Principles of marketing: An applied, collaborative learning approach

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Author’s Note

This Principles of Marketing e-text is my first effort at writing a textbook. I havetried to gather and record the areas of marketing that meet two goals. First, Ihave incl ded the information that is most likely to be sed by a typical marketing

st dent. !econd, I have written abo t principles of marketing that are tr eprinciples, that is, that are less likely to change f ndamentally in the foreseeablef t re. In choosing material to cover, I have tried to consider the fact that mostpeople who learn this material do not have their primary professionalresponsibility in marketing. Therefore, I have attempted to foc s on material thatwill be most helpf l to those who will not work primarily in the marketing area. Ifyo learn this material and are not a marketing person at least it will help yowork more effectively with those who are in marketing and improve yo r ability tobe a better cons mer.

I hope yo en"oy yo r experience with this e-book. #s with any pro"ect, I will be

trying to contin o sly change this book to meet the needs of its sers, so pleaselet me know of any s ggestions, recommendations yo may have partic larly asthey apply to yo r ability to learn and apply the material presented.

$exis F. %iggins, Ph.&.

lexishiggins'yahoo.com

mailto:[email protected]

mailto:[email protected]



Principles of marketing: An applied, collaborative learning approach

Table of Contents

Chapter One ( )hat is marketing and how does it differ from sales, advertising,

and promotion*Chapter Two ( )hat is Marketing Management and what do prod ct managersand marketing managers do*Chapter Three ( %ow do we identify and nderstand markets*Chapter our - )hy do we st dy b ying behavior in Marketing and what havewe learned*Chapter ive ( %ow companies manage marketing researchChapter !i" ( %ow do companies decide what prod cts and services to market*Chapter !even ( !pecific +hallenges of Marketing %igh TechnologyChapter #ight ( %ow is the pricing decision made*Chapter Nine ( %ow do prod cers get their prod cts and services to their target

c stomers*Chapter Ten ( )hat are the options for promoting prod cts and services*Chapter #leven ( +reativity and MarketingChapter Twelve ( )hat is the international market and why is it important*



Chapter One $ %hat is marketing and how does it differ from sales,advertising, and promotion&

Marketing is one of the most misunderstood and confusing terms used in business. How

would you define it? Think about what you believe marketing is and write your definitiondown now:

Marketing is : ”_________________________________________________

_____________________________________________________________”.

Save this definition to compare it to other definitions of marketing we cover later on.

Why is the term “marketing” surrounded by confusion?

irst! the word "marketing# means very different things to different people in differentindustries. or e$ample! a coal producer in %entucky &ust needs to understand what pricethe local buyer will be paying for the product and s'he can then plan to "market# (or &ustsell) the coal produced to the local buyer. Second! think about how much different theabove situation is from another case in which "marketing# must be done. *et#s say thatyou are a product+marketing engineer at ,gilent Technologies and your -roduct

arketing anager has informed you that you will be responsible for "marketing# a new product that has been conceptuali/ed by engineers in the 0esearch and 1evelopment(021) 1epartment. inally! assume a good friend of yours who has invented a new wayfor people to wash their car. She has asked you "to market# her product for her. 3n allthree of these situations! the product has already been conceptuali/ed and produced. 3twon#t help the individual marketer at all to consider how the market will react to the

product. 3n situation one! the coal miner must &ust e$tract the coal from the ground anddeliver it to a local coal broker for sale. 3n situation two! the product manager at ,gilentmust first figure out what the new product will be good for and who might want to buy it.

inally! in situation three! your friend has already invented the product4 it &ust remains foryou to figure out who the people are who wash their own car and how to reach them. 3nall three situations! the marketer is faced with coming up with a way to sell what hasalready been produced. This definition of marketing! unfortunately! is how most peoplewould define marketing! that is! 5 arketing is how an organi/ation or individual sells its

product or service.” Thus in this definition! marketing is relegated to finding ande$ploiting a market of buyers for the product or service.

6ut is that how marketing practitioners and people who teach marketing define it? *et#sreview some alternate definitions of marketing from the business literature.

The American Marketing Association’s definition. The ,merican arketing,ssociation (, ,) is the leading organi/ation in the 7.S. representing the academic sideof marketing. The organi/ation is comprised of and primarily impacted by people whoteach marketing at the college level. 3n 89 ;! the , , defined marketing as follows:



“The performance of business activities directed toward and incident to the f!ow ofgoods and services from producer to consumer or user.”"AMA #$%&'.

Note that the definition above focuses on the '(!T)(*+T(ON aspect ofmarketing and doesn’t reall include the - our P’s’: Product, price,promotion, place .distribution/0

3n 89;<! the , , definition was changed to “the process of p!anning and e(ecutingthe conception pricing promotion and distribution of ideas goods and services tocreate e(changes that satisfy individua! and organi)ationa! ob*ectives.” "AMA #$&+'

=ompare these two definitions: How are they similar and how do they differ?>hy do you think the , , made the change in the definition of marketing?

ow! compare the above discussion to @A70 definition of marketing. How do thedefinitions differ from yours? How are they similar?

Speaking of confusion! type in the key word 5marketing” into your favorite search engineon the internet and see what you find.

The Seven Steps in the Marketing Process

3t is natural that people in different situations define marketing differently. However! wewill approach the definition of marketing by first learning about the seven steps in the

process of marketing. >hile this process is not always followed! it is important that anystudent of marketing understand what steps must be taken to be successful in a marketingeffort. The marketing process can be described in the following seven steps:

,. ,nderstand the market wants'needs of interest6. 6ased on relative si/e and needs of the market! se!ect certain segments of the market

that are of the most interest to you and your organi/ation=. Thoroughly describe these segments based on their individual needs1. -reate a product or service that will meet the specific needs identifiedB. -ommunicate the concept of the product or service to the targeted customer in a

way that makes sense to the customer . e!iver the product or service to the targeted customer in a way that will be

convenient to the customer C. /o!icit feedback from the customer about how your product or service could be

improved to meet the customers# needs even better

This process is applicable to most situations encountered by those wanting to market a product or service. The process of marketing can be divided into "upstream# and"downstream# activities. That is! steps , through 1 are all "upstream# activities that



should be performed before a product actually e$ists. Surely! there are many readerswho will say! 5>ait! this won#t work for me! 3 am like those people who you describedat first! 3 already H,DB a product to sell! 3 &ust need to find somebody to 67@ 3TE” ,smarketers! we understand that many sellers don#t have the option or input to create a new

product or service. However! this e+book is designed for people who want to do

marketing the right way. 3f you must pick up the process after steps ,! 6! and = havealready been performed! reali/e that some steps have already been done! and you shouldcheck to see if they have been done correctly.

,lso note that marketing research plays an integral role in each of these stages. That is!the organi/ation that is truly focused on customer needs must be driven by an activeresearch effort.

'efinition of marketing we will use in this book

6ased on the seven+step approach to marketing! we will define marketing as:

“The conceptua!i)ation and de!ivery of customer satisfaction” F the first part of thisdefinition would be covered in steps , through 1 in the marketing process above and thefinal aspect "delivery# would be represented by steps B! ! and C. Af course! in order todeliver "customer satisfaction!# one must do customer research! thus step C will providefeedback into the continuation of the seven+step marketing process over time.

+pstream and 'ownstream 1arketing Activities in the 1arketing Process

)hat marketing activities are performed and how they are performed will have alot to do with how many choices yo have in managing the steps marketingprocess and the foc s of the organi ation s marketing effort. Theorgani ation will view the marketing f nction s responsibilities based on thehistory of the organi ation and its orientation to doing b siness. Forexample, there are several different orientations that organi ations se toapproach doing b siness or serving their c stomers. s ally, the firm doesnot specifically state this orientation. For example, if a firm defined itsprod ct policy as /research leading to creation of the most sophisticated,highest 0 ality prod cts and services in the world1 then it has decided to sea /Prod ct or Prod ction 2rientation.1 That is, the organi ation has decidedfor itself what c stomers want 3sophisticated, highest 0 ality prod cts4 andhas ignored the first three steps in the marketing process we describedabove.

#s a cons mer, do all c stomers want the most sophisticated, highest 0 alityprod cts and services* &o yo as a cons mer always seek o t the mostsophisticated, highest 0 ality prod cts and services*

%rite our answer to this 2uestion in the following line:



3333333333333333333333333333333333300

,nother approach or orientation to managing the marketing function can be called 5 /a!es"or 0romotion' orientation ”. 3n this approach! marketing is seen as serving the samefunction as with personal selling and advertising! and marketing#s primary &ob in the

organi/ation is to "sell! sell! sell.# 3n this approach! steps , through = of the marketing process are largely ignored and marketing resources are instead placed on generatingmore sales.

There is an approach to marketing called the 5=ustomer as onarch (or arketing)=oncept” and while it has been around under different names for many decades! it is stilla good guide to managing marketing activities. 3t can be described by the slogans "we doit all for you!# "have it your way# a former 6urger %ing slogan! or &ust by the simplesaying which perhaps you have already heard! 5find a need and fill it”. The arketing=oncept would rephrase this saying a bit! and be represented by an approach of 5find aneed! and fill it profitably and more effectively than the competition!” @es! this is a

demanding task! but in these times! we e$ist in an e$tremely competitive world. otethat this competition includes organi/ations in both the for+profit sector and the not+for+ profit sector! with the latter being as competitive as the former. The 5+ stomer as Monarch and the 5Marketing +oncept are related to the !even

!tep Marketing Process

The marketing concept can be thought of as having four parts as follows:

0art 1 2 ,nderstand and meet customers needs ! said another way! provide satisfying products and services to your target customers0art 11 2 Meet organi)ationa! goa!s F this is applicable for both for+profit and not+for+

profit organi/ations. or+profit organi/ations should have goals other than profit! a for+ profit goal being "make a fifteen percent return on investment#. , longer+term goal thatis ultimately tied to profits but immediately is tied to customer satisfaction might be: 56ea recogni/ed leader in customer satisfaction in our industry.” ot+for+profit organi/ationshave goals non+financial performance such as "provide thirty hours of client services perweek consistent with our organi/ational mission.#0art 111 2 1ntegrate marketing activities F this part can be the most comple$! but alsothe most critical. That is! when the organi/ation has agreed on a marketing strategy! itmust e$ecute the strategy in an efficient and effective way. or e$ample! 5fifty+percent+off” coupons appearing in the Sunday newspaper will not reach the goal of inducing new

product trial if the product is not available in stores due to a problem with productdistribution and if sale catalogs are printed by a central office without coordination withlocal business outlets! there will be regular inventory understocks or overstocks.0art 13 2 /atisfy customers better than the competition . , indicated above! BDB0@A0C, 3G,T3A has competition. 3f there are not similar product solutions that providesimilar benefits available then there will be competing uses for e$penditure of thecustomer#s income.



*ike the Seven Step arketing -rocess! the arketing =oncept serves as a guide forapplying organi/ational resources directed at marketing.



Chapter One #"ercises:

8. Summari/e on a one+page report what you find after you get on the internetand search the keyword "marketing.# Argani/e your answer according to the

different categories you find in your search.. 3n a one+page essay! compare the different definitions of marketing discussedincluding your own definition. Has your definition of marketing changed? 3fso! how?

I. 3dentify an organi/ation that you believe is fulfilling each step in themarketing concept. 3n your analysis! go step by step to better e$plain youranswer.

. 3dentify an organi/ation that you believe is not fulfilling each step in themarketing concept. 3n your analysis! go step by step to better e$plain youranswer.

<. >rite a &ob description for a manager of the marketing function (that is! what

would be his'her duties and ma&or responsibilities) in the followingorientations: production orientation! sales orientation! market (customer)orientation.

J. 3n a one+paragraph answer! e$plain how you believe the personal selling effortshould be related to marketing in a modern organi/ation.

K. Civen what you have learned in =hapter Ane! e$plain the difference betweenthe terms 5marketing” and 5promotion.”

-hapter 4ne 5!ossary

Marketing 6 5The conceptuali/ation and delivery of customer satisfaction”,pstream marketing activities 2 understanding! selecting! describing target markets!and creating a product or service to meet the needs of those target markets

ownstream marketing activities 2 communicating a product or service concept to thechosen target market and providing customer satisfaction in the process by deliveringthat product or service-ustomer as Monarch or marketing concept F a philosophy of doing business inwhich the organi/ation places utmost importance on delivering customer satisfaction!meeting organi/ational goals! and outperforming the competition while integrating allmarketing activities.





Chapter Two $ %hat is 1arketing 1anagement and what do productmanagers and marketing managers do&

The Meaning of the terms Marketing Manager and Marketing Management

Traditionally if a person had the title of 5manager!” it meant that s'he had responsibilityfor helping guide the activities of at least some number of employees. >hile thisterminology has changed over the years! we still consider someone who has the title of"manager# to be responsible for overseeing the allocation of resources for theorgani/ation. or e$ample! as an "individual contributor# 3 might have the responsibilityof performing certain work (for e$ample! writing marketing literature for the firm#s

products)! but not be responsible for the activities of anyone other than myself. 3n hightechnology industries! the word manager is often replaced with 51irector” to indicate thata person has primary responsibility for a certain organi/ational function. or e$ample!the "marketing director# may be responsible for all marketing activities in the firm. ,t

other firms! the term "marketing manager# would be used to describe the same thing. 3nsome organi/ations! the Dice+-resident of arketing may perform the same functions.The term -roduct anager is often used in high technology industries to assignresponsibility to a specific individual or group for the successful supervision of allmarketing activities related to a specific product or service. Sometimes the productmanager#s responsibility is defined in terms of the product s'he is overseeing andsometimes the responsibility is defined in terms of a specific technology. or e$ample!one high+tech firm might use the title of -roduct anager+1igital Systems to describe the

&ob of the person who is responsible for digital versus analog customer solutions. This brings up still another consideration. The use of titles varies across industries and si/e oforgani/ations. >e will discuss how different firms organi/e the marketing function in alater chapter.

What is marketing management?

>e will use the following definition of marketing management: 5 Marketingmanagement is the process allocating the resources of the organi/ation toward marketingactivities.” Thus! a marketing manager is someone who is responsible for directinge$penditures of marketing funds. 0elated to the term "management# is the term"strategy.# any words in the vocabulary of business management were taken from thefield of military science. or e$ample! the word "strategy# has been used in the militaryfor many decades to indicate a long+term commitment of resources toward accomplishinga certain goal. Thus it is often said that management is responsible for conceptuali/ingstrategies! and other employees are responsible for implementing those strategies. Thetime+honored anagement+by+Ab&ectives programs in which a supervisor will formulatestrategies and other employees will choose the method of reaching those ob&ectives is ane$ample of this relationship in action. ,s the reader can see! a discussion of "strategy!ob&ectives! and goals# can very Luickly develop into a miasma of terms and confusion.Thus! we will use the following definitions. irst! we will consider goals and ob&ectivesto be identical terms. Second! we will use the term "ob&ective# to refer to a broad+based



design of where the organi/ation would like to be at some point in the future. ore$ample! as an ob&ective! the organi/ation might decide to be the "leader in productLuality as &udged by customer surveys of our organi/ation and our five leadingcompetitors.# >e will define the term "strategy# as a method used to reach an ob&ective.

or e$ample! to reach our product Luality ob&ective! our organi/ation might decide to

enroll in a "total Luality program# offered by most large consulting firms. Thus! strategywill have two meanings. irst! it is the overall orientation an organi/ation choosing toallocate its resources! and second! strategy is a specific action used to implement plans.Thus! there is a two+tiered nature to strategy. Ane at the top! as a broad guide to

preferred action! and one below helping to implement ob&ectives. 7se "strategy# as akeyword search on the internet and see what you find.

3n marketing! we often use the "four -#s# to designate the areas of control a marketingmanager has at his'her command. The "four -#s# as you probably already know are:-roduct! -rice! -romotion! and -lace. The "four -#s# represents a convenient way tosummari/e the main factors involved in any "marketing strategy.# However! seen in a

contemporary sense! the four -#s may mistakenly be limited to downstream marketingactivities only and as =hapter Ane indicates! there are also upstream marketing activitiesthat are related to the marketing mi$. 3f this does not make sense to you! please go backand review the terms used in =hapter Ane.

The 1arketing 1anagement C cle

The planning cycle is composed of five basic steps. irst! -lanning is the process ofe$amining and understanding the surroundings within which the organi/ation functions.

or e$ample! 5environmental scanning” is the process of studying and making sense ofall the things that might impact the firm#s operation that are e$ternal to the firm. Thiswould include studying and gaining an understanding of such things as: competition!legislation and regulation! social and cultural trends! and technology. 6oth present anddeveloping trends in each of these areas must be identified and monitored.

Second! 3mplementation is the process of putting plans that have been made into action. 3tis the transition from e$pected reality to e$isting reality.

Third! onitoring is the process of tracking plans and identifying how plans map tochanges that take place during program operation when more information is acLuired.=orrection is the stage in which we take action to return our plan to the desired state

based on feedback obtained in the monitoring stage. 3f we find that return to the plannedstate is not practicable! we may ad&ust our planning outcomes. Thus! onitoring and=orrection may be considered two stages because after plans are put into action! one mustcontinually monitor performance and make ad&ustments to the plan based on the feedbackgathered through these monitoring activities. 3n summary! the marketing managementcycle composed of planning! implementing! monitoring! and correcting. >e use the usethe term " 01M- # as a device to remember the stages.



An e"ample of the marketing management c cle in action:4et’s 5et (t Together amil Organi6ation !ervices

The organi/ational mission of this service firm is: 5>e provide families with means toimprove their peace of mind and Luality of life.” 0epresentatives of the firm meet with

families! Luestion them to understand how the family operates at present! do an on+site"activities audit# that models patterns of daily life for the family! and then offersuggestions about how the family can be better organi/ed and more efficient in its use oftime. *et#s Cet 3t Together is owned and operated by a mother of three children. ,fterconducting several informal focus groups! she decided to start this business because shereali/ed that her family and most other families she observed lived in a state of chaos.,fter attending a seminar on creativity and innovation! she decided that there was a realneed in the marketplace for a not+for+profit educational institution to pass along all of theknowledge families have about how to manage their household activities moreeffectively.

,fter she came up with the idea! the owner reali/ed that she must get organi/ed herself!thus based on the 5 ive >#s and H TechniLue” (>ho! >hat! >here! >hen! >hy! andHow) she composed the following Luestions:

>hat will the customer satisfaction entail! that is! what are the needs 3 am trying to meet?>ho will receive customer satisfaction?>hy will my organi/ation deliver this particular customer satisfaction?>ho will deliver customer satisfaction?>here will 3 deliver customer satisfaction?>hen will 3 deliver customer satisfaction?How will 3 deliver customer satisfaction?

The owner then modeled the marketing management cycle as follows:

-lanning: irst answer the seven Luestions 3 have formulated.

,nswers to Luestions:

Muestion N 8: >hat will the customer satisfaction entail! that is! what are the needs 3 amtrying to meet?,nswer: -rovide easy+to+follow guidance on improving family organi/ation

Muestion N : >ho will receive customer satisfaction?,nswer: amilies who perceive a need for being better organi/ed.

Muestion N I: >hy will my organi/ation deliver customer satisfaction?,nswer: irst! there is a already perceived need to be better organi/ed. Second! there areways to fulfill that need that are not being provided to families.

Muestion N : >ho will deliver customer satisfaction?



,nswer: *et#s get it together! through a small staff of highly trained and ethicalindividuals! will provide this service to families

Muestion N <: >here will 3 deliver customer satisfaction?,nswer: The service will be provided through small introductory seminars and through

meetings in the homes of the families! if preferred.

Muestion N J: >hen will 3 deliver customer satisfaction?,nswer: =ustomer satisfaction will start with the first seminar and continue through acontinuing association with *et#s get it together.

Muestion N K: How will 3 deliver customer satisfaction?,nswer: Through a personal and caring approach with my clients involving seminarsand continuing personal contacts

3f you review the seven Luestions! and the answers above! you can see that some of the

planning has been done. >hat remains is to identify specific actions that must take placeto ensure success such as identifying the characteristics of the best candidates for ourservice! creation of the service materials (seminar materials! etc.) and details of thelogistics by which the service will be promoted and provided.

, brief e$ample of one aspect of this organi/ation#s marketing planning is:5>e will provide seminars that last one+half day to families who perceive the need forhelp in organi/ing their activities! thus we must identify likely places to offer theseseminars. >e have obtained a list of community centers! where space is provided free+of+charge for such activities! and will offer our seminars there! initially. However! wemay change that approach after initial seminars are offered (monitoring and correction)and move our seminars to more centrally located sites such as hotels and churches.”

The *usiness Plan

The business plan is an overall blueprint for the anticipated activities for the organi/ationover a coming time period! usually one+year (short term) or five+year (long+term). >eshould mention that many businesses are moving their long term planning periods to tenyears and beyond in order to better prepare for the future. These businesses often makeuse of creativity techniLues to attempt to outline what changes may occur in theirrespective environments and how the organi/ation should respond to those changes.



The 1arketing Plan

To form late effective marketing programs an organi ation needs to create andfollow a marketing plan. # marketing plan is a doc ment that describesthe activities in which the organi ation intends to engage in a coming

time period, s ally one-year. %owever, there are often sit ations inwhich an organi ation will have a medi m-term marketing plan 3two tofive years4 and a long-term marketing plan that covers plans for a five-year period or greater.

)hile there are many different approaches to preparing a marketing plan, thefollowing conditions sho ld exist6

8. those who do the plan are responsible or accountable for the plan#simplementation

. this same group is committed to the plan#s success

I. management is committed to the plan#s success and is willing to e$pendthe necessary resources for its implementation. the marketing plan is created in the conte$t of the organi/ation#s overall

business plan<. people in the organi/ation share a similar orientation to the marketing

function

3f these five conditions are met! the organi/ation is much more likely to be able tosuccessfully create and implement its marketing plan.

,n e$ample for the marketing is as follows:

3. B$ecutive summary (a one+page to two+page overview of the contents of the plan)33. Dision for the marketing plan (a paragraph that briefly describes the aspirations

for the coming time period and the theme of the plan)333. S>AT analysis outlining the strengths and weaknesses (internal to the

organi/ation) of the organi/ation and the opportunities and threats (e$ternal to theorgani/ation) that the organi/ation faces.

3D. 1escription of market'customer types and products'services that will providesatisfaction to those markets and customers

a. arket grid of markets and customers b. -roduct'service positioning strategy

D. arketing ob&ectives for the coming period (ob&ectives should be 5S7 ,=” orspecific! understandable! measurable! attainable! and consistent)

D3. 1escription of marketing programs with timeline (a calendar of ma&or marketingevents planned! with a description of each event)

This outline should be combined with the -3 = model described earlier in the chapter.The -3 = serves as a good guide for on+going implementation of the marketing plan.



>hile the outline above is simplified! it touches on the critical areas for a marketing plan.3t is important to point out! however! that a plan is only as good as its implementation!thus! it is usually better to have a poor plan and good implementation than a great planthat never gets implemented.



Chapter Two #"ercises

;. =all your local grocery or supermarket and ask to interview the store manager.Schedule an interview and in the interview ask the manager how s'he woulddefine marketing management. ,nd how his'her &ob relates to marketing

management.9. 3f you have an industry of interest! e$plore the definition of marketingmanagement in that industry by interviewing someone who works in thatindustry.

8O. ,pply the -3 = planning cycle (planning! implementation! monitoring! andcorrection) to model the actions necessary for a ten year old to set up alemonade stand. >rite a one+page essay on your analysis! identifyingactivities conducted in each step in the -3 = cycle.

88. 7se the marketing plan outline in the chapter to prepare a marketing plan forthe lemonade stand. *imit your marketing plan to two pages using keywordsto describe your plan.

8 . Search the internet for the term 5-roduct manager” and write a one+pagesummary of your findings.8I. >rite a &ob description for a marketing manager of the marketing function.

How does it compare to the description you gave in answer to Luestion si$ inchapter one?

8 . 3n a one page essay! make observations on "*et#s Cet 3t Together# amilyArgani/ation Services!# including the benefits families can e$pect from

participation and your estimate of demand for this new service. To whatsegment! if any! do you believe this service will appeal? 1escribe thissegment of families using factors like family income! education! lifestyle! etc.

-hapter Two 2 5!ossary

Marketing management 6 the process allocating the resources of the organi/ationtoward marketing activitiesMarketing p!an 6 a document that describes the activities leading to customersatisfaction the organi/ation anticipates intends to engage in a coming time period!usually one+year.





Chapter Three $ 7ow do we identif and understand markets&

,s a student of marketing! you have already learned that the main purpose of modernmarketing is to serve customers. 3f the organi/ation really believes in this philosophy!

that is! 5the =ustomer 0ules!” it only remains for the organi/ation to focus on researchingand understanding its customers and then delivering products and services to thecustomer that will not only meet the customer#s needs! but satisfy the customer in a waythat will keep the customer coming back to our organi/ation to do business with us.Therefore! often the first assignment for the marketing function is to gather and analy/einformation about customers. Today! that usually means first attempting to understandthe structure of the marketplace.

+nderstanding the 1arketplace and 'ifferent Customer !egments

The main goal of market segmentation "dividing the market into different portions

based on differences in customers' is to better understand the needs of our customersthus we need a structured approach to attain this goal. , simple seven+step approachfollows:

Step Ane: 3dentify the type of market with which you will be dealing

Step Two: ,naly/e the areas of satisfaction you are attempting to provide to thismarket! that is! what wants or needs do you intend to satisfy?

Step Three: Select dimensions with which to segment the market

Step our: 6ased on the selected dimensions! identify the segments inthe market under study

Step ive: Bvaluate whether the segment in which you are interested meetsthe four criteria for effective segmentation

Step Si$: =reate a profile of the customer identified including purchasing behavior e$pectations

Step Seven: =ombine the segmentation analysis with other analyses related to the product! market! and business strategy.

!tep 2ne6 Identify the type of market with which yo will be dealing

Types of Markets

arket segmentation is an approach by which we identify! define! and understanddifferent sub+markets for products and services. or e$ample! the automobile market is



comprised of many segments including passenger cars! vans! sports utility vehicles! pickup trucks! and many others. otice! that if youchoose one segment! for e$ample! passenger cars! there are many segments within thatsegment (for e$ample! Two+door sports sedans! four+door station wagons! convertibles!etc.). The first step to market segmentation is understanding and defining the market with

which you are working. or e$ample! if we e$amine the market for toothpaste! we mightfirst look at the type of market we are looking at. ormally! in marketing! we canidentify four types of markets.

8. consumer markets F people who buy for their own! personal non+business use(for e$ample! you buy a lawnmower at >al+ art to mow your own yard).

. organi/ational markets F organi/ations buy goods and services for use in theoperation of their businesses or for resale. or e$ample! =ompaL computer

buys many of its microprocessors from 3ntel =orporation and your localdentist must obtain supplies and materials to provide his'her services to

patients.

I. government markets F *ocal! state! and federal governments taken togetherconstitute for the largest demand for goods and services in the 7.S. ore$ample! your local police department must buy patrol cars.

. institutional markets F these markets include universities! hospitals! and othersimilar organi/ations. or e$ample! a hospital cafeteria must purchase foodand other supplies to run its operation.

ote that each of these types of markets has demand for both goods (tangible productsthat we can touch! feel and see) and services (intangible products that we cannot touch!feel! and see). ,fter identifying the type of market! we can then begin to identifysegments within that market. or e$ample! if we are analy/ing the consumer market fortoothpaste! we reali/e that there are many segments identified in that market already:health (that is! fluoride! tartar control! sensitive gums! and so forth)! attractiveness(whitening! breath freshener! etc.)! special needs (smokers# toothpaste! kids# toothpaste!etc.). ote that there are several different dimensions for segmenting markets. ore$ample! the last category we mentioned "special needs# includes both a lifestyle segment

F smokers! and an age segment F children. >e will address this issue later in the chapter.

1ifferent types of markets often reLuire a separate basis for market segmentation. ore$ample! we freLuently use age as a way to understand and segment consumer markets

because age often accounts for significant differences in the wants and needs ofconsumers. or e$ample! consider passenger cars. any people in their early yearschoose cars on the basis of styling! economy! acceleration! and! of course! price. Seniorsmay choose their car based primarily on brand name and safety issues. Thus age is oftenan important criterion in what satisfies a particular consumer. However! age is rarelyused to identify differences between organi/ations because usually! the age of anorgani/ation does not usually significantly impact its particular demand for products andservices. ,s in many cases in marketing! the e$ceptions to this statement only serve to

prove the rule.



!tep Two6 #naly e the areas of satisfaction yo are attempting to provide

to this market, that is, what wants or needs do yo intend to satisfy*

,s we will discuss in following chapters! people and organi/ations usually purchase benefits: not products or product features. Therefore! market segmentation analysisreLuires a clear definition of the benefits customers are e$pecting to receive through

purchase. or e$ample! people buy vacuum cleaners to attain their personal goal ofhaving a clean! sanitary carpet. The form of the product doesn#t matter as much as the

product#s ability to provide those benefits. >hat would you do if you were marketingmanager of a company that has vacuum cleaner bags as its sole product when more andmore vacuums are "bagless?# The implications for product design will be discussed in alater chapter.

>hen deciding on how to distribute a product! one organi/ation may choose the internet

based on its customers# desire for efficiency in buying and familiarity with the world+wide web! while another organi/ation may choose to distribute its products through atraditional retail outlet because the segment chosen prefers to "touch and feel# the

product.

or an additional e$ample! consider a small gift shop. 3f a market research studyindicated that customers of the shop preferred a lot of assistance in the product choice

process because over three+fourths of the products purchased in the store were purchasedas gifts! the product would be distributed through a physical location within which thecustomer could compare alternatives. Thus! the primary benefits sought in this shop werefinding a good gift idea with a sense of security against giving an inappropriate gift.

otice that the store#s owner might change from an inventory similar to her competitorsto a differentiated set of product choices aimed at meeting her customers# purchasinggoals of Luality and uniLueness.

!tep Three6 !elect dimensions with which to segment the market

The dimensions sed to segment the different types of markets will be organi edaccording to type of market beca se the dimensions sed for segmentation varys bstantially.

1imensions for Segmenting =onsumer arkets

#s disc ssed earlier, people in cons mer markets b y for their own, personalnon-b siness se, th s segmentation dimensions for this type of market foc s onthe characteristics of the b yer. Fo r dimensions are traditionally sed tosegment cons mer markets. These dimensions are6

a. demographic dimensions + demo# means people! and "graphics# means somerepresentation of thereof. So! demographics consists of all those



characteristics of people that are used to describe the si/e and composition ofthe population including age! gender! amount of income! level of education!and other such attributes.

b. psychographic dimensions + "psycho# from Creek means "spirit or mind# sowhile demographics deals with the statistical characteristics of the market

segment! psychographics refers to the characteristics of peoples# spirits andminds. or e$ample! psychographics is usually broken down into personality!life style! and motivation.

c. geographic dimensions F this dimension! not surprisingly! relates to where people live! for e$ample! the demand for snow skis is higher in themountainous states in the 7.S. than it is in the plains states.

d. behavioristic (or intended use) F this dimension relates to benefits sought ande$pected use by the customer. or e$ample! many products are sold inmultiple packages such as si$+packs because customers e$pect to consumemultiple units in relatively short periods of time.

&imensions for !egmenting 2rgani ational Markets=ustomers in organi/ational markets buy products either to use in the operation of their

business or to resell to other organi/ations. or e$ample! >almart must purchasecleaning products to keep >almart Stores clean and attractive! but >almart also buyscleaning products to sell to their customers. Civen this situation! different segmentationstrategies are reLuired based on the intended use of products bought by organi/ationalcustomers. 6ases often used include:

a. intended use of products bought b. e$pected benefits to be provided by products purchasedc. si/e of organi/ationd. S3= (or ,3=) codeP of organi/ation#s or organi/ation#s productse. Ather characteristics of organi/ation or specific industry

PStandard 3ndustrial =lassification or orth ,merican 3ndustry =lassification Systemcodes are numbers derived from the core business in which the organi/ations areengaged. These codes are useful for segmentation because all industrial activities aregiven a code in the 7.S. This scheme has been widened to include =anada and e$icosubseLuent to the , T, agreement. =heck out the website athttp:''www.census.gov'epcd'www'naics.html .

!tep Fo r6 7ased on the selected dimensions, identify the segments in the

market nder st dy

#fter dimensions have been selected to se in defining the segments, segmentsthen m st be identified in the market nder st dy. For example, if we are trying

http://www.census.gov/epcd/www/naics.html

http://www.census.gov/epcd/www/naics.html



to analy e the market for personal comp ters, we might choose to identify thefollowing segments6 desktop, laptop, P&# 3personal digital assistant4. )hich ofthe fo r dimensions did we se to create those segments* Primarily,behavioristic 3intended se4, beca se portability and comp ting power are twoimportant benefits so ght by different pc sers.

!tep Five6 8val ate whether the segment in which yo are

interested meets the fo r criteria for effective segmentation

To be useful! an approach to segmenting markets! the segments must be:

8. measurable (we can estimate how many people or organi/ations are in thesegment)

. accessible (we can reach the segment through available means)

I. compatible (the segment is consistent with the overall goals of theorgani/ation). substantial (the segment is large enough to &ustify our develop of products or

services &ust for that segment)

These four dimensions are helpful for understanding any market structure. However! wemust first understand the market! itself. or e$ample! try using this information toanaly/e a market with which you are familiar. 3dentify the different segments in thatmarket and list the four factors above! and the concerns for each factor as it relates to the

product or service you picked. or e$ample! segment the market for shampoo or soup!listing each criterion above followed by an e$planation about how this characteristic will

be present in the target market.

!tep !ix6 +reate a profile of the c stomer identified incl ding predictions

of expected p rchasing behavior

#s one might expect, there is a large body of literat re related to b ying behaviorin marketing beca se marketing foc ses on the b yer and his9her characteristics.)hile we will cover parts of this literat re the reader sho ld reali e that there areh ndreds of tho sands, if not millions of pages p blished in this area.

7sually when we attempt to model the buying process of our target customer. Af course!this process differs considerably across different types of markets as well as acrossdifferent types of customers.

nderstanding the significance of the p rchase for the target c stomer



Dery often! marketers overestimate the importance of purchases to consumers. aturally!if one researches! manufactures! and distributes a product to consumers! one is intimatelyinvolved with the product often virtually every working hour. This circumstance oftenresults in a heavy emphasis on customer decision+making when in fact the customer mayonly react on a very shallow psychological plane to products offered and the purchase

decision is in reality almost an afterthought. However! it is important for marketers toattempt to model the e$pected buyer behavior involved for their product. >e will discussthis issue further in the following chapter.

Marketing !trategy

>e will define "marketing strategy# as 5a marketing mi$ aimed at a specific targetmarket.” >hile this definition is a use of the "lower level# of the term strategy! we

believe that the definition is appropriate for beginning students in marketing. 3f we lookcloser at this definition we can see that a marketing strategy is:

A Marketing -roduct or serviceMix -rice AIMED AT a Q Target Market1istribution (-lace)-romotion

>e will use this definition throughout our study of marketing principles and you willsoon become comfortable thinking in these terms.

#"ample of seven8step segmentation process

-4et’s 5et (t Together’ amil Organi6ation !ervices

/tep 4ne7 1dentify the type of market with which you wi!! be dea!ing

/ The cons mer market1

!tep Two6 #naly e the areas of satisfaction yo are attempting to provide

to this market, that is, what wants or needs do yo intend to satisfy*

“We seek to enhance family life for parents and children alike by providing practical tools to improve organization in family life”

/tep Three7 /e!ect dimensions with which to segment the market

Demographic, Psychographic, Geographic, Behavioristic(a note to the reader: segmentation doesn’t always requires the use of all four ofthese factors in creating a profile but we suggest you always use each dimensionin your analysis whether or not you decide to drop one later on in the process!



/tep 8our7 9ased on the se!ected dimensions identify the segments in themarket under study

"emographic # household income over $%& &&& at least one parent is collegeeducated both parents work two children or more in household

suburban location in medium to large city'eographic # every geographic region of the )*) has families who fit our profile also see "emographic above +sychographic # ,busy or hectic’ lifestyle as described by people in segment -ehavioristic # family perceives life is ,too hurried too complicated too little

quality time together’

"0!ease note7 4ur marketing research studies indicated these facts and a!!owed us toformu!ate our customer profi!e'

!tep Five6 8val ate whether the segment in which yo are interested

meets the fo r criteria for effective segmentation

easurable F we were able to assess this segment and understand by using onlythe census data published by the 7.S. 6ureau of the =ensus(Website is http:''www.census.gov' !,ccessible F we can easily identify and communicate with households in profile.However! selecting specific households that may want our service is much moredifficult.=ompatible F our organi/ational mission is aimed at serving this segment! so! yes!the segment is compatible with our organi/ation and other products'servicesSubstantive F our research and pro&ections indicate that there are millions ofhouseholds in our target market. Therefore! we are starting our service in one cityand e$panding the service over the coming years.

!tep !ix6 +reate a profile of the c stomer identified incl ding p rchasing

behavior predictions

See Step our above. ,lso! we know that purchase behavior is a highinvolvement transaction for our target families. !tep !even6 +ombine the segmentation analysis with other analyses

related to the prod ct and market

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http://var/www/apps/conversion/tmp/scratch_3/is%20http://www.census.gov/)



>hile we believe our concept has a lot of promise! we must continue to flesh itout and do research. Argani/ational research will continue while weconceptuali/e and offer our first seminars to keep track of changes in the socialenvironment of our chosen geographic markets. >e will also maintain a researcheffort with all people contacted in relation to our concept including families who

participate! healthcare professionals! and community leaders.



Chapter Three #"ercises

8<. Summari/e in a one+page report what you find after you get on the internetand search the keyword "market segmentation.# Argani/e your answer

according to the different categories you find in your search.8J. Co to your local grocery store or supermarket and visit a specific productsection. 6reakfast cereal! bread! and personal care products are three goodareas! but there are many others. -ick a product category that is of interest toyou. Abserve the products offered and identify product categories that are

based on different consumer segments! in your opinion. -repare a one+pagereport on your findings.

8K. 7sing the four dimensions of segmentation for consumer markets! describe amarket segment with which you are familiar. 3n this e$ercise! list each of thefour dimensions and describe the segment with those dimensions. ore$ample! the market segment that Saturn ,utomobiles has worked towards

pleasing is men and women with a college education! in the middle+incomecategory. They lead a relatively frugal lifestyle and seek economy and Lualityin their purchases.

8;. =heck out the website of ,merican 1emographics aga/ine athttp:''www.americandemographics.com' . 0ead an article and write a one+

page summary of the article and its relevance to marketing.89. 3f you have an industry of interest! e$plore the markets and types of customers

served by that industry. ( or e$ample! the local utility company may beowned by government! so as a customer it will be considered a governmentmarket.)

O. ,pply the seven+step process of market segmentation to a new product ideathat you conceive listing your activities and comments in each step in the

process.8. 1o an internet search on each of the four dimensions of market segmenting

consumer markets (demographics! psychographics! geographics! and behavioristics) to compare your findings to the material in your -rinciples of

arketing e+book.. ,pply the -3 = planning model (planning! implementation! monitoring!evaluation! correction) to a club to which you belong. 3dentify each stepclearly.

I. >rite a &ob description for a manager of the marketing function. How does itcompare to the description you wrote in answer to Luestion si$ in chapter one?

http://www.americandemographics.com/

http://www.americandemographics.com/



-hapter Three 5!ossary

market segmentation + dividing the market into different portions based on differencesin customers

demographic dimensions F grouping potential customers on ob&ective factors! fore$ample! age'income'gender'ethnicity and level of education

psychographic dimensions F grouping potential customers on psychological factorsincluding personality! life+style! and motivation for purchases

behavioristic "or intended use' dimension Fused for market segmentation! thisdimension relates to benefits sought and e$pected use by the customer

marketing strategy + a marketing mi$ designed for and aimed at a specific targetmarket



Chapter our 8 %h do we stud bu ing behavior in 1arketing and whathave we learned&

3n =hapter Three we e$plored the different types of markets and the process of dividing

those markets into smalls portions called market segments. 3n this chapter we e$amine afew basic concepts related to buying behavior. >e use the term 5a few” because inmarketing! more has been written about buying behavior than in any other area. >hy doyou suppose this it true?Af course! you already know the answer: arketers believe the 5=ustomer 0ules” thuswe know our primary responsibility to the organi/ation is to gain an intimate knowledgeof our customers: what satisfies them and makes them happy and what benefits they areseeking in the marketplace.

+ons mer 7 ying 7ehavior

0esearchers in marketing have studied most areas of consumer behavior including theimpact of everything from music to lighting on how people behave and how theyconsume products. This is not surprising considering the fact that we live in aconsumption+driven culture. >e will focus on the basic constructs accepted today in thestudy of buying behavior.

+ons mer &ecision-Making

ost studies of the decision+making process in marketing have used an adaptation of thescientific method. This decision+making process is as follows:

a. -roblem recognition F the consumer recogni/es a problem. or e$ample! her carhas had ma&or mechanical problems for the last two months.

b. 3nformation search F internal and e$ternal. The consumer thinks about optionsshe may have to remedy her situation (internal search). ,nd then she seekse$ternal sources of information such as friends! newspapers! TD! and the internet.

c. ,lternative identification and evaluation F she has some ideas about whatalternatives she has and how to approach them. She now must compare andcontrast the options she has.

d. =hoice and purchase F based on this process of consideration the consumer now purchases the most attractive option she has identified.

e. -ost purchase evaluation F the consumer e$periences her choice and determines ifshe is happy with it.

f. eedback learning for future consumption behavior F the consumer remembershow she feels about her purchase and makes note of it for future reference(internal search).

,s a student! learning this approach is worthwhile for you so that you will have a generalframework to understand your purchasing behavior and the purchasing behavior of othersfor purposes of marketing research.



Af course! there are e$ceptions to the rather rigid! mechanistic processabove. irst! we often don#t go through all of the steps. This fact sometimes has to dowith :invo!vement’ . 3nvolvement can be defined as the personal importance and socialsignificance of the purchase. The importance can be a function of how much the product

or service costs and whether there are any social risks involved. 3nvolvement is oftenclassified as "high# or "low#. >e would add "medium# to the categories! because many products we buy fit into that area. or e$ample! we rarely buy new cars! laser surgery forvision correction! and new houses (all three of these would be high involvement) andwhile we freLuently buy low involvement products (coffee! soft drinks! chewing gum) wealso buy many more durable products that can be considered medium involvement. ore$ample! if a college student buys a new =1 player for his car or a new sports+coat! bothof these would probably be considered medium involvement because they are in themedium price range as far as his budget is concerned and there is some level of risksurrounding the purchase.

There is also another important consideration called situationa! effects . Situationaleffects are all of the circumstances surrounding our purchases that may strongly impactour decision+making process. or e$ample! a female college student is preparing to goout with her friends for the evening. She and her "buds# have decided to go to a clubwhere there will be music! dancing! and! most importantly! young men. The studentdecides to go to 1illard#s and buy a new blouse and a pair of new "dressy# slacks in

preparation for the night out. She also buys some makeup and fragrance. Rust last nightin the midst of studying for an e$am when the same student went out with her friends for

pi//a at a local pi//a parlor! she wore &eans and a ragged sweatshirt. >hy was there sucha difference in her dress and preparation? The social nature of the two evenings was verydifferent! thus situational effects strongly impacted this person#s buying behavior. >ehave all had a battery "go out# in our car and most of us don#t think of shopping for a

battery until our present battery goes dead. ,gain! the situation strongly impacts what arewilling and able to do as far as buying behavior. 7sually! we &ust try to find a batterywherever we can and as soon as we can to solve our problem.

>e! as consumers! feel no responsibility "to follow the rules# thus we may engage inunorthodo$ buying behavior that defies classification. or e$ample! go to >almart andobserve customers there. @ou will see all types of people buying all kinds of things:some of those purchases will be planned and some will be unplanned! although! ofcourse! you won#t be able to tell which is which. Aften! a "shopping trip# is directed notto a specific! planned purchase but &ust to "see what available# F so while the cognitive

perspective on shopping is useful! there is also a lot of buying behavior that defiesunderstanding. or e$ample! think a situation in which you engaged in an "impulse

purchase.# ,n impulse purchase is an unplanned purchase in which we &ust decide to buythe product with very little prior consideration.

:ro p9!ocial ;ariables that impact 7 ying 7ehavior



>hile there are many different impacts on consumer buying behavior that have to dowith groups! we consider the following three as the most important overall.

<eference :ro ps

irst! reference groups are collections of other people who strongly affect what we buyand how we go about buying it. >hat do you think is the most influential referencegroup for most people? 3f you guessed 5family” you are absolutely right. The family isnot only the most important reference group for children! a person#s family backgroundcan impact his or her buying behavior throughout life in many ways. Sometimes adults

buy "what our family bought# and sometimes they "won#t touch what my family liked#.This has been shown to be true in durable goods such as cars and appliances! as well as!nondurable goods like laundry detergent and shampoo. The family is a membershipreference group whereas other reference groups may be nonmembership referencegroups. The 7.S. arines recruits people based on the attractiveness of being 5, 7.S.

arine! the ew! the -roud.” This brings another factor into consideration. 3f you

consider the reference groups available to you! some will be groups you would like to bea member of but are not (for e$ample! 6eta Camma Sigma! the business student honorsociety "http7;;www.betagammasigma.org; ) and other groups you would not like to be amember of: perhaps an e$ample would be the 5winning lottery ticket losers club.”

:ro ps yo wo ld like to be a member of b t are not, are called Aspirant)eference 5roups , gro ps to which yo don t really expect membership, b t stillwant to be somehow related to are called Associative )eference 5roups andgro ps in which yo wo ld not seek membership are termed 'isassociative)eference 5roups .

any adopt the appearance of their aspirant or associative groups by engaging inconsumption behavior to e$press their personal sentiment. or e$ample! one may buy a=olorado 0ockies Hat and wear in public because s'he is a fan of that particular baseballteam. This person would belong to an associative reference group but not be a memberof an aspirant reference group because in our e$ample the fan does not really e$pect to beable to &oin the 0ockies team in any official capacity.

<thnicity 6 -u!ture;/ub cu!ture

The ethnic landscape of the 7.S. has changed constantly over the last few thousand yearsand that process continues. ative ,mericans continually shifted geographic habitat dueto weather and other human adversaries. ,s our country developed in the eighteenth!nineteenth! and twentieth centuries! different ethnic groups &oined the growing

population. Today the ethnic composition of the 7.S. is still changing. ,n e$cellentoverview of this important material can be found on the internet athttp:''www.census.gov'population'cen OOO'c kbrO8+ .pdf .

3ncumbent in these changes in ethnicity are changes in =ulture for the 7.S. Historicallydominated by the thoughts and mores of a >estern Buropean tradition! the 7.S. is

http://www.betagammasigma.org/

http://www.census.gov/population/cen2000/c2kbr01-2.pdf

http://www.betagammasigma.org/

http://www.census.gov/population/cen2000/c2kbr01-2.pdf



changing rapidly to accommodate many new ideas and ways of doing things. >e define5culture” as the totality of artifacts and behaviors handed down from one generation tothe ne$t. , subculture can be any segment of society that hands down its own beliefsacross an e$tended period of time. 3f we look at the great blues music tradition of the7.S. >e see a subculture of music! introduced by the music of ,frican+,mericans and

adopted by large segments of the white population. Thus! different subculturesintermingle their ideas and art forms in a ethnically diverse society.

Individ al9Psychological ;ariables that Impact 7 ying 7ehavior

$earning

>e! as human beings are constantly learning about our environment and a portion of thislearning is related to what we consume and when and how we consume it. Therefore!learning is an important concept in consumer buying behavior. *earning can be definedas 5changes in attitudes or behavior based on e$perience.” >e learn constantly about

products and services available and ad&ust our consumption patterns to what we learn.However! we sometimes obtain knowledge that does impact our consumption patterns forsome time. arketers cannot assess such learning easily. ,lthough as a marketing personyou can#t assess it! you must remain aware and track changes occurring in theenvironment. or e$ample! today most people do not perceive significant risks inconsuming hamburger meat! however! that may be changing Luietly across our 7.S.

population in response the 5 ad =ow” and 5foot and mouth disease” outbreaks in the7nited %ingdom (check out this website:( : http:''www.mad+cow.org' ). any people areaware of this threat presently! and it would not take much to drive them away fromconsuming beef and hamburger meat in all forms. 3f you were a marketing manager for afood company! you would be well advised to continually gather information on and beaware of this trend as consumers become more aware of this threat to health.

#ttit de

There are probably more studies of attitude in the marketing literature than any otherindividual variable affecting consumer buying behavior. ,n attitude can be defined"predisposition to respond to stimuli.# 3n plain Bnglish! an attitude is simply how we feelabout something. 3f you are apathetic about a certain product or issue! you don#t reallyhave an attitude related to it. 5 eutral attitude” is an o$ymoron! it is internallycontradictory. ,ttitude formation can follow several different patterns. However! we canuse a simple approach to understand how people form an attitude towards a product orservice. ,ttitudes are usually comprised of three parts: cognitive! evaluative! and

behavioral. That is! a consumer normally goes through three stages when forming anattitude. The stages may differ in the order they occur. or e$ample! for a highinvolvement product! most consumers will probably first think about a product (cognitivestage)! develop a feeling towards that product (evaluative stage) and then! if s'he likes the

product! purchase it (behavioral stage). >e will e$pand our discussion of attitudeformation in the chapter on marketing communications.

http://var/www/apps/conversion/tmp/scratch_3/:%20http://www.mad-cow.org/

http://var/www/apps/conversion/tmp/scratch_3/:%20http://www.mad-cow.org/



The most common attitude model applied in business is the "belief'importance weightmodel# also called the "multiattribute attitude model ( , ).# The , orientation tomeasuring attitudes is a simple but effective way to understand how people feel about

products and services. The , can be e$pressed in formula as follows:

, B iP3i

>here:, an attitude toward a product! service! or ideaB evaluation of attribute "i#3 importance of attribute "i#

, brief e$ample will be offered to e$plain this approach.

*et us say that ike has &ust graduated from college and is preparing to buy a new car.He has visited several dealerships! talked to his friends! and read product reviews on theinternet (e$ternal search). He has prepared the following list of products and hisevaluation of each product across four attributes (cost! economy! Luality! and

acceleration):Saturn ord =ontour -ontiac Crand ,m

=ost < K KBconomy K <Muality ; K J,cceleration < ;

ike#s importance weights are as follows:=ost O! Bconomy 8O! Muality 8O! ,cceleration O( ike used the "constant sum scale for his importance weights and the weights add up toone+hundred)

>hat is ike#s attitude toward the brands he is considering?

SolutionSaturn F <P O U KP8O U ;P8O U P O ,ttitude toward (Saturn) ?

ord =ontour F KP O U <P8O U KP8O U <P O ,ttitude toward ord ?-ontiac F KP O U P8O U JP8O U ;P O ,ttitude toward -ontiac ?

This approach to assessing attitudes is easy and can be a helpful tool for marketersattempting to understand how to improve their product offerings.

Perception

-erception can be defined as "the way we e$perience life.# That is! perception is how weattach meaning to all of the inputs that we are e$posed to in daily living. These inputscan be new words! a new song! or an advertisement about a product. arketers have

been interested in perception because they are constantly trying to communicate product



and service ideas to their target markets and they need to understand how thatinformation will be received and understood. Humans normally go through severalstages in the process of perceiving meaning. These stages include e$posure! attention!attached meaning! and retention. @ou may see a TD ad for =oca =ola (check it out at:http:''www.cocacola.com' ). or e$ample! first! you were present by the TD to be

e$posed to the ad. Second! it may have gained your attention because you liked the musicin the ad. Third! you attached meaning to the ad! recogni/ing the product and the musicaltheme! and finally! you find yourself humming the musical theme 5*ife tastes good” laterin the day.

uch has been written about "subliminal perception# over the years. Several popularwriters have made considerable money on books they published warning consumers that5@ou are being manipulated and you don#t even know it.” >hile! this is really ane$citing conspiracy theory that persists in media study! you as a college student! and soonto be graduate! should be in possession of the facts.Subliminal perception means literally "below the level of consciousness# thus if you can

identify symbols or words in an ad! you are not dealing with subliminal perception.0esearch indicates that while subliminal perception e$ists! if e$posed to subliminalstimuli! you may see a red bottle of =oca+=ola and decide you are seeing Santa =laus.That is! subliminal perception is not efficient at all. However! check out the followingwebsite for research on the matter of subliminal perception before you make up your ownmind: (http:''www.parascope.com'articles'OI9K'sublim.htm.)

-erception remains an important construct in marketing because the study of perceptioncan give information to marketing communications professionals about when and how

people receive and make sense of information.

<isk

0isk! in the consumer buying behavior area! can be defined as the potential negativeconseLuence of a certain action including buying or using a certain product or service. 3nmarketing! we usually use the term "perceived risk# because the person or persons we aretrying to understand determine the amount of risk. That is! we can advertise that there isno risk associated with taking aspirin for a headache! but some of the populace will

perceive a health risk (physical risk) because they have heard that aspirin is dangerous.There are several types of risk that have been identified in research. >e will cover fourkinds of risk:

a. -hysiological risk + associated with threats to one#s health b. inancial risk F risk associated with the loss of economic wealth or

financial securityc. -sychological risk F threats associated with some psychological

construct! for e$ample! a threat to one#s self+esteemd. Social risk F a threat to one#s social standing or social comfort

http://www.cocacola.com/

http://var/www/apps/conversion/tmp/scratch_3/(http://www.parascope.com/articles/0397/sublim.htm.)


http://var/www/apps/conversion/tmp/scratch_3/(http://www.parascope.com/articles/0397/sublim.htm.)



Surely! you are familiar with each type of risk as a consumer. @ou can see that marketerswant to understand not only how they can use risk to make their products more appealingfor purchase (for e$ample! home security systems). ,lso! one can see how companieslive in fear of hoa$es that will cause consumers to avoid the company#s products (checkout these websites to see some present hoa$es in our society.

(http:''search.yahoo.com'search?p hoa$es2n <http:''hoa$busters.ciac.org' )

2rgani ational 7 ying 7ehavior

2rgani ational &ecision-Making

Argani/ations often make decisions in a very similar fashion to consumers. 3n fact! therehas been substantial disagreement about whether the differences in consumer decision+making and organi/ational decision+making are adeLuate to &ustify separate models of

decision+making for the two. >e agree that the differences are small! and don#tnecessarily &ustify separate treatment. However! we do want to point out a couple ofimportant differences that e$ist in a fairly universal way. irst! organi/ational purchasedecisions are freLuently made by a group of individuals. Ane might argue that familiesare similar and we would agree. However! the group decision+making approach isconsistent across most organi/ations whereas families may be less oriented to this formof decision+making at least for many decisions. Second! the decision+making process fororgani/ations is certainly more formali/ed. ost families don#t consider any structuredapproach to their decision+making as a group and many organi/ations find it necessary tocodify many details about how purchase decisions shall be made. Covernment agenciesare legend for incredibly comple$ buying approaches.

Thus! marketers must strive to understand how organi/ations in their chosen marketsreach the buying decision. 3n considering the organi/ational purchase process we wouldrecommend that the student remember two differences between consumer decision+making and organi/ational decision+making related to purchasing. irst! we wouldsuggest adding a stage to the consumer decision+making process covered earlier in thischapter. Argani/ations often solicit bids from an approved bidder list or publishspecifications related to the product they are seeking to obtain. Second! there has beenconsiderable research on the "roles# assumed by people who impact the buying decision.These people! taken as a group! are called the buying center .

, list of the roles usually e$isting in the buying center might include:

a) initiator F this person first recogni/es the need for the product or serviceand may or may not have a say in the purchase decision.

b) user F this person will be responsible for operating the product that is bought or consuming the service that is purchased. ,gain! this personmay or may not have a say in what is purchased.

http://search.yahoo.com/search?p=hoaxes&n=25

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http://search.yahoo.com/search?p=hoaxes&n=25

http://hoaxbusters.ciac.org/



c) influencer F this person#s role may be only tangential to product use! buts'he will still have an impact on the purchase decision.

d) buyer F this person is responsible for obtaining the product! though s'hemay or may not have any impact on what is purchased.

e) decider F this person is responsible for the final determination of what will

be purchased.

@ou should become familiar with these roles and be able to understand how they would be e$pressed in a group+buying scenario. @ou should also be able to e$plain why amarketer would be interested in who plays what role.

:ro p9!ocial ;ariables that impact 2rgani ational 7 ying 7ehavior

>hile there are group variables that affect organi/ational buying behavior! the amount ofresearch in this area is relatively small. =ertainly! organi/ational relationships andorgani/ational culture! for e$ample! may have a strong impact on what is ultimately

purchased.Individ al9Psychological ;ariables that Impact 2rgani ational 7 ying7ehavior

>hile there has been a limited amount of research regarding these variables! the average business+to+business marketer doesn#t really have easy access to much knowledge in thisarea. There are some studies on perceived risk that indicate risk is an important personalconsideration for industrial buyers as supported by the saying 5 o one have ever beenfired for buying from 36 .”

Ather individual'psychological variables including learning! perception! attitudes! andorgani/ational culture also are important considerations in organi/ational buying as wellas consumer decision+making. There is still a lot to be learned in this area.

+ stomer <elationship Management 3+<M4

This area of organi/ational marketing is one of the most vibrant! intriguing areas intoday#s marketing landscape. >hile many marketers have reali/ed for years that the keyto long+term success is at least in part customer knowledge and customer care. However!this initiative is often lost in promotion without creation of a service delivery system toensure that customers are treated as "number one.#

>hile this catch phrase has gained added space in trade maga/ines and academic &ournals! some companies will see this as another opportunity to be "sales driven# and usethe concept as a way to promote their "customer care# programs. Sadly! such programsoften are not really directed at customer satisfaction and relationship building but onlyrepresent something else to advertise that may increase sales. any organi/ations thataggressively advertise such programs haven#t really done the research and made thecommitment necessary to make the programs successful in the long term.



However! many businesses in organi/ational markets have reali/ed the importance ofrelationship building and have made this a priority in their business planning activities.



-hapter 8our <(ercises

. >rite a one+page essay on your thoughts about how you would classify your behavior and orientation to products you buy?

<. 7se the consumer decision+making process to describe a recent purchase you

made. ake comments on each stage of the process.J. =an you think of situational effects that would make the purchase of a newsports+coat a high involvement purchase? B$plain.

K. 3dentify and fully describe one of each of the types of reference groupsdiscussed in this chapter.

;. Cive an e$ample of a low involvement! a medium involvement! and a highinvolvement purchase you have made recently. 1escribe how your decision+making behavior was different for each purchase.

9. B$plain how situational effects might impact a person#s decision+making ineach of the following e$amples:

a) ark has a &ob interview on riday and is wondering what to wear

b) Ranie is driving across 7tah to visit her parents and! due to a broken radiator hose! her car overheats on the interstate.c) The arvin family is headed to Te$as to visit relatives and wants

to stop at a restaurant for lunch.d) @ou have a first date tonight with a person to whom you are very

attracted and are thinking about where to buy dinner.IO. 5*earning always changes behavior. Atherwise! it is not learning and

not important to marketers.” ,gree or disagree and e$plain.I8. =ompare and contrast consumer+buying behavior and organi/ational

behavior.I . 3dentify the principal type of risk involved in each of the following:

a) Ranet undergoes a lab test for a health problem. b) ,dam buys a new mini+compact car and is not sure about what his

friends will say.c) Clenn misses a marketing e$am and fails to contact anyone

beforehand.d) Rerri decides to take a vacation and plans a trip to ,frica.e) Ramie invests her tip income every week in a local ".com# company.



-hapter 8our 5!ossary

consumer behavior + the processes people employ to obtain and use various productsand services.consumer decision + making the approach that a consumer employs in arriving at a

purchase decisionconsumer invo!vement + the personal importance and social significance of the purchasereference groups 6 collections of other people who strongly affect what we buy andhow we go about buying itcu!ture + the totality of artifacts and behaviors handed down from one generation tothe ne$t!earning F changes in behavior based on e$perienceperception F the manner in which we e$perience our environmentattitude F the magnitude of either positive or negative feelings about somethingrisk F the potential negative conseLuence of a certain action including buying or

using a certain product or servicebuying center F the group of individuals who play a role in the process of acLuisitionof goods and services for the organi/ation=ustomer relationship management F the overall process of establishing andsustaining positive interactions with the organi/ation#s various stakeholders



Chapter ive $ 7ow companies manage marketing research

The meaning of marketing research

Today! marketing research is pervasive. 3t is very likely that anyone reading this bookhas been a respondent in some kind of marketing research study. ,s the internetcontinues to develop there will be a trend towards more investment in marketingresearch. This will be caused by the increasing isolation of the individual in our societyand the corresponding need to access more information through impersonal versus

personal methods. 3t is unlikely that many readers of this te$t will ultimately havemarketing research as their primary employment so we have presented marketingresearch in a non+technical manner.

,s we have discussed a length! a marketing orientation reLuires that the organi/ationstudy and understand what will bring its customers satisfaction. This may sound simple!

but it is not. Aften very creative techniLues are needed to truly understand what thecustomer is seeking and how to deliver that solution on a profitable basis. =ustomersseek benefits! and it is often difficult for the customer to e$press what those benefits are.The marketing research department is responsible for providing this understanding.However! marketing research should never be seen as a separate entity isolated from therest of the marketing function or from the other functional areas of the firm. 3f thishappens! marketing research departments often lose what creativity they had and begin tofocus on a known set of techniLues with which marketing research personnel arecomfortable. This results in a lack of fresh thinking and innovative approaches. Themarketing research function also! ironically! becomes separated from the 021 functionand those in the organi/ation responsible for new product conceptuali/ation.

>e will define marketing research as 5all techniLues used to provide information thatassists the firm in all of its decision+making processes relevant to customers or clients.”>hile this definition is very broad! it is aimed at giving the marketing research functionthe breadth and depth of latitude that it needs to operate effectively. ote that theoutcome of marketing research is enhanced decision+making about needs and wants inthe marketplace and how to meet those needs and wants. ,lso note that marketingresearch is responsible for not only data gathering about customers! but data analysis and

presentation to management about customers and other issues.

Types of marketing research

arketing research approaches are varied. Ane marketing research pro&ect may entailLuestioning thousands of people by use of a survey instrument while another pro&ect mayonly involve meeting with a few present customers for breakfast. There are manydifferent types of marketing research pro&ects that reLuire various types of knowledge andacademic background. ,pproaches to conducting marketing research range fromLuantitative to Lualitative in nature. Muantitative marketing research is composed ofsophisticated techniLues that reLuire substantial competence in descriptive statistics while



Lualitative marketing research may reLuire a broad knowledge of psychology (the studyof individual behavior)! sociology (the study of group behavior)! and social psychology(the study of individual behavior in a group). 7nfortunately! there is presently noreLuired accreditation for a person to perform marketing research! thus! there are manyunLualified individuals and organi/ations that sell marketing research services!

particularly Lualitative marketing research! who are not well trained or educated in thediscipline and do not have sufficient e$perience.

= antitative Marketing <esearch

Types of Luantitative marketing research include surveys! audience measurement fordifferent types of media! and store audits! to name only a few. ,lthough marketing te$tsusually devote considerable attention to these approaches! the Luantitative approach hasgiven way to Lualitative marketing research in many cases. Thus! Lualitative research! at

present! is growing much faster in popularity. The reasons for this are that Lualitativeresearch is usually less e$pensive and faster to perform than Luantitative marketing

research.= alitative Marketing <esearch

Mualitative research is less involved with numbers and usually provides a "closer touch#with the sub&ects in the research pro&ect. Types of Lualitative research include focusgroups and observational studies. ocus groups gather a small number of respondentstogether to discuss topics yielded by the research Luestions. , moderator leads thediscussion and helps keep discussion lively and focused around the research Luestions.The moderator creates or is furnished with a "discussion guide# that outlines the areas to

be e$plored in the focus group.

Abservational studies involve watching respondents while they are engaged in someactivity. , common use of the observational method is watching children play with

prototypes of toys to understand which toy will be most popular. echanicalobservation is also used at retail stores to count the number of customers (sometimes witha simple turnstile) and in other public areas! parks for e$ample.) Secret shoppers! alsocalled mystery shoppers! are often used to help obtain a real customer#s assessment of astore#s service Luality (=heck out the following websites:(http:''www.nwscape.com'cgi+bin'nwscape'shoppers'welcome 4 http:''www.bmiltd.com' 4http:''www.customer+8st.com' ).

The Marketing <esearch Process 3n order to obtain useful results! that is! results on which we can make reliable decisions!we must follow a consistent process. >e recommend a process that includes these steps:

a. Bstablish a research pro&ect b. =onduct the research pro&ectc. ,naly/e the findings of the research pro&ect

http://www.nwscape.com/cgi-bin/nwscape/shoppers/welcome

http://www.bmiltd.com/

http://www.customer-1st.com/

http://www.nwscape.com/cgi-bin/nwscape/shoppers/welcome

http://www.bmiltd.com/

http://www.customer-1st.com/



d. Summari/e and -resent the findings of the research pro&ecte. ,ssess the findings of the research pro&ect

#stablish a research pro9ect

This step will usually involve four steps:

a. meet with client(s) b. &ointly e$plore problem or opportunity to be researchedc. create research Luestionsd. based on the research Luestions! create a research design

eet with client(s)

>hen beginning a marketing research pro&ect! we need to start with identifying the problem or opportunity. ,lthough there are e$ceptions! this will often reLuire a personal

meeting with all of those involved in establishing the pro&ect including the client! theresearcher(s)! and others involved in the pro&ect. The initial meeting is often not sufficientto establish the problem or opportunity to be researched. ,nother meeting is usuallyreLuired to define the problem or opportunity clearly enough to create research Luestions.

3t is imperative that this initial meeting be approached with an open mind and no preconceived notions about "the answer.# 3f a client or company manager already has "theanswer# (has already essentially decided on what the findings of the pro&ect will be)! amarketing research pro&ect is a waste of resources. >e say this because too often thefindings of a well+e$ecuted study are re&ected because it found the "wrong answer.# >ehave no way of estimating how often this happens! but we can say it happens often.

The reason we break meeting with clients into a separate step is because there will often be several meetings. 3t is important to reali/e that divergent thinking will play animportant role at this point of the research process. That is! this is the stage that theresearcher must avoid seeking closure and keep an open mind about how to characteri/ethe problem or opportunity under consideration. =lients will often have lots of ideasabout the pro&ect! including the problems and a likely solution to the problem. However!clients often bring a "symptom# into consideration as the "problem.# or e$ample! if onesays that "sales are down in the southeast region.# This is a symptom! not the problem.The problem is the cause of the drop in sales in the southeast so the researcher mustsearch "upstream# in time and events from the sales decline. This stage is a datagathering stage for the researcher. Aften! after meeting with the client! the researchermay decide not to take the research pro&ect because the client is "not ready# to pursue the

pro&ect.

+reate research 0 estions

,fter the researcher and client have agreed on problem or opportunity definition! theresearcher will be able to formulate research questions . , research Luestion is a



statement of what Lueries the pro&ect will seek to answer. 3n our e$ample! likely causesidentified in client meetings included aggressive efforts by a new competitor!demographic shifts in the population! and the possibility that our product is outdated inthe eyes of the marketplace. Thus! the research Luestions may be stated for the southeastregion study as:

0esearch Luestion 8 F what is the impact of our competitors on our sales?0esearch Luestion F what demographic changes have taken place recently?0esearch Luestion I F have there been changes in perception of our product?

ote that the "research Luestion# is rarely synonymous with a "survey Luestion# that is!several survey Luestions will usually be reLuired to address one research Luestion.

ormulating dependable survey Luestions is a highly technical and demanding processthat reLuires e$tensive training and e$perience. Survey Luestions should be both reliableand valid. 0eliability is the ability of a certain Luestion to gain consistent responses overasking the same Luestions several times. or e$ample! if we ask several people the same

Luestion and get very similar results! we can say the Luestion is reliable. However! thisdoes not mean that the Luestion will be useful for our study. Muestions also need to bevalid . Dalidity is the ability of a Luestion to measure what it purports to measure.

or e$ample! assume we are attempting to ascertain peoples# attitudes toward 1illard#s1epartment Store. >e have male and female models interview customers as they enterthe store. ale models interview all females entering the store! and female modelsinterview all males entering the store. The results of the survey indicate that 5 inety

percent of those surveyed find the 1illard#s shopping e$perience either 5B$tremelyen&oyable” or 5Dery en&oyable.” >ere the findings of this survey reliable? >ere theyvalid? 0emember! to be reliable a Luestion need only produce consistent answers and to

be valid! a Luestion must measure what the researcher claims it measures. ,nswersappear at the end of the chapter. +reate a research design

The research design is the approach we use to answer the research Luestions. Aften theclient will have already decided on a research design without considering what theappropriate one would be. or e$ample! in one case! a small candy manufacturer haddecided it needed to "research the market.# The company had already created a surveyform to be sent out though mail. , meeting was held between the candy company and amarketing research company. ,fter some consideration of research Luestions! theresearch design was changed to include a series of focus groups! and a mall interceptsurvey. The mail survey was deleted from the research plan.

0esearch designs can be Lualitative or Luantitative or include both types of research inlarger pro&ects. >hen the budget will allow it! which is rare! both Lualitative andLuantitative approaches should be used to answer the research Luestions. ,lternatively!



often clients must choose only one or two of the most compelling research Luestions toaddress using either a Luantitative approach or a Lualitative approach.

Primary and !econdary data

=ollecting data can be done in two ways. irst! we can collect the data our self to addressthe research Luestions. >hen we do! the data collected are called primary data . >henwe use data for decision+making based data that has been collected by someone else toaddress different research Luestions! this data is called secondary data . Marketingresearchers shou!d a!ways e(p!ore sources of secondary data before they decide toco!!ect primary data . The internet contains huge amounts of secondary data and free!

published data can be obtained free with the help of professional library personnel.-rofessionaly librarians are highly trained and are usually happy to be of assistance. 3norgani/ational marketing! secondary data research often begins with the e$amination ofthe ,3= (formerly S3=) codes relevant to the companies of interest in the study. (seethe following website:

3 http: dir0 ahoo0com )eference !tandards North;American;(ndustr ;Cl assification;! stem;;NA(C!; / 0

1an private reporting organi6ations provide information aboutindustrial organi6ations based on the NA(C0 Two such firms are!tandard and Poors 3 http: www0standardpoor0com 4 and the 'ow <onesCompan 3 http: www0dow9ones0com 4. These are onl two of manorgani6ations that provide such services0

!ampling and !election of the !ample

Aften marketing research studies reLuire that data be collected through the process ofsampling. , census is taken when we attempt to collect data from all possiblerespondents in a specified population. or e$ample! the 7.S. =ensus 6ureau attempts tocount every person in the 7.S. every ten years. An the other hand! sampling is collectingdata from only a portion of all possible respondents in the population of interest. That is!once we agree that we need to gather data from a limited number of organi/ations orindividuals! we must determine how they are to be chosen for the sampling process.There are two types of sampling: probability sampling and nonprobability sampling .0esults derived from probability samples can be applied to the remainder of the

population of organi/ations or people in the population of interest. 0esults derived fromnonprobability samples cannot be applied to the remainder of the population of interest.

or e$ample! if we draw a sample of students at a university to determine their attitudestoward raising tuition in order to build a parking garage on campus! in a probabilitysample we can generali/e our results to the other students on campus (the population ofinterest). However! if we collect a nonprobability sample! the responses gained onlyapply to the students we Luestioned in that sample. ote this has to do with =4W thesample is selected. 3f we &ust meet students on campus and do interviews! this would be anonprobability sample and would not necessarily produce results that would predict howmost students and others on campus feel about the parking garage.

http://dir.yahoo.com/Reference/Standards/North_American_Industry_Classification_System__NAICS_/)



http://www.standardpoor.com/


http://www.dowjones.com/








Thus! probability samples provide more powerful prediction abilities. However! probability samples are much more comple$ and e$pensive to gather.

Types of nonprobability samples are &udgment samples (the interviewer as asked to apply

his'her own opinion as to what respondents "fit# the profile of people to be interviewed)!Luota samples (the interviewer is given clear direction regarding how many people ofwhat type to interview! for e$ample! "fifty females! and fifty males)! and conveniencesamples (the interviewer selects people to interview based on the easiest ones tointerview). Ane can see that the selection process for nonprobability samples is usuallyunsophisticated and straightforward.

However! when we decide to draw a probability sample! that is! one for which we canapply basic descriptive statistical techniLues as taught in business statistics courses (fore$ample! 5/” scores! parametric! i.e.! normal distributions! etc.) , simple probabilitysample is one in which each sub&ect in the population of interest has an eLual and known

probability of being included in our sample. =an you think of a way to draw a sample ofstudents at your university or organi/ation that would have these two characteristics?

Selection of nonprobability samples only reLuires that the people interviewed are in the population of interest and! sometimes! as in the case of samples there is not even aguarantee of thatE

+ond ct the research pro"ect

The research design should provide good guidance for performing the research. ,s youalready know! research pro&ects can be Luantitative or Lualitative in nature or eveninvolve both kinds of research approaches. The statement of the research design should

be sufficiently complete to allow a Lualified! independent researcher to e$ecute theresearch study by following the statement of research Luestions and research design.

#naly e the findings of the research pro"ect

This stage is comprised of organi/ing the data gathered and carefully ascertaining whatthe data indicate. Bspecially for Luantitative studies! statistical software is often used tofacilitate activities in this stage of the pro&ect. S-SS! S,S! (statistical package for thesocial sciences F websites http:''www.spss.com 4http:''www.ats.ucla.edu'at'software'stat'sas'sas.htm ) or a similar statistical package isoften used to perform the analysis necessary for this step. 3n the same spirit as this e+

book! -rofessor 6ill iller! formerly a professor at 3owa State 7niversity! offers a freestatistical package on the internet at his website: http:''openstat.homestead.com' .

The researcher must be careful to be organi/ed and remain ob&ective during this stage.The statement of the research design should provide guidance to the researcher abouthow the data should be organi/ed and classified. There is often some pressure on the

http://www.spss.com/

http://www.ats.ucla.edu/at/software/stat/sas/sas.htm

http://openstat.homestead.com/


http://www.spss.com/

http://www.ats.ucla.edu/at/software/stat/sas/sas.htm




researcher to "find the right answer# as we indicated above! but for the sake of integrity!the researcher must remain ob&ectiveas s'he records! classifies and analy/es the data.

! mmari e and Present the findings of the research pro"ect

,fter the data are analy/ed! the researcher must draw conclusions from the findings and present the findings in a comprehensible manner. >hen summari/ing and presenting aresearch pro&ect! the best guide is to keep it simple and "accessible# to the reader of thereport. The temptation for the researcher is often to rely too heavily on statistics and thiscan very rapidly lose the attention and interest of the client. 7se of such terms as 5a twosigma range” only succeeds in confusing the client and very often over+emphasis on

&argon can alienate the client. 3ronically! this is particularly important when presenting areport to clients who are highly intelligent and educated. They know how the use of

&argon is often used to obfuscate the facts and this may indicate a lack of preparation onthe part of the presenter.

The Marketing <esearch Ind stryThere is a broad range of marketing research services available throughout the world.However! we in the 7.S. tend to be the most researched population in the world. 3n othercountries! marketing research may be limited or culturally unacceptable. =onductingresearch pro&ects in countries other than the 7.S. often reLuires different researchmethods and may entail a total revamping of the research design.

any companies in the 7.S. provide marketing research services and data. or e$ample!,.=. ielsen ( http:''acnielsen.com' ) is one of the largest! if not the largest organi/ation inthe 7.S. speciali/ing in marketing research. any of the ma&or advertising agencies alsoconduct ma&or consumer and organi/ational research (see http:''www.&wtworld.com' 4andhttp:''www.saatchi+saatchi.com'innovation'launch.html ! for e$ample).

*rief discussion of t pes of surve s

>hile focus groups and other Lualitative procedures are gaining popularity! surveysremain popular! as well. There are three primary kinds of surveys:mail surveys! face+to+face surveys (personal interviews)! telephone surveys! and agrowing category! internet surveys! which presently are Luite similar to mail surveys interms of advantages and disadvantages. >e often categori/e the different types ofsurveys on the three dimensions. irst! fle$ibility or to what e$tent is the interviewer ableto ad&ust his'her Luestions to the respondent depending on circumstances. Second! wealso look at response rate! that is! what proportion of those whom we contact willultimately participate in our study. ,nd finally! cost! that is! how much will it cost us toacLuire each response to our survey.

ail surveys are usually the least fle$ible! but may provide the lowest cost per completedsurvey. However! this depends on the research Luestions and how straightforward the

http://acnielsen.com/

http://www.jwtworld.com/

http://www.saatchi-saatchi.com/innovation/launch.html


http://www.jwtworld.com/

http://www.saatchi-saatchi.com/innovation/launch.html



survey Luestions are. ace+to+face surveys are still very popular! particularly the mall+intercept interview format in which interviewers are asked to solicit respondents from thegeneral population of people who visit shopping malls. irms engaged in organi/ationalmarketing can make use of this same concept by implementing "trade show intercepts.#Trade show intercepts are similar to mall intercepts in practice e$cept that these

interviews are conducting during a trade show and respondents are first Lualified! not ondemographic criteria but on criteria related to their employment. These approaches willremain popular into the foreseeable future although such intercepts are a nonprobabilitymethod of gathering data! and thus! cannot technically be generali/ed to the overall

population of interest. Telephone surveys are still popular but are becoming moredifficult to e$ecute due to growing telemarketing techniLues that many consumersattempt to avoid. That is! telemarketers often adopt a "foot in the door# approach bywhich they first claim to be doing "a marketing research study# in order to gain a segueinto a sales presentation over the telephone. ,s more and more consumers "block# their

phone lines from solicitation! telephone surveys will become more challenging toconduct.

,s adoption of the internet as a method of communication continues! surveys that utili/ethe internet as a medium for gathering data will increase. Surveys can be easily adaptedand completed on the internet making the data collection process relatively simple.However! at present it is difficult to verify the background of respondents and thisreduces the attractiveness of the internet for data collection aimed at gaining attitudestoward products and services. ,n e$ception would be when the study involves thosewho are intimately related to internet operation and use such as >ebmasters. , fewinteresting websites that maintain data on surveys done regarding internet use are:http:''www.isc.org'ds'new+survey.html ! http:''home.wi/ard.com'wwpr.html andhttp:''www.hot+topics.com'tellus.htm ).

,s time goes on! there will be many! more speciali/ed! websites that keep track ofinternet usage.

sing technology to record learning from marketing research pro"ects

Too often! knowledge gained from a marketing research study is lost as soon as the pro&ect is presented and a decision is made based on the study. arketing research pro&ects! if well designed and e$ecuted! should be stored and made readily available foruse in the future. *eading companies often catalog research pro&ects on their intranet sothat future decision makers will have past marketing results available. However! this doesnot necessarily mean that other people in that organi/ation will actually read and makeuse of those study results. *essons can be learned by reviewing past research that wasflawed. This practice enhances organi/ational learning substantially.

However! as the reader already knows! there is more information in our contemporaryenvironment available than humanly possible to read and understand. Therefore! to berealistic! marketing information managers must accept the fact that most organi/ationallearning that takes place will probably occur through "information catching# rather than

http://www.isc.org/ds/new-survey.html


http://home.wizard.com/wwpr.html

http://www.hot-topics.com/tellus.htm


http://home.wizard.com/wwpr.html

http://www.hot-topics.com/tellus.htm



"information seeking.# The information manager who enters the current environmentwith e$pectations that his fellow workers will avidly adopt and use the company intranet!reviewing all posted materials for the sole reason of learning more about the environmentshould probably ad&ust her or his e$pectations.



=hapter ive B$ercises

8. 1o a search on the internet using the term 5marketing research.” >rite a one+pagesummary of what you found! making note of the more interesting websites youvisited in the process.

. 1o a search on the internet using the term 5international marketing research.”>rite a one+page summary of what you found! making note of the moreinteresting websites you located.

I. 5,lthough performing marketing research is e$pensive! it is often much moree$pensive AT to perform.” 1iscuss this statement and e$plain what the personwho made the statement may mean.

. 53f a study does not have the potential to improve decision+making! it should not be performed.” 1iscuss this sentence and e$plain what the speaker means.

<. =ompare and contrast Luantitative marketing research and Lualitative marketingresearch.

J. ocus groups are a growing techniLue used in Lualitative marketing research.

6ased on a problem'opportunity statement! create a discussion guide and performa focus group with some of your fellow students. >rite up the results of the focusgroup e$plaining what you learned from the focus group. >hat problems did youhave in the process? 1o you believe this method is useful for gaining usefulinformation for decision+making about customers?

K. =ompare and contrast 5reliability and validity!” and describe why each isimportant in performing marketing research.

;. ,pply the marketing research process described in the chapter to outline how youwould assess the reaction of consumers to a new chocolate bar.

9. -erform a "college intercept survey# (that is! meet students on campus and askthem to participate in your survey) by creating a brief survey form (one+page! fiveor so Luestions). The survey can ask about anything from "campus life# tofavorite recreational activities of students. Summari/e your results and write up a

brief overview of your survey e$perience.8O. Search the internet using the keywords "mystery shoppers# and "secret shoppers#88. =heck out the website http:''www.marketscore.com' . 1escribe how you believe

this marketing research company derives revenue for its business? 1escribe whoyou believe would be the organi/ation#s customers.

Note on ‘Dillard’s Survey’: The survey conducted at Dillard’s was highlyreliable but not valid. Why? Because, given the research design, ost all!artici!ants will en"oy sho!!ing at Dillard’s and res!ond accordingly#$owever, attitudes towards sho!!ing at Dillard’s were not being

easured in the study. %n&ortunately, we were easuring attitudestowards the interviewers.

-hapter 8ive 5!ossary

marketing research F the process of obtaining information with which to improvemarketing decision making

http://www.marketscore.com/





marketing research process F the series of steps followed in order to ensure thevalidity and reliability of information gathering processes

research 0 estion 8 a statement of what general areas of in2uir the pro9ectwill seek to answer

research design F the plan formulated to answer the research Luestions>uestions re!iabi!ity F the ability of a Luestion to produce consistent responses ofseparate trials F that is! if we ask several people the same Luestion! do they tend torespond in a similar manner?>uestion va!idity F the e$tent to which the Luestion measure what is purported tomeasure F that is! if we say the Luestion measure peoples# attitudes towards our

product! does it measure attitudes towards our product and not attitudes toward theinterviewer! or store in which our product is sold?probabi!ity samp!e F data gathered in a way that makes findings in the dataapplicable to the remainder of the population of organi/ations or people in the

population of interestnonprobabi!ity samp!e F data gathered in a way that fails to make findings in thedata applicable to the remainder of the population of organi/ations or people in the

population of interestsecondary data F information collected by someone other than the researcher toaddress different research Luestionsprimary data F information gathered by the researcher to address specific Luestionsof interest to that researcherfocus group F a Lualitative data gathering techniLue in which a small number of

people are brought together to discuss a series of Luestions of interest



Chapter !i" $ 7ow do companies decide what products and services tomarket&

3n this chapter we begin a series of chapters on the components of the marketing mi$:

-roduct! -rice! 1istribution! and -romotion. Aur emphasis in this chapter will be the product or service that the organi/ation markets and how products are envisioned! createdand commerciali/ed.

3n this chapter! we will review the process of product development and how companiesmanage that process. >hile the process is similar for consumer marketers andorgani/ational marketers! there are significant differences in how different companiesapproach this function.

>e will define "product# as all things the buyer receives in an e$change! bad and good!intended and unintended. -roducts include all things the buyer receives including the

physical attributes (a new car) and the intangible attributes (a warranty and a financingcontract). 3t is sometimes helpful to list the main (sometimes called "salient#) attributesfor purposes of performing both upstream activities (for e$ample! concept development)and downstream activities (for e$ample! advertising and personal sales presentations).

3n this chapter we will discuss the following areas related to managing new productdevelopment ( -1):

the ideal climate for -1the -1 process

pitfalls in the -1

the role of product positioning in -1

The ideal climate for NP'

There are several characteristics that help describe an ideal climate for the new product development process. , list of these characteristics follows4

a. Coal clarity F the ob&ectives of the task are &ointly understood b. 0esources F adeLuate economic and non+economic support for the task c. Bncouragement F sincere emotional support for the task d. reedom F the ability to e$plore whatever directions of inLuiry that are

needede. 3ntegrity F management does what it says it will do

/tages in a typica! new product deve!opment process " 0 '

The -1 is basically an e$ercise in idea management. Thus! the process proceeds fromstage to stage. However! freLuently a new product team may skip around stages when

playing with a new product idea.



8. idea generation F conceptuali/e a list of new product ideas. idea assessment F evaluate the ideas based on a previously created list of criteria.

3n this stage ideas that are &udged not to meet the criteria are removed fromconsideration.

I. concept testing F the idea is assessed through discussion with potential customersor users. Ar! representatives of the organi/ation e$plore the product idea andassess its overall potential ( o physical product yet e$ists).

. idea choice F one or more ideas are selected for initial investment<. idea prototype development F an initial working model of the product is created

for testing and evaluationJ. final version development F a model of the final version of the product is createdK. commerciali/ation F the product is put into production and the distribution of the

new product to customers begins

8ach stage sho ld feedback information into the previo s stages and this

information sho ld be organi ed and retained for f t re se.Idea generation

The idea generation stage is the first stage in the >P&. %owever, in anorgani ation with a healthy environment for creative thinking, new ideas abo nd,and only rarely is it necessary to have a formal meeting to generate ideas. >ewideas flow from every day activities within the organi ation.

3deally! idea generation should be fun and naturally occurring. This is why a "formalmeeting for idea generation# should be somewhat of an o$ymoron in healthy! creativeorgani/ations. There are many creative problem+solving (=-S) techniLues that providee$tra stimulation for generating ideas for new products and services. The =ouger =enterfor the Study of =reativity and 3nnovation has applied over thirty =-S techniLues inorgani/ations with success. =-S approaches fall along a continuum from intuitive toanalytical. or e$ample! a commonly used analytical =-S techniLue is the 5< >#s andH” techniLue. 0udyard %ipling even wrote a poem about this techniLue. The "wishfulthinking# techniLue is a more intuitive =-S approach. The appendi$ to this chapterdescribes how to use each of these two techniLues.

Idea assessment

Most organi ations have extensive g idelines concerning the criteria for newprod ct ideas. !ome typical criteria are6 potential estimated demand for theprod ct, cost9reven e expectations, fit with the organi ation s b siness andmarketing strategy 3yo may want to go back and review compatibility in thedisc ssion of re0 irements for effective segmentation in +hapter Three.4 Manyprod ct ideas may not match with the firm s c rrent prod ct line and there sho ldbe g idance abo t what to do if this happens. !ome organi ations broker or sell



new prod ct ideas that don t entail serving c rrent or planned f t re c stomersegments.

+reative ideas are " dged on two criteria6 >ovelty and ;al e 3or tility4. )e havefo nd that b siness firms primarily p t more importance on the expected

economic ret rns 3val e4 of a new idea than whether the idea is partic larly novelor new. %owever, in a context of the arts, this emphasis is s ally reversed. Thatis, in the arts, " dges often look to novelty first and val e later. This point bringsabo t an nderlying problem in " dging new ideas. >ovelty can s ally be

" dged fairly early on, whereas, val e is sometimes diffic lt to assess for sometime.

In order to have a steady flow of new ideas, organi ations m st establish a clearnderstanding with personnel responsible for new prod ct development how

these two dimensions will be assessed.

+oncept testingIn this stage, employees play with the idea and have f n considering its potential.The rationale nderlying concept testing is that organi ations are m ch wiser toexplore the idea thoro ghly before act ally b ilding a physical prototype. 2ftenthe 5Five ) s and % techni0 e, described in +hapter 8leven, can be helpf l infleshing o t the new prod ct idea. If c stomers are involved in this stage,5pro"ective techni0 es can often be sed to illicit the opinions of c stomers abo tnew prod ct ideas witho t asking the c stomers directly.

>e have mentioned two types of thinking: convergent and divergent. =onvergentthinking is the type of thinking with which most people in the 7.S. culture are mostfamiliar. 3n this approach to thinking the mind or minds of those involved follows alinear process of reasoning ultimately arriving at a point of conclusion. 1ivergentthinking is Luite different in that it reLuires the participant or participants to "play# withideas going off in une$pected directions. 1e6ono is well known for coining the term5lateral thinking” which is a type of divergent thinking (see: http:''www.edwdebono.com' and review 1e6ono#s 5Si$ Hats ethod”).

ote that when involved in the ideal approach to creative thinking! people feel they havetime to "play# with ideas and forget about "hard work# or 5the e$pected conclusion.” Thisfact might trouble some managers! but the endeavor is usually well worth the timee$pended. -articularly! in the 7.S. we constantly and incorrectly eLuate "hard work# with"no fun# and something to be feared or dreaded.

The -1 process should begin with divergent thinking and then apply convergentthinking with a careful recording of all new ideas as the process proceeds.

nfort nately, in the .!. c lt re, people who are expert 5idea destroyers areoften rewarded informally and formally in many organi ations. That is, in o r

http://www.edwdebono.com/

http://www.edwdebono.com/



c lt re there is often more reward for observing what is wrong with an idea,rather than stating what right abo t it. Many great ideas with considerablepositive potential are re"ected every day in organi ations, not beca se the ideaisn t any good, b t beca se people in the organi ation are more oriented to ideadestr ction than idea constr ction

Idea +hoice

1uring this stage! the organi/ation decides where its resources are best invested. ,multiattribute model similar to the one we discussed in chapter three is often used tomake such decisions. The ma&or criteria for choice are listed and an importance weight isassigned to each attribute. Then competing ideas are assessed on this basis. Abviously!this process reLuires a healthy climate for creativity and innovation within whichemployees can "let go# of personal ownership of ideas and &udge the ideas on an ob&ective

basis.

Idea prototype development& ring this stage working models of the new prod ct are created to assess thefeasibility of mass prod ction of the prod ct. )e sho ld note that the sameactivity co ld be engaged with services. In fact, it is easier with services, s ally,than with tangible prod cts. For example, if I resta rant is in the process ofdeveloping new men items, it can prepare different variations of the items andlet the resta rant staff sample the items. In some cases a resta rant maymaintain a panel of expert tasters comprised of c rrent c stomers to assist indetermining which new dishes to p t on the men .

Final version development

7eca se learning takes place in each stage of >P&, a final version of the prod ctis created to assess whether or not to take the prod ct into the f llcommerciali ation stage. For example, in o r resta rant example above, onecan see that a trial r n of preparing dishes from s pply to delivery and samplingsho ld take place to identify possible bottlenecks and problems in the processbefore an item is adopted for incl sion in the men .

In the case of physical prod cts, this stage is s ally worthwhile to identifypossible problems b t also to assess whether the organi ation sho ld make acommitment to f ll commerciali ation.

#s the reader is no do bt aware, companies often adopt a test marketingapproach, which in many ways is the same of 5final version development exceptthat test marketing entails a trial r n of the total marketing mix 3note the followingwebsite that performs new prod ct tests for clients via the internet6http699www.prod ct-testing.com94.

http://www.product-testing.com/

http://www.product-testing.com/



+ommerciali ation

#fter the organi ation has refined its prod ction and distrib tion systems, it onlyremains to enter the commerciali ation stage. This stage s ally is implementedin small increments in order to f rther refine all systems involved in marketing the

new prod ct or service. # notable exception is when a firm seeks f ll-scalecommerciali ation as soon as possible with its prod ct or service. 8xamples ofthis strategy incl de new prod cts for the cinema and prod cts that are low in

ni0 eness and th s will be copied 0 ickly by competitors if initially s ccessf l.

Common pitfalls in the NP' Process

Darious pitfalls can occur during the process of new product development. ,n easy wayto identify these barriers to new product development is to apply a =-S techniLue calledthe "problem reversal techniLue# and "reverse# the characteristics of an ideal climatedescribed earlier considering the outcome of any of these characteristics being absent in

the organi/ation. The following list may help e$plain how an absence of thesecharacteristics can discourage new product development.

a. *ack of Coal clarity F the ob&ectives of the task are not &ointlyunderstood! so people in the process are confused and disagree aboutwhat they are e$pected to accomplish

b. *ack of 0esources F there is inadeLuate economic and non+economicsupport for the task so that the -1 process is doomed from its

beginningc. *ack of Bncouragement F management does not provide sincere

emotional support for the task thus employees on the -1 team feel"unconnected# and "neglected# by management feeling that no one valuestheir activity

d. *ack of reedom F absence of the ability to e$plore whatever directionsof inLuiry are needed. embers of the -1 team constantly feelrestricted in considering novel approaches to problem solving becausethey may be seen by others as not relevant and "too playful#

e. *ack of 3ntegrity F management repeatedly fails to follow through on promises made! thus leaving members of the -1 team frustrated andneglected F this if often the cause of total "shutdown# of creativity of the

-1 team

Several roles are commonly adopted on new product development teams. 7nfortunatelysome of these roles are counterproductive and should be purposely deleted from the

process. ,lthough there are many different possible roles in the idea generation stage ofthe -1! we will identify and discuss a few of the most common roles:

Positive roles6 enhance new idea generation and prod ct development



Willie the wild idea man F lots of ideas! likes to have fun! gets bored easily withdetailsInga, the analytical ( constantly asks 0 estions s ch as /exactly what do

yo mean by that*1, /%ow wo ld that work*18dith, the enco rager ( may often say /?eah, that is a great idea@1

Pam, the peacemaker ( nconscio sly red ces conflict by foc sing onideas, not people2tto, the observer ( says very little b t is engaged in the process and hasmany ideas which m st be actively drawn o t by others

>egative <oles6 disco rage new idea generation and prod ct development

"oubtful "avid F fearful! always hesitant to approve of a new ideaSerious Sandra ( has tro ble with )illie s glee and Inga s constant0 estions, constantly says, /2kay, let s get to work and stop playingaro nd1

Patty the parent ( similar to !andra b t feels compelled to 5take the gro pin hand and manage it ( believes she is 5responsibleNasty Nick - never approves of anyone s ideas b t his own. #lways has asnide comment abo t other peoples ideas, often offered as h mor War Story Wally ( always has a story abo t 5how we did it back then

2f co rse, all of the positive roles are nice to have on a >P& team. %owever,&o btf l &avid, Patty the Parent, and Anowing >ick have no legitimate place onan idea generation or even >P& team. The roles of &avid and )ally can betolerated if other team members can cope with them.

These roles or roles similar to them tend to be present on most new prod ctteams and can either facilitate the process or retard it.

Organi6ing for New Product 'evelopment

B st as everyone in the organi ation is responsible for c stomer satisfaction,everyone in the organi ation sho ld be responsible for new prod ct ideas. Thetask of concept ali ing ideas abo t new prod cts sho ld not be reserved for thefew people who are members of the >P& teams.

Primary s ccess in managing the >P& Process has been reali ed thro gh these of Cross8functional Teams . These gro ps are comprised of people with

different ed cational backgro nds and different organi ational areas, which makethem more prod ctive, and more challenging to cond ct at the same time. Forexample, at &aimler-+hrysler9 !, >P& teams have members from mostorgani ational f nctions incl ding design, engineering, marketing, man fact ring,and finance. )hile this approach introd ces the potential for more chaotic gro pmeetings, it also introd ces the potential for a rich ca ldron for the creation ofideas.



The role of product positioning in NP'

Product positioning can be defined as the image of a prod ct in the mind of thetarget c stomer in relation to competing prod cts and other prod cts of the same

company. For example, if someone says /Mercedes-7en 1 yo might think/l x rio s and expensive.1 Then, if someone says /l x rio s and expensive,1yo might respond by saying 7M), $ex s, or +adillac, as well as, Mercedes-7en . Th s prod ct positioning is a critical part of nderstanding how to foc sthe new idea generation process. )e often think in terms of new benefits we canprovide c stomers or new ways of providing those benefits. For example, atraditional benefit so ght with new cars is personal safety. 2ne new prod ctdesign team in the car ind stry so ght o t and hired as a cons ltant, a retired

.!. #ir Force officer who had spent his career in aircraft escape systems tostim late the team s ideas abo t new feat res in car safety.

8xamining the relative positions of prod cts in the marketplace can be of greatassistance in new prod ct idea generation. )hether yo reali e it or not, yoalready have a rich nderstanding of prod ct positioning thro gh yo r everydayactivities as a cons mer. For example, think abo t breakfast cereals. 7reakfastcereals are available in many different types6 s gar-added9no s gar added 3isthis segmentation based on 5benefits so ght* 4C vitamin enriched vers s 5allnat ral 3is this segmentation based on 5lifestyle*14C and finally, some cerealsmay enco rage 5overall reg larity like bran cerealsC still another segment. Th s,yo , as a marketing st dent sho ld be aware of segmentation approaches, andsho ld be able to se positioning concepts as a way to nderstand where yo rprod ct sho ld 5fit in in the marketplace. &o a keyword search internet sing/prod ct positioning1 and /percept al mapping.1 37e s re to p t yo r keyword in0 otation marks to avoid references to other, non-related areas.

4ack of ideas versus lack of climate for creativit : (s lack of ideas a sign oflack of abilit of emplo ees or a lack of willingness on the part ofemplo ees&

2rgani ations with a pa city of new prod ct ideas sho ld not ass me that theiremployees are 5" st not creative. )e have cond cted st dies on many differentorgani ations and employees indicate that the larger problem for them personallyis not new ideas, b t the fact that they don t believe their new ideas will beadopted or even serio sly considered by management.



-hapter /i( <(ercises

D. &o an internet search on the term /new prod ct development1 andprepare a one-page s mmary of yo r findings.

E. &o an internet search on the term /idea generation1 and prepare a

one-page s mmary of yo r findings.. %ave yo ever been in a sit ation at work or in a niversityorgani ation in which yo were attempting to identify new ideas thatwere creative* se the dimensions of an ideal creative environment toidentify which dimension existed in yo r sit ation and which ones didnot.

G. ?o , as a cons mer, see new prod cts everyday. +hoose a newprod ct and describe what new additional benefits it p rports toprovide to cons mers that its competitors do not. 7e s re to try tofoc s yo r description on 5new benefits not 5new feat res.

H. +oncept ali e a new prod ct or new service for which yo think there

is a need. &escribe the segment to which this new prod ct or servicewill appeal and what additional benefits will accr e to these potentialc stomers. se the /Five ) s and %1 techni0 e to flesh o t yo ranswer.

. the keyword /idea generation1 and describe yo r findings in a one-page report.

J. :o to yo r favorite dr gstore and o tline the prod ct positions that aresed either for toothpaste or shampoo. &escribe the different benefits

c stomers are seeking in each different position.K. 8xplain how a market segment relates to a prod ct positionL. +reate a skit to perform in yo r class that demonstrates the idea

generation process and the ten roles in the process described in thechapter.



Chapter !i" 5lossar

new product development process ( the stages people in the organi ationgo thro gh in order to create and market new prod cts or servicesproduct ( all things a b yer receives in an exchange, good and bad,

intended and nintendedcross8functional teams ( prod ct development teams that incl derepresentatives from all or most the f nctional areas in the organi ationincl ding < &, Man fact ring, Finance, Marketing, and othersproduct positioning 8 the image of a prod ct in the mind of the targetc stomer in relation to competing prod cts and other prod cts of the samecompany



Chapter !even $ !pecific Challenges of 1arketing 7igh Technolog

The meaning of -7igh Tech’

,lthough marketing high technology operates on the same basic principles! given its

impact on contemporary lives! it is worthwhile to e$plore high technology as a separatearea. >e will use the term high technology to mean "sophisticated knowledge associatedwith some general field of endeavor.# Thus! high technology can apply to mostindustries! but usually in specific areas. or e$ample! one might think of the bituminouscoal industry as being "very low+tech.# However! that industry applies very sophisticatedknow+how in many areas! including e$ploration! e$traction and analysis. An the otherhand! many would say that the computer industry is "very hi+tech# while! in reality!computers! as an industry can today be considered a commodity! although in some fields!such as integrated circuit creation and manufacture! it is technology+intensive. ,ll of thisto say! usually the more one knows about any industry! the easier it is to identify the areasof that industry that are technology+intensive! or "high+tech.#

a. arket+1riven 1ecision aking b. aintaining 6alance 6etween 021 and arketingc. anaging in a ast+-aced Bnvironment

1arket8'riven 'ecision 1aking

any areas of high technology have a past based on the premise of 5build it and they willcome.” eaning that the orientation was initially to engineering! and ultimately! a

product was created for which there was demand based on its technical features. Theonly reason technical features ever are needed is that they are able to provide additional

benefits sought by a group of customers.

3n order to understand the forces are work! let us review what we have said about new products. irst! a new product must provide additional user benefits! or the same benefitsin a more effective way! based on the customer#s perception. Therefore! while many new

product ideas in the realm of technology+intensive products and services have seensuccess! their success was based on the additional benefits people received! not on the"new way of doing things!# itself. or e$ample! if someone offered you a solar+poweredra/or! you might say "no thank you!# based on your perception that there are no additional

benefits to be reali/ed by using the product! whereas! if someone offered you a solar+ powered palm+top device! you might consider based on the added benefit that you wouldnever have to change batteries in the device. Thus! always look for additional benefits!not features! and you are more likely to really understand customers# needs. Sometimesthe benefits of a feature become so well+recogni/ed that we talk in terms of the feature!itself. or e$ample! most people know that a turbocharger on a car indicates addedacceleration! therefore! we recogni/e the benefits of the feature instantly with outreference to the benefits the feature will provide. However! this is the e$ception ratherthan the rule! and when in doubt! it is preferable to think in terms of benefits.





1anaging in the ast8Paced #nvironment of 7igh Technolog

>hile marketing can add value high technology environments! it is imperative that thereis a clear understanding of the role of marketing. ,lso! the interface between themarketing and 021 departments needs to be clearly defined. This rarely happens

because most firms in high technology industries are not market+driven! they tend to beeither sales+driven or technology+driven. Some indicators that a high+tech firm is sales+driven are:

The top e$ecutive for marketing has the title: Dice+-resident ofSales and arketingThe marketing department has no marketing research personnelassigned to itSales personnel have little or no input into what products aredevelopedSales personnel are paid primarily on a commission

structure with little incentive to develop long+term customerrelationships

Some indicators that a high+tech firm is technology+driven are:

arketing has little or no input regarding what products aredevelopedThere are no formal programs for marketing research other thanvisits to present customers by 021 personnel

o sophisticated technologies are used to uncover present and potential customers needs

arketing#s primary role is seen as either "sell what we make# or"find prospects to buy what we make#

>hile there are many e$ceptions! we believe that most organi/ations operating in hightechnology areas are characteri/ed by either a sales orientation or a technologyorientation. or a student of principles of marketing! this simply means that you musthave a sound understanding of what marketing is in the ideal world! because some day!you may be responsible for introducing marketing principles into an organi/ationyourself.

Product positioning for 7igh Technolog

3n no area is it more important to position products than in technology+intensiveenvironments. The temptation is often to position the product in terms of features.However! it is usually more feasible to position along the lines of benefits sought becausethat language translates instantly to how the customer is thinking. There are e$ceptionsas discussed above! but! most freLuently customers are seeking how their &ob can beaccomplished more efficiently and more effectively. This is particularly important if theuser is not an influencer as described in =hapter Three. Aften the reason it is difficult to



position a high technology product offering is that the product really doesn#t provide anyadditional benefits to its target customers. >hile the saying 5build a better mousetrapand the world will beat a path to your door” holds some truth! it is the proper answer forsuccess).



=hapter Seven B$ercises

8. 1oes "high technology# mean the same thing to you as it did before you read thischapter? >rite your answer in a one+page essay.

. >hat is the role of the 0esearch and 1evelopment 1epartment?

I. 1o a search on the internet on the term 0esearch and 1evelopment andsummari/e your findings in a one+page report.. 1escribe the responsibilities of the marketing department in a technology driven

organi/ation versus a market+driven organi/ation.<. 1escribe the responsibilities of the marketing department in a sales+ driven

organi/ation in a high technology industry sector.J. ,gree or disagree with the following statement giving the reasoning behind your

answer: 5Technology sells.”K. 3nterview a manager in a high technology sector and discuss the meaning of

marketing with him or her.;. 0ead the article on Muality unction 1eployment cited earlier in this chapter and

write a two+page report on how the material covered in this article would apply tomarketing.



Chapter !even 5lossar

7igh technolog 8 sophisticated knowledge associated with some generalfield of endeavor

1arket8'riven 'ecision 1aking $ an approach to choice that is based onidentified desires for benefits among specified c stomer gro ps

@ua!ity 8unction ep!oyment F a concept that attempts to translate customer benefits sought into product features

e(t 9ench /yndrome F the assumption that a designer or engineer will haveidentical needs of his'her customers thus! the engineer is in the best position to knowwhat products to design and build



Chapter #ight $ 7ow is the pricing decision made&

The price variable in the marketing mi$ is a critical element. -rice can! by itself!communicate much about a product or service. or e$ample! what would you think of

buying an engagement ring at 6ob#s 0eally Cood! 6ut =heap! Rewelry Store! or for that

matter! at a yard sale. ost consumers link price with Luality and there are manyorgani/ations that carefully reinforce the Luality of their product! using price as asurrogate cue (or substitute indicator) for Luality. or e$ample! check out the websitesof marketers of prestige items and observe how the price variable is used to indicateLuality). =heck out 6 >#s website and watch on of the movies there.(http:''www.bmw.com'bmwe'inde$.shtml ).

>hen the pricing decision is made! the organi/ation must consider several factors. Thesefactors are as follows:

a. Supply (or cost)

b. 1emand (or revenue)c. -erceptions in the marketplaced. =ompetition and =ompetitors# pricing strategiese. Covernment 0egulationf. =ompany#s desired pricing position

!uppl .or cost/

If there is an ab ndant s pply of a prod ct or service, it may not be a candidatefor being approached as a prod ct or service for sale. For example, we don tconsider air to breathe as being a commodity we m st b y. 2f co rse, thatis only beca se there is a plentif l s pply. 2f co rse, in +olorado, manypeople find that the air s pplied by the great o tdoors is not s fficient inoxygen, th s, they m st b y air that is rich in oxygen by renting oxygen tanksto enhance their respiratory systems. >ative #mericans had to locate closeto a water s pply, b t didn t worry abo t having to p rify the water. %ence,time can change most everything, partic larly how we perceive certain goodsand services as candidates for commercial prod cts. B st a few years ago,people cons med very little bottled water thro gho t most of the nited!tates. Today, demand for bottled water is growing rapidly. !o, think abo tthe things yo cons me that yo presently don t pay for, and consider thatcommodity is a candidate for a prod ct in the f t re 3fresh air and openspace, for example4.

emand "or revenue'

To &ustify commanding a positive price in the marketplace! there must be some demandfor a product or service. >e have seen above where many products traditionallyconsidered as free! have given way to other identical or similar products for which thereis now a strong consumer demand! and a price to pay. Thus! the nature of demand

http://www.bmw.com/bmwe/index.shtml

http://www.bmw.com/bmwe/index.shtml



changes constantly for goods and services. =onsider the amount of demand today for"ice bo$es# (products for keeping perishable food cool). These products were heavilydemanded before the advent of the electric refrigerator. Thus! we often see that demandfor a product can decrease or even disappear if substitute products are introduced that are

perceived as being superior in their ability to provide the benefits being sought. or

e$ample! eight track audiotapes were popular for a few years in the late 89JO#s and early89KO#s until a newer technology in the form of cassette tapes was introduced and vinylrecords of recorded music have largely given way to the =ompact 1isk (=1) as the

preferred medium. >ill the internet and -I technology eclipse =1 technologyeventually?

Perceptions in the marketplace

-erceptions in the marketplace can set both a positive price and a normative price in themarketplace. , positive price simply describes how much something costs whereas anormative price describes what something "should cost# based on an individual#s or a

group#s opinion. or e$ample! the positive price was so high for selected drugs used totreat ,31S that some groups protested that the normative price was simply too highgaining societal support and eventual price decreases from the manufacturers of these

pharmaceuticals.,lso! consider the recent higher prices for gasoline and the various protests put forth byindividuals and groups that the gasoline prices were 5too high” and 5not right.” These

protest essentially were observing that gasoline had reach a price that was above thenormative price for most people.

3n the 7.S.! a branch of government often sets normative prices! particularly in the casewhere there is only one supplier (a monopoly). or e$ample! most states have a publicutilities commission or board that is responsible for overseeing the pricing practices offirms that provide the populace with utility service for natural gas! water! and electricity.However! there are notable e$ceptions to this rule. ormative prices do not have to bespecific. 7sually there are consumer e$pectations that help guide the normative price.

or e$ample! how many times have you heard that! "my water bill is too highE”This interaction between positive price and normative price is an ongoing phenomenonand of particular interest to marketers who attempt to create and sustain customersatisfaction.

>hile the marketer does not usually have control over the normative price! s'he canusually control the positive price. Setting price can be a time+consuming process and wewill discuss setting price later in this chapter. However! this discussion should havealready made the reader aware of the importance of understanding whether by custom ofthe marketplace! there is already a normative price for a product or service above which a

price may be considering "unfair# or "price+gouging.#

Competition and Competitors’ pricing strategies

3n the 7.S.! competition can have several impacts on the pricing decision.



irst! if the firm is the only seller of a product considered essential to public welfare! thefirm may have to function in a heavily regulated environment.This type of environment is called a monopoly (one seller).

Second! a firm may function in an industry in which there is an established price leaderthat perennially sets a price that other firms follow! although this may not always be thecase. This type of competitive structure is called an oligopoly (few sellers).

Third! if the firm functions in a market where there are many competitors offering similar products! the firm may not have a choice about what level price to seek.3p re competition4.

ourth! the firm may compete in an industry or market in which although products are physically similar! sellers are able to draw differences in perception of such things asLuality and prestige among products. This competitive model is called "monopolistic

competition# and is applicable for most everyday consumer purchases as well as business+to+business purchases in the 7.S.

5overnment )egulation

ost firms in the 7.S. function in an environment that is highly regulated. or e$ample! before starting a business! one must obtain various licenses directed at everything fromlocal government ta$ation and /oning laws! to state government consumer protectionlaws! and finally! the grand+daddy of them all in regulation! the ederal Covernmentwhich regulates all interstate commerce based on constitutional power and has ma&orregulatory responsibility for the health and welfare of employees. However! thecapitalistic system is unable in its present form to halt abuses to the environment byorgani/ations and thus! most of this regulation! while onerous! is needed. This body oflaw still allows various environmental abuses such as the Summitville ind disaster inthe state of =olorado. 3n fact! if we e$plore the primary legislation that impacts pricing!we find that most of that regulation was brought about by pressure on congress e$erted

by businesses that were competing with other businesses. Anly a small portion of theselaws were passed to address the protection of consumers. So! the ne$t time you hear

businesses cry "Cet the government off our backs# reali/e the businesses are really saying"get the government off my back# but "make sure the government protects me from unfair

practices by my competition.#

Compan ’s desired pricing position

6ased on a company#s business and marketing strategy! it should determine its pricing position. ,s we reviewed earlier in this chapter! some companies have a high price'e$clusive'prestige position (check out the website for 0olls+0oyce automobiles(http:''www.rollsroyce.co.uk'rolls+royce'inde$.html ) or 0ole$ >ristwatches! while othershave a low price position (>al+ art! for e$ample).

http://www.rollsroyce.co.uk/rolls-royce/index.html

http://www.rollsroyce.co.uk/rolls-royce/index.html



, company should choose its own price position! whether high'prestige or low'value andattempt to guide its constituencies (customers! supplies! employees! general public! andothers) to the conclusion the company desires.For example, a local store that sells 5everything for a dollar 3for example, see

3http: www0dollargeneral0com 4 will want to position itself 0 ite differently

than a marketer of excl sive prod cts similar to <olex watches 3seehttp: www0role"0com 4.

The Pricing 'ecision

,s pointed out above! the pricing decision is impacted by many different factors. Thus!the initial pricing decision can be time+consuming although there are e$ceptions. 3n

pricing livestock! for e$ample! the pricing decision can be Luite simple. , cattle ranchermay take his or her cattle to the local auction house once a year to "thin his'her herd ofolder cows and young calves.” 3n this case! the rancher will be forced to accept whatever

price his'her cattle bring at the auction. 3n this case! the pricing decision is reduced toanswering the Luestion: 5=an 3 accept the price being offered at the local auction?” 3fthe answer to this Luestion is "no!# the rancher then has to decide whether to seek anotherauction or liLuidate his'her herd. However! usually the pricing decision is much morecomplicated and should involve a careful consideration of all five factors listed above.

Cost and 'emand Oriented Pricing 1odels

>e may use cost or demand as a basis for setting pricing. Traditionally! this orientationis applied in microeconomic theory by creating demand curves based a summation ofindividual utility functions for buyers in the marketplace. Thus! we first assess buyers#

perception of how much they would e$pect to pay for a product or service based on theutility (or usefulness) they would e$pect to derive from product or service and combinethese individual utility functions to create a demand curve for the product in Luestion.>hile! this approach is straightforward theoretically! it often defies practical application.However! the general lesson we learn from the approach is an important one. That is! the

price based on a demand+oriented model! can be based on the e$pected utility (benefits)that customers in the marketplace e$pect to receive from acLuiring our product ascompared to other available products.

Pricing models based on cost

-robably the oldest model used! this approach uses cost to the seller to determine aselling price. or e$ample! for years a :keystone’ or :key6stoning’ pricing policy has

been used by many retailers to set price. This approach simply doubles the cost andarrives at the selling price. any other models used cost as a pricing basis! for e$ample!internal rate of return pricing usually begins with cost determination and then computesdifferent pro&ected levels of return on investment for future time periods. This pricingmethod was adopted by Ceneral otors early in the company#s history and was appliedfor decades with their products. >hy not &ust use cost+pricing always? >hile the

http://www.dollargeneral.com/

http://www.rolex.com/

http://www.dollargeneral.com/




approach is simple and has the advantage of "guaranteeing# some profit margin! theapproach ignores the most important factor in pricing4 demand. Thus! by using solely acost+based approach the seller my miss opportunities for additional profit or set a pricetoo high to reali/e adeLuate sales to even cover cost.

Pricing models based on demand

>itness salaries paid to professional athletes. How are these "prices# for athletic talentdetermined? 7sually! based on demand and what others will similar skills can e$pect toreceive in a free market. -rices can also set using demand for the product or service as aguide. or e$ample! if an analysis of demand indicates that buyers! based on the benefitsthey would derive from it! would e$pect to pay VIO!OOO dollars for a new kind of testingdevice! this at least gives the seller some guidance in setting price. This approach isknown as "the e$pected price approach# and! theoretically! is the basis for setting price

based on demand in icroeconomics. Af course! this approach reLuires a timeconsuming analysis and it not as simple as &ust setting the price based on cost. However!

if a seller focuses only on cost to set a price! s'he might be either setting price so highthere will be no demand! or foregoing considerable profits.

or e$ample! if demand is very high there are times when we can virtually ignore coststructures. or e$ample! if a professional athlete has a remarkable season of

performance! s'he can sometimes demand an incredibly high salary based on his'her performance the previous season.

3n some cases! there may be "an e$pected price.# The e$pected price is a price thatconsumers would anticipate being reasonable for the benefits derived from using the

product. There may also be a "customary price# for a product or service. The customary price is a price level that consumers are used to paying based history or normale$pectations. or e$ample! if consumer testers try out a new! revolutionary vacuumcleaner! when asked they indicate that they would pay normally anticipate paying V<OO orless for the product! although the seller cost structure would mean losing money at a priceof less than V<OO.

-restige pricing is often applied by organi/ations that attempt to create a sense ofe$clusivity for their product or service. This pricing approach assumes that the productor service faces a market structure characteri/ed by "monopolistic competition.# Thus!

prospective buyers perceive a difference in products based on the distinction or reputationof particular brands. any product categories this factor to set price. or e$ample!wristwatches! liLuor! and automobiles all have a "prestige# segment created through the

perception of e$clusivity an distinction. Af course! in order to create and sustain such amarket position! the organi/ation must commit to a long+term strategy

,nderstanding 0rice <!asticity of emand 0rice e!asticity of demand is a method used in microeconomics to understand howLuantity demanded moves in con&unction with price changes. That is! if prices are raised!



what happens to Luantity demanded? >e would usually argue that Luantity demandedgoes down. However! can you think of a situation in which raising prices will result inmore of the product or service being demanded?

3t is imperative that the marketer have a clear understanding of how Luantity will respond

to price changes. Thus! a basic understanding of price elasticity of demand is called for.-rice elasticity of demand can be computed by applying a simple formula for 5e” theelasticity of demand as shown below:

-rice elasticity formula in words:

-rice elasticity of demand is eLual to the percentage change in Luantity demandeddivided by the percentage change in price.

-rice elasticity formula in symbols:

e W XL' W Xp>here:e elasticity of demand

L Luantity demanded p price

The elasticity coefficient of elasticity! "e!# has a domain from greater than a positive one!to less than a negative one. >hen "e# is greater than one! elasticity is termed " e!asticdemand .# >hen "e# is less than one! we characteri/e demand as " ine!astic demand .#>hen we have an elasticity coefficient eLual to one! demand is said to be unitarydemand .

>e will present e$amples at the conclusion of this chapter.

!etting Price

The firm must arrive at a price that will provide it with sufficient profitability while being palatable to the marketplace. Af course! the ultimate price is related to all five factorsthat we discussed above. , very simple way to look at setting price is to consider the"markup.# arkup can be computed on cost or se!!ing price .>e would use the same simple formula for each approach to computing selling price:

/e!!ing price e>ua!s -ost p!us Markup or /0 - B M where! S- selling price! = cost! and 7 percentage markup.

sing Mark p on cost to determine selling price

3n this approach to setting price! we first determine the markup and then add it to the costto find the selling price. That is! we simply multiply the cost by the percentage ofmarkup.



or e$ample! let us assume that the owner of a small gift shop desires to gain an averageforty percent markup based on a percentage of cost on a of the products she sells in hershop. She will use the formula! S- = U . (or forty percent of cost) to determine theselling price of items in her gift shop (for e$ample! if a children#s book costs the ownerV8 ! her selling price will be S- V8 U . (V8 ) or V8 U V<.JO V89.JO.

sing Mark p on selling price to determine selling price

Some students ask 5How can 3 determine markup based on selling price if 3 don#t knowthe selling priceE” Cood LuestionE >e simply define the markup on the selling price inalgebraic terms! initially. This approach is not as intuitive and applies simple algebra tofirst define and then determine the selling price. -lease note! that this approach may notmake as much sense to you initially if you are not comfortable with basic algebra. 6ut

please don#t despair4 once you understand this approach you will be able to remember it.Selling price can also be determined as a markup based on a percentage of selling price asdescribed in our discussion of "key stoning# above. 3n this case! we apply the same

simple formula. However! now we must draw on simple algebra and define the selling price as the unknown and the markup as a function of the selling price. That is! while ourformula is identical to the computation using cost as a basis for markup (S- = U 7)!now markup itself becomes an unknown! as well. That is! if we use the same gift shopand price structure as our e$ample above! the cost is V8 ! and the markup is . of theselling price rather than the price! or . S-. Therefore! the solution to our problem would

be S- = U 7! or S- = U . S-. That is! now the markup is determined as a percentage of selling price rather than a percentage of cost. Solving for the selling priceunder this approach! we would find the following.

! bstit ting in the form la6 !P N + O M , we find that, !P N DG O .G!P or theselling price is e0 al to DG pl s .G times the selling price. >ow, gro ping theterms with 5!P together to solve the e0 ation, we s btract .G from bothsides. 2n the right side of the e0 ation, DG O .G!P min s .G!P e0 als DG.2n the least side of the e0 ation, !P min s .G!P e0 als . !P3<emembering that /!P is nderstood to be 5D!P. , that is, D!P min s .G!PN. !P. >ow o r e0 ation reads 5. !P N DG.

<ecalling that we can simplify the e0 ation 5. !P N DG f rther, remove the 5.by dividing both sides by 5. . 2n the left side of the e0 ation, . !P divided by. !P is e0 al to simply !P4. !o the e0 ation now reads 5!P N DG dividedby . . Th s selling price is e0 al to DG divided by . or E . . >ow,s bstit te the selling price of E . into o r form la to check yo r answer.

This simple approach to using selling price as a basis for markup is used by manyretailers and if one ever wants to market a product to retailers (or wholesalers! for thatmatter) one should understand this approach to arriving at selling price.

=hapter Bight B$ercises



8. =heck out 6 >#s website described in above in =hapter Bight (and watch one ofthe movies there ("ambush or "the hire#). >hy would 6 > go to such e$penseto produce these movies? >hat is the price the viewer of the movie pays?0emember! price does not have to be economic in nature. B$plain your answer ina one+paragraph summary.

. B$plore the website of =artier! 3nc. ( .artie # /! ( http:00www)cartier)com ! anddescribe how this company attempts to create a high price! high Luality (prestige) position in the marketplace.

I. B$plore the website of Time$! 3nc. ( http:''www.time$.com' ) and write a paragraph observing differences between the =artier and the Time$ sites.6e sure to describe the positioning of each company#s products after viewing theirrespective websites.

. B$plore the website of the Shane =ompany and describe this company#sorientation to pricing and prestige(http:''www.shanecompany.com'weddings'wedding_planner.asp. )

<. B$plore the website for >almart and comment on >al+ art#s approach to price

(http:''www.walmart.com' ).J. >hy do different companies have different approaches to pricing? 7se thewebsites above to support your answer.

K. =reate a product positioning map (four cell matri$) for wristwatches. 7se thedimensions of price and prestige. Summari/e your product positioning map andwhat you learned by doing this positioning map in a two+page report.

;. Co to a local supermarket and a local department store and write a half+pagereport that observes differences in how prices are displayed at each store.

9. 5=ollege tuition is a price &ust like any other.” ,gree or disagree with thisstatement and e$plain your answer.

http://www.cartier.com/

http://www.timex.com/

http://www.shanecompany.com/weddings/wedding_planner.asp.

http://www.walmart.com/

http://www.cartier.com/

http://www.timex.com/

http://www.shanecompany.com/weddings/wedding_planner.asp.

http://www.walmart.com/





+hapter >ine ( %ow do prod cers get their prod cts and services to their targetc stomers*

This area of the marketing mi$ is usually called "distribution# simply because its mainconcern is to distribute goods and services to the target customers.

Argani/ations typically use a large number of strategies to get their goods and services totarget customers rather than only one. =ritical to understanding and managingdistribution are the concepts of time and p!ace uti!ity . Time uti!ity can be defined ashaving the product available when the customer would prefer to acLuire it and p!aceuti!ity is having the product available where the customer would prefer to acLuire it.>hile the internet can provide the ultimate in time utility for some products or services(for e$ample! e+mail)! for many products! it does not provide sufficient time utility.6uying a book over the internet still reLuires that the book be delivered to the buyer

before "consumption of the product#. Therefore! it is generally faster to buy a book froma local retailer than to obtain the same book through the internet. However! thedevelopment of the market for e+books may change this situation. or e$ample! this e+

book is delivered to the user instantly anytime the user desires to access it. The action onthe part of the reader is to gain ability to log on to the internet and go to our website(http:''www.principlesofmarketing.com) .

, marketer may adopt a broadcast strategy in which products are sent out to customersin as wide a manner as possible. This strategy is usually not efficient or effective formost firms! particularly small firms due to the cost. The strategy is typically adopted bymany organi/ations that have not done sufficient research to understand the specificcharacteristics their target customer and how the customer would generally prefer toobtain the product or service in Luestion. or e$ample! organi/ations that are production+oriented concentrate primarily on manufacturing their products efficiently (with theunderlying assumption that there will be a demand for the product). Sales+orientedorgani/ations focus on promotion and personal selling and are not typically concernedwith the ideal product solution that the customer is seeking. Technology oriented firmsassume that customers are seeking the most advanced technology! thus these firms focuson the most advanced way of doing things whether the customer is seeking this solutionor not. ,ll of the organi/ations above often adopt these respective orientations becausethey have insufficient knowledge of customers or concern for customers to engage in afocused distribution strategy.

>e use the terms goods to refer to tangible products (those that can be seen and touched!for e$ample a new pair shoes) and the term services to refer to intangible products (fore$ample a visit to the dentist)! those that cannot be seen or touched during the process of

providing the service. ,lthough traditionally services have been delivered through a"direct# marketing channel or directly from the seller to the buyer! as technologydevelops! many services are now be delivered directly to the customer. -reviously! theseservices reLuired personal contact between seller and buyer. or e$ample! investmentdecisions (in stocks! bonds! or other investment options) historically reLuired a face+to+face meeting between the investor and his investment advisor. Today! many peoplemanage their investments through the internet and never work face+to+face with another

http://var/www/apps/conversion/tmp/scratch_3/(http://www.principlesofmarketing.com)





human being. inancial services offered by banks are similar in that! since theintroduction of the ,utomatic Teller achine (,T )! it is not necessary for customers of

banks to meet face+to+face with bank representatives. ,s the practice of 5direct deposit”and other electronic forms of banking grow! there will less and less need for personalinteractions between financial institutions and their customers. This is not to the say that

there will no longer be a need for "bricks and mortar# banks! because some segments ofcustomers will still feel it necessary to visit personally with the bank#s representations.

8ocused istribution /trategy 2 “8ive Cights don’t make a Wrong”

, focused distribution strategy is driven by customers# needs! and thus is created inrelation to when and how customers would prefer to buy a product or service. Thus! theorgani/ation seeks to deliver the " right product with the right service! to the rightcustomer! at the right time and right place. or e$ample! if we market a product thatcustomers would prefer to buy any time of day or night and any day of the week! wewould strive to make the product available to customers on an around+the+clock basis.

or e$ample! emergency medical care for people and their pets might constitute such a product (service). ote that many >al+ art stores adopted this approach to ensure that>al+ art products are available whenever customers might seek them and that >algreendrugstores have adopted the same strategy. Aver the last few decades people in the 7.S.have grown to e$pect that some types of stores will "always be open# and thus manyleading market+oriented organi/ations have responded to that e$pectation and manyothers have not. Af course! not all customers for most products have the same wants andneeds! thus! the demand for all products and services does not occur on this basis. ormany marketers! the idea of being open to serve customers virtually all of the time is nota viable strategy. ,gain! "five rights don#t make a wrong# thus the only viable way toknow what the target market wants is to understand them well enough to answer the "fiverights.# This distribution strategy reLuires that the firm commit to learning about and caring aboutits customers. This has to be a strategic or long+lived commitment with adeLuateresources devoted to accomplish the task. any firms advertise that they have thiscommitment! but in reality! few do.

Options for focused distribution

3n the 7.S.! there are usually many options available to create and effectively managedistribution. >e say! 5usually!” because the distribution function ("-lace#) tends to bethe least fle$ible component of the four -#s in the marketing mi$. Thus! whiledistribution options usually e$ist! freLuently some creativity is reLuired to identify andweave these options together into an effective system that provides high satisfactionlevels to customers.

2ptions for foc sed distrib tion in the cons mer market





provide distribution services than the producer. or e$ample! if you operated a fishingfleet in ,laska! your primary concern and abilities would be related to operating a fleet of

boats! and locating and catching fish. =learly! a wise person would spend his'her timefocusing on this aspect of the business. >hereas! there would! no doubt! be anorgani/ation that has as its primary concern and abilities! the processing of the fish

brought into port every day. ,lthough! as a fishing operation one organi/ation could do both fishing! and processing! it might not have the resources to peform both activities.Thus! in most industries! there are different firms engaged in the different endeavors itreLuires to produce and deliver the product to the consumer#s door.

3n the grocery industry! companies like Sysco ( http:''www.sysco.com' ) and the lemingcompanies ( http:''www.fleming.com ) provide everything from training classes inmerchandising to recipes for new dishes to their customers! as well as distributed

products from producers to retail grocers. The above e$ample would represent a distribution channel in which both wholesalers and

retailers are needed as marketing intermediaries. ote that a "retailer# is technically amarketing intermediary! so that when a retailer advertises s'he "cuts out the middleman!#it is unlikely that claim is true because! technically the retailer 3S a middlemanE

3n summary! the above discussion should help you conclude that while marketingintermediaries are not always use! that provide essential services which usually add valueto products that we! as consumers desire to purchase. The key to the value of a marketingintermediary is that the marketing intermediary provides services with which we asconsumers cannot do without. The only time when a marketing intermediary is notneeded is when we as consumers are willing to perform some of the services that themarketing intermediary performs. or e$ample! if we are willing to drive to 0ocky ord!=olorado! to buy our cantaloupes! we have performed a service usually reserved for amarketing intermediary. 3n fact! in this case! there probably will be at least twointermediaries involved! the transportation company that moves the melons from 0ocky

ord to your home town! and the retailer who grades the melons and places them fordisplay in his'her grocery store. So! the ne$t time you go to the grocery! reali/e that thereason you are able to buy e$otic products from all around the world depends largely onthe services of marketing intermediaries.They don#t necessarily make distribution more e$pensive but they do often make it much

better! providing consumers with more place and time utility.

,s the reader can see! there are many different options to distribution! but the mainoption other than the direct channel! is the option that includes the use of marketingintermediaries! of which there are many different kinds.

2ptions for foc sed distrib tion in the organi ational market

,lthough there are instances in which the distribution channel to provide satisfaction toan organi/ational market is identical to the distribution that will provide ma$imumsatisfaction to a consumer market such as Sam#s =lub in the 7.S.! these two types of

http://www.sysco.com/

http://www.fleming.com/


http://www.fleming.com/



markets usually make use of different kinds of marketing intermediaries! at least in title.or e$ample! manufacturers’ representatives are used widely in organi/ational markets

than they are in consumer markets. , manufacturers# representative is an independentorgani/ation that represents a group of different producers. The manufacturers#representative will usually have as clients several different producers that manufacture

products used in the same industry or application. or e$ample! a manufacturers#representative in the building materials industry might work for several different producers of structural materials for building homes. B$amine the following 70*address to find the websites of different categories of manufacturers# representatives.(http:''search.yahoo.com'search?p manufacturersW KUrepresentatives2n < ).

1ndustria! distributors are marketing intermediaries that service organi/ations by providing them with products and services in a convenient manner. There are literallytens of thousands of these firms in the 7.S. alone. However! the firms are often "hidden#from consumers since most are located in industrial districts within cities. See thefollowing website for an e$ample of an industrial distributor:

http:''www.wwid.com' .'ifferent t pes of products in consumer markets

3t is helpful to study the type of behavior in which consumers engage to better understandtheir wants and needs when it comes to product or service delivery. or consumer

products! researchers have identified several different types of products based onconsumer behavior. >e will describe four of these types of consumer products:7nsought goods! convenience goods! shopping goods! and specialty goods. 3t is helpfulto consider three characteristics when attempting to place a product or service in one ofthese categories. irst! we must reali/e that we classify goods and services on what

behavior we would e$pect from most consumers! thus! pi//a would be classified as aconvenience good because most consumers buy it in that manner. That is! when most

people buy pi//a! the purchase decision if not a high involvement purchase surrounded by considerable perceived risk. >hile you might say: 53 only eat the pi//a baked by myfavorite local pi//a place: 0ubino#s -i//a!” you should reali/e that the pertinent Luestionis not how you personally buy pi//a! but how most consumers buy pi//a. >e wouldobserve the effort put into the purchase including how much time is spent on the purchaseand how often the product is purchased. >e also consider the price and the personalsignificance of the purchase! because these directly impact how much time you arewilling to spend on the making the purchase. Situational effects are also important toconsider! including time pressure and occasion of the purchase because each of thesefactors affect the personal significance of the purchase.

Therefore! we define a convenience good as a product or service that is purchased with:

8. minimal amount of time e$pended under . normal consumption conditions (for e$ample! not a special occasion or of

particular personal significance) and that isI. purchased freLuently.

http://search.yahoo.com/search?p=manufacturers%27+representatives&n=25

http://www.wwid.com/

http://search.yahoo.com/search?p=manufacturers%27+representatives&n=25

http://www.wwid.com/



Ane can see that with convenience goods! time and place utility are e$tremely important because the most available supplier of the product may be the one that is chosen solely onlocation of the supplier (for e$ample! gasoline for your lawnmower).

/hopping goods are those products that are purchased less freLuently for which theaverage consumer is willing to spend some e$tra time in the shopping process. ore$ample! when buying a new =1 player for her car! a consumer may want to compareseveral different brands and stores before she decides on which =1 player to buy. Thuswith shopping goods the consumer will usually compare different brands and suppliers

before s'he makes a purchase decision. The added time the consumer is willing to spendwill vary directly with the cost of the new product and the personal significance(perceived risk or situational impacts) of the purchase.

/pecia!ty goods are products that we purchase for which we have a definite preferencefor the supplier. This preference may be based on prestige of the supplier (for e$ample!

0ole$ wristwatches http:''www.role$.com' ) or a long+standing involvement with the product (for e$ample! %rispy %reme 1onuts:http:''www.krispykreme.com'kkcollect.html also http:''www.bluebell.com' ).

,nsought goods are those products that consumers will not normally buy during regularshopping activities. or e$ample! the family doesn#t usually decide to spend a nicespring day shopping for burial plots and funeral services. >hile we all have need forthese products and services! they are not necessarily pleasurable to consider buying! thuswe in one way or another avoid buying certain products and services during our normalshopping activities. or e$ample! if you own an automobile! think back to the last timeyou bought a battery for your car. ost of us only buy a battery when we believe our

present battery most be replaced! thus! the good is unsought in normal shoppingactivities. 3ntangible goods! such as life insurance also fit into this category.(for e$ample! look at http:''www.northwesternmutual.com' ! http:''www.prudential.com and http:''www.sci+corp.com' ).

arketers of unsought goods choose intriguing appeals! usually based on perceived risk!either of personal risk (for e$ample! assuaging grief of family members) or financial risk(dramati/ing the conseLuences of financial loss).

ifferent types of products in organi)ationa! markets

3n organi/ational marketing! researchers have classified products! not on behaviorobserved among organi/ational buyers and decision makers! but on the intended use ofthe product or service. Thus the types of organi/ational products we identify are basedon what purpose the organi/ation has for the product or service being acLuired. ore$ample! a local gift shop may need to buy a new neon sign for its window to draw theattention of passers+by. The gift shop is buying the neon sign! not to resell! but to use inthe conduct of its business! thus the intended use is to promote the gift shop and increaseits sales.


http://www.krispykreme.com/kkcollect.html

http://www.bluebell.com/

http://www.northwesternmutual.com/


http://www.prudential.com/

http://www.sci-corp.com/



http://www.bluebell.com/


http://www.prudential.com/

http://www.sci-corp.com/



The following are brief descriptions of the different types of good and services inorgani/ational markets:

i. 0aw materials + products that are in their natural form like salmon from

the sea or coal from the earth.ii. -rocess materials F products that have undergone some change in formutility! for e$ample! trees that have been cut into boards in a lumber mill.

iii. =omponent parts F products do not undergo any change in form utility andappear in the final product in identical form! for e$ample! spark plugs orwindshield wipers in a new automobile.

iv. a&or eLuipment F products for which the basic processes of theorgani/ation depend! for e$ample! &et planes for a commercial airlinecarrier or ovens for a bakery.

v. ,ccessory eLuipment F products that are used to facilitate and maintain basic production and operations of the firm. or e$ample! a hand drill

used by a tent manufacturer.vi. Supplies F these products are similar to convenience goods in theconsumer products typology in that they are of minor cost and areconsumed freLuently. B$amples would include oil and grease formaintaining ma&or eLuipment.

vii. 6usiness services F intangible portions of the company#s basic processesthat enhance and protect its operations for e$ample security services andcleaning services



=hapter ine B$ercises

8. 0ead the history of %rispy %reme donuts on the %rispy %reme website(http:''www.krispykreme.com'kkcollect.html )! and write a one+page report on

what you find there.. Cive two e$amples of other similar company success stories you find on the weband describe them in a one+page essay.

I. >hy are 0ole$ watches only distributed through selected &ewelry stores and not%+ art? 3n a one+page report describe how does this e$ample identifies one ofthe common reasons for distributing a product through only a few outlets.

. *ist three different products that belong in each category of consumer productsand e$plain why you think most consumers would classify them this way.

<. >hy do are there different approaches for classifying consumer products andorgani/ational products? =an you think of products that can fit into either area?B$plain.

J. B$plain how drive+through windows for fast+food restaurants relate to place andtime utility. any futurists e$pect present trends toward more time and placeutility to continue. 1o you agree? >hy or why not?

K. Disit the ary %ay website and write a one+page essay summari/ing what youfound there ( http:''www.marykay.com' ).

;. Disit the Sysco >ebsite and write a one+page essay on what you found there(http:''www.sysco.com' ).

9. >hat are marketing intermediaries and why do most business people believe it isimperative in our economy to have marketing intermediaries?

8O. ,re retailers (organi/ations that sell primarily to people who buy for their own! personal non+business use)! marketing intermediaries? B$plain.

88. Cive e$amples in which a personal computer would be ma&or eLuipment for oneorgani/ation and accessory eLuipment for another.

8 . Search the internet with the keyword 5industrial distributors” and write a one+ page summary on what you found. >hy are consumers not more familiar withthis type of organi/ation?

8I. 3s a premium sound system in a new car a "component part# or "accessoryeLuipment# to an organi/ational marketer? B$plain why most consumers wouldanswer accessory eLuipment! although that is incorrect.


http://www.marykay.com/



http://www.marykay.com/




-hapter ine 5!ossary

9roadcast strategy 2 a distribution strategy based on delivering the product or service tocustomers on as a wide a basis as possible. Aften as a result of inadeLuate knowledgeabout customer needs and wants and characteristics

8ocused strategy F a distribution strategy based on delivering the product or service based on performance of upstream marketing activities to determine the "five rights# ofthe organi/ation#s product or service.

irect distribution F an approach used by some organi/ations in which the organi/ationitself is responsible for delivering its products and services to the customer.

Marketing intermediary F an independent organi/ation that assists producers indelivering their products and services to their customers

Manufacturers’ representative F a type of marketing intermediary that serves severalnon+competing producers of complementary products by accessing and maintainingrelationships with a wide variety of customers in business+to +business markets

1ndustria! distributor 2 a type of marketing intermediary in business+to+business thatservices organi/ations by providing them with products and services usually in a specific

product category such as electrical or plumbing supplies.



Chapter Ten $ %hat are the options for promoting products and services&

>e have already discussed the importance of performing upstream marketing activities prior to performing downstream marketing activities. -romotion takes place in theintermediate and later stages of marketing planning because promotion reLuires:

8. first a definition of the target audience. second! a description of the benefits to be delivered to that target audience

I. third! clear ob&ectives about what the program aims to accomplish! and. fourth! a strategy to be employed to communicate with that target audience and

accomplish the ob&ectives.

This process may seem backwards to some who would e$pect to make the media decisionfirst. That is! if an organi/ation is sales+driven! it would first attempt to perform numberfour above. However! a market+driven firm reali/es that is must perform the first threesteps prior to media choice.

'efinition of the target audience

Traditionally! the role of promotion has been identified as to "inform! persuade! andremind.# >hile these stages are always necessary! often one or the other has taken place

prior to the creation of a promotion program. or e$ample! most consumers in the 7.S.culture are aware of and understand the benefits of =oca+=ola and where to find the

product! so informational advertising may not be necessary ( http:''www.cocacola.com' ).However! =oca+=ola must continually work hard to keep its name in front of consumersand remind them that the product is available and that it will provide the consumer withcertain benefits. 50eminder advertising” is often placed by market leaders to supportother promotional campaigns that are in progress. Thus! =oca+=ola is committed toconstant advertising! although most consumers are aware of the product in over twohundred countries (see http:''www.cocacola.com' ). >hen you think of target markets!reali/e that they are always changing. -eople age and change over time! therefore! targetmarkets do the same thing. So! new =oca+=ola ads while persuading and reminding a

portion of the target market! also continually inform a certain part of the target marketwho due to age or culture are not aware of the product yet.

History shows that market leaders can Luickly lose their competitive position if theydon#t constantly keep their name in front of their target market. This is particularly truewith today#s media saturation and intense competition. ,s we discussed in =hapterThree! the target audience for consumer products is usually defined in terms ofdemographic! psychographic! geographic! and behavioristic attributes. Ance we haveclearly defined the target market! we create marketing programs to communication withmembers of the target market.

'escription of benefits to be delivered to the target market








3t is imperative to understand what benefits (not product features) the target market willreceive by buying our product or service and this description should be crafted in wordsthat communicate these benefits to members of the target market. Thus! the notion of5empathy” with the target market becomes critical. 3f we don#t really understand ourcustomers well! it will show in our attempts to communicate with them. or e$ample! if

our target market first seeks the minimi/ation of financial risk in their purchase! we mightchoose to provide a thirty+day money back guarantee. >hereas! if our target market ismore interested in minimi/ing technological risk in their purchase! we might choose todecrease this perceived risk by providing a twelve+month "technology trade+up program#or adopting promotion comprised of user testimonials dealing with the product.

Clear ob9ectives about what the program aims to accomplish

Setting ob&ectives for promotion programs is a critical part of achieving success.However! in practice! setting ob&ectives sometimes destroys creativity associated with the

promotion program. Thus! while we strongly recommend formulating ob&ectives that

will guide the promotion program! we caution promotion managers to avoid an approachthat is too rigid and Luells the creative process.

Ab&ectives for promotion programs can be either sales+oriented ob&ectives orcommunication+oriented ob&ectives. That is! we can either identify specific targets wewish to meet in terms of increased sales or specific targets we want to attain in terms ofcommunicating with the target audience for the program.

!trateg to be emplo ed to communicate with the target audience

Rust as in planning! the word "strategy# is used in several different ways in promotionmanagement. irst! strategy can refer to an overall game plan or orientation to the

promotion program. or e$ample! a company might discover through research that theirtarget customers seek reliability above all other attributes thus the organi/ation mightadopt a strategy of "emphasis on reliability.#An the other hand! an organi/ation might adopt a "direct mail strategy# if it finds thatdirect mail would be the best way to reach its customers. Hence! use of the word"strategy# has no guidelines and can confuse the issue. >e recommend that when thereader uses the word strategy! the reader provide an e$planation regarding how thestrategy would be implemented. This leaves no doubt regarding the word#s meaning.=ommunication ob&ectives can be driven by measures such as product awareness!knowledge (of certain attributes or benefits) or preference. Bach of these measures can

be used to assess how effective promotional efforts have been in attaining theirob&ectives.

The Promotion 1i"

Traditionally! we employ a promotion mi$ to effectively budget and distribute funds for promotion. The promotion mi$ includes the following components:



a) ,dvertising F paying for space in a medium such as a newspaper or trade &ournal

b) -ersonal Selling F a face to face contact with a customerc) Sales -romotion F any program that provides additional incentive for the

customer to make a purchase

d) -ublicity F obtaining space in a medium such as a newspaper in which wedo not have to pay for the space based on the newsworthiness! or othercharacteristic of the article printed.

>hen creating a promotion program we attempt to meld the four elements together in acogent way so that each element supports the other and provides the target audience witha consistent message over time. This practice is call "integrated promotion management#or "integrated marketing communications.#

or organi/ations marketing convenience goods in consumer markets! advertising usuallyaccounts for the largest proportion of the promotion mi$! whereas! personal selling

traditionally comprises the largest e$penditure for organi/ational markets.Creating !uccessful Promotion Programs

,s dicussed above! there are four steps to creating successful promotion programs:

8) a definition of the target audience) a description of the benefits to be delivered to that target audience

I) clear ob&ectives about what the program aims to accomplish!) a strategy to be employed to communicate with that target audience

or e$ample! arie#s Cift Shop is a small store in downtown anitou Springs! =olorado.arie#s parents opened the shop and named it for their newborn daughter in 89J; and the

shop has operated continuously since then. arie! after earning a college degree with ama&or in marketing! was asked by her parents to manage the gift shop so that her parentscould retire. arie accepted this challenge although she had two small children and wasa single mother. arie reali/ed any funds spent for promotion must yield results in theform of increased sales. The first step for arie was to determine who the targetaudience for any promotion would be. Having worked in the shop part+time for manyyears! arie believed that most her customers were from the local anitou Springs areaalthough a significant proportion of customers in the summer were tourists. Shecommissioned a small marketing research study with her former university to e$plore hercustomer base. Two of the research Luestions for this study were 5(8) >ho are our

present customers and ( ) why do they buy from us?” The marketing research studyfound the answers to these Luestions were that over seventy percent of the currentcustomers were from the anitou Springs area and had been customers of arie#s CiftShop for over two years. The study also indicated that most of the customers purchasedgifts for immediate family and friends for traditional gift+giving occasions including

birthdays! weddings! and =hristmas. Thus! after the marketing research study! ariedefined her target audience as "-resent customers with a G3- code in the anitou Springs



city limits and G3- codes contiguous to the anitou Springs G3- codes. arie alsoreali/ed that she should begin to keep a =ustomer 3nformation System that would enableher to communicate regularly with her present customer.

,nother of the Luestions in arie#s study was ">hy do you make purchases from

arie#s Cift Shop?# Ane of the responses to this Luestion on the survey was 53 amfamiliar with the 0uohonen family.” Aver si$ty percent responded affirmatively to thisLuestion indicating that one of their main buying motives was to "support local

businesses# and that the customer "en&oyed visiting with members of the 0uohonenfamily.# Thus! most customers were already familiar with arie#s Cift Shop before

buying from the shop.

Therefore! the three primary benefits customers were seeking were determined to be:

a. e$perience personali/ed service from a familiar source b. support local merchants like the 0uohonen family

c. obtain a uniLue gift,fter a meeting with a local marketing communications firm! these benefits were used asa guide for creating a promotion strategy for arie#s Cift Shop. arie#s decided to adoptthis approach as a long+term strategy and committed to this strategy for a three year

period! thus! adoption of a promotion strategy should not usually be seen as short+term.

>e will discuss this promotion program in more detail in a later chapter.

Overview of Advertising

,s indicated above! advertising can be defined as communicating with target audiencesthrough paid! non+personal messages! usually placed in a mass medium. ,dvertising isthe easiest but absolutely! more e$pensive alternative for marketing communications.That is! the initial outlay for an advertising campaign may be the most e$pensive optionfor promotion. However! advertising may possibly provide the lowest "cost per contact.#

or e$ample! usually audiences are measured by using a figure known at =- or cost perthousand (the " # denotes use of the 0oman numeral designation for one thousand.) Seethe appendi$ to this chapter: ,n easy guide to audience measurement.

3f you do an internet search on the word! "advertising#! you will find many differentreferences and categories presented there. Some researchers estimate that by the age ofeighteen the average person in the 7.S. was viewed well over one million advertisementsand that figure is probably very low if we consider all commercial messages to which weare e$posed in the 7.S. >hat are the implications of this staggering statistic? irst! mostof us consider ourselves "e$perts# in advertising because we have seen so many ads.However! to be truly e$pert! one must understand and develop the attribute of "empathy.#Bmpathy is simply being able to understand another person#s feelings are reactions toevents in his or her environment. 3t is easy to feel sympathy for someone who is onlytwenty+one years old but dying of cancer. However! it is much more challenging to



understand how that person must feel . This e$ample demonstrates how fundamentallyunimportant most advertising is to the average person. However! advertising issometimes very important to us as individuals. >hy? irst! we often use advertising as away to identify right and wrong behaviors: both fundamental and minor behaviors insociety. or e$ample! some ads give us cues about "what is cool# and what is "not cool# in

everyday behaviors. @ou might want to access http:''www.nickatnight.com' and click onthe inde$ and go to the "retromercials# section found in "Tvland#(http:''www.tvland.com'TD*.&html ) to see commercials that for the most part are overthirty years old. =an you identify how "cool behavior# and "uncool behavior# havechanged in the last few decades?

,lso! you might want to access ,dvertising ,ge aga/ine online athttp:''www.adage.com' and also check out a history of advertising at(http:''www.adage.com'news_and_features'special_reports' ) to get some perspective onhow TD advertising has changed and developed over the last several decades.

The tobacco industry continues to advertise heavily through alternative means that avoidregulations of the ederal Trade =ommission ( T=)! thus easily avoiding the law! whilecontinuing to advertise a product proven ha/ardous the health of its users. or e$ample!note how the motion picture industry continues to accept money to feature its products infilms. 0eview the following article found at:http:''www.ftc.gov'os'comments'tobaccocomments 'siegelmichaelmdmph.htm

,lso! the reader might want to review the website of a company that has as its core business the "placement# of products in various media vehicles. ( review:http:''www.productivity.net'=ompany -rofile.htm

Overview of Personal !elling

-ersonal selling is the worst nightmare most of my marketing students have about acareer in marketing. >hy? 3 think they see personal selling as a low status! low paidcareer full of disappointments and lack of personal freedom. 3n one way the students arecorrect! almost any career in personal selling is going have many disappointments if onedefines a customer not saying "yes# instantly as a disappointment. However! a career in

personal selling can yield a most rewarding professional life if a person can develop astrong self+esteem and truly believes in what s'he is selling. ,s -eter 1rucker! a leadingwriter in marketing and management! has said: 5(true)Y. marketing involves almost noselling.” r. 1rucker refers to the fact that if a marketer does his or her &ob andunderstands and delivers a product or service solution that the customer is truly seeking!it only remains for the marketer to e$plain how this solution will provide the benefitssought! and the customer is then willing and eager to buy. >hy does this sound sounrealistic to many of us? 6ecause! as consumers! we rarely e$perience a solution that isso well researched or a seller who values the customer this much. ,s mentioned earlierin the te$t! most companies in the 7.S. are sales driven and not market driven! so thattheir primary concern is not customer satisfaction but selling the customer what thecompany has available to sell. Therefore! it is no surprise that many consumers are

http://www.nickatnight.com/

http://www.tvland.com/TVL.jhtml

http://www.adage.com/

http://www.adage.com/news_and_features/special_reports/

http://www.ftc.gov/os/comments/tobaccocomments2/siegelmichaelmdmph.htm

http://www.productivity.net/Company%20Profile.htm

http://www.nickatnight.com/

http://www.tvland.com/TVL.jhtml

http://www.adage.com/

http://www.adage.com/news_and_features/special_reports/

http://www.ftc.gov/os/comments/tobaccocomments2/siegelmichaelmdmph.htm

http://www.productivity.net/Company%20Profile.htm



dissatisfied with the product and services they buy. However! as competition forcesorgani/ations to be more customer+oriented! the remaining firms that are solely sales+driven will eventually disappear from the economic landscape.

Traditionally in personal selling! organi/ations follow a process from the time preceding

customer contact to the time following the sale! including some follow+up activity. 3nmany organi/ational markets! this follow+up stage is called "post+sales support# and isone of the most effective methods for keeping customers. 3nvesting in retaining currentcustomers is much more cost+efficient than ignoring current customers in search of newcustomers. This approach! used historically with many consumer products is called"churning# and is adopted by sales driven firms. ew and used car sales are e$amples of

product categories that used the churning method for decades! although! due in somecases to the efforts of new car manufacturers! this practice is becoming less popular.

ew car manufacturers are recogni/ing that their long+term success depends on buildingand nurturing a diverse customer base. This reLuires on+going customer research and anhonest commitment to customers in all production and services systems that are

responsible for delivering customer satisfaction. Today this commitment is still rare! butin the future it will be essential. =heck out the website for Saturn automobiles(http:''www.saturnbp.com'inde$.&html ) to observe the efforts put forth by this companyto be truly customer+oriented. or e$ample! check out the 5 y Saturn” section on theSaturn website.

any firms view the personal selling process as a "sales funnel!# that is! the process begins with many different possible customers! and narrows over time to more specificcustomers who are first identified as "Lualified prospects.# , qualified prospect can bedefined as an individual! family! or organi/ation that is likely to be seeking the benefitswe seek to provide and has the ability to obtain those benefits by entering into arelationship with our organi/ation. Thus! locating and identifying Lualified prospects

becomes a primary function of the marketing or sales effort. However! we mustremember that if an organi/ation is truly marketing oriented! this process is made mucheasier because the customer profile created early on in product or service developmenthas already given clear definition to our target customers.

,fter identifying Lualified prospects! it remains to contact these prospects and consultwith them about our chosen solution to their product needs in terms of the benefits theyare seeking which we aspire to provide. Thus! while the "sales funnel# begins with a

profile of our target customer and the benefits that s'he wants! the number of prospectsdecreases as we proceed through the sales process. ,s we gather more information aboutwhat customers we can better satisfy! we continually use this information as feedback tomore precisely align our solution with the benefits sought by our target market. The"delivery system# of the organi/ation must strive to maintain fle$ibility throughout the

personal selling process and be capable of ad&usting the product solution to meet needs ofcustomers as the organi/ation gains better resolution about what those needs are e$actly.

ost traditional models of the selling process have the process culminate in a"presentation# and then proceed to a "feedback# stage that occurs after a presentation and

http://www.saturnbp.com/index.jhtml

http://www.saturnbp.com/index.jhtml



purchase. >hile this approach to modeling the process if helpful! it denies the reLuireddynamic nature of customer relationships and often is too infle$ible to be of ma$imumuse. That is! as we learn more about e$actly what benefits our customers are seeking! wemust continually ad&ust our product or service offering to better provide those benefits.

or e$ample! a response to feedback from customers in a restaurant that "this place it too

smoky!# must be forthcoming very Luickly if the restaurant is to be successful. >hilethis response is not as easy with tangible products! especially high technology products!organi/ations marketing such goods must always aspire to solicit this kind of feedbackand respond to it as Luickly as possible.

or more information on personal selling and sales management consult the two topics atthe following website:

Overview of !ales Promotion

6ecause we define sales promotion as 5any added incentive designed to inform! persuadeor remind a certain portion of the target market!” sales promotion ends up being a large!catch+all category including coupons! special offers! customer sweepstakes! and manyother promotional activities. These activities are used both in consumer markets andorgani/ational markets although the methods often differ. or e$ample! if one reviewsthe local Sunday paper! one will find almost countless coupons included by advertisers toencourage customers to buy. However! only a very small percentage of these couponsare ever even seen let alone e$changed by consumers. 3n organi/ational markets!companies often spend large amounts of money on trade shows which are regional!national! and international e$positions that usually share a common theme such as anindustry (for e$ample! see http:''www.keyImedia.com'comde$' ) or some other theme(for e$ample! seehttp:''search.yahoo.com'search?p internationalUtradeUshows2n < ).

@ou might also want to check out this website that operates in the 7nited %ingdom(http:''www.isp.org.uk'welcome.html )! it is an industry sponsored web presence.

4verview of 0ub!icity

-ublicity differs from advertising in that the advertiser does not pay for the space in themedium or publication with publicity. That is! a new feature is placed because itostensibly will be of interest to the readers of the publication. =heck out this website foran e$ample of a firm that does publicity e$clusively:http:''www.publicity.com'mri' .

There are also public service announcements that often attain similar ob&ectives. Thechallenge with publicity is preparing an article that is newsworthy and of interest to thereaders of a publication. Abtain a copy of a local newspaper! and see if you can find anarticle included in the newspaper that you believe was published without a charge to theadvertiser based on its interest to readers.

http://www.key3media.com/comdex/

http://search.yahoo.com/search?p=international+trade+shows&n=25

http://www.isp.org.uk/welcome.html

http://www.publicity.com/mri/


http://www.key3media.com/comdex/

http://search.yahoo.com/search?p=international+trade+shows&n=25

http://www.isp.org.uk/welcome.html




or e$ample! the Ca/ette in =olorado Springs! =olorado ( http:''www.ga/ette.com ' ) publishes an article on a new car every week. This article is usually published without acharge to the manufacturer of the car because the editors of the Ca/ette believe thatreaders will find the article newsworthy and of special interest. The same may be true ofarticles containing restaurant and movie reviews.

The main reLuirement of obtaining publicity in most media is that the article placedshould be newsworthy and credible and of special interest to viewers or readers.

ormulating an (ntegrated 1arketing Communications Plan

The primary challenge in promotion management is the integration of all activitiesdirected at communicating with one#s various audiences so that the organi/ation presentsa consistent understandable image to those groups. >e say "audiences# because at anygiven time! the organi/ation may be communicating with its customers! suppliers!employees! competitors! and the general public in several different conte$ts. 3t is

imperative that the organi/ation create and reinforce a clear image in the marketplace.Thus! all communications should be centrally produced and managed. This is not to saythat there will not be creativity in individual marketing communications efforts! only thatthese efforts will have agreed upon guidelines so that all of the different groups withwhich the organi/ation communicates are given a consistent image of the organi/ation.

,fter different parts of the organi/ation agree upon what image the organi/ation seeks toattain! an integrated marketing communications ( ,0=A ) program can be establishedand implemented. ,ll components of the promotion mi$ then have some underlyingconcept to reinforce. or e$ample! in the e$ample of arie#s Cift Shop described above!

arie wanted to make sure that all communications with customers! employees! andsuppliers used the same logo and letterhead. arie also reali/ed that an emphasis on

personal service! the availability of uniLue products! and the consistency of localownership would be critical to maintain her chosen organi/ational image. >e willdescribe arie#s chosen ,0=A program at length later on.

A Note on Positioning

,s we have indicated! it is essential to know who the target customer is and what benefitss'he is seeking. or e$ample! there is usually a temptation to ignore this reLuirement andattempt to "be all things to all people.# or e$ample! recently a group of 6, students ata university decided to enter into a business venture together. Several students in thegroup had managed to save some funds through various means. Two students hadrecently left military service and two others had received a "departure bonus# from a hightechnology firm. The students agreed that they wanted to open a restaurant together.>hen asked who their target market would be the students responded 5>ell! everyonewho eats.” Abviously! this definition of a target market is too broad and providesinsufficient guidance about the 5 ive >#s and H” (who! what! when! where! why! andhow) of the whole concept of the business. The students needed to more clearly definethe concept of the restaurant and precisely who they were e$pecting to serve in the

http://www.gazette.com/

http://www.gazette.com/



business. or e$ample! the needs of those who are searching for "a fast lunch# will differsignificantly from those who aspire to "rela$ and talk# over their lunch. 3t would bedifficult to position a restaurant to simultaneously meet all of these needs well.



-hapter ine <(ercises

8. Disit a Saturn dealership and another new car dealership and write a one+pagesummary of your e$periences paying particular attention to sales+driven versuscustomer+driven behavior on the part of the salesperson or salespersons you met.

. Abtain a maga/ine advertisement for which you think the target market is clearlydefined and comment on what you believe are the characteristics of that targetmarket.

I. Abtain three maga/ine ads! one that primarily is designed to "inform!# one thattries to "persuade!# and one that "reminds.#

. Disit the ick at ight website described in your chapter and view two"retromercials# on that site. >rite a one+page essay on how you believeadvertising has changed since your chosen retromercial aired.

<. Co to a grocery store and interview the manager there. ,sk the manager abouthis'her promotion mi$ and what components are in it and how they are managed.>rite a one+page essay describing the results of your interview.

J. Co to the following website and obtain an estimate on how much was spent onclassified ads in newspapers between 899< and OOO. 1escribe what yourreaction was when you learned of the amount.(http:''www.naa.org'marketscope'databank'Muarterly=lassified+new.htm )

K. The ederal Trade =ommission#s 8999 report on advertising for tobacco productsis available on the web ( ederal Trade =ommission =igarette 0eport for 8999 ).0ead this report and write a one+page essay on your personal reactions.

;. 7se the keyword "-rofessional selling# to search the internet. >rite a one+pageessay on your findings. ,lso! note the following website in your essay(http:''www.nfsa.com') .

9. ,gree or disagree with the following statement and e$plain your answer usingmaterials found in =hapter Ten. 53f everyone is your customer! then no one isyour customer.”

http://www.naa.org/marketscope/databank/QuarterlyClassified-new.htm

http://srd.yahoo.com/goo/'expenditures+for+advertising'/15/*http://www.quackwatch.com/02ConsumerProtection/FTCActions/cigarette.html

http://var/www/apps/conversion/tmp/scratch_3/(http://www.nfsa.com/)

http://www.naa.org/marketscope/databank/QuarterlyClassified-new.htm

http://srd.yahoo.com/goo/'expenditures+for+advertising'/15/*http://www.quackwatch.com/02ConsumerProtection/FTCActions/cigarette.html

http://var/www/apps/conversion/tmp/scratch_3/(http://www.nfsa.com/)



-hapter Ten 5!ossary



MA QQ ( #ppendix +hapter TenAn eas guide to audience measurement

2verview of basic terms sed in a dience meas rement0adio and TD audience measurement

Situation description: F , consumer packaged goods company runs a campaign on television for a newsoap product F 5Cerm 6uster Hand Soap ® .” The market for this product is estimated to be around Omillion people who are particularly concerned about the presence of germs on their hands during food

preparation. The campaign will be targeted to this market throughout the holiday season of OOO. The product is to be introduced through a television ad campaign beginning Actober OOO and running through1ecember OOO.

8. Ceach 2 “the percentage of target prospects e(posed to one or more ads for a brand during somestated period.” 1uring the company#s initial advertising campaign! half of the people (8O million

people) in this target market will be e$posed to the ad during the three+month life of the campaign.Thus the 0each is <O (that is <OW of the target market will see the ad. That is! fifty percent of the

people in the target market will be e$posed to the ad at least one or more times.) =oncerning reach!some people subscribe to the "three+hit theory.” That is! it takes three effective e(posures to move the

prospect through the hierarchy of effects. (,ttention! 3nterest! 1esire! and ,ction). Three effectivee$posures usually reLuires much greater than three total e$posures. >hy?

. 8re>uency 2“the average number of e(posures to advertisements received by a!! prospects whowere reached during the given time period.” 3n the preceding e$ample! your campaign reached 8Omillion prospects or half the target market. Suppose that media research indicates that the < million

people in the target market will be e$posed to this ad si$ times while < million people will be e$posedfour times during the campaign. Thus! the freLuency or average number of e$posures for the targetmarket will be five.

5C0’s or gross rating points6the 5C0 !eve! is a ru!e of thumb used by media personne! to assess there!ative strength of the campaign. 3n our e$ample! the C0-#s would be <O. C0-#s yield a comparisonof different options for reach and freLuency through e$amining the relative e$posure schedule of differentcampaign options (their relative "bang for the buck.#) >hile this measure has obvious shortcomings (that is!is an e$posure more powerful if it occurs previous to the food preparation period versus after the food

preparation period) it has been applied traditionally in TD and radio advertising. There is the growingLuestion of effectiveness . or e$ample! we can run ten second spots or si$ty second spots and end up withthe same 5C0-#s” (an e$posure is an e$posure) but do they have the same "selling power.” 3 think not.That is! while your C0-#s have increased with ten second spots! does that mean have you necessarilyincreased the communication and learning that has taken place with the target market? However! themeasure is helpful for comparing competing media schedules.



3n our e$ample above! need to decide which is more important for our situation! reach or freLuency. Thatis! is it more important for a larger proportion of the target market to be e$posed at least once! or is it moreimportant for prospects to be e$posed to our message several times. This debate finds little agreement!e$cept to say the "more is better.# Af course! ad agencies and media representatives are glad to have youspend more money always. However! you need to analy/e and think about what is needed to convey yourmessage. That is! are the benefits the product delivers relatively easy to understand? 3f so! which wouldyou prefer to emphasi/e in a campaign: reach or freLuency? An the other hand! if product benefits aredifficult to convey would your answer be different? Think about different schedules and how they impact your communication potential. 0emember that youare spreading the amount of dollars over different communication ob&ectives. =an#t do it allE or e$ample!if you emphasi/e reach over freLuency that means that 5more people will receive fewer e$posures.”=ompare this to emphasi/ing freLuency over reach so that 5fewer people will receive more e$posures.”

unds are always limited and you will asked to make decisions of this sort that trade off resources and people in your organi/ation e$pect to be able to trust your answers. ,fter all! you are the marketer with the

,STB0 A 67S3 BSS ,1 3 3ST0,T3A 1BC0BBE



Measures of te!evision audiences and their re!ationships to each other-overage"number of T3 househo!ds in signa!range of T3 station or network'

7+T .homes using T>/ )ating0ercentage of coverage 0ercentage of with sets turned on coverage tuned to a particu!ar

programstation or network

Audience /hare"percentage of =,T tuned

to a particu!ar program

station or network'

% T R # dience share N <ating

*rief e"ampleA recent infomercial for !u6anne !omers’ 'epression Cure aired on thelocal cable T> station in Out There, ?ansas, had the following viewership:Coverage $ this local cable channel can provide a coverage of @ millionhouseholds7+T $ for the @ midnight to a0m0 time slot, the percentage of coveragewith T> sets turned on is one out of twent or five percent or 0BAudience !hare $ during that time slot the percentage of homes using T>that is tuned to this cable channel is si"t percent)ating $ the rating for this infomercial would be 0B D 0EB F 0BGThus the percentage of total coverage tuned to this particular program was0BG or said another wa , the program reached EB,BBB households or three

percent of the total coverage0

Interesting websites to review6 #.+. >ielsen and +ompany, http: acnielsen0com and #rbritron <atings , http: www0arbitron0com home home0htm . #lso, yo might try #merican &emographics maga ine to explore more information abo t a dience characteristics athttp: www0demographics0com , and also, !immons !t dy of Media and Markets3http: www0smart8mktg0com products !1)*'OC0html 4.

There are many other reso rces for assessing markets and a dience meas rement that areeasily accessed on the internet and yo might want to see what yo can find in yo r own search.


http://var/www/apps/conversion/tmp/scratch_3/,%20http://www.arbitron.com/home/home.htm


http://www.demographics.com/


http://www.smart-mktg.com/products/SMRBDOC.html




http://www.smart-mktg.com/products/SMRBDOC.html



Newspaper and maga6ine audience measurement

The *asic CP1 formula is sed to compare different media options . That is, we compare thecost of reaching one tho sand viewers across different stations. For example, If we sed thebasic +PM form la 3cost of one nit of time49n mber of ho seholds reached4, we



-hapter <!even 2 -reativity and Marketing

3f one e$plored the research in arketing! s'he would find many references to

creativity. ost of these mentions of creativity would be found in one of three areas:

advertising! personal selling! or new product development. 3n advertising! for e$ample! people use the term "creative# as a noun to describe the portion of an advertisement that

comprises the artwork that translates the appeal or basic selling proposition of the ad and

how the appeal will be conveyed to the target market. or e$ample! 5Susan and 6ryan

will be responsible for doing the creative.” 3n personal selling! creativity is usually

applied in a conte$t of "creative selling# with no particular specific reference to the

literature of creativity or what

"creativity# really means. 3n new product development! creativity is used to describe how

individuals or teams can identify and implement new product ideas. The e$amples above

all miss the primary role of creativity in marketing. >e will define creativity as

5identifying and describing new ideas that are novel and useful.” Thus! individual and

group creativity plays a critical role in all phases of marketing practice.

&efinitions of +reativity

,n e$amination of the literature of other disciplines reveals do/ens of definitions

of creativity. rom these various definitions! three themes emerge that seem to be beneficial to the study of marketing and creativity.

The first group of definitions suggests that! to be truly creative! an innovation

must demonstrate 5radical newness.” 3ncluded are those situations in which the problem

or opportunity as initially posed was vague and not well defined. Thus! part of the task is

to formulate the problem itself. This has implications for marketing and a firm#s ability to

be more market+oriented.

, second group of definitions supposes 5creativity is the imaginatively gifted

recombination of known elements into something new”. This group of researchers

concludes that a creative solution does not necessarily reLuire new components but can

simply integrate e$isting knowledge in a more valuable way. This definition has

implications for upstream marketing activities including target customer needs

assessment and competitive benchmarking studies. or e$ample! we may already know



that tracking customers reLuires a continuous data collection effort! but creativity

techniLues may help identify new sources or new ways to consult those sources once they

are identified. >e will later discuss conditions for creative environments that can enable

such 5imaginatively gifted recombination.”

, third group of definitions believes that! to be creative! a solution must have

value. This is especially applicable in an era where the marketing information

management function is participating fundamentally in pursuing a distinctive competitive

advantage for the organi/ation. The ob&ectives of newness and imaginatively gifted

recombination are meaningless if they do not provide value+added results.

+onditions of +reativity

Individ als and teams that are otherwise regarded as e0 ally competentdo not perform e0 ally. # primary reason is that certain preconditions m st be

met and certain organi ational components marshaled to help individ als and

teams become creative. The +o ger +enter for the !t dy of +reativity has

applied the G-Ps model of creativity in many different contexts and fo nd it to be

a good g ide for nderstanding creativity. The G-Ps model of creativity provides

the basis for the remainder of this chapter and addresses the application of

str ct re and techni0 es for facilitating creativity in marketing.

The #pplication of +reativity6 The G-P s Model

The G-Ps model provides a good str ct re for nderstanding creativity and

its application in marketing. The model represents creativity as a dynamic

phenomenon comprised of fo r highly interactive components6 person, process,

prod ct, and press 3work climate4. The model s simplicity allows for the

individ al meas rement and assessment of each component as well as

eval ation of the interaction of the components. #nother strength of the model is

that it can be applied to a specific f nctional organi ation, s ch as a marketing

department or marketing research department, as well as the organi ation as a

whole. In the remainder of this chapter, each of the fo r /Ps1 is described and



disc ssed in relation to marketing management and marketing research practice.

The First P6 The +reative Person

umerous fallacies e$ist regarding creativity in people. ew of us perceive

ourselves to be creative! possibly because many highly publici/ed research efforts have

been focused on the study of creativity in geniuses and highly accomplished

professionals. ost people are inclined to believe that creativity is inherited and that we

either possess it or we don#t.

0esearch demonstrates that creativity is present in everyone and is normally

distributed. evertheless! most people utili/e less and less of their native creative ability

as they mature. ationwide studies of ,merican school children reveal progressively

lower scores on creativity tests as they move through the school system! with a precipitous 5 th grade slump”.

arketing management can stimulate creativity in employees by reinforcing the

fact that all individuals are innately creative. Through encouraging the use of proven

creativity techniLues! marketing managers can help employees restore the natural

curiosity and originality that they e$hibited as preschoolers. anagement can also

provide motivation for employees to become more creative. 3t is important to consider

both intrinsic and e$trinsic motivation. 3ntrinsic motivation comes from the anticipated

satisfaction of generating a creative idea and putting it into effect. arketing

management can provide e$trinsic motivation by rewards! such as recognition and

financial incentives! and can also facilitate a creative climate (discussed later) in which

employees more easily obtain the intrinsic satisfaction of creatively accomplishing a task

or pro&ect.

The /econd 07 The -reative 0rocess

+onsiderable research has foc sed almost excl sively on the creative

process thro gh which people can enhance their creative abilities and creative

res lts. Five ma"or st dies of creativity overwhelmingly show significant positive

res lts when creative abilities are deliberately n rt red.



There are many creative problem+solving techniLues that have been shown to be

helpful in marketing. >hile the space devoted to creativity in this e+book is limited! we

provide description and directions for using two of these =-S techniLues. The " ive >#s

and H# techniLue and the 5>ishful Thinking” techniLue are described in an appendi$ to

this chapter.

The Third P6 The +reated Prod ct

,n analysis of creativity can also start with the end product! by identifying the

characteristics necessary for ob&ects to be classified as creative. Athers believe that if

people are informed about their native creativity capabilities! are provided processes to

facilitate creativity! and are supported through a positive climate for creativity! it is

logical to assume that creative products and services will result. evertheless! it ishelpful for employees to have ways to measure their creativity results. However! a

framework should be developed for measurement of creativity in marketing activities.

arketing management could then translate in specific terms how creativity would be

recogni/ed! &udged and rewarded. >e discuss measuring the creative content of ideas in

the marketing conte$t below.

The 8ourth 07 0ress "the <nvironment for -reative Work'

-ress is a term from the field of education that refers to the relationship between

human beings and their environment. The importance of the work environment for

encouraging'discouraging creativity is well supported in creativity research. Aptimum

results do not occur unless an organi/ation has a positive climate for creativity.

There has been considerable research on the ways that work environments

influence creativity. The climate for creativity comprises those factors that stimulate or

retard creative behavior. Studies indicate that organi/ation#s can create a set of norms

that encourage creative thinking. These norms would include universal tolerance for new

ideas! and universal organi/ational intolerance of cynicism and sarcasm. -eople should

be rewarded for identifying what is good about a new idea before they are allowed to be

critical of the new idea. Argani/ations that systematically positively recogni/e those who





=hapter Bleven B$ercises

8. Has your definition of "creativity# changed as a result of reading this chapter?B$plain.

. orm a small group and address a Luestion assigned to you using one of the =-S

techniLues described below. ,ppoint a member of the group to keep notes of theevents when your group starts 5problem solving.”I. 1escribe a moment in your life in which you believe you were most creative!

including a description of the 5 -#s of creativity” in your life at the time.. >hy are those who constantly "kill# creative ideas by inappropriate &oking or

other behaviors so dangerous to the creative effort in an organi/ation? B$plain.<. 7se the si$ dimensions of a healthy creative climate to describe how you would

establish an ideal climate for creativity at your workplace. How much changewould have to take place? B$plain.

J. 0eview the material below on 5-ersonal =reativity Gones (-=G#s)” and describeyour own -=G.



Appendi( 17 escription of

Two -0/ techni>ues7

Steps in using the 5 ive >#s and H” TechniLue

a. identify the who! what! when! where! why! and how of the situation underconsideration b. draw up a list of responses to each dimensionc. use this list as a way to identify creative responses to the problem or

opportunity

note: this techniLue is more analytical in nature because it provides a good checklist tomake sure most areas are covered. >hile the techniLue is valuable to outline an area thatneeds to be e$plored! another more intuitive techniLue is often helpful to use to generatenew ideas after this techniLue is applied initially

!teps in using the H%ishful ThinkingI Techni2uea. suspend reality (a challenge in itselfE)

b. identify the "perfect solution# that is! what would be the best solution to asituation if anything were possible.

c. now! work back from the "perfect solution# introducing reality a little at atime! being careful to challenge each part of an idea considered impossible

ote: this techniLue is more intuitive in nature because it provides a good tool tochallenge traditional knowledge that may be no longer applicable or relevant! thetechniLue is valuable because it starts with solutions rather than problems. -lus! thistechniLue is 7 E





-hapter Twe!ve 2 What is the internationa! market and why is it important?

,s a consumer you regularly buy products manufactured in other countries. The 7.S.usually has a negative balance of trade! meaning that as a country we import more

products than we e$port (for e$ample! see the following website and review our annual

trade deficits for the last ten years):(http:''www.kiplingerforecasts.com'kbftables'usecon'trade'trade_balance_annual.html ).

>hat is the impact of this trade deficit? B$perts disagree as to whether this deficitcreates real problems for the 7.S. economy or not. =ritics argue that buying so manyimported goods hurts the market for 7.S. &obs! while others believe that this opencompetition forces 7.S. businesses to learn how to compete effectively in global markets., full discussion of this issue is beyond the material in this course. However! you shouldhave a clear understanding and appreciation for the arguments e$pressed surrounding thisissue. 3f you do your own search on the keywords 57.S. balance of trade” and 5tradedeficits” you will find many different viewpoints on this topic.

Aur point is that! as a consumer you buy products manufactured in other countries almostdaily. @ou are! no doubt! familiar with the fact that estles is a foreign company and thatthey recently merged with a 7.S. company! -urina. (seehttp:''www.nestle.com'all_about'inde$.html for an article outlining the merger) and thatmany products you buy are manufactured in =hina (see http:''www.census.gov'foreign+trade'balance'c<KOO.html for recent government data on the 7.S. trade balance with=hina).

However! you may not be familiar with iskars! based in inland(http:''www.fiskars.com' ) or that your 1oc arten#s were probably under a brand nameowned by a company based in 7.%. ( http:''www.drmartens.com'flash') .

3nternational marketing is the rule today! rather than the e$ception. Since , T, ( orth,merican ree Trade ,greement) was instituted! the 7.S.! e$ico! and =anada aremoving towards an open market without trade barriers (search with keyword 5 , T,”to find further information)! and the Buropean 7nion (http:''userpage.chemie.fu+

berlin.de'adressen'eu.html ) has tried to reach this goal for several years.

Thus any student of marketing should have some understanding of global tradeagreements! particularly! , T,! the Buropean 7nion! and the Ceneral ,greement onTa$es and Tariffs! also known as 5C,TT” ( http:''gatt.org' ). ,s global competition forthe production and marketing of goods and services intensifies! these trade agreementswill become more controversial.

Choosing a strateg for international marketing

3f an organi/ation determines that it has the interest and capability to market its productsinternationally! the organi/ation must then choose among several options. Traditionally!the following four options have been identified:

http://www.kiplingerforecasts.com/kbftables/usecon/trade/trade_balance_annual.html

http://www.nestle.com/all_about/index.html


http://www.census.gov/foreign-trade/balance/c5700.html


http://www.fiskars.com/

http://www.drmartens.com/flash/)

http://var/www/apps/conversion/tmp/scratch_3/(http://userpage.chemie.fu-berlin.de/adressen/eu.html


http://gatt.org/

http://www.kiplingerforecasts.com/kbftables/usecon/trade/trade_balance_annual.html




http://www.fiskars.com/

http://www.drmartens.com/flash/)



http://gatt.org/





How would you approach marketing to these different areas of the world? The first stepin any kind of marketing endeavor is to understand what satisfies the customer! and thefirst step in understanding is listening! an attribute that we in the 7.S. do not oftene$hibit. 3n some cultures in the world! there is nothing wrong or uncomfortable with

silence. However! being silent is not an attribute of most subcultures in the 7.S. thus business people from the 7.S. often talk rather than listen to people from other countries.This seems simple! but as an e$ercise! try to be in a group of people and not say a wordfor at least thirty seconds. Sound easy? Try it.

7nderstanding other cultures reLuires an effort at empathy. That is! one must try tounderstand what it is like to "stand in another#s shoes.# >hile this is intellectually easy tounderstand! it is challenging to actually do. or e$ample! how does an ,ma/onian 3ndiansee his or her world?



=hapter Twelve B$ercises

8. B$amine the okia website ( http:''www.nokia.com'main.html) and makeobservations on differences you find in this site and the otorola website(http:''www.motorola.com'home' ). 1o you believe the differences you identified

are due to the different countries within which the two organi/ations function?B$plain thoroughly.. =ompare the websites of Aras! Ay ( http:''www.oras.com' ) and oen

(http:''www.moen.com ). =an you identify country+oriented differences in thesetwo companies? 3f so! list and discuss each difference you find.

I. 1iscuss the following statement: 5,s the worldwide web develops! it willminimi/e differences in the way different countries do business and willhomogeni/e the environment of business.”

. 0eview the word 5international marketing” on the internet and summari/e yourfindings in a one+page report.

<. 6ased on the opening vignette that discussed the estle =ompany#s recent

acLuisition of -urina eeds! make three predictions on other naturalconsolidations between other 7.S. firms and foreign firms that you believe maytake place in the future.

J. B$amine the website for 1iamler'=hrysler =orporation(http:''www.daimlerchrysler.com' ). ind an article on the internet that discusseswhether this merger will be successful! including your own thoughts on themerger in a one+page essay. >hat challenges! if any! do you believe e$ist for thismerger based on cultural differences?

K. ind an interesting website of a foreign company that you believe does a good &obof describing the company#s products and makes them of interest to a reader fromthe 7.S.

;. >rite a one+page essay on an article you find discussing the disagreement between ord otor =ompany and irestone Tires.

9. ,gree or disagree with the following statement and give reasoning for your position: 5the problems between irestone =orporation(http:''www.firestone.com' ) and ord otor =ompany(http:''www.ford.com'servlet'ecmcs'ford'inde$.&sp ) were primarily because the

http://www.nokia.com/main.html)a

http://www.motorola.com/home/

http://www.oras.com/

http://www.moen.com/

http://www.daimlerchrysler.com/

http://www.firestone.com/

http://www.ford.com/servlet/ecmcs/ford/index.jsp

http://www.nokia.com/main.html)a

http://www.motorola.com/home/

http://www.oras.com/

http://www.moen.com/

http://www.daimlerchrysler.com/

http://www.firestone.com/

http://www.ford.com/servlet/ecmcs/ford/index.jsp

Documents

Principles of marketing: An applied, collaborative learning approach