacks.
• It can drive up manufacturing and marketing costs by reducing economies of scale.
• It can create logistics problems.

Individual marketing is the tailoring of products and marketing programs to the needs and preferences of individual customers. Individual marketing has also been labeled one-to-one marketing, mass customization, and markets-of-one marketing.

Choosing a Targeting Strategy

Which strategy is best depends on:
• Company resources
• Product variability
• Product’s life-cycle stage
• Market variability
• Competitors’ marketing strategies

Socially Responsible Target Marketing: Target marketing sometimes generates controversy and concern. Issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products. Marketers of a wide range of industries have been criticized for their marketing efforts directed toward children. Problems arise when marketing adult products to kids, whether intentionally or unintentionally. The growth of the Internet and other carefully targeted direct media has raised new concerns about potential targeting abuses. The issue is not so much who is targeted, but how and for what. Controversies arise when marketers attempt to profit by unfairly targeting vulnerable segments or target them with questionable products or tactics. Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company, but also the interests of those targeted.

DIFFERENTIATION AND POSITIONING

Value proposition: How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments. A product position is the way the product is defined by consumers on important attributes.

Positioning Maps: Perceptual positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions.

Choosing a Differentiation and Positioning Strategy: The differentiation and positioning task consists of three steps:

1. Identifying a set of differentiating competitive advantages upon which to build a position
2. Choosing the right competitive advantages
3. Selecting an overall positioning strategy

Identifying Possible Value Differences and Competitive Advantages

To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage. It can differentiate along the lines of product, service, channel, people, or image. Choosing the Right Competitive Advantages

How Many Differences to Promote: Ad man Rosser Reeves believes a company should develop a unique selling proposition (USP) for each brand and stick to it. Other marketers think that companies should position themselves on more than one differentiator.

Which Differences to Promote: A difference is worth establishing to the extent that it satisfies the following criteria:
Important: The difference delivers a highly valued benefit to target buyers.
Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.
Superior: The difference is superior to other ways that customers might obtain the same benefit.
Communicable: The difference is communicable and visible to buyers.
Preemptive: Competitors cannot easily copy the difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference profitably.
Selecting an Overall Positioning Strategy

The full positioning of a brand is called the brand’s value proposition.
More for More positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs.
More for the Same positioning involves introducing a brand offering comparable quality but at a lower price.
The Same for Less positioning can be a powerful value proposition—everyone likes a good deal.
Less for Much Less positioning is offering products that offer less and therefore cost less. This involves meeting consumers’ lower performance or quality requirements at a much lower price.
More for Less positioning is the winning value proposition.

In the long run, companies will find it very difficult to sustain such best-of-both positioning.
Developing a Positioning Statement: Company and brand positioning should be summed up in a positioning statement. The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference).

Segmenting Business Markets

Segmenting Business Markets

Consumer and business marketers use many of the same vari¬ables to segment their markets.  Business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal character¬istics.

Segmenting International Markets
Companies can segment international markets using one or a combination of several variables.
• Geographic location: Nations close to one another will have many common traits and behaviors.
• Economic factors: Countries may be grouped by population income levels, or by their overall level of economic development.
• Political and legal factors: Type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy.
• Cultural factors: Grouping markets according to common languages, religions, values and attitudes, customs, and behavioral patterns.

Intermarket segmentation is segmenting of consumers who have similar needs and buying behavior even though they are located in different countries.

Requirements for Effective Segmentation

To be useful, market segments must be:
• Measurable: The size, purchasing power, and profiles of the segments can be measured.
• Accessible: The market segments can be effectively reached and served.
• Substantial: The market segments are large or profitable enough to serve.
• Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs.
• Actionable: Effective programs can be designed for attracting and serving the segments.
MARKET TARGETING
Evaluating Market Segments
In evaluating different market segments, a firm must look at three factors:
1. Segment size and growth
2. Segment structu¬ral attractiveness
3. Company objectives and resources
The largest, fastest-growing segments are not always the most attractive ones for every company.
The company also needs to examine major structural factors that affect long-run segment attractiveness.
• A segment is less attractive if it already contains many strong and aggressive competitors.
• The existence of many actual or potential substitute products may limit prices and the profits.
• The relative power of buyers also affects segment attractiveness.
A segment may be less attractive if it contains powerful suppliers who can control prices.

Selecting Target Market Segments
A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
Undifferentiated Marketing: Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different.
Differentiated Marketing: Using a differentiated marketing (or segmented market¬ing) strategy, a firm decides to target several market segments and designs separate offers for each.
Concentrated Marketing: Using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, the firm goes after a large share of one or a few smaller segments or niches. It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments.  It can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

Micromarketing: Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes

Institutional Markets

Institutional Markets:

The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care. Institutions differ from one another in their sponsors and in their objectives. Many institutional markets are characterized by low budgets and captive patrons. Many marketers set up separate divisions to meet the special characteristics and needs of institutional buyers.

Government Markets: The government market offers large opportunities for many companies, both big and small. In most countries, government organizations are major buyers of goods and services. Government organizations typically require suppliers to submit bids, and normally they award the contract to the lowest bidder. In some cases, the government unit will make allowance for the supplier’s superior quality or reputation for completing contracts on time. Government organizations tend to favor domestic suppliers over foreign suppliers. Government buyers are affected by environmental, organizational, interpersonal, and individual factors. One unique thing about government buying is that it is carefully watched by outside publics, ranging from Congress to a variety of private groups interested in how the government spends taxpayers’ money. Because their spending decisions are subject to public review, government organizations require considerable paperwork from suppliers, who often complain about excessive paperwork, bureaucracy, regulations, decision-making delays, and frequent shifts in procurement personnel. Most governments provide would-be suppliers with detailed guides describing how to sell to the government. Non-economic criteria also play a growing role in government buying.
• Government buyers are asked to favor depressed business firms and areas; small business firms; minority-owned firms; and business firms that avoid race, gender, or age discrimination.
• Many firms that sell to the government have not been marketing oriented.
• Total government spending is determined by elected officials rather than by any marketing effort to develop this market.
• Government buying has emphasized price, making suppliers invest their effort in technology to bring costs down.
• When the product’s characteristics are specified carefully, product differentiation is not a marketing factor.
• Nor do advertising or personal selling much matter in winning bids on an open-bid basis.

Several companies have established separate government marketing departments.

These companies anticipate government needs and projects, participate in the product specification phase, gather competitive intelligence, prepare bids carefully, and produce stronger communications to describe and enhance their companies’ reputations.

LN 06: Target Marketing

This chapter looks further into key customer-driven marketing strategy decisions—how to divide up markets into meaningful customer groups (segmentation), choose which customer groups to serve (targeting), create market offerings that best serve targeted customers (differentiation), and position the offerings in the minds of consumers (positioning).
Most companies have moved away from mass marketing and toward target marketing—identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each.
Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.
Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.
Differentiation involves actually differentiating the firm’s market offering to create superior customer value.
Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

MARKET SEGMENTATION
Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

Segmenting Consumer Markets

Geographic Segmentation: Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods.

Demographic Segmentation: divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Demographic factors are the most popular bases for segmenting customer groups.

Age and Life Cycle Stage means offering different products or using different marketing approaches for different age and life cycle groups.
Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.
Income segmentation has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel.

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics.
Marketers also use personality variables to segment markets.

Behavioral Segmentation: Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.
Occasion segmentation means grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item.
Benefit segmentation means grouping buyers according to the different benefits that they seek from the product.
User Status means segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product.
Usage Rate means grouping markets into light, medium, and heavy product users.
Loyalty Status means dividing buyers into groups according to their degree of loyalty.

Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables.

The Business Buying Process

The Business Buying Process

Buyers who face a new task buying situation usually go through all stages of the buying process. Buyers making modified or straight rebuys may skip some of the stages.

Problem Recognition: Problem recognition can result from internal or external stimuli. Internally, the company may decide to launch a new product that requires new production equipment and materials. Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a better product or a lower price.

General Need Description: The buyer next prepares a general need description that describes the characteristics and quantity of the needed item. For standard items, this process presents few problems. For complex items, however, the buyer may have to work with others—engineers, users, and consultants—to define the item.

Product Specification: The buying organization next develops the item’s technical product specifications, often with the help of a value analysis engineering team. Product value analysis is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production. The team decides on the best product characteristics and specifies them accordingly.

Supplier Search: The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. Today, more and more companies are turning to the Internet to find suppliers. The newer the buying task, the more complex and costly the item, and the greater the amount of time the buyer will spend searching for suppliers.

Proposal Solicitation: In the proposal solicitation stage of the business buying process, the buyer invites qualified suppliers to submit proposals. When the item is complex or expensive, the buyer will usually require detailed written proposals or formal presentations from each potential supplier.

Supplier Selection: During supplier selection, the buying center often will draw up a list of the desired supplier attributes and their relative importance. Buyers may attempt to negotiate with preferred suppliers for better prices and terms before making the final selections. In the end, they may select a single supplier or a few suppliers. Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time.

Order-Routine Specification: The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or suppliers and lists items such as technical specifications, quantity needed, expected time of delivery, return policies, and warranties. In the case of maintenance, repair, and operating items, buyers may use blanket contracts rather than periodic purchase orders. A blanket contract creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period.

Performance Review: The performance review may lead the buyer to continue, modify, or drop the arrangement. The eight-stage model provides a simple view of the business buying-decision process. The actual process is usually much more complex.

Institutional and Government Markets: Much of this discussion also applies to the buying practices of institutional and government organizations. However, these two non-business markets have additional character¬istics and needs.

Major Types of Buying Situations

Major Types of Buying Situations

There are three major types of buying situations:
In a straight rebuy, the buyer reorders something without any modifications. It is usually handled on a routine basis by the purchasing department.
In a modified rebuy, the buyer wants to modify the product specifications, prices, terms, or suppliers. The modified rebuy usually involves more decision participants than does the straight rebuy.
A company buying a product or service for the first time faces a new task situation. In such cases, the greater the cost or risk, the larger the number of decision participants and the greater their efforts to collect information will be.

Many business buyers prefer to buy a complete solution to a problem from a single seller. Instead of buying and putting all the components together, the buyer may ask sellers to supply the components and assemble the package or system. Thus, systems selling is often a key business marketing strategy for winning and holding accounts.

Participants in the Business Buying Process

The decision-making unit of a buying organization is called its buying center: all the individuals and units that participate in the business decision-making process. The buying center includes all members of the organization who play any of five roles in the purchase decision process.

• Users are members of the organization who will use the product or service.
• Influencers often help define specifications and also provide information for evaluating alternatives.
• Buyers have formal authority to select the supplier and arrange terms of purchase.
• Deciders have formal or informal power to select or approve the final suppliers.
• Gatekeepers control the flow of information to others.

The buying center is not a fixed and formally identified unit within the buying organization. It is a set of buying roles assumed by different people for different purchases. Within the organization, the size and makeup of the buying center will vary for different products and for different buying situations. The buying center concept presents a major marketing challenge. The business marketer must learn who participates in the decision, each participant’s relative influence, and what evaluation criteria each decision participant uses. The buying center usually includes some obvious participants who are involved formally in the buying process. It may also involve less obvious, informal participants, some of whom may actually make or strongly affect the buying decision. Sometimes, even the people in the buying center are not aware of all the buying participants.


Major Influencers on Business Buyers

Business buyers are subject to many influences when they make their buying decisions. Business buyers respond to both economic and personal factors. They react to both reason and emotion. When suppliers’ offers are very similar, business buyers have little basis for strictly rational choice. Because they can meet organizational goals with any supplier, buyers can allow personal factors to play a larger role in their decisions. When competing products differ greatly, business buyers are more accountable for their choice and tend to pay more attention to economic factors. Business buyers are heavily influenced by factors in the current and expected economic environment, such as the level of primary demand, the economic outlook, and the cost of money. An increasingly important environmental factor is supply of key materials. Many companies are now more willing to buy and hold larger inventories of scarce materials to ensure adequate supply. Business buyers also are affected by technological, political, and competitive developments in the environment. Culture and customs can strongly influence business buyer reactions to the marketer’s behavior and strategies, especially in the international marketing environment. Organizational factors are also important. Each buying organization has its own objectives, policies, procedures, structure, and systems, and the business marketer must understand those factors as well.

The buying center usually includes many participants who influence each other; so interpersonal factors also influence the business buying process. It is often difficult to assess such interpersonal factors and group dynamics. Each participant in the business buying-decision process brings in personal motives, perceptions, and preferences. These individual factors are affected by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk.

LN 05 BUSINESS BUYER BEHAVIOUR

LN 05 BUSINESS BUYER BEHAVIOUR

This chapter examines business customers—those that buy goods and services for use in producing their own products and services or for resale to others. As with firms selling to final buyers, firms marketing to business customers must build profitable relationships with business customers by creating superior customer value.

Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. It also includes the behavior of retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.
In the business buying process, business buyers determine which products and services their organizations need to purchase, and then find, evaluate, and choose among alternative suppliers and brands.
Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behavior.


Business Markets: The business market is huge. In fact, business markets involve far more dollars and items than do consumer markets. The main differences between consumer and business markets are in market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.

Market Structure and Demand: The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. Even in large business markets, a few buyers often account for most of the purchasing.

Business demand is derived demand. It ultimately derives from the demand for consumer goods. B-to-B marketers sometimes promote their products directly to final consumers to increase business demand. Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes, especially in the short run. Business markets have more fluctuating demand. The demand for many business goods and services tends to change more—and more quickly—than the demand for consumer goods and services does.

Nature of the Buying Unit: Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Often, business buying is done by trained purchasing agents who spend their working lives learning how to buy better. The more complex the purchase, the more likely that several people will participate in the decision-making process.

Types of Decisions and the Decision Process
Business buyers usually face more complex buying decisions than do consumer buyers. Purchases often involve large sums of money, complex technical and economic considerations, and interactions among many people at many levels of the buyer’s organization. The business buying process also tends to be longer and more formalized than the consumer buying process. In the business buying process, buyer and seller are often much more dependent on each other.

Many customer companies are now practicing supplier develop¬ment, systematically developing networks of supplier-partners to ensure an appropriate and dependable supply of products and materials that they will use in making their own products or reselling to others.

At the most basic level, marketers want to know how business buyers will respond to various marketing stimuli. Within the organization, buying activity consists of two major parts: the buying center and the buying decision process.

The Buyer Decision Process

The Buyer Decision Process 

The buyer decision process consists of five stages:
1. Need recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5.Postpurchase behavior

Need Recognition: The buyer recognizes a problem or need triggered by either an: Internal stimuli, or External stimuli

Information Search: Information search may or may not occur.  Consumers can obtain information from any of several sources.
1. Personal sources (family, friends, neighbors, acquaintances)
2. Commercial sources (advertising, salespeople, Web sites dealers, packaging, displays)
3. Public sources (mass media, consumer rating organizations, Internet searches)
4. Experiential sources (handling, examining, using the product)
5. Commercial sources inform the buyer.
Personal sources legitimize or evaluate products for the buyer.

Evaluation of Alternatives: Alternative evaluation is how the consumer processes information to arrive at brand choices. How consumers go about evaluating purchase alternatives depends on the individual consumer and the specific buying situation. In some cases, consumers use careful calculations and logical thinking. At other times, the same consumers do little or no evaluating; instead they buy on impulse and rely on intuition.

Purchase Decision: Generally, the consumer’s purchase decision will be to buy the most preferred brand.
Two factors can come between the purchase intention and the purchase decision. 1.Attitudes of others
2.Unexpected situational factors

Postpurchase Behavior: The difference between the consumer’s expectations and the perceived performance of the good purchased determines how satisfied the consumer is. If the product falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is said to be delighted. Cognitive dissonance, or discomfort caused by postpurchase conflict, occurs in most major purchases.

The Buyer Decision Process for New Products
A new product is a good, service, or idea that is perceived by some potential customers as new.
The adoption process is the mental process through which an individual passes from first learning about an innovation to final adoption. Adoption is the decision by an individual to become a regular user of the product.
Stages in the Adoption Process
Consumers go through five stages in the process of adopting a new product:
1. Awareness: The consumer becomes aware of the new product, but lacks information about it.
2. Interest: The consumer seeks information about the new product.
3. Evaluation: The consumer considers whether trying the new product makes sense.
4. Trial: The consumer tries the new product on a small scale to improve his or her estimate of its value.
5. Adoption: The consumer decides to make full and regular use of the new product.

Individual Differences in Innovativeness
People differ greatly in their readiness to try new products. People can be classified into the adopter categories. The five adopter groups have differing values.
1. Innovators are venturesome—they try new ideas at some risk.
2. Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas early but carefully.
3. The early majority are deliberate—although they rarely are leaders, they adopt new ideas before the average person.
4. The late majority are skeptical—they adopt an innovation only after a majority of people have tried it.
5. Laggards are tradition bound—they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

Influence of Product Characteristics on Rate of Adoption
Five characteristics are important in influencing an innovation’s rate of adoption.
1. Relative advantage: The degree to which the innovation appears superior to existing products.
2. Compatibility: The degree to which the innovation fits the values and experiences of potential consumers.
3. Complexity: The degree to which the innovation is difficult to understand or use.
4. Divisibility: The degree to which the innovation may be tried on a limited basis.
5. Communicability: The degree to which the results of using the innovation can be observed or described to others.

Personal Factors

Personal Factors

Age and Life-Cycle Stage. People change the goods and services they buy over their lifetimes.
Tastes in food, clothes, furniture, and recreation are often age-related. Buying is also shaped by the stage of the family life cycle. Marketers often define their targets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage.
Occupation: A person’s occupation affects the goods and services they purchase.
Economic Situation: A person’s economic situation will affect store and product choice.
Lifestyle is a person’s pattern of living as expressed in his or her psychographics. This involves measuring major AIO dimensions such as activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products).

Personality and Self-Concept
Personality refers to the unique psychological character¬istics that distinguish a person or group.
A brand personality is the specific mix of human traits that may be attributed to a particular brand. One researcher identified five brand personality traits:
1.Sincerity (down-to-earth, honest, wholesome, and cheerful)
2.Excitement (daring, spirited, imaginative, and up-to-date)
3.Competence (reliable, intelligent, and successful)
4.Sophistication (upper class and charming)
5.Ruggedness (outdoorsy and tough)
The basic self-concept premise is that people’s possessions contribute to and reflect their identities; that is, “we are what we have.”
Psychological Factors
Motivation: A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction.
Psychoanalyst Sigmund Freud suggested that a person’s buying decisions are affected by subconscious motives that even the buyer may not fully understand.
Motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations. Abraham Maslow sought to explain why people are driven by particular needs at particular times. He determined that human needs are arranged in a hierarchal fashion.

Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Selective attention is the tendency for people to screen out most of the information to which they are exposed. Selective distortion describes the tendency of people to interpret information in a way that will support what they already believe.  Selective retention is the retaining of information that supports their attitudes and beliefs.
Subliminal advertising refers to marketing messages received without consumers knowing it. Studies have established no link between subliminal messages and consumer behavior.

Learning describes changes in an individual’s behavior arising from experience. A drive is a strong internal stimulus that calls for action. A drive becomes a motive when it is directed toward a particular stimulus object. Cues are minor stimuli that determine when, where, and how the person responds.

Beliefs and Attitudes: A belief is a descriptive thought that a person has about something. Attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea. Attitudes are difficult to change.

Types of Buying Decision Behavior
1. Complex Buying Behavior: Consumers undertake complex buying behavior when they are highly involved in a purchase and perceive significant differences among brands.Consumers may be highly involved when the product is expensive, risky, purchased infrequently, and highly self-expressive. Typically, the consumer has much to learn about the product category.Marketers of high-involvement products must understand the information-gathering and evaluation behavior of high-involvement consumers.
2. Dissonance-Reducing Buying Behavior: Dissonance-reducing buying behavior occurs when consumers are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands. After the purchase, consumers might experience postpurchase dissonance (after-sale discomfort) when they notice certain disadvantages of the purchased brand or hear favorable things about brands not purchased. To counter such dissonance, the marketer’s after-sale communications should provide evidence and support to help consumers feel good about their brand choices.
3. Habitual Buying Behavior: Habitual buying behavior occurs under conditions of low consumer involvement and little significant brand difference. Consumer behavior does not pass through the usual belief-attitude-behavior sequence. Consumers do not search extensively for information about the brands, evaluate brand characteristics, and make weighty decisions about which brands to buy. They passively receive information as they watch television or read magazines. Because buyers are not highly committed to any brands, marketers of low-involvement products with few brand differences often use price and sales promotions to stimulate buying.
4. Variety-Seeking Buying Behavior: Consumers undertake variety-seeking buying behavior in situations characterized by low consumer involvement but significant perceived brand differences. In such cases, consumers often do a lot of brand switching.

LN 04: CONSUMER MARKETS AND CONSUMER BUYER BEHAVIOR

LN 04: CONSUMER MARKETS AND CONSUMER BUYER BEHAVIOR

Consumer buyer behavior refers to the buying behavior of final consumers—individuals and households who buy goods and services for personal consumption. All of these consumers combine to make up the consumer market. The Sri Lankan consumer market consists of more than 22 million people.

Model of Consumer Behavior

The central question for marketers is: How do consumers respond to various marketing efforts the company might use?
Marketing stimuli consist of the four Ps: product, price, place, promotion. Other stimuli include major forces and events in the buyer’s environment: economic, technological, social, and cultural. The marketer wants to understand how the stimuli are changed into responses inside the consumer’s “black box,” which has two parts.
1.The buyer’s characteristics influence how he or she perceives and reacts to the stimuli.
2.The buyer’s decision process itself affects the buyer’s behavior.

Characteristics Affecting Consumer Behavior
Cultural Factors: Culture is the most basic cause of a person’s wants and behavior. Marketers are always trying to spot cultural shifts.
Subcultures are groups of people with shared value systems based on common life experiences and situations.
Social classes are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Social class is not determined by a single factor, but is measured as a combination of occupation, income, education, wealth, and other variables.

Social Factors
Groups and Social Networks: A person’s behavior is influenced by many small groups. Marketers use word-of-mouth influence and buzz marketing to spread the word about their brands. Opinion leaders are people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert social influence on others.
Online social networks are online communities where people socialize or exchange information and opinions.
Family is the most important consumer buying organization in society.
Roles and Status: A role consists of the activities people are expected to perform. Each role carries a status reflecting the general esteem given to it by society.

The Cultural Environment

The Cultural Environment

The cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.

The Persistence of Cultural Values

Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government.

Secondary beliefs and values are more open to change.

Shifts in Secondary Cultural Values

Marketers want to predict cultural shifts in order to spot new opportunities or threats.

People’s Views of Themselves. People vary in their emphasis on serving themselves versus serving others.
People’s Views of Others: In past decades, observers have noted several shifts in people’s attitudes toward others. Trend trackers see a new wave of “cocooning.”
People’s Views of Organizations: By and large, people are willing to work for major organizations and expect them to carry out society’s work. Many people today see work as a required chore to earn money to enjoy their nonwork hours.
People’s Views of Society: People vary in their attitudes toward society. This influences their consumption patterns and marketplace attitudes.
People’s Views of Nature: Recently, people have recognized that nature is finite and fragile, and that it can be destroyed by human activities.
This renewed love of things natural has created a 63-million-person “lifestyles of health and sustainability” market.
People’s Views of the Universe: In general, religious conviction and practice have been dropping off gradually through the years.

RESPONDING TO THE MARKETING ENVIRONMENT

Many companies think the marketing environment is an uncontrollable element to which they must react and adapt. Other companies take a proactive stance toward the marketing environment. Rather than assuming that strategic options are bounded by the current environment, these firms develop strategies to change the environment. By taking action, companies can often overcome seemingly uncontrollable environmental events.

THE MACROENVIRONMENT

THE MACROENVIRONMENT

Demographic Environment: Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. Changes in the world demographic environment have major implications for business. Thus, marketers keep close track of demographic trends and developments in their markets, both at home and abroad.
Changing Age Structure of the Population
Author Douglas Coupland calls them Generation X. Others call them the “baby busters.” Increasing parental divorce rates and higher employment for their mothers made them the first generation of latchkey kids. The GenXers developed a more cautious economic outlook, and are a more skeptical bunch. Millennials (also called Generation Y or the “echo” boomers). Born between 1977 and 2000, these children of the baby boomers number 83 million or more. This group includes several age cohorts: Tweens (age 10–12), Teens (age 13–18), Young adults (age 19–33). Millennials are fluent in and comfortable with digital technology. It is a way for life for them.

Generational marketing: Rather than risk turning off one generation in favor of another, marketers need to form precise age-specific segments within each group. It may be more useful to segment people by lifestyle, life stage, or common.

Economic Environment

The economic environment consists of factors that affect consumer purchasing power and spending patterns. Industrial economies constitute rich markets for many different kinds of goods. Subsistence economies consume most of their own agricultural and industrial output, and offer few marketing opportunities.  In between are developing countries, which can offer outstanding marketing opportunities.

Income Distribution: Income distribution in the Sri Lanka is highly skewed. The rich have grown richer, the middle class has shrunk, and the poor have remained poor. This uneven distribution of income has created a tiered market.

The Natural Environment: The natural environment involves the natural resources that are needed as inputs by marketers, or that are affected by marketing activities. Trends in the natural environment:
Growing shortages of raw materials, Increased pollution and Increased government intervention. Companies are developing strategies and practices that support environmental sustainability

Technological Environment: The technological environment is perhaps the most dramatic force now shaping our destiny. Technology has released such wonders as antibiotics, robotic surgery, miniaturized electronics, smartphones, and the Internet. These new technologies can offer exciting opportunities for marketers.

The Political and Social Environment: Marketing decisions are strongly affected by developments in the political environment. This consists of laws, government agencies, and various pressure groups.

Legislation Regulating Business: Governments develop public policy to guide commerce. Increasing Legislation. Legislation affecting business around the world has increased steadily over the years. Business legislation has been enacted for a number of reasons: To protect companies from each other, To protect consumers from unfair business practices and To protect the interests of society against unrestrained business behavior. Because government agencies have discretion in enforcing laws, they can have an impact on a company’s marketing performance.  Increased Emphasis on Ethics and Socially Responsible Actions

Socially Responsible Behavior: Enlightened companies encourage their managers to “do the right thing.” The boom in Internet marketing has created a new set of social and ethical issues. Cause-Related Marketing. To exercise their social responsibility and build more positive images, many companies are now linking themselves to worthwhile causes.

ANALYZING THE MARKETING ENVIRONMENT- marketing 9

ANALYZING THE MARKETING ENVIRONMENT

A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. The microenvironment consists of the actors close to the company that affect its ability to service its customers. The macroenvironment consists of larger societal forces that affect the microenvironment.

THE  MICROENVIRONMENT
Marketing management’s job is to build relationships with customers by creating customer value and satisfaction.

The Company: All the interrelated groups form the internal environment. All groups must work in harmony to provide superior customer value and relationships.

Suppliers: Suppliers provide the resources needed by the company to produce its goods and services.  Marketing managers must watch supply availability—supply shortages or delays, labor strikes, and other events can cost sales in the short run and damage customer satisfaction in the long run. Marketing managers also monitor the price trends of their key inputs.

Marketing Intermediaries: Marketing intermediaries help the company to promote, sell, and distribute its products to final buyers.
• Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers.
• Physical distribution firms help the company to stock and move goods from their points of origin to their destinations.
• Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets.
• Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.
Today’s marketers recognize the importance of working with their intermediaries as partners rather than simply as channels through which they sell their products.

Competitors: Marketers must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. No single competitive marketing strategy is best for all companies.
Publics: A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives.
• Financial publics influence the company’s ability to obtain funds.
• Media publics carry news, features, and editorial opinion.
• Government publics. Management must take government developments into account.
• Citizen-action publics. A company’s marketing decisions may be questioned by consumer organizations, environmental groups, and others.
• Local publics include neighborhood residents and community organizations.
• General public. The general public’s image of the company that affects its buying.
• Internal publics include workers, managers, volunteers, and the board of directors.
• Customers

There are five types of customer markets. The company may target any or all of these:

1. Consumer markets: individuals and households that buy goods and services for personal consumption.
2. Business markets: buy goods and services for further processing or for use in their production process.
3. Reseller markets: buy goods and services to resell at a profit.
4. Government markets: composed of government agencies that buy goods and services to produce public services.
5. International markets: buyers in other countries, including consumers, producers, resellers, and governments.

marketing 8

Marketing Analysis

Managing the marketing function begins with a complete analysis of the company’s situation. The company must analyze its markets and marketing environment to find attractive opportunities and avoid environmental threats. The marketer should conduct a SWOT analysis, by which it evaluates the company’s overall strengths, weaknesses, opportunities, and threats.

Marketing Planning

Marketing planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives. A detailed marketing plan is needed for each business, product, or brand. A marketing strategy consists of specific strategies: target markets, positioning, the marketing mix, and marketing expenditure levels.

Marketing Implementation

Marketing implementation is the process that turns marketing plans into marketing actions in order to accomplish strategic marketing objectives. Implementation involves day-to-day, month-to-month activities that effectively put the marketing plan to work. Implementation addresses the who, where, when, and how. In an increasingly connected world, people at all levels of the marketing system must work together to implement marketing strategies and plans. Successful marketing implementation depends on how well the company blends its people, organizational structure, decision and reward systems, and company culture into a cohesive action program that supports its strategies.

Marketing Department Organization

The company must design a marketing organization that can carry out marketing strategies and plans. The most common form of marketing organization is the functional organization. Under this organization functional specialists head the various marketing activities. A company that sells across the country or internationally often uses a geographic organization. Companies with many very different products or brands often create a product management organization. A product manager develops and implements a complete strategy and marketing program for a specific product or brand. For companies that sell one product line to many different types of markets and customers that have different needs and preferences, a market or customer management organization might be best. A market management organization is similar to the product management organization.  Market managers are responsible for developing marketing strategies and plans for their specific markets or customers. Large companies that produce many different products flowing into many different geographic and customer markets usually employ some combination of the functional, geographic, product, and market organization forms. Many companies are finding that today’s marketing environment calls for less focus on products, brands, and territories and more focus on customers and customer relationships.  More and more companies are shifting their brand management focus toward customer management.

Marketing Control

Marketing control involves evaluating the results of marketing strategies and plans and taking corrective action to ensure that objectives are attained. Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its annual plan. Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities. Marketing strategies and programs can quickly become outdated, and each company should periodically reassess its overall approach to the marketplace.

PLANNING MARKETING: PARTNERING TO BUILD CUSTOMER RELATIONSHIPS- marketing 7

PLANNING MARKETING: PARTNERING TO BUILD CUSTOMER RELATIONSHIPS

Within each business unit, more detailed planning takes place. The major functional departments in each unit must work together to accomplish strategic objectives. Marketing provides a guiding philosophy—the marketing concept—that suggests that company strategy should revolve around building profitable relationships with important customer groups. Marketing provides inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them. Marketing designs strategies for reaching the unit’s objectives.

Partnering with Other Company Departments
Each company department can be thought of as a link in the company’s value chain. A value chain is the series of departments that carry out value-creating activities to design, produce, market, deliver, and support the firm’s products. A company’s value chain is only as strong as its weakest link.Success depends on how well each department performs its work of adding customer value and on how well the activities of various departments are coordinated. In practice, departmental relations are full of conflicts and misunderstandings.
Partnering with Others in the Marketing System
The firm needs to look beyond its own value chain and into the value chains of its suppliers, distributors, and ultimately, customers. More companies today are partnering with other members of the supply chain to improve the performance of the customer value delivery network. Increasingly, today’s competition no longer takes place between individual competitors. Rather, it takes place between the entire value-delivery networks created by these competitors.

MARKETING STRATEGY AND THE MARKETING MIX
Marketing strategy is the marketing logic by which the company hopes to achieve these profitable relationships.
Customer-Driven Marketing Strategy
Companies know that they cannot profitably serve all consumers in a given market—at least not all consumers in the same way.
Market Segmentation
The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products or marketing programs is called market segmentation. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts.
Market Targeting
Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.
Market Differentiation and Positioning
A product’s position is the place the product occupies relative to competitors in consumers’ minds. Marketers want to develop unique market positions for their products. Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers. Positioning establishes differentiation. To gain competitive advantage, the company must offer value to target consumers. This is accomplished through product differentiation—actually differentiating the company’s market offering so that it gives consumers more value.

Developing an Integrated Marketing Mix
The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. Product means the goods-and-services combination the company offers to the target market. Price is the amount of money customers must pay to obtain the product. Place includes company activities that make the product available to target consumers. Promotion means activities that communicate the merits of the product and persuade target customers to buy it. An effective marketing program blends all of the marketing mix elements into a coordinated program designed to achieve the company’s marketing objectives by delivering value to consumers. Some critics feel that the four Ps may omit or underemphasize certain important activities. From the buyer’s viewpoint, in this age of customer relationships, the four Ps might be better described as the four Cs:
1. Customer solution (Product)
2. Customer cost (Price)
3. Convenience (Place)
4. Communication (Promotion)

MANAGING THE MARKETING EFFORT

Managing the marketing process requires the four marketing management functions shown in Figure 2.6.
• Analysis
• Planning
• Implementation
• Control

Designing the Business Portfolio- marketing 6

Designing the Business Portfolio

 A business portfolio is the collection of businesses and products that make up the company. The best portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

Analyzing the Current Business Portfolio: The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses making up the company. A strategic business unit (SBU) is a unit of the company which has a separate mission and objectives and that can be planned independently from other company businesses. The next step in business portfolio analysis calls for management to assess the attractiveness of its various SBUs and decide how much support each deserves. Most standard portfolio-analysis methods evaluate SBUs on two important dimensions—the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry. The Boston Consulting Group Approach. The best-known portfolio-planning method was developed by the Boston Consulting Group.
This matrix defines four types of SBUs:
• Stars: high-growth market, high-share product
• Cash cows: low-growth market, high-share product
• Question marks: low-share product, high-growth market
• Dogs: low-share product, low-growth market

Once it has classified its SBUs, the company must determine what role each will play in the future. The company can invest more in the business unit in order to grow its share. It can invest just enough to hold the SBU’s share at the current level. It can harvest the SBU, milking its short-term cash flow regardless of the long-term effect. Or it can divest the SBU by selling it or phasing it out.

Problems with Matrix Approaches
Portfolio-analysis approaches have limitations.
• They can be difficult, time-consuming, and costly to implement.
• Management may find it difficult to define SBUs and measure market share and growth.
• These approaches focus on classifying current businesses but provide little advice for future planning.
Because of such problems, many companies have dropped formal matrix methods in favor of more customized approaches that are better suited to their specific situations.

Developing Strategies for Growth and Downsizing
Designing the business portfolio involves finding businesses and products the company should consider in the future. Marketing has the main responsibility for achieving profitable growth for the company.  Marketing must identify, evaluate, and select market opportunities and lay down strategies for capturing them. The product/market expansion grid:
• Market penetration involves making more sales to current customers without changing its products.
• Market development involves identifying and developing new markets for its current products.
• Product development is offering modified or new products to current markets.
• Diversification is where a company starts up or buys businesses outside of its current products and markets.
Companies must also develop strategies for downsizing their businesses.

THE CHANGING MARKETING LANDSCAPE- marketing 5

THE CHANGING MARKETING LANDSCAPE

This section explores five major developments: the changing economic environment, the digital age, the growth of not-for-profit marketing, rapid globalization, and the call for more social responsibility.

The Changing Economic Environment
The Great Recession, which began in 2008, caused many consumers to rethink their spending priorities and cut back on their buying.
Companies in all industries have aligned their marketing strategies with these new economic realities, stressing value above all.
Wealthier consumers have joined the trend toward frugality. Even luxury brands are stressing value.
A recession creates winners and losers, just like a boom. A troubled economy can present companies with opportunities as well as threats.

The Digital Age
The recent technology boom has created a digital age. The most dramatic new technology is the Internet.  The digital age has provided marketers with new ways to learn about and track customers, and to create products and services tailored to individual needs. Digital media has become a global phenomenon.
Online marketing is now the fastest growing form of marketing. In addition to the “click-only” dot-coms, most traditional “brick-and-mortar” companies have now become “click-and-mortar” companies.
The Growth of Not-for-Profit Marketing
In recent years, marketing has also become a major part of the strategies of many not-for-profit organizations, such as colleges, hospitals, museums, zoos, symphony orchestras, and even churches. The nation’s nonprofits face stiff competition for support and membership. Sound marketing can help them to attract membership and support.

Rapid Globalization
Marketers are now connected globally with their customers and marketing partners. Almost every company, large or small, is touched in some way by global competition. McDonald’s now serves 60 million customers daily in 32,000 restaurants worldwide—some 66 percent of its revenues come from outside the United States. Today, companies are buying more supplies and components abroad.

Sustainable Marketing—The Call for More Social Responsibility
Marketers are reexamining their relationships with social values and responsibilities and the very Earth that sustains us. Corporate ethics and social responsibility have become hot topics for almost every business. Forward-looking companies view socially responsible actions as an opportunity to do well by doing-good.

SO, WHAT IS MARKETING? PULLING IT ALL TOGETHER
Marketing is the process of building profitable customer relationships by creating value for customers and capturing value in return. The first four steps in the marketing process create value for customers. The final step in the process allows the company to capture value from customers. When building customer and partner relationships, companies must harness marketing technology, take advantage of global opportunities, and act in an ethical and socially responsible way.


LN 02: Strategic Market Planning

Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing market opportunities. Strategic planning sets the stage for the rest of the planning in the firm. Companies typically prepare annual plans, long-range plans, and strategic plans.

Defining a Market-Oriented Mission: Many organizations develop formal mission statements. A mission statement is a statement of the organization’s purpose—what it wants to accomplish in the larger environment. A clear mission statement acts as an “invisible hand” that guides people in the organization. A market-oriented mission statement defines the business in terms of satisfying basic customer needs. Management should avoid making its mission too narrow or too broad. Missions should be realistic, specific, fit the market environment, based on the company’s distinctive competencies, and motivating.

Setting Company Objectives and Goals: The company’s mission needs to be turned into detailed supporting objectives for each level of management. The mission leads to a hierarchy of objectives, including business objectives and marketing objectives. Marketing strategies and programs must be developed to support these marketing objectives.

Designing the Business Portfolio: A business portfolio is the collection of businesses and products that make up the company. The best portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

Analyzing the Current Business Portfolio: The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses making up the company. A strategic business unit (SBU) is a unit of the company which has a separate mission and objectives and that can be planned independently from other company businesses. The next step in business portfolio analysis calls for management to assess the attractiveness of its various SBUs and decide how much support each deserves. Most standard portfolio-analysis methods evaluate SBUs on two important dimensions—the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry. The Boston Consulting Group Approach. The best-known portfolio-planning method was developed by the Boston Consulting Group.
This matrix defines four types of SBUs:
• Stars: high-growth market, high-share product
• Cash cows: low-growth market, high-share product
• Question marks: low-share product, high-growth market
• Dogs: low-share product, low-growth market

Once it has classified its SBUs, the company must determine what role each will play in the future. The company can invest more in the business unit in order to grow its share. It can invest just enough to hold the SBU’s share at the current level. It can harvest the SBU, milking its short-term cash flow regardless of the long-term effect. Or it can divest the SBU by selling it or phasing it out.

Partner Relationship Management - marketing 4

Partner Relationship Management

Partners Inside the Company: Today’s marketers know they must work closely with others inside and outside the company to jointly bring more value to customers. Today, firms are linking all departments in the cause of creating customer value. Rather than assigning only sales and marketing people to customers, they are forming cross-functional customer teams.

Marketing Partners Outside the Firm: Marketing channels consist of distributors, retailers, and others who connect the company to its buyers. The supply chain describes a longer channel, stretching from raw materials to components to final products that are carried to final buyers. Through supply chain management, many companies today are strengthening their connections with partners all along the supply chain.

CAPTURING VALUE FROM CUSTOMERS

The first four steps in the marketing process involve building customer relationships. The final step involves capturing value in return. By creating superior customer value, the firm creates highly satisfied customers who stay loyal and buy more.

Creating Customer Loyalty and Retention

The aim of customer relationship management (CRM) is to create not just customer satisfaction, but customer delight. This means that companies must aim high in building customer relationships. Customer delight creates an emotional relationship with a product or service, not just a rational preference. Companies are realizing that losing a customer means losing more than a single sale. It means losing customer lifetime value.

Growing Share of Customer
Share of customer is defined as the share the company gets of customers purchasing in their product categories. (Thus, banks want to increase “share of wallet.”)
Building Customer Equity: Companies want not only to create profitable customers, but to “own” them for life, capture their customer lifetime value, and earn a greater share of their purchases.

What Is Customer Equity?

Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers. Clearly, the more loyal the firm’s profitable customers, the higher the firm’s customer equity. Customer equity may be a better measure of a firm’s performance than current sales or market share.

Building the Right Relationships with the Right Customers
Not all customers, not even all-loyal customers, are good investments. Customers can be classified into one of four relationship groups, according to their profitability and projected loyalty. “Strangers” show low potential profitability and little projected loyalty. The relationship management strategy for these customers is simple: Don’t invest anything in them. “Butterflies” are potentially profitable but not loyal. The company should use promotional blitzes to attract them, create satisfying and profitable transactions with them, and then cease investing in them until the next time around. “True friends” are both profitable and loyal. There is a strong fit between their needs and the company’s offerings. The firm wants to make continuous relationship investments to delight these customers and retain and grow them. “Barnacles” are highly loyal but not very profitable. There is a limited fit between their needs and the company’s offerings.
Important point: Different types of customer require different relationship management strategies. The goal is to build the right relationships with the right customers.

PREPARING AN INTEGRATED MARKETING PLAN AND PROGRAM- marketing 3

PREPARING AN INTEGRATED MARKETING PLAN AND PROGRAM

The company’s marketing strategy outlines which customers the company will serve and how it will create value for these customers. Next, the marketer develops an integrated marketing program that will actually deliver the intended value to target customers. The marketing program consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement its marketing strategy. The marketing mix tools are classified into the four Ps of marketing: product, price, place, and promotion. The firm blends all of these marketing mix tools into a comprehensive integrated marketing program that communicates and delivers the intended value to chosen customers.

BUILDING CUSTOMER RELATIONSHIPS

Customer Relationship Management: Customer relationship management is perhaps the most important concept of modern marketing. Customer relationship management is the overall process of building and maintaining profitable customer relation¬ships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping, and growing customers.

Relationship Building Blocks: Customer Value and Satisfaction
The key to building lasting customer relationships is to create superior customer value and satisfaction.

Customer Value
Customer-perceived value is the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Customers often do not judge values and costs “accurately” or “objectively.” Instead, customers act on perceived value.

Customer Satisfaction

Customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations. If the product’s performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted. Although the customer-centered firm seeks to deliver high customer satisfaction relative to competitors, it does not attempt to maximize customer satisfaction. A company can always increase customer satisfaction by lowering its price or increasing its services. But this may result in lower profits. The purpose of marketing is to generate customer value profitably.

Customer Relationship Levels and Tools

Companies can build customer relationships at many levels. At one extreme, a company with many low-margin customers may seek to develop basic relationships with them. At the other extreme, in markets with few customers and high margins, sellers want to create full partnerships with customers. Many companies offer frequency marketing programs that reward customers who buy frequently or in large amounts.

The Changing Nature of Customer Relationships
Yesterday’s big companies focused on mass marketing to all customers at arm’s length. Today’s companies are building deeper, more direct, and more lasting relationships with carefully selected customers.
Relating with More Carefully Selected Customers
Called selective relationship management, many companies now use customer profitability analysis to weed out losing customers and to target winning ones for pampering.
Relating More Deeply and Interactively
Today’s marketers are incorporating interactive approaches that help build targeted, two-way customer relationships.

Two-Way Customer Relationships: New technologies have profoundly changed the way people relate to one another. This changing communications environment also affects how companies and brands relate to customers. Increasingly, marketers are using new communications approaches in building closer customer relationships. Consumers have more information about brands than ever before. The marketing world is now embracing customer-managed relationships. Companies can no longer rely on marketing by intrusion. Companies must practice marketing by attraction—creating market offerings and messages that involve consumers rather than interrupt them.

Consumer-generated marketing: has become a significant marketing force. Here, consumers themselves are playing a bigger role in shaping their own brand experiences and those of others.

DESIGNING A CUSTOMER-DRIVEN MARKETING STRATEGY- marketing 2

DESIGNING A CUSTOMER-DRIVEN MARKETING STRATEGY

Marketing management is defined as the art and science of choosing target markets and building profitable relationships with them. 

The marketing manager must answer two important questions: 

1. What customers will we serve (what’s our target market)? 

2. How can we serve these customers best (what’s our value proposition)?

Selecting Customers to Serve

A company must first decide whom it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). Marketing managers know they cannot serve all customers. By trying to do so, they end up not serving any well. Marketing managers must decide which customers they want to target and on which level, timing, and nature of their demand. “Marketing management is customer management and demand management”.

Choosing a Value Proposition: A company’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. (BMW promises “the ultimate driving machine.”) Such value propositions differentiate one brand from another. 

Marketing Management Orientations

Marketing management wants to design strategies that will build profitable relationships with target consumers. But what philosophy should guide these marketing strategies? There are five alternative concepts under which organizations design and carry out their marketing strategies: 

The Production Concept: holds that consumers will favor products that are available and highly affordable. Management should focus on improving production and distribution efficiency. 

The Product Concept: holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements. 

The  Selling Concept: holds that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort. The concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such as insurance or blood donations. These industries must be good at tracking down prospects and selling them on product benefits. 

The Marketing Concept: holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customer focus and value are the paths to sales and profits. Rather than a “make and sell” philosophy, it is a customer-centered “sense and respond” philosophy. The job is not to find the right customers for your product but to find the right products for your customers. Customer-driven companies research current customers deeply to learn about their desires, gather new product and service ideas, and test proposed product improvements. Customer-driven marketing is understanding customer needs even better than customers themselves do and creating products and services that meet existing and latent needs.

The Societal Marketing Concept: questions whether the pure marketing concept overlooks possible conflicts between consumer short run wants and consumer long run welfare. The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s well being. 

UNDERSTANDING THE MARKETPLACE AND CUSTOMER NEEDS

UNDERSTANDING THE MARKETPLACE AND CUSTOMER NEEDS

Five core customer and marketplace concepts are critical: (1) needs, wants, and demands; (2) marketing offerings (products, services, and experiences); (3) value and satisfaction; (4) exchanges and relationships; and (5) markets.

Customer Needs, Wants, and Demands
Needs: The most basic concept underlying marketing is that of human needs. Human needs are states of felt deprivation. They include physical, social, and individual needs. These needs were not created by marketers; they are a basic part of the human makeup.
Wants are the form human needs take as they are shaped by culture and individual personality. An American needs food but wants a Big Mac.
Demand: When backed by buying power, wants become demands.

The best marketing companies go to great lengths to learn and understand their customers’ needs, wants, and demands.

Market Offerings: Products, Services, and Experiences

Needs and wants are fulfilled through market offerings some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Market offerings include products and services—activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything.

Marketing myopia occurs when a company becomes so taken with their own products that they lose sight of underlying customer needs. Read the Article!!!

Customer Value and Satisfaction: Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers switch to competitors and disparage the product to others. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships.

Exchanges and Relationships

Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences.
Markets: A market is the set of actual and potential buyers of a product.
“Marketing means managing markets to bring about profitable customer relationships”.

Market Offerings—Products, Services, and Experiences

Needs and wants are fulfilled through market offerings—some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Market offerings include products and services—activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything.

Marketing myopia occurs when a company becomes so taken with their own products that they lose sight of underlying customer needs. Please read the assigned article!!!

Customer Value and Satisfaction

Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers switch to competitors and disparage the product to others. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships.

Exchanges and Relationships

Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences.

Legal issues for entrepreneurs 3

Trade marks

A trade mark is a sign that can distinguish goods and services from those of other traders. A sign can include a combination of words, logos and pictures. To register a trade mark, it must be:

•    distinctive for a group of goods and services
•    not the same as (or similar to) any earlier marks on the register for the same or similar goods and services
A trade mark is a marketing tool which helps to develop and distinguish the brand.

 The trade mark also provides reassurance for consumers. People will recognize products more easily when they see them advertised. For example, goods bearing the Nike 'tick' logo demonstrate they are Nike products and meet Nike quality standards. Entrepreneurs register trade marks, designs and logos to protect and represent their brands. Branding delivers huge commercial value to a company. Many people recognize brands rather than individual products or services. The benefits of having a registered trade marks are:

•    It provides notice to everyone the entrepreneur has exclusive rights to the use of the mark.
•    It establishes incontestable rights regarding the commercial use of the mark.
•    It establishes the right to deposit registrations with customs to prevent importation of goods with similar mark.
Copyright

Copyright is an IP right that relates to the expression of an idea, not the idea itself. Copyright provides exclusive rights to creative individuals for the protection of their literary or artistic productions. For example, anyone can write a story based on the idea of a superhero, but they cannot copy the name, the text or illustrations from other books about the same subject. Copyright protects sound recordings, films, broadcasts, photographs and original artistic, musical, dramatic and literary works.
For the author of creative material to obtain copyright protection, the material must be in a tangible form so it can be communicated or reproduced. It also must be the author's  own work and thus the product of his or her skill or judgment. Concepts, principles, processes, systems, or discoveries are not valid for copyright protection until they are  put in tangible form-written or recorded.

Trade Secrets

Certain business processes and information cannot be patented, copyrighted, or trademarked. Yet they may be protected as trade secrets. Customer lists, plans, research and development, pricing information, marketing techniques, and production techniques are examples of potential trade secrets. Generally, anything that makes an individual company unique and has value to a competitor could be a trade secret.


Protection of trade secrets extends both to ideas and to their expression. For this
reason, and because a trade secret involves no registration or filing requirements, trade-secret protection is ideal for software. Of course, the secret formula, method, or other information must be disclosed to key employees. Businesses generally attempt to protect their trade secrets by having all employees who use the process or information agree in their contracts never to divulge it. Theft of confidential business data by industrial espionage, such as stealing a competitor's documents, is a theft of trade secrets
without any contractual violation and is actionable in itself.


The law clearly outlines the area of trade secrets: Information is a trade secret if  (1) it is not known by the competition, (2) the business would lose its advantage if the competition were to obtain it, and (3) the owner has taken reasonable steps to protect the secret from disclosure

Licensing
Licensing is the practice of leasing a legally protected property (such as a trademarked or copyrighted name, logo, likeness, character, phrase or design) to another party in conjunction with a product, service or promotion.
It is based on a contractual agreement between the owner of the property (or its agent) known as the licensor; and a licensee – normally a manufacturer or retailer. It grants the licensee permission to use the property subject to specific terms and conditions, which may include the purpose of use, a defined territory and a defined time period. In exchange for this usage, the licensor receives financial remuneration - normally in the form of a guaranteed fee and/or royalty on a percentage of sales.

The benefit of licensing for licensors

The key benefit for a licensor is the ability to exploit and enhance its brand or property. Licensing can do this by:
•    increasing its brand presence at retail or distribution outlet
•    creating further brand awareness to support its core products or services
•    supporting and enhancing its core values by associations with the licensed products/service or category (e.g. association with a healthy food or with a cutting edge mode of fashion)
•    entering new markets (consumer or geographical) which were unfeasible with it’s own resources or capabilities
•    generating new revenue streams, often with little involvement or additional financial or other resource implications

The benefit of licensing for licensees
The key benefit for a licensee (especially manufacturer or retailer) is the ability to significantly increase consumer interest in and sales of its products or services. Licensing can do this by: 

•    transferring the values and consumer favour towards the property to the licensed product or service
•    providing added value and differentiation from competitive offerings
•    providing additional marketing support or momentum from the core property’s activity provided by the licensor
•    appealing to new target markets who have not historically been interested in a licensee’s product or service
•    giving credibility for moving into new market sectors through product extension
•    gaining additional retail space and favour

Legal issues for entrepreneurs 2

Intellectual Property Rights (IPR)

People have ideas all the time. In business, new ideas can lead to new products and services. They can lead to a better way of doing something. Ideas can come from existing businesses through research and development. For example, Apple, an established technology company, developed the iPod. Ideas generate value to the economy by encouraging people to buy or invest in new developments. Many ideas come from entrepreneurs who go on to start up new businesses. They also inspire competitors to invent new products in order to regain market share.
Intellectual property rights (IPR) can be used to protect the technology, brand name, design and creativity behind the concept. It gives the creator sole ownership of the concept, in a similar way to owning physical property like a house or car. Owners can control the use of their intellectual property to gain financial reward.

Why do entrepreneurs protect their ideas?

It is important for anyone to protect his or her ideas. This allows them to benefit from their creativity without their ideas being directly copied and exploited by others. For entrepreneurs, the idea is often the entire basis for the new business. Without the idea, the business would not exist. Entrepreneurs invest money to develop business ideas. It is therefore essential that entrepreneurs safeguard this investment.

Benefits of IPR

Intellectual property (IP) rights provide entrepreneurs with many benefits:

•    IP rights provide protection against a competitor directly copying the idea. This helps the entrepreneur to recover their costs in developing the idea.

•    IP rights help businesses maintain their long-term competitive edge. Registered IP ensures that entrepreneurs get all the financial benefits from their ideas. Continued revenue will keep the business afloat.

•    Registered IP is an asset. It helps convince financial institutions to invest in a business, enabling more money to be raised for development.

•    Registered IP gives consumers confidence that products meet appropriate standards and quality.

•    By being able to profit from their IP, entrepreneurs are rewarded for taking risks and developing new innovations. They can invest profits in work on new ideas.

•    Ownership of the IP enables entrepreneurs to license or franchise ideas to others without risk. This means entrepreneurs are able to expand the market for their products and services more easily, and can increase revenue for the business.

How do entrepreneurs protect their ideas?

There are four main categories of intellectual property rights (IPR). Each gives a different protection and is used for different purposes.

Patents

Patents are for inventions. Entrepreneurs can seek patents for a new product or a new process that can be used in industry. For example, James Dyson obtained a patent for his bag-less vacuum cleaner. A patent can protect the invention, preventing other businesses from making, using, importing or selling similar products.
To apply for a patent, a business must submit a patent specification. This is a written description, often with drawings of the invention. This sets out what the invention does and provides important technical details. A patent can last up to 20 years; if it is renewed every year.