5-1 Chapter 5 Copyright © 2003 by Nelson, a division of Thomson Canada Limited. PowerPoint Presentation by Thomas M c Kaig, Ryerson University Marketing

5-1Chapter 5 Copyright © 2003 by Nelson, a division of Thomson Canada Limited.

PowerPoint Presentation by PowerPoint Presentation by

Thomas MThomas MccKaig, Ryerson UniversityKaig, Ryerson University

Marketing Marketing Research & Research & Product StrategyProduct Strategy

55


Looking AheadLooking Ahead

After studying this chapter, you should be able to:

1. Describe small business marketing.

2. Discuss the nature of the marketing research process.

3. Explain the term market and methods of forecasting sales.

4. Identify the components of a formal marketing plan.

5. Explain how customer satisfaction influences customer loyalty.

6. Identify the key characteristics of consumer behaviour.

7. Explain product strategy and related concepts.

8. Describe the components of a firm’s total product offering.


What is Small Business Marketing?What is Small Business Marketing?

• MarketingActivities directing the flow of goods and services from

producer to consumer or user.

• Small business marketing consists of those business activities that relate directly to: Identifying a target marketDetermining target market potentialPreparing, communicating, and delivering a bundle of

satisfaction to the target market


Essential Marketing ActivitiesEssential Marketing Activities

• Market AnalysisAn evaluation process that encompasses market

segmentation, marketing research, and sales forecasting

• Marketing MixThe combination of product,

pricing, promotion, and distribution activities.


Marketing Philosophies Make a DifferenceMarketing Philosophies Make a Difference

• Consumer-OrientedAll marketing efforts begin and end with the customer;

focus is on the consumer’s needs—this philosophy is the most consistent with long-term success of the firm

Production-OrientedEmphasizes development of the product and production

efficiencies over other activities• Sales-Oriented

Favours product sales over production efficiencies and customer preferences


Figure 5.1

Market Analysis

Marketing Mix

Marketing Research

Market Segmentation

Sales Forecasting

Target Market

Target MarketEntrepreneur

Entrepreneur

Distribution

Promotion

Pricing

Product

Core Marketing Activities for Small Business

Core Marketing Activities for Small Business


The Nature of Marketing ResearchThe Nature of Marketing Research

• Steps In the Marketing Research Process1. Identifying the informational need

Why do we need to know this?

2. Searching for secondary dataWho has researched this topic already?

3. Collecting primary dataWho do we ask and what do we ask them?

4. Interpreting the dataGot the information, now what does it mean?

…continued


The Nature of Marketing ResearchThe Nature of Marketing Research

• Marketing Research The gathering, processing, reporting, and interpreting of

market information

• Secondary Data Market information that has been previously compiled

by others

• Primary Data New market information that is gathered by the firm

conducting the research


Methods for Collecting Primary DataMethods for Collecting Primary Data

• Observational MethodsHumanMechanical

• Questioning MethodsSurveys

• Mail

• Telephone

Personal interviewsExperiments


Ingredients of a MarketIngredients of a Market

Ingredient 1Customers:People or

businesses

Ingredient 2Purchasing

power: Money/credit

Ingredient 3Unsatisfied

needs


Estimating Market PotentialEstimating Market Potential

• The Sales ForecastA prediction of how much (in units and/or

dollars) of a product or service will be purchased within a market during a specified period of time

An essential component of a business plan that:• Assesses the new venture’s feasibility.

• Assists in planning for product scheduling, setting inventory levels, and personnel decisions


Figure 5.3

Limited Entrepreneurial/Managerial Experience

New Venture

Poor Understanding ofForecasting Techniques

Established Business

Conditions That MakeForecasting Easier

Conditions That MakeForecasting More Difficult

ExperiencedEntrepreneur/Manager

Entrepreneur Familiar withForecasting Techniques

Forecast

Dimensions of Sales Forecasting DifficultyDimensions of Sales Forecasting Difficulty


Sales Forecasts and LimitationsSales Forecasts and Limitations

• This is a prediction of how much of a product or service within a market will be purchased during a specific time frame.

• Formally defined, a sales forecast estimates how much of a product or service can be sold within a given market in a defined period of time.

• Sales forecasting can and will be inaccurate either due to inexperience or inconclusive forecasting assumptions.


The Forecasting Process:Two Dimensions of Forecasting

The Forecasting Process:Two Dimensions of Forecasting

• The Starting PointBuildup process

• All potential buyers in various submarkets are identified and then the estimated demand is added up (bottom-up).


Understanding Potential Target MarketsUnderstanding Potential Target Markets

• MarketA group of customers or potential customers who have

purchasing power and unsatisfied needs

• Focus strategyA type of competitive strategy in which cost and

marketing strategies are achieved within narrow market segments

• Market SegmentationThe division of a market into several smaller groups with

similar needs.


The Formal Marketing PlanThe Formal Marketing Plan

• Market AnalysisCustomer profile

• A description of potential customers in a target marketSales forecasts

• “most likely,” “pessimistic,” and “optimistic”• The Competition

Profile of key management personnelOverall strengths and weaknessesRelated products being marketed or testedLikelihood of competitors’ entry into target market

…continued


The Formal Marketing PlanThe Formal Marketing Plan

• Marketing StrategyTotal product and/or service plan

• Decisions affecting the total productDistribution plan

• Decisions regarding product delivery to customersPricing plan

• Setting an acceptable value on the productPromotional plan

• Communicating information to the target market


Satisfying the Customer: The Key to Customer Loyalty

Satisfying the Customer: The Key to Customer Loyalty

• Three Basic Beliefs:1. Superior customer service creates customer

satisfaction.

2. Customer satisfaction produces customer loyalty.

3. Small firms possess great potential for providing superior customer service.


Components of Customer SatisfactionComponents of Customer Satisfaction

1. The most basic element of the product or service that customers expect all competitors to deliver.

2. General support services, such as customer assistance.

3. A recovery process for counteracting bad experiences.

4. Extraordinary services that excel in meeting customers’ preferences and make the product or service seem customized.


Why Firms Fail to Adopta Consumer Orientation

Why Firms Fail to Adopta Consumer Orientation

• The State of CompetitionWith no competition or high demand, firms focus on

production.• Production Focus of Small Business Managers

Small business managers tend to have strong production skills and weak marketing skills.

• Focus on the PresentSmall business managers tend to focus on current success

which is the result of an overemphasis on selling.


Ways to Develop Extraordinary ServicesWays to Develop Extraordinary Services

• Naming NamesGreet customers by name.

• Custom CareKnow what your customers’ want.

• Keeping in TouchCommunicate frequently with

your customers.

• Boo-Boo ResearchAsk lost customers why they went elsewhere.


The Customer Service CommitmentThe Customer Service Commitment

• Exceptional customer service provides a potential competitive edge opportunity to small firms.

• Being attentive and respectful of customers leads to customer satisfaction and to success.

• Superior levels of customer service are not easy to attain and are not cheap.


Evaluating Customer ServiceEvaluating Customer Service

• Customer service problems are the main source of customer complaints.

• Ways to address complaints:Watch for problemsTalk to customersCheck up on the service

• Evaluating customer service is essential of any business


Understanding the CustomerUnderstanding the Customer

• Key Points about Customers:Customers are first and foremost human beings.A customer’s satisfaction results from their

interaction with the firm.Understanding customers leads to more

customer satisfaction and loyalty.


Simplified Model of Consumer BehaviourSimplified Model of Consumer Behaviour

Decision-Making Process

Sociological FactorsCulture

Social ClassReference GroupsOpinion Leaders

Psychological FactorsNeeds

PerceptionsMotivations

Attitudes

InformationSearch

and Evaluation

ProblemRecognition

PurchaseDecision

Post-PurchaseDecision

Figure 5.5


Stage 1 in Consumer Decision MakingStage 1 in Consumer Decision Making

• Problem RecognitionThe current state or a change in current state is

not the ideal state of affairs due to:• Change in financial status• Change in household characteristics• Normal depletion of a resource• Product or service performance• Past decisions• Availability of products


Stage 2 in Consumer Decision MakingStage 2 in Consumer Decision Making

• Information Search and EvaluationEvaluation criteria

• The features of a product or service that customers use to compare brands.

Evoked set• A group of brands that a customer

is both aware of and willing to consider as a solution to a purchase problem.


Stages 3 & 4 in Consumer Decision MakingStages 3 & 4 in Consumer Decision Making

• Purchase decisionDeciding how and where to make the purchase

decision:• Store versus nonstore (catalogue, TV, and the Internet)

• Post-purchase evaluationCognitive dissonance

• The anxiety that occurs when a customer has second thoughts immediately following a purchase.


Purchase"This is the one

I want."

Post-PurchaseDissonance"Did I buy the

right one?"

Usage"I found another

use for…”

ProductDisposal

"Can I trade this in?"

PositiveEvaluation

“It works great."

NegativeEvaluation

“Doesn't work well."

ConsumerComplaints

"I'm callingthe store."

No Repurchase

Repurchase

Post-Purchase Activities of ConsumersPost-Purchase Activities of Consumers

Figure 5.6


Consumer Behaviour ModelConsumer Behaviour Model

• Psychological FactorsNeeds

• Can be classified as physiological, social, psychological, and spiritual.

• Consumers’ needs are never completely satisfied.

• Difficulty occurs in determining which need can be satisfied by a specific product or service.

• A service or product can satisfy more than one need.

…continued



• Psychological Factors (continued) Perceptions

• The individual processes that give meaning to the stimuli confronting consumers.

Perceptual categorization• The process of grouping similar things so as to

manage huge quantities of incoming stimuli.

• Brand loyalty (a perceptual barrier) makes it difficult for competing brands to reach the loyal consumer.

…continued



• Psychological Factors (continued)Motivations

• Goal-directed forces that organize and give direction to the tension caused by unsatisfied needs.

• Provide the behavioural impetus for consumers to act to fulfill a need.

• Marketing is motivation and does not create needs.Attitudes

• An enduring opinion based on knowledge, feeling, and behavioural tendency.

…continued



• Sociological FactorsCulture

• Behavioural pattern and values that characterize a group of consumers in a target market.

Social class• Societal divisions that have different

levels of social prestige.

…continued



• Sociological FactorsReference groups

• Groups that an individual allows to influence his or her behaviour.

Opinion leaders• A group leader who plays a key communications role.


Product DefinitionProduct Definition

• ProductA total bundle of satisfaction—a service, a good, or both—

offered to consumers in an exchange transaction. Includes both the main element (physical product or core

service) and complementary components (features).


Service Marketing versus Goods MarketingService Marketing versus Goods Marketing

Characteristics

Characteristics

Pure ServicesMarketing

Pure ServicesMarketing

Pure GoodsMarketing

Pure GoodsMarketing

Tangibility

Production/Consumption

Standardization

Perishability

Tangibility

Production/Consumption

Standardization

Perishability

Intangible

goods

Occur at the

same time

Less

standardization

Greater

perishability

Intangible

goods

Occur at the

same time

Less

standardization

Greater

perishability

Tangible

goods

Occur at

different times

More

standardization

Less

perishability

Tangible

goods

Occur at

different times

More

standardization

Less

perishability

HybridServices/

GoodsMarketing

HybridServices/

GoodsMarketing

Figure 5.7


Product StrategyProduct Strategy

• Product StrategyThe way the product component of the marketing mix is

used to achieve a firm’s objectives.Product item

• The lowest common denominator in the product mix—the individual item

Product line• The sum of the related individual product items

Product mix consistency• The similarity of product lines in a product mix

…continued



• Product Development ProcessIdea accumulation

• Increasing the number of ideas under consideration

Business analysis • Product’s relationship to the existing product line

• Cost of development and introduction

• Available personnel and facilities

• Competition and market acceptance

…continued



• Product Development ProcessTotal Product Development

• Branding, packaging, pricing, and promotion

Product Testing• Proving the product design

through consumer reaction to the product.


Product Life CycleProduct Life Cycle

Figure 5.8


The Product or Service ConceptThe Product or Service Concept

• Core features ensure: The product and

service of a firm meets the needs of the target customer.

Based on location, unique products, quality of service, store design, advertising or technology

Secondary features are non-critical in nature and may include attractive packaging, or an interesting window display.


Business AnalysisBusiness Analysis

Product’s Product’s relationship to relationship to

existing lineexisting line

Product’s Product’s relationship to relationship to

existing lineexisting line

Development Development CostsCosts

Development Development CostsCosts

Available Available Personnel and Personnel and

facilitiesfacilities

Available Available Personnel and Personnel and

facilitiesfacilities

Competition and Competition and Market Market

acceptanceacceptance

Competition and Competition and Market Market

acceptanceacceptance


Building the Total Product OfferingBuilding the Total Product Offering

• BrandingA verbal and/or symbolic means of identifying a product.

• Rules for Naming a Product:Select a name that is easy to pronounce and remember.Choose a descriptive name.Use a name that can have legal protection.Select a name with promotional properties.Select a name that can be used on several product lines of

a similar nature.


Protecting a Product OfferingProtecting a Product Offering

• TrademarkAn identifying feature used to distinguish a

manufacturer’s product

• Service MarkA legal term indicating the

exclusive right to use a brand to identify a service.

Vinnie’sVinnie’s

VillaVilla™™


Packaging, Labelling, and WarrantiesPackaging, Labelling, and Warranties

• PackagingColour, design, and protection for the product.

• LabellingShows the brand and informs the consumer.

• WarrantiesA promise that the product will perform at a certain level or

meet certain standards.• Implied and written warranties• Policy considerations: Cost, service capability, competitive

practices, customer perceptions, legal implications

Documents

5-1 Chapter 5 Copyright © 2003 by Nelson, a division of Thomson Canada Limited. PowerPoint Presentation by Thomas M c Kaig, Ryerson University Marketing