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CHAPTER OUTLINE
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CHAPTER OBJECTIVES
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CHAPTER SUMMARY
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LECTURE NOTES
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v. Give concise but complete directions.
vi. Use scaled questions rather than simple yes/no questions.
D. Interpreting and reporting the information.
1. After data are accumulated, they must be organized into meaningful
information.
2. Methods of summarizing and simplifying data include tables, charts, and
graphs.
3. Descriptive statistics such as mean, mode, and median are also helpful.
E. Marketing research questions
1. Sales
2. Distribution
3. Markets
4. Advertising
5. Products
III. Inhibitors to Marketing Research
A. Cost.
1. Marketing research can be expensive.
2. Affordable marketing techniques exist for smaller companies.
B. Complexity.
1. Quantitative aspects frighten many entrepreneurs.
2. Key concern is interpretation of the data.
3. Entrepreneurs can obtain help from specialists.
C. Strategic decisions.
1. Some entrepreneurs feel that only major strategic decisions need
marketing research support.
2. Sales efforts could be enhanced through research results.
D. Irrelevancy.
1. Some entrepreneurs believe that marketing research data either tell them
what they already know or are irrelevant.
2. Data that confirm what is already known can be acted upon with more
confidence.
IV. Internet Marketing
A. Advantages of the Internet for marketing.
1. Increases a companys presence and brand equity.
2. New customers are easily cultivated.
3. Customer service is improved.
4. Information transfer is accomplished in a cost-efficient manner.
B. Limitations of Internet marketing.
1. Limited target audience.
2. Customer resistance to purchasing over the Internet.
V. Developing the Marketing Concept
A. Marketing philosophy
1. A production-driven philosophybased on the belief produce efficiently
and worry about sales later.
2. A sales-driven philosophyfocuses on personal selling and advertising to
persuade customers to buy the companys output.
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3. A consumer-driven philosophyrelies on research to discover consumer
preferences, desires, and needs before production actually begins.
B. Marketing segmentationthe process of identifying a specific set of
characteristics that differentiate one group of customers from the rest.
C. Consumer behaviorthere are many types and patterns of consumer
characteristics. Five common ways consumers view a product are service are
as convenience goods, shopping goods, specialty goods, unsought goods, and
new products.
VI. Developing a Marketing Plan
A marketing plan is the process of determining a clear, comprehensive approach to the
creation of customers.
A. Current marketing researchdetermining who the customers are, what they want,
and how they buy
B. Current sales analysispromoting and distributing products according to
marketing research findings
C. Marketing information systemcollecting, screening, analyzing, storing,
retrieving, and disseminating marketing information on which to base plans,
decisions, and actions
D. Sales forecastingcoordinating personal judgment with reliable market
information
E. Evaluationidentifying and assessing deviations from marketing plans
F. Final considerations for entrepreneursmarketing plans must be based on
the ventures specific goals
VII. Pricing strategies
A. The following factors affect entrepreneurs in the pricing of their products or
services:
1. The degree of competitive pressure.
2. Availability of sufficient supply.
3. Seasonal or cyclical changes in demand.
4. The costs of distribution.
5. Economic conditions.
B. Pricing procedures differ depending on the nature of the venture.
VIII. Summary
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SUGGESTED ANSWERS FOR DISCUSSION QUESTIONS (END-OF-CHAPTER)
1. In your own words, what is a market? How can marketing research help an
entrepreneur identify a market?
A market is potential customers who have purchasing power. The potential customers
make up the market. An entrepreneur would not know what type of venture or area to
engage in without market research. The market analysis helps tell the entrepreneur what to
do.
2. What are the five steps in the marketing research process? Briefly describe each.
(1) Defining the purpose and objectives of the researchin other words, you need to
define precisely the informational requirements of the decision to be made
(2) Gathering secondary datathese data involve using already compiled data. The two
types are internal and external
(3) Gathering primary datathese data involve gathering new information. The two forms
are surveys and experimentation
(4) Interpreting and reporting informationthis segment deals with analyzing and
reporting useful information where it is needed
(5) Marketing research questionsthe questions deal in the areas of: sales, distribution,
advertising, and products
3. Which is of greater value to the entrepreneur, primary or secondary data? Why?
Secondary data are of greater value because they usually contain the information desired
and are inexpensive. Sometimes the decision to go forward can be made with
secondary data alone.
4. Identify and describe three of the primary obstacles to undertaking marketing
research.
(1) Costmarket research can be expensive
(2) Complexity-the interpretation of the quantitative aspects of marketing research
(3) Strategic decisions-cost and complexity are usually tied into major decisions
(4) Irrelevancyonly a certain amount of research is not useful
5. Describe the benefits and concerns of marketing on the Internet. Be specific in your
answer.
The internet can be helpful to a business in marketing their products and services, because:
1 It increases a companys presence and brand equity.
2. New customers are easily cultivated.
3. Customer service is improved.
4. Information transfer is accomplished in a cost-efficient manner.
However, two chief concerns exist with marketing on the Internet: 1) There is a limited
target audience, and 2) Sometimes customers resist purchasing over the Internet.
6. How would an entrepreneurs new-venture strategy differ under each of the following
marketing philosophies: production-driven, sales-driven, consumer-driven?
(1) Production-driventhis is based on the belief produce efficiently and worry
(2) Sales-driventhis focuses on personal selling and advertising to persuade customers to
buy the companys output
(3) Consumer-driventhis relies on research to discover consumer preferences, desires,
and needs before production actually begins
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7. In your own words, what is market segmentation? What role do demographic and
benefit variables play in the segmentation process?
Market segmentation is identifying the factors that classify consumer groups.
Demographic factors are used to determine a geographic or demographic profile of
consumers and purchasing power. Benefit variables identify the unsatisfied needs that exist
in a market.
8. Identify and discuss three of the most important personal characteristics that help an
entrepreneur identify and describe customers. Also, explain how the product life cycle
will affect the purchasing behavior of these customers.
Consumers are considered to fall into five categories: innovators, early adopters, early
majority, late majority, and laggards. Income, education, and time orientation are important
characteristics in each of these categories. For example, innovators usually have high
incomes while laggards have below-average incomes. This may be why laggards dont get
things as quickly. Early adopters education consists of college while the late majority have
some high school. Early adopters may understand the theory of supply and demand; the late
majority might not. Early majority are present-oriented, whereas laggards are tradition-
oriented. Laggards dont accept new methods because they live in the past.
9. Identify and discuss three of the psychological characteristics that help an
entrepreneur identify and describe customers. Also, explain how the product life cycle
will affect the purchasing behavior of these customers.
Some psychological characteristics are nature or needs, perceptions, and self-concept.
Early adopters purchase goods that make others notice them. The laggard purchases only the
basic needs for survival. The perceptions of the early majority influence the purchase of
goods that make them acceptable, where the late majority purchase products for the home.
The innovators self-concept is for the elite things in life, whereas the late majority is
concerned with security purchases.
10. How does the way consumers view a ventures product or service affect strategy? For
example, why would it make a difference to the entrepreneurs strategy if the
consumers viewed the company as selling a convenience good as opposed to a shopping
good?
If consumers view a ventures product or service as quality, the consumers would likely
desire the ventures product or service. On the other hand, a product of low quality would
not be desired.
11. Identify and describe four of the major forces shaping buying decisions in the new
century.
(1) The continuing increase in educational attainment levels means more knowledgeable,
discriminatory purchasing. People are less likely to obtain something that is of a low
quality.
(2) Great discretionary time resulting from reduced work hours means even greater demand
for leisure products, travel, and recreational services. People are living more for the joy
of the present than waiting to fulfill their pleasures in the future.
(3) An older, more mature population means purchase decisions will reflect greater
conservatism in the search for value and for lifestyle satisfaction. Being more mature,
people will not buy goods that are not beneficial.
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(4) Higher income attained by traditionally lower-paid blue-collar workers will lead to far
greater experimentation in long-standing white-collar purchases such as wines, ethnic
foods, and the theater. People in the lower middle class desire the finer things in life.
12. What does the entrepreneur of an emerging venture need to know about sales research
and a marketing information system?
An entrepreneur must understand that he needs to continually review methods employed
for sales and distribution in relation to market research. He must understand that information
systems can be helpful in monitoring strategies, decisions, and programs concerning
marketing.
13. For developing a marketing plan, what are the five steps that are particularly helpful?
Identify and describe each.
(1) Appraise marketing strengths and weaknesses, emphasizing factors that contribute to
the firms competitive edge. By knowing your strengths and weaknesses, you know
what to avoid and what not to avoid.
(2) Develop marketing objectives along with the short-and intermediate-range sales goals
necessary to meet those objectives. Setting goals will give you a measure of success.
(3) Develop product/service strategies. This will determine needs and specifications.
(4) Develop marketing strategies. These are needed to achieve different goals.
(5) Determine pricing structure. Determine which customers will be attracted.
14. What are some of the major environmental factors that affect pricing strategies? What
are some of the major psychological factors that affect pricing? Identify and discuss
three of each.
Environmental factors:
(1) Degree of competitive pressurein a monopoly where there is no competition, prices
are set as desired. In perfect competition, prices are set.
(2) Seasonal or cyclical changes in demandsome goods are more available in certain
seasons, so the price is lower. During the off-season, prices are higher because goods
arent as available.
(3) Cost of distributionif the cost to distribute is higher, then the price of the product or
service will be a little higher to compensate for the higher distribution cost.
Psychological conditions:
(1) In some situations, the quality of a product is interpreted by customers by the items
price level. Customers believe the higher the price the higher the quality.
(2) An emphasis on the monthly cost of purchasing an expensive item often results in
greater sales than an emphasis on total selling price. Items like cars or stereos, which
are expensive, are easier to pay for monthly because few people have the funds to pay
the total sales price.
(3) The greater the number of meaningful customers benefits the seller can convey about a
given product, the less will be the price resistance. The customer is more inclined to
look at the benefits and ignore the costs.
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TEACHING NOTES FOR END-OF-CHAPTER EXERCISE
One of the most important activities of entrepreneurs is identifying their customers. In this
exercise, the reader first orders the sequence of types of buyers in a market. Early adopters, early
majority, laggards, innovators, and late majority are the choices. Then the reader is given a list
of descriptions of customers, and they are asked to label what type of buyer each describes.
Answers are given at the end of the exercise.
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TEACHING NOTES FOR END-OF-CHAPTER CASES
1. Will the information that Roberta is seeking be of value to her in competing in this
market? Why or why not?
Yes, the information will be of great use because her strategy must develop a niche that
will differentiate her from the competition.
2. How would your recommend Roberta put together her marketing research plan? What
should be involved?
Recommend a five-step plan that identifies the specific needs of her business. She should
first define the purpose and objectives of her research, then gather secondary and primary
data. After this she needs to develop an information-gathering instrument to collect the data,
and finally, she should interpret and record the information and review it to determine the
market she has found. The results should answer questions about sales, distribution, markets,
advertising, and products.
3. How expensive will it be for Roberta to follow your recommendations for her
marketing research plan? Describe any other marketing research she could undertake
in the near future that would be of minimal cost.
The cost of the plan I described could fit into her budget if she used sources such as her
local business bureau, college or university, chamber of commerce, small-business
development center, and state agencies that can provide low-cost research ideas and
information about her area of business.
1. Has Brian completed the proper marketing research for this potential opportunity?
Why or why not? Explain.
Brian has not completed the proper marketing research for this potential opportunity. He
has failed to gather any secondary or primary data on the potential market. Actually he has
not conducted any marketing research whatsoever. There are a number of recommended
methods of marketing research that could be recommended to Brian. More specifically the
following questions need to be considered:
Sales
1. Do you know all you need to know about your competitors sales performance by type of
product and territory?
2. Do you know which accounts are profitable and how to recognize a potentially profitable
one?
3. Is your sales power deployed where it can do the most good, maximizing your investment
in selling costs?
Distribution
1. If you are considering introducing a new product or line of products, do you know all you
should about distributors and dealers attitudes toward it?
2. Are your distributors and dealers salespeople saying the right things about your
products or services?
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3. Has your distribution pattern changed along with the geographic shifts of your markets?
Markets
1. Do you know all that would be useful about the differences in buying habits and tastes by
territory and kind of product?
2. Do you have as much information as you need on brand or manufacturer loyalty and
repeat purchasing in your product category?
3. Can you now plot, from period to period, your market share of sales by products?
Advertising
1. Is your advertising reaching the right people?
2. Do you know how effective your advertising is in comparison to that of your
competitors?
3. Is your budget allocated appropriately for greater profitaccording to products,
territories, and market potentials?
Products
1. Do you have a reliable quantitative method for testing the market acceptability of new
products and product changes?
2. Do you have a reliable method for testing the effect on sales of new or changed
packaging?
3. Do you know whether adding higher or lower quality levels would make new profitable
markets for your products?
2. Based on the case, are there key mistakes that you would caution Brian about?
Explain.
Yes, Brian must be cautious in pursuing this venture for many reasons but we identify
three critical ones. (1) he has failed to conduct marketing research as pointed out in question
#1; (2)he has also failed to identify the market segment for which his venture would be
specifically aimed; and (3) his pricing completely lacks any strategy.
3. What specific steps would you recommend to Brian in order for him to better assess
this opportunity?
Brian need to conduct the basic market research expected of any new venture start up.
Some of the most basic questions he needs to consider are:
Identify where potential customers go to purchase music? Specifics.
Why do they choose to go there?
What is the size of that market? How much of it can Brians business capture?
Can music be rented anywhere else? If so, how does Brians business idea compare with
competitors?
Is Brians rental service even desired by potential customers? If so, how can he
demonstrate that to potential investors?
These questions can be handled quite easily through the process of marketing research
discussed in the chapter. Brian should consider developing an information gathering
instrument. The following tips would help him understand the manner in which it should be
developed:
Make sure each question pertains to a specific objective in line with the purpose of
Brians rental idea.
Place simple questions first and difficult-to-answer questions later in the questionnaire.
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Avoid leading and biased questions.
Ask How could this question be misinterpreted? Reword questions to reduce or
eliminate the possibility they will be misunderstood.
Give concise but complete directions in the questionnaire. Succinctly explain the
information desired, and route respondents around questions that may not relate to them.
When possible, use scaled questions rather than simple yes/no questions to measure
intensity of an attitude or frequency of an experience. For example, instead of asking Do
we have friendly sales clerks? (yes/no), ask How would you evaluate the friendliness of
our sales clerks? Have respondents choose a response on a five-point scale ranging from
Very unfriendly (1) to Very friendly
In developing an instrument that could be distributed to the target market Brian believes
will pursue online rental of music. The answers he receives will provide a far greater
understanding of Brians target market and the true viability of this idea.
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SMALL BUSINESS AND ENTREPRENEURSHIP RESOURCE CENTER
Sources:
Question 1:
Make the Web Work for You.(Consumer Research). Hilary Oliver.
Natural Foods Merchandiser (May 2008): p22.
Question 2:
The New Marketing Mix: Where Will You Meet Your Customers? John Graham.
American Salesman 53.3 (March 2008): p16 (5).
Questions:
1. According to the text, "The Internet allows website visitors to match their needs with
the offerings of the company." This article shows how a natural products retailer uses
the Internet to do this. What are the "Must-have elements" and things to remember
when using the Internet to help solidify relationships with your customers?
List what is on sale at the store. People can check the store's specials online regularly, so they
can better plan their shopping trip.
It can be helpful to feature an online shopping list program. Shoppers can enter the items
they need, and the program organizes the list by department before the shopper prints it out,
so the customer can streamline the shopping trip.
Retailers are also making use of blogs. Stores are drawing attention to themselves by giving a
voice to their management and keeping their shoppers up-to-date on events.
"I like reading things written by the people in charge of the company," says one customer
surveyed, explaining that getting to know the faces behind a store can build a sense of
security and loyalty.
For example, Leisha Doherty, community development manager for the Syracuse Real Food
Co-op, says the store's blog, which is only a few months old, has already been an integral
link to driving traffic into the store. "The blog is such a great format," she says. "It can be
updated easily and doesn't need a system administrator." The co-op usually updates its blog a
couple of times weekly and includes photos of events, new products and even new
employees.
One other tool shoppers look for is the online recipe box. For the organic and natural
industry, the recipe page is one of the top hits on Web sites, following the homepage,
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specials and events. Highlighting recipes that feature unusual ingredients can encourage
shoppers to buy something they don't typically put on their shopping lists. Similar content
can be created, based on the needs of consumers in your industry.
Things to remember
In building a solid Web presence, a few tips will help you avoid disappointing surfers who
are just a click away from someone else's site, and just a car ride away from someone else's
store:
* Make sure to update your site regularly so customers come to view it as a resource,
Doherty says. Shoppers who never see anything new on the site will eventually quit checking
it.
* Always reply promptly to online communication from customers. Consumers have said
"Sometimes when I post a question, I'm afraid it will disappear into a bottomless pit of e-mail
somewhere and never be answered."
* Build a strong brand connection between your online presence and brick-and-mortar store
to help guarantee that the rapport you've developed in your store carries over to your Web
site. Using consistent graphics and style will help ease the flow.
2. According to this article, "It wasn't so long ago that the marketer's quiver held a
handful of arrows. The skillful often chose some combination of print advertising,
radio, broadcast television and cable spots, Yellow Pages ads, direct mail, billboards,
special events, telemarketing, press stories--and of course, word of mouth. These were
the trusted marketing tools. You could count on them." Today there is no magic
answer - no marketer can say with certainty how to reach a particular audience as
things stand today. What four "thought-lines" does the article provide, for when
considering an organization's marketing strategies? Do you agree with these?
The email blast frenzy lasted about a year, about as long as it took to ramp up the spam
filters. The question today is always, what's next? Will Google's cell phone deliver
advertising messages that work with consumers? Should electronic ads be games? And what
about mini-social (and micro) networks? How will they fare in letting customers speak with
each other about your company's products and services?
If there is a message in all this, don't expect any tactic to last. Everything is temporary.
Technology will constantly open the way to new opportunities.
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2. All marketing is essentially experimental. On top of the temporary nature of marketing
tactics, they are also experimental.
"We're waiting to see how all this shakes out before we do anything," says a company
president. The words are hauntingly reminiscent of those who announced rather proudly that
they would wait to buy a computer until they were perfected. Today, these same people view
their computers as disposable. It all happened in just a few years.
Even though there are those, particularly some vendors and ad agencies, that like to suggest
that they have "the answer," it's clear that all marketing is, to one extent or another,
experimental. There are no certainties, no guarantees. What works with one group of
customers may not work with another. And some things don't work at all.
3. Marketing requires an array of tactics. A major shift in thinking about marketing is needed.
Rather than bouncing three or four balls at one time, marketers are juggling up to a dozen or
more at the same time. The roster may include a blog, a series of eBulletins delivered to
particular customer segments, several websites, advertising sequences on Google and Yahoo,
personalized direct mail, TV and radio spots, print newsletters, print advertising in selected
venues, billboards and a mini-social network, to name but a few. The frustration is felt when
someone says, "What about trying billboards?"
The marketing concept is finding ways to connect as intimately and meaningfully as possible
with individual customers, recognizing that not even three or four venues can deliver your
message to your entire universe of customers and prospects.
4. Customers are the only experts. Perhaps the most poignant moment of the CNN TV debate
featuring the videoed questions was the one featuring the woman who had lost her hair as a
result of breast cancer treatment. Nothing was more real than her question about healthcare.
Al Wittemen, the managing director for retail strategy for Advantage Retail and a marketer
for 35 years, points out that today's customers think less about brands and more about
themselves. Even though it should be obvious, it's ignored more often than not.
Wittemen uses prepared foods as an example of consumer behavior. When the customers
come to the supermarket, there is far less interest in picking out a particular brand than there
is in picking out dinner for tonight. In other words, "shoppers are not necessarily looking for
high drama. More often, they are looking for relevant solutions to their immediate needs," he
notes.
Why did an advertising agency replace a higher-end well-known brand (Xerox) copy
machine with a lesser known one (Lexmark)? It's simpler, faster and more flexible. That's
exactly what Honda, Hyundai and Kia are all about, too.
When customers are getting ready to make a purchase today, the first place they go is to the
Internet, to look for what others have to say.
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Among his observations regarding customer behavior, George Colony, the Forrester
Research CEO, says that while 100-question surveys might help measure customer
satisfaction, there is one question that will do the job: "Would you recommend this product
or service to a friend or colleague?"
It's time to forget about the hype and listen to the customers; they're the experts.
The marketing mix today isn't just in flux; it's fluid. If anyone thinks it's time to wait on the
sidelines until the parade of possibilities goes by, the competition will have run off with the
customers.
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