CHAPTER 1 - create customer value

MARKETING - the process by which companies STEP 3: Construct an integrated marketing program
engage customers, build strong customer that delivers superior value
relationships, and create customer value in - build strong customer relationships
order to capture value from customers in return
- not in the old sense of making a sale — “telling STEP 4: Engage customers, build profitable
and selling”— but in the new sense of satisfying relationships, and create customer delight
customer needs - creating superior customer value
- engages consumers effectively, understands * By creating value for consumers, they in turn capture
their needs, develops products that provide value from consumers in the form of sales, profits, and
superior customer value, and prices, distributes,
long-term customer equity.
and promotes them well
- AIM: to make selling unnecessary (Peter STEP 1: UNDERSTANDING THE MARKETPLACE AND
Drucker) CUSTOMER NEEDS
- a social and managerial process by which
individuals and organizations obtain what they FIVE CORE CUSTOMER AND MARKETPLACE CONCEPTS:
need and want through creating and exchanging
(1) Needs, Wants, and Demands
value with others
(2) Market Offerings
- involves building profitable, value-laden
- products, services, and experiences
exchange relationships with customers
(3) Value and Satisfaction
- engaging customers and managing profitable
(4) Exchanges and Relationships
customer relationships
(5) Markets
- TWO-FOLD GOAL OF MARKETING:
✔ to attract new customers by promising CUSTOMER NEEDS, WANTS, AND DEMANDS
superior value
✔ to keep and grow current customers by NEEDS - states of felt deprivation
delivering value and satisfaction - basic physical needs for food, clothing, warmth,
- TRADITIONAL FORMS: and safety
✔ the abundance of products at shopping - social needs for belonging and affection
malls - individual needs for knowledge and self-
✔ ads on TV screen, magazines, or mailbox expression
- NEW MARKETING APPROACHES: (reach you - basic part of the human makeup
directly, personally, and interactively)
WANTS - the form human needs take as they are
✔ everything from imaginative websites and
smartphone apps to blogs, online videos, shaped by culture and individual personality
and social media - eg. An American needs food but wants a Big
Mac, fries, and a soft drink. A person in Papua,
SELLING AND ADVERTISING - only part of a New Guinea, needs food but wants taro, rice,
larger marketing mix — a set of marketing tools yams, and pork.
that work together to engage customers, satisfy - shaped by one’s society and are described in
customer needs, and build customer terms of objects that will satisfy those needs
relationships
- only the tip of the marketing iceberg DEMANDS - human wants that are backed by buying
power
THE MARKETING PROCESS: Creating and Capturing
Customer Value MARKET OFFERINGS - some combination of products,
services, information, or experiences offered to a
STEP 1: Understand the marketplace and customer market to satisfy a need or want
needs and wants - not limited to physical products
- companies work to understand consumers - include services – activities or benefits offered
STEP 2: Design a customer value–driven marketing for sale that are essentially intangible and do
strategy not result in the ownership of anything (eg.
 banking, airline, hotel, retailing, and home STEP 2: DESIGNING A CUSTOMER VALUE-DRIVEN
repair services) MARKETING STRATEGY AND PLAN
- also include other entities, such as persons,
places, organizations, information, and ideas MARKETING MANAGEMENT - the art and science of
choosing target markets and building profitable
MARKETING MYOPIA - the mistake of paying more relationships with them
attention to the specific products a company offers than - simply put, it is customer management and
to the benefits and experiences produced by these demand management
products
- they are so taken with their products that they Marketing Manager’s Aim:
focus only on existing wants and lose sight of - to engage, keep, and grow target customers by
underlying customer needs creating, delivering, and communicating
superior customer value
CUSTOMER VALUE AND SATISFACTION - Two Important Questions:
✔ What customers will we serve (what’s our
* Satisfied customers buy again and tell others about target market)?
their good experiences. ✔ How can we serve these customers best
(what’s our value proposition)?
*Dissatisfied customers often switch to competitors and
disparage the product to others. SELECTING CUSTOMERS TO SERVE
* Customer value and customer satisfaction are key MARKET SEGMENTATION - dividing the market into
building blocks for developing and managing customer segments of customers
relationships.
TARGET MARKETING - selecting which segments it will
EXCHANGES AND RELATIONSHIPS go after
EXCHANGE - the act of obtaining a desired object from CHOOSING A VALUE PROPOSITION - how it will serve
someone by offering something in return targeted customers — how it will differentiate and
position itself in the marketplace
*Marketing consists of actions taken to create,
maintain, and grow desirable exchange relationships VALUE PROPOSITION - set of benefits or values it
with target audiences involving a product, service, idea, promises to deliver to consumers to satisfy their needs
or other object.
FIVE ALTERNATIVE CONCEPTS:
MARKETS - the set of all actual and potential buyers of a
product or service 1. Production Concept
- share a particular need or want that can be 2. Product
satisfied through exchange relationships 3. Selling
4. Marketing
CORE MARKETING ACTIVITIES: 5. Societal Marketing Concepts
- consumer research
- product development PRODUCTION CONCEPT - the idea that consumers will
- communication favor products that are available and highly affordable
- distribution - the organization should focus on improving
- pricing production and distribution efficiency
- service - one of the oldest orientations that guides
sellers
MAJOR ENVIRONMENTAL FORCES: - can lead to marketing myopia
- demographic - run a major risk of focusing too narrowly on
- economic their own operations and losing sight of the real
- natural objective — satisfying customer needs and
- technological building customer relationships
- political
- and social/cultural)
PRODUCT CONCEPT - the idea that consumers will favor businesses while also preserving or enhancing
products that offer the most quality, performance, and the ability of future generations to meet their
features needs
- the organization should devote its energy to - concerned not just with short-term economic
making continuous product improvements gains but with the well-being of their
- can also lead to marketing myopia – focusing customers, the depletion of natural resources
only on the company’s products vital to their businesses, the viability of key
suppliers, and the economic well-being of the
SELLING CONCEPT - the idea that consumers will not communities in which they operate
buy enough of the firm’s products unless the firm - aka purpose-driven marketing or values-driven
undertakes a large-scale selling and promotion effort
- typically practiced with unsought goods—those SHARED VALUE - recognizes that societal needs, not just
that buyers do not normally think of buying, economic needs, define markets
such as life insurance or blood donations - focuses on creating economic value in a way
- AIM: often to sell what the company makes that also creates value for society
rather than to make what the market wants
- carries high risks – focuses on creating sales STEP 3: PREPARING AN INTEGRATED MARKETING PLAN
transactions rather than on building long-term, AND PROGRAM
profitable customer relationships MARKETING MIX - the set of marketing tools the firm
MARKETING CONCEPT - a philosophy in which achieving uses to implement its marketing strategy
organizational goals depend on knowing the needs and FOUR Ps OF MARKETING:
wants of target markets and delivering the desired - PRODUCT - a need-satisfying market offering
satisfactions better than competitors do - PRICE – how much it will charge for the offering
- customer focus and value are the paths to sales - PLACE - how it will make the offering available
and profits to target consumers
- a customer-centered sense-and-respond - PROMOTION - engage target consumers,
philosophy
communicate about the offering, and persuade
- to find the right products for your customers,
consumers of the offer’s merits
not to find the right customers for your product
- takes an outside-in perspective STEP 4: MANAGING CUSTOMER RELATIONSHIPS AND
CAPTURING CUSTOMER VALUE
*Customer-driven companies research customers
deeply to learn about their desires, gather new product CUSTOMER RELATIONSHIP MANAGEMENT - the overall
ideas, and test product improvements. process of building and maintaining profitable customer
relationships by delivering superior customer value and
*Such customer-driven marketing usually works well
satisfaction
when a clear need exists and when customers know - deals with all aspects of acquiring, engaging,
what they want. and growing customers
CUSTOMER-DRIVING MARKETING - understanding KEY TO BUILDING LASTING CUSTOMER
customer needs even better than customers themselves RELATIONSHIPS:
do and creating products and services that meet both - to create superior customer value and
existing and latent needs, now and in the future. satisfaction
SOCIETAL MARKETING CONCEPT - the idea that a CUSTOMER-PERCEIVED VALUE - the customer’s
company’s marketing decisions should consider evaluation of the difference between all the benefits
consumers’ wants, the company’s requirements, and all the costs of a marketing offer relative to those of
consumers’ long-run interests, and society’s long-run competing offers
interests - customers often do not judge values and costs
“accurately” or “objectively” but on perceived
- calls for sustainable marketing, socially and value
environmentally responsible marketing that
meets the present needs of consumers and
CUSTOMER SATISFACTION - the extent to which a PARTNER RELATIONSHIP MANAGEMENT - working
product’s perceived performance matches a buyer’s closely with partners in other company departments
expectations and outside the company to jointly bring greater value
to customers
*If the product’s performance falls short of
expectations, the customer is dissatisfied. MARKETING CHANNELS - consist of distributors,
retailers, and others who connect the company to its
*If performance matches expectations, the customer is
buyers
satisfied.
SUPPLY CHAIN - describes a longer channel, stretching
*If performance exceeds expectations, the customer is
from raw materials to components to final products
highly satisfied or delighted.
that are carried to final buyers
*Companies aim to delight customers by promising only
SUPPLY CHAIN MANAGEMENT - strengthening
what they can deliver and then delivering more than
connections with partners all along the supply chain
they promise.
CAPTURING VALUE FROM CUSTOMERS - in the form of
CUSTOMER RELATIONSHIP LEVELS AND TOOLS
sales, market share, and profits
*A company with many low-margin customers may
CUSTOMER LIFETIME VALUE - the value of the entire
seek to develop basic relationships with them.
stream of purchases a customer makes over a lifetime
*In markets with few customers and high margins, of patronage
sellers want to create full partnerships with key
SHARE OF CUSTOMER - the portion of the customer’s
customers.
purchasing that a company gets in its product
FREQUENCY MARKETING PROGRAMS - reward categories
customers who buy frequently or in large amounts
CUSTOMER EQUITY - the total combined customer
CUSTOMER-ENGAGEMENT MARKETING - making the lifetime values of all of the company’s customers
brand a meaningful part of consumers’ conversations
BUILDING THE RIGHT RELATIONSHIPS WITH THE RIGHT
and lives by fostering direct and continuous customer
involvement in shaping brand conversations, CUSTOMERS
experiences, and community *BUTTERFLIES - potentially profitable but not loyal
- goes beyond just selling a brand to consumers
- GOAL: to make the brand a meaningful part of *TRUE FRIENDS - both profitable and loyal
consumers’ conversations and lives
*BARNACLES - highly loyal but not very profitable
*The old marketing involved marketing brands to
*STRANGERS - show low potential profitability and little
consumers.
projected loyalty
CUSTOMER-MANAGED RELATIONSHIPS – customers
DIGITAL AND SOCIAL MEDIA MARKETING - using digital
connect with companies and with each other to help
marketing tools such as websites, social media, mobile
forge and share their own brand experiences
apps and ads, online video, email, and blogs to engage
ATTRACTION — creating market offerings and messages consumers anywhere, at any time, via their digital
that engage consumers rather than interrupt them devices

CONSUMER-GENERATED MARKETING - Brand REAL-TIME MARKETING - marketers can engage

exchanges created by consumers themselves—both consumers in the moment by linking brands to
invited and uninvited—by which consumers are playing important trending topics, real-world events, causes,
an increasing role in shaping their own brand personal occasions, or other important happenings in
experiences and those of other consumers consumers’ lives
- one form of customer-engagement marketing
MOBILE MARKETING - the fastest-growing digital
marketing platform
- Smartphones are ever present, always on, finely
targeted, and highly personal.
CHAPTER 2 2 STEPS IN BUSINESS PORTFOLIO PLANNING:
1. The company must analyze its current business
STRATEGIC PLANNING - the process of developing and portfolio and determine which businesses
maintaining a strategic fit between the organization’s should receive more, less, or no investment.
goals and capabilities and its changing marketing 2. It must shape the future portfolio by developing
opportunities strategies for growth and downsizing.
- sets the stage for the rest of planning in the firm
- involves adapting the firm to take advantage of ANALYZING THE CURRENT BUSINESS PORTFOLIO
opportunities in its constantly changing PORTFOLIO ANALYSIS - the process by which
environment management evaluates the products and businesses
- starts process by defining its overall purpose that make up the company
and mission, mission is then turned into - major activity in strategic planning
detailed supporting objectives that guide the
STEPS IN PORTFOLIO ANALYSIS
entire company
STEP 1: Identify STRATEGIC BUSINESS UNITS (SBUs)
MARKETING PLANNING - occurs at the business-unit, SBUs - the key businesses that make up the company
product, and market levels ✔ can be:
- supports company strategic planning with more ✔ a company division
detailed plans for specific marketing ✔ a product line within a division
opportunities ✔ or sometimes a single product or brand

STEPS IN STRATEGIC PLANNING STEP 2: Assess the attractiveness of its various SBUs
CORPORATE LEVEL: and decides how much support each deserves.
1. Defining The Company Mission TWO IMPORTANT DIMENSIONS IN EVALUATING SBUs:
2. Setting Company Objectives and Goals ✔ the attractiveness of the SBU’s market or
3. Designing The Business Portfolio industry
BUSINESS UNIT, PRODUCT, AND MARKET LEVELS ✔ the strength of the SBU’s position in that market
4. Planning Marketing and Other Functional
or industry
Strategies
BOSTON CONSULTING GROUP – a leading management
STEP 1: DEFINING A MARKET-ORIENTED MISSION
consulting firm that developed the best-known
MISSION STATEMENT – a statement of the
portfolio-planning method
organization’s purpose — what it wants to accomplish
in THE BOSTON CONSULTING GROUP (BCG) APPROACH
the larger environment GROWTH-SHARE MATRIX - a portfolio-planning method
- What is our business? that evaluates a company’s SBUs in terms of market
- Who is the customer? growth rate and relative market share.
- What do consumers value?
- What should our business be? MARKET GROWTH RATE - vertical axis
- acts as an “invisible hand” that guides people in ✔ provides a measure of market attractiveness
the organization.
- should be market oriented and defined in terms RELATIVE MARKET SHARE - horizontal axis
of satisfying basic customer needs ✔ measure of company strength in the market.
- should be meaningful and specific yet
motivating
1. STARS - high-growth, high-share businesses/products
STEP 2: SETTING COMPANY OBJECTIVES AND GOALS ✔ often need heavy investments to finance
STEP 3: DESIGNING THE BUSINESS PORTFOLIO their rapid growth
BUSINESS PORTFOLIO - the collection of businesses and ✔ growth will eventually slow down, and will
products that make up the company turn into cash cows
- the one that best fits the company’s strengths 2. CASH COWS - low-growth, high-share businesses or
and weaknesses to opportunities in the products
environment. ✔ established and successful SBUs
 ✔ need less investment to hold their market share opportunities through market penetration, market
✔ produce a lot of the cash that the company uses development, product development, or diversification
to pay its bills and support other SBUs that need
investment

3. QUESTION MARKS - low-share business units in high-

growth markets
✔ require a lot of cash to hold their share, let
alone increase it
✔ Management has to think hard about which
question marks it should try to build into stars
and which should be phased out

4. DOGS - low-growth, low-share businesses & products MARKET PENETRATION - company growth by increasing
✔ may generate enough cash to maintain sales of current products to current market segments
themselves but do not promise to be large without changing the product
sources of cash ✔ growth through marketing mix improvements
—adjustments to its product design,
advertising, pricing, and distribution efforts.

MARKET DEVELOPMENT - company growth by

identifying and developing new market segments for
current company products
✔ can review new demographic markets (eg.
Women)
✔ new geographical markets (eg. Making a name
in international markets)

PRODUCT DEVELOPMENT - company growth by offering

modified or new products to current market segments
✔ eg. adding athletic shoes to apparel lines
FOUR STRATEGIES FOR EACH SBU:
✔ invest more in the business unit to BUILD its DIVERSIFICATION - company growth through starting up
share or acquiring businesses outside the company’s current
✔ invest just enough to HOLD the SBU’s share at products and markets
the current level
✔ HARVEST the SBU, milking its short-term cash *Companies must develop not only strategies for
flow regardless of the long-term effect. growing their business portfolios but also strategies for
✔ DIVEST the SBU by selling it or phasing it out DOWNSIZING them.
and using the resources elsewhere
DOWNSIZING - pruning out weaker, less-profitable
PROBLEMS WITH MATRIX APPROACHES: products and markets to focus more limited resources
✔ Can be difficult, time consuming, and costly to on the strongest ones
implement ✔ prune, harvest, or divest

DEVELOPING STRATEGIES FOR GROWTH AND PLANNING MARKETING: PARTNERING TO BUILD

DOWNSIZING CUSTOMER RELATIONSHIPS
MAJOR FUNCTIONAL DEPARTMENTS:
*A firm must be careful not to make growth itself an ● MARKETING - plays a key role in the company’s
objective. strategic planning in several ways.
✔ provides a guiding philosophy — the
COMPANY’S OBJECTIVE:
marketing concept —suggests the
✔ to manage “profitable growth”
company strategy should revolve around
PRODUCT/MARKET EXPANSION GRID - a portfolio- creating customer value and building
planning tool for identifying company growth
 profitable relationships with important
consumer groups
✔ provides inputs to strategic planners by
helping to identify attractive market
opportunities and assessing the firm’s
potential to take advantage of them
✔ designs strategies for reaching the unit’s
objectives
● FINANCE
● ACCOUNTING
● PURCHASING
● OPERATIONS
● INFORMATION SYSTEMS
● HUMAN RESOURCES
—must work together to accomplish strategic
objectives

KEY INGREDIENTS IN THE MARKETER’S FORMULA FOR

SUCCESS: MARKET SEGMENTATION - dividing a market into
✔ CUSTOMER ENGAGEMENT distinct groups of buyers who have different needs,
✔ VALUE characteristics, or behaviors and who might require
separate marketing strategies or mixes.
PARTNERING WITH OTHER COMPANY DEPARTMENTS ✔ consumers can be grouped and served in
VALUE CHAIN - the series of internal departments that various ways based on geographic,
carry out value-creating activities to design, produce, demographic, psychographic, and behavioral
market, deliver, and support a firm’s products factors
*Marketers must find ways to get all departments to MARKET SEGMENT - a group of consumers who
“think consumer” and develop a smoothly functioning respond in a similar way to a given set of marketing
value chain. efforts
PARTNERING WITH OTHERS IN THE MARKETING MARKET TARGETING - evaluating each market
SYSTEM segment’s attractiveness and selecting one or more
VALUE DELIVERY NETWORK - a network composed of segments to serve
the company, suppliers, distributors, and, ultimately,
customers who partner with each other to improve the POSITIONING - arranging for a product to occupy a
performance of the entire system in delivering clear, distinctive, and desirable place relative to
customer value competing products in the minds of target consumers

MARKETING STRATEGY AND THE MARKETING MIX DIFFERENTIATION - actually differentiating the market
offering to create superior customer value
MARKETING STRATEGY - the marketing logic by which
the company hopes to create customer value and DEVELOPING AN INTEGRATED MARKETING MIX
achieve profitable customer relationships MARKETING MIX - the set of tactical marketing tools—
product, price, place, and promotion— that the firm
*The company decides which customers it will serve blends to produce the response it wants in the target
(segmentation and targeting) and how (differentiation market
and positioning). ✔ PRODUCT - the goods-and-services combination
the company offers to the target market
MARKETING MIX - product, price, place, and promotion ✔ PRICE - the amount of money customers must
(the four Ps) pay to obtain the product
✔ PLACE - company activities that make the
CUSTOMER VALUE-DRIVEN MARKETING STRATEGY
product available to target consumers
 ✔ PROMOTION - activities that communicate the MANAGING THE MARKETING EFFORT AND
merits of the product and persuade target MARKETING RETURN ON INVESTMENT
customers to buy it
MANAGING THE MARKETING EFFORT
SERVICE PRODUCTS - banking, airline, and retailing
FIVE MARKETING MANAGEMENT FUNCTIONS:
services
- ANALYSIS
- PLANNING
- IMPLEMENTATION
- ORGANIZATION
- CONTROL - consists of measuring and
evaluating the results of marketing activities
and taking corrective action where needed

MARKETING ANALYSIS - provides the information and

evaluations needed for all the other marketing activities

SWOT ANALYSIS - an overall evaluation of the

company’s strengths (S), weaknesses (W), opportunities
(O), and threats (T)

*The four Ps concept takes the seller’s view of the

market, not the buyer’s view.

*The four Ps might be better described as the four As

from the Buyer’s viewpoint.

STRENGTHS - internal capabilities, resources, and

positive situational factors that may help the company
serve its customers and achieve its objectives.

WEAKNESSES - include internal limitations and negative

situational factors that may interfere with the
company’s performance

OPPORTUNITIES - favorable factors or trends in the

ACCEPTABILITY - the extent to which the product
external environment that the company may be able to
exceeds customer expectations
exploit to its advantage
AFFORDABILITY - the extent to which customers are
THREATS - unfavorable external factors or trends that
willing and able to pay the product’s price
may present challenges to performance
ACCESSIBILITY - the extent to which customers can
MARKETING PLANNING - involves choosing marketing
readily acquire the product
strategies that will help the company attain its overall
AWARENESS - the extent to which customers are strategic objectives
informed about the product’s features, persuaded to try
MARKETING PLAN - begins with an executive summary
it, and reminded to repurchase
that quickly reviews major assessments, goals, and
*Product design influences acceptability, price affects recommendations
affordability, place affects accessibility, and promotion
influences awareness.
 - MAIN SECTION: detailed SWOT analysis of the
current marketing situation as well as potential
threats and opportunities.
- states major objectives for the brand and
outlines the specifics of a marketing strategy for
achieving them

MARKETING STRATEGY - consists of specific strategies

for target markets, positioning, the marketing mix, and
marketing expenditure levels
- outlines how the company intends to engage
target customers and create value in order to
capture value in return

MARKETING IMPLEMENTATION - turning marketing

strategies and plans into marketing actions to
accomplish strategic marketing objectives

CONTENTS OF A MARKETING PLAN:

MARKETING CONTROL - measuring and evaluating the

results of marketing strategies and plans and taking
corrective action to ensure that the objectives are
achieved

MARKETING RETURN ON INVESTMENT (MARKETING

ROI) - the net return from a marketing investment
divided by the costs of the marketing investment
CHAPTER 3 - ALL DEPARTMENTS: from Manufacturing and
Finance to Legal and Human Resources — share
MARKETING ENVIRONMENT - actors and forces outside
the responsibility for understanding customer
marketing that affect marketing management’s ability
needs and creating customer value.
to build and maintain successful relationships with
● SUPPLIERS - form an important link in the
target customers
company’s overall customer value delivery network
Disciplined methods for collecting information and - provide the resources needed by the company
developing insights about the marketing environment: to produce its goods and services
- MARKETING RESEARCH - their problems can seriously affect marketing
- MARKETING INTELLIGENCE - *Supply shortages or delays, natural disasters,
and other events - can cost sales in the short
MARKETING ENVIRONMENT CONSISTS OF:
run and damage customer satisfaction in the
● MICROENVIRONMENT - actors close to the
long run
company that affect its ability to serve its
- *Rising supply costs - may force price
customers
increases that can harm the company’s sales
- THE COMPANY
volume
- SUPPLIERS
● MARKETING INTERMEDIARIES - firms that help the
- MARKETING INTERMEDIARIES
company to promote, sell, and distribute its goods
- CUSTOMER MARKETS
to final buyers
- COMPETITORS
- include resellers, physical distribution firms,
- PUBLICS
marketing services agencies, and financial
● MACROENVIRONMENT - larger societal forces
intermediaries
that affect the microenvironment
- RESELLERS - distribution channel firms that
- DEMOGRAPHIC
help the company find customers or make
- ECONOMIC
sales to them, include wholesalers and
- NATURAL
retailers that buy and resell merchandise
- TECHNOLOGICAL
- PHYSICAL DISTRIBUTION FIRMS - help the
- POLITICAL
company stock and move goods from their
- CULTURAL FORCES
points of origin to their destinations
THE MICROENVIRONMENT - MARKETING SERVICES AGENCIES (marketing
*MARKETING SUCCESS requires building relationships research firms, advertising agencies, media
with other company departments, suppliers, marketing firms, and marketing consulting firms) - help
intermediaries, competitors, various publics, and the company target and promote its products
customers, which combine to make up the company’s to the right markets
VALUE DELIVERY NETWORK. - FINANCIAL INTERMEDIARIES - banks, credit
● THE COMPANY
companies, insurance companies, and other
- marketing management takes other company
businesses that help finance transactions or
groups into account — Top Management,
insure against the risks associated with the
Finance, Research and Development (R&D),
buying and selling of goods
Purchasing, Operations, Human Resources,
● COMPETITORS
Accounting
● PUBLIC - any group that has an actual or potential
*All of these interrelated groups form the
interest in or impact on an organization’s ability to
internal environment.
achieve its objectives
- TOP MANAGEMENT - sets the company’s
- SEVEN TYPES OF PUBLICS:
mission, objectives, broad strategies, and
✔ FINANCIAL PUBLICS - influences the
policies
company’s ability to obtain funds
*MARKETING MANAGERS - make decisions
(Banks, investment analysts, and
within these broader strategies and plans.
stockholders – major financial publics)
- MARKETING – take the lead
 ✔ MEDIA PUBLICS - carries news, ✔ INTERNATIONAL MARKETS - buyers in
features, editorial opinions, and other other countries, including consumers,
content (television stations, producers, resellers, and governments
newspapers, magazines, blogs and
other social media)
✔ GOVERNMENT PUBLICS - Marketers
must often consult the company’s
lawyers on issues of product safety, THE MACROENVIRONMENT
● THE DEMOGRAPHIC ENVIRONMENT - of major
truth in advertising, and other matters
interest to marketers because it involves people,
✔ CITIZEN-ACTION PUBLICS - consumer
and people make up markets
organizations, environmental groups,
- *The world’s large and highly diverse
minority groups, and others.
population poses both opportunities and
✔ INTERNAL PUBLICS - workers,
challenges.
managers, volunteers, and the board
- DEMOGRAPHY - study of human populations in
of directors
terms of size, density, location, age, gender,
- Large companies use newsletters
race, occupation, and other statistics
and other means to inform and
- BABY BOOMERS - the 78 million people born
motivate their internal publics.
during the years post-World War II (1946) and
When employees feel good about
lasting until 1964
the companies they work for, this
- one of the most powerful forces shaping
positive attitude spills over to the
the marketing environment
external publics.
- wealthiest generation, one analyst calls “a
✔ GENERAL PUBLIC - The public’s image
marketer’s dream.”
of the company affects its buying
- GENERATION X - the 49 million people born
behavior.
between 1965 and 1976 in the “birth dearth”
✔ LOCAL PUBLICS - local community
following the baby boom.
residents and organizations
- lie in the shadow of the boomers
- Large companies usually work to
- less materialistic than the other groups
become responsible members of
- family comes first—both children and
the local communities in which
their aging parents—and career second
they operate.
- a more skeptical bunch
● CUSTOMERS - the most important actors in the
- sensible shoppers who research products
company’s microenvironment.
heavily before they consider a purchase,
- FIVE TYPES OF CUSTOMER MARKETS:
prefer quality to quantity, and tend to be
✔ CONSUMER MARKETS - individuals and
less receptive to overt marketing pitches
households that buy goods and services
- first to grow up in the internet era
for personal consumption
- most educated generation to date, and
✔ BUSINESS MARKETS - buy goods and
they possess hefty annual purchasing
services for further processing or use in
power
their production processes
- MILLENNIALS (GENERATION Y) - the 83 million
✔ RESELLER MARKETS - buy goods and
children of the baby boomers born between
services to resell at a profit
1977 and 2000
✔ GOVERNMENT MARKETS - government
- or the echo boomers
agencies that buy goods and services to
- most financially strapped generation,
produce public services or transfer the
facing higher unemployment and
goods and services to others who need
saddled with more debt, many have
them
near-empty piggy banks
 - because of their numbers, they make up ● THE TECHNOLOGICAL ENVIRONMENT - forces that
a huge and attractive market, both now create new technologies, creating new product and
and in the future market opportunities
- first generation to grow up in a world - changes rapidly, creating new markets and
filled with computers opportunities; however, every new technology
- engage with brands in an entirely new replaces an older technology
way, such as with mobile or social - Companies that do not keep up will soon find
media their products outdated.
- frugal, practical, connected, mobile, and - Food and Drug Administration (FDA) - created
impatient complex regulations for testing new drugs
- seek authenticity and opportunities to - Consumer Product Safety Commission (CPSC) -
shape their own brand experiences and establishes safety standards for consumer
share them with others products and penalizes companies that fail to
- GENERATION Z - people born after 2000 meet them
(although many analysts include people born ● POLITICAL ENVIRONMENT Laws, government
after 1995) who make up the kids, tweens, agencies, and pressure groups that influence and
and teens markets limit various organizations and individuals in a
- approximately 82 million given society.
- fluency and comfort with digital - PUBLIC POLICY — sets of laws and regulations
technologies that limit business for the good of society as a
- takes smartphones, tablets, wireless whole
internet, and social media for granted, - PURPOSE OF GOVERNMENT REGULATION:
making this group highly mobile, ✔ Protect Companies from Each Other
connected, and social ✔ Protect Consumers from Unfair Business
● THE ECONOMIC ENVIRONMENT - factors that Practices
affect consumer purchasing power and spending ✔ Protect The Interests of Society Against
patterns Unrestrained Business Behavior
- can have a dramatic effect on consumer ● CULTURAL ENVIRONMENT - Institutions and other
spending and buying behavior forces that affect society’s basic values,
● THE NATURAL ENVIRONMENT – the physical perceptions, preferences, and behaviors
environment and the natural resources that are
needed as inputs by marketers or that are affected
by marketing activities
- unexpected happenings in the physical
environment — anything from weather to
natural disasters — can affect companies and
their marketing strategies
- TRENDS IN THE NATURAL ENVIRONMENT:
✔ SHORTAGES OF RAW MATERIALS
✔ INCREASED POLLUTION
✔ INCREASED GOVERNMENT INTERVENTION
- ENVIRONMENTAL SUSTAINABILITY - developing
strategies and practices that create a world
economy that the planet can support
indefinitely; means meeting present needs
without compromising the ability of future
generations to meet their needs
CHAPTER 4 - Research objectives must be translated into
specific information needs.
BIG DATA - the huge and complex data sets generated
- SECONDARY DATA - information that already
by today’s sophisticated information generation,
exists somewhere, having been collected for
collection, storage, and analysis technologies
another purpose
CUSTOMER INSIGHTS - fresh marketing information- *Internet search engines - can be a big help in
based understandings of customers and the locating relevant secondary information sources
marketplace that become the basis for creating *usually be obtained more quickly and at a
customer value, engagement, and relationships lower cost than primary data
- PRIMARY DATA - information collected for the
MARKETING INFORMATION SYSTEM  (MIS) - people specific purpose at hand
and procedures dedicated to assessing information
needs, developing the needed information, and helping RESEARCH APPROACHES:
decision makers to use the information to generate and ● OBSERVATIONAL RESEARCH - gathering primary
validate actionable customer and market insights data by observing relevant people, actions, and
situations
INTERNAL DATABASES - collections of consumer and - ETHNOGRAPHIC RESEARCH – a form of
market information obtained from data sources within observational research that involves sending
the company network trained observers to watch and interact with
COMPETITIVE MARKETING INTELLIGENCE - the consumers in their “natural environments”
systematic monitoring, collection, and analysis of ● SURVEY RESEARCH - gathering primary data by
publicly available information about consumers, asking people questions about their knowledge,
competitors, and developments in the marketing attitudes, preferences, and buying behavior
environment ● EXPERIMENTAL RESEARCH - gathering primary
data by selecting matched groups of subjects,
MARKETING RESEARCH - the systematic design, giving them different treatments, controlling
collection, analysis, and reporting of data relevant to a related factors, and checking for differences in
specific marketing situation facing an organization group responses
THE MARKETING RESEARCH PROCESS: CONTACT METHODS:
● MAIL, TELEPHONE, AND PERSONAL
1. DEFINING THE PROBLEM AND RESEARCH
INTERVIEWING
OBJECTIVES
- MAIL QUESTIONNAIRES - used to collect large
- EXPLORATORY RESEARCH - marketing research
amounts of information at a low cost per
to gather preliminary information that will help
respondent
define problems and suggest hypotheses
- Respondents may give more honest
- DESCRIPTIVE RESEARCH - marketing research to
answers than to an unknown interviewer in
better describe marketing problems, situations,
person or over the phone
or markets, such as the market potential for a
- no interviewer is involved to bias
product or the demographics and attitudes of
respondents’ answers
consumers
- not very flexible; all respondents answer
- CAUSAL RESEARCH - marketing research to test
the same questions in a fixed order
hypotheses about cause-and-effect
- usually take longer to complete and
relationships
response rates are often low
2. DEVELOPING THE RESEARCH PLAN FOR
- TELEPHONE INTERVIEWING - one of the best
COLLECTING INFORMATION
methods for gathering information quickly
- RESEARCH PLAN - outlines sources of existing
- provides greater flexibility than mail
data and spells out the specific research
questionnaires
approaches, contact methods, sampling plans,
and instruments that researchers will use to
gather new data
 - Interviewers can explain difficult questions - ONLINE MARKETING RESEARCH - collecting
and skip some questions or probe on primary data through internet and mobile
others surveys, online focus groups, consumer
- Response rates tend to be higher than with tracking, experiments, and online panels and
mail questionnaires brand communities
- interviewers can ask to speak to - QUANTITATIVE RESEARCH - conducting
respondents with the desired marketing surveys and collecting data
characteristics or even by name - Well-suited with the internet
- the cost per respondent is higher than with - ONLINE FOCUS GROUPS - gathering a small
mail, online, or mobile questionnaires. group of people online with a trained
- people may not want to discuss personal moderator to chat about a product, service, or
questions with an interviewer organization and gain qualitative insights about
- introduces INTERVIEWER BIAS — the way consumer attitudes and behavior
interviewers talk, how they ask questions, - BEHAVIORAL TARGETING - using online
and other differences that may affect consumer tracking data to target
respondents’ answers advertisements and marketing offers to specific
- in this age of do-not-call lists and consumers
promotion-harassed consumers, potential - SAMPLE - a segment of the population selected
survey respondents are increasingly for marketing research to represent the
hanging up on telephone interviewers population as a whole
rather than talking with them
- PERSONAL INTERVIEWING - Two Forms:
- INDIVIDUAL INTERVIEWING - involves
talking with people in their homes or
offices, on the street, or in shopping malls
- Flexible
- Trained interviewers can guide
interviews, explain difficult questions,
and explore issues as the situation
requires
RESEARCH INSTRUMENTS:
- can show subjects actual products,
● QUESTIONNAIRES - most common instrument
packages, advertisements, or videos
- very flexible — there are many ways to ask
and observe reactions and behavior.
questions
- may cost three to four times as much
- CLOSED-ENDED QUESTIONS - include all the
as telephone interviews
possible answers, and subjects make choices
- FOCUS GROUP INTERVIEWING - personal
among them (e.g. multiple-choice questions and
interviewing that involves inviting small
scale questions); provide answers that are
groups of people to gather for a few hours
easier to interpret and tabulate
with a trained interviewer to talk about a
- OPEN-ENDED QUESTIONS - allow respondents
product, service, or organization
to answer in their own words; especially useful
- The interviewer “focuses” the group
in exploratory research, when the researcher is
discussion on important issues
trying to find out what people think but is not
- IMMERSION GROUPS — what other
measuring how many people think in a certain
companies use; small groups of
way
consumers who interact directly and
- Researchers should also use care in the wording
informally with product designers
and ordering of questions. They should use
without a focus group moderator
simple, direct, and unbiased wording. Questions
present
should be arranged in a logical order. The first
question should create interest if possible, and
 difficult or personal questions should be asked
last so that respondents do not become
defensive.
● MECHANICAL INSTRUMENTS - used to monitor
consumer behavior (e.g. Nielsen Media
Research attaches people meters to television
sets in selected homes to record who watches
which programs. Retailers use checkout
scanners to record shoppers’ purchases.)
3. IMPLEMENTING THE RESEARCH PLAN ––
collecting, processing, and analyzing the data
4. INTERPRETING AND REPORTING THE FINDINGS –
drawing conclusions

CUSTOMER RELATIONSHIP MANAGEMENT (CRM) -

managing detailed information about individual
customers and carefully managing customer touch
points to maximize customer loyalty

MARKETING ANALYTICS - analysis tools, technologies,

and processes by which marketers dig out meaningful
patterns in big data to gain customer insights and gauge
marketing performance
CHAPTER 5 - SOCIAL CLASS - relatively permanent and ordered
divisions in a society whose members share similar
CONSUMER BUYER BEHAVIOR - buying behavior of
values, interests, and behaviors
FINAL CONSUMERS — individuals and households that
- not determined by a single factor, such as
buy goods and services for personal consumption
income, but is measured as a combination of
CONSUMER MARKET - all individuals and households occupation, income, education, wealth, and
that buy or acquire goods and services for personal other variables
consumption - show distinct product and brand preferences in
areas such as clothing, home furnishings, travel
CENTRAL QUESTION FOR MARKETERS: How do and leisure activity, financial services, and
consumers respond to various marketing efforts the automobiles
company might use?
SOCIAL FACTORS - consumer’s small groups, social
THE MODEL OF BUYER BEHAVIOR networks, family, and social roles and status

- GROUP - two or more people who interact to

accomplish individual or mutual goals
- MEMBERSHIP GROUPS - groups that have a
direct influence and to which a person belongs
2 PARTS OF BLACK BOX: - REFERENCE GROUPS - serve as direct (face-to-
BUYER’S CHARACTERISTICS - influence how he or she face interactions) or indirect points of comparison
perceives and reacts to the stimuli or reference in forming a person’s attitudes or
- include a variety of cultural, social, personal, behavior
and psychological factors - People often are influenced by reference
BUYER’S DECISION PROCESS - affects his or her groups to which they do not belong.
behavior - Aspirational Group - one to which the
- decision process — from need recognition, individual wishes to belong
information search, and alternative evaluation
WORD-OF-MOUTH INFLUENCE - the impact of the
to the purchase decision and post purchase
personal words and recommendations of trusted
behavior — begins long before the actual
friends, family, associates, and other consumers on
purchase decision and continues long after
buying behavior
CHARACTERISTICS AFFECTING CONSUMER BEHAVIOR
OPINION LEADER - a person within a reference group
CULTURAL FACTORS
who, because of special skills, knowledge, personality,
- CULTURE - set of basic values, perceptions, wants,
or other characteristics, exerts social influence on
and behaviors learned by a member of society
others
from family and other important institutions - influentials or leading adopters
- most basic cause of a person’s wants and - BUZZ MARKETING - involves enlisting or
behavior creating opinion leaders to serve as “brand
- SUBCULTURE - group of people with shared value ambassadors” who spread the word about a
systems based on common life experiences and company’s products
situations
- include nationalities, religions, racial groups, ONLINE SOCIAL NETWORKS - online social communities
and geographic regions — blogs, online social media, brand communities, and
- TOTAL MARKET STRATEGY - integrating ethnic other online forums — where people socialize or
themes and cross-cultural perspectives within a exchange information and opinions
- “word-of-web”
brand’s mainstream marketing, appealing to
consumer similarities across subcultural
- FAMILY - can strongly influence buyer behavior; the
segments rather than differences
most important consumer buying organization in
society
PERSONAL FACTORS - buyer’s occupation, age and reflect their identities—that is, “we are
stage, economic situation, lifestyle, and personality and what we consume.”
self-concept
PSYCHOLOGICAL FACTORS – motivation, perception,
- OCCUPATION - blue-collar workers tend to buy learning, and beliefs and attitudes
more rugged work clothes, whereas executives -MOTIVATION
buy more business suits - MOTIVE (drive) – a need that is sufficiently
- AGE AND LIFE STAGE- people change the goods pressing to direct the person to seek
and services they buy over their lifetimes; tastes satisfaction of the need
in food, clothes, furniture, and recreation are - some are Biological – arising from states of
often age related tension such as hunger, thirst, or discomfort;
- Stage of the Family Life Cycle — the stages Others are Psychological – arising from the
through which families might pass as they need for recognition, esteem, or belonging. A
mature over time need becomes a motive when it is aroused to a
- Life-Stage Changes - usually result from sufficient level of intensity
demographics and life-changing events— - TWO OF THE MOST POPULAR THEORIES:
marriage, having children, purchasing a Sigmund Freud - assumed that people are
home, divorce, children going to college, largely unconscious about the real psychological
changes in personal income, moving out of forces shaping their behavior
the house, and retirement - theory suggests that a person’s buying
- ECONOMIC SITUATION - trends in spending, decisions are affected by subconscious
personal income, savings, and interest rates motives that even the buyer may not fully
- LIFESTYLE - a person’s pattern of living as understand
expressed in his or her psychographics – Abraham Maslow – sought to explain why
activities (work, hobbies, shopping, sports, people are driven by particular needs at
social events), interests (food, fashion, family, particular times
recreation), and opinions (about themselves, - Maslow’s Hierarchy of Needs - from the
social issues, business, products) most pressing at the bottom to the least
- PERSONALITY AND SELF-CONCEPT pressing at the top; include Physiological
- PERSONALITY - the unique psychological Needs, Safety Needs, Social Needs, Esteem
characteristics that distinguish a person or Needs, and Self-Actualization Needs
group; traits such as self-confidence,
dominance, sociability, autonomy,
defensiveness, adaptability, and
aggressiveness
- BRAND PERSONALITY - the specific mix of
human traits that may be attributed to a
particular brand
- FIVE BRAND PERSONALITY TRAITS:
✔ Sincerity - down-to-earth, honest,
wholesome, and cheerful
✔ Excitement - daring, spirited,
imaginative, and up-to-date - MOTIVATION RESEARCH - probes the
✔ Competence - reliable, intelligent, and subconscious motivations underlying
successful consumers’ emotions and behaviors toward
✔ Sophistication - glamorous, upper class, brands
charming -PERCEPTION - process by which people select, organize,
✔ Ruggedness - outdoorsy and tough and interpret information to form a meaningful
- SELF-CONCEPT - also called self-image; idea picture of the world
that people’s possessions contribute to and - 3 PERCEPTUAL PROCESSES:
 Selective Attention - tendency for people to DISSONANCE-REDUCING BUYING BEHAVIOR - high
screen out most of the information to which involvement but few perceived differences among
they are exposed—means that marketers must brands
work especially hard to attract the consumer’s - consumers are highly involved with an
attention expensive, infrequent, or risky purchase but see
Selective Distortion - tendency of people to little difference among brands
interpret information in a way that will support - POSTPURCHASE DISSONANCE (after-sale
what they already believe; tend to retain discomfort) - when they notice certain
information that supports their attitudes and disadvantages of the purchased carpet brand or
beliefs hear favorable things about brands not
Selective Retention - consumers are likely to purchased
remember good points made about a brand HABITUAL BUYING BEHAVIOR - low consumer
they favor and forget good points made about involvement and few significant perceived brand
competing brands differences
*Subliminal Advertising – consumers affected - consumers have little involvement in this
by marketing messages without even knowing it product category — they simply go to the store
-LEARNING - changes in an individual’s behavior arising and reach for a brand; If they keep reaching for
from experience the same brand, it is out of habit rather than
- DRIVE - a strong internal stimulus that calls for strong brand loyalty.
action; becomes a motive when directed
toward a particular stimulus object VARIETY-SEEKING BUYING BEHAVIOR - low consumer
- CUES - minor stimuli that determine when, involvement but significant perceived brand differences
where, and how the person responds; a camera - consumers often do a lot of brand switching
buyer might spot several camera brands in a - For example, when buying cookies, a consumer
shop window, hear of a special sale price, or may hold some beliefs, choose a cookie brand
discuss cameras with a friend. without much evaluation, and then evaluate
-BELIEFS AND ATTITUDES that brand during consumption
- BELIEF – a descriptive thought that a person - Brand switching occurs for the sake of variety
holds about something rather than because of dissatisfaction
- may be based on real knowledge, opinion,
or faith and may or may not carry an
emotional charge
- ATTITUDE – a person’s consistently favorable or
unfavorable evaluations, feelings, and
tendencies toward an object or idea
- put people into a frame of mind of liking or
disliking things, of moving toward or away
from them
THE BUYER DECISION PROCESS
TYPES OF BUYING DECISION BEHAVIOR: - 5 STAGES:
COMPLEX BUYING BEHAVIOR - high consumer
involvement in a purchase and significant perceived
differences among brands NEED RECOGNITION - first stage of the buyer decision
- Consumers may be highly involved when the process, in which the consumer recognizes a problem or
product is expensive, risky, purchased need
infrequently, and highly self-expressive - can be triggered by INTERNAL STIMULI when
- someone buying a new car might undertake a one of the person’s normal needs—for
full information-gathering and brand evaluation example, hunger or thirst—rises to a level high
process enough to become a drive
 - can also be triggered by EXTERNAL STIMULI – - the relationship between the CONSUMER’S
For example, an advertisement or a discussion EXPECTATIONS and the product’s PERCEIVED
with a friend might get you thinking about PERFORMANCE
buying a new car. - COGNITIVE DISSONANCE - discomfort caused
by postpurchase conflict
INFORMATION SEARCH - stage in which the consumer is
motivated to search for more information THE BUYER DECISION PROCESS FOR NEW PRODUCTS
- SEVERAL SOURCES: NEW PRODUCT - a good, service, or idea that is
PERSONAL SOURCES - family, friends, perceived by some potential customers as new
neighbors, acquaintances; most effective
source; legitimize or evaluate products for the ADOPTION PROCESS - the mental process through
buyer which an individual pass from first hearing about an
COMMERCIAL SOURCES - advertising, innovation to final adoption
salespeople, dealer and manufacturer web and ADOPTION - the decision by an individual to become a
mobile sites, packaging, displays regular user of the product
- normally inform the buyer
- where consumers receive the most STAGES IN THE ADOPTION PROCESS:
information about a product from; AWARENESS - the consumer becomes aware of the new
controlled by the marketer product but lacks information about it
PUBLIC SOURCES - mass media, consumer INTEREST - the consumer seeks information about the
rating organizations, social media, online new product
searches and peer reviews
EXPERIENTIAL SOURCES - examining and using EVALUATION - the consumer considers whether trying
the product the new product makes sense

ALTERNATIVE EVALUATION - stage in which the TRIAL - the consumer tries the new product on a small
consumer uses information to evaluate alternative scale to improve his or her estimate of its value
brands in the choice set
ADOPTION - the consumer decides to make full and
- how consumers process information to choose
regular use of the new product
among alternative brands
FIVE ADOPTER GROUPS:
PURCHASE DECISION - the buyer’s decision about which
INNOVATORS – venturesome — they try new ideas at
brand to purchase
some risk
- In the evaluation stage, the consumer ranks
brands and forms PURCHASE INTENTIONS. EARLY ADOPTERS - guided by respect — opinion leaders
- 2 Factors Can Come Between the Purchase in their communities and adopt new ideas early but
Intention and the Purchase Decision: carefully
ATTITUDES OF OTHERS - If someone important
to you thinks that you should buy the lowest- EARLY MAINSTREAM ADOPTERS – deliberate —
priced car, then the chances of you buying a although they rarely are leaders, they adopt new ideas
more expensive car are reduced. before the average person
UNEXPECTED SITUATIONAL FACTORS – e.g. the LATE MAINSTREAM ADOPTERS – skeptical — they
economy might take a turn for the worse, a adopt an innovation only after a majority of people have
close competitor might drop its price, or a tried it
friend might report being disappointed in your
preferred car. Thus, preferences and even LAGGING ADOPTERS - tradition bound — they are
purchase intentions do not always result in an suspicious of changes and adopt the innovation only
actual purchase choice. when it has become something of a tradition itself

POSTPURCHASE BEHAVIOR - The stage in which

consumers take further action after purchase, based on
their satisfaction or dissatisfaction
FIVE CHARACTERISTICS IMPORTANT IN INFLUENCING
AN INNOVATION’S RATE OF ADOPTION:
RELATIVE ADVANTAGE - the degree to which the
innovation appears superior to existing products

COMPATIBILITY - the degree to which the innovation

fits the values and experiences of potential consumers

COMPLEXITY - The degree to which the innovation is

difficult to understand or use

DIVISIBILITY - the degree to which the innovation may

be tried on a limited basis

COMMUNICABILITY - the degree to which the results of

using the innovation can be observed or described to
others

OTHER CHARACTERISTICS THAT INFLUENCE THE RATE

OF ADOPTION: initial and ongoing costs, risk and
uncertainty, and social approval
CHAPTER 6 - BUSINESS BUYER BEHAVIOR - In this model,
marketing and other stimuli affect the buying
BUSINESS BUYER BEHAVIOR - buying behavior of
organization and produce certain buyer responses.
organizations that buy goods and services for use in the
BUYING ACTIVITY CONSISTS OF TWO MAJOR
production of other products and services that are sold,
PARTS: The Buying Center – all the people involved
rented, or supplied to others
in the buying decision
BUSINESS BUYING PROCESS - the decision process by THE BUYING DECISION PROCESS
which business buyers determine which products and
services their organizations need to purchase and then
find, evaluate, and choose among alternative suppliers
and brands

BUSINESS MARKETS – huge; involve far more dollars

and items than do consumer markets
- MAIN DIFFERENCES FROM CONSUMER
MARKETS: market structure and demand, the
nature of the buying unit, and the types of MAJOR TYPES OF BUYING SITUATIONS:
decisions and the decision process involved. STRAIGHT REBUY – a business buying situation in which
the buyer routinely reorders something without
Market Structure and Demand modifications
BUSINESS MARKETER NORMALLY DEALS WITH:
- Far fewer but far larger buyers than the consumer MODIFIED REBUY – a business buying situation in which
marketer does the buyer wants to modify product specifications,
- Many business markets have inelastic and more prices, terms, or suppliers
fluctuating demand. NEW TASK – a business buying situation in which the
- DERIVED DEMAND - business demand that buyer purchases a product or service for the first time
ultimately comes from (derives from) the demand
for consumer goods SYSTEMS SELLING (or solutions selling) - buying a
packaged solution to a problem from a single seller,
NATURE OF THE BUYING UNIT - usually involves more thus avoiding all the separate decisions involved in a
decision participants and a more professional complex buying situation
purchasing effort; Often, business buying is done by
trained purchasing agents who spend their working lives PARTICIPANTS IN THE BUSINESS BUYING PROCESS
learning how to buy better. BUYING CENTER - all the individuals and units that play
a role in the purchase decision-making process
TYPES OF DECISIONS AND THE DECISION PROCESS - USERS - members of the buying organization who
- BUSINESS BUYERS - usually face more complex will actually use the purchased product or service
buying decisions than do consumer buyers - INFLUENCERS - people in an organization’s buying
- BUSINESS PURCHASES - often involve large sums of center who affect the buying decision; they often
money, complex technical and economic help define specifications and also provide
considerations, and interactions among people at information for evaluating alternatives
many levels of the buyer’s organization - BUYERS - people in an organization’s buying center
- THE BUSINESS BUYING PROCESS - tends to be longer who make an actual purchase
and more formalized - DECIDERS – people in an organization’s buying
- SUPPLIER DEVELOPMENT - systematic development center who have formal or informal power to
of networks of supplier-partners to ensure an select or approve the final suppliers
appropriate and dependable supply of products and - GATEKEEPERS - people in an organization’s buying
materials for use in making products or reselling center who control the flow of information to
them to others. others
 SUPPLIER SELECTION - stage of the business buying
process in which the buyer reviews proposals and
MAJOR INFLUENCES ON BUSINESS BUYERS:
selects a supplier or suppliers
ENVIRONMENTAL
- ECONOMIC ENVIRONMENT - level of primary ORDER-ROUTINE SPECIFICATION - stage of the business
demand, the economic outlook, and the cost of buying process in which the buyer writes the final order
money with the chosen supplier(s), listing the technical
- SUPPLY of key materials specifications, quantity needed, expected time of
- TECHNOLOGICAL, POLITICAL, AND delivery, return policies, and warranties
COMPETITIVE DEVELOPMENTS in the - VENDOR-MANAGED INVENTORY - they turn
environment over ordering and inventory responsibilities to
- CULTURE AND CUSTOMS their suppliers

ORGANIZATIONAL - Each buying organization has its PERFORMANCE REVIEW - stage of the business buying
own objectives, strategies, structure, systems, and process in which the buyer assesses the performance of
procedures, and the business marketer must the supplier and decides to continue, modify, or drop
understand these factors well. the arrangement

INTERPERSONAL - often difficult to assess ENGAGING BUSINESS BUYERS WITH DIGITAL AND
SOCIAL MARKETING
INDIVIDUAL - affected by personal characteristics such TWO IMPORTANT TECHNOLOGY ADVANCEMENTS:
as age, income, education, professional identification, E-PROCUREMENT AND ONLINE PURCHASING
personality, and attitudes toward risk - E-PROCUREMENT - Purchasing through electronic
connections between buyers and sellers—usually
THE BUSINESS BUYER DECISION PROCESS: (8 STAGES) online.
PROBLEM RECOGNITION - the first stage of the business - Reverse Auctions - they put their purchasing
buying process in which someone in the company requests online and invite suppliers to bid for the
recognizes a problem or need that can be met by
business
acquiring a good or a service
- Trading Exchanges - companies work collectively
to facilitate the trading process
- Setting Up Their Own Company Buying Sites
- Companies Can Create Extranet Links with Key
Suppliers
GENERAL NEED DESCRIPTION - stage in the business
buying process in which a buyer describes the general B-TO-B DIGITAL AND SOCIAL MEDIA MARKETING -
characteristics and quantity of a needed item using digital and social media marketing approaches to
engage business customers and manage customer
PRODUCT SPECIFICATION - stage of the business buying relationships anywhere, anytime
process in which the buying organization decides on and - aren’t really targeting businesses, they are
specifies the best technical product characteristics for a targeting individuals in those businesses who
needed item affect buying decisions
- PRODUCT VALUE ANALYSIS - an approach to
cost reduction in which components are studied INSTITUTIONAL AND GOVERNMENT MARKETS
carefully to determine if they can be INSTITUTIONAL MARKET - schools, hospitals, nursing
redesigned, standardized, or made by less costly homes, prisons, and other institutions that provide
methods of production goods and services to people in their care

SUPPLIER SEARCH - stage of the business buying GOVERNMENT MARKET - governmental units—federal,
process in which the buyer tries to find the best vendors state, and local—that purchase or rent goods and
services for carrying out the main functions of
PROPOSAL SOLICITATION - stage of the business buying government
process in which the buyer invites qualified suppliers to
submit proposals
CHAPTER 7 ● BEHAVIORAL SEGMENTATION - dividing a market
into segments based on consumer knowledge,
MARKETING STRATEGY
attitudes, uses of a product, or responses to a
4 MAJOR STEPS IN DESIGNING A CUSTOMER VALUE– product
DRIVEN MARKETING STRATEGY: ● OCCASION SEGMENTATION - dividing the market
In the first two steps, the company selects the into segments according to occasions when buyers
customers that it will serve. get the idea to buy, actually make their purchase,
● MARKET SEGMENTATION - dividing a market into or use the purchased item
distinct groups of buyers who have different needs, ● BENEFIT SEGMENTATION - dividing the market into
characteristics, or behaviors and who might require segments according to the different benefits that
separate marketing strategies or mixes consumers seek from the product
● MARKET TARGETING (TARGETING) - evaluating ● USER STATUS - markets can be segmented into
each market segment’s attractiveness and selecting nonusers, ex-users, potential users, first-time users,
one or more segments to serve and regular users of a product
In the final two steps, the company decides on a value - Marketers want to reinforce and retain regular
proposition. users, attract targeted nonusers, and
reinvigorate relationships with ex-users.
● DIFFERENTIATION - actually differentiating the - Included in the potential users group are
market offering to create superior customer value consumers facing life-stage changes—such as
● POSITIONING - arranging for a market offering to new parents and newlyweds—who can be
occupy a clear, distinctive, and desirable place turned into heavy users.
relative to competing products in the minds of ● USAGE RATE - markets can also be segmented into
target consumers light, medium, and heavy product users
- Heavy users - often a small percentage of the
MARKET SEGMENTATION
market but account for a high percentage of
4 IMPORTANT SEGMENTATION TOPICS:
- Segmenting Consumer Markets total consumption
- Segmenting Business Markets ● LOYALTY STATUS - a market can also be
- Segmenting International Markets segmented by consumer loyalty
- The Requirements For Effective Segmentation - Consumers can be loyal to brands (Tide),
stores (Target), and companies ( Apple).
SEGMENTING CONSUMER MARKETS: - Buyers can be divided into groups according to
● GEOGRAPHIC SEGMENTATION - dividing a market their degree of loyalty:
into different geographical units, such as nations, - Completely Loyal — they buy one brand all
states, regions, counties, cities, or even the time and can’t wait to tell others about it.
neighborhoods - Somewhat Loyal — they are loyal to two or
● DEMOGRAPHIC SEGMENTATION - dividing the three brands of a given product or favor one
market into segments based on variables such as brand while sometimes buying others
age, life-cycle stage, gender, income, occupation, - No Loyalty To Any Brand — they either want
education, religion, ethnicity, and generation something different each time they buy, or
● AGE AND LIFE-CYCLE SEGMENTATION - dividing a they buy whatever’s on sale
market into different age and life-cycle groups
● GENDER SEGMENTATION - dividing a market into USING MULTIPLE SEGMENTATION BASES
different segments based on gender *Marketers rarely limit their segmentation analysis to
● INCOME SEGMENTATION - dividing a market into only one or a few variables. Rather, they often use
different income segments multiple segmentation bases in an effort to identify
● PSYCHOGRAPHIC SEGMENTATION - dividing a smaller, better-defined target groups.
market into different segments based on lifestyle SEGMENTING BUSINESS MARKETS:
or personality characteristics *Consumer and business marketers use many of the
same variables to segment their markets.
Business buyers - can be segmented geographically, the largest possible homogeneous group worth
demographically (industry, company size), or by pursuing with a tailored marketing program.
benefits sought, user status, usage rate, and loyalty ● DIFFERENTIABLE - the segments are conceptually
status. distinguishable and respond differently to different
marketing mix elements and programs. If men and
Yet business marketers also use some additional
women respond similarly to marketing efforts for
variables, such as customer operating characteristics,
soft drinks, they do not constitute separate
purchasing approaches, situational factors, and
segments
personal characteristics.
● ACTIONABLE - effective programs can be designed
SEGMENTING INTERNATIONAL MARKETS: for attracting and serving the segments. For
example, although one small airline identified
*Companies can segment international markets using seven market segments, its staff was too small to
one or a combination of several variables. develop separate marketing programs for each
They can segment by geographic location, grouping segment.
countries by regions such as Western Europe, the MARKET TARGETING
Pacific Rim, South Asia, or Africa. Evaluating Market Segments
GEOGRAPHIC SEGMENTATION - assumes that nations 3 FACTORS:
- SEGMENT SIZE AND GROWTH - a company wants
close to one another will have many common traits and
to select segments that have the right size and
behaviors
growth characteristics
World markets can also be segmented based on - “right size and growth” is a relative matter. The
ECONOMIC FACTORS. Countries might be grouped by largest, fastest-growing segments are not
population income levels or by their overall level of always the most attractive ones for every
economic development. A country’s economic company. Smaller companies may lack the skills
structure shapes its population’s product and service and resources needed to serve larger segments.
needs and therefore the marketing opportunities it Or they may find these segments too
offers. competitive. Such companies may target
segments that are smaller and less attractive, in
Countries can also be segmented by POLITICAL AND
an absolute sense, but that are potentially more
LEGAL FACTORS such as the type and stability of
profitable for them
government, receptivity to foreign firms, monetary
- SEGMENT STRUCTURAL ATTRACTIVENESS - For
regulations, and amount of bureaucracy.
example, a segment is less attractive if it already
CULTURAL FACTORS can also be used, grouping markets contains many strong and aggressive competitors
according to common languages, religions, values and or if it is easy for new entrants to come into the
attitudes, customs, and behavioral patterns. segment. The existence of many actual or potential
substitute products may limit prices and the profits
INTERMARKET (CROSS-MARKET) SEGMENTATION - that can be earned in a segment. The relative
forming segments of consumers who have similar needs power of buyers also affects segment
and buying behaviors even though they are located in attractiveness. Buyers with strong bargaining
different countries power relative to sellers will try to force prices
REQUIREMENTS FOR EFFECTIVE SEGMENTATION down, demand more services, and set competitors
To be useful, market segments must be: against one another—all at the expense of seller
● MEASURABLE - the size, purchasing power, and profitability. Finally, a segment may be less
profiles of the segments can be measured attractive if it contains powerful suppliers that can
● ACCESSIBLE - the market segments can be control prices or reduce the quality or quantity of
effectively reached and served ordered goods and services.
● SUBSTANTIAL - the market segments are large or - COMPANY OBJECTIVES AND RESOURCES
profitable enough to serve. A segment should be
SELECTING TARGET MARKET SEGMENTS
TARGET MARKET - set of buyers who share common MARKET VARIABILITY - If most buyers have the same
needs or characteristics that a company decides to tastes, buy the same amounts, and react the same way
serve to marketing efforts, undifferentiated marketing is
appropriate.
*Market targeting can be carried out at several
different levels: Competitors’ Marketing Strategies - should be
considered. When competitors use differentiated or
● UNDIFFERENTIATED (MASS) MARKETING - a
concentrated marketing, undifferentiated marketing can
market-coverage strategy in which a firm decides
be suicidal. Conversely, when competitors use
to ignore market segment differences and go after
undifferentiated marketing, a firm can gain an
the whole market with one offer
advantage by using differentiated or concentrated
● DIFFERENTIATED (SEGMENTED) MARKETING - a
marketing, focusing on the needs of buyers in specific
market-coverage strategy in which a firm targets
segments.
several market segments and designs separate
offers for each SOCIALLY RESPONSIBLE TARGET MARKETING
● CONCENTRATED (NICHE) MARKETING - a market- *Smart targeting helps companies become more
coverage strategy in which a firm goes after a large efficient and effective by focusing on the segments that
share of one or a few segments or niches they can satisfy best and most profitably. Targeting also
● MICROMARKETING - tailoring products and benefits consumers—companies serve specific groups of
marketing programs to the needs and wants of consumers with offers carefully tailored to their needs.
specific individuals and local customer segments; it However, target marketing sometimes generates
includes local marketing and individual marketing. controversy and concern. The biggest issues usually
- LOCAL MARKETING - tailoring brands and involve the targeting of vulnerable or disadvantaged
marketing to the needs and wants of local consumers with controversial or potentially harmful
customer segments — cities, neighborhoods, products.
and even specific stores
DIFFERENTIATION AND POSITIONING
- INDIVIDUAL MARKETING - tailoring products
and marketing programs to the needs and VALUE PROPOSITION — how it will create
preferences of individual customers differentiated value for targeted segments and what
positions it wants to occupy in those segments
Mass customization - the process by which
firms interact one to one with masses of PRODUCT POSITION - the way a product is defined by
customers to design products, services, and consumers on important attributes — the place it
marketing programs tailor-made to individual occupies in consumers’ minds relative to competing
needs products

CHOOSING A TARGETING STRATEGY POSITIONING MAPS

*Undifferentiated marketing - more suited for uniform PERCEPTUAL POSITIONING MAPS - show consumer
products, such as grapefruit or steel perceptions of their brands versus those of competing
products on important buying dimensions
*Differentiation or Concentration - more suited for
products that can vary in design, such as cameras and CHOOSING A DIFFERENTIATION AND POSITIONING
cars STRATEGY

*The product’s life-cycle stage also must be considered. IDENTIFYING POSSIBLE VALUE DIFFERENCES AND
When a firm introduces a new product, it may be COMPETITIVE ADVANTAGES
practical to launch one version only, and
COMPETITIVE ADVANTAGE - an advantage over
undifferentiated marketing or concentrated marketing
competitors gained by offering greater customer value
may make the most sense. In the mature stage of the
either by having lower prices or providing more benefits
product life cycle, however, differentiated marketing
that justify higher prices
often makes more sense.
*If a company positions its product as offering the best
quality and service, it must actually differentiate the
product so that it delivers the promised quality and
service. Companies must do much more than simply
shout out their positions with slogans and taglines. They
must first live the slogan.

In what specific ways can a company differentiate

itself or its market offer?
- It can differentiate along the lines of product,
services, channels, people, or image.

Through Product Differentiation, brands can be

differentiated on features, performance, or style and
design.
CHAPTER 10 * The customer will decide whether a product’s price is
right.
PRICE - The amount of money charged for a product or
service, or the sum of the values that customers * Pricing decisions must start with customer value.
exchange for the benefits of having or using the product
or service. * When customers buy a product, they exchange
- has been the major factor affecting buyer something of value (the price) to get something of value
choice (the benefits of having or using the product).
- only element in the marketing mix that
* Effective customer-oriented pricing involves
produces revenue
understanding how much value consumers place on the
- one of the most flexible marketing mix
benefits they receive from the product and setting a
elements: can be changed quickly
price that captures that value.
- PRICING - number-one problem faced by many
marketing executives; many companies do not * Although costs are an important consideration in
handle well setting prices, COST-BASED PRICING is often product
- smart managers treat pricing as a key strategic driven.
tool for creating and capturing customer value - Company designs what it considers to be a good
- have a direct impact on a firm’s bottom line: product, adds up the costs of making the
small percentage improvement in price can product, and sets a price that covers costs plus
generate a large percentage increase in a target profit.
profitability - Marketing must then convince buyers that the
- price plays a key role in creating customer value product’s value at that price justifies its
and building customer relationships purchase.
- If the price turns out to be too high, the
* Customer perceptions of the product’s value set the
company must settle for lower markups or
ceiling for its price.
lower sales, both resulting in disappointing
* Product costs set the floor for a product’s price. profits.

* In setting its price between these two extremes, the * “Good value” is not the same as “low price.”
company must consider several external and internal
* A company will often find it hard to measure the value
factors:
customers attach to its product.
- competitors’ strategies and prices
- the overall marketing strategy and mix * Sometimes, companies ask consumers how much they
- the nature of the market and demand would pay for a basic product and for each benefit
added to the offer. Or a company might conduct
THREE MAJOR PRICING STRATEGIES:
experiments to test the perceived value of different
● CUSTOMER VALUE–BASED PRICING
product offers.
● COST-BASED PRICING
● COMPETITION-BASED PRICING TWO TYPES OF VALUE-BASED PRICING:
- GOOD-VALUE PRICING - offering the right
CUSTOMER VALUE–BASED PRICING - Setting price
combination of quality and good service at a fair
based on buyers’ perceptions of value rather than on
price
the seller’s cost.
- In many cases, this has involved
- the marketer cannot design a product and
introducing less-expensive versions of
marketing program and then set the price
established brand name products or new
- Price is considered along with all other
lower-price lines.
marketing mix variables before the marketing
- VALUE-ADDED PRICING - Attaching value-added
program is set.
features and services to differentiate a
- Company first assesses customer needs and
company’s offers and charging higher prices.
value perceptions; then sets its target price
based on customer perceptions of value. COST-BASED PRICING - Setting prices based on the costs
- The targeted value and price - drive decisions of producing, distributing, and selling the product plus a
about what costs can be incurred and the fair rate of return for effort and risk.
resulting product design.
* A company’s costs may be an important element in its * Using standard markups to set prices do not generally
pricing strategy. make sense. Any pricing method that ignores demand
and competitor prices is not likely to lead to the best
* Companies with lower costs can set lower prices that price.
result in smaller margins but greater sales and profits.
However, other companies intentionally pay higher BREAK-EVEN PRICING (TARGET RETURN PRICING) -
costs so that they can add value and claim higher prices Setting price to break even on the costs of making and
and margins. marketing a product or setting price to make a target
return.
TYPES OF COSTS: - Another cost-oriented pricing approach
- FIXED COSTS/OVERHEAD - costs that do not - uses the concept of a break-even chart - shows
vary with production or sales level the total cost and total revenue expected at
- a company must pay each month’s bills for different sales volume levels
rent, heat, interest, and executive salaries
regardless of the company’s level of output COMPETITION-BASED PRICING - Setting prices based on
- VARIABLE COSTS - vary directly with the level of competitors’ strategies, prices, costs, and market
production offerings.
- the total varies with the number of units
produced * If consumers perceive that the company’s product or
- TOTAL COSTS - sum of the fixed and variable service provides greater value, the company can charge
costs for any given level of production a higher price.

* To price wisely, management needs to know how its * If consumers perceive less value relative to competing
costs vary with different levels of production. products, the company must either charge a lower price
or change customer perceptions to justify a higher
EXPERIENCE CURVE (LEARNING CURVE) - The drop in price.
the average per-unit production cost that comes with
accumulated production experience. Internal factors affecting pricing include the company’s
- If a downward-sloping experience curve exists, overall marketing strategy, objectives, and marketing
this is highly significant for the company. Not mix as well as other organizational considerations.
only will the company’s unit production cost
External factors include the nature of the market and
fall, but it will fall faster if the company makes
demand and other environmental factors.
and sells more during a given time period.
- carries some major risks: might give the product Overall Marketing Strategy, Objectives, and Mix
a cheap image; assumes that competitors are
weak and not willing to fight it out by meeting Target costing - Pricing that starts with an ideal selling
the company’s price cuts; while the company is price, then targets costs that will ensure that the price is
building volume under one technology, a met.
competitor may find a lower-cost technology
that lets it start at prices lower than those of * Other companies deemphasize price and use other
the market leader, which still operates on the marketing mix tools to create non-price positions.
old experience curve.
* Often, the best strategy is not to charge the lowest
COST-PLUS PRICING (MARKUP PRICING) - Adding a price but rather to differentiate the marketing offer to
standard markup to the cost of the product. make it worth a higher price.
- simplest pricing method
Organizational Considerations
- remains popular for many reasons: sellers are
more certain about costs than about demand; * Management must decide who within the
when all firms in the industry use this pricing organization should set prices.
method, prices tend to be similar, so price
competition is minimized; many people feel The Market and Demand
that it is fairer to both buyers and sellers.
* Good pricing starts with understanding how
Markup Price = unit cost/(1 - desired return on sales) customers’ perceptions of value affect the prices they
are willing to pay.
Pricing in Different Types of Markets:

- Pure competition - the market consists of many

buyers and sellers trading in a uniform
commodity, such as wheat, copper, or financial
securities.
- Monopolistic competition - the market consists
of many buyers and sellers trading over a range
of prices rather than a single market price.
- Oligopolistic competition - the market consists
of only a few large sellers.
- Pure monopoly - the market is dominated by
one seller.

Demand curve - A curve that shows the number of units

the market will buy in a given time period, at different
prices that might be charged.

Price elasticity - A measure of the sensitivity of demand

to changes in price.

* If demand hardly changes with a small change in price,

we say demand is inelastic.

* If demand changes greatly, we say the demand is

elastic.

* Economic conditions can have a strong impact on the

firm’s pricing strategies. Economic factors such as a
boom or recession, inflation, and interest rates affect
pricing decisions because they affect consumer
spending, consumer perceptions of the product’s price
and value, and the company’s costs of producing and
selling a product.
CHAPTER 11 - Optional-product pricing - The pricing of
optional or accessory products along with a
New product pricing - for products in the introductory
main product.
stage of the product life cycle
- Captive-product pricing - Setting a price for
Product mix pricing - for related products in the products that must be used along with a main
product mix product, such as blades for a razor and games
for a video-game console.
Price adjustment tactics - account for customer - ‘two-part pricing’ - broken into a fixed fee plus
differences and changing situations, and strategies for a variable usage rate.
initiating and responding to price changes.
- By-product pricing - Setting a price for by-
New Product Pricing Strategies: products to help offset the costs of disposing of
them and help make the main product’s price
- Market-skimming pricing (price skimming) -
more competitive.
Setting a high price for a new product to skim
- Product bundle pricing - Combining several
maximum revenues layer by layer from the
products and offering the bundle at a reduced
segments willing to pay the high price; the
price.
company makes fewer but more profitable
sales. Price Adjustment Strategies:
* First, the product’s quality and image must support its - Discount - A straight reduction in price on
higher price, and enough buyers must want the product purchases during a stated period of time or of
at that price. larger quantities.
* Second, the costs of producing a smaller volume - cash discount - a price reduction to buyers
cannot be so high that they cancel the advantage of who pay their bills promptly; “2/10, net 30”
charging more.
- quantity discount - a price reduction to buyers
* Finally, competitors should not be able to enter the who buy large volumes.
market easily and undercut the high price.
- functional discount / trade discount - offered
- Market-penetration pricing - Setting a low price to trade-channel members who perform certain
for a new product in order to attract a large functions, such as selling, storing, and record
number of buyers and a large market share. keeping
* First, the market must be highly price sensitive so that - seasonal discount - a price reduction to buyers
a low price produces more market growth. who buy merchandise or services out of season.
* Second, production and distribution costs must - Allowance - Promotional money paid by
decrease as sales volume increases. manufacturers to retailers in return for an
agreement to feature the manufacturer’s
* Finally, the low price must help keep out the
products in some way.
competition, and the penetration price must maintain
its low-price position. Otherwise, the price advantage - another type of reduction from the list price.
may be only temporary.
- trade-in allowances - price reductions given
Product Mix Pricing Strategies: for turning in an old item when buying a new
one; most common in the automobile industry,
- Product line pricing - Setting the price steps
but they are also given for other durable goods.
between various products in a product line
based on cost differences between the - Promotional allowances - payments or price
products, customer evaluations of different reductions that reward dealers for participating
features, and competitors’ prices. in advertising and sales-support programs.
- Segmented pricing - Selling a product or service - Some manufacturers offer low- interest
at two or more prices, where the difference in financing, longer warranties, or free
prices is not based on differences in costs. maintenance to reduce the consumer’s “price.”

- customer-segment pricing - different - “deal-prone” customers who wait until brands

customers pay different prices for the same go on sale before buying them.
product or service.
- Geographical pricing - Setting prices for
- product form pricing - different versions of the customers located in different parts of the
product are priced differently but not according country or world.
to differences in their costs.
- FOB-origin pricing - Pricing in which goods are
- location-based pricing - company charges placed free on board a carrier; the customer
different prices for different locations, even pays the freight from the factory to the
though the cost of offering each location is the destination.
same.
- Uniform-delivered pricing - Pricing in which
- time-based pricing - a firm varies its price by the company charges the same price plus
the season, the month, the day, and even the freight to all customers, regardless of their
hour. location.

- Psychological pricing - Pricing that considers - Zone pricing - Pricing in which the company
the psychology of prices and not simply the sets up two or more zones. All customers within
economics; the price is used to say something a zone pay the same total price; the more
about the product. distant the zone, the higher the price.

- For example, consumers usually perceive - Basing-point pricing - Pricing in which the
higher-priced products as having higher quality. seller designates some city as a basing point and
charges all customers the freight cost from that
- reference prices - Prices that buyers carry in
city to the customer.
their minds and refer to when they look at a
given product; noting current prices, - Freight-absorption pricing - Pricing in which
remembering past prices, or assessing the the seller absorbs all or part of the freight
buying situation charges in order to get the desired business.

- Promotional pricing - Temporarily pricing fixed-price policy — setting one price for all buyers — is
products below the list price, and sometimes a relatively modern idea that arose with the
even below cost, to increase short-run sales. development of large-scale retailing at the end of the
nineteenth century.
- A seller may simply offer discounts from
normal prices to increase sales and reduce - Dynamic pricing - Adjusting prices continually
inventories. to meet the characteristics and needs of
individual customers and situations.
- Sellers also use special-event pricing in certain
seasons to draw more customers. *Consumers armed with smart-phones now
routinely visit stores to see an item, compare
- Limited-time offers, such as online flash sales,
prices online while in the store, and then
can create buying urgency and make buyers feel
request price matches or simply buy the item
lucky to have gotten in on the deal.
online at a lower price. Such behavior is called
- cash rebates - offered to consumers who buy showrooming.
the product from dealers within a specified
- International Pricing
time; the manufacturer sends the rebate
directly to the customer. - The price that a company should charge in a
specific country depends on many factors:
 economic conditions, competitive situations, pricing elements that were formerly part of the
laws and regulations, and the nature of the offer. Or it can shrink the product or substitute
wholesaling and retailing system. less-expensive ingredients instead of raising the
price.
- Consumer perceptions and preferences also
may vary from country to country, calling for Buyer Reactions to Price Changes
different prices.
- A price increase, which would normally lower
- the company may have different marketing sales, may have some positive meanings for
objectives in various world markets, which buyers.
require changes in pricing strategy - Similarly, consumers may view a price cut in
several ways.
- Costs play an important role in setting
- A brand’s price and image are often closely
international prices.
linked. A price change, especially a drop in
- price escalation may result from differences in price, can adversely affect how consumers view
selling strategies or market conditions. In most the brand.
instances, however, it is simply a result of the
Competitor Reactions to Price Changes
higher costs of selling in another country—the
additional costs of operations, product - A firm considering a price change must worry
modifications, shipping and insurance, about the reactions of its competitors as well as
exchange-rate fluctuations, and physical those of its customers.
distribution.
Responding to Price Changes
Initiating Price Cuts:
* If the company decides that effective action can and
- One such circumstance is excess capacity. should be taken, it might make any of four responses.
- Another is falling demand in the face of strong
- First, it could reduce its price to match the
price competition or a weakened economy.
competitor’s price. It may decide that the
- drive to dominate the market through lower
market is price sensitive and that it would lose
costs
too much market share to the lower-priced
Initiating Price Increases: competitor.
- company might maintain its price but raise the
- major factor is cost inflation
perceived value of its offer.
- Another factor leading to price increases is
- Or the company might improve quality and
over-demand: When a company cannot supply
increase price, moving its brand into a higher
all that its customers need, it may raise its
price–value position.
prices, ration products to customers, or both—
- Finally, the company might launch a low-price
consider today’s worldwide oil and gas industry.
“fighter brand”—adding a lower-price item to
- When raising prices, the company must avoid
the line or creating a separate lower-price
being perceived as a price gouger.
brand.
- Techniques for avoiding these problems: One is
to maintain a sense of fairness surrounding any Price-fixing - states that sellers must set prices without
price increase. Price increases should be talking to competitors; illegal per se—that is, the
supported by company communications telling government does not accept any excuses for price-
customers why prices are being raised. fixing.
- companies should consider ways to meet higher
Predatory pricing — selling below cost with the
costs or demand without raising prices.
intention of punishing a competitor or gaining higher
- it might consider more cost-effective ways to
long-run profits by putting competitors out of business.
produce or distribute its products. It can
“unbundle” its market offering, removing * The seller can also discriminate in its pricing if the
features, packaging, or services and separately seller manufactures different qualities of the same
product for different retailers. The seller has to prove
that these differences are proportional. Price
differentials may also be used to “match competition”
in “good faith,” provided the price discrimination is
temporary, localized, and defensive rather than
offensive.

* Laws also prohibit retail (or resale) price maintenance

—a manufacturer cannot require dealers to charge a
specified retail price for its product. Although the seller
can propose a manufacturer’s suggested retail price to
dealers, it cannot refuse to sell to a dealer that takes
independent pricing action, nor can it punish the dealer
by shipping late or denying advertising allowances.