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Thursday, May 26, 2016
Using Marketing Channels to Create Value for Customers
Sometimes when you buy a good or service, it passes straight from the producer to
you. But suppose every time you purchased something, you had to contact its
maker? For some offerings, such as a haircut, this would work. But what about the
products you purchase at the grocery store? You couldn’t begin to contact and buy
from all the makers of those products. It would be an incredibly inefficient way to
do business.
Fortunately, companies partner with one another, alleviating you of this burden.
So, for example, instead of Procter & Gamble selling individual toothbrushes to
consumers, it sells many of them to a drugstore close to you, which then sells them
to you and other people.
The specific avenue a seller uses to make a finished good or service available to you
for purchase—for example, whether you are able to buy it directly from the seller,
at a store, online, from a salesperson, and so on—is referred to as the product’s
marketing channel1 (or distribution channel). All of the people and organizations
that buy, resell, and promote the product “downstream” as it makes its way to you
are part of the marketing channel. This chapter focuses on downstream channels.
In the next chapter, we look not only “downstream” but also “upstream” at the
people and organizations that supply the materials and services and that allow
products to be made in the first place. The firms a company partners with to actively promote and sell a product as it
travels through its marketing channel to users are referred to by the firm as its
channel members2 (or partners). Companies strive to choose not only the best
marketing channels but also the best channel partners. A strong channel partner
like Walmart can promote and sell the heck out of a product that might not
otherwise turn a profit for its producer. In turn, Walmart wants to work with strong
channel partners it can depend on to continuously provide it with great products
that fly off the shelves. By contrast, a weak channel partner can be a liability.
The simplest marketing channel consists of just two parties—a producer and a
consumer. Your haircut is a good example. When you get a haircut, it travels
straight from your hairdresser to you. No one else owns, handles, or remarkets the
haircut to you before you get it. However, many other products and services pass
through multiple organizations before they get to you. These organizations are
called intermediaries3 (or middlemen or resellers). Companies partner with intermediaries not because they necessarily want to
(ideally they could sell their products straight to users) but because the
intermediaries can help them sell the products better than they could working
alone. In other words, they have some sort of capabilities the producer needs:
contact with many customers or the right customers, marketing expertise, shipping
and handling capabilities, and the ability to lend the producer credit are among the
types of help a firm can get by utilizing a channel partner. There are four forms of
utility, or value, that channels offer. These are time, form, place, and ownership.
you. But suppose every time you purchased something, you had to contact its
maker? For some offerings, such as a haircut, this would work. But what about the
products you purchase at the grocery store? You couldn’t begin to contact and buy
from all the makers of those products. It would be an incredibly inefficient way to
do business.
Fortunately, companies partner with one another, alleviating you of this burden.
So, for example, instead of Procter & Gamble selling individual toothbrushes to
consumers, it sells many of them to a drugstore close to you, which then sells them
to you and other people.
The specific avenue a seller uses to make a finished good or service available to you
for purchase—for example, whether you are able to buy it directly from the seller,
at a store, online, from a salesperson, and so on—is referred to as the product’s
marketing channel1 (or distribution channel). All of the people and organizations
that buy, resell, and promote the product “downstream” as it makes its way to you
are part of the marketing channel. This chapter focuses on downstream channels.
In the next chapter, we look not only “downstream” but also “upstream” at the
people and organizations that supply the materials and services and that allow
products to be made in the first place. The firms a company partners with to actively promote and sell a product as it
travels through its marketing channel to users are referred to by the firm as its
channel members2 (or partners). Companies strive to choose not only the best
marketing channels but also the best channel partners. A strong channel partner
like Walmart can promote and sell the heck out of a product that might not
otherwise turn a profit for its producer. In turn, Walmart wants to work with strong
channel partners it can depend on to continuously provide it with great products
that fly off the shelves. By contrast, a weak channel partner can be a liability.
The simplest marketing channel consists of just two parties—a producer and a
consumer. Your haircut is a good example. When you get a haircut, it travels
straight from your hairdresser to you. No one else owns, handles, or remarkets the
haircut to you before you get it. However, many other products and services pass
through multiple organizations before they get to you. These organizations are
called intermediaries3 (or middlemen or resellers). Companies partner with intermediaries not because they necessarily want to
(ideally they could sell their products straight to users) but because the
intermediaries can help them sell the products better than they could working
alone. In other words, they have some sort of capabilities the producer needs:
contact with many customers or the right customers, marketing expertise, shipping
and handling capabilities, and the ability to lend the producer credit are among the
types of help a firm can get by utilizing a channel partner. There are four forms of
utility, or value, that channels offer. These are time, form, place, and ownership.
Managing the Offering
Managing all of a company’s offerings presents a number of challenges. Depending
on the size of the company and the breadth of the company’s offerings, several
positions may be needed.
A brand manager is one such position. A brand manager is the person
responsible for all business decisions regarding offerings within one brand. By
business decisions, we mean making decisions that affect profit and loss, which
include such decisions as which offerings to include in the brand, how to position
the brand in the market, pricing options, and so forth. Indeed, a brand manager is
often charged with running the brand as if it were its own separate business.
A brand manager is much more likely to be found in consumer marketing
companies. Typically, B2B companies do not have multiple brands so the position is
not common in the B2B environment. What you often find in a B2B company is a
product manager, someone with business responsibility for a particular product
or product line. Like the brand manager, the product manager must make many
business decisions, such as which offerings to include, advertising selection, and so
on. Companies with brand managers include Microsoft, Procter & Gamble, SC
Johnson, Kraft, Target, General Mills, and ConAgra Foods. Product managers are
found at Xerox, IBM, Konica-Minolta Business Solutions, Rockwell International,
and many others.
The University of Georgia was the first to launch a graduate program in brand
management, but the only major program now being taught in the United States is
at the University of Wisconsin. The program is managed through the university’s
Center for Brand and Product Management. Most brand managers simply have an
undergraduate degree in marketing, but it helps to have a strong background in
either finance or accounting because of the profitability and volume decisions
brand managers have to make. In the United Kingdom, a number of school have
undergraduate degree programs specializing in brand management, as does Seneca
College in Toronto, Canada. In some companies, a category manager has responsibility for business decision
within a broad grouping of offerings. For example, a category manager at SC
Johnson may have all home cleaning products, which would mean that brands such
as Pledge, Vanish, Drano, Fantastik, Windex, Scrubbing Bubbles, and Shout would
be that person’s responsibility. Each of those brands may be managed by brand
manager who then reports directly to the category manager.
At the retail level, a category manager at each store is responsible for more than
just one manufacturer’s products. The home cleaning category manager would have
responsibility for offerings from SC Johnson, as well as Procter & Gamble, Colgate-
Palmolive, and many other producers.
Another option is to create a market manager, who is responsible for business
decisions within a market. In this case, a market can be defined as a geographic
market or region; a market segment, such as a type of business; or a channel of
distribution. For example, SC Johnson could have regional insect control managers.
Regional market managers would make sense for insect control because weather
has an influence on which bugs are pests at any given time. For example, a southern
regional manager would want more inventory of the repellent Off! in March
because it is already warm and the mosquitoes are already breeding and biting in
the southern United States.
In B2B markets, a market manager is more likely to be given responsibility for a
particular market segment, such as all hospital health care professionals or doctor’s
offices. All customers such as these (retail, wholesale, and so forth) in a particular
industry compose what’s called a vertical market44, and the managers of these
markets are called vertical market managers45. B2B companies organize in this
way because
• buying needs and processes are likely to be similar within an industry,
• channels of communication are likely to be the same within an
industry but different across industries.
Because magazines, Web sites, and trade shows are organized to serve specific
industries or even specific positions within industries, B2B marketers find vertical
market structures for marketing departments to be more efficient than organizing
by geography.
Market managers sometimes report to brand managers or are a part of their firms’
sales organizations and report to sales executives. Market managers are less likely
to have as much flexibility in terms of pricing and product decisions and have no control over the communication content of marketing campaigns or marketing
strategies. These managers are more likely to be tasked with implementing a
product or brand manager’s strategy and be responsible for their markets. Some
companies have market managers but no brand managers. Instead, marketing vice
presidents or other executives are responsible for the brands.
on the size of the company and the breadth of the company’s offerings, several
positions may be needed.
A brand manager is one such position. A brand manager is the person
responsible for all business decisions regarding offerings within one brand. By
business decisions, we mean making decisions that affect profit and loss, which
include such decisions as which offerings to include in the brand, how to position
the brand in the market, pricing options, and so forth. Indeed, a brand manager is
often charged with running the brand as if it were its own separate business.
A brand manager is much more likely to be found in consumer marketing
companies. Typically, B2B companies do not have multiple brands so the position is
not common in the B2B environment. What you often find in a B2B company is a
product manager, someone with business responsibility for a particular product
or product line. Like the brand manager, the product manager must make many
business decisions, such as which offerings to include, advertising selection, and so
on. Companies with brand managers include Microsoft, Procter & Gamble, SC
Johnson, Kraft, Target, General Mills, and ConAgra Foods. Product managers are
found at Xerox, IBM, Konica-Minolta Business Solutions, Rockwell International,
and many others.
The University of Georgia was the first to launch a graduate program in brand
management, but the only major program now being taught in the United States is
at the University of Wisconsin. The program is managed through the university’s
Center for Brand and Product Management. Most brand managers simply have an
undergraduate degree in marketing, but it helps to have a strong background in
either finance or accounting because of the profitability and volume decisions
brand managers have to make. In the United Kingdom, a number of school have
undergraduate degree programs specializing in brand management, as does Seneca
College in Toronto, Canada. In some companies, a category manager has responsibility for business decision
within a broad grouping of offerings. For example, a category manager at SC
Johnson may have all home cleaning products, which would mean that brands such
as Pledge, Vanish, Drano, Fantastik, Windex, Scrubbing Bubbles, and Shout would
be that person’s responsibility. Each of those brands may be managed by brand
manager who then reports directly to the category manager.
At the retail level, a category manager at each store is responsible for more than
just one manufacturer’s products. The home cleaning category manager would have
responsibility for offerings from SC Johnson, as well as Procter & Gamble, Colgate-
Palmolive, and many other producers.
Another option is to create a market manager, who is responsible for business
decisions within a market. In this case, a market can be defined as a geographic
market or region; a market segment, such as a type of business; or a channel of
distribution. For example, SC Johnson could have regional insect control managers.
Regional market managers would make sense for insect control because weather
has an influence on which bugs are pests at any given time. For example, a southern
regional manager would want more inventory of the repellent Off! in March
because it is already warm and the mosquitoes are already breeding and biting in
the southern United States.
In B2B markets, a market manager is more likely to be given responsibility for a
particular market segment, such as all hospital health care professionals or doctor’s
offices. All customers such as these (retail, wholesale, and so forth) in a particular
industry compose what’s called a vertical market44, and the managers of these
markets are called vertical market managers45. B2B companies organize in this
way because
• buying needs and processes are likely to be similar within an industry,
• channels of communication are likely to be the same within an
industry but different across industries.
Because magazines, Web sites, and trade shows are organized to serve specific
industries or even specific positions within industries, B2B marketers find vertical
market structures for marketing departments to be more efficient than organizing
by geography.
Market managers sometimes report to brand managers or are a part of their firms’
sales organizations and report to sales executives. Market managers are less likely
to have as much flexibility in terms of pricing and product decisions and have no control over the communication content of marketing campaigns or marketing
strategies. These managers are more likely to be tasked with implementing a
product or brand manager’s strategy and be responsible for their markets. Some
companies have market managers but no brand managers. Instead, marketing vice
presidents or other executives are responsible for the brands.
Tuesday, May 24, 2016
Marketing Research
Marketing managers are constantly faced with the necessity of defining problem areas. They must make decisions concerning target markets and about the marketing mixes best adapted to these markets. They have to make assumptions concerning competitors’ actions and about the uncontrollable and ever-changing environmental factors. It is the task of marketing research to help the marketing manager make better decisions and to choose wisely among alternative marketing strategies. It should aid the manager not only in planning, but also, through the feedback it provides, in controlling. Nature of Marketing Research Marketing research is the systematic, objective, and exhaustive gathering, recording, and analyzing of the facts relevant to any problem in the field of marketing. It can be thought of as the application of the scientific method to the solution of marketing problems - followed by the making of recommendations based on the results. Marketing research includes various subsidiary types of research, the most important being: (1) product research, involving market tests for new products, seeking out new uses of present products, and making studies of packaging effectiveness, among other activities; (2) market analysis, primarily the study of the size, location, and other characteristics of market; (3) sales research, activities such as evaluating sales policies, making pricing studies, assessing the effectiveness of salespeople, and setting sales quotas; (4) consumer research, of which motivation research is a type, concerned chiefly with the discovery and analysis of consumer attitudes, reactions, and preferences; and (5) advertising research, designed to help in evaluating the advertising program and in making decisions concerning it. Motivation or Qualitative Research
Motivation research is a qualitative tool, unlike other methods of market research designed to provide quantitative results. It makes use of the findings and methods of the behavioral sciences - particularly psychology, sociology, and anthropology. It aims at discovering not only the conscious opinions, attitudes, preferences, and wants of consumers but also their unconscious drives and motivations. The so-called ―depth interview‖ is used in this type of research. Limitations of Marketing Research Marketing research is not the cure-all for every company problem related to marketing. Many executives still look with skepticism on marketing research and need to be ―sold‖ on its usefulness. This is reflected in marketing research budgets that average about 0.2 percent of sales as compared to new-product research with budgets running from 5 to 10 percent. This situation often leads to the development of products with negligible market potential. The Computer and Marketing Information Systems Some market research functions are being expanded to a marketing information system (MIS). More market-related data are available than most firms can translate into useful information. A system is needed to provide an orderly flow of pertinent data from both internal and external sources that is relevant for decision making. A MIS can be the basis for monitoring, developing, and selecting various plans and functions. Recent developments in the use of computers, and a subsequent decline in the cost of using them has encouraged more marketers toward a MIS. New applications for gathering information include:
1. Computer-prepared market research reports.
Dun & Bradstreet provides data on 390,000 business firms and from a model can compile individual market profiles.
2. Measuring movement of goods.
Selling Areas-Marketing, Inc., a subsidiary of Time, Inc., provides its chain store and wholesaler clients with data on 66 main product categories and 361 sub-groupings.
3. Input-output analysis.
Evaluation of changes in usage patterns of industries or firms. Planning Market Research Some basic steps in planning marketing research include:
1. Developing hypotheses.
Most hypotheses tested emerge from insight or knowledge gained from individual experience, previous research studies or general information on a subject or activity. The hypothesis must be stated in form that can be measured by acceptance or rejection. For example: ―Trading stamps develop stronger shopper loyalty to grocery store choice, than other factors.‖ If no conclusion can be assumed, then a null hypothesis or a ―no difference statement‖ can be used. For example: ―There is no difference in shopper loyalty between grocery stores using trading stamps and those which do not.‖ Validity of a hypothesis is easier to confirm if acceptance or rejection can be measured. When forming a hypothesis, the researcher must be sure that the variable being tested is the only variable. In the above example, for instance, the stores must be comparably priced, convenient, have a similar selection of goods, etc.
2. Sources of market information: Collective data.
Market research provides information and reduces risk by helping executives make rational choices under conditions of less-than-perfect knowledge. Marketing research includes fact-finding and management counseling. Management counseling entails the assessment of various talents and thoughts of persons in marketing and the other functional areas of the firm such as accounting, production, or finance as they relate to marketing decisions. This again is the systems approach in action (MISs). Fact-finding is the actual collection of data and information. This activity includes the generation of primary and secondary data, which may then be processed further by the application of operations research techniques. Primary data. Primary data is information gathered from original sources for a specific purpose or objective. Some techniques for gathering primary data include:
1. Surveys. Answers to questions are sought through telephone or personal, face-to-face interviews, or through the mail. Generally, a specific list of questions or a questionnaire is prepared and mailed. Validity and reliability of these surveys are vital considerations. Pretesting for clarity and question sequence, instruction adequacy, and ease with which results can be edited, coded, and tabulated is essential. Then the reliability of the final results must be determined by careful statistical analysis. One common mistake in questionnaire construction is to ask questions that interest the researcher but do not provide information that can be used to make a marketing decision.
2. Observation. Here the consumer is observed in the act of purchasing. Sometimes films are taken and then analyzed. Candid camera is actually an observation technique.
3. Field experiments. May involve the survey method, the observation method, or both. The main characteristics are more rigorous research design, often using sample control groups and sophisticated statistical techniques.
Secondary data. Many people desiring market research information make the mistake of rushing out to get primary data before exhausting existing secondary sources. Secondary data may be readily available and at little or no cost. Secondary sources include: internal company records; U.S. government publications; trade, professional, and business associations; university research bureaus; libraries; and consulting, advertising, and other firms. Especially helpful government publications are the Census of Business and other publications of the U.S. Bureau of the Census; the Statistical Abstract of the United States, the Survey of Current Business, and the Monthly Labor Review. Trade publications may be located by referring to the Ayer Directory of Newspapers and Periodicals and associations through the U.S.D.A. publication, National Associations of the United States. University bureaus of business research such as those at Michigan, Harvard, Ohio State, Minnesota, Washington, Illinois, California, and Texas provide services for both private and public organizations. Interpreting Research Findings At the outset of a market research study some guidelines should be established for a continual evaluation of the data throughout the collection period. It is crucial that the marketing researchers and the research users cooperate at every stage in the research design. Often research studies go unused due to the inability of the user to understand lengthy discussions of research limitations or the use of unfamiliar technology. In addition to a written report, an oral presentation should be required to expand or clarify the results. Future Trends Noticeable improvements in market research relate to the use of advanced statistical techniques. This should lead to the further reduction of risk and uncertainty in business decisions. However, research is not a one-shot process. Research is important both preceding and following major change decisions and to ensure that research data remain current.
Motivation research is a qualitative tool, unlike other methods of market research designed to provide quantitative results. It makes use of the findings and methods of the behavioral sciences - particularly psychology, sociology, and anthropology. It aims at discovering not only the conscious opinions, attitudes, preferences, and wants of consumers but also their unconscious drives and motivations. The so-called ―depth interview‖ is used in this type of research. Limitations of Marketing Research Marketing research is not the cure-all for every company problem related to marketing. Many executives still look with skepticism on marketing research and need to be ―sold‖ on its usefulness. This is reflected in marketing research budgets that average about 0.2 percent of sales as compared to new-product research with budgets running from 5 to 10 percent. This situation often leads to the development of products with negligible market potential. The Computer and Marketing Information Systems Some market research functions are being expanded to a marketing information system (MIS). More market-related data are available than most firms can translate into useful information. A system is needed to provide an orderly flow of pertinent data from both internal and external sources that is relevant for decision making. A MIS can be the basis for monitoring, developing, and selecting various plans and functions. Recent developments in the use of computers, and a subsequent decline in the cost of using them has encouraged more marketers toward a MIS. New applications for gathering information include:
1. Computer-prepared market research reports.
Dun & Bradstreet provides data on 390,000 business firms and from a model can compile individual market profiles.
2. Measuring movement of goods.
Selling Areas-Marketing, Inc., a subsidiary of Time, Inc., provides its chain store and wholesaler clients with data on 66 main product categories and 361 sub-groupings.
3. Input-output analysis.
Evaluation of changes in usage patterns of industries or firms. Planning Market Research Some basic steps in planning marketing research include:
1. Developing hypotheses.
Most hypotheses tested emerge from insight or knowledge gained from individual experience, previous research studies or general information on a subject or activity. The hypothesis must be stated in form that can be measured by acceptance or rejection. For example: ―Trading stamps develop stronger shopper loyalty to grocery store choice, than other factors.‖ If no conclusion can be assumed, then a null hypothesis or a ―no difference statement‖ can be used. For example: ―There is no difference in shopper loyalty between grocery stores using trading stamps and those which do not.‖ Validity of a hypothesis is easier to confirm if acceptance or rejection can be measured. When forming a hypothesis, the researcher must be sure that the variable being tested is the only variable. In the above example, for instance, the stores must be comparably priced, convenient, have a similar selection of goods, etc.
2. Sources of market information: Collective data.
Market research provides information and reduces risk by helping executives make rational choices under conditions of less-than-perfect knowledge. Marketing research includes fact-finding and management counseling. Management counseling entails the assessment of various talents and thoughts of persons in marketing and the other functional areas of the firm such as accounting, production, or finance as they relate to marketing decisions. This again is the systems approach in action (MISs). Fact-finding is the actual collection of data and information. This activity includes the generation of primary and secondary data, which may then be processed further by the application of operations research techniques. Primary data. Primary data is information gathered from original sources for a specific purpose or objective. Some techniques for gathering primary data include:
1. Surveys. Answers to questions are sought through telephone or personal, face-to-face interviews, or through the mail. Generally, a specific list of questions or a questionnaire is prepared and mailed. Validity and reliability of these surveys are vital considerations. Pretesting for clarity and question sequence, instruction adequacy, and ease with which results can be edited, coded, and tabulated is essential. Then the reliability of the final results must be determined by careful statistical analysis. One common mistake in questionnaire construction is to ask questions that interest the researcher but do not provide information that can be used to make a marketing decision.
2. Observation. Here the consumer is observed in the act of purchasing. Sometimes films are taken and then analyzed. Candid camera is actually an observation technique.
3. Field experiments. May involve the survey method, the observation method, or both. The main characteristics are more rigorous research design, often using sample control groups and sophisticated statistical techniques.
Secondary data. Many people desiring market research information make the mistake of rushing out to get primary data before exhausting existing secondary sources. Secondary data may be readily available and at little or no cost. Secondary sources include: internal company records; U.S. government publications; trade, professional, and business associations; university research bureaus; libraries; and consulting, advertising, and other firms. Especially helpful government publications are the Census of Business and other publications of the U.S. Bureau of the Census; the Statistical Abstract of the United States, the Survey of Current Business, and the Monthly Labor Review. Trade publications may be located by referring to the Ayer Directory of Newspapers and Periodicals and associations through the U.S.D.A. publication, National Associations of the United States. University bureaus of business research such as those at Michigan, Harvard, Ohio State, Minnesota, Washington, Illinois, California, and Texas provide services for both private and public organizations. Interpreting Research Findings At the outset of a market research study some guidelines should be established for a continual evaluation of the data throughout the collection period. It is crucial that the marketing researchers and the research users cooperate at every stage in the research design. Often research studies go unused due to the inability of the user to understand lengthy discussions of research limitations or the use of unfamiliar technology. In addition to a written report, an oral presentation should be required to expand or clarify the results. Future Trends Noticeable improvements in market research relate to the use of advanced statistical techniques. This should lead to the further reduction of risk and uncertainty in business decisions. However, research is not a one-shot process. Research is important both preceding and following major change decisions and to ensure that research data remain current.
Introduction to Marketing
There have been some exciting changes in the way marketing is viewed by practicing marketing managers and students of marketing. No longer is marketing thought of as being limited to personal selling and advertising designed to get rid of the output of the production process. On the contrary, today the concept of marketing held by most successful firms is that (1) marketing must be consumer oriented, and (2) it must have a part in the decision making in all phases of management. Modern marketing begins with the customer, not with the production department. But it plays a vital role in design and production; and it follows the product through its entire cycle into the hands of the final users. Thus management is seen as a total marketing management system, highly complex, and often expensive.
Marketing Defined
Marketing is an organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketers with a stronger consumer orientation and a broader management approach place emphasis, in defining marketing, on its role in directing the flow of goods and services to the consumer. In other words, marketing is not viewed as the actual performance of such functions as production and design but as the influencing and guiding of these activities through the role marketing plays in decision making. Marketing may also be defined as the activities involved in recognizing consumer needs, developing products and services to satisfy these needs, and creating and then expanding a demand for these products and services.
While marketing, especially in its use of marketing research and in its borrowing from the behavioral sciences, does to some extent employ the scientific method, it can never control all the variables or exactly repeat experiments with the same results. Therefore, marketing is more of an art than a science. Like practitioners of other arts, the marketing person relies on skill, judgment, and intuition in making decisions more often than on scientifically established certainties. The Economic Impact of Marketing Marketing’s role as a catalytic agent is dramatically illustrated by the growth of the U.S. Gross Domestic Product (GDP). GDP, the value of all goods and services produced in a year, rose from a little over $1 trillion in 1970 to over $12.3 trillion by the first quarter of 2005. Marketing provides the synergistic network required for an economy of abundance. Marketing activities are the source of increasing employment. Sales employees in manufacturing, service, and other industries, retail employees, and workers in transportation, communications, and other related groups represent between one fourth and one third of the civilian labor force. About 50 cents of every retail dollar goes to cover marketing costs. Basic Economic Functions Marketing is a regulating force, allocating scarce resources and influencing the distribution and size of income for both individuals and firms. Basically, marketing is closely related to the broader field of economics. Marketing is viewed by economists as creating time, place and possession utilities - that is having goods when and where they are wanted, and then completing the transfer to provide possession utility. As a branch of economics, marketing draws on such concepts as value theory, demand-supply analysis, scale of economy, marginal revenue, the law of diminishing marginal utility, various theories of competition, and concepts of nonprice competition. While most closely related to the field of economics, marketing also makes use of techniques and findings borrowed from the other behavioral sciences, especially psychology, sociology, and anthropology. These disciplines help the marketer better understand consumers - their motivations and needs, their social behavior and structure, and human nature in general. Marketing also looks to mathematics for techniques - sampling, probability and quality control, and quantitative methods with varying applications. The Marketing Management Concept Today, most successful business firms have emerged, or are emerging, from dominance by production and engineering considerations to a marketing management viewpoint, which encompasses all of the activities of the firm. Fundamental to this new philosophy is the recognition and acceptance of a customer-oriented approach. Although the overall dimensions of the business system are determined by individual decisions, such decisions now include a much broader range of interrelated internal and external factors.
Internally, executive decision makers now realize that profitable decisions emerge from not only production or sales estimates, but also from the ripple effect of information concerning areas such as personnel, finance, management, or accounting. Each area of the firm has aspects of marketing just as marketing contains functions of all the other areas. To make intelligent decisions a marketing manager must know the nature of these other functions and must understand how alternative marketing strategies will be affected. Externally, information for the development of alternative strategies is generated by a consumer-oriented view of marketing activity by the firm. Early approaches to marketing emphasized commodities, institutions, and functions. These elements were studied in an attempt to determine the nature of the marketing activity. Little emphasis was placed on interaction between the various functional areas of the firm or on the decision-making process. Functional conflicts arise when the accountant wants a high rate of capital turnover and return on investment, the production manager or engineer wants costly capital-intensive equipment to produce large homogeneous quantities, the cost control person wants small inventories and limited varieties, the personnel manager wants stable production with few cyclical demands for labor, and the marketer wants increased varieties and large inventories in an attempt to please clients and maximize sales. It is easy to see that any marketing strategy will involve many compromises before an optimum decision is reached. Marketing management implies that all functional areas, including marketing, must be first devoted to determining consumers’ wants followed by an integrated effort toward satisfying those wants at a profit. Profit replaces sales as a primary goal. A basic change in management attitudes resulting in organizational and procedural changes may be necessary for effective adoption of the marketing management concept. Today’s marketing person - more and more, the marketers of the future - rely on systems theories and analysis to guide their decisions. Marketing is seen as a total system, embedded in the overall social and economic system, and not as a collection of unrelated activities and institutions. You will learn more of the systems approach later in this course. Present-day marketers and students of marketing emphasize the importance of marketing strategy. Development of strategies entails two steps: (1) selection of a target market, and (2) development of a marketing mix. The Target Market The idea of a target market is based on the concept of market segmentation - the thought that any market with divergent demands (heterogeneous) will consist of a number of smaller markets. The marketer can identify these segments and set up targets by taking into consideration the characteristics of potential customers in these segments, the marketing mixes that might meet their needs, the goals of the company’s marketing program, and various other factors. The market grid is a matrix type of chart used to analyze markets, set up target markets, and develop appropriate marketing mixes for each individual segment.
Thursday, May 5, 2016
How Markets Are Segmented
Sellers can choose to pursue consumer markets, business-to-business (B2B)
markets, or both. Consequently, one obvious way to begin the segmentation process
is to segment markets into these two types of groups.
Different factors influence consumers to buy certain things. Many of the same
factors can also be used to segment customers. A firm will often use multiple
segmentation bases5, or criteria to classify buyers, to get a fuller picture of its
customers and create real value for them. Each variable adds a layer of information.
Think of it as being similar to the way in which your professor builds up
information on a PowerPoint slide to the point at which you are able to understand
the material being presented.
There are all kinds of characteristics you can use to slice and dice a market. “Bigand-
tall” stores cater to the segment of population that’s larger sized. What about
people with wide or narrow feet, or people with medical conditions, or certain
hobbies? Next, we look primarily at the ways in which consumer markets can be
segmented. Later in the chapter, we’ll look at the ways in which B2B markets can be
segmented.
Types of Segmentation Bases
Notice that the characteristics
fall into one of four segmentation categories: behavioral, demographic, geographic, or
psychographic. We’ll discuss each of these categories in a moment. For now, you can
get a rough idea of what the categories consist of by looking at them in terms of
how marketing professionals might answer the following questions:
•Behavioral segmentation. What benefits do customers want, and how do they use our product?
• Demographic segmentation. How do the ages, races, and ethnic
backgrounds of our customers affect what they buy?
• Geographic segmentation. Where are our customers located, and how
can we reach them? What products do they buy based on their
locations?
• Psychographic segmentation. What do our customers think about
and value? How do they live their lives?
Behavioral segmentation divides people and organization into groups according
to how they behave with or act toward products. Benefits segmentation—segmenting
buyers by the benefits they want from products—is very common. Take toothpaste,
for example. Which benefit is most important to you when you buy a toothpaste:
The toothpaste’s price, ability to whiten your teeth, fight tooth decay, freshen your
breath, or something else? Perhaps it’s a combination of two or more benefits. If
marketing professionals know what those benefits are, they can then tailor
different toothpaste offerings to you (and other people like you). For example,
Colgate 2-in-1 Toothpaste & Mouthwash, Whitening Icy Blast is aimed at people
who want the benefits of both fresher breath and whiter teeth.
Another way in which businesses segment buyers is by their usage rates—that is,
how often, if ever, they use certain products. Harrah’s, an entertainment and
gaming company, gathers information about the people who gamble at its casinos.
High rollers, or people who spend a lot of money, are considered “VIPs.” VIPs get
special treatment, including a personal “host” who looks after their needs during
their casino visits. Companies are interested in frequent users because they want to
reach other people like them. They are also keenly interested in nonusers and how
they can be persuaded to use products.
The way in which people use products is also be a basis for segmentation. Avon Skin
So Soft was originally a beauty product, but after Avon discovered that some people
were using it as a mosquito repellant, the company began marketing it for that
purpose. Eventually, Avon created a separate product called Skin So Soft Bug Guard,
which competes with repellents like Off! Similarly, Glad, the company that makes
plastic wrap and bags, found out customers were using its Press’n Seal wrap in ways
the company could never have imagined. The personnel in Glad’s marketing
department subsequently launched a Web site called 1000uses.com that contains
both the company’s and consumers’ use tips. Some of the ways in which people use
the product are pretty unusual, as evidenced by the following comment posted on
the site: “I have a hedgehog who likes to run on his wheel a lot. After quite a while
of cleaning a gross wheel every morning, I got the tip to use ‘Press’n Seal wrap’ on his wheel, making clean up much easier! My hedgie can run all he wants, and I don’t
have to think about the cleanup. Now we’re both GLAD!”
Although we doubt Glad will ever go to great lengths to
segment the Press ’n Seal market by hedgehog owners,
the firm has certainly gathered a lot of good consumer
insight about the product and publicity from its
1000uses.com Web site. (Incidentally, one rainy day, the
author of this chapter made “rain boots” out of Press ’n
Seal for her dog. But when she later tried to tear them
off of the dog’s paws, he bit her. She is now thinking of
trading him in for a hedgehog.)
markets, or both. Consequently, one obvious way to begin the segmentation process
is to segment markets into these two types of groups.
Different factors influence consumers to buy certain things. Many of the same
factors can also be used to segment customers. A firm will often use multiple
segmentation bases5, or criteria to classify buyers, to get a fuller picture of its
customers and create real value for them. Each variable adds a layer of information.
Think of it as being similar to the way in which your professor builds up
information on a PowerPoint slide to the point at which you are able to understand
the material being presented.
There are all kinds of characteristics you can use to slice and dice a market. “Bigand-
tall” stores cater to the segment of population that’s larger sized. What about
people with wide or narrow feet, or people with medical conditions, or certain
hobbies? Next, we look primarily at the ways in which consumer markets can be
segmented. Later in the chapter, we’ll look at the ways in which B2B markets can be
segmented.
Types of Segmentation Bases
Notice that the characteristics
fall into one of four segmentation categories: behavioral, demographic, geographic, or
psychographic. We’ll discuss each of these categories in a moment. For now, you can
get a rough idea of what the categories consist of by looking at them in terms of
how marketing professionals might answer the following questions:
•Behavioral segmentation. What benefits do customers want, and how do they use our product?
• Demographic segmentation. How do the ages, races, and ethnic
backgrounds of our customers affect what they buy?
• Geographic segmentation. Where are our customers located, and how
can we reach them? What products do they buy based on their
locations?
• Psychographic segmentation. What do our customers think about
and value? How do they live their lives?
Behavioral segmentation divides people and organization into groups according
to how they behave with or act toward products. Benefits segmentation—segmenting
buyers by the benefits they want from products—is very common. Take toothpaste,
for example. Which benefit is most important to you when you buy a toothpaste:
The toothpaste’s price, ability to whiten your teeth, fight tooth decay, freshen your
breath, or something else? Perhaps it’s a combination of two or more benefits. If
marketing professionals know what those benefits are, they can then tailor
different toothpaste offerings to you (and other people like you). For example,
Colgate 2-in-1 Toothpaste & Mouthwash, Whitening Icy Blast is aimed at people
who want the benefits of both fresher breath and whiter teeth.
Another way in which businesses segment buyers is by their usage rates—that is,
how often, if ever, they use certain products. Harrah’s, an entertainment and
gaming company, gathers information about the people who gamble at its casinos.
High rollers, or people who spend a lot of money, are considered “VIPs.” VIPs get
special treatment, including a personal “host” who looks after their needs during
their casino visits. Companies are interested in frequent users because they want to
reach other people like them. They are also keenly interested in nonusers and how
they can be persuaded to use products.
The way in which people use products is also be a basis for segmentation. Avon Skin
So Soft was originally a beauty product, but after Avon discovered that some people
were using it as a mosquito repellant, the company began marketing it for that
purpose. Eventually, Avon created a separate product called Skin So Soft Bug Guard,
which competes with repellents like Off! Similarly, Glad, the company that makes
plastic wrap and bags, found out customers were using its Press’n Seal wrap in ways
the company could never have imagined. The personnel in Glad’s marketing
department subsequently launched a Web site called 1000uses.com that contains
both the company’s and consumers’ use tips. Some of the ways in which people use
the product are pretty unusual, as evidenced by the following comment posted on
the site: “I have a hedgehog who likes to run on his wheel a lot. After quite a while
of cleaning a gross wheel every morning, I got the tip to use ‘Press’n Seal wrap’ on his wheel, making clean up much easier! My hedgie can run all he wants, and I don’t
have to think about the cleanup. Now we’re both GLAD!”
Although we doubt Glad will ever go to great lengths to
segment the Press ’n Seal market by hedgehog owners,
the firm has certainly gathered a lot of good consumer
insight about the product and publicity from its
1000uses.com Web site. (Incidentally, one rainy day, the
author of this chapter made “rain boots” out of Press ’n
Seal for her dog. But when she later tried to tear them
off of the dog’s paws, he bit her. She is now thinking of
trading him in for a hedgehog.)
Wednesday, May 4, 2016
Marketing Planning Roles
Who, within an organization, is responsible for creating its marketing plans? From
our discussion above, you might think the responsibility lies with the organization’s
chief marketing officer (CMO). The reality is that a team of marketing specialists is
likely to be involved. Sometimes multiple teams are involved. Many companies
create marketing plans at the divisional level. For example, Rockwell International
has so many different business areas that each does its own strategic planning. The
division responsible for military avionics, for instance, creates its own marketing
plans and strategies separately from the division that serves the
telecommunications industry. Each division has its own CMO.
Some of the team members specialize in certain areas. For example, the copier
company Xerox has a team that specializes in competitive analysis. The team
includes an engineer who can take competitors’ products apart to see how they
were manufactured, as well as a systems analyst who tests them for their performance. Also on the team is a marketing analyst who examines the
competition’s financial and marketing performance.
Some marketing-analyst positions are entry-level positions. You might be able to
land one of these jobs straight out of college. Other positions are more senior and
require experience, usually in sales or another area of marketing. Marketing
analysts, who are constantly updating marketing information, are likely to be
permanent members of the CMO’s staff.
In some consumer-goods companies with many brands (such as P&G and SC
Johnson), product—or brand—managers serve on their firm’s marketing planning
teams on an as-needed basis. These individuals are not permanent members of the
team but participate only to the extent that their brands are involved. Many other
members of the firm will also participate on marketing planning teams as needed.
For example, a marketing researcher is likely to be part of such a team when it
needs data for the planning process.
our discussion above, you might think the responsibility lies with the organization’s
chief marketing officer (CMO). The reality is that a team of marketing specialists is
likely to be involved. Sometimes multiple teams are involved. Many companies
create marketing plans at the divisional level. For example, Rockwell International
has so many different business areas that each does its own strategic planning. The
division responsible for military avionics, for instance, creates its own marketing
plans and strategies separately from the division that serves the
telecommunications industry. Each division has its own CMO.
Some of the team members specialize in certain areas. For example, the copier
company Xerox has a team that specializes in competitive analysis. The team
includes an engineer who can take competitors’ products apart to see how they
were manufactured, as well as a systems analyst who tests them for their performance. Also on the team is a marketing analyst who examines the
competition’s financial and marketing performance.
Some marketing-analyst positions are entry-level positions. You might be able to
land one of these jobs straight out of college. Other positions are more senior and
require experience, usually in sales or another area of marketing. Marketing
analysts, who are constantly updating marketing information, are likely to be
permanent members of the CMO’s staff.
In some consumer-goods companies with many brands (such as P&G and SC
Johnson), product—or brand—managers serve on their firm’s marketing planning
teams on an as-needed basis. These individuals are not permanent members of the
team but participate only to the extent that their brands are involved. Many other
members of the firm will also participate on marketing planning teams as needed.
For example, a marketing researcher is likely to be part of such a team when it
needs data for the planning process.
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