Marketing Key Ideas

7/29/2019 Marketing Key Ideas

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Marketing is a guiding

philosophy for the firm

as a whole.

KEY IDEA

Marketing is a set of six

imperatives the must

dosof marketing.

Four marketing princi-

ples guide execution of

the six imperatives.

KEY IDEA

The firms major task is

to attract, retain, and

grow customers by

developing and deliver-

ing valued offers.

The firm enhances

shareholder value by

successfully attracting,

retaining, and growing

customers.

KEY IDEA

The firm has two basic

functions marketing

and innovation.

KEY IDEA

Marketing is critical for

a firms success in

todays increasingly

complex and fast-

changing environment.

KEY IDEA

The shareholder-value

perspective is increas-

ingly widespread

around the world.

KEY IDEA

Customers are the sole

source of firm rev-

enues, and all firm

activities are costs.

Customers are the firms

core assets, yet they donot appear on the

balance sheet.

Some balance-sheet

assets act as strategic

liabilities.

KEY IDEA

Customers are the

critical source of

cash inflows.

KEY IDEA

There are two sides to

value. When the firm

delivers high customer

value, it attracts,

retains, and grows

customers. When thefirm attracts, retains,

and grows customers,

it earns high value for

shareholders.

KEY IDEA

CHAPTER 1: INTRODUCTION TO MANAGING MARKETING

WHAT DOES MARKETING ME AN TODAY ?

page 5_______________________ page 6_______________________

WHAT IS MARKETING?

page 8 __________________________________________________________________________________________________

MARKETING AND SHAREHOLDER VALUE

page 9_______________________ page 10 _________________________________________________________________________________________________


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C H A P T E R 1 I I N T R O D U C T I O N T O M A N A G I N G M A R K E T I N G

Marketing must identify

market segments

groups of customers

with similar needs that

value similar benefits,

with similar priority

levels.

KEY IDEA

The firm should target

those market segments

that best use its strengths

and exploit competitors

weaknesses.

KEY IDEA

Decisions about the

firms strategic direction

set the stage for

designing the marketing

offer.

KEY IDEA

The Marketing Mixcomprises:

Product

Promotion

Distribution (or Place)

Service

Price

KEY IDEA

Marketing must keepthe firm focused on

customers needs,

regardless of current

feasibility.

KEY IDEA

MARKETING AS A PHILOSOPHY: EXTERNAL AND INTERNAL ORIENTATIONS

page 11______________________

External and internal

orientations are coreconcepts for examining

the firms basic

philosophy.

KEY IDEA

The firm should view

marketing expendituresas an investment, not as

an expense.

KEY IDEA

An externally oriented

firm goes beyond acustomer focus. It

works hard to under-

stand competitors,

markets, and environ-

mental forces in

general.

KEY IDEA

Long-run success is

difficult for internallyoriented firms.

Internal orientations

often focus on opera-

tions, sales, finance,

and/or technology.

KEY IDEA

Marketing should

identify market oppor-

tunities and advise

top management on

potential strategic

actions.

KEY IDEA

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THE SIX MARKETING IMPERATIVES

page 16______________________ page 17 ___________________________________________________________ page 18______________________

page 19______________________ page 20 _________________________________________________________________________________________________

Marketing mustexercise leadership

to encourage coop-

eration across multiple

functions.

KEY IDEA

Marketing must monitorand control the firms

actions and perform-

ance to keep it on track.

KEY IDEA

THE FOUR PRINCIPLES OF MARKETING

page 21______________________ page 22______________________ page 23______________________ page 24______________________

Selectivity focuses on

the choice of market or

market segment target.

Concentration refers

to concentrating

resources so as to

deliver value to that

target.

KEY IDEA

The firm earns

marketplace success

by providing value to

customers.

The firm develops,

produces, and delivers

products and services,

but customers perceive

value only in the bene-

fits these products and

services provide.

KEY IDEA

To secure a differential

advantage, customers

must perceive greater

value in the firms offer

than in competitors

offers.

KEY IDEA

The firm achieves

integration by agreeing

on priorities those

involved in designing

and implementing the

offer must develop

close and cooperative

working relationships.

KEY IDEA


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CHAPTER 2: THE VALUE OF CUSTOMERS: OPTIMIZING SHAREHOLDER VALUE

OPENING CASE: ROYAL BANK OF CANADA

page 31 ___________________________________________________________

When the firm creates

value for customers, it

successfully attracts,

retains, and grows

those customers.

By being attracted,

retained, and grown,

customers create value

for the firm and its

shareholders.

KEY IDEA

Customer lifetime

value (LTV) is the link

between delivering

value to customers

and creating value

for shareholders.

KEY IDEA

CUSTOMER LIFETIME VALUE (LTV)

page 32______________________

Customer lifetime

value depends on just

three factors margin,

retention rate, and

discount rate.

KEY IDEA

The margin multiple is a

handy way to calculate

customer lifetime value.

Increasing customer

retention rate has

greater leverage on

customer lifetime valuethan reducing the

discount rate.

KEY IDEA

page 34______________________

page 36______________________ page 38______________________

The margin the firm

earns from a customer

tends to increase over

time.

KEY IDEA

INCREASING CUSTOMER LIFETIME VALUE

Small increases in

customer retention

can dramatically

improve profitability

and customer lifetime

value.

KEY IDEA


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C H A P T E R 2 I T H E V A L U E O F C U S T O M E R S : O P T I M I Z I N G S H A R E H O L D E R V A L U E

page 44______________________ page 45______________________

ENHANCING CUSTOMER LIFETIME VALUE

There are three ways

to improve customer

LTV with current

customers improve

customer retention,

grow customer margins,

and delete customers.

KEY IDEA

There are three

approaches to

improving customer

LTV with potential

customers retrieve,

acquire, and ignore

customers.

KEY IDEA


BEING SELECTIVE ABOUT CUSTOMERS

The firm should develop

systems for measuring

customer profitability.

KEY IDEA

At many firms, 20%

of customers provide

80% of revenues and

120% of profits.

At these same firms,

80% of customers pro-

vide 20% of revenues

and are responsible for

20% of firm losses.

KEY IDEA

In general, customers

are critical firm assets,

but some customers

may be liabilities and

should be fired.

The firm may have to

reject some potential

customers on the basis

of a detailed profitability

analysis.

KEY IDEA

Poor profitability is

not the only reason to

reject or fire customers.

KEY IDEA

page 42______________________

ACQUIRING NEW CUSTOMERS

The firm should try to

acquire customers if

the expected customer

lifetime value is greater

than the acquisition

cost.

KEY IDEA


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CHAPTER 3: MARKET INSIGHT

page 58______________________

The firm must secure

insight in three broad

areas: the market,

customers, and com-

petitors, the company,

and complementers

the M4Cs.

KEY IDEA

page 61 ___________________________________________________________

OPENING CASE: NETFLIX

When firms secure

good market insight,

they do a better job of

identifying opportunities

and gaining competitive

advantage.

KEY IDEA

Market insight com-

prises four separate

aspects market

structure, market and

product evolution,

industry forces, and

environmental forces.

KEY IDEA

page 62______________________ page 63______________________ page 64______________________

MARKET STRUCTURE

Markets consist of

people and organiza-

tions that require goods

and services to satisfy

their needs and are

able and willing to pay.

KEY IDEA

We can view any

market as being made

up of several different

areas.

The firm avoids market-

ing myopia by using a

broad market definition.

KEY IDEA

A useful way of catego-

rizing products in a

market is product class,

product form, product

line, and product item.

KEY IDEA


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C H A P T E R 3 I M A R K E T I N S I G H T

The firms current direct

competitors can change

via acquisition, merger,

and LBOs.

KEY IDEA

The firm faces many

forces current direct

competitors, new direct

entrants, indirect com-

petitors, suppliers, and

buyers that can frus-

trate its ability to make

profits and seize new

opportunities.

KEY IDEA

The firm may face new

direct competitors from

geographic expansion,

start-up entry, new

sales and distribution

channels, strategic

alliances, networks,

and the firms own

employees.

KEY IDEA

The firm faces a broad

set of environmental

forces political,

economic, sociocultu-

ral, technological,

legal/regulatory,

and environmental

(physical) PESTLE.

KEY IDEA

Technological

innovation can be

sustaining (improving

performance of

established products)

or disruptive

(offering new

value propositions).

KEY IDEA

Environmental forces

are constantly in flux;

they also interact with

each other.

KEY IDEA

The managerial process

environment comprises

the intellectual capital

for leading and

managing a business.

KEY IDEA

page 72 ___________________________________________________________ page 73______________________

INDUSTRY FORCES


ENVIRONMENTAL FORCES

page 67______________________ page 70 ___________________________________________________________

MARKET AND PRODUCT EVOLUTION

Critical variables affect-

ing market size include

population size, popula-

tion mix, geographic

population shifts,

income and income

distribution, and age

distribution.

KEY IDEA

Product-form life-cycle

stages have consistent

characteristics across

products and services.

KEY IDEA

Markets and products

generally evolve in a

consistent manner over

time.

The life-cycle frame-

work is useful for

describing market and

product evolution.

KEY IDEA


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CHAPTER 4: CUSTOMER INSIGHT

OPENING CASE: IKEA

page 89______________________

Customer insight

requires a deep and

unique understanding of

customers.

Good customer insight

requires answers to

three questions: Who

are the customers?

What do they need

and want? How do

they buy?

KEY IDEA

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page 93______________________

IDENTIFYING CUSTOMERS

To secure customer

insight, the firm must

correctly identify

customers.

KEY IDEA

Macro-level customers

are organizations;

micro-level customers

are individuals.

KEY IDEA

Purchase decisions

involve many customer

roles: decision-maker,

influencer, spoiler,

champion, specifier,

gatekeeper, buyer,

information provider,

and user.

KEY IDEA

The firm must pay

attention to both its

current and potential

customers.

KEY IDEA

Indirect customers may

be more important than

direct customers

they are often final

users and ultimatelydrive product demand.

KEY IDEA

page 94______________________


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C H A P T E R 4 I C U S T O M E R I N S I G H T

page 94 ___________________________________________________________ page 96______________________ page 97______________________

CUSTOMER NEEDS, BENEFITS, AND VALUES

To attract, retain, and

grow customers, the

firm must:

Develop offers of

value to satisfy

customers needs

Communicate the

value of those offers

to customers.

KEY IDEA

Customers have

recognized needs

and latent needs.

Recognized needs

may be expressedor

non-expressed.

KEY IDEA

Maslows approach

places a persons needs

in an ordered hierarchy.

KEY IDEA

The feature/benefit/

value ladder ensures

that the firm focuses

on providing value to

customers, provides

options for communica-

tion, and broadens the

view of competition.

KEY IDEA

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page 102 __________________________________________________________ page 103_____________________ page 104_____________________

EVC is the maximum

price customers will

pay.

The firm delivers

economic value by

reducing customers

costs and/or increasing

their revenues.

KEY IDEA

To gain greater

customer insight, the

firm must ask: What

motivates people in

customer roles to

behave the way

they do?

KEY IDEA

The firm must deliver

the rightcombination

of functional, psycho-

logical, and economic

benefits and values to

those customers it

wants to attract, retain,

and grow.

KEY IDEA

Customers receive

value from their

experiences.

KEY IDEA

The firm must learn the

customers decision-

making process (DMP).

KEY IDEA

Membership in the

customers considera-

tion set is crucial for

the firm.

KEY IDEA

The firm should try to

understand customers

evaluation processes.

The linear-compensa-

tory approach to

evaluation and choice

balances the firms

performance on the

relevant attributes.

KEY IDEA

page 105_____________________ page 106_____________________

Customers often

deviate from rationality

in making purchase

decisions.

KEY IDEA

There are three

categories of purchase

decision: routinized-

response behavior,

limited problem-solving,

and extended problem-

solving.

KEY IDEA


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C U S T O M E R I N S I G H T I C H A P T E R 4

By identifying sources

of influence in the

consumer decision-

making process,

firms formulate better

market strategies.

KEY IDEA

page 106_____________________ page 108_____________________ page 109_____________________

INFLUENCES ON CONSUMER PURCHASE PROCESSES

A variety of environ-

mental factors affect

consumers purchasing

decisions culture,

social class, other

people, family, and the

situation.

KEY IDEA

Individual factors

that affect purchase

decisions include

economic resources,

time availability,

cognitive resources,

comfort with tech-

nology, life-cycle stage,

and lifestyle.

The VALS2 Lifestyle

framework is a usefulapproach to under-

standing lifestyles.

KEY IDEA

page 112_____________________

INFLUENCES ON ORGANIZATIONAL PURCHASE PROCESSES

Important consid-

erations for the

organizational

purchase-decisionprocess are increased

corporate attention to

procurement, changes

in the procurement

process, reducing the

number of suppliers,

and evolution in buyer-

seller relationships.

KEY IDEA


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CHAPTER 5: INSIGHT ABOUT COMPETITORS, COMPANY, AND COMPLEMENTERS

Competitors

IDENTIFYING COMPETITORS

page 124_____________________ page 125_____________________ page 127_____________________

Competitive insight is

securing a deep enough

understanding of com-

petitors to provide a

unique perspective.

Competitive insight is

crucial for attracting,retaining, and growing

customers.

The firm must act on

competitive insight in its

own decision-making.

KEY IDEA

The firms most serious

competitive threats may

be the least obvious.

KEY IDEA

Be aware of potential

competition from within

your own firm.

Be prepared to offer

multiple products as

customer needs evolve.

KEY IDEA

page 129_____________________ page 130_____________________ page 131_____________________

DESCRIBING COMPETITORS

When focusing on com-

petitive data-gathering,

the firm should be clear

about the level and type

of data it requires.

KEY IDEA

The firm can secure

timely competitive

information from many

internal and external

sources.

KEY IDEA


formal processes to

secure timely and

relevant competitive

information.

KEY IDEA

The firm should not use

unethical or illegal

processes to collect

competitor data.

Leaky organizations

help the firm secure

competitive data.

Good counter-

intelligence procedures

prevent proprietary

data from leaking.

KEY IDEA

page 132 __________________________________________________________ page 133_____________________

The firm should use a

rigorous framework

to organize its data-

gathering.

KEY IDEA

Organizations do not

make decisions

people in organizations

make decisions.

KEY IDEA


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I N S I G H T A B O U T C O M P E T I T O R S , C O M P A N Y , A N D C O M P L E M E N T E R S I C H A P T E R 5

page 135_____________________ page 136_____________________

EVALUATING COMPETITORS

Competitive assessment

analysis is a powerful

tool for marketers.

It maps customer

requirements needs,

benefits, and values

into corporatecapabilities/resources.

KEY IDEA

Game theory is a

structured way of

identifying options

and evaluating their

consequences.

KEY IDEA

page 137_____________________ page 138_____________________

PROJECTING THE ACTIONS OF COMPETITORS

A good approach to

projecting the com-

petitors future actions

is to develop a set of

robust scenarios that

examine the competi-

tors strategic options.

KEY IDEA

The firm projects the

competitors future

actions by identifying

the most likely scenario

from the set of alterna-

tive scenarios.

KEY IDEA

page 139_____________________

MANAGING COMPETITORS

The firm may be able to

manageits competitors

by sending signals.

The major signals

available to the firmare pre-emptive,

warning, and tit-for-tat.

The firm may also send

competitors misleading

information.

KEY IDEA

Complementers

page 141_____________________ page 142 __________________________________________________________

Independent organiza-

tions, including cus-

tomers and suppliers,

can be the firms

complementers.

KEY IDEA

Competitors can com-

plement the firm in the

marketplace or in the

back office. Competitors

can also offer weak

complementarity.

KEY IDEA

A firms complementary

product activities may

be unwelcome by its

competitors.

KEY IDEA


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CHAPTER 6: MARKETING RESEARCH

THE MARKETING RESEARCH PROCESS

page 153_____________________

The marketing research

process contains

several well-defined

steps that the manager

and the researcher

should follow.

KEY IDEA

CRITICAL DISTINCTIONS IN MARKETING RESEARCH

page 154_____________________ page 155_____________________

Secondary marketing

research uses data

relevant to your

research needs that

have already been

collected for some

other purpose. Primary

market research

requires you to

collect new data.

KEY IDEA

Qualitative marketing

research is not con-

cerned with numbers.

Quantitative market

research focuses on

quantitative analysis.

KEY IDEA

SECURING Q UALITATIVE RESEAR CH DATA

page 158_____________________

SECURING QUANTITATIVE RESEA RCH DATA

page 160_____________________

Focus groups, one-on-

ones, and blogs and

wikis are alternative

means for collecting

qualitative data directly

from respondents.

Projective techniques,

observation, and ethno-

graphic research are

indirect qualitative

data-gathering

approaches.

KEY IDEA

When designing a

process to collect

survey data, the firm

must make several

important trade-offs,

primarily between cost,

time, and flexibility.

KEY IDEA

MARKET AND SALES POTENTIALS, MARKET AND SALES FORECASTS

page 163_____________________ page 165_____________________ page 166_____________________

Market potential is the

maximum sales that

the firm expects in the

market in a given time

period. Sales potential

is the maximum sales

the firm might achieve

in a corresponding

time period.

KEY IDEA

There are several

approaches to making

market forecasts.

One of the most

popular uses multiple

regression analysis.

KEY IDEA

Many firms develop

synthetic sales

forecasts, using a

combination of top-

down and bottom-up

approaches.

KEY IDEA


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M A R K E T I N G R E S E A R C H I C H A P T E R 6

APPENDIX 6.1: ANALYZING QUANTITATIVE RESEARCH DATA

page 171_____________________ page 175 __________________________________________________________

Cross tabs are a tried

and true method for

analyzing simple

quantitative marketing

research data.

KEY IDEA

Conjoint analysis is a

versatile marketing

research technique

that can provide

significant insight

into many marketing

questions.

KEY IDEA

Multidimensional

scaling is a valuable

technique for develop-

ing market maps,

aka perceptual maps.

KEY IDEA

Factor analysis helps

the researcher reduce

an unwieldy number

of variables into a

manageable set.

Cluster analysis helps

the researcher to place

many respondents into

meaningful groups.

KEY IDEA

page 176_____________________


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A strategy for growth

has four components:

vision, mission, growth

path, and timing of

entry.

KEY IDEA

Vision is the description

of an ideal future state

for a firm or business

unit. Vision sets a broad

direction for the firm.

When developed with

employee participation,

it can inspire the entire

organization for the

long run.

KEY IDEA

The firms mission

should guide its search

for opportunity.

The five approaches to

developing mission are:

core ingredient or

natural resource,

technology, product

or service, market or

market segment, or

customer needs. The firms mission can

use a single approach

or combine approaches.

The firm should pro-

actively revise its

mission.

KEY IDEA

The four fundamentalpaths to growth are

market penetration,

product growth, market

growth, and product

and market diversifica-

tion. These four paths

give rise to nine individ-

ual growth paths.

KEY IDEA

The four timing-of-entryoptions pioneer,

follow-the-leader,

segmenter, and

me-too correspond,

respectively, to entry in

the introduction, early

growth, late growth,

and maturity stages of

the product life cycle.

The firm must match

its capabilities to its

timing-of-entry strategy.

These capabilities must

evolve as its markets

evolve.

KEY IDEA

CHAPTER 7: DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS

A STRATEGY FOR GROWTH

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D E T E R M I N E A N D R E C O M M E N D W H I C H M A R K E T S T O A D D R E S S I C H A P T E R 7

A venture portfolio

is the set of growth

opportunities the firm

addresses.

The strategy for growth

helps the firm develop

its venture portfolio.

The defining character-

istics of the venture

portfolio are expected

financial return, timingof contribution to

profits, and risk.

KEY IDEA

The firm should exam-

ine each opportunity

using four screening

criteria: objectives,

compatibility (or fit),

core competence, and

synergy.

KEY IDEA

In setting objectives,

the firm should strike

a balance between

revenue and profit

growth, risk, stability,

and flexibility.

KEY IDEA

The three important

dimensions of com-

patibility (or fit) are:

product-market fit,

product-company fit,

and company-market fit.

KEY IDEA

The firm should con-

sider four perspectives

when evaluating oppor-

tunities: objectives,

compatibility, core

competence, and

synergy.

KEY IDEA

Options for implement-

ing a growth strategy

include internal devel-

opment, insourcing,

outsourcing, acquisi-

tion, strategic alliance,

licensing and technol-

ogy purchase, and

equity investment.

KEY IDEA

THE VENTURE PORTFOLIO

page 195_____________________

SCREENING CRITERIA: EVALUATING OPPORTUNITIES

page 196_____________________ page 197_____________________ page 198_____________________ page 199_____________________

IMPLEMENTING GROWTH STRATEGIES

page 204_____________________


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CHAPTER 8: MARKET SEGMENTATION AND TARGETING

THE MARKET SEGMENTATION PROCESS

page 213_____________________ page 216_____________________ page 218_____________________

Market segmentation

is a conceptual and

analytic process it is

critical for developing

and implementing

an effective market

strategy.

KEY IDEA

Four categories of can-

didate descriptor vari-

ables or segmentation

variables can define

market segments:

geographic, demo-

graphic, behavioral, and

socio-psychological.

KEY IDEA

In any market,

customers have

different need profiles.

The market segmenta-

tion process identifies

groups of customers.

When segmentation is

done well, customers

within a segment have

similar need profiles.

Customers in differentsegments have different

need profiles.

KEY IDEA

MARKET SEGMENTS

page 219_____________________ page 220_____________________ page 223 __________________________________________________________

The best approach

for forming market

segments is to group

customers based ontheir need profiles. The

firm should then use

descriptor or segmenta-

tion variables to identify

the different segments.

KEY IDEA

The market segmen-

tation process can

combine creativity

and sophisticateddata analysis.

KEY IDEA

B2B firms often treat

major customers as

individual market seg-

ments. In B2C markets,many firms are practic-

ing mass customization.

KEY IDEA

The firm must continu-

ally evolve its segmen-

tation, as customers

need profiles evolve.

KEY IDEA


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M A R K E T S E G M E N T A T I O N A N D T A R G E T I N G I C H A P T E R 8

For each segment it

targets, the firm should

develop a unique offer

precisely tailored to

the need profile of cus-

tomers in that segment.

KEY IDEA

In deciding which

segments to target,

the firm should ask

two questions:

How attractive is this

segment?

Does the firm have

the business

strengths to win

in this segment?

KEY IDEA

A firm can improve

its market segment

position by investing

in those business

strengths that

determine success.

A firm may identify

more attractive market

segments by refining its

segmentation approach.

KEY IDEA

Perceptual maps show

how various products

serve customers or

segment needs. They

show market segment

sizes and customer

ideal points in each

segment. These data

help the firm make

targeting decisions.

KEY IDEA

Large firms and small

firms each have

advantages in targeting

market segments.

Mis-steps can cause

each to lose a strong

position.

KEY IDEA

TARGETING MARKET SEGMENTS

page 225_____________________ page 226_____________________ page 229_____________________

page 231 __________________________________________________________


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The goal of market and

market-segment strate-

gies is very simple

to attract, retain, and

grow customers in the

face of competitors

trying to do the same

thing.

The market strategy is

the firms game plan for

addressing the market.It states what the firm is

trying to achieve, what

it will do and will not do.

Notably, it identifies

those segments the firm

targets for effort.

KEY IDEA

The market strategy

requires decisions

about results, re-

sources, and actions.

Well-developed market

and market-segment

strategies fulfill four

purposes for the firm

provide strategic

direction in the market,

state how to secure

differential advantage,guide the effective

allocation of scarce

resources, and achieve

cross-functional

coordination.

KEY IDEA

Effective market and

market-segment strate-

gies show how the firm

will secure a differential

advantage.

KEY IDEA

An effective market

strategy helps the firm

allocate its resources.

Externally, the firm

allocates resources to

target market segments,

and selects specific

resources to secure

differential advantage.

Internally, the firm

allocates resources

across internal

activities.

KEY IDEA

CHAPTER 9: MARKET STRATEGY THE INTEGRATOR

OPENING CASE: MAYO CLINIC

page 237_____________________

THE PURPOSE OF MARKET AND MARKET-SEGMENT STRATEGIES

page 238_____________________ page 239_____________________ page 240_____________________


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M A R K E T S T R A T E G Y T H E I N T E G R A T O R I C H A P T E R 9

Inter-functional conflict

is endemic. Formulating

the market strategy

should resolve this

conflict and achieve

cross-functional

coordination.

KEY IDEA

The firm must make

trade-offs among the

three categories of

strategic objectives:

growth and market

share, profitability, and

cash flow.

KEY IDEA

Priorities for strategic

objectives evolve during

product life-cycle

stages.

KEY IDEA

Operational objectives

provide the numbers to

attach to the strategic

objectives; they specify

how much is needed

and by when.

KEY IDEA

Managers should

explicitly discuss

the trade-offs and

expectations among

strategic objectives

before setting opera-

tional objectives.

KEY IDEA

The firm competes for

customer targets

decision-makers or

influencers.

KEY IDEA

The firms competitive

target can be current

or potential, direct or

indirect, or in the supply

chain. Sometimes the

targeted competitor

is not immediately

obvious.

KEY IDEA

The value proposition

is the firms major

competitive weapon

for gaining its target

customers; it also

defines the firms

implementation focus.

The firm must developa value proposition for

each target customer

type.

KEY IDEA

Positioning is not what

you do to a product:

Positioning is what you

do to the mind of the

prospect.

KEY IDEA

ELEMENTS OF THE MARKET-SEGMENT STRATEGY

page 240_____________________

PERFORMANCE OBJECTIVES

page 242_____________________ page 243 ________________________________________________________________________________________________

POSITIONINGpage 251 __________________________________________________________ page 252_____________________ page 253_____________________


20/47

C H A P T E R 9 I M A R K E T S T R A T E G Y T H E I N T E G R A T O R

Together, individual

market segment

strategies must form

a coherent market

strategy. The segment

strategies must be

distinct, yet the firm

should seek out

positive synergies

in implementation

programs.

KEY IDEA

The marketing mix

and other functional

programs implement

the market strategy.

KEY IDEA

Marketing mix pro-

grams should support

the value proposition,

and all elements should

support one another.

KEY IDEA

The firms functional

areas must support the

market strategy.

KEY IDEA

IMPLEMENTATION PROGRAMS

page 254_____________________ page 255 ________________________________________________________________________________________________


21/47

CHAPTER 10: MANAGING THROUGH THE LIFE CYCLE

OPENING CASE: RYANAIR

page 263_____________________

Firms failing to act

pre-emptively may

face significant

opportunity costs.

KEY IDEA

DEVELOPING COMPETITIVE STRATEGIC OPTIONS

page 266_____________________

Scenarios help the firm

generate competitive

strategic options.

The main building block

for these scenarios is

product life-cycle stage.

Successful strategies

should have a strong

creative element.

Life cycles are shorten-

ing for many products.

KEY IDEA

BUILDING PRODUCT LIFE-CYCLE SCENARIOS

page 267 __________________________________________________________ page 269 __________________________________________________________

Pioneers must be pre-

pared to tap multiple

sources to fund losses

early in the life cycle.

KEY IDEA

The most common

government-imposed

barriers are patents.

Firms sometimes lobby

governments to imposeregulations on their

competitors.

KEY IDEA

When the firm executes

a low-price penetration

strategy, it must accept

low profit margins for a

substantial time period.Continual cost reduc-

tions are essential to

sustain low prices.

KEY IDEA

A pioneer can sustain

first-mover advantages

by producing high-

quality products. The

firm earns a leadingreputation and sets the

stage for creating a

strong brand.

KEY IDEA

page 270_____________________

By the early-growth

stage, customers

accept the product,

and the market leader

should be profitable.

KEY IDEA

page 272 __________________________________________________________

Generally, followers in

growth markets are

unprofitable and have

negative cash flows.

The followers goal is

to learn from others and

minimize cost and risk.

KEY IDEA

Imitationmeans

copying the leader

but being more effec-

tive in execution.

Leapfrogginggoes

one better than the

leader by developing

innovative and superior

products and/or target-

ing emerging market

segments.

KEY IDEA


22/47

C H A P T E R 1 0 I M A N A G I N G T H R O U G H T H E L I F E C Y C L E

By late growth, basic

customer benefits and

values are still impor-

tant but may not enter

into customers choice

decisions. Customers

are more likely to base

their purchase deci-

sions on additional

benefits and values.

KEY IDEA

In late growth, the firm

must decide whether to

target many segments

or just a few.

KEY IDEA

Creative Ways to Drive

Growth in the Maturity

Stage

Increase customers

use of the product

Improve the product

or service

Improve physical

distribution

Reduce price

Reposition the brand

Enter new markets

KEY IDEA

Markets that seem

mature may have

growth potential waiting

to be unlocked via

creative approaches.

KEY IDEA

Market leaders in

mature, concentrated

markets should have

low costs, decent

profits, and positive

cash flows.

KEY IDEA

Market leaders in

concentrated markets

have two major

alternatives

long-run leadership

or harvesting.

KEY IDEA

Followers in mature

concentrated markets

typically have higher

costs and lower profits

and are financially

weaker than market

leaders. But they mayrejuvenate to become a

major threat.

KEY IDEA

Firms can make

considerable profits

in declining markets.

KEY IDEA

In a declining market,

the firms options

depend on market

hospitality and its

business strengths.

KEY IDEA

BUILDING PRODUCT LIFE-CYCLE SCENARIOS CONTINUED

page 274 __________________________________________________________ page 276_____________________ page 277_____________________


In mature fragmented

markets, no firm has a

large market share.

KEY IDEA

page 283 __________________________________________________________


23/47

CHAPTER 11: MANAGING BRANDS

WHAT IS A BRAND?

page 295_____________________

The brand is a symbol

around which the firm

and its customers can

construct a relationship.

KEY IDEA

BRAND EQUITY AND THE VALUE OF BRANDS

page 298_____________________ page 299_____________________

Brand equity reflects

the trust established

between the brand

owner and its

customers.

KEY IDEA

Brand equity generally

builds up slowly over

time.

A brand can quickly

lose value if not

managed properly.

KEY IDEA

MONETIZING BRAND EQUITY

page 300_____________________ page 302_____________________

BUILDING AND SUSTAINING A STRONG BRAND

page 304_____________________ page 305_____________________

Replacement cost

and cash flow

methods are two

internal approaches

for calculating firm

brand equity.

KEY IDEA

The firm earns a

contribution to firm

brand equity only when

a customer purchases

the brand.

KEY IDEA

Carefully chosen

brand identity and

consistent execution

are critical to develop-

ing brand loyalty.

KEY IDEA

Firm brand equity

represents the brands

balance sheet

Brand health checks

compare a brands

strengths against

historic trends and

benchmark competing

brands.

KEY IDEA

MANAGING BRAND ARCHITECTURE


The firm should careful-

ly manage the evolution

of its brand portfolio.

Firms adjust their brand

portfolios in response

to shifting consumer

trends, competitiveresponses, and mergers

and acquisitions.

KEY IDEA

There are pros and

cons for both multi-

branding and umbrella

branding.

KEY IDEA

Increasingly, global

firms make branding

decisions at head-

quarters, rather than

in individual countries.

Think global, act local!

guides many firms.

Multinational firms

should consider a brand

portfolio that includes

global, regional, and

national brands. Over-

time, the geographic

scope of some brands

may narrow, and other

brands may broaden.

KEY IDEA

Firms that leverage

brands secure auto-

matic brand awareness

for the new product.

They avoid new brand

introduction costs and

may increase profitsfor little additional

investment.

For an extension to be

viable, the brand must

have strong positive

associations. The

difference between

these brand associa-

tions and the product

extension should not be

incongruous.

KEY IDEA


24/47

C H A P T E R 1 1 I M A N A G I N G B R A N D S

The firm can conserve

brand equity by effec-

tive brand migration.

KEY IDEA

The firm can enhance

brand equity by effec-

tive strategic alliances.

KEY IDEA

Three ways to reposi-

tion a brand are:

address new market

segments, change

brand associations,

and alter the brands

competitive target.

Continuous innovation

pre-empts the need to

revitalize a brand.

KEY IDEA

MANAGING BRAND ARCHITECTURE CONTINUED

page 311_____________________ page 312 __________________________________________________________


25/47

CHAPTER 12: MANAGING THE PRODUCT LINE

THE PRODUCT PORTFOLIO CONCEPT

page 322_____________________ page 323_____________________ page 324 __________________________________________________________

The firms products

have important

resource-related

interrelationships.

The firm does not

optimize its overall

profits by maximizing

profits from individual

products. It must

consider the entire

product line. Firms with imbalanced

portfolios are vulnera-

ble to acquisition.

KEY IDEA

Financial analysis

methods rely on fore-

casts these can

be highly uncertain.

Financial analysis

does not consider

strategic issues.

Too much reliance on

financial analysis can

lead to misallocation

of resources acrossproducts.

Financial analysis

methods ignore

marketing

considerations.

KEY IDEA

Portfolio analysis is a

systematic, organized,

and easily communi-

cated way of assem-

bling, assessing, and

integrating important

information about

product opportunities.

KEY IDEA

Portfolio analysis

addresses many

problems with

financial analysis.

KEY IDEA

page 325_____________________ page 327_____________________ page 328_____________________

Portfolio analysis is

best viewed as anadditional tool for

setting investment

priorities not as an

alternative to financial

analysis.

KEY IDEA

Long-run market growth

and RMS define thegrowth-share matrix.

The growth-share

matrix can be overused

and misinterpreted.

KEY IDEA

The firm can use the

multifactor matrix(Chapter 8) for resource

allocations among

products.

The growth-share and

multifactor matrices

have advantages and

disadvantages that

impact the viability

of strategic

recommendations

that they generate.

KEY IDEA


26/47

C H A P T E R 1 2 I M A N A G I N G T H E P R O D U C T L I N E

Sometimes one product

helps another (positive

complementarity);

sometimes it hurts

another (negative

complementarity).

KEY IDEA

When making product

decisions, the firm

should carefully consid-

er current and potential

interactions with the

firms other products.

KEY IDEA

Firms face conflicting

pressures for broad

versus narrow product

lines.

ROS and ROI measure

very different things.

KEY IDEA

Firms often differentiate

individual products by

time availability, prod-

uct performance, and

package quantities.

Implementing a firewall

strategy can lead to

product proliferation.

KEY IDEA

Product proliferation

refers to product

variety. Market seg-

mentation explores

differences in customer

needs.

The firm can develop

multiple offers based

on a single product,

targeted to several

segments.

KEY IDEA

A simplified product

line can make the firm

more competitive. But

the firm should use

appropriate criteria for

its deletion decisions.

KEY IDEA

Sometimes the firm can

successfully resurrect

deleted products.

KEY IDEA

Beware deleting prod-

ucts without consider-

ing all relevant issues.

KEY IDEA

OTHER IMPORTANT PRODUCT INTERRELATIONSHIPS

page 331 __________________________________________________________

PRODUCT LINE BREADTH: PROLIFERATION VERSUS SIMPLIFICATION

page 332_____________________ page 333_____________________ page 334_____________________

page 336 __________________________________________________________

OTHER PRODUCT LINE ISSUES

page 336_____________________


27/47

CHAPTER 13: DEVELOPING NEW PRODUCTS

OPENING CASE: THOMSON FINANCIAL BOARDLINK

page 347_____________________

Successful new

products enhance

shareholder value.

KEY IDEA

WHERE AND HOW INNOVATION OCCURS

page 348 __________________________________________________________

NEW PRODUCT DEVELOPMENT

page 352_____________________

Innovation embracesnew products, but also

processes and tech-

nologies.

Sustaining innovations

improve products and

processes on existing

performance dimen-

sions. Disruptive inno-

vations offer different

value propositions.

Leading firms often

invest in sustainingversus disruptive

innovations.

KEY IDEA

The firm should servecurrent, especially

loyal, customers it

must also createnew

customers.

KEY IDEA

page 349_____________________ page 351_____________________

The customer-innovation relationship

involves a two-way

communication flow.

KEY IDEA

Firms can be Isolates,Followers, Shapers, or

Interactors, based on

their innovation focus

and customer focus.

KEY IDEA

Product development

trade-offs include t ime,

risk, and financial

return. Four develop-ment approaches

are basic technology

research, applied

technology research,

market-focused

development, and

market tinkering.

KEY IDEA


28/47

C H A P T E R 1 3 I D E V E L O P I N G N E W P R O D U C T S

The firm should

develop clear criteria

for a project to pass

through each gate.

KEY IDEA

The stage-gate process

is a systematic method

for new product devel-

opment. The stages

are idea generation,

preliminary screening,

concept development,

business-case analysis,

development, product

testing, market-factor

testing, test marketing,

and commercialization.

The firm must manage

Type I and Type II

errors.

The cost of failure in-

creases at each stage.

KEY IDEA

The firm should tap

multiple sources for

new ideas.

The best way to get

a good idea is to get

a lotof ideas.42

KEY IDEA

Preliminary screening

aims to form a balanced

portfolio of new product

ideas.

Different types of new

product idea require

different screening

criteria.

KEY IDEA

The product conceptshould appeal to

customers and guide

development.

KEY IDEA

Business-case analysisassesses the financial

viability of a product

concept.

Forecasting sales

revenues is the most

difficult step in busi-

ness-case analysis.

KEY IDEA

Many firms make verylarge investments in

product development.

Multi-functional

teams and customer

involvement aid the

development process.

Design is an increasing-

ly important part of the

development process.

KEY IDEA

The House of Qualitymaps customer needs

into product design.

KEY IDEA

THE STAGE-GATE PROCESS FOR NEW PRODUCT DEVELOPMENT

page 354_____________________


page 355_____________________ page 359_____________________ page 360_____________________


29/47


30/47

In the communications

process, senders send

information, and

receivers receive infor-

mation.

Miscommunication

arises from problems in

encoding, distortion,

and decoding.

KEY IDEA

Personal communica-

tion is face-to-facewith

individuals or groups.

KEY IDEA

Non-personal communi-

cation occurs without

interpersonal contact

between sender and

receiver.

KEY IDEA

Quasi-personal

communications

embrace interaction

and feedback without

human involvement.

KEY IDEA

Word-of-mouth

communication occurs

among customers and

potential customers.

KEY IDEA

The firm has two major

types of communica-

tions targets: those

directly relatedto the

firms products and

others not directly

related.

KEY IDEA

Most firms use either

push or pull strategies

large firms

often use combination

push/pull strategies.

KEY IDEA

Firms have many com-

munications targets

other than customers.

KEY IDEA

Communications

objectives and timelines

drive the choice of

communication tools.

KEY IDEA

Integration ensures

maximum communica-

tions impact to achieve

firm goals.

KEY IDEA

CHAPTER 14: INTEGRATED MARKETING COMMUNICATIONS

COMMUNICATIONS: PROCESS AND TOOLS

page 380 ________________________________________________________________________________________________

page 381_____________________ page 382_____________________

DEVELOPING THE COMMUNICATIONS STRATEGY

page 383_____________________

INTEGRATING COMMUNICATIONS EFFORTS

page 389_____________________

page 384_____________________ page 385_____________________ page 387_____________________


31/47

Advertising is critical

for both market and

communications

strategies.

KEY IDEA

Hierarchy-of-effects

models for high

involvement and

low involvement

products are central

to understanding how

advertising works.

KEY IDEA

There are two types

of advertising objec-

tives output and

intermediate.

Output objectives are

what the firm ultimately

wants to achieve.

Intermediate objectives

relate to hierarchy-of-

effects models and

include awareness,knowledge, liking or

preference, and trial.

KEY IDEA

Creating advertising is

an enigma, more art

than science, mysteri-

ous and unexplainable.

KEY IDEA

Rational-style adver-

tising includes demon-

stration, comparative,

one- and two-sided

appeals, refutational,

and primacy or recency.

Emotional-style adver-

tising includes humor,

fear, celebrity endorse-

ment, and storytelling.

KEY IDEA

In setting media objec-

tives, the firm must con-

sider reach, frequency,

and gross rating points.

The advertisingmessage must appear

in the right place at

the right time.

Major timing options

are continuous,

flighting, and pulsing.

KEY IDEA

The objective and task

method, based on

marginal analysis,

should underpin the

budgeting process.

Rule-of-thumb

methods can lead to

unsatisfactory results.

KEY IDEA

Evaluating advertising

effectiveness is a

complex task. The firm

must choose among

various types of tests

and measures.

KEY IDEA

Direct marketing offers

advantages over mass

advertising: flexibility,

action-oriented cus-

tomer response, better

measurement, pre-

dictability, better

customer knowledge,

ability to tailor the offer,

and ability to identify

prospects.

KEY IDEA

Publicity and Public

Relations relies on an

intermediary, typically

the press, to transmit

a message to a target

audience.

KEY IDEA Sales promotion is a

potpourri of techniques,

mostly for short-term

objectives.

Poorly designed sales

promotion programs

hurt profits and brand

image.

KEY IDEA

Only quasi-personal

communication taps the

webs true potential.

KEY IDEA

CHAPTER 15: NON-PERSONAL COMMUNICATION

ADVERTISING

page 396_____________________


page 397_____________________ page 398_____________________ page 400_____________________

DIRECT MARKETING

page 412_____________________

SALES PROMOTION

page 415 ____________________

THE INTERNET

page 417_____________________

PUBLICITY ANDPUBLIC RELATIONS

page 414_____________________


32/47

CHAPTER 16: DIRECTING AND MANAGING THE FIELD SALES EFFORT

MARKETINGS ROLE IN THE FIELD SALES EFFORT

page 427_____________________ page 428_____________________ page 429 __________________________________________________________

Effectively managing

the sales/marketing

interface is critical

for achieving sales

excellence.

KEY IDEA

Firms often group

customers into separate

tiers like Tier I

(platinum), Tier II (gold),

and Tier III (bronze)

and address each

differently.

KEY IDEA

Some customers

purchase small volumes

but disproportionately

consume the firms

resources.

KEY IDEA

Tier I customers provide

the highest levels of

sales and profits.

Strategic account man-

agers are responsible

for individual accounts.

Global account man-

agers are responsible

for multinational cus-

tomers that want to

make global purchases.

KEY IDEA

THE TASKS OF SALES FORCE MANAGEMENT

page 430 __________________________________________________________ page 431 __________________________________________________________

Sales objectives are

the firms desired

results. Achieving

sales objectives is the

sales forces central

task. Sales objectives

turned into specific

performance require-

ments are called

quotas.

KEY IDEA

page 432_____________________ page 435 __________________________________________________________

Gross sales revenues

are the traditional basis

for sales objectives.

Sometimes firms base

objectives on profit or

profit contribution.

KEY IDEA

Sales objectives

integrate the firms

market strategy and

sales strategy.

KEY IDEA

The firm should break

down sales objectives

by control unit sales

regions, sales districts,

and individual sales

territories. It should

also calendarize sales

objectives quarterly,

monthly, and possibly

weekly.

KEY IDEA

The firm can set sales

objectives related tocustomer retention,

market share, price

realization, close

rates, and customer

satisfaction.

KEY IDEA

Salespeople conduct

several activities. Inmany firms, they spend

less than 20 percent of

time face-to-face with

customers trying to

make sales.

KEY IDEA

Guidelines should

specify how sales-people must allocate

their time.

KEY IDEA


33/47

D I R E C T I N G A N D M A N A G I N G T H E F I E L D S A L E S E F F O R T I C H A P T E R 1 6

page 437 ________________________________________________________________________________________________

page 439 __________________________________________________________ page 440_____________________ page 442_____________________

Selling effort guidelines

must mirror the struc-

ture of sales objectives.

Typically, selling effort

is not proportional to

sales objectives.

The firm must break

down selling effort

allocations by individual

control units like sales

regions, sales districts,and sales territories.

The firm should allocate

selling effort by account

category.

KEY IDEA

The value proposition

anchors the sales

approach the central

message the sales-

person delivers to

customers.

KEY IDEA

The firm should tailor

the sales message to

different customer

targets and design a

process to explain the

firms benefits.

KEY IDEA

Selling is a system to

facilitate customer

buying. Coaching, counseling,

and training can

improve the selling

process.

KEY IDEA

The employee-based or

outsourced sales force

decision involves con-trol, cost, and flexibility

trade-offs.

KEY IDEA

Key sales organization

design variables are

degree of centralizationor decentralization,

number of management

levels, and span of

control.

Specialization may lead

to higher sales but also

higher costs. It may

also cause problems

when several firm

salespeople sell to the

same customer.

KEY IDEA

The firm should

implement sales force

reorganizations verycarefully.

KEY IDEA


34/47

C H A P T E R 1 6 I D I R E C T I N G A N D M A N A G I N G T H E F I E L D S A L E S E F F O R T

Sales territories should

have roughly equal

sales potential and

workloads.

KEY IDEA

The firm should actively

engage salespeople

in the sales planning

process.

KEY IDEA

A pipeline system con-

tinually tracks success

at different stages in

the selling process.

Rigorous pipeline

analysis leads to better

forecasts.

KEY IDEA

The firms reward

system should motivate

salesperson behavior.

Primary components

are financial incentives,

recognition, and

promotions.

The primary ways to

pay salespeople are

salary, commission,

and bonus.

KEY IDEA


rigorous systems for

recruiting, selecting,

training, retaining, and

replacing salespeople.

KEY IDEA

To simplify translating

product and segment

objectives into sales

objectives, the firm

can focus on existing

versus new productsand existing versus

new customers.

KEY IDEA

THE TASKS OF SALES FORCE MANAGEMENT CONTINUED

page 443 __________________________________________________________

APPENDIX 16.1: ILLUSTRATION OF SETTING OBJECTIVE BY PRODUCT AND CUSTOMER

page 452

page 444_____________________

page 446_____________________ page 447_____________________


35/47

CHAPTER 17: DISTRIBUTION DECISIONS

DISTRIBUTION SYSTEMS AND THEIR EVOLUTION

page 458_____________________

A distribution channel

comprises many enter-

prises, their interrela-

tionships, and the

functions they perform.

A distribution systems

effectiveness changes

over time.

Distribution arrange-

ments are more difficult

to change than othermarketing implementa-

tion elements.

KEY IDEA

Distribution closes gaps

in physical locationand

timebetween finishedproducts at the factory

and consumers and

end-user customers.

KEY IDEA

DEVELOPING A DISTRIBUTION STRATEGY

page 458_____________________ page 460 __________________________________________________________ page 461_____________________

Direct distribution

methods, combined

with database market-ing, are powerful alter-

natives to indirect

distribution.

KEY IDEA

Advantages for wholly

owned retail distribution

are greater operationalcontrol and earning the

entire retail margin; dis-

advantages are capital

required for growth,

and operating risk.

KEY IDEA

Direct channels:

Supplier firms manage

the contact with con-sumers and end users.

Indirect channels:

intermediaries like dis-

tributors, wholesalers,

and retailers play a

major role in transfer-

ring products from

suppliers to consumers

and end users.

Intermediaries offer

value-added benefits

that suppliers cannot.

They provide productassortments, shopping

experience, market

access, and often

reduce the costs of

conducting various

distribution functions.

KEY IDEA


36/47

C H A P T E R 1 7 I D I S T R I B U T I O N D E C I S I O N S

For B2B suppliers,

conditions typically

favor either direct or

indirect distribution.

In each case, there

are several options.

KEY IDEA

Suppliers should select

distribution channel(s)

that are appropriate for

their target segment(s)

and perform the

required functions.

Providing customer

benefits and values,

rather than traditional

industry practice,

should guide thesuppliers distribution

choices.

KEY IDEA

Critical distribution

strategy decisions

include identifying the

functions to be per-

formed, deciding on

direct versus indirect

channels and distribu-

tion channel breadth,

and setting criteria for

intermediaries.

KEY IDEA

A well-designed com-

pensation system can

help the supplier direct

its distributors efforts.

KEY IDEA

Intermediaries add

value by reducing the

number of relationships

a supplier and end-usercustomer must have.

Intermediaries occupy

the nexus between

suppliers and end-user

customers.

KEY IDEA

Distribution channel

members have high

conflict potential.

KEY IDEA

When suppliers attempt

to improve their powerpositions, they should

try to anticipate the

actions of other

distribution channel

members.

KEY IDEA

The partnership model

is an increasinglypopular alternative to

the power/strategic

conflict approach.

Channel members

jointly set goals and

work together for

greater efficiency

and effectiveness.

KEY IDEA

Distribution laws vary

by industry and geogra-

phy. What is illegal in

the U.S. may be normal

business practice in

other countries.

In the U.S., many

antitrust lawsuits

involve distribution

issues.

KEY IDEA

DEVELOPING A DISTRIBUTION STRATEGY CONTINUED

page 462_____________________

MANAGING DISTRIBUTION CHANNELS

page 466_____________________

page 471_____________________ page 472_____________________

page 468_____________________

LEGAL ISSUES IN DISTRIBUTION

page 473_____________________

page 469_____________________

page 463_____________________ page 464_____________________


37/47

CHAPTER 18: MANAGING SERVICES, CUSTOMER SERVICE,AND CUSTOMER RELATIONSHIP MANAGEMENT

PRODUCTS, SERVICES, AND CUSTOMER SERVICE

page 480_____________________ page 481_____________________

Customers buy offersor

promises of benefits

and values; the key

element may be a

product or a service.

KEY IDEA

A service is: any act or

performance that one

party can offer another

that is essentially

intangible and does

not result in the

ownership of anything.

Customer service

enhances value

inherent in the core

product or service.

KEY IDEA

CHARACTERISTICS OF SERVICES

page 482_____________________ page 483 __________________________________________________________

Services are over 70

percent of employment

and GDP in developed

countries.

Factors driving services

growth are rising

incomes, age-related

demographic shifts,

outsourcing, leveraging

core competence,

franchising, customer

behavior changes,

deregulation, technol-

ogy, and globalization.

KEY IDEA

Moments of truthare

opportunities for

customer satisfaction

or dissatisfaction.

KEY IDEA

Customers often focus

on tangible aspects of

intangible services

service facilities, serv-

ice equipment, service

personnel, and serviceguarantees.

Service guarantees

should be uncondi-

tional, painless to

invoke, and easy and

quick to collect. They

should also be simple

to understand and

communicate and

meaningfully related

to the service being

guaranteed.

KEY IDEA


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C H A P T E R 1 8 I M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L AT I O N S H I P M A N A G E M E N T

For services, production

and consumption are

inseparable.

Since the firm cannot

inventory services, it

must either increase or

decrease supply and/or

demand.

KEY IDEA

Reducing variability

is more difficult for

services than for

products.

KEY IDEA

Service variability can

be positive when

human service

providers tailor their

behavior for individual

customers.

The firm can reduce

human variability

through automation.

KEY IDEA

Because they cannot

be inventoried, services

are perishable.

KEY IDEA

Services are divisible

the service blueprint

is the sequence of

activities that make

up the service.

KEY IDEA

People do not acquire

services in a physical

sense.

KEY IDEA

Fellow customers can

influence the service

experience the

customer is NOT

always right.

KEY IDEA

Expectations

disconfirmation is

perceived quality

less expected quality.

SERVQUAL identifies

five gaps for diagnosing

service quality.

KEY IDEA

Variables influencing

perceived service

quality include

responsiveness,

reliability, assurance,

empathy, and tangibles.

SERVQUALs related

subscale scores pro-

vide actionable items

for improving serviceperformance.

KEY IDEA

High satisfaction no

longer guarantees high

customer retention.

Firms must delight their

customers.

KEY IDEA

All firms experience

service failures;

how they address

them is key.

KEY IDEA

CHARACTERISTICS OF SERVICES CONTINUED

page 484 __________________________________________________________

SERVICE QUALITY

page 487_____________________ page 488_____________________ page 490 __________________________________________________________

page 486 ________________________________________________________________________________________________

page 485 __________________________________________________________

page 491_____________________ page 492_____________________

A drive for service

efficiency can lead

to inflexible systems

they cannot deal with

idiosyncratic customer

behavior.

KEY IDEA

Few aggrieved

customers complain

they just defect.

Firms should make

complaining easier,

then follow up swift ly

and aggressively.

KEY IDEA


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M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L A T I O N S H I P M A N A G E M E N T I C H A P T E R 1 8

CUSTOMER SERVICE

page 493 __________________________________________________________

page 495 __________________________________________________________ page 497_____________________

page 494_____________________

CUSTOMER RELATIONSHIP MANAGEMENT


Customer service can

be more central than

the core product or

service.

KEY IDEA

Customer service has

eight flower-of-service

dimensions.

KEY IDEA

Customer service is

different before, during,

and after the purchase.

KEY IDEA

Customers requiring

similar products andservices may have

differing needs for

customer service, and

vice versa.

KEY IDEA

Human capital planning

requires specialattention to recruitment,

selection, training

and development,

appraisal, recognition,

reward, and retention

of customer service

employees.

KEY IDEA

Customer service

infrastructure combinesthe technological

and human resources

necessary to deliver

high-level customer

service.

KEY IDEA

Customer defection

rate is a more valuable

performance measure

than customer satisfac-

tion. The firm should

identify and measure

critical elements driving

customer satisfaction.

KEY IDEA

CRM is a synthesis

of marketing, quality

management, and

customer service to

form mutually benefi-

cial relationshipswith

customers.

Technology has an

important role in CRM,

but CRM is not about

technology.

KEY IDEA

Superior customer

databases are relevant,

structured, current,

consistent, accurate,

accessible, complete,

and secure.

The customer database

should distinguish

among customers

on loyalty and value to

the firm. Customer databases

are more valuable when

they also contain data

about relationships with

competitors.

KEY IDEA

The firm should exam-

ine its privacy policy for

the impact on customer

relationships.

Customer loyalty

programs have many

design parameters.

KEY IDEA


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Price has a larger

impact on profits than

any other lever. Price

changes affect margins,

unit volumes, costs, and

customer perceptions.

KEY IDEA

In setting prices, the

firm should consider

perceived customer

value, costs, com-

petition, and strategic

objectives. Excessive

focus on a single

element leads to

suboptimal pricing

decisions.

KEY IDEA

What seems to be a

pricing problem may

be a perceived value

problem.

KEY IDEA

The firm creates value

for customers primarily

via non-price elements

in its offer the

marketing mix.

Many factors affect the

value that customers

perceive in the firms

offer.

KEY IDEA

Price apportions value

some to the firm,

some to customers.

KEY IDEA

Pricing at what the

market will bearis

not useful advice;

the market will bear

many prices.

KEY IDEA

PED helps estimate

market demand when

price changes.

KEY IDEA

CHAPTER 19: MANAGING PRICE AND VALUE

OPENING CASE: SOUTHWEST AIRLINES

page 509_____________________

page 516_____________________

Part 1: Developing Pricing Stategy

page 510_____________________

PERCEIVED CUSTOMER VALUE

page 511 __________________________________________________________ page 515 __________________________________________________________


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M A N A G I N G P R I C E A N D V A L U E I C H A P T E R 1 9

Critical topics in per-

ceived customer value

are creating, measur-

ing, and capturing

value. Customers price

sensitivity is closely

related to value.

KEY IDEA

In cost-plus pricing,

the firm identifies its

costs and adds a

profit margin.

Cost-plus pricing

does not consider

customer value.

KEY IDEA

Disadvantages of cost-

plus pricing are profit

limitations, arbitrary

cost measurement, and

mismatch with market

realities.

Firms often determine

fixed costs per unit

arbitrarily by assuming

some level of sales

or production.

KEY IDEA

Costs have an important

price-setting role for

birth control, death

control, and profit

planning.

KEY IDEA

Customers do not care

about the firms costs;

they care only about

the value they receive.

The real purpose of

price is notto recover

costs but to capturevalue in the customers

mind.

KEY IDEA

The firm should seek

offer superiority, not

price superiority.

KEY IDEA

In high fixed cost/

low variable cost

oligopolies, firms often

cut prices to gain extravolume. Prices can

spiral downward and

profits vanish.

KEY IDEA

Rampant price-cutting

is disastrous for all but

the low-cost producer.

KEY IDEA

The firm has various

price and non-price

actions for responding

to price competition.

KEY IDEA

page 517_____________________

page 519_____________________ page 520_____________________

page 518 __________________________________________________________

COSTS


COMPETITION


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C H A P T E R 1 9 I M A N A G I N G P R I C E A N D V A L U E

CMU and CMR are

critical concepts in

price-setting. They

allow the firm to

calculate breakeven

sales volumes for

various pricing options.

KEY IDEA

Many firms make a

fixed offer, then vary

the price when under

pressure. Firms with

a price menu have

variable offers with

fixed prices.

KEY IDEA

Single product prices

are rare in the real

world.

Pricing actions vary

between highly visible

and opaque.

KEY IDEA

The firm needs good

systems to track ele-

ments in the pricing

toolkit.

The pricing toolkit pro-

duces the pocket pricevia the price waterfall.

Pricing toolkit elements

are differentially impor-

tant to customers.

KEY IDEA


pricing policies at high

levels in the firm.

Price-setting can be a

strategic capability.

KEY IDEA

Many governments

scrutinize prices for

illegal activity.

KEY IDEA

The firm should link

pricing strategy to its

strategic objectives.

KEY IDEA

The firms major options

for strategic objectives

are: maximize growth in

volume and/or market

share, maximize profits,

or maximize cash flow.

KEY IDEA

STRATEGIC OBJECTIVES

page 524 __________________________________________________________

Part 2: Sett ing Prices

USING PERCEIVED CUSTOMER VALUE, COSTS, COMPETITION, AND STRATEGIC OBJECTIVES

page 530_____________________

TACTICAL PRICING

page 532_____________________

PRICING MANAGEMENT

page 538_____________________

LEGAL AND ETHICAL ISSUES IN PRICING

page 539_____________________

page 533_____________________

page 531_____________________


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C H A P T E R 2 0 I E N S U R I N G T H E F I R M I M P L E M E N T S T H E M A R K E T I N G O F F E R A S P L A N N E D

Soft systems can also

help make firms more

externally oriented.

KEY IDEA

HRM gives the firm

many opportunities to

focus on the customer.

If the firm hires the

rightpeople and

develops and manages

them appropriately, an

external orientation

should follow.

KEY IDEA

Hiring experienced

marketers, including

those at the highest

levels, can play a major

role in developing an

external orientation.

Marketing education

can help marketers

learn new behaviors

that help instill an

external perspective.

KEY IDEA

Many firms training

courses include

customer input and/or

participation.

KEY IDEA

Managers at all

functions and levels

should have consistent

and regular contact

with customers.

KEY IDEA

Customer-focused

measures put teeth

into the external

orientation effort.

KEY IDEA

Todays success sows

the seeds of tomorrows

defeat.

KEY IDEA

page 562_____________________ page 563_____________________ page 564 __________________________________________________________

page 565 __________________________________________________________

TRANSFORMING THE ORGANIZATION TO BECOME EXTERNALLY ORIENTED CONTINUED

page 567_____________________

SUSTAINING AN EXTERNAL ORIENTATION


45/47

CHAPTER 21: MONITORING AND CONTROLLINGFIRM PERFORMANCE AND FUNCTIONING

KEY PRINCIPLES OF MONITOR-AND-CONTROL PROCESSES

page 574_____________________

page 576 __________________________________________________________

page 575 __________________________________________________________

Monitor-and-control

processes are the most

powerful means of

changing individual

behavior in firms.

Monitor-and-control

processes focus on the

firms results: Is the firm

achieving its planned

results? And on firm

functioning: Is the firmfunctioning well?

KEY IDEA

Post-action control

means waiting for a pre-

set time before compar-

ing actual results against

performance standards.

KEY IDEA

Steering control con-

tinually compares the

firms actual results to

performance standards

and allows it to be more

market responsive.

Feedback cycles the

time between the firms

actions and the results

it measures should

not be too short.

KEY IDEA

The firm should use

objective measures for

monitor-and-control

purposes; if scales are

appropriate, these

should be validated.

KEY IDEA

The firm should meas-

ure performance at

multiple organizational

levels.

Good performance in a

unit or sub-unit canhide poor performance

elsewhere. The firm

must isolate the

problem areas.

KEY IDEA

The firm should

measure both unitsales volume and

sales revenues.

The firm must ensure

its volume measures

are accurate and

consistently derived.

KEY IDEA

Marketers generally

prefer profit contribu-tion and direct product

profit measures to

bottom-lineprofit.

KEY IDEA

Most firms measure

product profitability;fewer firms measure

customer profitability.

KEY IDEA

page 581_____________________ page 583_____________________ page 584 __________________________________________________________

MONITORING AND CONTROLLING FIRM PERFORMANCE

Sales volume and

profitability measureshave serious short-

comings; they dont

show the firms

performance relative

to its competitors.

KEY IDEA


46/47


47/47

APPENDIX: FINANCIAL ANALYSIS FOR MARKETING DECISIONS

SECTION 1: PARTITIONING COSTS FOR MARKETING DECISION-MAKING

page A2 _____________________

page A7 _____________________

page A13 ____________________

page A8 _____________________ page A10 __________________________________________________________

page A5 _____________________ page A6 ___________________________________________________________

Variable costs increase

and decrease as

volumes increase

and decrease.

Fixed costs do not vary

with volume over a

reasonable range.

KEY IDEA

For marketing decision-

making, the firm should

reclassify its costs as

variable and fixed.

A contribution magin

approach makes it easy

to calculate the profit

impact of volume

changes.

KEY IDEA

Contribution margin per

unit is contribution on a

per unit basis.

KEY IDEA

At the breakeven point

contribution margin

covers fixed costs and

profits are zero.

Profit is a residual. Its

what is left over after

contribution margin

covers fixed costs.

KEY IDEA

Managers can change

programmed fixed costs

in the short/medium

run. Standby fixed

costs only change in

the long run.

KEY IDEA

The firm can use the

breakeven approach to

calculate the profit

impact of changing

programmed fixed

costs.

KEY IDEA

The difference between

a direct cost and an

indirect cost is simple

to figure out. I f the

product, sales territory,

or function were to go

away and the cost

would also go away,

it i

Documents

Marketing Key Ideas