Chapter 1: What Is Marketing?

1. What is marketing?

"The activity, set of institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society at large."
- American Marketing Association

“Marketing is the science and art of exploring, creating, and delivering value to satisfy the
needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It
defines, measures and quantifies the size of the identified market and the profit potential. It
pinpoints which segments the company is capable of serving best and it designs and
promotes the appropriate products and services.”
- Dr. Philip Kotler

2. List and explain is the marketing mix?

1. Product - The product aspects of marketing deal with the specifications of the actual
goods or services, and how it relates to the end-user's needs and wants. The product element
consists of product design, new product innovation, branding, packaging, labelling. The
scope of a product generally includes supporting elements such as warranties, guarantees,
and support. Branding, a key aspect of the product management, refers to the various
methods of communicating a brand identity for the product, brand, or company.

2. Promotion - This includes all aspects of marketing communications; advertising, sales

promotion, including promotional education, public relations, personal selling, product
placement, branded entertainment, event marketing, trade shows and exhibitions.

3. Place - This refers to how the product gets to the customer; the distribution channels and
intermediaries such as wholesalers and retailers who enable customers to access products or
services in a convenient manner. This third P has also sometimes been called Place,
referring to the channel by which a product or service is sold (e.g. online vs. retail), which
geographic region or industry, to which segment (young adults, families, business people),
etc. also referring to how the environment in which the product is sold in can affect sales.

4. Price - This refers to the process of setting a price for a product, including discounts. The
price need not be monetary; it can simply be what is exchanged for the product or services,
e.g. time, energy, or attention or any sacrifices consumers make in order to acquire a product
or service. The price is the cost that a consumer pays for a product—monetary or not.
Methods of setting prices are in the domain of pricing science.

3. What is the difference between nonprofit marketing and social marketing?

When a nonprofit organization engages in marketing activities, this is called Nonprofit

Marketing.

Marketing conducted in an effort to achieve certain social objectives can be done by

government agencies, nonprofit institutions, religious organizations, and others and is called
Social Marketing.
Chapter 2: Strategic Planning

1. What is a value proposition?

A value proposition is a promise of value to be delivered, communicated, and

acknowledged. It is also a belief from the customer about how value (benefit) will be
delivered, experienced and acquired. A value proposition is a statement which identifies
clear, measurable and demonstrable benefits consumers get when buying a particular
product or service. It should convince consumers that this product or service is better than
others on the market. This proposition can lead to a competitive advantage when consumers
pick that particular product or service over other competitors because they perceive greater
value.

2. Describe SWOT analysis.

SWOT Analysis is a tool to find out the Strengths, Weaknesses, Opportunities, and Threats
that are to be expected in a project or in a business venture or in something similar. It means
that the marketing environment (internal and external to the organization or individual) is
looked at. It is one of the best tools to conduct the internal and external analysis for any
company. The technique was developed by Albert Humphrey, who led a research project at
Stanford University in the 1960s and 1970s using data from the Fortune 500 companies.

3. Prepare SWOT analysis for your organization.

Strengths Weaknesses

 A unique combination of both  The struggle to develop awareness

creative and business sense.
 An elegant office that gives off the
perception of creative, cutting-edge
design, implying a skilled service
provider.
 A targeted focus for attracting
customers.
related to a start-up company.
 Increasingly limited amount of time
for marketing activities as more and
more time is needed to finish projects.
 The struggle to constantly appear on
the "cutting edge."

Opportunities Threats

 A growing market that does not  Competition from local competitors

seem to be focused on attracting a who decide to focus on Metolius'
target customer segment. targeted segments.
 The ability to generate future  Significant increase in ease of use of
business by leveraging the graphic design software that allows
 technological advances of the
Internet.
 An industry that is not significantly
effected by slumps in the economy.
individuals to design their own
graphical pieces.
 A shift in local industries that
changes the demographics of many of
the companies located in Concord.

4. Suppose you work for a major hotel chain. Using Porter’s five forces model, explain
what you need to consider with regard to each force?

a) New entrant threats

It is expensive to build and operate a new hotel, as well as taking time to get things off the ground,
so if a new rival enters your neighborhood you’ll have a few months’ warning. The main tools you
can use to your advantage are differentiation and expertise – because any new entrant to your local
market will need a few unique selling points to compete in the same sector with yours, and they’ll
also need the staff to deliver the product. Look to provide service standards and facilities that new
entrants won’t be able to match, and make sure your best staff don’t feel the need to seek work
elsewhere when the new entrant is recruiting.

b) Substitute threats

Substitutes don’t include direct competitors, so we’re not talking about other hotels here. We’re
talking about alternatives to staying in your hotel. We could consider factors such as Airbnb and
camping, but the more likely reason why people would no longer stay in a hotel could be quite
different. One example occurs when cities get better transport connections, so visitors no longer
have to stay overnight. Another possibility is that the main attractions in your destination are
surpassed by an alternative attraction somewhere else which draws visitors away.

c) Customer bargaining power

One problem faced by hotels is that customers face almost no switching costs, so they have almost
perfect flexibility in choosing and changing their hotel. The internet has also helped customers by
giving them instant access to all the information they need to make their choice, and this can put
guests in a very strong position. Squeezing profits out of these consumers requires subtlety, the
provision of unique benefits, and the ability to make money while offering great value. Of course,
for an individual property, the equation might be more favourable. If you’re the only hotel with a
sea-view, customers can’t really hold out for a better deal elsewhere. For this reason you need to
know what you can offer, and have a very good idea of the value customers will place upon your
product.

d) Supplier bargaining power

The most important suppliers in the hotel industry are those people who supply their labour – your
staff. Of course, as the cost of employing someone rises, their value to the organization declines, but
in many areas the employees hold the upper hand in terms of supply and demand. Suppliers of other
products and services may also be well placed in areas where strong competition among hotels leads
to high levels of demand for hotel supplies. Your suppliers may be taking advantage of that high
demand at your expense. This is one reason why it’s important to build good relationships with your
local community, including suppliers and the potential labour force. You’ll need these people
somewhere down the line.

e) Industry rivalries

The final threat to your profitability comes from your existing competitors. We need to take into
account the activities of all the hotels which might be competing for the same target market. If you
understand your own target sector particularly well, you may have a shortlist of competitors with
only a handful of names on it, because many of the hotels which might ostensibly be considered
rivals aren’t actually competing with you directly for the same guests. In fact, they may even be
benefitting your business by creating additional interest in your destination. However, given the
ability of customers to check out information online and quickly determine the differences between
hotels and the prices they charge, you need to keep a close eye on your main rivals to make sure
your product doesn’t suddenly become uncompetitive.

5. How do product development strategies differ from market development strategies?

The key difference between product development and market development is that product
development is a strategy that focuses on developing new products in existing markets
whereas market development strategy identifies and develops new market segments for
existing products.

6. Explain deferent level of strategies in an organization.

 Corporate level strategy: This level answers the foundational question of what you want to
achieve. Is it growth, stability, or retrenchment?

 Business unit level strategy: This level focuses on how you’re going to compete. Will it be
through customer intimacy, product or service leadership, or lowest total cost? What’s the
differentiation based on?

 Market level strategy: This strategy level focuses on how you’re going to grow. Will it be
through market penetration, market development, product or service development, or
diversification?

7. What is Boston Consulting Group (BCG) Matrix? explain each state.

Created by the Boston Consulting Group, the BCG matrix – also known as the Boston or growth
share matrix – provides a framework for analyzing products according to growth and market share.
The matrix has been used since 1968 to help companies gain insights on what products best help
them capitalize on market share growth opportunities.
Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing
market. In general, they are not worth investing in because they generate low or negative cash
returns. But this is not always the truth. Some dogs may be profitable for long period of time, they
may provide synergies for other brands or SBUs or simple act as a defense to counter competitors
moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make
sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation

Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as much
cash as possible. The cash gained from “cows” should be invested into stars to support their further
growth. According to growth-share matrix, corporates should not invest into cash cows to induce
growth but only to support them so they can maintain their current market share. Again, this is not
always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating
new products or processes, which may become new stars. If there would be no support for cash
cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment

Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash
generators and cash users. They are the primary units in which the company should invest its
money, because stars are expected to become cash cows and generate positive cash flows. Yet, not
all stars become cash flows. This is especially true in rapidly changing industries, where new
innovative products can soon be outcompeted by new technological advancements, so a star instead
of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market
development, product development

Question marks. Question marks are the brands that require much closer consideration. They hold
low market share in fast growing markets consuming large amount of cash and incurring losses. It
has potential to gain market share and become a star, which would later become cash cow. Question
marks do not always succeed and even after large amount of investments they struggle to gain
market share and eventually become dogs. Therefore, they require very close consideration to
decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product development, divestiture
8 -What is General Electric (GE) Approach?

The GE approach is a nine-box matrix which is used as a strategy tool. It helps multi-
business corporations evaluate business portfolios and prioritize investments among
different business units in a systematic manner. This technique is used in brand marketing
and product management.

Chapter 3: Consumer Behavior: How People Make Buying Decisions

1. What is Maslow’s Hierarchy of Needs?

Maslow's hierarchy of needs is a motivational theory in psychology comprising a five-

tier model of human needs, often depicted as hierarchical levels within a pyramid. From
the bottom of the hierarchy upwards, the needs are: physiological, safety, love and
belonging, esteem and self-actualization. Needs lower down in the hierarchy must be
satisfied before individuals can attend to needs higher up.

2. What mean by Social Classes and list the level of Social Classes.
 A social class is a group of people who have the same social, economic, or
educational status in society. In a social class, people try to make the same kind of
purchases as are expected by their peers. Marketeers try to target their products on
class-based market segments.

Upper Upper Class

Upper-Uppers are the social elite who live on inherited wealth and have well-known
families. They maintain more than one home and send their children tothe best
schools. They are in the market for jewelry, antiques, homes, and foreignvacations.
While small as group they serve as a reference group to others tothe extent that other
social classes imitate their consumption decisions.

Lower Upper Class

Lower Uppers are persons who have earned high income or wealth through
exceptional ability in their profession or business. They usually come from the
middle-class. They tend to be active in social and civic affairs and seek to buy the
symbols of social status for themselves and their children, such as expensive cars,
homes and schooling. Their ambition is to be accepted and the upper-upper status, a
status that is more likely to be achieved by their children than themselves.

Upper Middle Class

Upper Middles possess neither family status nor unusual wealth. The primarily
concerned with “career”. They have attained positions as professionals, independent
businesspersons, and corporate managers. They believe in education and want their
children to develop professional or administrative skills so that they will not drop
into the lower stratum. They are civic minded and are a quality market for good
clothes, homes, furniture and appliances.

Lower Middle Class

The common man represents this group. Some are highly paid workers and small
business owners and may not have a very high education.This class aspires for
respectability. They wish to have well maintained houses in good neighbourhoods.
Marketeers sell products, to this group, which have respectability and social
acceptance in the society.

Upper Lower Class

Upper Lowers are working, though their living standard is just above the poverty
line. They perform unskilled work and are poorly paid. Often they are educationally
deficient. Although they fall near the poverty line, they manage to maintain some
level of cleanliness

Lower Lower Class

Lower Lowers are visibly poverty-stricken and usually out of work. Some are not
interested in finding permanent jobs and most are dependent in charity for income.
Their homes and possessions are “dirty, ragged, and broken-down”.

3. Describe how buying patterns and purchase decisions may vary by age, gender, and stage of
life.
Age –

A child usually doesn’t think much about where to buy his products from or when to buy. The child
is usually directed by his family about his decision of from where to buy and when. A child doesn’t
necessarily buy goods for his needs. The products which please him/her are purchased and thus, the
larger share of responsibility of purchasing lies on the family.

A teenager and the adult have total discretion to decide for their purchases by themselves. Be it the
shopping destination, the time to purchase, the method of payment or whether to buy or not. The
entire process is completed by them on their own and their age affects their purchase decisions a lot.

Lastly, the older society individuals are a little dependent on their families again for their purchase
decisions due to lack of being physically and economically independent. Their needs are fulfilled by
the way it is found suitable by the people around them.

Therefore, we can clearly see that age effects the purchase decision as well. This important step in
the buying process is greatly influenced by the age o the buyers.

Gender –

There is a decade worth of scientific research on this subject, which shows that there are observable
differences in how men and women behave as shoppers. It’s clear, men and women think differently
about shopping and will approach the act of shopping online in different ways.

Gaining an understanding of how gender differences influence purchase decisions and recognizing
gender-specific tendencies (not stereotypes!) is important for any business that sells to people – and
wants to do so more effectively.

Let’s look at how these tendencies can affect online buying behavior and what you can do to make
it work in your favor.

1. It’s all in the brain: Men on a mission, women on a journey

2. Men’s motives for shopping appear to be more utilitarian, whereas women’s
shopping motives tend to be hedonic
3. Women prefer the hunt, men want a quick and effortless process
4. Women make decisions on a more emotional level, whereas men approach decision-
making with facts and data
5. Men are loyal to brands, women are loyal to good service
6. Men are more likely to make purchases on mobile devices
7. Good customer service? Woman want to feel important, Men want to get out fast
8. Women perceive higher levels of risk for online shopping

Stage of life –
We have probably noticed that the things you buy have changed as you age. Think about what you
wanted and how you spent five dollars when you were a child, a teenager, and an adult. When you
were a child, the last thing you probably wanted as a gift was clothing. As you became a teen,
however, cool clothes probably became a bigger priority. Don’t look now, but depending on the
stage of life you’re currently in, diapers and wrinkle cream might be just around the corner.
For example, if you’re single and working after graduation, you probably spend your money
differently than a newly married couple. How do you think spending patterns change when someone
has a young child or a teenager or a child in college? Diapers and day care, orthodontia, tuition,
electronics—regardless of the age, children affect the spending patterns of families. Once children
graduate from college and parents are empty nesters, spending patterns change again.

4. How are companies trying to reach opinion leaders?

As Opinion leaders are people with expertise in certain areas. Consumers respect these people and
often ask their opinions before they buy goods and services.
In 1944, sociologist Paul Lazarsfeld introduced “The two-step flow of communication model”.
According to this model, mass media doesn’t directly influence the mass audience. Rather, the
information flows from mass media to the opinion leaders who interpret the media messages and
put them into context for the wider population. Thus, people have a feeling of more trust towards
opinion leaders as compared to the advertised mass media.

Today’s companies are using different techniques to reach opinion leaders. Network analysis using
special software is one way of doing so. Orgnet.com has developed software for this purpose.
Orgnet’s software doesn’t mine sites like Facebook and LinkedIn, though. Instead, it’s based on
sophisticated techniques that unearthed the links between Al Qaeda terrorists. Explains Valdis
Krebs, the company’s founder: “Pharmaceutical firms want to identify who the key opinion leaders
are. They don’t want to sell a new drug to everyone. They want to sell to the 60 key oncologists.

5. Explain Stages in the Buying Process?

You’ve been a consumer with purchasing power for much longer than you probably realize—since
the first time you were asked which cereal or toy you wanted. Over the years, you’ve developed a
systematic way you choose among alternatives, even if you aren’t aware of it. Other consumers
follow a similar process. The first part of this chapter looks at this process. The second part looks at
the situational, psychological, and other factors that affect what, when, and how people buy what
they do.

Keep in mind, however, that different people, no matter how similar they are, make different
purchasing decisions. You might be very interested in purchasing a Smart Car. But your best friend
might want to buy a Ford 150 truck. Marketing professionals understand this. They don’t have
unlimited budgets that allow them to advertise in all types of media to all types of people, so what
they try to do is figure out trends among consumers. Doing so helps them reach the people most
likely to buy their products in the most cost-effective way possible.

Stages in the Buying Process

Figure Stages in the Consumer’s Purchasing Process" outlines the buying stages consumers go
through. At any given time, you’re probably in some sort of buying stage. You’re thinking about the
different types of things you want or need to eventually buy, how you are going to find the best
ones at the best price, and where and how will you buy them. Meanwhile, there are other products
you have already purchased that you’re evaluating. Some might be better than others. Will you
discard them, and if so, how? Then what will you buy? Where does that process start?

The Buying Process

Stage 1. Need Recognition

Perhaps you’re planning to backpack around the country after you graduate, but you don’t have a
particularly good backpack. Marketers often try to stimulate consumers into realizing they have a
need for a product. Do you think it’s a coincidence that Gatorade, Powerade, and other beverage
makers locate their machines in gymnasiums so you see them after a long, tiring workout? Previews
at movie theaters are another example. How many times have you have heard about a movie and
had no interest in it—until you saw the preview? Afterward, you felt like had to see it.

Stage 2. Search for Product Information

Maybe you have owned several backpacks and know what you like and don’t like about them. Or,
there might be a particular brand that you’ve purchased in the past that you liked and want to
purchase in the future. This is a great position for the company that owns the brand to be in—
something firms strive for. Why? Because it often means you will limit your search and simply buy
their brand again.

If what you already know about backpacks doesn’t provide you with enough information, you’ll
probably continue to gather information from various sources. Frequently people ask friends,
family, and neighbors about their experiences with products. Magazines such as Consumer Reports
or Backpacker Magazine might also help you.

Internet shopping sites such as Amazon.com have become a common source of information about
products. Epinions.com is an example of consumer-generated review site. The site offers product
ratings, buying tips, and price information. Amazon.com also offers product reviews written by
consumers. People prefer “independent” sources such as this when they are looking for product
information. However, they also often consult nonneutral sources of information, such
advertisements, brochures, company Web sites, and salespeople.

Stage 3. Product Evaluation

Obviously, there are hundreds of different backpacks available to choose from. It’s not possible for
you to examine all of them. (In fact, good salespeople and marketing professionals know that
providing you with too many choices can be so overwhelming, you might not buy anything at all.)
Consequently, you develop what’s called evaluative criteria to help you narrow down your choices.

Evaluative criteria are certain characteristics that are important to you such as the price of the
backpack, the size, the number of compartments, and color. Some of these characteristics are more
important than others. For example, the size of the backpack and the price might be more important
to you than the color—unless, say, the color is hot pink and you hate pink.

Osprey backpacks are known for their durability. The company has a special design and quality
control center, and Osprey’s salespeople annually take a “canyon testing” trip to see how well the
company’s products perform.

Marketing professionals want to convince you that the evaluative criteria you are considering reflect
the strengths of their products. For example, you might not have thought about the weight or
durability of the backpack you want to buy. However, a backpack manufacturer such as Osprey
might remind you through magazine ads, packaging information, and its Web site that you should
pay attention to these features—features that happen to be key selling points of its backpacks.

Stage 4. Product Choice and Purchase

Stage 4 is the point at which you decide what backpack to purchase. However, in addition to the
backpack, you are probably also making other decisions at this stage, including where and how to
purchase the backpack and on what terms. Maybe the backpack was cheaper at one store than
another, but the salesperson there was rude. Or maybe you decide to order online because you’re too
busy to go to the mall. Other decisions, particularly those related to big ticket items, are made at this
point. If you’re buying a high-definition television, you might look for a store that will offer you
credit or a warranty.

Stage 5. Postpurchase Use and Evaluation

At this point in the process you decide whether the backpack you purchased is everything it was
cracked up to be. Hopefully it is. If it’s not, you’re likely to suffer what’s called post purchase
dissonance. You might call it buyer’s remorse. You want to feel good about your purchase, but you
don’t. You begin to wonder whether you should have waited to get a better price, purchased
something else, or gathered more information first. Consumers commonly feel this way, which is a
problem for sellers. If you don’t feel good about what you’ve purchased from them, you might
return the item and never purchase anything from them again. Or, worse yet, you might tell
everyone you know how bad the product was.

Companies do various things to try to prevent buyer’s remorse. For smaller items, they might offer
a money back guarantee. Or, they might encourage their salespeople to tell you what a great
purchase you made. How many times have you heard a salesperson say, “That outfit looks so great
on you!”? For larger items, companies might offer a warranty, along with instruction booklets, and a
toll-free troubleshooting line to call. Or they might have a salesperson call you to see if you need
help with product.

Stage 6. Disposal of the Product

There was a time when neither manufacturers nor consumers thought much about how products got
disposed of, so long as people bought them. But that’s changed. How products are being disposed is
becoming extremely important to consumers and society in general. Computers and batteries, which
leech chemicals into landfills, are a huge problem. Consumers don’t want to degrade the
environment if they don’t have to, and companies are becoming more aware of the fact.
Take an example, Crystal Light, a water-based beverage that’s sold in grocery stores. You can buy
it in a bottle. However, many people buy a concentrated form of it, put it in reusable pitchers or
bottles, and add water. That way, they don’t have to buy and dispose of plastic bottle after plastic
bottle, damaging the environment in the process. Windex has done something similar with its
window cleaner. Instead of buying new bottles of it all the time, you can purchase a concentrate and
add water. You have probably noticed that most grocery stores now sell cloth bags consumers can
reuse instead of continually using and discarding of new plastic or paper bags.

6. What purchasing decisions have you been able to influence in your family and why?

We have the direct influence on the purchasing decisions of our family. Children may also have a
strong influence on family buying decisions. The nation’s 36 million children ages 8 to 12 wield an
estimated $30 billion in disposable income. They also influence an additional $150 billion that their
families spend on them in areas such as food, clothing, entertainment, and personal care items. One
study found that kids significantly influence family decisions about everything from where they
take vacations to what cars and cell phones they buy.23 For example, to encourage families to take
their children out to eat again following the recent recession, casual restaurants reached out to
children with everything from sophisticated children’s menus and special deals to a wealth of kid-
focused activities.

Children are serving as the role of consumers these days and are influencing in the purchase decision directly and
indirectly. Children of today are generally known as consumers, buyers, spenders, shoppers and in general
influencers towards purchasing decisions. Nowadays children have more autonomy and dominancy within the
families as compared to the previous generations, so it makes a clear picture that children are vocal about their
needs and wants towards their parents. Generally, study of children as a influencer plays a very important role for
markers, researchers in identifying the factors which tends to stimulate the kids in influencing their parents for
making the purchase decision.

7. Why is understanding consumer behavior so important for companies?

Understanding consumer behavior is important for any organization before launching a product. If
the organization failed to analyses how a customer will respond to a particular product, the company
will face losses. Consumer behavior is very complex because each consumer has different mind and
attitude towards purchase, consumption and disposal of product. Understanding the theories and
concepts of consumer behaviour helps to market the product or services successfully. Moreover,
studying consumer behaviour helps in many aspects. As there is constant change in the living
standards, trend, fashion and change in technology; consumer’s attitude towards the purchase of
product variety. Understanding these factors is of utmost importance because the marketing of
product is largely dependent on these factors. Thus, consumer behavior serves as a successful tool
for marketers in meeting their sales objectives.
Buyer Behaviour is referred to the behaviour that is displayed by the individual while they are
buying, consuming or disposing any particular product or services. These behaviors can be affected
by multiple factors. Moreover, it also involves search for a product, evaluation of product where the
consumer evaluates different features, purchase and consumption of product. Later the post
purchase behaviour of product is studied which shows the consumer satisfaction or dissatisfaction
where it involves disposal of product
Chapter 4: Business Buying Behavior

1. Explain what derived demand is.

Derived demand is an economic term describing the demand for a good/service resulting from the
demand for an intermediate or related good/service. It is a demand for some physical or intangible
thing where a market exists for both related goods and services in question. The derived demand
can have a significant impact on the derived good's market price.

For example, a modern example exists within the computer marketplace. As more business became
dependent on technology and households expand home computing capabilities, the demand for
computers rises. Derived demand may be shown in the areas of computer peripherals, such as
computer mice and monitors, as well as in the components required to produce the computers. The
components can include items such as motherboards and video cards, as well as the materials used
to produce them.

Derived demand is solely related to the demand placed on a good or service for its ability to acquire
or produce another good or service. The principles behind derived demand work in both directions;
if the demand for a good decrease, the demand for the goods required to produce the item will also
decrease.

2. Explain Types of B2B Buyers.

Business buyers can be either nonprofit or for-profit businesses. To help you get a better idea of the
different types of business customers in B2B markets, we’ve put them into four basic categories:
producers, resellers, governments, and institutions.

(i) Producers

Producers are companies that purchase goods and services that they transform into other products.
They include both manufacturers and service providers. Procter & Gamble, General Motors,
McDonald’s, Dell, and Delta Airlines are examples. So are the restaurants around your campus,
your dentist, your doctor, and the local tattoo parlor. All these businesses have to buy certain
products to produce the goods and services they create. General Motors needs steel and hundreds of
thousands of other products to produce cars. McDonald’s needs beef and potatoes. Delta Airlines
needs fuel and planes. Your dentist needs drugs such as Novocain, oral tools, and X-ray machines.
Your local tattoo parlor needs special inks and needles and a bright neon sign that flashes “open” in
the middle of the night.
(ii) Resellers

Resellers are companies that sell goods and services produced by other firms without materially
changing them. They include wholesalers, brokers, and retailers. Walmart and Target are two big
retailers you are familiar with. Large wholesalers, brokers, and retailers have a great deal of market
power. If you can get them to buy your products, your sales can exponentially increase.

Every day, retailers flock to Walmart’s corporate headquarters in Bentonville, Arkansas, to try to
hawk their products. But would it surprise you that not everybody wants to do business with a
powerhouse like Walmart? Jim Wier, one-time CEO of the company that produces Snapper-brand
mowers and snowblowers, actually took a trip to Walmart’s headquarters to stop doing business
with the company. Why? Snapper products are high-end, heavy-duty products. Wier knew that
Walmart had been selling his company’s products for lower and lower prices and wanted deeper
and deeper discounts from Snapper. He believed Snapper products were too expensive for
Walmart’s customers and always would be, unless the company started making cheaper-quality
products or outsourced their manufacturing overseas, which is something he didn’t want to do.

(iii) Governments

Can you guess the biggest purchaser of goods and services in the world? It is the U.S. government.
It purchases everything you can imagine, from paper and fax machines to tanks and weapons,
buildings, toilets for NASA (the National Aeronautics and Space Administration), highway
construction services, and medical and security services. State and local governments buy enormous
amounts of products, too. They contract with companies that provide citizens with all kinds of
services from transportation to garbage collection. (So, do foreign governments, provinces, and
localities, of course.) Business-to-government (B2G) markets, or when companies sell to local,
state, and federal governments, represent a major selling opportunity, even for smaller sellers. In
fact, many government entities specify that their agencies must award a certain amount of business
to small businesses, minority- and women-owned businesses, and businesses owned by disabled
veterans.
(iv) Institution

Institutional markets include nonprofit organizations such as the American Red Cross, churches,
hospitals, charitable organizations, private colleges, civic clubs, and so on. Like government and
for-profit organizations, they buy a huge quantity of products and services. Holding costs down is
especially important to them. The lower their costs are, the more people they can provide their
services to.

The businesses and products we have mentioned so far are broad generalizations to help you think
about the various markets in which products can be sold. In addition, not all products a company
buys are high dollar or complex. Businesses buy huge quantities of inexpensive products, too.
McDonald’s, for example, buys a lot of toilet paper, napkins, bags, employee uniforms, and so
forth. Pretty much any product you and I use is probably used for one or more business purposes
(cell phones and cell-phone services, various types of food products, office supplies, and so on).
Some of us own real estate, and so do many businesses. But very few of us own many of the other
products businesses sell to one another: cranes, raw materials such as steel, fiber-optic cables, and
so forth.

3. Which people do you think have the most influence on the decisions a buying center makes?
Why?

Here are the people or Entities that influence the decision of Buying center.
In the business-to-business (B2B) context (as opposed to B2C), buying decisions are made in
groups. The group responsible for making the buying decision in companies is referred to as Buying
Center or the decision-making unit (DMU).

The influencers are the tech personnel who help develop specs and evaluate alternate products.
They are important when products involve new and advanced technology. Major purchases
typically require input/ have influence from various parts or People of the organization, including
finance, accounting, purchasing, information technology management, and senior management.
Highly technical purchases, such as information technology systems or production equipment,
require the expertise of technical specialists. In some cases, the buying center acts as an informal ad
hoc group. In other cases, the buying center is a formally sanctioned group with specific mandates,
criteria, and procedures.
For example, in the hi-tech sector, the decision-making unit generally comprises the following
roles:

 The economic buyer – This individual is responsible for buying products that enable the
company to achieve a business advantage. The economic buyer justifies the purchase by
linking it to profit. The economic buyer’s position within the organization can range from
the business unit manager level to as high as the CEO.
 The infrastructure buyer – This role influences the buying decision at the execution level. If
a product poses challenges at the installation phase, then the infrastructure buyer and/or
DMU steps in to decide whether the return on investment (ROI) is worth the time and
money required to set up the infrastructure. The infrastructure buyer is typically someone in
the IT department.
 The user buyer – This position influences the buying decision at the user level and decides
whether the organization will achieve its financial objectives through the purchase. For
instance, if end users provide negative feedback about the product, or demonstrate that the
product is hard to use, then the economic buyer will determine whether the purchase will
prevent the company from reaching its economic goals.
The Business buyers are subject to many influences when they make their buying decision. Some
marketers assume that the major influences are economic, but business buyers actually respond to
both economic and personal factors. Far from being cold, calculating, and impersonal, business
buyers are human and social as well. They react to both reason and emotion. When suppliers’ offers
are very similar, business buyers have little basis for a 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. However, when competing products differ greatly.

4. Explain the stages in the B2B Buying Process.

Following Figures lists the eight stages of 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. We will examine these steps for the typical new task
buying situation.

Stages of the Business Buying Process

I. Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that can be met by
acquiring a specific product or service. 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. Or a machine may break down and need new parts. Perhaps a purchasing manager is unhappy with
a current supplier’s product quality, service, or prices. 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.

II. General Need Description

Having recognized a need, 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 need to work with others—engineers, users,
consultants—to define the item. The team may want to rank the importance of reliability, durability,
price, and other attributes desired in the item. In this phase, the alert business marketer can help the
buyers define their needs and provide information about the value of different product
characteristics.

III. 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. Sellers, too, can use value analysis as a tool to help secure a new
account. By showing buyers a better way to make an object, outside sellers can turn straight rebuy
situations into new task situations that give them a chance to obtain new business.

IV. 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 computer searches, or phoning other
companies for recommendations. Today, more and more companies are turning to the Internet to
find suppliers. For marketers, this has leveled the playing field—the Internet gives smaller suppliers
many of the same advantages as larger competitors. The newer the buying task, and the more
complex and costlier the item, the greater the amount of time the buyer will spend searching for
suppliers. The supplier’s task is to get listed in major directories and build a good reputation in the
marketplace. Salespeople should watch for companies in the process of searching for suppliers and
make certain that their firm is considered.

V. Proposal Solicitation

In the proposal solicitation stage of the business buying process, the buyer invites qualified
suppliers to submit proposals. In response, some suppliers will send only a catalog or a salesperson.
However, when the item is complex or expensive, the buyer will usually require detailed written
proposals or formal presentations from each potential supplier. Business marketers must be skilled
in researching, writing, and presenting proposals in response to buyer proposal solicitations.
Proposals should be marketing documents, not just technical documents. Presentations should
inspire confidence and make the marketer’s company stand out from the competition.

VI. Supplier Selection

The members of the buying center now review the proposals and select a supplier or suppliers.
During supplier selection, the buying center often will draw up a list of the desired supplier
 attributes and their relative importance. Such attributes include product and service quality,
reputation, on-time delivery, ethical corporate behavior, honest communication, and competitive
prices. The members of the buying center will rate suppliers against these attributes and identify the
best suppliers. 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 supplies to avoid being totally dependent on one supplier
and allow comparisons of prices and performance of several suppliers over time. Today’s supplier
development managers want to develop a full network of supplier partners that can help the
company bring more value to its customers.

VII. 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
delivery time, 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. Many large buyers now practice vendor-managed inventory, in
which they turn over ordering and inventory responsibilities to their suppliers. Under such systems,
buyers share sales and inventory information directly with key suppliers. The suppliers then monitor
inventories and replenish stock automatically as needed. For example, most major suppliers to large
retailers such as Walmart, Target, Home Depot, and Lowe’s assume vendor-managed inventory
responsibilities.

VIII. Performance Review

In this stage, the buyer reviews supplier performance. The buyer may contact users and ask them to
rate their satisfaction. The performance review may lead the buyer to continue, modify, or drop the
arrangement. The seller’s job is to monitor the same factors used by the buyer to make sure that the
seller is giving the expected satisfaction.

In all, the eight-stage buying-process model shown in Figure provides a simple view of the business
buying as it might occur in a new task buying situation. However, the actual process is usually
much more complex. In the modified rebuy or straight rebuy situation, some of these stages would
be compressed or bypassed. Each organization buys in its own way, and each buying situation has
unique requirements. Different buying center participants may be involved at different stages of the
process. Although certain buying-process steps usually do occur, buyers do not always follow them
in the same order, and they may add other steps. Often, buyers will repeat certain stages of the
process. Finally, a customer relationship might involve many different types of purchases ongoing
at a given time, all in different stages of the buying process. The seller must manage the total
customer relationship, not just individual purchases.

5. Explain how a straight rebuy, new buy, and modified rebuy differ from one another.

In a straight rebuy, the buyer reorders something without any modifications. It is usually handled
on a routine basis by the purchasing department. To keep the business, “in” suppliers try to maintain
product and service quality. “Out” suppliers try to find new ways to add value or exploit
dissatisfaction so that the buyer will consider them.

In a modified rebuy, the buyer wants to modify product specifications, prices, terms,
or suppliers. The in suppliers may become nervous and feel pressured to put their best foot
forward to protect an account. Our suppliers may see the modified rebuy situation as an opportunity
to make a better offer and gain new business.
A company buying a product or service for the first time faces new buy /new task situation. In such
cases, the greater the cost or risk, the larger the number of decision participants and the greater the
company’s efforts to collect information. The new task situation is the marketer’s greatest
opportunity and challenge. The marketer not only tries to reach as many key buying influences as
possible but also provides help and information. The buyer makes the fewest decisions in the
straight rebuy and the most in the new task decisions.

The key different characteristics are given below;

Chapter 5: Market Segmenting, Targeting, and Positioning

1. Using the shotgun and rifle analogy, how do mass marketing, targeted marketing, and one-
to-one marketing compare with one another?

Shotgun marketing

The focus of shotgun marketing is to reach a large audience through a wide-ranging approach (Mass
Marketing) to let the audience know the variety of services offered by the firm. Such a strategy
works best for firms that offer a wide range of services at competitive prices, such as bookkeeping,
attest services, tax preparation, valuation, employee benefits, and general consulting. Shotgun
marketing will generally yield more leads at a lower cost per impression than rifle marketing. But
many of the leads it generates are low-quality, requiring firm personnel (or the firm’s outside
marketing company) to carefully vet them to ensure that the firm only follows up with prospects
who fit its desired client profile.
Shotgun advertising may involve press releases or ads on websites or in publications such as local
or regional newspapers, business journals, chamber of commerce and city economic development
publications, and trade group publications. It may also involve social media and online marketing
efforts using broad keywords such as: “CPA,” “bookkeeping,” “accounting,” “reviews,” “audits,”
“tax return,” “tax audits,” “company valuation,” and “financial consulting.” However, search engine
optimization efforts with these generalized keywords can result in spotty results. While the
conversion rate on these shotgun marketing campaigns may not be stellar, such advertising may still
be justified if general branding is important to the partners.

Rifle marketing

Rifle marketing focuses on specific, high-yield prospects. This strategy often involves the
acquisition of mailing lists and working with third parties to reach a desired audience via direct
mail, cold-calling, and social media.

Direct outreach to specific target markets, such as manufacturers, exporters, real estate developers,
private-equity firms, restaurateurs, hoteliers, high-tech companies, health care companies,
distribution/logistics firms, or high-net-worth clients will generally result in higher margin work and
higher closure rates, provided a firm has the necessary expertise in the specific niche practice.

Firms employing rifle marketing will generally focus their front-end time and financial resources to
narrow prospective targets. This strategy usually results in fewer prospects compared to shotgun
marketing; however, the closure rate often is higher as prospects have been pre-screened as solid
matches consistent with the firm’s expansion profile.

One-to-one marketing, also referred to as personalized marketing, helps companies shape their
products or services so they appeal to individual customers. Not only does this type of marketing
help make promotional messages more appealing to each shopper, it builds customer loyalty. The
possibility of generating a higher rate of return on marketing investments is another incentive to
learn more. Rifle Approach have the advantage of a scope for the one to one marketing.

2. What mean by market segmentation?

The process of dividing a market into distinct groups of buyers who have different needs,
characteristics, or behaviors, and who might require separate products or marketing programs is
called market segmentation.

3. Explain types of Segmentation?

There is no single way to segment a market. A marketer has to try different segmentation variables,
alone and in combination, to find the best way to view market structure. Following table outlines
the major types that might be used in segmenting consumer markets. Here we look at the major
geographic, demographic, psychographic, and behavioral variables.

Types of Segmentation
Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographical units, such as
nations, regions, states, counties, cities, or even neighborhoods. A company may decide to operate
in one or a few geographical areas or operate in all areas but pay attention to geographical
differences in needs and wants. Many companies today are localizing their products, advertising,
promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods.
For example, Walmart operates virtually everywhere but has developed special formats tailored to
specific types of geographic locations. In strongly Hispanic neighborhoods in Texas and Arizona,
Walmart is now testing Hispanic-focused Super Mercado de Walmart stores, which feature layouts,
signage, product assortment, and bilingual staff to make them more relevant to local Hispanic
customers. In markets where full-size superstores are impractical, Walmart has opened
supermarket-style Marketside grocery stores. Marketside stores are one-third the size of Walmart’s
other small-store format

Demographic segmentation

Demographic segmentation divides the market into segments 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. One
reason is that consumer needs, wants, and usage rates often vary closely with demographic
variables.

Age and Life-Cycle Stage. Consumer needs and wants change with age. Some companies use age
and life-cycle segmentation, offering different products or using different marketing approaches for
different age and life-cycle groups. For example, for children, Oscar Mayer offers Lunchables, full
of fun, kid-appealing finger food. For older generations, it markets Deli Creations, “with all the
warmth, flavor, and fresh-baked taste you look forward to—in a microwave minute without having
to go out.” Other companies focus on the specific age of life-stage groups. For example, although
consumers in all age segments love Disney cruises, Disney Cruise Lines focuses primarily on
families with children, large and small. Most of its destinations and shipboard activities are
designed with parents and their children in mind. Marketers must be careful to guard against
stereotypes when using age and life-cycle segmentation. Although some 80-year-olds fit the
doddering stereotypes, others play tennis. Similarly, whereas some 40-year-old couples are sending
their children off to college, others are just beginning new families.

Thus, age is often a poor predictor of a person’s life cycle, health, work or family status, needs, and
buying power. Companies marketing to mature consumers usually employ positive images and
appeals. For example, one Carnival Cruise Lines ad for its Fun Ships features an older boomer and
child riding waterslides, stating “fun has no age limit.”

Gender. Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.
For example, P&G was among the first with Secret, a brand specially formulated for a woman’s
chemistry, packaged and advertised to reinforce the female image.

Income. The marketers of products and services such as automobiles, clothing, cosmetics, financial
services, and travel have long used income segmentation. Many companies target affluent
consumers with luxury goods and convenience services.

Psychographic Segmentation

Psychographic segmentation divides buyers into different segments based on social class, lifestyle,
or personality characteristics. People in the same demographic group can have very different
psychographic characteristics.

The products people buy reflect their lifestyles. As a result, marketers often segment their markets by
consumer lifestyles and base their marketing strategies on lifestyle appeals. For example, car-sharing nicher
Zipcar rents cars by the hour or the day. But it doesn’t see itself as a car-rental company. Instead it sees itself
as enhancing its customers urban lifestyles and target them.

Marketers also use personality variables to segment markets. For example, cruise lines target
adventure seekers. Royal Caribbean appeals to high-energy couples and families by providing
hundreds of activities, such as rock wall climbing and ice skating. Its commercials urge travelers to
“declare your independence and become a citizen of our nation—Royal Caribbean, The Nation of
Why Not.”

Behavioral Segmentation

Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or
responses to a product. Many marketers believe that behavior variables are the best starting point for
building market segments.

Occasions. Buyers can be grouped according to occasions when they get the idea to buy, actually
make their purchase, or use the purchased item. Occasion segmentation can help firms build up
product usage. For example, most consumers drink orange juice in the morning, but orange growers
have promoted drinking orange juice as a cool, healthful refresher at other times of the day. By
contrast, Coca-Cola’s “Good Morning” campaign attempts to increase Diet Coke consumption by
promoting the soft drink as an early morning pick-me-up.

Benefits Sought. A powerful form of segmentation is grouping buyers according to the different
benefits that they seek from a product. Benefit segmentation requires finding the major benefits
people look for in a product class, the kinds of people who look for each benefit, and the major
brands that deliver each benefit.

User Status. Markets can be segmented into nonusers, ex-users, potential users, first-time users,
and regular users of a product. Marketers want to reinforce and retain regular users, attract targeted
nonusers, and reinvigorate relationships with ex-users.

Usage Rate. Markets can also be segmented into light, medium, and heavy product users. Heavy
users are often a small percentage of the ma

Loyalty Status. A market can also be segmented by consumer loyalty. Consumers can be loyal to
brands (Tide), stores (Target), and companies (Apple). Buyers can be divided into groups according
to their degree of loyalty. Some consumers are completely loyal—they buy one brand all the time.

4. What buyer characteristics do companies look at when they segment markets?

Table "Common Ways of Segmenting Buyers" shows some of the different types of buyer
characteristics used to segment markets. Notice that the characteristics fall into one of four
segmentation

categories: behavioral, demographic, geographic, or psychographic. We’ll discuss each of these

categories in a moment. For now, you can get a rough idea of what the categories consist of by
looking at them in terms of how marketing professionals might answer the following questions:

• Behavioral segmentation. What benefits do customers want, and how do they use our
product?
 • Demographic segmentation. How do the ages, races, and ethnic backgrounds of our
customers affect what they buy?
• Geographic segmentation. Where are our customers located, and how can we reach them?
What products do they buy based on their locations?
• Psychographic segmentation. What do our customers think about and value? How do they
live their lives?

5. What two types of information do market researchers gather to develop consumer insight?

A variety of tools and research techniques can be used to segment markets. Government agencies,
such as the U.S. Census Bureau, collect and report vast amounts of population information and
economic data that can reveal changing consumption trends. Technology is also making it easier for
even small companies and entrepreneurs to gather information about potential customers. For
example, the online game company GamePUMA.com originally believed its target market consisted
of U.S. customers, but when the firm looked more closely at who was downloading games from its
Web site, they were people from all over the globe. With the increased use of social media,
companies are able to get information on consumers search behavior. Loyalty cards that consumers
scan at many grocery and drug stores provide an incredible amount of information on consumers’
buying behavior.

The information requires gathering quantitative information and data. Quantitative information can
be improved with qualitative information you gather by talking to your customers and getting to
know them. (Recall that this is how Healthy Choice frozen dinners were created.) Consumer
insight is what results when you use both types of information. You want to be able to answer the
following questions.

 Am I looking at the consumers the way they see themselves?

 Am I looking at life from their point of view?

Best Buy asked store employees to develop insight about local consumer groups in order to create
special programs and processes for them. Employees in one locale invited a group of retirees to
their store to explain how to make the switch to digital television. The store sold $350,000 worth of
equipment and televisions in just two hours’ time. How much did it cost? The total cost included
ninety-nine dollars in labor costs plus coffee and donuts.

Intuit, the company that makes the tax software Quicken, has a “follow me home” program. Teams
of engineers from Intuit visit people’s homes and spend a couple of hours watching consumers use
Quicken. Then they use the insights they gain to improve the next version of Quicken. Contrast this
story with that of a competing firm. When a representative of the firm was asked if he had ever
observed consumers installing or using his company’s product, he responded,

6. What factors does a firm need to examine before deciding to target a market?

After you segment buyers and develop a measure of consumer insight about them, you can begin to
see those that have more potential. Now you are hunting with a rifle instead of a shotgun. The
question is, do you want to spend all day hunting squirrels or ten-point bucks? An attractive market
has the following characteristics:

 It is sizeable (large) enough to be profitable given your operating cost. Only a tiny
fraction of the consumers in China can afford to buy cars. However, because the
country’s population is so large (nearly 1.5 billion people), more cars are sold in
China than in Europe (and in the United States, depending on the month). Three
 billion people in the world own cell phones. But that still leaves three billion who
don’t. Sara Corbett.
 It is growing. The middle class of India is growing rapidly, making it a very
attractive market for consumer products companies. People under thirty make up the
majority of the Indian population, fueling the demand for “Bollywood” (Indian-
made) films.
 It is not already swamped by competitors, or you have found a way to stand out in a
crowd. IBM used to make PCs. However, after the marketplace became crowded
with competitors, IBM sold the product line to a Chinese company called Lenovo.
 Either it is accessible or you can find a way to reach it. Accessibility, or the lack of
it, could include geographic accessibility, political and legal barriers, technological
barriers, or social barriers. For example, to overcome geographic barriers, the
consumer products company Unilever hires women in third-world countries to
distribute the company’s products to rural consumers who lack access to stores.
 The company has the resources to compete in it. You might have a great idea to
compete in the wind-power market. However, it is a business that is capital intensive.
What this means is that you will either need a lot of money or must be able to raise
it. You might also have to compete with the likes of T. Boone Pickens, an oil tycoon
who is attempting to develop and profit from the wind-power market. Does your
organization have the resources to do this?
 It “fits in” with your firm’s mission and objectives. Consider TerraCycle, which has
made its mark by selling organic products in recycled packages. Fertilizer made from
worm excrement and sold in discarded plastic beverage bottles is just one of its
products. It wouldn’t be a good idea for TerraCycle to open up a polluting, coal-fired
power plant, no matter how profitable the market for the service might be.

7. Why do companies position products?

Why should buyers purchase your offering versus another? If your product faces competition, you
will need to think about how to “position” it in the marketplace relative to competing products.
After all you don’t want the product to be just another “face in the crowd” in the minds of
consumers. Positioning involves tailoring your product so that it stands out from the competition
and people want to buy it.

One way to position your product is to plot customer survey data on a perceptual map. A perceptual
map is a two-dimensional graph that visually shows where your product stands, or should stand,
relative to your competitors, based on criteria important to buyers. The criteria can involve any

number of characteristics—price, quality, level of customer service associated with the product, and
so on.

8. Is it always harder to find new customers than it is to retain old ones or does it depend on the
business you’re in?
Finding and attracting new customers is generally far more difficult than retaining your current
customers. Think about how much time and energy you spend when you switch your business from
one firm to another, even when you’re buying something as simple as a haircut. If you aren’t happy
with your hair stylist and want to find a new hairdresser, you first have to talk to people with
haircuts you like or read reviews of salons. Once you decide on a particular salon, you have to find
it and explain to the new hairdresser how you want your hair cut and hope he or she gets it right.
You also have to figure out what type of credit cards the new salon will accept and whether tips can
be put on your credit card.

Finding new customers, getting to know them, and figuring out what they really want is also a
difficult process, one that’s fraught with trial and error. That’s why it’s so important to get to know,
form close relationships, and focus selling efforts on current customers.
In 2009, Backroads, a California company focused on adventure-based travel increased its revenues
by creating a personalized marketing campaign for people who had done business with them in the
past. Backroads looked at customers’ past purchases, the seasons in which they took their trips, the
levels of activity associated with them, and whether or not the customers tended to vacation with
children. Based on their findings, Backroads created three relevant trip suggestions for each
customer and sent postcards and e-mails with links to customized Web pages reminding each
customer of the trips he/she had previously booked with Backroads and suggesting new ones. “In
terms of past customers, it was like off-the-charts better [than past campaigns],” says Massimo
Prioreschi, the vice president of Backroads’ sales and marketing group

9. Does one-to-one marketing have to be expensive? How can small organizations interact with
their customers in a cost-effective way?

You could go so far as to break down segments to the individual level, which is the goal behind
one-to-one marketing. However, doing so would be dreadfully expensive.
After all, you are really going to develop different products and different marketing campaigns and
communications for each group. Probably not, but “you need to perform your due diligence and
understand where the majority of the people you are trying to reach land on this matrix, modifying
your message according to this insight,

Reaching out to your customer directly and appealing to them to invest in your product is perhaps
the most effective marketing technique that you can use. In this day and age where social media is
the communication channel, one on one marketing is actually possible. One to one marketing
enables a business to customize the marketing content and build a trusting and lasting relationship
with the customer. That is not all. This type of direct marketing also encourages word-of-mouth
advertising that a company can benefit from significantly. Are you ready for it? Here are some cost
effective one to one marketing tectics

Before you launch a one on one marketing campaign, you need to identify who your customers are
and what they need. More than anything, you need to know if it is possible to communicate with
them directly, to make this kind of marketing possible. Also, figure out which of your customers
would appreciate direct communication and what is the best way to reach out to them. While social
media is a great platform, not everyone is on Facebook or Twitter. So, traditional marketing
methods like telephone calls and personalized letters should also be considered.

Up Selling and Cross Selling

One of the biggest advantages of one on one marketing is that it helps you build a comfortable
enough relationship with the customers where you can influence them to look at your other products
or ask them to invest more in the same product. Categorize your customers based on their previous
purchases and offer them deals on new products they cannot refuse.

Customized Newsletters
Another advantage of direct marketing is that it enables you to learn enough about the customer and
send customized newsletters. For example, a mobile phone supplier can send a customized
newsletter with information about latest iPhone apps and accessories to all his customers who have
purchased an iPhone from him. Similarly, a laptop or computer retailer can segregate his customers
based on the brand of laptop they have purchased from him and send them information about
relevant accessories and upgrades for each of them.

Increase Customer base with Word of Mouth Marketing

A happy customer would be more than willing to tell the world about your product or service. One
on one marketing enables you to offer exclusive deals where your existing customers can benefit by
introducing your product or service to their family and friends. This not only earns them rewards,
but also helps you expand your customer base.

When planned carefully, a direct marketing campaign, either through the social media platforms
like Facebook or twitter or through customized emails, can deliver the desired results. All you need
to do is know what the customers expect and give them that.

10. Are large companies better off using multi segment strategies and small companies better off
using niche strategies? Why or why not?

Chapter 6: Creating Offerings

1. What mean by core product?

core product is the BENEFIT of the product that makes it valuable to you. So, with the car example,
the benefit is convenience i.e. the ease at which you can go where you like, when you want to.
Another core benefit is speed since you can travel around relatively quickly.
2. What mean by Product Levels and Product Lines?

Product Levels
Product planners need to think about products and services on three levels (Figure). Each level adds
more customer value.
Product Levels
  The most basic level is the core customer value, which addresses the question What is the
buyer really buying? When designing products, marketers must first define the core,
problem-solving benefits or services that consumers seek.
 At the second level, product planners must turn the core benefit into an actual product.
They need to develop product and service features, design, a quality level, a brand name,
and packaging. For example, the BlackBerry is an actual product. Its name, parts, styling,
features, packaging, and other attributes have all been carefully combined to deliver the core
customer value of staying connected.
 product planners must build an augmented product around the core benefit and actual
product by offering additional consumer services and benefits. The BlackBerry is more than
just a communications device. It provides consumers with a complete solution to mobile
connectivity problems. Thus, when consumers buy a BlackBerry, the company and its
dealers also might give buyers a warranty on parts and workmanship, instructions on how to
use the device, quick repair services when needed, and a toll-free telephone number and
Web site to use if they have problems or questions.

Product Lines

It means group of products that are closely related because they function in a similar manner, are
sold to the same customer groups, are marketed through the same types of outlets, or fall within
given price ranges.

3. What is the difference between product depth and product breadth?

Product depth refers to the number of versions offered for each product in the line. Colgate
toothpastes come in 16 varieties, ranging from Colgate Total, Colgate Max Fresh, Colgate
Sensitive, Colgate Cavity Protection, and Colgate Tartar Protection to Ultrabrite, Colgate Sparkling
White, Colgate Luminous, and Colgate Kids Toothpastes. Each variety comes in its own special
forms and formulations. For example, you can buy Colgate Total in regular, mint stripe gel, or
whitening liquid.

Product breadth refers to the number of different product lines the company carries. For example,
the “Colgate World of Care” includes a fairly contained product mix, consisting of personal and
home care products that you can “trust to care for yourself, your home, and the ones you love.” By
contrast, GE manufactures as many as 250,000 items across a broad range of categories, from light
bulbs to jet engines and diesel locomotives.

4. What are the four types of consumer offerings? How do they differ from one another?

Consumer products are products and services bought by final consumers for personal consumption.
Marketers usually classify these products and services further based on how consumers go about
buying them. Consumer products include convenience products, shopping products, specialty
products, and unsought products. These products differ in the way’s consumers buy them and,
therefore, in how they are marketed (see Table)

 Convenience products are consumer products and services that customers usually
buy frequently, immediately, and with minimal comparison and buying effort. Examples
include laundry detergent, candy, magazines, and fast food. Convenience products are
usually low priced, and marketers place them in many locations to make them readily
available when customers need or want them.
 Shopping products are less frequently purchased consumer products and services
that customers compare carefully on suitability, quality, price, and style. When buying
shopping products and services, consumers spend much time and effort in gathering
information and making comparisons. Examples include furniture, clothing, used cars, major
 appliances, and hotel and airline services. Shopping products marketers usually distribute
their products through fewer outlets but provide deeper sales support to help customers in
their comparison efforts.
 Specialty products are consumer products and services with unique characteristics or brand
identification for which a significant group of buyers is willing to make a special chase
effort. Examples include specific brands of cars, high-priced photographic equipment,
designer clothes, and the services of medical or legal specialists. A Lamborghini automobile,
for example, is a specialty product because buyers are usually willing to travel great
distances to buy one. Buyers normally do not compare specialty products.
 Unsought products are consumer products that the consumer either does not know about or
knows about but does not normally consider buying. Most major new innovations are
unsought until the consumer becomes aware of them through advertising. Classic examples
of known but unsought products and services are life insurance, preplanned funeral services,
and blood donations to the Red Cross.

5. How do brands help companies market their products?

The brand name becomes the basis on which a whole story can be built about a product’s special
qualities. The seller’s brand name and trademark provide legal protection for unique product
features that otherwise might be copied by competitors.

Developing a strategic marketing plan, your brand serves as a guide to understanding the purpose of
your key business objectives and enables you to align the plan with those objectives. Branding
doesn't just count during the time before the purchase—the brand experience has to last to create
customer loyalty

Branding helps the seller to segment markets. For example, Toyota Motor Corporation can offer the
major Lexus, Toyota, and Scion brands, each with numerous sub brands such as Camry, Corolla,
Prius, Matrix, Yaris, Tundra, Land Cruiser, and others—not just one general product for all
consumers

6. What is the purpose of a brand extension?

Brand Extension is the use of an established brand name in new product categories. This new
category to which the brand is extended can be related or unrelated to the existing product
categories. A renowned/successful brand helps an organization to launch products in new categories
more easily. For instance, Nike’s brand core product is shoes. But it is now extended to sunglasses,
soccer balls, basketballs, and golf equipment’s. An existing brand that gives rise to a brand
extension is referred to as parent brand. If the customers of the new business have values and
aspirations synchronizing/matching those of the core business, and if these values and aspirations
are embodied in the brand, it is likely to be accepted by customers in the new business. It gives
many benefits to the Company like;

 It increases brand image.

 The risk perceived by the customers reduces.
 The likelihood of gaining distribution and trial increases. An established brand name
increases consumer interest and willingness to try new product having the established brand
name.
 The efficiency of promotional expenditure increases. Advertising, selling and promotional
costs are reduced. There are economies of scale as advertising for core brand and its
extension reinforces each other.
  Cost of developing new brand is saved.
 Consumers can now seek for a variety.

7. How do brand managers differ from category managers?

A Brand Manager oversees a role that is highly strategic in nature. By cultivating the message that
a company wants to send to consumers, brand managers can be considered advocates for
organizations. They works for short term activities in next to next new product development.

A Category Manager works in the marketing department of a company, usually within the retail
field. The main goal of the Category Manager is to drive sales within their respective category. If
you're a creative thinker who loves coming up with innovative marketing plans to help set your
division apart from the competition, this could be your ideal position.
Category Manager is responsible for staying abreast of the major news and trends within your
specific category, keeping tabs on competitor products and pricing, and ensuring that your products
are meeting customers' needs. Additionally, you're in charge of such duties as product design and
development, packaging design, sales tools development, and product strategy.

8. How does packaging add value for consumers and retailers?

As Packaging involves designing and producing the container or wrapper for a product.
Traditionally, the primary function of the package was to hold and protect the product.

Color and design in packaging can have a noticeable effect on consumer behaviors, writes
Consumer Reports.org. Color is often used in packaging to attract attention, but colors also must be
taken in the context of the product’s marketing goals. For example, children’s cereal packaging has
many bright colors that attract their eyes; health-focused cereals will have more whites and pastels
to project a softer, more adult image. Brands with strong color patterns should incorporate them into
the packaging design.

Customers will associate a brand’s image with how its product is packaged. Technology products
often come in sleek and unique packaging to reinforce the image of innovation that the company’s
brand aims to project. Beverages may have unique bottle designs and the packaging for a food
product could feature a design that makes it easier to eat. The brand image that the product’s
packaging promotes should differentiate it from competitors, which can be difficult when the
products are similar.

It supports the Retailers as well. When shoppers walk into a store to buy a product, the first point of
physical interaction with that product is its packaging. Packaging is what the consumer sees, feels,
reads and handles. Whether the consumer realizes it or whether the impact is simply subconscious,
packaging makes a difference in determining what gets noticed on the shelf and ultimately
purchased. The package becomes an extension of the product itself. From high-end electronics to
packaged foods, companies are increasing their focus on incorporating more distinctive packaging
that attracts a loyal customer base and adds value for the brand and customer alike.

Chapter 7: Developing and Managing Offerings

1, Explain New Offering Development Process

Companies face a problem: They must develop new products, but the odds weigh heavily against
success. To create successful new products, a company must understand its consumers, markets, and
competitors and develop products that deliver superior value to customers. It must carry out strong new-
product planning and set up a systematic, customer-driven new product development process for finding
and growing new products. Figure shows the eight major steps in this process.
i. Idea Generation
New-product development starts with idea generation—the systematic search for newproduct ideas. A
company typically generates hundreds of ideas, even thousands, to find a few good ones. Major sources
of new-product ideas include internal sources and external sources such as customers, competitors,
distributors and suppliers, and others.
Using internal sources, the company can find new ideas through formal R&D. However, in
one survey, 750 global CEOs reported that only 14 percent of their innovation ideas came
from traditional R&D. Instead, 41 percent came from employees, and 36 percent came from
customers.
Companies can also obtain good new-product ideas from any of a number of external sources. For
example, distributors and suppliers can contribute ideas. Distributors are close to the market and can
pass along information about consumer problems and new-product possibilities. Suppliers can tell the
company about new concepts, techniques, and materials that can be used to develop new products.
Competitors are another important source. Companies watch competitors’ ads to get clues about their
new products.
ii. Idea Screening
The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding
stages is to reduce that number. The first idea-reducing stage is idea screening, which helps spot good
ideas and drop poor ones as soon as possible. Product development costs rise greatly in later stages, so
the company wants to go ahead only with those product ideas that will turn into profitable products.
Many companies require their executives to write up new-product ideas in a standard format that can be
reviewed by a new-product committee. The write-up describes the product or the service, the proposed
customer value proposition, the target market, and the competition. It makes some rough estimates of
market size, product price, development time and costs, manufacturing costs, and rate of return. The
committee then evaluates the idea against a set of general criteria.
iii. Concept Development and Testing
An attractive idea must be developed into a product concept. It is important to distinguish between a
product idea, a product concept, and a product image. A product idea is an idea for a possible product
that the company can see itself offering to the market. A product concept is a detailed version of the idea
stated in meaningful consumer terms. A product image is the way consumers perceive an actual or
potential product. Concept Development Suppose a car manufacturer has developed a practical
battery-powered, all-electric car Its initial prototype is a sleek, sporty roadster convertible that sells for
more than $100,000.16 However, in the near future, it plans to introduce more-affordable, mass-market
versions that will compete with today’s hybrid cars. This 100 percent electric car
will accelerate from zero to sixty miles per hour in 5.6 seconds, travel more than 300 miles on a single
charge, recharge in 45 minutes from a normal 120-volt electrical outlet, and
cost about one penny per mile to power. Concept testing calls for testing new-product concepts with
groups of target consumers. The concepts may be presented to consumers symbolically or physically.
Here, in more detail, is concept 3:
 An efficient, fun-to-drive, battery-powered compact car that seats four. This 100 percent electric
wonder provides practical and reliable transportation with no pollution.
 It goes more than 300 miles on a single charge and costs pennies per mile to operate.
 It’s a sensible, responsible alternative to today’s pollution-producing gas-guzzlers. Its
fully equipped price is $25,000.
Many firms routinely test new-product concepts with consumers before attempting to turn them into
actual new products. For some concept tests, a word or picture description might be sufficient. However,
a more concrete and physical presentation of the concept will increase the reliability of the concept test.
 iv. Marketing Strategy Development
Suppose the carmaker finds that concept 3 for the electric car tests best. The next step is
marketing strategy development, designing an initial marketing strategy for introducing this car to the
market.
The marketing strategy statement consists of three parts. The first part describes the target market; the
planned value proposition; and the sales, market share, and profit goals for
the first few years. Thus: The target market is younger, well-educated, moderate- to high-income
individuals, couples, or small families seeking practical, environmentally responsible transportation.

The car will be positioned as more fun to drive and less polluting than today’s internal combustion
engine or hybrid cars. The company will aim to sell 50,000 cars in the first year, at a loss of not
more than $15 million. In the second year, the company will aim for sales of 90,000 cars and a
profit of $25 million.
The second part of the marketing strategy statement outlines the product’s planned price,
distribution, and marketing budget for the first year: The battery-powered electric car will be
offered in three colors—red, white, and blue— and will have a full set of accessories as standard
features. It will sell at a retail price of $25,000, with 15 percent off the list price to dealers. Dealers
who sell more than 10 cars
per month will get an additional discount of 5 percent on each car sold that month. A marketing
budget of $50 million will be split 50–50 between a national media campaign and local event
marketing. Advertising and the Web site will emphasize the car’s fun spirit and low emissions.
During the first year, $100,000 will be spent on marketing research to find out who is buying the car
and what their satisfaction levels are.
The third part of the marketing strategy statement describes the planned long-run sales, profit goals,
and marketing mix strategy:
We intend to capture a 3 percent long-run share of the total auto market and realize an after-tax
return on investment of 15 percent. To achieve this, product quality will start high and be improved
over time. Price will be raised in the second- and third-years if competition and the economy permit.
The total marketing budget will be raised each year by about 10 percent. Marketing research will be
reduced to $60,000 per year after the first year.

v. Business Analysis

Once management has decided on its product concept and marketing strategy, it can evaluate the
business attractiveness of the proposal. Business analysis involves a review of the sales, costs, and
profit projections for a new product to find out whether they satisfy the company’s objectives. If
they do, the product can move to the product development stage. To estimate sales, the company
might look at the sales history of similar products and conduct market surveys. It can then estimate
minimum and maximum sales to assess the range of risk. After preparing the sales forecast,
management can estimate the expected costs and profits for the product, including marketing, R&D,
operations, accounting, and finance costs. The company then uses the sales and costs figures to analyze
the new product’s financial attractiveness.

vi. Product Development

For many new-product concepts, a product may exist only as a word description, a drawing, or
perhaps a crude mock-up. If the product concept passes the business test, it moves into product
development. Here, R&D or engineering develops the product concept into a physical product. The
product development step, however, now calls for a huge jump in investment. It will show whether
the product idea can be turned into a workable product. The R&D department will develop and test
one or more physical versions of the product concept. R&D hopes to design a prototype that will
satisfy and excite consumers and that can be produced quickly and at budgeted costs. Developing a
successful prototype can take days, weeks, months, or even years depending on the product and
prototype methods.
vii. Test Marketing
If the product passes both the concept test and the product test, the next step is test marketing, the
stage at which the product and its proposed marketing program are introduced into realistic market
settings. Test marketing gives the marketer experience with marketing a product before going to the
great expense of full introduction. It lets the company test the product and its entire marketing
program—targeting and positioning strategy, advertising, distribution, pricing, branding and
packaging, and budget levels. The amount of test marketing needed varies with each new product.
Test marketing costs can be high, and it takes time that may allow competitors to gain advantages.
When the costs of developing and introducing the product are low, or when management is already
confident about the new product, the company may do little or no test marketing. In fact, test
marketing by consumer-goods firms has been declining in recent years. Companies often do not
test-market.

viii. Commercialization
Test marketing gives management the information needed to make a final decision about whether to
launch the new product. If the company goes ahead with commercialization— introducing the new
product into the market—it will face high costs. The company may need to build or rent a
manufacturing facility. And, in the case of a major new consumer product, it may spend hundreds of
millions of dollars for advertising, sales promotion, and other marketing efforts in the first year. For
example, to introduce its McCafé coffee in the United States, McDonald’s spent $100 million on an
advertising blitz that spanned TV, print, radio, outdoor, the Internet, events, public relations, and
sampling. Similarly, Verizon spent $100 million to introduce the Droid smart phone, and Microsoft
spent $100 million or more on marketing to introduce its Bing search engine.22 The company
launching a new product must first decide on introduction timing. If the carmaker’s new battery-
powered electric car will eat into the sales of its other cars, the introduction may be delayed. If the
car can be improved further, or if the economy is down, the company may wait until the following
year to launch it. However, if competitors are ready to introduce their own battery-powered models,
the company may push to introduce its car sooner.
Next, the company must decide where to launch the new product—in a single location, a region, the
national market, or the international market. Few companies have the confidence, capital, and
capacity to launch new products into full national or international distribution from the get-go.
Instead, they develop a planned market rollout over time.
For example, when Miller introduced Miller Chill, a lighter Mexican-style lager flavored with lime
and salt, it started in selected southwestern states, such as Arizona, New Mexico, and Texas,
supported by local TV commercials. Based on strong sales in these initial markets, the company
then rolled out Miller Chill nationally, supported by $35 million worth of TV commercials and print
ads. Finally, based on the brand’s U.S. success, Miller rolled out Miller Chill internationally,
starting in Australia. Some companies, however, may quickly introduce new models into the full
national market. Companies with international distribution systems may introduce new products
through swift global rollouts. Microsoft did this with its Windows 7 operating system, using a
mammoth advertising blitz to launch the operating system simultaneously in more than 30 markets
worldwide.

2. Who are lead users?

Lead users are early adopters of new products, services and technologies, who experience needs that
are unknown to the general public. These needs will be common in a marketplace, but they are
faced by lead users months or years in advance of the bulk of consumers in the market. They are
positioned in such a way that they will be benefitted if a solution is obtained for their needs.
Lead users provide significant prospects for the introduction of innovative products and
technologies. So, they are considered as a type of the ‘creative consumers’ phenomenon, which
pertains to consumers who adapt to, modify, or transform a proprietary offering.

3. How should a company evaluate new ideas? What are the criteria?

The first thing to do when you get a business idea is determine whether it’s a good idea. Not every
idea that seems good at first is practical. And some business ideas have no market.
You’ll need to do some research to evaluate your business idea. Here’s a checklist of questions to use as
a guide:

 Is there a need for this product or service? Some of the most popular products and services meet
a need that people currently have. The product or service may improve upon or complement an
existing product or service, or your idea may be a completely approach to meeting a need.
 Is there a desire for this product or service? Admittedly, some of the most popular products are
desire-based rather than need-based. That means that someone is purchasing the product because
they want to. A few needs-based reasons for a purchase include to increase status or to follow a
trend.
 Who is currently meeting the need for this product or service? Answering this question gives
you a start on evaluating your competition. You need to know not only who your competitors
are, but also how many of them there are. Don’t forget to consider indirect competition.
 Who will buy this product or service? Find out who your typical customer is likely to be. This
may involve conducting surveys, testing the waters, finding a focus group, and more. The better
your understanding your potential customer, the more likely you are to create a successful
business.
 How big is that market? You may have a great business idea. It may even be brilliant. But, if the
market for your idea is very small, your business might not be viable–that is unless people are
willing to pay a premium for your product or service. Which brings us to the next question.
 How much are people willing to pay for your product or service? Your intake from your product
or service needs to cover your costs and should include a healthy profit. Remember, that even a
small niche market can be profitable if potential customers are willing to pay you enough
money.
 How hard will it be to implement the idea? Let’s face it, some ideas are easier to implement than
others. When answering this question, take into consideration the amount of time it will take you
to launch your business as well as whether or not you will need to hire someone to help.
After doing your research, you should be able to tell whether you want to continue on and develop
your business idea.

4. Draw and explain product Life Cycle.

After launching the new product, management wants that product to enjoy a long and
happy life. Although it does not expect that product to sell forever, the company wants to
earn a decent profit to cover all the effort and risk that went into launching it. Management
is aware that each product will have a life cycle, although its exact shape and length is not
known in advance.
Figure shows a typical product life cycle (PLC), the course that a product’s sales and profits take
over its lifetime.
  Introduction Stage
The introduction stage starts when a new product is first launched. Introduction takes time, and
sales growth is apt to be slow. Well-known products such as frozen foods and HDTVs lingered for
many years before they entered a stage of more rapid growth.
In this stage, as compared to other stages, profits are negative or low because of the low
sales and high distribution and promotion expenses. Much money is needed to attract distributors
and build their inventories. Promotion spending is relatively high to inform consumers of the new
product and get them to try it. Because the market is not generally ready for product refinements at
this stage, the company and its few competitors produce basic versions of the product. These firms
focus their selling on those buyers who are the most ready to buy.
A company, especially the market pioneer, must choose a launch strategy that is consistent with the
intended product positioning. It should realize that the initial strategy is just the first step in a
grander marketing plan for the product’s entire life cycle. If the pioneer chooses its launch strategy
to make a “killing,” it may be sacrificing long-run revenue for the sake of short-run gain. As the
pioneer moves through later stages of the life cycle, it must continuously formulate new pricing,
promotion, and other marketing strategies. It has the best chance of building and retaining market
leadership if it plays its cards correctly from the start.
 Growth Stage
If the new product satisfies the market, it will enter a growth stage, in which sales will start
climbing quickly. The early adopters will continue to buy, and later buyers will start following their
lead, especially if they hear favorable word of mouth. Attracted by the opportunities for profit, new
competitors will enter the market. They will introduce new product features, and the market will
expand. The increase in competitors leads to an increase in the number of distribution outlets, and
sales jump just to build reseller inventories. Prices remain where they are or decrease only slightly.
Companies keep their promotion spending at the same or a slightly higher level. Educating the
market remains a goal, but now the company must also meet the competition.
Profits increase during the growth stage as promotion costs are spread over a large volume and as
unit manufacturing costs decrease. The firm uses several strategies to sustain rapid market growth
as long as possible. It improves product quality and adds new product features and models. It enters
new market segments and new distribution channels. It shifts some advertising from building
product awareness to building product conviction and purchase, and it lowers prices at the right time
to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high current profit. By
spending a lot of money on product improvement, promotion, and distribution, the company can
capture a dominant position. In doing so, however, it gives up maximum current profit, which it
hopes to make up in the next stage.
 Maturity Stage
At some point, a product’s sales growth will slow down, and it will enter the maturity stage. This
maturity stage normally lasts longer than the previous stages, and it poses strong challenges to
marketing management. Most products are in the maturity stage of the life cycle, and therefore most
of marketing management deals with the mature product.
The slowdown in sales growth results in many producers with many products to sell. In turn, this
overcapacity leads to greater competition. Competitors begin marking down prices, increasing their
advertising and sales promotions, and upping their product development budgets to find better
versions of the product. These steps lead to a drop-in profit. Some of the weaker competitors start
dropping out, and the industry eventually contains only well-established competitors.
Although many products in the mature stage appear to remain unchanged for long periods, most
successful ones are actually evolving to meet changing consumer needs. Product managers should
do more than simply ride along with or defend their mature products—a good offense is the best
defense. They should consider modifying the market, product, and marketing mix. In modifying the
market, the company tries to increase consumption by finding new users and new market segments
for its brands. For example, mature 101-year old card maker American Greetings is now reaching
younger consumers through social-networking widgets and instant-messaging channels.
The company can try modifying the marketing mix—improving sales by changing one or more
marketing mix elements. The company can offer new or improved services to buyers. It can cut
prices to attract new users and competitors’ customers. It can launch a better advertising campaign
or use aggressive sales promotions—trade deals, cents-off, premiums, and contests. In addition to
pricing and promotion, the company can also move into new marketing channels to help serve new
users.

 Decline Stage
The sales of most product forms and brands eventually dip. The decline may be slow, as in the cases
of stamps and oatmeal cereal, or rapid, as in the cases of cassette and VHS tapes. Sales may plunge
to zero, or they may drop to a low level where they continue for many years. This is the decline
stage.
Sales decline for many reasons, including technological advances, shifts in consumer tastes, and
increased competition. As sales and profits decline, some firms withdraw from the market. Those
remaining may prune their product offerings. They may drop smaller market segments and marginal
trade channels, or they may cut the promotion budget and reduce their prices further.
Carrying a weak product can be very costly to a firm, and not just in profit terms. There are many
hidden costs. A weak product may take up too much of management’s time. It often requires
frequent price and inventory adjustments. It requires advertising and sales force attention that might
be better used to make “healthy” products more profitable. A product’s failing reputation can cause
customer concerns about the company and its other products. The biggest cost may well lie in the
future. Keeping weak products delays the search for replacements, creates a lopsided product mix,
hurts current profits, and weakens the company’s foothold on the future.
For these reasons, companies need to pay more attention to their aging products. A firm’s first task
is to identify those products in the decline stage by regularly reviewing sales, market shares, costs,
and profit trends. Then management must decide whether to maintain, harvest, or drop each of these
declining products.
Management may decide to maintain its brand, repositioning or reinvigorating it in hopes of moving
it back into the growth stage of the PLC. P&G has done this with several brands, including Mr.
Clean and Old Spice. Management may decide to harvest the product, which means reducing
various costs (plant and equipment, maintenance, R&D, advertising, sales force), hoping that sales
hold up. If successful, harvesting will increase the company’s profits in the short run.
Finally, management may decide to drop the product from its line. It can sell it to another firm or
simply liquidate it at salvage value. In recent years, P&G has sold off several lesser or declining
brands, such as Folgers coffee, Crisco oil, Comet cleanser, Sure deodorant, Duncan Hines cake
mixes, and Jif peanut butter. If the company plans to find a buyer, it will not want to run down the
product through harvesting.

5. Explain why and when penetration and skimming pricing are used in the introduction
stage?

Penetration Pricing implies a pricing technique in which new product is offered at low price, by
adding a nominal markup to its cost of production, to penetrate the market as early as possible. It
aims at maximizing the market share of the product, and once it is achieved, i.e. when the demand
picks up, the firm can increase the price of the product.

Penetration pricing results in lower profits in the short run, however, in the long run, it results in
higher profits because it increases the market base. The reasons behind adopting penetration pricing
are as under:
 New product offered by the firm is already provided by other well-established brands. The
low price will lure customers to switch to the new product, who are already familiar with
other brands.
 It can help in increasing sales of the product in short period.
 It restricts new entrants from entering the market.
The pricing strategy in which high markup is charged for the new product, leading to the high price,
so as to skim the cream from the market, is known as Skimming Pricing. It entails fixing a high
price for the new product before other competitors step into the market.

This technique is used in case of new product, which faces no to little competition in the market,
and have a great extent of consumer acceptability. Market skimming pricing is adopted by the
company, due to the following reasons:

 In the early stages, the demand for the product is inelastic, till the product occupies a good
position in the market.
 In the initial phase, the demand for the product is not known, and high price helps in
covering the cost of production.
 In the beginning, there is a huge requirement of capital for producing the product, resulting
in high production cost. Further, a huge amount is invested in the promotional activities, that
also adds to its cost. When the product is charged high, it will cover the cost of production
and promotion expenses easily.

6. What different strategies do firms use to extend the life cycles of their products throughout
the maturity stage?

After you’ve created a product your company will sell on the open market, that product has a
natural life cycle. The cycle begins with the product’s introduction into the market, continues with
the product’s growth as it captures the attention of your target audience, its maturity – which refers
to peak sales of the product – and eventually, its decline. Your goal as an entrepreneur is to extend
that period of maturity for as long as possible, but you must understand the most effective strategies
to achieve that goal.
Adding New Features
Products tend to grow stale after years of being in the market, and that’s because customers have
adjusted to the features and characteristics that once made the product unique or special. As a result,
the decline of a product is often tied to familiarity and the need for customers to feel as if something
old has become new again. That’s why adding new features to your product can be an effective
extension strategy.
For example, if you're selling an electric bicycle that only allows for two speeds, you could add
several new speed options to renew excitement in your target audience.
Changing Product Packaging
Research has found that clever product packaging can help your target audience feel more loyal to
your brand. In fact, one study found that 33 percent of buyer decision-making is based on product
packaging. Another study found that 40 percent of buyers would share pictures of an attractive
product package on social media.
Repackaging your product can help it seem new and improved to your target audience, and it can
also appeal to prospects that haven’t yet become buyers. Packaging includes the colors you choose,
the design elements, the size of the package, the words and images you display on the package and
the type of font you use.
Identifying New Markets
One of the benefits of globalization is that it has opened up the international market to small
businesses in a way that wasn’t possible decades ago. Your company now has access to customers
throughout the world, and that’s especially true if you are an e-commerce business that does all its
selling on the internet. If you’ve done your market research properly, you will quickly realize your
target audience isn’t limited to the U.S., but in fact, buyer behavior is similar across borders. You
still have to market to the right audience, but the size of that audience and your access to that
audience is now greatly expanded

Chapter 8: Using Marketing Channels to Create Value for Customers

1. What mean by marketing Channels?

It is a set of interdependent organizations that help make a product or service available for use or
consumption by the consumer or business user.
A company’s channel decisions directly affect every other marketing decision. Pricing depends on
whether the company works with national discount chains, uses high-quality specialty stores, or
sells directly to consumers via the Web. The firm’s sales force and communications decisions
depend on how much persuasion, training, motivation, and support its channel partners need.
Whether a company develops or acquires certain new products may depend on how well those
products fit the capabilities of its channel members. For example, Kodak initially sold its Easy
Share printers only in Best Buy stores because of the retailer’s on-the-floor sales staff and their
ability to educate buyers on the economics of paying a higher initial printer price but lower long-
term ink costs.

2. Explain Types of Channel Partners.

The two types you hear about most frequently are wholesalers and retailers. Keep in mind, however,
that the categories we discuss in this section are just that—categories. In recent years, the lines
between wholesalers, retailers, and producers have begun to blur considerably. Microsoft is a
producer of goods, but recently it began opening up its own retail stores to sell products to
consumers, much as Apple has done. 1 As you will learn later in the chapter, Walmart and other
large retailers now produce their own store brands and sell them to other retailers. Similarly, many
producers have outsourced their manufacturing, and although they still call themselves
manufacturers, they act more like wholesalers. Wherever organizations see an opportunity, they are
beginning to take it, regardless of their positions in marketing channels.

Wholesalers obtain large quantities of products from producers, store them, and break them down
into cases and other smaller units more convenient for retailers to buy, a process called “breaking
bulk.” Wholesalers get their name from the fact that they resell goods “whole” to other companies
without transforming the goods. If you are trying to stock a small electronics store, you probably
don’t want to purchase a truckload of iPods. Instead, you probably want to buy a smaller assortment
of iPods as well as other merchandise. Via wholesalers, you can get the assortment of products you
want in the quantities you want. Some wholesalers carry a wide range of different products. Other
carry narrow ranges of products.

Merchant wholesalers are wholesalers that take title to the goods. They are also sometimes
referred to as distributors, dealers, and jobbers. The category includes both full-service wholesalers
and limited-service wholesalers. Full-service wholesalers perform a broad range of services for their
customers, such as stocking inventories, operating warehouses, supplying credit to buyers,
employing salespeople to assist customers, and delivering goods to customers. Maurice Sporting
Goods is a large North American full-service wholesaler of hunting and fishing equipment. The
firm’s services include helping customers figure out which products to stock, how to price them,
and how to display them.

Brokers, or agents, don’t purchase the products they sell (take title to them). Their role is limited to
negotiating sales contracts for producers. Clothing, furniture, food, and commodities such as lumber
and steel are often sold by brokers. They are generally paid a commission for what they sell and are
assigned to different geographical territories by the producers with whom they work. Because they
have excellent industry contacts, brokers and agents are a “go-to” resource for both consumers and
companies trying to buy and sell products.

Manufacturers’ sales offices or branches are selling units that work directly for manufacturers.
They are a type of factory outlet store. They sell products to stores and sometimes to consumers,
often at a discount.

Retailers buy products from wholesalers, agents, or distributors and then sell them to consumers.
Retailers vary by the types of products they sell, their sizes, the prices they charge, the level of
service they provide consumers, and the convenience or speed they offer. You are familiar with
many of these types of retailers because you have purchased products from them.

3. How do companies add value to products via their marketing channels?

Producers use intermediaries because they create greater efficiency in making goods available to
target markets. Through their contacts, experience, specialization, and scale of operation,
intermediaries usually offer the firm more than it can achieve on its own. Figure A shows how using
intermediaries can provide economies. Figure shows three manufacturers, each using direct
marketing to reach three customers. This system requires nine different contacts. Figure B shows
the three manufacturers working through one distributor, which contacts the three customers. This
system requires only six contacts. In this way, intermediaries reduce the amount of work that must
be done by both producers and consumers. From the economic system’s point of view, the role of
marketing intermediaries is to transform the assortments of products made by producers into the
assortments wanted by consumers. Producers make narrow assortments of products in large
quantities, but consumers want broad assortments of products in small quantities. Marketing
channel members buy large quantities from many producers and break them down into the smaller
quantities and broader assortments desired by consumers.

In making products and services available to consumers, channel members add value
by bridging the major time, place, and possession gaps that separate goods and services
from those who use them. Members of the marketing channel perform many key functions.
Some help to complete transactions:
 Information: Gathering and distributing marketing research and intelligence information
about actors and forces in the marketing environment needed for planning and
aiding exchange.
 Promotion: Developing and spreading persuasive communications about an offer.
 Contact: Finding and communicating with prospective buyers.
 Matching: Shaping and fitting the offer to the buyer’s needs, including activities such as
manufacturing, grading, assembling, and packaging.
 Negotiation: Reaching an agreement on price and other terms of the offer so that ownership
or possession can be transferred.
Others help to fulfill the completed transactions:
 Physical distribution: Transporting and storing goods.
 Financing: Acquiring and using funds to cover the costs of the channel work.
 Risk taking: Assuming the risks of carrying out the channel work.

4. Why are direct marketing channels possible for some products and not others?

Direct selling is interesting for consumers because of the convenience and service it provides, which
includes personal demonstration and explanation of products, home delivery, and satisfaction
guarantees.
Direct selling suits the sale of almost every category of products that can be found in traditional
retail locations and in department stores. It is also very convenient for the sales of services such as
telecoms, gas and electricity supplies. Cosmetic and personal care products, household items and
wellness are the strongest sectors in direct selling. Other products categories include food and
beverages, nutritional products, jewelry and clothes, books, toys and games, home improvement
products, etc.

5. Explain the difference between a pull and a push strategy when it comes to marketing
communications?

6. Name the factors that affect channel-selection decisions?

7. What gives some organizations more channel power than others?

8. Why do channel conflicts occur?

9. What are some reasons for backward integration? For forward integration? Does such integration
always benefit the consumer?

Chapter 9: Gathering and Using Information: Marketing Research

and Market Intelligence

1. What mean by marketing information system?

The Marketing Information System refers to the systematic collection, analysis, interpretation,
storage and dissemination of the market information, from both the internal and external sources, to
the marketers on a regular, continuous basis.
The marketing information system distributes the relevant information to the marketers who can
make the efficient decisions related to the marketing operations viz. Pricing, packaging, new
product development, distribution, media, promotion, etc.

2. Why do companies gather market intelligence and conduct marketing research?

Companies gathers intelligence for various reasons, e.g. Making marketing channels decisions,
Staying in Touch with the happenings in the marketplace, setting price tags, getting to know more
about the marketing environment, for product ideas etc.
Gathering market intelligence involves several activities such as: Scanning newspapers and reports.
Studying economic data produced by the government.
It is extremely difficult to develop and provide a high-quality product or service without conducting
at least some basic market research. Some people have a strong aversion to the word “research”
because they believe that the word implies a highly sophisticated set of techniques that only highly
trained people can use. Some people also believe that, too often, research generates lots of useless
data that is in lots of written reports that rarely are ever read, much less used in the real world. This
is a major misunderstanding.
Odds are that you have already conducted at least some basic forms of market research. For
example, you have listened (a research technique) to others complain about not having enough of
something -- that should suggest providing what they need in the form of a product or service.

3. Explain the Steps in the Marketing Research Process?

The Marketing Research is the systematic collection, analysis, and interpretation of data pertaining
to the marketing conditions. The basic reason for carrying out the marketing research is to find out
the change in the consumer behavior due to the change in the elements of the marketing mix
(product, price, place, promotion. A typical marketing research is given below;

Step 1. Define the Objective & Your “Problem”

Perhaps the most important step in the market research process is defining the goals of the project.
At the core of this is understanding the root question that needs to be informed by market research.
There is typically a key business problem (or opportunity) that needs to be acted upon, but there is a
lack of information to make that decision comfortably; the job of a market researcher is to inform
that decision with solid data. Examples of “business problems” might be “How should we price this
new widget?” or “Which features should we prioritize?”
By understanding the business problem clearly, you’ll be able to keep your research focused and
effective. At this point in the process, well before any research has been conducted, I like to
imagine what a “perfect” final research report would look like to help answer the business
question(s). You might even go as far as to mock up a fake report, with hypothetical data, and ask
your audience: “If I produce a report that looks something like this, will you have the information
you need to make an informed choice?” If the answer is yes, now you just need to get the real data.
If the answer is no, keep working with your client/audience until the objective is clear, and be happy
about the disappointment you’ve prevented and the time you’ve saved.
Step 2. Determine Your “Research Design”
Now that you know your research object, it is time to plan out the type of research that will best
obtain the necessary data. Think of the “research design” as your detailed plan of attack. In this
step you will first determine your market research method (will it be a survey, focus group, etc.?).
You will also think through specifics about how you will identify and choose your sample (who are
we going after? where will we find them? how will we incentivize them? etc.). This is also the
time to plan where you will conduct your research (telephone, in-person, mail, internet, etc.). Once
again, remember to keep the end goal in mind–what will your final report look like? Based on that,
you’ll be able to identify the types of data analysis you’ll be conducting (simple summaries,
advanced regression analysis, etc.), which dictates the structure of questions you’ll be asking.
Your choice of research instrument will be based on the nature of the data you are trying to collect.
There are three classifications to consider:

Exploratory Research This form of research is used when the topic is not well defined or
understood, your hypothesis is not well defined, and your knowledge of a topic is vague.
Exploratory research will help you gain broad insights, narrow your focus, and learn the basics
necessary to go deeper. Common exploratory market research techniques include secondary
research, focus groups and interviews. Exploratory research is a qualitative form of research.

Descriptive Research If your research objective calls for more detailed data on a specific topic,
you’ll be conducting quantitative descriptive research. The goal of this form of market research is
to measure specific topics of interest, usually in a quantitative way. Surveys are the most common
research instrument for descriptive research.
Causal Research The most specific type of research is causal research, which usually comes in the
form of a field test or experiment. In this case, you are trying to determine a causal relationship
between variables. For example, does the music I play in my restaurant increase dessert sales (i.e. is
there a causal relationship between music and sales?).

Step 3. Design & Prepare Your “Research Instrument”

In this step of the market research process, it’s time to design your research tool. If a survey is the
most appropriate tool (as determined in step 2), you’ll begin by writing your questions and
designing your questionnaire. If a focus group is your instrument of choice, you’ll start preparing
questions and materials for the moderator. You get the idea. This is the part of the process where
you start executing your plan.
By the way, step 3.5 should be to test your survey instrument with a small group prior to broad
deployment. Take your sample data and get it into a spreadsheet; are there any issues with the data
structure? This will allow you to catch potential problems early, and there are always problems.

Step 4. Collect Your Data

This is the meat and potatoes of your project; the time when you are administering your survey,
running your focus groups, conducting your interviews, implementing your field test, etc. The
answers, choices, and observations are all being collected and recorded, usually in spreadsheet
form. Each nugget of information is precious and will be part of the masterful conclusions you will
soon draw.
Step 5. Analyze Your Data
Step 4 (data collection) has drawn to a close and you have heaps of raw data sitting in your lap. If
it’s on scraps of paper, you’ll probably need to get it in spreadsheet form for further analysis. If it’s
already in spreadsheet form, it’s time to make sure you’ve got it structured properly. Once that’s all
done, the fun begins. Run summaries with the tools provided in your software package (typically
Excel, SPSS, Minitab, etc.), build tables and graphs, segment your results by groups that make
sense (i.e. age, gender, etc.), and look for the major trends in your data. Start to formulate the story
you will tell.
Step 6. Visualize Your Data and Communicate Results
You’ve spent hours poring through your raw data, building useful summary tables, charts and
graphs. Now is the time to compile the most meaningful take-aways into a digestible report or
presentation. A great way to present the data is to start with the research objectives and business
problem that were identified in step 1. Restate those business questions, and then present your
recommendations based on the data, to address those issues.
When it comes time to presenting your results, remember to present insights, answers and
recommendations, not just charts and tables. If you put a chart in the report, ask yourself “what
does this mean and what are the implications?” Adding this additional critical thinking to your final
report will make your research more actionable and meaningful and will set you apart from other
researchers.
While it is important to “answer the original question,” remember that market research is one input
to a business decision (usually a strong input), but not the only factor.

4. What are the Types of Research Design?

Research design is defined as a framework of methods and techniques chosen by a researcher to

combine various components of research in a reasonably logical manner so that the research
problem is efficiently handled. It provides insights about “how” to conduct research using a
particular methodology. Every researcher has a list of research questions which need to be assessed.
This can be done with research design.

1. Descriptive Research Design: In a descriptive research design, a researcher is solely interested

in describing the situation or case under his/her research study. It is a theory-based research design
which is created by gather, analyze and presents collected data. By implementing an in-depth
research design such as this, a researcher can provide insights into the why and how of research.

2. Experimental Research Design: Experimental research design is used to establish a relationship

between the cause and effect of a situation. It is a causal research design where the effect caused by
the independent variable on the dependent variable is observed. For example, the effect of an
independent variable such as price on a dependent variable such as customer satisfaction or brand
loyalty is monitored. It is a highly practical research design method as it contributes towards solving
a problem at hand. The independent variables are manipulated to monitor the change it has on the
dependent variable. It is often used in social sciences to observe human behavior by analyzing two
groups effect of one group on the other.

3. Correlational Research Design: Correlational research is a non-experimental research design

technique which helps researchers to establish a relationship between two closely connected
variables. Two different groups are required to conduct this research design method. There is no
assumption while evaluating a relationship between two different variables and statistical analysis
techniques are used to calculate the relationship between them.

Correlation between two variables is concluded using a correlation coefficient, whose value ranges
between -1 and +1. If the correlation coefficient is towards +1, it indicates a positive relationship
between the variables and -1 indicates a negative relationship between the two variables.
4. Diagnostic Research Design: In the diagnostic research design, a researcher is inclined towards
evaluating the root cause of a specific topic. Elements that contribute towards a troublesome
situation are evaluated in this research design method.

There are three parts of diagnostic research design:

 Inception of the issue

 Diagnosis of the issue
 Solution for the issue

5. Explanatory Research Design: In exploratory research design, the researcher’s ideas and
thoughts are key as it is primarily dependent on their personal inclination about a particular topic.
Explanation about unexplored aspects of a subject is provided along with details about what, how
and why related to the research questions.

5. What are the six basic elements of a research report?

The six components of a research report are as follows: An abstract, introduction, methodology,
results, discussion, and references.

Components of a Research Report

The six components of a research report are as follows: An abstract, introduction, methodology, results,
discussion, and references.
The Abstract
The abstract is an overview of the research study and is typically two to four paragraphs in length.
Think of it as an executive summary that distills the key elements of the remaining sections into a few
sentences.
An abstract will look similar to the following:
In many cases, you can determine what is interesting about a study by analyzing the abstract.
Introduction
The introduction provides the key question that the researcher is attempting to answer and a review of
any literature that is relevant. In addition, the researcher will provide a rationale for why the research is
important and will present a hypothesis that attempts to answer the key question. Lastly, the
introduction should summarize the state of the key question following the completion of the research.
For example, are there any important issues or questions still open?
Methodology
The methodology section of the research report is arguably the most important for two reasons. First it
allows readers to evaluate the quality of the research and second, it provides the details by which
another researcher may replicate and validate the findings.
(1) Typically, the information in the methodology section is arranged in chronological order with the
most important information at the top of each section.
(2) Ideally the description of the methodology doesn’t force you to refer to other documents; however if
the author is relying on existing methods, they will be referenced.
Results
In longer research papers, the results section contains the data and perhaps a short introduction.
Typically, the interpretation of the data and the analysis is reserved for the discussion section.
Discussion
The discussion section is where the results of the study are interpreted and evaluated against the existing
body or research literature. In addition, should there be any anomalies found in the results, this is where
the authors will point them out. Lastly the discussion section will attempt to connect the results to the
bigger picture and show how the results might be applied.
References
This section provides a list of each author and paper cited in the research report. Any fact, idea, or
direct quotation used in the report should be cited and referenced.

6. How does a probability sample differ from a nonprobability sample?

probability sampling refers to the sampling method in which all the members of the population has
a pre-specified and an equal chance to be a part of the sample. This technique is based on the
randomization principle, wherein the procedure is so designed, which guarantees that each and
every individual of the population has an equal selection opportunity. This helps to reduce the
possibility of bias.
Statistical inferences can be made by the researchers using this technique, i.e. the result obtained
can be generalized from the surveyed sample to the target population. The methods of probability
sampling, are provided below:

 Simple Random Sampling

 Stratified Sampling
 Cluster Sampling
 Systematic Sampling

nonprobability sample When in a sampling method, all the individuals of the universe are not given
an equal opportunity of becoming a part of the sample, the method is said to be Non-probability
sampling. Under this technique as such, there is no probability attached to the unit of the population
and the selection relies on the subjective judgment of the researcher. Therefore, the conclusions
drawn by the sampler cannot be inferred from the sample to the whole population. The methods of
non-probability sampling are listed below:

 Convenience Sampling
 Quota Sampling
 Judgment or Purposive Sampling
 Snowball Sampling
probability sample and nonprobability sample difference is given in figure

7. Are small business owners at a disadvantage if they lack the marketing research resources large
companies have? Why or why not?

Starting a small business is a challenging feat for many entrepreneurs, as they focus on creating
quality services and products that will add value to the lives of their target consumers. Just like the
people who operate large businesses, small business owners have to devise creative ways to
advertise. Small business owners have the disadvantage for small businesses comes with some
advantages given below;
Stronger Access to the Local Market
Small businesses can take advantage of local marketing by making direct connections with the
community and its members. From participating in local business associations to sponsoring local
events, they have the ability to personally introduce their businesses to market they service. Arrange
speaking engagements in your business community to generate potential leads for your business.
Focus on a Niche
Small business owners with specialty stores, products and services can take advantage of niche
marketing to reach their target clients. Niche markets give small business owners a competitive
advantage. In-store events targeted to consumers with similar interests and buying behavior can
generate sales leads for small business owners. There even is the opportunity to form networking
groups with other professionals within your niche, who are not competitors.
Power of Word-of-Mouth
Small businesses rely on word-of-mouth to help advertise their businesses to potential clients in the
communities they serve. From posting reviews on social networks like Twitter and Facebook to
using personal blogs to document experiences with businesses, consumers drum up free publicity
for small businesses

Chapter 10: The Marketing Plan

1. What is a marketing plan and how is it used?

A marketing plan can also be described as a technique that helps a business to decide on the best
use of its resources to achieve corporate objectives. It can also contain a full analysis of the
strengths and weaknesses of a company, its organization and its products.
A marketing plan is used often developed to help a company set and achieve sales goals. The plan
includes information about the company's products and services and at what percentage they will be
featured in helping the company obtain those goals.

2. Explain Marketing Plan Outlines.

As a marketer, you’ll need a good marketing plan to provide direction and focus for your
brand, product, or company. With a detailed plan, any business will be better prepared to
launch a new product or build sales for existing products. Nonprofit organizations also use
marketing plans to guide their fund-raising and outreach efforts. Even government agencies develop
marketing plans for initiatives such as building public awareness of proper
nutrition and stimulating area tourism.
The Purpose and Content of a Marketing Plan
Unlike a business plan, which offers a broad overview of the entire organization’s mission,
objectives, strategy, and resource allocation, a marketing plan has a more limited scope. It
serves to document how the organization’s strategic objectives will be achieved through
specific marketing strategies and tactics, with the customer as the starting point. It is also
linked to the plans of other departments within the organization. It will be best explain with
example below
Sample Marketing Plan for Sonic
This section takes you inside the sample marketing plan for Sonic, a hypothetical start-up company.
The company’s first product is the Sonic 1000, a multimedia, cellular/Wi-Fi–enabled smartphone.
Sonic will be competing with Apple, Nokia, Research in Motion, Motorola, Samsung, and other
well-established rivals in a crowded, fast-changing marketplace for smartphones that combine
communication, entertainment, and storage functionality. The marginal definitions explain the
purpose and function of each section of the plan.
Executive Summary
Sonic is preparing to launch a new multimedia, dual-mode smartphone, the Sonic 1000, in
a mature market. Our product offers a competitively unique combination of advanced features and
functionality at a value-added price. We are targeting specific segments in the
consumer and business markets, taking advantage of opportunities indicated by higher demand for
easy-to-use smartphones with expanded communications, entertainment, and
storage functionality.
The primary marketing objective is to achieve first-year U.S. sales of 500,000 units. The primary
financial objectives are to achieve first-year sales revenues of $75 million, keep first year losses
under $8 million, and break even early in the second year.
Current Marketing Situation
Sonic, founded 18 months ago by two entrepreneurs with experience in the PC market, is about to
enter the mature smartphone market. Multifunction cell phones, e-mail devices, and wireless
communication devices are commonplace for both personal and professional use. Research shows
that the United States has 262 million wireless phone subscribers, and 85 percent of the population
owns a cell phone.
Market Description
Sonic’s market consists of consumers and business users who prefer to use a single device for
communication, information storage and exchange, and entertainment on the go. Specific segments
being targeted during the first year include professionals, corporations, students, entrepreneurs, and
medical users.
Product Review
Our first product, the Sonic 1000, offers the following standard features with a Linux operating
system:
• Built-in dual cell phone/Internet phone functionality and push-to-talk instant calling
• Digital music/video/television recording, wireless downloading, and playback
• Wireless Web, e-mail, text messaging, and instant messaging
• 3.5-inch color screen for easy viewing
• Organization functions, including calendar, address book, and synchronization
• GPS for directions and maps
• Integrated 4-megapixel digital camera
• Ultrafast, 20-gigabyte removable memory card with upgrade potential
• Interchangeable case wardrobe of different colors and patterns
• Voice recognition functionality for hands-free operation
Competitive Review
The emergence of lower-priced smartphones, including the Apple iPhone, has increased competitive
pressure. Competition from specialized devices for text and e-mail messaging, such as BlackBerry
devices, is a major factor, as well. Key competitors include the following:
• Nokia. The market leader in smartphones, Nokia offers a wide range of products for personal and
professional use. It purchased the maker of the Symbian operating system and made it into a
separate foundation dedicated to improving and promoting this mobile software platform. Many of
Nokia’s smartphones offer full keyboards, similar to Research in Motion models. Nokia also offers
stripped-down models for users who do not require the full keyboard and full multimedia
capabilities.
• Apple. The stylish and popular iPhone 4 has a 3.5-inch color screen and is well equipped for
music, video, and Web access; it also has communication, calendar, contact management, and file
management functions. Its global positioning system technology can pinpoint a user’s location.
Also, users can erase data with a remote command if the smartphone is lost or stolen. However,
AT&T was for years the only U.S. network provider. Apple has only recently added new providers.
The iPhone 4 is priced at $199 for the 16GB model and $299 for the 32GB model.
• RIM. Lightweight BlackBerry wireless multifunction products are manufactured by Research in
Motion and are especially popular among corporate users. RIM’s continuous innovation and solid
customer service strengthen its competitive standing as it introduces smartphones with enhanced
features and communication capabilities. Its newest Blackberry, the Torch 9800, is the company’s
first touch-screen smartphone that includes a full keyboard. Priced at $199 with a two-year AT&T
contract, the Torch competes with its iPhone and Android rivals.
Channels and Logistics Review
Sonic-branded products will be distributed through a network of retailers in the top 50 U.S.
markets. Some of the most important channel partners are as follows:
• Office supply superstores. Office Max and Staples will both carry Sonic products in stores,
in catalogs, and online.
• Computer stores. Independent computer retailers will carry Sonic products.
• Electronics specialty stores. Circuit City and Best Buy will feature Sonic products.
• Online retailers. Amazon.com will carry Sonic products and, for a promotional fee, will give Sonic
prominent placement on its homepage during the introduction.
Strengths, Weaknesses, Opportunities, and Threat Analysis
Sonic has several powerful strengths on which to build, but our major weakness is a lack of
brand awareness and image. The major opportunity is the demand for multimedia smartphones that
deliver a number of valued benefits, eliminating the need for customers to carry
more than one device. We also face the threat of ever-higher competition from consumer
electronics manufacturers, as well as downward pricing pressure.
Below table summarizes Sonic’s main strengths, weaknesses, opportunities, and threats.

Objectives and Issues

We have set aggressive but achievable objectives for the first and second years of market entry.
• First-year objectives. During the Sonic 1000’s initial year on the market, we are aiming for
unit sales volume of 500,000.
• Second-year objectives. Our second-year objectives are to sell a combined total of one million
units of our two models and break even early in this period.
Marketing Strategy
Sonic’s marketing strategy is based on a positioning of product differentiation. Our primary
consumer target is middle- to upper-income professionals who need one portable device to
coordinate their busy schedules, communicate with family and colleagues, get driving directions,
and be entertained on the go. Our secondary consumer target is high school, college, and graduate
students who want a multimedia, dual-mode device. This segment can be described
demographically by age and educational attainment level.
Our primary business target is mid- to large-sized corporations that want to help their managers and
employees stay in touch and be able to input or access critical data when not in the office. This
segment consists of companies with more than $25 million in annual sales and more than 100
employees. We are also targeting entrepreneurs and small-business owners as well as medical users
who want to update or access patients’ medical records while reducing paperwork.
Positioning
Using product differentiation, we are positioning the Sonic as the most versatile, convenient, and
value-added model for personal and professional use. Our marketing will focus on hands-free
operation of multiple communication, entertainment, and information capabilities that differentiate
the Sonic 1000 from its competitors.
Product Strategy
The Sonic 1000, including all the features described earlier, will be sold with a one-year warranty.
We will introduce a more compact, powerful high-end model (the Sonic 2000) in the second year.
Building the Sonic brand is an integral part of our product strategy. The brand and logo (Sonic’s
distinctive yellow thunderbolt) will be displayed on the product and its packaging and reinforced by
its prominence in the introductory marketing campaign.
Pricing Strategy
The Sonic 1000 will be introduced at $150 wholesale/$199 estimated retail price per unit. We
expect to lower the price of this first model when we expand the product line by launching the Sonic
2000, whose wholesale price will be $175 per unit. These prices reflect a strategy of attracting
desirable channel partners and taking share from Nokia, Research in Motion, Motorola, and other
established competitors.
Distribution Strategy
Our channel strategy is to use selective distribution, marketing Sonic smartphones through well-
known stores and online retailers. During the first year, we will add channel partners until we have
coverage in all major U.S. markets and the product is included in the major electronics catalogs and
Web sites. We will also investigate distribution through cell-phone outlets maintained by major
carriers, such as Verizon Wireless. In support of our channel partners, Sonic will provide
demonstration products, detailed specification handouts, and full-color photos and displays
featuring the product. Finally, we plan to arrange special payment terms for retailers that place
volume orders.
Marketing Communications Strategy
By integrating all messages in all media, we will reinforce the brand name and the main points of
product differentiation. Research about media consumption patterns will help our advertising
agency choose appropriate media and timing to reach prospects before and during product
introduction. Thereafter, advertising will appear on a pulsing basis to maintain brand awareness and
communicate various differentiation messages. The agency will also coordinate public relations
efforts to build the Sonic brand and support the differentiation message. To create buzz, we will
host a user-generated video contest on our Web site. To attract, retain, and motivate channel
partners for a push strategy, we will use trade sales promotions and personal selling. Until the Sonic
brand has been established, our communications will encourage purchases through channel partners
rather than from our Web site.
Marketing Research
Using research, we are identifying the specific features and benefits that our target market segments
value. Feedback from market tests, surveys, and focus groups will help us develop the Sonic 2000.
We are also measuring and analyzing customers’ attitudes toward competing brands and products.
Brand awareness research will help us determine the effectiveness and efficiency of our messages
and media. Finally, we will use customer satisfaction studies to gauge market reaction.
Marketing Organization
Sonic’s chief marketing officer, Jane Melody, holds overall responsibility for all marketing
Activities. Following figure shows the structure of the eight-person marketing organization. Sonic has hired
Worldwide Marketing to handle national sales campaigns, trade and consumer sales promotions, and public
relations efforts.
Action Programs
The Sonic 1000 will be introduced in February. The following are summaries of the action
programs we will use during the first six months of next year to achieve our stated objectives.
• January. We will launch a $200,000 trade sales promotion campaign and exhibit at the major
industry trade shows to educate dealers and generate channel support for the product launch in
February. Also, we will create buzz by providing samples to selected product reviewers, opinion
leaders, influential bloggers, and celebrities. Our training staff will work with retail sales personnel
at major chains to explain the Sonic 1000’s features, benefits, and advantages.
• February. We will start an integrated print/radio/Internet advertising campaign targeting
professionals and consumers. The campaign will show how many functions the Sonic smartphone
can perform and emphasize the convenience of a single, powerful handheld device. This multimedia
campaign will be supported by point-of-sale signage as well as online-only ads and video tours.
• March. As the multimedia advertising campaign continues, we will add consumer sales
promotions, such as a contest in which consumers post videos to our Web site showing
how they use the Sonic in creative and unusual ways. We will also distribute new pointof-purchase
displays to support our retailers.
• April. We will hold a trade sales contest offering prizes for the salesperson and retail organization
that sells the most Sonic smartphones during the four-week period.
• May. We plan to roll out a new national advertising campaign this month. The radio ads will
feature celebrity voices telling their Sonic smartphones to perform various functions, such as
initiating a phone call, sending an e-mail, playing a song or video, and so on. The stylized print and
online ads will feature avatars of these celebrities holding their Sonic smartphones.
Budgets
Total first-year sales revenue for the Sonic 1000 is projected at $75 million, with an average
wholesale price of $150 per unit and a variable cost per unit of $100 for 500,000 units. We
anticipate a first-year loss of up to $8 million on the Sonic 1000 model. Break-even calculations
indicate that the Sonic 1000 will become profitable after the sales volume exceeds 650,000, which
we anticipate early in the product’s second year. Our break-even analysis of Sonic’s first
smartphone product assumes wholesale revenue of $150 per unit, variable cost of $100 per unit, and
estimated first-year fixed costs of $32,500,000. Based on these assumptions, the break-even
calculation is as follows:

Controls
We are planning tight control measures to closely monitor quality and customer service satisfaction.
This will enable us to react very quickly to correct any problems that may occur.
Other early warning signals that will be monitored for signs of deviation from the plan include
monthly sales (by segment and channel) and monthly expenses. Given the market’s
volatility, we are developing contingency plans to address fast-moving environmental
changes, such as new technology and new competition
Marketing Plan Tools
Prentice Hall offers two valuable resources to assist you in developing a marketing plan:
• The Marketing Plan Handbook by Marian Burk Wood explains the process of creating a
marketing plan and includes detailed checklists and dozens of real-world examples.
• Marketing Plan Pro is an award-winning software package that includes sample plans,
step-by-step guides, an introductory video, help wizards, and customizable charts for
documenting a marketing plan.

4. Which forecasting method would be most accurate for forecasting sales of hair-care
products?

Owing to its significance as one of the primary grooming products for both men and women, this has
resulted in an increased demand for grooming products, the demand for hair care has been increasing. In
addition, with more than 54% of the population falling in the age bracket of 20-65 years, a significant
number of people are concerned about the effects of aging.
With the youth and middle-aged population facing hair-related problems, such as discoloring, thinning,
etc., the demand for hair care is also increasing. There has also been a considerable surge in global E-
commerce sales and companies are looking for ways to explore this sector, to boost their sales.
Time series techniques examine sales patterns in the past in order to predict sales in the future. For
example, with a trend analysis, the marketing executive identifies the rate at which a company’s sales
have grown in the past and uses that rate to estimate future sales. For example, if sales have grown 3
percent per year over the past five years, trend analysis would assume a similar 3 percent growth rate
next year.

5. What is the difference between managerial control and statistical control? How is statistical
control used?

Managerial controlling is a relatively new way of conducting the performance evaluation of

individual units of the company. To realize its objectives, management create special cells that
normally do not have imposed any specific era of interest or permanent staffing. Such controlling
teams may also be permanently introduced in the organizational structure of the company. The term
usually means system of coordination, planning and control of enterprise information security. In
the most general terms, controlling support knowledge creation and oversee the transformation of
this knowledge into concrete actions that deliver measurable results.

Statistical control is the application of statistical techniques to ensure that processes meet
standards. All processes are subject to a certain degree of variability. While studying process data in
the 1920s, Walter Shewhart of Bell Laboratories made the distinction between the common
(natural) and special (assignable) causes of variation. A process is said to be operating in statistical
control when the only source of variation is common (natural) causes. The process must first be
brought into statistical control by detecting and eliminating special (assignable) causes of variation.
Then its performance is predictable, and its ability to meet customer expectations can be assessed.
The objective of a process control
system is to provide a statistical signal when assignable causes of variation are present. Such a
signal can quicken appropriate action to eliminate assignable causes.

6. What should a marketing audit accomplish?

A marketing audit is a comprehensive examination and analysis of your marketing activities, goals
and objectives. By implementing an audit, you're able to take a look at the way your marketing
efforts are planned and managed, and how they are performing relative to the goals of your original
marketing plan.
The marketing audit process helps your company analyze and evaluate your B2B marketing
strategies, activities, goals and results. While the process takes time, the results can be enlightening
and might:

 Focus your communication of a consistent message to the right customers.

 Reveal new, unknown or neglected markets.
 Help fine-tune current strategies and plans to help increase market share.
 Here are the eight steps for conducting a marketing audit to capture the information a
corporate marketer needs about their company and how they do business.

1. Assemble an Overview of Your Company. The details to include are:

Company location, date established, sales history, number of employees, key personnel and
chronology of company events like mergers, acquisitions and divestitures.
An estimation of the current awareness level of company as well as perception of your company has
among your buying influencers.
2. Describe Your Marketing Goals and Objectives. They can be concepts like increase company
visibility, increase audience size, differentiate from competition, increase or maintain market share,
generate qualified sales leads or increase usage within existing customers. List your goals and
objectives as being:
Long-term, with 6 to 8 goals listed a priority order to be accomplished in the next two years.
Short-term, with a narrowing to 1 to 2 goals to be accomplished in the next 12 months.
3. Describe Your Current Customers. Include information like:
Job titles or functions, industry or SIC codes, geographic location, company size and other
demographic, ethnic or behavioral descriptions.
Size of current customer audience.
4. Describe Customers You’d Like to Target. Include the same type of information used in # 3
but also include:
If target customers are outside your usual industry, geography or size of current customers.
Any internal or external factors that have changed in your business or industry causing you to target
a particular group.
  A behavior that needs to be present for retargeting to occur.
 Size of target customer audience
5. Describe Your Product or Service. Describe it in terms of its purpose, features, benefits,
pricing, sizing and distribution methods. Also include:

 Strength or weakness as compared to competition.

 Any economic, legal, social, technical, seasonal or governmental factors that affect
product/service.
 Current awareness level as well as perception of your product/service.
 Sales or market share history and any changes over time.
6. Describe Your Past Business or Marketing Encounters. Describe what has:

 Helped grow your business as well as what has not helped grow business.
 Not been tried but might have helped.
 Your competition has been doing to grow their business.
7. Identify Three to Six Competitors. Include the company name and location as well as:
 Describe their products/services in terms of their features, benefits, pricing, sizing and
distribution methods.
 Sales or market share history.
 Competition’s strategy for the near future.
8. Begin to Outline a Communication Plan. Begin to list current and future media sources as well
if costs are fixed annual costs, and what funds are available for new efforts for:
 Advertising vehicles like broadcast, print, out-of-home and online advertising.
 Promotional vehicles like website, collateral, direct marketing, interactive and online
marketing.
 Media relation vehicles like media contacts, public relations and articles.
 Event vehicles like trade shows, special events, seminars and webinars.
 Analytic vehicles like databases, market research and tracking systems.
 List any promotional medium considered to be the most effective to date.
Once this information is written down on paper, you can refer back to it as your roadmap to
achieving your marketing goals and objects for the coming year. And as new ideas pop up, this
document can help remind you of the big picture. Minor adjustments can be made along the way as
changes are bound to occur in sales, customer retention and product development throughout the
year.