Marketing Management

Chapter 1
Creating and Capturing Customer Value
Marketing is
- building & managing profitable customer relationships
- attracting new customers by promising superior value
- keep and grow current customers by delivering satisfaction
- not only selling & advertising but satisfying customer needs focus on
customers in order to capture value from them in return
1) Marketing Process:
Steps of the Marketing Process: Understanding the marketplace and customer
needs/wants Design a customer driven marketing strategy Construct an
integrated marketing program that delivers super value build profitable relations
and create customer delight ALL in order to CAPTURE CALUE to create
PROFIT and CUSTOMER EQUITY

Steps of the Marketing Process

2) FIRST STEP: Understanding Marketplace and Customer

Needs

Need: State of felt deprivation (Food, Safety, Socializing, Knowledge and

Expression)
Wants: human needs shaped by culture, individual personality, also society
changes them
Demands: human wants that are backed up by buying power (what resources
do they have?)

To get a better understanding of those needs, wants and demands consumer

research and analysis of data

Market offerings: Products, Services, Experiences not limited to physical

products and include entities such as persons, places, organizations, information,
ideas.

Marketing Myopia: Sellers mistake of paying too much attention to specific

products rather than to the benefits of the experience of those products. Products
only a tool to solve a consumer problem Creation of Brand Experience (Ex.:
Service plus Product)

Customer Value and Satisfaction: What do customers actually expect from

the product? It is influenced by propaganda and image.

If too low: company is able to satisfy the expectations of the customers, but fail to
attract new customers
If too high: buyers might be disappointed
right LEVEL of EXPECTATION for VALUE & SATISFACTION

Exchanges and Relationships:

Exchange Act of obtaining a desired object from someone by offering
something in return.

When agreement is reached: transaction takes place (monetary or barter situation)

Marketing consists of actions taken to build and maintain desirable exchange
relationships with target audiences involving products, service, ideas etc. STRONG
relationships must be build in order to hold the customers and deliver superior
customer value.

Markets: Market is the set of actual and potential buyers.

A need or want that needs to be satisfied by engaging in exchange relationships.

Consumer research, product development, communication, distribution,
pricing, and service are core marketing activities.
VALUE CREATING PROCESS: Each party in the system adds value
Suppliers Company, Competitors Marketing Intermediaries
CONSUMERS (See figure 1.2 on page 32)
affected by major environmental forces (demographic, economic, natural,
technological, political, social/cultural)
success depends on how the entire system serves the need of the final consumer
3) SECOND STEP: Designing a Customer Driven Marketing

Strategy

Which customers should we choose and how can we bring them value?
Marketing Management = art of choosing target markets in order to build
profitable relationships
Find, attract, keep, and grow target customers by creating, delivering,
communicating superior customer value

Questions we must answer in the beginning: Whats our target market?

Whats our value proposition?

Selecting Customers to serve

Dividing market into segments of customers (MARKET SEGMENTATION) and
selecting which segments it will go after (TARGET MARKETING)

Its not about finding as many customers as possible, but about serving the right
ones well and profitably. (DEMARKETING = we dont want ALL the customers, that
we can get)

Choosing a Value Proposition =Set of benefits or values a company promises

to deliver to customers to satisfy their needs

How will the company differentiate and position itself on the market?
Value Propositions help differentiate one brand from another. Strong value
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propositions give advantages in their target market. (Smart Car = compact, agile,
economical, ecological)

Marketing Management Orientations (Marketing Philosophies to the

Marketplace)

What philosophy should guide the marketing strategies? What weight should be
given to the interests of customers, the organization, and society? Interests may
conflict here.
5 Alternative Concepts (under which organizations design and carry out marketing
strategies)
- The Productions Concept (oldest concept) Consumer will favor products that
are available and highly affordable. Management will focus on improving production
and distribution efficiency. (in some cases successful, for ex.: Lenovo)
BUT can lead to marketing myopia: focus is too narrowly on their own operations
and loses sight of customer needs satisfaction and building customer relationships.
- The Product Concept Consumer will favor products that offer the most in
quality, performance, innovative features. Focus lies on continuous product
improvements. Marketing myopia: The better mousetrap? Consumers may not need
that.
- The Selling Concept Consumers will not buy enough of the product unless a
large scale selling and promotion effort is undertaken. (Insurance, blood donations)
Tracking down prospects and selling them on a products benefits. Aim is to sell
rather than building long term relationships with customers.
Starting point of Selling Concept is the Factory, Focus on the Existing Products,
Means are Selling and Promoting and End is Profits through Sales Volume(See
Figure 1.3 Page 34) INSIDE-OUT VIEW
- The Marketing Concept Hold that the key to achieving organizational goals
consists in determining the needs and wants of target markets and delivering
desired satisfactions more effectively and efficiently than competitors. Instead of
make and sell philosophy, rather sense and respond philosophy find the
right products for the customers, not the other way around (Customer-driven
companies)
Starting point of Marketing Concept is the Market, Focus on the Customer
Needs, Means are Integrated Marketing and End is Profits through Customer
Satisfaction (See Figure 1.3 Page 34) OUTSIDE-IN VIEW
Understanding the customer better, than they even know themselves. They often
dont know what they want, or even what is possible. Customer-driving
Marketing
- The Societal Marketing Concept Three considerations underlying the
societal marketing concept: Society (Human welfare), Company (Profits),
Consumers (Want satisfaction) TRIANGLE (See figure 1.4 p. 35) Are there any
possible conflicts between consumer short-run wants and consumer long-run
welfare?
Improve both customers and societys well being = Sustainable Marketing,
socially and environmentally responsible marketing but also satisfaction of needs
of consumers and businesses, while preserving the ability for future generations
(Bottled water industry?)

3) THIRD STEP: Preparing an Integrated Marketing Plan and

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Program

A program that will actually deliver the intended value to target customers.
Transforming the marketing strategy into action.
Consists of: MARKETING MIX (Set of tools to implement Marketing Strategy) 4 Ps
Product, Price, Place and Promotion all must blend into a comprehensive
plan that communicates and delivers the value intended => Integrated
Marketing Program

4) FOURTH and most important STEP: Building Customer

Relationships
Customer Relationship Management (=CRM most important concept of
modern marketing, key marketing tool today)
Managing detailed information about individual customers and carefully managing
customer touchpoints for more customer loyalty. Aspects like acquiring, keeping
and growing customers Customer value and satisfaction (AGAIN! Who would have
thought)
Principles:
Customer Value: Attracting and retaining customers BUT customers ACT on
PERCEIVED VALUE, not the actual one. Relative to every customer, which product
is more valueable.
Customer Satisfaction: Depends on the products perceived performance
relative to a buyers expectation Performance may be less, matched or
exceeding the expectation THIS influences Customer LOYALTY Customer
DELIGHT leads to better company performance (ex.: Ritz-Carlton hotel)
---->> Delicate Balance between Customer Value, Satisfaction while still
maintaining high profits.
Customer Relationship Levels and Tools
FULL VS. BASIC Parternships
- Basic Partnerships: Low-margin Customers For example: Nike doesnt contact
their customers personally, but instead brand-building advertising, PR, Website
- Full Partnerships: Few Customers with High-Margins Nikes sales representatives
have a close relationsip to Foot Locker, Sports Authority large retailers
There are different levels in between these extremes
-Ways to build a stronger BOND with customers Frequency Marketing
Program (reward for loyalty, frequent buys or high amount spent hotels, airlines
etc) Club Marketing Program (benefits to create member communities
Harley Davidson has Harley Owner Group)
Changing Nature of Customer Relationships
Mass Marketing or Focus on deeper more direct and long lasting relationships?
- Relating with more carefully selected customers uses selective relationship
management to target fewer, more profitable customers:
Customer Profitability Analysis which customers are too costly to serve,
which should we focus on, where are our profits? If they prove to not be profitable,
then customer may be send to competitors by the own company (insurance
company) Customer Divestment
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- Relating more deeply and interactively incorporating two-way relationships

through blogs, websites, online communities, social networks:
Two-Way Customer Relationships changing communications environment
affects companies and how brands relate to customers creation of a community
surrounding the brand
This also means greater power & control to consumers information about brand is
everywhere, point of view is shared on different platforms customermanaged relationships
Creating Market offerings and messages that involve consumer rather than
interrupt them (brand-consumer interaction = twitter, facebook)
Consumer- Generated Marketing: Consumers themselves are playing a big role
in shaping their brand experience and of others aswell. (Heinz invited consumer to
submit youtube videos as ads for Ketchup) But it can be time consuming and costly
to be processed and actually find something useful.
Partner Relationship Management
= It involves working closely with partners in other company departments and
outside the company to jointly bring greater value to customers.
Partners inside the Company: Every functional area can interact with customers
(electronically). No matter what job you have in the company, you must understand
marketing. Linking departments cross-functional customer teams costumer
value
Marketing Partners Outside the Firm: Marketing Channels consists of
distributors, retailers, and others who connect the company to its buyers. deliver
costumer value. Supply Chain describes the channel from raw materials to final
product to final buyer. Success also depends on how well your Supply Chain
performs against the competitors supply chains Strategic Partners, Strategic
alliances

5.) FIFTH STEP: Capturing Value from Customers

Creating Customer Loyalty and Retention
Customer delight (emotional relationship with the brand, not just rational
preference) consumers are loyal to products and positive influence on brand
image, because of propaganda complete satisfaction necessary to keep up the
loyalty (slight drop could influence loyalty and keeping an old costumer is cheaper
than having to gain a NEW one)
Costumer Lifetime Value: is the value of the entire stream of purchases that the
customer would make over a lifetime of patronage (it means losing an entire stream
of purchases)
Growing Share of Customer
Share of Customer: The Portion of the costumers purchasing that a company
gets in its product categories. By offering greater variety of to current customers
cross-sell, up-sell = Amazon recommends its customers based on their purchase
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history, product searches other products that might be of interest.

Building Customer Equity
=Total number of combined customer lifetime values of all f the companys
customers
Companies want to own the customer for life, therefore earn greater share of their
purchases and capture customer lifetime value
What is Customer Equity? = Ultimate aim of CRM is to produce high customer
equity. Its the total combined customer lifetime values OF ALL THE COMPANYS
CUSTOMERS. good measure of a firms performance
Building the Right Relationships with the Right Customers: Customers are
assets that must be managed and maximized. But not all are profitable.
Classification scheme based on potential profitability and projected loyalty:
Strangers, butterflies, true friends and barnacles Strangers: low
potentional profitability, little loyalty / Butterflies: potentially profitable, but not
loyal / True friends: profitable and loyal / Barnacles: highly loyal but not very
profitable Different types of customers require different relationship
management strategies

The Changing Marketing Landscape

Major Trend and Developments:
Uncertain Economic Environment: Even brands like Lexus promote fuel economy,
resale value etc cutting prices in a down economy. BUT balance between brands
value propositions and the current times while also enhancing long-term equity.
Digital Age: WE are all connected to eachother Web 2.0, but Web 3.0 is starting:
virtual world to carry in your pocket.
Rapid Globalization: Companies are connected globally with their customers and
marketing partners. Global Competition. Global marketing? Go global? But how?
Sustainable Marketing the Call for more Social responsibility: Social Values,
responsibilities and how the Earth sustains us. Corporate ethics, environmental
responsibilities protecting land and water
Growth of Not-for-Profit Marketing: Colleges, hospitals, museums, zoos, churches
etc. face competition for support and membership. Attracting new donors?
So what is Marketing? Pulling it all together Summary Figure 1.5 Page 53

Chapter 2
Objectives of this Chapter:
Companywide Strategic Planning: Defining Marketings Role
Designing the Business Portfolio
Planning Marketing: Partnering to build Customer Relationships
Marketing Strategy and the Marketing Mix
Managing the Marketing Effort
Measuring and Managing Return on Marketing Investment (ROI)

1.) Company and Marketing Strategy: Partnering to Build

Customer Relationships
Companywide Strategic Planning: Defining Marketings Role
Strategic planning is the process of developing and maintaining a strategic fit
between the organizations goals and capabilities and its changing marketing
opportunities.
Game plan for long-run survival and growth, - given its specific situation,
opportunities, objectives and resources.
Steps in Strategic Planning:
(Corporate level---> ) Defining a company mission (guide for company, which
direction) Setting company objectives and goals Designing the
business portfolio (how much support to give to each business or product of the
portfolio) Planning marketing and other functional strategies (-- > on the
level of business unit, product and market) (See figure 2.1 p. 63)
STEPS IN STRATEGIC PLANNING
1.) FIRST STEP: Defining a Market- Oriented Mission
Mission statement: Organizations purpose what it wants to accomplish in the
larger environment Invisible Hand leading the way of the business they
should be meaningful and motivating (We create fantasies a place where dreams
come true etc Disney) What VALUE is created for the customer? Emphasize on
that rather than profit goals. How will the company win in the marketplace?
The Company must answer certain question carefully and completely in order to be
successful. What is our business? What should our business be? Who is the
customer? What do consumers value?
Mission statements should be market oriented not product oriented. = >
Defined in terms of satisfying the customer basic needs. (Facebook: not a social
network, but its mission is to connect people; Google: information universally
accessible and useful)
Product-Oriented Definition VS. Market- Oriented Definition (see figure 2.1
p.64 for more examples)
2.) SECOND STEP: Setting Company Objectives and Goals
Turning the mission into detailed supporting objectives of each level of the
management.
Broad Mission leads to a hierarchy of objectives, including business objectives and
marketing objectives.
Business Objectives: Build profitable customer relationships, Invest in research,
Improve profits
Marketing Objectives: Increase market share, Create local partnerships, and
increase promotion
In a way, the firms mission is translated into a set of objectives for the current
period.

3.) THIRD STEP: Designing the Business Portfolio

Guided by the mission statement and objectives set beforehand, the business
portfolio is set up. It shows the companys strengths and weaknesses to
opportunities in the environment.
Business Portfolio: collection of businesses and products that make up the
company
The planning involves two steps: Analysis of the current portfolio, then
determine which business should receive more, less or no investment. Then the
future portfolio must be shaped by developing strategies for growth and
downsizing.
Analyzing the current Business Portfolio (major activity in strategic
planning)
Portfolio Analysis: Management evaluates the products and businesses of their
company
Identification of key businesses that make up the company STRATEGIC
BUSINESS UNITS (SBUs: it can be a division, a product line, a single product or
brand) How much support should the various SBUs get?
they should fit the core philosophy and competencies
Summary: STEPS of analyzing the current Business Portfolio: Identify key
businesses(SBUs) Asses the attractiveness of its various SBUs Decide how
much support each SBUs deserves
The BOSTON Consulting Group Approach
The best known portfolio planning method was
developed by that Group, a leading management
consulting firm.
AXIS: Market Growth Rate (attractiveness of
market) Relative Market Share ( measure of
company strength in the market)
This classification places strategic business
units/products in the following four categories:
1. Stars SBUs/products characterized by highgrowth and high- market share. They often require
heavy external investment to sustain their rapid
growth as they may not be producing any positive cash flow. Eventually, their
growth will slow, and they will turn into cash cows.
2. Cash Cows - SBUs/products characterized by low-growth, high-market share.
These are well established and successful BUs that dont require substantial
investment to keep their market share. They produce a lot of cash to be used for
other business units (Stars and Question Marks) of the company.
3. Question Marks - SBUs/products characterized by low-market share in highgrowth markets. They require a lot of financial resources to increase their share
since they cannot generate enough cash themselves. The crucial decision is to
decide which Question Marks to phase out and which ones to grow into Stars.
4. Dogs - SBUs/products with low-growth, low-market share. In addition, they often
have poor profitability. The business strategy for a Dog is most often to divest.
However, occasionally management might make a decision to hold a Dog for
possible strategic repositioning as a Question Mark or Cash Cow.

Problem with Matrix Approaches: They can be difficult, time consuming, costly to
implement. Its difficult to define SBUs and measure market share and growth.
ALSO: they measure CURRENT businesses but provide little advice for future.
Nowadays strategic planning is decentralized; cross-functional teams of divisional
manager are responsible.
Developing Strategies for Growth and Downsizing
Product/Market Expansion Grid: A portfolio-planning tool for identifying
company growth opportunity through market penetration, market development,
product development, or diversification
Marketing needs to identify, evaluate, and select market opportunities and
establish strategies for capturing them.
ANSOFF MATRIX : Market Penetration/Market Development/Product
Development/Diversification
(for more information see p.69/70)

Downsizing: The reduction of the business portfolio by eliminating products or

business units that are not profitable or that dont fit the companys strategy
anymore. Difficult economic times: focus limited resources on the stronger products
or markets. Dont waste energy trying to salvage fading opportunities.
4.) FOURTH STEP: Planning Marketing: Partnering to Build Customer
Relationship
Major functional departments in each unit marketing, finance, accounting,
purchasing, operations, information systems, hum resources, and others must
work together to accomplish strategic objectives. Costumer value = key ingredient
for success but marketing alone cannot deliver superior value. Therefore
PARTNER RELATIONSHIP MANAGEMENT besides customer relationship
management
Partnering with other company departments:
Value Chain: Series of internal departments that carry out value-creating activities
to design, produce, market, deliver and support a firms products.
Even More than that: They must partner effectively with other companies in the
marketing system to form VALUE DELIVERY NETWORK (includes company,
suppliers, distributors, customers who partner with each other to improve
performance of system) value can be only achieved if the whole company
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obsesses over creating that value, not only the marketing department.
5.) FIFTH STEP: Marketing Strategy and the Marketing Mix
Marketing Strategy is: Which customers will we serve? (Segmentation and
Targeting) and How will we create value (Differentiation and Positioning)
After that the Marketing Program is designed 4Ps
Customer Driven Marketing Strategy: Too many different
kinds of consumers with too many different kinds of
needs = dividing up the market choosing best
segments design strategy to serve best
TOOLS:
- Marketing Segmentation: Dividing market into
groups of buyers with different needs,
characteristics, behavior etc require different
marketing programs
- Marketing Segment: A group of costumers who
respond in similar way to given set of marketing
efforts
- Market Targeting: Process of evaluating each
market segments attractiveness and selecting one
or more segments to enter.
- Market Positioning: Arranging for a product to
occupy a clear, distinctive, desirable place relative to
competing products in the minds of target costumers.
- Differentiation: Positioning the brand effectively how
to stand out from other brands
Developing an Integrated Marketing MIX
Marketing Mix: Set of tactical marketing tools products,
price, place, promotion that firm blends to produce the
response it wants in the target market.
Concern: 4 Ps concept takes the sellers view of the
market, not the buyers view 4 Cs (Product = Customer
Solution; Price = Customer Cost; Place = Convenience;
Promotion = Communication)
6.)SIXTH STEP: Managing the Marketing Effort
Through implementation the company turns plans (Strategic and
Marketing Plan) into actions but measuring and evaluating
the result of marketing activities for corrective action are needed
Analysis (see figure 2.6 page 78 ) Its a circular Process
(continuous)
Marketing Aalysis: SWOT Analysis (Strength, weakness,
opportunities, threats) Show the current market situation
Micro/Macro Environment
Concepts of a Marketing Plan:
- Executive Summary: Summary of goals and
recommendations helping top management find major
points quickly

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Current marketing situation: Describes target market and companys position,

with information about market, product, performance, competition, distribution.
Threats and opportunities analysis: Assesses threats and opportunities that
product might face, helping management to anticipate the developments that
impact the firm and its strategies
Objectives and issues: Objectives that company would like to attain during the
plans term + key issues
Marketing strategy: broad marketing logic by which it wants to create customer
value + target markets, positioning, marketing expenditure levels, strategies for
each elemenet of marketing mix + reaction to SWOT analysis
Action programs: How to turn plan in Action programs Answering: What,
When, Who, How much?
Budgets: A projected profit and loss statement shows expected revenues, cost
of production, distribution, marketing. Budget is basis for materials buying,
production scheduling, personnel planning, marketing operations
Controls: Controls that will be used to monitor progress review
implementation, spot products that are not meeting the goals and measures of
RETURN on MARKETING INVESTMENT

Marketing Implementation: The process that turns marketing plan into

marketing actions to accomplish strategic marketing objectives
Successful implementation depends on how well the company blends its people,
organizational structure, and decision and reward system and company culture into
a cohesive action plan that supports those strategies.
Modern Marketing departments can be arranged in several ways:
- Functional Organizations: different marketing activities are headed by
functional specialist a sales manager, an advertising manager, a marketing
research manager, a customer service manager, new product manager
- Geographic Organizations: companies that sell across the country or
internationally = sales and marketing people are assigned to specific region,
countries etc.
- Product Management Organization: Many different Products or Brands =
each product/brand has own strategy and marketing program
- Market or Customer Management: For companies that sell one product line
to many different types of markets and customers who have different needs etc.
Marketing Control: Controlling is the measurement and evaluation of result and
the taking of corrective action as needed Differences between expected and
actual performances Corrective actions
Operating control: Checking Ongoing Performance against the annual plan with
corrective actions if necessary
Strategic control: Looking whether the companys basic strategies are matched to
its opportunities. They can be quickly outdated, therefore necessary to periodically
reassess its approach to the market.
7.) LAST STEP: Measuring and Managing Return on Marketing Investment
Return on marketing investment (Marketing ROI): is the net return from a
marketing investment divided by the costs of the marketing investment. Marketing
ROI provides a measurement of the profits generated by investments in marketing
activities. most difficult part of marketing
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Chapter 3
Analyzing the Marketing Environment
Objectives of this Chapter:
The companys Microenvironment
The companys Macroenvironment
Responding to the Marketing Environment
The Marketing Environment: Includes the actors and forces outside marketing
that affect marketing managements ability to build and maintain
successful relationships with customers. Marketers must be
environmental trend trackers and opportunity seekers. Marketing
Research and Marketing Intelligence for collecting information on
the environment/customers/competitors.
Microenvironment: Actors close to the company that affect its
ability to serve its customers company, suppliers, marketing
intermediaries, customer markets, competitors, publics. (VALUE
CHAIN)
Macroenvironment: The larger societal forces that affect the microenvironment
demographic, economic, natural, technological, political and cultural forces.

Microenvironment
The Company (INTERNAL environment): Top management (sets the
companys mission, objectives, broad strategies, policies) Finance R&D
Purchasing Operations Accounting
When designing the marketing plans, marketing management takes other company
groups into account.
They form the internal environment.
Suppliers: Link in the companys overall customer value delivery network. They
provide the resources to produce goods and services (also supply shortages, delays,
labor strikes, natural disasters = could damage customer satisfaction) Treated as
partners to provide customer value
Marketing Intermediaries: Help the company to promote, sell and distribute its
products to final buyers = include resellers, physical distribution channel firms,
wholesalers, retailers, marketing service agencies (marketing research firms,
advertising agencies, media firms, marketing consulting firms etc), financial
intermediaries (banks, credit companies, insurance companies VALUE DELIVERY
NETWORK
Ex.: Coca-Cola and McDonalds
Competitors: Provide greater customer value than your competitors. Firms must
gain strategic advantage by positioning their offerings against competitors
offerings.
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Publics: Any group that has an actual or potential interest in or impact on an

organizations ability to achieve its objectives:
Financial publics (Ability to obtain funds = banks etc) Media publics (editorial
opinion = newspaper etc) Government publics (government development? =
lawyer must be consultet on products safety etc) Citizen-action publics
(consumer organizations, environmental groups, minority groups etc) Local
publics (neighborhood, community = provide some community support) General
public (attitude of general public towards activities = image of company) Internal
publics (workers, managers, volunteers, directors = newsletters to inform and
motivate internal publics)
Company can create marketing plan for these major publics as well as for the
customer markets. Achieve GOODWILL, favorable word of mouth, donations etc.

Macroenvironment
Companies that understand and adapt well to their environment can thrive. How
can marketing plans be affected by these?
The Demographic Environment
Demography is the study of human populations in terms of size, density, location,
age, gender, race, occupation, and other statistics Demographic environment is
important because it involves people, and people make up markets Demographic
trends include age, family structure, geographic population shifts, educational
characteristics, and population diversity
Changing age structure of the population:
- Baby boomers include people born between 1946 and 1964 Most affluent
Westerners
- Generation X includes people born between 1965 and 1976 High parental
divorce rates, Cautious economic outlook, Less materialistic , Family comes first,
Lag behind on retirement savings
- Millennials (Generation Y or echo boomers) include those born between
1977 and 2000
Comfortable with technology Includes: Tweens (ages 812), Teens (1319),
Young adults (20s)
Korean Generational Groups
The War Generation The Baby Boomers (1955-1963) The 386 generation
(1960s) (term came about in the 1990s when the generation were in their 30s)
Born 1960s, educated 1980s (now called the 486 generation) The X generation
(1970s) The Y generation (1980s) The W generation (World Cup Generation)
The P generation (Participation, Passion, Power, Paradigm shift) has been argued
to include the X generation V Generation (1990s) Valiant, Various and Vivid
Generational marketing is important in segmenting people by lifestyle of life
state instead of age
Marketers need to form precise age-specific segments within each group (ex. Baby
boomers) Defining people by their birth date may be less effective than segmenting
them by their lifestyle, life stage, common values
Changing FAMILY: More people are Divorcing or separating Choosing not to
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marry Choosing to marry later Marrying without intending to have children

Increased number of working women Stay-at-home dads
Changes in the Workforce More educated More white collar
INCREASING DIVERSITY: Markets are becoming more diverse International,
National Also Ethnicity, Gay and lesbian, Disabled
Economic Environment :
consists of factors that affect consumer purchasing power and spending patterns.
Marketers must pay close attention to major trends and consumer spending
patterns both across and within world markets. Nations vary greatly in their level
and distribution of income:
For Example: - Industrial economies are richer markets - Subsistence economies
consume most of their own agriculture and industrial output
Changes in consumer Spending
Until recently consumers would buy and spent their money freely, without caution
because of the boom in stock markets etc. BUT Changes in income now they
are buying less and expect greater value in the things they buy. VALUE
MARKETING (involves ways to offer financially cautious buyers greater valuethe
right combination of quality and service at a fair price)
Ernst EngelEngels Law:
As income rises:
The percentage spent on food declines
The percentage spent on housing remains constant
The percentage spent on savings increases
Natural Environment:
involves the physical environment and the natural resources that are needed as
inputs by marketers or that are affected by marketing activities. For example
changing weather or natural disaster warm winter influences the sales of winter
clothes, but boosted the demand for running shoes etc.
Marketers should be aware of several trend in the natural environment:
Shortages of raw materials
Increased pollution
Increase government intervention
These concerns have lead to a so-called green movement environmentally
sustainable strategies
Technological Environment:
Is perhaps the most dramatic force in changing the marketplace Creates new
products and opportunities But safety of new product always a concern (scary
and dangerous products little transmitters implanted in products?, Chemical
Weapons etc) As products become more complex, public needs to know whether
they are safe or not. Government agencies regulate them etc.
Political and Social Environment
Political environment consists of laws, government agencies, and pressure groups
that influence or limit various organizations and individuals in a given society
Affecting Businesses around the world and it is increasing well-conceived
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regulation can encourage competition and ensure fair markets

Business Legislation: to protect companies from each other
Government Regulation: to protect consumers from unfair business practices
to protect the interest of society against unrestrained business behavior
- New laws and their enforcement will continue to increase Marketers need to
know about major laws
- Increased emphasis on ethics: Beyond written laws and regulations, businesses
are also governed by social codes and rules of professional ethics
- Socially responsible behavior These businesses actively seek out to protect
the long-run interests of their consumers and the environment
- Cause-related marketing To exercise more social responsibility and build more
positive images, many companies are linking themselves with worthwhile
causes. has become primary form of corporate giving do well by doing good
---- > but also controversial: cause-related may in fact be cause-exploitative
marketing? (taking advantage of disasters to promote own company?)
Cultural Environment
Cultural environment consists of institutions and other forces that affect a societys
basic values, perceptions, and behaviors. People grow up in a particular society that
shapes their basic beliefs and values. absorb worldviews that define their
relationships
The following cultural characteristics can affect marketing decision making:
Persistence of Cultural Values
- Core beliefs and values are persistent and are passed on from parents to
children and are reinforced by schools, churches, businesses, and government
- Secondary beliefs and values are more open to change and include peoples
views of themselves, others, organization, society, nature, and the universe
Shifts in Secondary Cultural Values
Peoples view of themselves: People vary their emphasis on serving
themselves versus serving others. Some seek pleasure, wanting fun, change. Others
seek self-realization, self expression etc influence the product and services that
match their views of themselves.
Yankelovich Monitors consumer segments:
- Do-it-yourselfersrecent movers
- Adventurers
Peoples view of others: Peoples attitudes and interactions with others shift
over time. Internet age could result in diminished human interaction. More
cocooning vs. Mass mingling
Peoples view of organizations: Attitude towards corporations, government
agencies, trade unions etc
Peoples view of society: Attitude toward their society Patriots defend it Reformers want to change it - Malcontents want to leave it
Peoples view of nature: Some feel ruled by it - Some feel in harmony with it Some seek to master it Peoples view of the universe: Renewed interest in
spirituality

Responding to the Marketing Environment

There are three kinds of companies: those who make things happen, those who
watch things happen, and those who wonder whats happened.
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Many companies view the marketing environment as an uncontrollable element to

which they must react and adapt. They analyze environmental forces and design
strategies that will help the company avoid threats and take advantage of
opportunities. Other companies take proactive stance toward the marketing
environment. Others are reactive And so on (for more see p. 113)

Chapter 4
Managing Marketing Information to gain Customer Insights
How companies develop and manage information about important marketplace
elements: Customers, competitors, products and marketing programs.
In this Chapter:
Marketing Information and Customer Insights Assessing Marketing Information
Needs Developing Marketing Information Marketing Research Analyzing
Marketing Information Distributing and Using Marketing Information Other
Marketing Information Considerations
Information:
A wise person recognizes the convenience of a general statement, but bows to the
authority of a particular fact
To manage a business well is to manage its future; and to manage the future is to
manage information
Information Complaints:
Too much information of the wrong kind and not enough of the right kind
Marketing information is so dispersed throughout the company that great effort is
often required to locate simple facts
Vital information: suppressed by executives for personal reasons arrives
too late to be useful
Information arrives providing no idea of its accuracy and there is no-one to turn to
for confirmation
Customer Insights are: Real Value lies behind HOW the information will be
used
- Fresh and deep insights into customers needs and wants (Apple iPod instead of
Walkman)
- Difficult to obtain Not obvious consumers cant tell you what they need or
why they buy Customers unsure of their behavior

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Most companies are overloaded with data and overwhelmed by it tweets,

blogs, Facebook, digital channels Not quantity but quality counts AND more
effective use of existing information

Companies are forming customer insights team: (Harness information to turn

into customer insights)
Include all company functional areas
Use insights to create more value for their customers
Customer controlled could be a problem
Marketing information system (MIS): consists of people and procedures
dedicated to:
Assessing the information needs
Developing needed information
Helping decision makers use the
information for customer
- They make information available to
users in the right form at the right time.
MARKETING INFORMATINS SYSTEM

Marketers obtain information from:

Internal data , Marketing
intelligence , Marketing research
MIS provides information to the
companys marketing and other managers and external partners such as
suppliers, resellers, and marketing service agencies
Characteristics of a Good MIS : Balancing what the information users would like
to have against what they need and what is feasible to offer
Internal databases: are electronic collections of consumer and market
information obtained from data sources within the company network
Marketing Intelligence: Marketing intelligence is the systematic collection and
analysis of publicly available information about consumers, competitors and
developments in the marketplace
Goal of competitive marketing intelligence is to improve strategic design
making by understanding the consumer environment, assessing and tracking
competitors actions and providing early warning of opportunities and threats. From
quizzing own companys employees, benchmarking competitors products, to
researching and monitoring the Internet etc. (Chief Listening Officers = are going
through online customer conversations)
Marketing Research: Marketing research is the systematic design, collection,
analysis, and reporting of data relevant to a specific marketing situation facing
an organization A SPECIFIC PROBLEM
Companies frequently hire outside research specialist to consult with management
on specific marketing problems
Marketing Research Process:

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1.

Step Defining
the problem and research objectives:
Exploratory research: Marketing research to gather preliminary information that will
help define problems and suggest hypotheses.
Descriptive research: To better describe marketing problems, situations, markets or
potential ones for a products or the demographics and attitudes of consumers
Causal research: Marketing research to test hypotheses about cause-and-effect
relationships
2. Step Developing the research plan for collecting information
Once researchers have defined the problem and objectives, they must determine
the exact information needed, develop a plan to gather it effectively. THE
RESEARCH PLAN outlines sources of existing data and spells out the specific
research approaches, contact methods, sampling plans, and instruments to gather
data
The research plan should be a written proposal, especially when large and
complex project.
The proposal should cover: - Management problem - Research objectives Information to be obtained - How the results will help management decisions
Budget (Research Costs)
What data to use?
Secondary data consists of information that already exists somewhere, having
been collected for another purpose Disadvantages: Relevant, accurate, current,
impartial? Questions to be answered in perspective of the secondary
data. Advantages: Cost, Speed, no data elsewhere
Primary data consists of information gathered for the special research
plan
Planning PRIMARY DATA COLLECTION:
1. Research Approaches: (Different types of methods)
- Observational research involves gathering primary data by
observing relevant people, actions, and situations
- Ethnographic research involves sending trained observers to watch and
interact with consumers in their natural environment
- Survey research is the most widely used method and is best for descriptive
informationknowledge, attitudes, preferences, and buying behavior Flexible
People can be unable or unwilling to answer Gives misleading or pleasing
answers Privacy concerns
- Experimental research is best for gathering causal informationcause-andeffect relationships

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2. Contact Methods:
Focus Group: Six to 10 people with a
trained moderator Challenges: Expensive - Difficult to generalize from
small group - Consumers not always open
and honest

Online Research:
Advantages: Low
Cost, Speed, High response rate, Good for hard to reach groups
Disadvatages: Restricted internet access, not sure who is
answering
3. Sampling Plan
Sample is a segment of the population selected for marketing research to
represent the population as a whole Designing the sample requires three
decisions:
Who is to be surveyed? How many people should be surveyed? How should the
people be chosen?
The different kind of samples:

4.

Research

Instruments
Questionnaires: - Most common - Administered in person, by phone, or online Flexible - Research must be careful with wording and ordering of questions
Questions
Close-end questions: include all possible answers, and subjects make choices
among them Provide answers that are easier to interpret and tabulate
Open-end questions: allow respondents to answer in their own words Useful in
exploratory research

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Mechanical Instruments: People meters, Checkout scanners, Neuro-marketing,

Eye Cameras (track consumers eyes as they look at marketing materials Print
Ads, Web pages, other web applications?)
3. Step Implementing the Research Plan
When the researcher puts the marketing research plan into action.
Involves collecting, processing, analyizing, interpreting the
data. This can be made by the firms research staff or by outside firm.
4. Step Interpreting and Reporting the FINDS
Analyzing and Using the Marketing Information
Customer Relationship Management (CRM)
CRM consists of sophisticated software and analytical tools that integrate
customer information from all sources, analyze it in depth, and apply the results to
build stronger customer relationships
carefully managed customer touchpoints to maximize customer loyalty
Customer Relationship Management Touchpoints
Customer purchases, Sales force contacts, Service and support calls, Web site visits,
Satisfaction surveys, Credit and payment interactions, Research studies
Distributing and Using Marketing Information
Marketing has no value until it is used to gain customer insights and make better
marketing decisions. Thus MIS make information readily available to managers and
others who need it. Information distribution involves entering information into
databases and making it available in a timeuseable manner Intranet provides
information to employees and other stakeholders Extranet provides information to
key customers and suppliers

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