1

Chapter 1

MARKETING STUDY GUIDE

CHAPTER 1
CUSTOMER VALUE, SATISFACTION, CUSTOMER RELATIONSHIPS, AND CUSTOMER
EXPERIENCES

KEY POINTS TO TAKE AWAY FROM THIS

CHAPTER

UNNECESSARY INFORMATION
(CHAPTER 1)

What is marketing and what are the

factors influencing it?

No requirements for successful

marketing

How marketing discovers and satisfies

consumer needs

No breadth and depth of marketing

Selling vs. marketing (product vs

marketing orientation)

WHAT IS MARKETING?

An organizational function or set of processes

Creating, communicating and delivering value to customers

Managing customer relationships in a way to benefit the organization and stakeholders

GOAL: Facilitating Exchange

FACTORS WHICH INFLUENCE MARKETING ACTIVITIES

INTERNAL (Within the organization):
1. Organizational Leadership:

R&D

Finance

Human Resources

Marketing

Manufacturing

Information Systems

2.

Chapter 1

3. Relationships with customers

4. Alliances other organizations
5. Ownership of shareholders
6. Partnerships with suppliers
EXTERNAL (ENVIRONMENTAL FORCES):
1. Social social trends, behaviors, demographics
2. Economic globalization, countrys state of economy (boom/bust)
3. Technological Improvement, Development
4. Competitive Market competition, market size
5. Regulatory rules, standards and laws

HOW MARKETING DISCOVERS AND SATISFIES CONSUMERS NEEDS

NEEDS VS. WANTS

Consumers needs: State of feeling deprivation

Consumers wants: Needs shaped by culture, knowledge or personality (desire for something not
based on physical deprivation)

In effective marketing, the key is to convert needs into wants.

DISCOVERING A CONSUMERS NEEDS

Study or observe potential customers

Scrutinize consumers carefully (current customers)

Studying the potential customers in the market will give information about their needs to the
organizations marketing department (studies, observations, surveys etc).
SATISFYING CONSUMER NEEDS

Identify target market

Develop a marketing program:

Controllable Factors: Marketing Mix (4 Ps Product, Place, Price, Promotion)

Uncontrollable Factors: Environmental Forces (Social, Technological, Economic,

Regulatory, Competitive)

Chapter 1

Steps of Discovering and Satisfying Consumers needs

ORGANIZATIONS MARKETING DEPARTMENT
Develop concepts for products

GENERAL IDEA OF HOW MARKETING BECAME SOME IMPORTANT

PRODUCTION ERA SALES ERA MARKETING CONCEPT ERA MARKET
ORIENTATION ERA CUSTOMER EXPERIENCE MANAGEMENT ERA
1) PRODUCTION ERA: Focusing only on product - A good product will sell itself
2) SALES ERA: Manufacturing and production is greater than demand, need to make as many sales
as possible (need salespeople to find buyers)
3) MARKETING CONCEPT ERA: The consumers rule, find needs and fulfill them
4) MARKET ORIENTATION ERA: Create customer value and satisfaction, develop long-term
relationship with customers
5) CUSTOMER EXPERIENCE ERA: Managing interactions with customers at all levels and touch
points (Before, during and after sales)
In the beginning, marketing started off with just a focus on selling the product. It then moved on from
trying to maximizing sales only to marketing through the 4 Ps and providing a full customer experience
before, during and after a sale.

MARKETING ORIENTATION VS. PRODUCT ORIENTATION

MARKETING ORIENTATION
The marketing orientation focuses on the CUSTOMER.
As mentioned earlier, the marketing orientation starts off from identifying customers needs to creating
more value, satisfaction and lifetime value. In this case, the marketing mix must be established
accordingly

Customer Value: unique combination of benefits received by the customer

o

what does a customer get out of your product that they cannot get elsewhere?

Customer Satisfaction: The matching between the customers expectations of your product
versus what you truly are capable of delivering to them through your product

Chapter 1
o

Customer Relationship Management: Building good relationships with the customer to develop
a long-term relationship with them
o

(Performance vs. Expectation)?

(services after sale, see how the product is doing for them, provide any
maintenance/support for them, long-term relationship to encourage customers to return
for future purchases)

Customer Lifetime Value: All the profit generated from the purchases of a customer from a
company over their lifetime
o

(how much profit that can be generated when a customer continues to purchase from a
single company)

PRODUCT ORIENTATION
The product orientation focuses on the specifications and benefits of the product. The idea that a good
product will sell itself and buyers will come on their own. There is little to no focus on customers

CHAPTER 2-3
DEVELOPING SUCCESSFUL MARKETING STRATEGIES AND UNDERSTANDING THE MARKETING
ENVIRONMENT

KEY POINTS TO TAKE AWAY FROM THIS

CHAPTER

The strategic marketing process

UNNECESSARY INFORMATION (CH. 2-3)

No 3 level of strategies

No business vs mission statement

No implementation and control phase

STRATEGIC MARKETING PROCESS

The strategic marketing process consists of 3 phases (each phase containing its own steps)
1) Planning
2) Implementation
3) Control

PLANNING PHASE

Chapter 1

STEP 1 SITUATION ANALYSIS

Identify industry trends

Analyze your competitors

Assess your own company

Research on customer

In order to get a good idea about your organizations current position, you should do a SWOT analysis. In
this analysis, you get a good idea about industry trends, competition, present and future customers, and
competencies of your own company.
SWOT ANALYSIS:

Strengths

Weaknesses

Opportunities

Threats

Internal capabilities of the organization that

help it reach its goals

INTERNA
L

Internal limitations which may hinder the

organization from reaching its goals

Conditions in the environment that favor

the organizations strengths

EXTERN
AL

Conditions in the environment that do not

relate to strengths or favor weaknesses

Internal Strengths and Weaknesses

Production costs, marketing skills, employee skill/capabilities, financial resources, firms

technology, company or brand image etc.

Key point to guide you: Does the organization have control over it? If they do, its internal.

External Opportunities and Threats

Social, Economic, Technological, Regulatory, Competitive

As mentioned earlier, these are simply environmental factors.

ENVIRONMENTAL SCAN
SWOT analysis requires environmental scanning. Changes in the environment can have an effect on
not only the organization but also the suppliers and customers. Environmental factors are a source of
threats and opportunities and need to be managed.

Chapter 1

1) SOCIAL: Demographics & Culture

2) ECONOMICS: Macro & Micro
3) TECHNOLOGY: Impact on Marketers
4) COMPETITIVE: Alternative forms of Competition

Entry Is there low or high barriers to entry? (Culture can be a huge barrier!)

Power of Buyers and Suppliers Do buyers and suppliers have power? (threat)

Existing Competitors & Substitutes Who has the same products as you? What products can
consumers use to substitute yours?

5) REGULATORY

Protection of Consumers and Competition Fair Pricing and competition, deregulations

Self-Regulation Associations, Corporate governance, Social responsibility

Consumerism tested, standards (consumer boards)

After getting a good feel about where you currently stand, you want to know in what direction you would
like to bring your organization. This can be done with either:

Business Portfolio Analysis (BCG Matrix)

Market-Product Analysis

BUSINESS PORTFOLIO ANALYSIS (BCG MATRIX)

STARS

High
Low
MARKET GROWTH RATE

High growth rate, high relative market share

Generates lots of profit but requires a lot of cash
(heavy investment)
Hard to have too many stars, too many
investments needed, requires cash cows
QUESTION MARKS

on in the business

Need a lot of cash

Potential to become
novelty/trend

High

Low relative market share but high growth rate (early

cycle, introductory)
Low

RELATIVE MARKET SHARE

stars (but may flop like
products)

Chapter 1

CASH COWS

Low growth rate, but high relative market share (usually later on in the business cycle, mature)

Generate strong cash flow

Usually finance stars until the growth slows or move question marks to become stars

DOGS

Low growth rate, small market share

Difficult to generate strong cash flow

Little investment needed

4 BASIC STRATEGIES
1) Build: Heavy investment (required for maintaining stars or moving question marks to stars)
2) Hold: Trying to keep same position (usually cash cows)
3) Harvest: Still producing not for the long term, try extract as much money from it as possible
(usually dogs, little growth rate/market share)
4) Divest: Decide to end it, sell out inventory and ending production
MARKET PRODUCT ANALYSIS
PRODUCTS
MARKETS

Current
New

Current

Market Penetration

Product Development

Selling existing products in existing

markets (gaining competitors share of
market)

Selling a new product in a pre-existing

market

i.e. McDonalds using price promotions in

pre-existing markets

New

i.e. McDonalds introducing

coffee/salad, new burgers

Market Development

Diversification

Selling existing products in new markets

(usually new segments or geographic)

Selling new product in a new market

i.e. Tim Hortons introducing Timbits in

China

i.e. McDonalds introducing a new

clothing line

Chapter 1

STEP 2 PLANNING PHASE: MARKET PRODUCT FOCUS

Set market and product goals

Select target markets

Find points of difference

Position the product

WHICH PRODUCTS WILL BE DIRECTED TOWARD WHICH CUSTOMERS?

The what and who of strategic marketing process

Select target market(s)

Find points of differentiation (address the needs of the target market)

Position the product (image, type of product i.e. luxury)

STEP 3 MARKETING PROGRAM

Develop the programs marketing mix (4 Ps)

Develop the budget by estimating revenue, expenses and profits

DEVELOPMENT OF THE MARKETING MIX

The how of strategic marketing process

Product strategy What to sell?

Place (distribution) strategy Where and how to sell it?

Price strategy How much to sell it for (high or low)?

Promotion Strategy How to promote it? (flyers, radio ads, TV ads)

CHAPTER 9
MARKET SEGMENTATION, TARGETING AND POSITIONING
KEY POINTS TO TAKE AWAY FROM THIS CHAPTER

What is market segmentation and why is it necessary?

Chapter 1

Process of segmenting and targeting markets

Differences: Head-to-head vs. differentiation positioning

Perceptual maps

Who are our customers? What attributes, how they behave?

WHAT IS MARKET SEGMENTATION?

1) Market: People or organizations which have needs/wants and have the ability and willingness to
buy
2) Market Segment: A subgroup of people with similar characteristics, causing them to have similar
product needs
3) Market Segmentation: Process of dividing a market into meaningful, relatively small, identifiable
segments/groups, usually based on similar characteristics or product needs what is best for
company
A higher degree of market segmentation helps customize but is costly.
EXAMPLES:

Full segmentation based on individual needs

Segmentation by gender

Segmentation by age

Segmentation by gender and age

WHY SEGMENT MARKETS?

Market segmentation allows company to have a more precise definition of the needs and wants of
customers. Having a clearer definition allows them to create more accurate marketing objectives which
improves resource allocation and provides better marketing results.
-more organized, clearer and more efficient

WHEN TO SEGMENT MARKETS?

When you have
One product with multiple segments

Airlines/Hotels which serve both tourist and business travelers

Multiple products and multiple segments

GAP and H&M (kids and adults)

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Segments of one (mass customization)

Wedding planners, interior designing, customized t-shirts

STEPS IN SEGMENTING AND TARGETING MARKETS

1) Group potential buyers into segments
2) Group products into categories if possible
3) Develop a market-product grid, try to estimate market size
4) Select target markets
5) Take marketing actions to reach target market (position in their mind what needs will be fulfilled
by your product)

STEP 1 GROUP POTENTIAL BUYERS INTO SEGMENTS

How do we group the potential buyers?
Based on the:
-potential for increased profit
-similarity of needs within segment
-difference of needs among segments
-reachability with marketing mix
-simplicity
SEGMENTATION BASES/VARIABLES
The characteristics of groups, individuals or organizations that are used to divide a total market into
segments
DEMOGRAPHIC VARIABLES

GEOGRAPHIC VARIABLES

AGE

RELIGION

REGION

GENDER

CLIMATE

RACE

FAMILY LIFE
CYCLE

TERRAIN

ETHNICITY

SOCIAL
CLASS

URBAN,
SUBURBAN,
RURAL

INCOME

OCCUPATIO
N

EDUCATION

FAMILY SIZE

PSYCHOGRAPHIC VARIABLES

BEHAVIORISTIC VARIABLES

COUNTRY
SIZE

CITY SIZE

MARKET
DENSITY

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PERSONALITY ATTRIBUTES

VOLUME USAGE

MOTIVES

END USE

LIFESTYLES

BENEFIT EXPECTATIONS

BRAND LOYALTY

PRICE SENSITIVITY

Note: Using psychographic variables are much

more powerful for finding underlying needs

Geographic Segmentation:

World region/country Europe, Asia, Canada

Region of CountryNorth, South, East Coast, West Coast, Province

City of metro size Montreal

Neighborhood (Postal Code) Kirkland vs. Westmount

Demographic Segmentation:

Age, gender, family size, income, occupation, etc.

Baby Boomers

Gen X and Y

Easier to measure than most other types of variables, most popular bases for segmenting
customer groups

Family Cycle Combination between age, marital status, children

Psychographic Segmentation:

Personality environmentally friendly, risk-taker

Lifestyle athletic, outdoorsy, frequent flyer, rises early, sleeps late

Behavioral

Benefits sought low calories, energizing (caffeine)

Usage Rate (80/20 rule) ISP, phone providers, air miles (how often you use it)

Multiple Segmentation: Using a combination of multiple bases to identify smaller, better-defined target
groups. Usually start with a single base then expand to other bases.

STEP 2 GROUP PRODUCTS INTO CATEGORIES

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Chapter 1

Grouping products into categories is important for firms with many products. They are often represented
by product lines.

STEP 3 DEVELOP MARKET-PRODUCT GRID AND ESTIMATE MARKET SIZE

STEP 4 SELECT TARGET MARKET(S) / TARGET SEGMENTS

Out of all the segments, the target segment is the subset that you intend to target/reach (most relevant to
you).
Criteria:

Market Size

Expected Growth

Competitive Position (how will you have a competitive advantage?)

Cost of reaching segment (do the costs of reaching the segment outweigh the benefits of
targeting them?)

Match firms capabilities (Are the firms capabilities matching to the segment?)

STEP 5 TAKE MARKETING ACTION

Develop a marketing mix based on the chosen target market(s) In what way will you market to your
target market?

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Chapter 1

Segmenting costs money, it is necessary to weigh the costs with the benefits. The more mass marketing it
is, the cheaper, the more customized it is, the more expensive.
1. Mass marketing (undifferentiated strategy)

No segments

Not personalized, may not address needs very well

There is a single marketing mix.

2. Differentiated Marketing

Large segments with specific marketing mixes

3. Concentrated (niche) marketing

One segment of a market with specialized marketing mix

4. Micromarketing (One-to-one Marketing)

Customize your marketing to the individual (every experience is customized to their

needs)

POSITIONING THE PRODUCT

Refers to the place an offering occupies in the consumers mind on important attributes relative to
competitive products (how your product is placed in the consumers mind)
Two approaches: Head-to-head positioning, Differentiation Positioning
i.e. Coca Cola vs. Pepsi, or Apple respectively

DIFFERENTIATION VS POSITIONING
Differentiation: Actual tangible differences between your product and that of your competitors
Positioning: Using a marketing strategy to create a unique definite image of your product/brand name in
the customers mind

PERCEPTUAL MAPS
Displays location of brand in the mind of consumers, enables managers to see how consumer perceive
competing products/brand relative to their own

identify important attributes for product class (two dimensions, i.e. Luxury vs. Economy and
Conservative vs. Sporty)

judgments of existing brands with respect to these important attributes (based on market data)

ratings of an idea brands attributes

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Chapter 1

WHY IS POSITIONING IMPORTANT?

It helps in designing your market strategies and identify direct and indirect competitors.

Product: How do you plan to package your product? Customer service and warranties?

Location (distribution)

Pricing

Promotion (advertising, public relations, sales promotions) What message do you want to
convey? What media do you want to convey it through?

RECAP: (1) Segmentation Discover groups and needs in a marketplace (2) Targeting target groups
for which you can provide superior solutions for (3) Positioning Make the target groups recognize your
superior offer

QUANTITATIVE ANALYSIS
There are 5 separate quantitative analysis topics that are addressed:
1. Market share

Calculating the market share

Estimating the size of a market using Step Down Analysis

2. Types of Costs and Margins

Fixed and Variable Costs

Contribution and Profit Margins

3. Breakeven Analysis

In units and dollars

Using breakeven analysis strategically

4. Price Elasticity

For a single product

Cross price elasticity between two products

5. Price Chains

Inverted and non-inverted

MARKET SHARE

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Chapter 1

The market share is a % of the segment that your brand of product controls.

Market Share ( $ )=

Our Brand $ sales

Total segment $ sales

Market Share (units )=

Our Brandunit sales

Total segment unit sales

EXAMPLE 1 MARKET SHARE

Last year in Brandon, 1,000 new cars were sold. Total value of all the new cars sold was
$25,000,000. In Brandon, the Jaguar car dealership sold 10 new Jaguars at an average price of
$250,000. Calculate the market share in both $s and units of the Brandon Jaguar dealership in the new
car segment.

Market Share ( $ )=

10250,000
=0.1=10
25,000,000

Market Share (units )=

10
=0.01=1
1000

EXAMPLE 2 - STEP DOWN ANALYSIS

Used when we are looking for market share information but we cannot exactly find the information
we require to calculate the market share.
Suppose our product is a new liquid laundry detergent for:

price sensitive

Montrealers

who like using liquid laundry detergent

Suppose our brand has $365,000 in sales and that the total Canadian market of all laundry detergent is
$217,500,000.

Size of the Quebec laundry detergent market in comparison to all of Canada: 21%

Size of the Montreal laundry detergent market in comparison to all of Quebec: 48%

Size of the Price Sensitive segment of consumers in Montreal: 20%

Size of the Liquid (as opposed to Powder) Detergent sales in Montreal:45%

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Chapter 1

What is our market share of the price sensitive segment of liquid laundry detergent in Montreal?

CanadianMarket=$217,500,000
1.

Quebec Market=21 ( 217,500,000 ) =$ 45,675,000

2.

Montreal Market=48 ( 45,675,000 )=$21,924,000

3.

PriceSensitiveSegmentMontreal=20 ( 21,924,000 )=$ 4,384,800

4.

Liquid Detergent SalesMontreal=45 ( 4,384,800 )=$1,973,160

Our Market Share=

$365,000
=18.5
$1,973,160

TYPES OF COSTS AND MARGINS

1. Fixed Costs (FC) costs that do not fluctuate with changes in volume of production

i.e. advertising, administration and overhead, rent, fixed salaries, utilities, research and
development

2. Variable Costs (VC) costs that are directly associated with changes in volume of production

i.e. labor, materials, transportation, promotion costs (allowances or coupons)

3. Contribution Margin (CM) represents how much is left over after accounting for variable costs
to cover fixed expenses. The contribution margin % tells you what % of each $ you earn goes
towards covering fixed expenses (after variable costs have already been accounted for).
4. Profit Contribution/Margin (PC or PM) represents how much is left over after accounting for
both variable costs and fixed costs

CM perunit=( Price per unitVC perunit )

CM perunit ( )=

Price perunitVC perunit

Price perunit

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Chapter 1

100 =VC( of SalesPrice)+CM( of SalesPrice)

Unit SP
-Per Unit VC
Per Unit CM
-Per Unit FC
Per Unit PM

EXAMPLE 3 CONTRIBUTION MARGIN

Several years ago Joey sold lemonade from his lemonade stand. He sold a glass of lemonade for $0.05.
Each plastic glass cost Joey $0.01. If Joeys total variable cost was $0.03 per drink, what is the unit
contribution margin and %?

CM perunit=0.050.03=0.02
CM perunit ( )=

0.050.03
=40
0.05

BREAKEVEN ANALYSIS

BE ( units )=
BE ( $ ) =

Total FC
Total FC
=
Per Unit PricePerUnit VC
CM

Total FC
Per Unit VC
1
Per Unit Price

EXAMPLE 4 BREAKEVEN ANALYSIS

For example, consider a micro-brewery that wants to enter the Quebec market. Total unit sales of
micro beer in Quebec = 7,000,000 bottles per year. The Per-Unit VC for this microbrewery is $.85 per
bottle.
Strategy 1: Heavy advertising in order to try and sell at a higher per unit price.
Advertising = $500,000

Price = $3.00 per bottle

Strategy 2: Lower advertising, and therefore sell at a lower price per unit.
Advertising = $200,000

Price = $2.25 per bottle

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Which strategy is best according to a breakeven analysis?

Strategy 1BE ( units )=

Total FC
500,000
=
=232,559.14
PerUnit PricePerUnit VC 30.85

Strategy 2BE ( units ) =

Total FC
200,000
=
=142,857.14
Per Unit PricePerUnit VC 2.250.85

Strategy 1market share=

232,559.14
=3.32
7,000,000

Strategy 2market share=

142,857.14
=2.04
7,000,000

According to BE analysis, Strategy 1 is best.

The marketer would then determine how much of the market they can realistically capture and
compare this to their breakeven analysis. Suppose it is determined that they can only capture 2% of the
market. What price do they have to sell their beer for in order to make the $500,000 advertising strategy
pay off?

27,000,000=140,000units
Total FC
500,000
=
=140,000
Per Unit PricePerUnit VC X0.85
500,000
+0.85=X
140,000

4.42=X
PRICE ELASTICITY
Measures how sensitive or responsive a consumers demand is to a change in price.

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Chapter 1

PE=

changedemand
NewOld
where change=
change price
Old

If PE<1

Price Inelastic, price changes do not really change demand

Decrease in price= less than proportional increase in demand

Increase in price= less than proportional decrease in demand

Lowering price Decrease in Profits, Raising price Increase in Profits

If PE>1

Price Elastic, price changes significantly affect demand

Decrease in price = more than proportional increase in demand

Increase in price = more than proportional decrease in demand

Lowering price Increase in Profits, Raising price Decrease in Profits

If PE=1

Unit Elastic

Change in price = proportional change in demand

EXAMPLE 5 PRICE ELASTICITY

Going back to the microbrewery example, suppose:

at $2.25 per bottle, theyll sell 300,000 bottles.

at $4.42 per bottle, theyll sell 140,000 bottles.

What is price elasticity?

changedemand=

changeprice=

300,000140,000
=1.14=114
140,000

2.254.42
=0.49=49
4.42

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PE=

Chapter 1

1.14
=2.32
0.49

CROSS-PRICE ELASTICITY
Relationship between change in price of one product relative to a change in demand of another product.
Complementary products: An increase (decrease) in price of product A will cause a decrease (increase)
of demand in product B
i.e. Iphone and Iphone case, Ice cream and ice cream cone, CDs and CD players, fries and ketchup
Substitute products: An increase (decrease) in price of product A will cause an increase (decrease) of
demand in product B
i.e. Water bottles, cassette and CD players

If PE is +ive substitute

If PE is ivecomplementary

If PE is 0no relationship

EXAMPLE 6 CROSS-PRICE ELASTICITY

For example, complementary products like bread & butter. Suppose that Butter is promoted and its price
is dropped from $3.09 to $2.79. Suppose that this yields an increase in demand for bread from 4,000
loaves to 6,300 loaves.

changedemand of bread=

changeprice of butter=

PE=

6,3004,000
=0.575
4000

2.793.09
=0.0971
3.09

0.575
=5.92
0.0971

PRICE CHAINS

Contribution Margin of Selling Price=

Selling Price perUnitPer Unit VC

Selling Price Per Unit

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How much will be used to cover fixed costs, given your selling price

Contribution Margin of Sales=

Markup oncost=

Total SalesTotal VC
Total Sales

Selling Price perUnitPer Unit VC

PerUnit VC

By how much you increase your price, given your cost

CHAPTER 5
CONSUMER BEHAVIOUR
KEY POINTS TO TAKE AWAY FROM THIS CHAPTER

Consumer purchase decision process

Influences on the consumer purchase decision process

CONSUMER PURCHASE DECISION PROCESS

It is a 5 step process used by consumers when buying goods/services.
1. Problem or Need Recognition
2. Information Search
3. Evaluation of Alternatives
4. Purchase Decision
5. Post-purchase Evaluation

STEP 1 PROBLEM/NEED RECOGNITION

It is the realization of having a need or problem through external and or internal stimuli. Here, the person
realizes a problem or need in their actual situation, and hope to seek for an ideal situation.
External stimuli: when somebody points out something to you
Internal stimuli: when you realize yourself (i.e. hunger, feeling cold, computer is slow, etc.)

STEP 2 INFORMATION SEARCH

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After recognizing a need, the person will want to know how to satisfy it, therefore they will do some
research on it.
INTERNAL INFORMATION SEARCH

Recalling information or experiences from memory (personal)

EXTERNAL INFORMATION SEARCH

Personal Sources Relatives, friends, colleagues, etc.

Public Sources Reviews, consumer reports, government agencies, etc.

Marketing Controlled Sources Advertisements, store displays, company websites, etc.

Experiential Sources Handling, examining, using the product, etc. (usually in store)

Note: More information searching occurs when consumers by more costly products or products that
require long-term commitments. During information searches, the consumer gains knowledge of brand
names, criteria to judge brands and consumer value perceptions. The awareness set is a set of all the
brands that the consumer becomes informed and aware of.

STEP 3 EVALUATE ALTERNATIVES

1. From the Awareness Set, the consumer analyzes the brands using evaluative criteria.

Objective Criteria i.e. price, speed, material, performance specs

Subjective Criteria brand image, value, perception

2. The consumer then forms an Evoked or Consideration Set, a group of acceptable brands that
fit the evaluative criteria.
3. A choice is then made based on the ranking of the evoked set.

STEP 4 PURCHASE DECISION

The consumer makes a purchase decision where to buy and when to buy.

STEP 5 POST-PURCHASE EVALUATION

Consumer satisfaction depends on the consumers expectations and perceived product performance. The
level of satisfaction will influence a consumers decision on repeating purchases. The higher the level of
satisfaction, the more likely a consumer will return for future purchases.

Performance < expectations Disappointment

Performance = expectations Satisfaction

Performance > expectations Delight

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COGNITIVE DISSONANCE
It is buyer discomfort caused by post-purchase conflict. The greater the level of commitment required of
the consumer, the greater the discomfort and regret experienced by the consumer.
There is an anxiety of not knowing if the right choice was made in purchase. Customer follow-up
programs help reduce this problem by reassuring consumers of their purchase.
Methods to reduce dissonance on part of the marketer: guarantees, warranties, follow-up calls, display
product superiority in ads, send post-purchase thank you or letter

INFLUENCES ON THE CONSUMER PURCHASE DECISION PROCESS

1. Marketing Mix influences (product, price, place, promotion)
2. Psychological influences
3. Sociocultural influences
4. Situational influences

SITUATIONAL INFLUENCES ON CONSUMER BEHAVIOUR

Purchase Task

Is the purchase for you or for somebody else?

If purchasing for yourself you use your own criteria, if you purchase for somebody else, you use
an implied criteria

Social Surroundings

Who else is present when the purchase is made?

You may be affected by the judgments or opinions/thoughts of others around you

i.e. friends, family, colleagues

Physical Surroundings

the environment around you at the time of purchase

i.e. noisy, smelling, unclean atmosphere vs. pleasant, clean atmosphere

Temporal Effects

the time at which customers usually make purchases

i.e. ski resort (more purchases during ski season)

Antecedent States

the state you happen to be in at the time of purchase

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i.e. your mood, clothes you are wearing, the amount of cash you have on hand

PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOUR

Motivation

What drives you to take action to satisfy a specific need

Needs can be physiological to self-fulfillment, marketer try to arouse these needs

The higher up the need is in the levels, the greater the self-fulfillment this also requires greater
level of motivation and marketing effort

Personality

Often revealed in a persons self-concept (who they are, how they see themselves, how they wish
to see themselves as)

i.e. healthy, trendy, risk-taking, confident

Perception

Perceived risk the amount of anxiety a consumer feels during the purchasing process

How you perceive the information and prices

Consumers are risk-averse, marketers want to reduce the perceived risk by adding services

Learning

Experiences previous experiences also affect how you evaluate new purchases

Thinking and reflecting

Values, Beliefs and Attitudes

Attitudes are shaped by values and personal beliefs

Religion

Personality related

i.e. anti-animal cruelty, pro-life, Jewish (jewish dietary laws)

Lifestyle

how people spend their time and money

i.e. movies, sports, watching games, vacations, cooking and baking

SOCIOCULTURAL INFLUENCES ON CONSUMER BEHAVIOUR

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Chapter 1

Personal Influence

Opinion leadership individuals who influence others directly or indirectly

Word of mouth

Having a spokesperson or endorsement

i.e. getting a celebrity to endorse a product

Reference groups

people you associate with that you use as a basis for self-appraisal

i.e. colleagues, friends

Family

Consumer socialization how you were brought up can affect what you buy and your perceptions
on products and brands (i.e. frugal parents, likely you will become frugal or complete opposite)

Family Life Cycle (i.e. married, have kids, divorced, widowed?)

Family Decision Making (making choices as a group)

Social Class

Consumers in social classes often have similar attitudes, lifestyles and buying behavior

i.e. upper class = less price sensitive, lower-middle class = more price sensitive

Culture/Subculture

this affects what is important to you, your values, perception, wants and behaviors

subcultures are usually identified by age, geography and ethnicity

i.e. baby boomers, immigrants, French-Canadian, Gen X or Y

CHAPTER 11 PT. 1
MANAGING PRODUCTS

KEY POINTS TO TAKE AWAY FROM THIS CHAPTER

26

The product life cycle (PLC)

How you can extend PLC

PLC and consumers

Managing PLC

Chapter 1

THE PRODUCT LIFE CYCLE (PLC)

Stages:
1- Introductory Stage
2- Growth Stage
3- Maturity Stage
4- Decline Stage
Including research & development stage, the first stage would be the product development stage.

INTRODUCTORY STAGE
This is the initial stage of the products life cycle, where the product is first introduced to the market.
Characteristics of this stage include:

Sales start at zero and grow slowly

Profit is minimal, if not usually negative

To enter a market, the product should be prices either as penetration pricing (pricing low to gain
market share) or price skimming (pricing high then reducing the price over time)

There are relatively few competitors

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Chapter 1

As a promotion strategy, marketers should aim to raise awareness and inform consumers of the
product

There is a relative small product line

i.e. Oakley Airwave, Google Glass

GROWTH STAGE
This is the second stage of the product life cycle, where sales and profits begin to rise rapidly.
Characteristics of this stage include:

Increase of competition entering the market

Product pricing becomes aggressive

The product line expands

Promotion expenditures are moderate, mostly likely the promotion strategy is to differentiate your
product and persuade consumers to use your product

Any gaps in market coverage are filled

Production efficiencies will help lower costs (in thus increase profits)

i.e. Urban Decay, Tablets

MATURITY STAGE
This is the third stage of the product life cycle, where the sales curve peaks and begins to decline, and
profits begin to fall. Characteristics of this stage include:

The market is saturated

Intense competition

Weaker competitors lose interest and leave the market

Promotion strategy is mainly reminder oriented, can consider lower price but may lead to price
wars

Increased brand equity, may not have to lower price at all

Distribution sometimes expands to a global scale

Strategic objectives include : (1) Generating cash flow, (2) Maintaining market share (defend and
gain)

i.e. Cheetos, Toothpaste, Coca Cola and Pepsi

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Chapter 1

DECLINE STAGE
This is the final stage of the PLC, where sales and profit decline rapidly. Characteristics of this stage
include:

Cutting items from the product line

Reducing promotion expenses

Eliminating marginal distributors

Planning to phase out the product, remove unpopular products, keep best sellers

Harvesting the products remaining value (attempting to extract as much profit from product as
possible)

Divesting the product when losses are sustained and return to profitability is unlikely (decreasing
investment to the product)

i.e. Twinkies, Radio, CD players

ALTERNATIVE LIFE CYCLES

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Chapter 1

Examples:
High-learning product: Oakley Airwave, professional products, DOTA require educating the consumer
and convincing them of a need
Low-learning product: Windows XPrather non-novel products
Fashion product: fashion trends like skinny jeans, rompers, and converse
Fad Product: Flappy Bird, Draw Something, Silly Bandz

PLC AND CONSUMERS

Innovators: These people are higher educated and use multiple information sources. They are risktaking/venturesome and make up the consumers of the introductory stage. They arent very price
sensitive.
Early adopters: They are the leaders of a social setting, often spreading information about a product to
others and having slightly above average education, they make up a part of the introductory stage and
growth stage.

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Early Majority: They are deliberate and have many informal social contacts. They make up the largest
portion of the growth stage.
Late Majority: They are skeptical and have a below-average social status, taking up the most of the
maturity stage.
Laggards: They have a fear of debt and depend mainly on neighbors and friends as a source of
information. They make up the decline stage.

MANAGING THE PLC

How do you manage the PLC if you notice a decline occurring with your product?

Modify the product

o

Modify the characteristics of the product to extend sales

i.e. packaging, logo, features

if you modify a product enough, you can restart its product life cycle

Modify the market

o

Find new users, target a new segment

i.e. movies discounted during the day mainly for kids, introduce children sizes

Increase the use of existing users play on season, choose peak seasons to arouse
needs of users

i.e. Ski season ski resort, Winter cold, need warmth of Campbell soup

Modify positioning (by modifying market or product)

o

Reposition the product to target an entire different segment/market

Reacting to a competitor

Reaching new markets

Reacting to trends

Changing the value offer

i.e. Repositioning Miley Cyrus (Disney star to singer)

CHAPTER 10
DEVELOPING NEW PRODUCTS

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Chapter 1

KEY POINTS TO TAKE AWAY FROM THIS

CHAPTER

New product development process

UNNECESSARY INFORMATION (CH.10)

Differences between a product item,

product line, and product mix

No types of new products

Classification of consumer goods

WHAT IS A PRODUCT?
A product can be a good, a service, or an idea. It remains at the heart of the marketing mix, as without a
product, you cannot determine the price, promotion or place (distribution).
Examples:
Good: Water bottle, laptop, lamp
Service: Hairdressing, cleaning, plumbing
Idea: newly invented sport, new religion

PRODUCT ITEM, PRODUCT LINE, PRODUCT MIX

Product Item: A specific version of a product.
i.e. Frosted Flakes, Mr. Christies cookies, Cheerios
Product Line: A group of closely related product items, viewed as a unit because of marketing, technical
or end-use considerations.
i.e. Breakfast cereals, Snack bars, healthy cereals, cookies
Product Mix: The total group of products offered by a company

Width of a product mix number of product lines a company offers

Depth of product mi number of product items in each product line

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Chapter 1

CLASSIFICATION OF PRODUCTS

CONSUMER PRODUCTS
Products purchased by the end consumer
BUSINESS PRODUCTS

Products purchased by other businesses, assist

directly or indirectly in providing products for
resale
1.

2.
3. Convenience Good

Preference of brands,
substitutes still acceptable

Frequently purchased, relatively

inexpensive, little commitment/effort
required

Large number of selective

outlets

Widespread distribution

Aware of brand, but substitutes

are acceptable
Promotion aims towards price,
availability and awareness
i.e. snack food, toiletries, cake
mix, groceries
4. Shopping Good
Requires comparison shopping,
usually more expensive
Promotion stresses
differentiation

i.e. appliances, clothing,

cameras
5. Specialty Good

A particular item consumers search

extensively for, usually requires a
lot of commitment (expensive)

Very brand loyal, no substitutes

Promotion aims at uniqueness of

brand and status

Limited distribution

i.e. houses, Ferrari, Picasso

painting, Rolex watches, LV bags

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6. Unsought Good
Unknown to potential buyer or
known but not actively sought
Price varies and distribution is
often limited

NEW PRODUCT PROCESS

1. New Product Strategy Development
2. Idea Generation
3. Idea Screening and Evaluation
4. Business Analysis
5. Development
6. Marketing Testing
7. Commercialization
8. New Product

Promotion aims at raising

awareness

Substitutes are accepted

i.e. sling box, burial insurance,

thesaurus, helicopter

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Chapter 1

NEW PRODUCT STRATEGY DEVELOPMENT

In this stage, companies are developing structures, approaches and guidelines to innovate.
The innovation focus is determined (radical innovation or incremental? Usually it is incremental as it takes
a lot of commitment and bears a lot of risk.) Position as an innovator? Or copycat?

IDEA GENERATION
This stage is characterized by brain storming, pooling product concepts and generating ideas from many
different groups. May ask consumer groups, study competition, use R&D, or use non-consumers for their
input, etc.

IDEA SCREENING AND EVALUATION

First filtering in the product development process

Evaluate the feasibility of the idea

o

Internal Evaluation

i.e. How is its technical feasibility, how well it matches with the new product
strategy and company culture? (weighted points system, screening criteria)

External Evaluation

i.e. concept tests (prior to building a prototype), get a feel of what consumers and
experts think about the concept using questions (you will NOT proceed unless
this part is acceptable)

BUSINESS ANALYSIS

Last checkpoint before a prototype is created

Planning out the specified product features and the appropriate marketing strategy

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Chapter 1

Estimating financial projections (demand, costs, sales, profitability) through quantitative analysis

Evaluating if the projections satisfy the companys objectives (i.e. increase profits by 2% by end
of year)

DEVELOPMENT

Prototype is made

Often requires a large amount of investment

Testing for safety and durability

Literally developing the tangible product (laboratory and consumer tests)

MARKETING TESTING

Exposing the product and marketing program to consumers in realistic marketing settings (i.e.
testing it in a smaller market (in one city) or testing it in a consumer group)

Products are usually modified and retested several times

Various forms of testing test marketing, simulated test markets, virtual reality market testing

Not always possible to implement (i.e. cars, some services, very expensive products)

COMMERCIALIZATION

Positioning and officially launching the product in full-scale production and sales

Large investment is require, usually the most expensive stage (i.e. promoting the product, slotting
fees (getting it on the shelf), failure fees (promises to sell as much as promised))

36

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CHAPTER 11 PT. 2
BRANDING

KEY POINTS TO TAKE AWAY FROM THIS

CHAPTER

Brand equity

Brand strategy

UNNECESSARY INFORMATION (CH. 11)

No trademarks (differences)

No Brand name vs. brand mark

WHAT IS BRAND EQUITY?

Brand: Name, term, symbol, design or combination of thereof which identifies a sellers products and
differentiates them from competitors product
Branding: Activity of using a brand to distinguish products and organizations from its competitors
Brand equity: The added value that a brand name gives to a product beyond the provided functional
benefits
i.e. how much more a consumer is willing to pay for one brand over no name cola vs coca cola
WHY IS BRAND EQUITY IMPORTANT?
Strong brand equity provides competitive advantages:

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Chapter 1

Higher consumer awareness

Higher consumer brand loyalty

Less sensitivity to price competition

Advantage in introducing new products (since more awareness)

BRANDING STRATEGIES
1. Multiproduct branding
2. Multibranding
3. Private Branding
4. Mixed Branding

MULTIPRODUCT BRANDING
Branding products under one enveloping brand name, aka Family Branding or corporate branding

PROS: Useful for introducing new products

CONS: if there are bad associations with the brand, there will be spillover to all products under
the brand
o

i.e. RIMs Blackbery Curve, Blackberry Z, Blackberry Torch

LINE EXTENSION
Using a current brand name to enter a new market segment in its product class
o

i.e. Mr. Christie introducing crackers rather than cookies, a singer becoming a rapper

BRAND EXTENSION
Using a current brand name to enter an entirely different product class
o

i.e. Mr. Christie introducing ice cream, a singer rolling out a new perfume

MULTIBRANDING
Using different brands for different products

PROS: Helps reach and target different segments

CONS: If consumers recognize the parent company, may be scrutinized by differences

between brands (Unilever under fire because of Dove promoting real beauty in women but
Axe promoting objectification of women)

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Chapter 1
o

i.e. Unilever Dove, Axe, Ben & Jerrys, Lipton

Proctor & Gamble Pringles, Pantene, Tide, Downy, Charmin

PRIVATE BRANDING
A.K.A private labeling or reseller/store branding, usually branded for products of a retailer/wholesaler

PROS: Products are usually cheaper but have a higher margin since here is less cost through
little to no advertising/marketing and lack of shelf costs, helps develop own brand equity and get
traffic in store through brand loyalty

CONS: Competing against big brands and taking up shelf space

o

i.e. Costco Kirkland, Loblaws Presidents Choice

MIXED BRANDING
The firm markets its products under both its own name and a resellers name

PROS: Helps reach different target markets and takes advantage of excess capacity

CONS: Can cannibalize your own brand or product

o

i.e. Michelin making tires under its own brand and under Sears, Epson making printers under
its own brand and under IBM

CHAPTER 13
PRICING

KEY POINTS TO TAKE AWAY FROM THIS

CHAPTER

Price constraints and price objectives

Selection of approximate price levels

39

Focus on Step 1& 4 in steps in setting

price

Chapter 1

Steps 2-3 are less important

Steps 5-6 are not important

UNNECESSARY INFORMATION (CH. 13)

WHAT IS PRICE?
Price: that which is given up in an exchange to acquire a good or service (either monetary or nonmonetary)
The price has a direct impact on revenue and profits, the two most important metrics for measuring a
firms performance.
PRODUCT COSTS
PLACE COSTS
PROMOTION COSTS
PRICE REVENUE
FUNDAMENTALS OF PRICING
Customers will BUY if Value > Price
Firms SELL if Price > Cost

STEPS IN SETTING PRICE

1. Identify pricing constraints and objectives
2. Estimate demand and revenue
3. Estimate cost, volume and profit relationships
4. Select an approximate price level
5. Set list or quoted price
6. Make special adjustments to list or quoted price

STEP 1 IDENTIFYING PRICING CONSTRAINTS AND OBJECTIVES

Price Constraints: Factors that limit how flexible firms are in setting price

Demand for product

PLC stage

Cost of the product

Type of market (market power and structure)

Competitors prices

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Chapter 1

Regulations (govt.)

Pricing Objectives: The strategic role of pricing

1. PROFIT

Profit Maximization: setting the price as high as possible to maximize profits (revenues
are as large as possible relative to cost) CON: very short term focus, cutting prices may
lead to price wars

Target profit: aiming for a predetermined Return on Investment (ROI), usually a promise
of profits for shareholders

2. SALES

Market share: Maximizing unit sales or sales volume in order to maximize share of the
market

3. SOCIAL RESPONSIBILITY

Pricing based on obligations to the society, usually from govt. or nonprofit organizations

4. MARKET POSITIONING

Reflecting the positioning of the brand or product (high end vs. low end)

i.e. LV and Rolex will consistently be priced highly, while no name products will be priced
lowly

STEP 4 SELECTING AN APPROXIMATE PRICE LEVEL

1. Demand-Oriented: Focus on customer tastes and preferences

Price Skimming Pricing high now, reducing price slowly later, useful when there is little
competition

Penetration Pricing Starting with a low pricing to attract mass market and gain market
share, useful when expecting competition

Yield Management Pricing Different prices over time for a set amount of capacity i.e.
Hotels, Airlines (do not sell below variable cost because then the contribution margin will
be negative)

2. Cost-Oriented: Focus on production and marketing costs

Standard Markup Pricing Adding a fixed % to cost (i.e. 120% markup)

Cost-Plus Pricing Adding a specific amount to cost (i.e. $20 more per unit)

3. Profit-Oriented: Focus on balancing both revenue and cost

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Chapter 1

Target Profit Pricing Setting a specific dollar amount (i.e. $150 for one unit)

Target ROI Pricing Setting a specific ROI (i.e. ROI % of 150%)

4. Competition-Oriented: Focus on market share and competition

Above/At/Below-Market Pricing Setting a price based on the price of similar products in

the market (i.e. Above: Holt Renfrew, At- The Bay, Below-Winners)

Loss Leader Pricing Setting very low price to attract customers attention in hopes they
will buy other products (i.e. Amazon Kindle attract purchases of ebooks, printersattract
purchase of ink)

CHAPTER 14
MARKETING CHANNELS

KEY POINTS TO TAKE AWAY FROM THIS

CHAPTER

The role of intermediaries

Marketing channels for consumer goods

Multi-channel distribution

Vertical marketing systems

Levels of distribution intensity

Channel conflicts

UNNECESSARY INFORMATION (CH. 14)

Don't need to specifically know the

factors affecting channel choice.

WHAT ARE MARKETING CHANNELS?

Individuals or firms involved in the process of making a product or service available for use or
consumption by consumers.
Products flow through these channels from producers to intermediaries to consumers.

WHAT ARE INTERMEDIARIES?

Any liaison between the manufacturer and the consumer (end-user market)
1. Agent or Broker

Has legal authority to represent wholesaler, retailer, or manufacturer

Does not take ownership of product

Has connections, negotiates on behalf of a wholesaler, retailer or manufacturer

2. Wholesaler

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Chapter 1

Sells to other intermediaries

Takes ownership of product

aka distributor

3. Retailer

Mainly sells to customers

Takes ownership of product

i.e. Costco is both a wholesaler and retailer

WHY DO WE NEED INTERMEDIARIES?
1. Transactional Function

Buying Purchasing products for resale/supply

Selling Contacting potential customers, promoting products and soliciting orders

Risk Taking Assuming the risk of carrying ownership of inventory that can become
obsolete or deteriorate

2. Logistical Function

Storing Purchasing large amounts and breaking them down to smaller portions to sell to
customers

Dispersing/transporting Moving the product to customers physically

Assorting Creating product assortments from several sources to serve customers

3. Facilitating Function

Financing Extending credit to customers

Providing marketing information Provide information to customers and suppliers

(competition and trends)

Grading Assigning quality grading to products (testing, judging, inspecting)

Essentially intermediaries make transactions and logistics more efficient, and facilitate manufacturers and
customers.

MARKETING CHANNELS FOR CONSUMER GOODS

43

i.e. Apple, Dell, online

clothing stores, outlet
stores.

Chapter 1

i.e. Toothpaste,
Toiletries

Most goods, i.e.

goods sold at Costco

44

If it has full control, it is a direct channel.

MULTI/DUAL CHANNEL DISTRIBUTION

Delivering products through multiple channels
PROS: Reaches different target markets, on avg. multichannel shoppers spend more money
CONS: Channels may not get along, may have different prices on different channels

Chapter 1

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Chapter 1

CONVENTIONAL VS VERTICAL MARKETING SYSTEMS (VMS)

CONVENTIONAL DISTRIBUTION
CHANNELS

1 independent channel members

Often results in poor performance

Each member seeking to maximize its

own profits

VERTICAL MARKETING SYSTEMS (VMS)

Channel members cooperate to act as a

unified system

One channel owns, has contracts with,

or has so much market power that all
members cooperate

Benefits: Greater control, less conflict,

economies of scale due to system size

Corporate VMS

Owning another channel

Successive stages of production and distribution under a single ownership

Backward/forward integration

i.e. Apple forward integration (opened own store), Tim Hortons backward integration (roasting
own coffee)

Contractual VMS

Having a contract with another channel

Independent production and distribution firms that collaborate on the basis of contracts

Gives more control over intermediaries

i.e. franchising, with strict guidelines and standards

Administered VMS

Cooperation due to market power

Coordination of successive stages of production and distribution due to the power of one channel
member

i.e. Walmart, Canadian Tire, Costco (have so much power that suppliers need to be on the stores
shelves because a large portion of their sales come from them)

Factors that can affect channel choice include: environmental factors, consumer/market factors, product
factors, and company factors.

LEVELS OF DISTRIBUTION INTENSITY

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Chapter 1

How available is your product, how widespread?

INTENSIVE DISTRIBUTION

available at every outlet where target customers may want to buy i.e. soft drinks ,water bottles

SELECTIVE DISTRIBUTION

available in few retail outlets in geographic area i.e. fashion items

EXCLUSIVE DISTRIBUTION

available in one or very few retail outlets in geographic area i.e. Rolex watches

CHANNEL CONFLICTS
Vertical Conflict: between different levels in the marketing channel

Supplier or manufacturer unhappy with retailer i.e. not enough promotion, price too low/high,
inadequate displays

Retailer unhappy with manufacturer i.e. manufacturer selling at cheaper prices online

Horizontal Conflict: between same levels in marketing channel

Competition between retailers or wholesalers

How do we avoid/resolve these conflicts?

Diversify product offerings sell different products online than in retail stores

Potentially through VMS or channel cooperation eradicate any discrepancies in pricing for
example

CHAPTER 16
INTEGRATED MARKETING COMMUNICATIONS (IMC)
KEY POINTS TO TAKE AWAY FROM THIS CHAPTER

What is IMC?

Goals and tasks of promotion

Promotional mix of an IMC and factors affecting it (Pros and cons of advertising, public relations,
sales promo, personal selling, direct marketing)

WHAT IS INTEGRATED MARKETING COMMUNICATIONS? (IMC)

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Chapter 1

IMC: Coordination of all promotional activity/messages for a product or service to assure consistency of
messages at every contact point where a company meets an audience (customers, other businesses,
investors, intermediaries).
i.e. same music, same spokesperson, same logo, same style of design/format

WHAT ARE THE GOALS AND TASKS OF PROMOTION?

Goals/tasks depend on the product life cycle
1. INFORM: increase awareness, educate consumer, explain product, build company image during
introductory stage
2. PERSUADE: encourage brand switching, influence customers to buy now, persuade customers
to call, induce action during growth stage
3. REMIND: remind customers where to buy, remind that they need the product during maturity
stage

DIFFERENT TYPES OF PROMOTION

1. Advertising
2. Public Relations
3. Sales Promotion
4. Personal Selling
5. Direct Marketing

ADVERTISING
One-way mass communication about a product/organization that is paid for by an identified sponsor (i.e.
TV, radio, newspapers, billboards, etc.)
PROS:

Control over message

Reaches many people (cheaper per contact)

CONS:

Expensive for production (initial cost)

Not customized to each person (everybody sees the same ad)

Not interactive (impersonal)

Hard to perceive benefit/effect of advertising

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Chapter 1

PUBLIC RELATIONS (PR)

Form of communication management that evaluates public attitudes and seeks to earn public
understanding and acceptance (i.e. through events, sponsorships, newspaper articles, reviews about
brand/product, awards, spokesperson, product placement)
PROS:

Cheap/free

Considered as more credible since there is usually a second opinion on the company/product

More important than ads, reflective of reputation and public perception of company/product

Can reach many people (mass market)

CONS:

Little to no control over message

No direct or specific message

Hard to measure its effectiveness

SALES PROMOTION
Short-term inducement of value offered as an incentive for consumers to buy a good/service (i.e. free
samples, coupons, contest premiums)
PROS:

Increases sales effectively in short term

Increases store traffic

Can measure the effect of the sales promotion

CONS:

Lack of brand loyalty

No long-term outlook

May condition buyers to not buy at normal price, only at discounted prices if used too often

PERSONAL SELLING
Two-way flow of communication between a buyer and seller, often face to face encounters, designed to
influence a persons or groups purchasing decision (i.e. salesperson, usually for more complex
purchases that require more information)

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Chapter 1

PROS:

Personalize messages and service to customer

Good for developing customer relationships (develops loyalty)

Better communication through two-way flow

CONS:

May have inconsistent messages

May come off as aggressive (commissions)

Cannot reach as many people

Expensive per contact

DIRECT MARKETING
Direct communication with consumers to generate a response in the form of an order, request for further
information, or a visit to a retail outlet (i.e. direct mail, catalogues)
PROS:

Very customizable to consumer (referrals, drawing on past purchases)

Advantage over personal selling: less expensive per contact, Advantage over ads: customizable
message

CONS:

May be perceived as annoying/spam, can unsubscribe

Expensive to manage databases

All in all, any of the types of promotions used in a strategy must follow IMC, having clear and consistent
messages throughout the promotional mix.

IMC: FACTORS AFFECTING THE PROMOTIONAL MIX

The promotional mix will depend on the product life cycle, push/pull strategy, the target audience,
available funds, stage of buying decision and product characteristics.

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Chapter 1

PULL AND PULL STRATEGIES

Push strategy: Using promotional efforts to PUSH the product through the distribution channel

Convincing/attracting intermediaries to purchase your product (mainly personal selling directed to

intermediaries)

Pull strategy: Using consumer advertisement to PULL the product through the distribution channel

Effectively create demand from the consumer to the intermediaries, mainly advertising directed to
consumers

51

PRODUCT LIFE CYCLE

Chapter 1

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Chapter 1

PRE-INTRODUCTORY
Announce existence of product and use of pre-introduction publicity, usually through small amounts of
advertisement
INTRODUCTORY
Want to inform, educate, raise awareness of brand/product, usually through heavy advertisement and
public relations to raise awareness, promotions to induce trial of product, personal selling to obtain
distribution,
GROWTH
Want to persuade consumers to buy your product over competitions product, heavy advertising and
public relations to build brand loyalty, decrease use of sales promotions, personal selling to maintain
distribution
MATURITY

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Chapter 1

Want to remind consumers about product and where to buy it, maintain and gain market share from
competitors, slight decrease in advertising although orienting towards more persuading and reminding,
increased sales promotions, personal selling to maintain distribution
DECLINE
Slowly phasing out product, drastic decrease in advertising and public relations, both promotion and
personal selling maintained at low levels

OTHER FACTORS
Product Characteristics

Complexity and perceived risk

Business product vs. consumer product

B2B more personal selling and promotions, Consumer more public relations, personal selling,
advertising

Consider cognitive dissonance requires more personal selling

Stage of Buying Decision

Pre-purchase(inform), purchase (persuade), postpurchase (remind)

Target Audience

E.g. number of potential buyers, geographic location, end consumer vs. intermediary, type of
consumer

Available Funds

How much money you have available to fund promotions

IMC coordination is EXPENSIVE and DIFFICULT, if not done properly, it can lead to consumer confusion,
loss of customers, loss of brand equity, conflicts within company.

CHAPTER 17-18
ADVERTISING, SALES, PROMOTION, PERSONAL SELLING
KEY POINTS TO TAKE AWAY FROM THIS CHAPTER

Different types of advertising media

The pros and cons of each

ADVERTISING
Product Advertising: For a product

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Chapter 1

Promotes benefits of a good/service

Pioneering Advertising

Informs and raises awareness about a product

Stimulate primary demand

Heavily used during introductory stage

Competitive Advertising
o

Persuasive, emphasis on differentiation

Influence the demand of a specific product

Comparative advertising: direct/indirect comparison of 2+ competing brands

Usually maturity stage

Reminder Advertising:
o

Reminds consumers of product

Focuses on drawing attention

Often focused on the brand rather than product

Institutional Advertising: For the company

Promotes the corporation/organization as a whole

Designed to change or maintain corporate identity

Staying consistent, not particular focus on a specific product

Mostly reminder advertising

DESIGNING ADVERTISEMENTS
Goal is to sell benefits, not the attributes and specs
i.e. convenience, efficiency, pleasure, health, protection, relaxation, beauty, confidence
The benefits are communicated through different advertising appeals, but the appeal is not necessarily
the benefit.
i.e. sex appeal, fear appeal, convenience appeal, fun/humorous appeal, environmental appeal

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Chapter 1

SELECTING THE RIGHT MEDIA

MEDIUM

ADVANTAGES

DISADVANTAGES

Newspapers

Geographic selectivity and flexibility;

year-round readership, low cost

Little demographic selectivity, low passalong rate (short life span), poor colour,
ads compete for attention with other
features

Magazines

Good reproduction; demographic

selectivity; geographic selectivity, high
pass-along rate

Limited demonstration capabilities, lack

of urgency, long time needed to place ad

Radio

Low cost; immediacy of message; can

use sound; can target specific
audiences; can be scheduled on short
notice (convenient)

No visual elements; short advertising life

of message; high frequency required;

Television

Reaches extremely large audiences; low

cost per contact; video and audio
possible; demographic selectivity with
cable station

High cost to prepare and run ads; short

life of message; little demographic
selectivity with network stations; long
lead time required

Outdoor Media

Low cost; geographic selectivity; high

visibility; repeat exposure

Only short and simple messages; no

demographic selectivity; criticized as
traffic hazard

Internet

Fastest growing medium; ability to reach

narrow target audience; short lead time;
ads can be interactive and link to
advertiser; video and audio capabilities

Tracking effectiveness; animation and

interactivity requires time and resources,
perceived as annoying and can be
blocked by adblock

SALES PROMOTION

CONSUMER ORIENTED SALES

PROMOTION

TRADE-ORIENTED SALES PROMOTION

Directed to intermediaries, B2B

E.g. discounts, cooperative advertising

Directed to the ultimate consumer

E.g., coupons, samples, rebates,
contests, premiums, bundling

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PERSONAL SELLING
Personal Selling has an advantage if.

Advertising and Sales Promotion have an

advantage if

The product has a high value.

The product has a low value.

It is a custom-made product.

It is a standardized product.

There are few customers.

There are many customers.

The product is complex

The product is easy to understand.

Customers are concentrated in geographic

area

Customers are geographically dispersed

Examples: insurance, airplane engines, custom

windows

Examples: soap, cereal, T-Shirts

CHAPTER 7
REACHING GLOBAL MARKETS
KEY POINTS TO TAKE AWAY FROM THIS CHAPTER

International marketing mix

Customization vs. standardization

International entry strategies

INTERNATIONAL MARKETING MIX

1. International Economic environment

How is the economy doing in the country? Stable/Unstable?

2. International Socio-cultural environment

Are there particular customs or cultural differences that need to be considered? (i.e.
religion muslims and beef, jewish dietary law)

3. International competitive environment

How many competitors are there in the country?

4. International regulatory environment

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Are there any legal restrictions which complicate entering the foreign market? (i.e.
language laws in Quebec)

5. International technological environment

To what degree are technological innovations used by consumers (cars vs. bikes? Cell
phones?)

DEMAND: Most of all do the foreign consumers need the product?

CUSTOMIZATION VS STANDARDIZATION
Customization:

Adjusting marketing mix according to cultural, regional and national differences.

Pros: Customized to consumers needs and wants (need to figure these out by R&D)

Cons: Lower economies of scale, added complexity to operations, difficult to manage and design
appropriate marketing mix, higher R&D expense

Standardization:

Development of marketing mixes that treat the world or its major regions as one entity (i.e. North
America, Europe, Asia, etc.)

Includes the standardization of products, promotion campaigns, prices, and distribution channels

Think globally, act locally

Pros: Economies of scale, lower R&D expense, lower advertising expense

Cons: Can lead to lower customer satisfaction

Note: This comes in degrees, you can be highly customized (custom product) or highly standardized
(itunes, Wacom), and usually its a mix leaning to one side of the spectrum.

CUSTOMIZE

STANDARDIZE

Lower economies of scale

Economies of scale

Closer to customers needs and wants

(need to figure out what needs through
R&D)

Lower R&D expense

Lower Advertising Expense

More difficult to manage and design

the appropriate mix

Can lead to lower customer satisfaction

Increased complexity of operations

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INTERNATIONAL ENTRY STRATEGIES

In terms of least costly/profitable/risky to most costly/profitable/risky:
1. Exporting Producing in home, selling in foreign (directly or through intermediary)
2. Licensing Giving foreign locals legal rights to operate under your name (franchising)
3. Joint Venture Cooperating with another firm to create local business
4. Foreign Direct Investment (FDI) Investing in and owning a foreign subsidiary or division

EXPORTING
Producing goods in one country and selling them in another.

Direct Exporting: through own distribution i.e. Iphones made in US distributed through Canadian
Apple stores

Indirect Exporting: through intermediary i.e. Iphone made in US distributed through Canadian
Walmart stores

PROS:

CONS:

Low risk

Less control

Quick way to enter

Lower profit potential

Low financial commitment

LICENSING
Offering the right to a trademark, patent, or any similarly valued items of intellectual property in return for
a fee (usually a fee + percentage of commissions)

TYPES: Contract manufacturing, contract assembly, franchising

PROS:

CONS:

Lower risk

Forgoes control/less control

Relatively fast way to enter

Can be used for services (cant export

services)

May create competition (allowing others

to learn your manufacturing process)

Brand image may be jeopardized

Creates employment in host country

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JOINT VENTURE
Agreement between two or more firms to invest and create a local business, sharing ownership, control
and profits of new company
i.e. Danone and Grameen Bank in Bangladesh, MillerCoors = SABMiller and Molson Coors

PROS:

Greater risk (but shared)

More control (partial owner)

Good way to acquire market knowledge

(local partner)

Greater financial
investment/commitment

Greater risk of conflict (making

decisions with a partner, interest
conflicts)

Greater risk

Greater profit potential

CONS:

FOREIGN DIRECT INVESTMENT (FDI)

A firm investing and owning a foreign subsidiary or division
i.e. American company opens up a factory in China

PROS:

Most control

Cost savings (no cost of coordinating

with partner, shipping, long run savings)

Greater financial
investment/commitment

Most sensitive to local environmental

factors (strikes, protests, unions,
education)

Can take a long time to settle

Better knowledge of local market

Less affected by exchange rates (as

compared to exports)

Higher profit potential

CONS:

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