Chapter 1 MARKETING STRATEGY A firms go-to-market approach that outlines its product, price, channel, and marketing communications

strategies (the marketing mix elements). MARKETING PLAN A document developed for a time frame of one year. It encapsulates the organizations marketing strategy to illustrate how the business aims to understand-create-deliver-manage customer value. TARGET MARKET Once market segmentation is complete, the firm has to decide which segment(s) it wants to serve. This is called selecting target markets. The idea behind target marketing is simplewe cannot be all things to all people. MARKETING MIX The set of tools a marketing strategist uses to create value for chosen customers (target market). We can think of the marketing mix as comprising product strategy, pricing strategy, channel of distribution strategy (also called place), and marketing communications strategy (also called promotion). MARKET SEGMENTATION A fundamental pillar in marketing. Market segmentation refers to dividing customer needs into groups (or segments) in such a way that customers within a group share similar needs, and each group is distinct from other groups in terms of its needs. Market segmentation enables an organization to accrue several benefits such as the ability to serve needs better, utilize resources more effectively, and discover unmet needs. Contrast with mass marketing. CUSTOMER FOCUS An organizational philosophy that guides decision making. An organization that is customer focused makes decisions from the outside in. That is, the organization first considers customer needs and then attempts to satisfy those needs. All decisions are made keeping the customer in mind. (Contrast this philosophy with product focus.) TOTAL SHAREHOLDER RETURN (TSR) TSR represents the change in capital value of a listed/quoted company over a period (typically one year or longer), plus dividends, expressed as a plus or minus percentage of the opening value. RETURN ON INVESTMENT (ROI)

A measure of the return being generated by an investment. For example, if you invest $100 in a mutual fund that generates $8 in income for the year, the ROI is 8%. ROIs are calculated for any business investment such as capital deployed, sales efforts, advertising expenditures, and so forth.

Chapter 2 BUYING CENTRE A group of people responsible for making a purchase decision in an organization. For example, the buying centre in a hospital for medical diagnostic machines may consist of a physician, nurse, administrator, and social worker. FOCUS GROUPS A qualitative (exploratory) research technique that is a guided discussion between a group of respondents, led by a moderator. This technique is useful for generating and evaluating ideasnew product concepts, marketing communication messages, and so forth. EXPLORATORY RESEARCH A set of techniques such as focus groups, depth interviews, and ethnography. These techniques are designed to explore ideas. Another name for exploratory research is qualitative research. PARTICIPANT OBSERVATION A component of ethnographic research where the researcher does not merely observe, but also participates in an activity (for example, shopping) alongside customers to get a better understanding of their needs and motives. DEPTH INTERVIEWS A qualitative (exploratory) research technique where a moderator conducts a guided conversation with one respondent. This technique is useful in understanding customer decision making and the sources of influence on decision making. ETHNOGRAPHY A qualitative (exploratory) technique where the researcher engages in participant observation with customers. In essence, the researcher gains deep insight by becoming the customer. PRIMARY RESEARCH Research you have to conduct yourself. Contrast with secondary research, which is research that someone else has conducted and can be obtained free of charge or for a fee, depending on the source. SURVEY RESEARCH Data collection by means of a questionnaire. Surveys are useful in validating findings by sampling a larger set of respondents than is typical in qualitative (exploratory) research.

QUALITATIVE RESEARCH A set of techniques such as focus groups, depth interviews, and ethnography. These techniques are designed to explore ideas. Another name for qualitative research is exploratory research. SECONDARY RESEARCH Research that someone else has conducted that can be obtained free of charge or for a fee, depending on the source. Contrast with primary research, which you have to conduct yourself. BASIC CARE VARIABLES Variables that are table stakes or the bare minimum to enter any industry. Product quality, on-time delivery, and customer service are examples of basic care variables. Focusing on these variables alone does not offer the firm an advantage over its competitors.

Chapter 3 MARKET SEGMENTATION A fundamental pillar in marketing. Market segmentation refers to dividing customer needs into groups (or segments) in such a way that customers within a group share similar needs, and each group is distinct from other groups in terms of its needs. Market segmentation enables an organization to accrue several benefits such as the ability to serve needs better, utilize resources more effectively, and discover unmet needs. Contrast with mass marketing. ETHNOGRAPHY A qualitative (exploratory) technique where the researcher engages in participant observation with customers. In essence, the researcher gains deep insight by becoming the customer. PSYCHOGRAPHIC SEGMENTATION The practice of segmenting customers using attitudinal and lifestyle variables such as activities, interests, and opinions MARKET SHARE The slice of the total market you have vis-á-vis your competitors. Market share can be calculated based on number of units or dollar amount. If 100 widgets are sold in a market in a given time period, and your firm sells 15 widgets, your market share is 15%. If the total value of widgets sold in the same time period is $1000 and your firm has sales of $225, your market share (based on dollar amount) is 22.5%. So when examining market share, it is very important to see whether the unit of analysis is units or dollars. USAGE SEGMENTATION A way to segment customers based on usage. For example, beer manufacturers know that they can segment their customers into low-, medium-, and high-usage customers. LISTING FEES A fee charged by a retailer to carry a manufacturers goods on its shelves. MASS MARKETING Presenting the same offer to all customers. Mass marketing ignores customer needs and is, therefore, untenable. Contrast with market segmentation.

Chapter 4 NON-PROFIT ORGANIZATION An organization whose primary goal is not to make a profit. These organizations tackle such problems as hunger, housing, heritage conservation, and a myriad of other worthy pursuits. Although their main goal is not profit, it does not mean that these organizations can make a loss and still remain in business. Contrast with for-profit business MARKETING PLAN A document developed for a time frame of one year. It encapsulates the organizations marketing strategy to illustrate how the business aims to understand-create-deliver-manage customer value. FUNCTIONAL PLAN A plan developed for a function such as human resources, operations, or the supply chain. Functional plans are based on the context provided by the marketing plan. COMMODITY Although we typically tend to associate commodities with such things as wheat, steel, or frozen orange juice concentrate, in marketing a commodity refers to something that is not differentiated in the mind of the customer. Contrast with brand. MARKETING STRATEGY A firms go-to-market approach that outlines its product, price, channel, and marketing communications strategies (the marketing mix elements). MACROENVIRONMENTAL TRENDS Trends facing the business externally. Common trends examined are demographic, socio-cultural, economic, technological, political, and regulatory. COMPETITIVE DIFFERENTIATION An act of differentiating yourself from your competitors, usually by building a brand. CORE PRODUCT Product features or attributeswhether the container of ketchup is made of plastic or glass, the number of seats in a restaurant, and so forth. FOR-PROFIT BUSINESS

A business whose primary goal is to make a profit. Contrast with non-profit organization. STRATEGIC PLAN A plan developed at the CEOs level. It is a very high-level plan delineating what markets (businesses) the organization should enter or exit. There are two key differences between a strategic plan and a marketing plan: time frame and level of detail. The strategic plan is developed for a time frame of three to five years (or longer in some organizations), while the marketing plan is developed for a time frame of one year. The marketing plan contains details on marketing strategy (product, price, channel, and marketing communications), while the strategic plan does not.

Chapter 5 AUGMENTED PRODUCT The additions or augmentations that are made to the core product. Typically, these include such things as brand name, logo, colour schemes, corporate website, warranties, guarantees, toll-free numbers that customers can call to receive additional product information, call centres, and so forth. PRODUCT LIFE CYCLE A concept, challenged by some authors, that states that products predictably go through four phasesintroduction, growth, maturity, and decline. As we saw in Chapter 5, this is not a fait accompli. In other words, while there may be a life cycle for technology or product categories (we no longer use typewriters, for example), a brand can go on forever (IBM no longer makes typewriters, but it went on to make computers and laptops, and now sells computer-related services). BRAND A brand is a differentiated offering in the marketplace. Although frequently associated with branded goods and services, such as Mercedes Benz cars or Disney theme parks, anything can be branded if it is differentiated (in the eyes of the customer) from competitors. A one-word opposite of brand is commodity. BRAND IMAGE The brand identity as received in the marketplace. The strategist has no control over brand image. It can only be measured. Even if the strategist relinquishes control of the brand, a certain image of the brand will develop in the marketplace. This is because customers, competitors, suppliers, media, and the government will shape the brands image. BRAND EQUITY The value a brand adds to a product. Picture a can of peas without a brand label. How much would you pay for this product? Now, picture the same product, but with a Green Giant (a well-known brand) label. How much would you pay for this product? The difference between these two price levels (most consumers would pay more for the Green Giant product) is the equity of the brand (Green Giant, in this case). PRODUCT In marketing, the term product refers to a good, a service, a place, an idea, a person, an institution, and so forth. The product is the totality of the customers experiences. FUNCTIONAL PRODUCT

How the product functions or performsthe taste of the ketchup, friendliness of the restaurant staff, salesperson knowledge, and so forth. POTENTIAL PRODUCT The true solution the customer wants from the product. A very powerful concept, it enables the strategist to recognize that, although two competitors may have the same core product, it is possible to differentiate (build a brand) by carefully thinking about the potential product. CORE PRODUCT Product features or attributeswhether the container of ketchup is made of plastic or glass, the number of seats in a restaurant, and so forth. BRAND AWARENESS A measure of how aware a customer is of the existence of a brand. BRAND LOYALTY A measure of how loyal a customer is to a brand. We measure brand loyalty by asking customers (1) if they would buy the brand the next time they were in the market for the product and (2) if they would recommend the brand to someone else.

Chapter 6 VARIABLE COST This is cost that varies with volume "produced." Items like wages paid per hour and raw material are variable costs. If a hairstylist is paid $50 per hour, the owner of the salon has to pay the stylist $500 for a 10-hour shift, but only $250 for a 5-hour shift. Constrast this type of cost with fixed cost, which remains fixed, regardless of "production" volume. PRICE ELASTICITY The percentage change in volume for a given percentage change in price. Michael Marn and his colleagues have found that a price decrease of 1% typically drives up demand by around 1.7% (cited in the pricing chapter). Another term for price elasticity is price sensitivity. Of course, price elasticity varies by customer segment and product category (for example, consumers may be price inelastic for food items, but price elastic for luxury goods). TARGET COSTING A method where the firm sets a price for the product, establishes a profit margin it wants to achieve, and then tries to bring costs under control to enable it to achieve the desired profit margin. Hence, if an item is going to be priced at $10 and the firm requires a profit margin of $3, its costs cannot exceed $7. The firm has to try to provide the product for $7 or give up its quest entirely. TOTAL COST Total cost = total fixed cost + total variable cost. VENDOR MANAGED INVENTORY (VMI) A program that eliminates customers paperwork and processing costs because the supplier manages the customers inventory and ships the product without any effort on the customers part. FIXED COST The cost that has to be incurred, regardless of production volume. A salon owner has to pay monthly rent, regardless of how many customers are served during that month. Contrast this with variable costcost that varies by production volume. AVERAGE COST A cost figure arrived at by taking an average (mean) of all costs. The problem with average cost data is that averages hide the true picture. TARGET COSTING

A method where the firm sets a price for the product, establishes a profit margin it wants to achieve, and then tries to bring costs under control to enable it to achieve the desired profit margin. Hence, if an item is going to be priced at $10 and the firm requires a profit margin of $3, its costs cannot exceed $7. The firm has to try to provide the product for $7 or give up its quest entirely. INCREMENTAL COST The increment to cost (positive or negative) that results from the pricing decision. If a symphony director lowers the price of a ticket, she may sell more tickets. Her variable costs (for example, printing more programs) would go up, representing an incremental cost that is a direct result of the pricing decision. On the other hand, rehearsal costs would not be affected by how many tickets were sold for a given performance. So rehearsal costs would not be considered incremental costs. BREAK-EVEN POINT Number of units that must be sold to produce a profit of zero (but a point at which all costs are recovered). [Break even = fixed cost/(unit price - variable unit cost)] PRICE WATERFALL A chart showing the list price and various discounts subtracted from the list price to arrive at the pocket price. Price waterfalls show price leakages that occur in a firm. PRICE SKIMMING A practice where the initial price of the product is set high. Over time, prices are reduced. For example, firms that have invested heavily in new product development and want to recoup their costs follow this practice. VALUE-BASED PRICING A pricing method that takes into account customer perceptions of value, rather than the sellers cost. Contrast this method with cost-plus pricing COST-PLUS PRICING A pricing method whereby a profit margin is added to the cost of an item to arrive at the final price. If a T-shirt costs $7 to make and the firm wants a profit margin (markup) of 43%, the final price of the T-shirt is $10 [($7 + (.43 X $7)]. Contrast with value-based pricing. PRICE PENETRATION A practice where the initial price of the product is set low to attract customers. Over time, prices are raised if the product proves popular. ACQUISITION COST

The price paid by a customer to acquire a good or service. PRIVATE LABEL BRAND A brand offered under the label of a retailer. For example, Staples sells its own brand of paper products. Often, the supplier to a private label could be a national brand (such as International Paper). PRICE WAR A situation in an industry where competitors are trying to win by outdoing each other on lowering prices. POCKET PRICE Also known as realized price. The actual price received by a firm for a given transaction. Pocket prices are different from list prices because the firm may give its customers special terms (for example, discounts) and conditions to secure the customers business. BRAND IMAGE The brand identity as received in the marketplace. The strategist has no control over brand image. It can only be measured. Even if the strategist relinquishes control of the brand, a certain image of the brand will develop in the marketplace. This is because customers, competitors, suppliers, media, and the government will shape the brands image. PRODUCT FOCUS (ORIENTATION) A narrow-minded and myopic organizational philosophy that guides decision making. An organization that is product focused makes decisions from the inside out. That is, this organization does not consider customer needs when making decisions. (Contrast this philosophy with customer focus.) MARKETING STRATEGY A firms go-to-market approach that outlines its product, price, channel, and marketing communications strategies (the marketing mix elements). POCKET PRICE BAND A chart showing various pocket prices and the percentage of sales made at each pocket price point. Pocket price bands reveal the extent of pricing abuse that occurs in a firm, costing the firm untold amounts in lost profits.

Chapter 7 CORE PRODUCT Product features or attributeswhether the container of ketchup is made of plastic or glass, the number of seats in a restaurant, and so forth. VERTICAL INTEGRATION A channel practice where a business buys another business that is its supplier or its customer. For example, an orange juice manufacturer vertically integrates when it buys an orchard (this is known as backward integration). If the manufacturer buys a retail store to sell orange juice, this is known as forward integration. Vertical integration has given way to a newer concept called virtual integration. BRAND AWARENESS A measure of how aware a customer is of the existence of a brand. CHANNEL CONFLICT A conflict that arises when one channel member behaves in a way that hurts another channel member. For example, when Mattel, the toy company, sells toys to Wal-Mart it hurts toy retailers such as Toys R Us. This is because Wal-Mart can sell the toys more cheaply than Toys R Us because it buys toys in bulk from Mattel. POTENTIAL PRODUCT The true solution the customer wants from the product. A very powerful concept, it enables the strategist to recognize that, although two competitors may have the same core product, it is possible to differentiate (build a brand) by carefully thinking about the potential product. SUPPLY CHAIN A network of channel partners, from raw material to final sale. A good supply chain not only moves goods, but also moves information. The proper movement and sharing of information is crucial for any organization to achieve its strategy. Zara and Saturn are good examples of this (Chapter 7). CHANNEL ECONOMICS A process of examining a channels profitability (channel expenses divided by channel sales) and a channels capacity for generating sales. VIRTUAL INTEGRATION Instead of buying a channel member, as in vertical integration, virtual integration works by providing accurate, up-to-the-minute information to channel

partners so they all work in a synchronized way to serve the customer. Dell and Zara (Chapter 7) are great examples of companies that succeed by practising virtual integration. SUPPLY CHAIN A network of channel partners, from raw material to final sale. A good supply chain not only moves goods, but also moves information. The proper movement and sharing of information is crucial for any organization to achieve its strategy. Zara and Saturn are good examples of this (Chapter 7). VALUE CHAIN This is the same concept as a supply chain. The difference lies in how we use it. The value chain enables us to examine how value is created at each step of the supply chain. Such analysis enables us to identify avenues for collaboration between channel partners and elimination of redundancies, all with a view to better serving the final customer. Lego and Arbol Industries (Chapter 7) provide examples on how to use the value chain example.

Chapter 8
CORRELATION A statistical technique of establishing if two items are related to one another. For example, are advertising and sales related? Correlation merely states that there is a relationship; it does not specify if there is a causal relationship. That is, it does not state whether advertising causes sales. RETURN ON INVESTMENT (ROI) A measure of the return being generated by an investment. For example, if you invest $100 in a mutual fund that generates $8 in income for the year, the ROI is 8%. ROIs are calculated for any business investment such as capital deployed, sales efforts, advertising expenditures, and so forth. ENCODING Refers to packaging a message using such means as a brochure or advertisement, for example. INTEGRATED MARKETING COMMUNICATIONS (IMC) A framework to effectively integrate different marketing communications tools to achieve strategic objectives. IMC is based on two premises: (1) customers become progressively more involved with a brand and (2) different marketing communications tools have different uses. IMC attempts to use the proper tool at the proper customer involvement stage to achieve an overall sense of cohesion. SOCIAL MEDIA Also called new media or alternate media. The term social media refers to media made possible by the internet; for example, blogs, Twitter, Facebook, MySpace, and YouTube.

Chapter 9
TOTAL COST OF OWNERSHIP (TCO) ANALYSIS TCO analysis attempts to break down a customers total costs into acquisition, possession, usage, and disposal costs. The idea behind TCO analysis is that price is just one component of a customers total cost to own a good or service. And if we are successful in decreasing the customers total costs, we can make the customer insensitive to the price paid to acquire the good or service (acquisition cost). PRICE WATERFALL A chart showing the list price and various discounts subtracted from the list price to arrive at the pocket price. Price waterfalls show price "leakages" that occur in a firm. SALES CYCLE The length of time it takes for a sales professional to close the deal with a customer, calculated from the time the initial contact is made to the time the contract is signed. BUYING FUNNEL A framework that shows how customers go through the purchase process (also called a purchasing funnel). Customers initially become aware of a need, they are initially unaware of a brands existence, they give consideration to a few brands, they make a purchase, they evaluate their purchase, and they become loyal to the brand (or not, depending on their experience with it). SALES REVIEW A formal review to (1) compare actual sales figures to targets, (2) evaluate how well the sales plan is being implemented, and (3) provide feedback to other functions on what the sales function is observing in the marketplace regarding competitors, customers, and market trends. A sales review is accomplished in two ways. First, the sales function reviews sales data during its internal meetings. Second, the sales function conducts a sales review with marketing and other functions. BRAND AWARENESS A measure of how aware a customer is of the existence of a brand. POCKET PRICE

Also known as realized price. The actual price received by a firm for a given transaction. Pocket prices are different from list prices because the firm may give its customers special terms (for example, discounts) and conditions to secure the customers business. BRAND ASSOCIATIONS A set of perceptions a customer may have about a brand. Brand associations are represented in a customers memory as a set of images, feelings, beliefs, and attitudes. In marketing, we attempt to measure and understand brand associations because they drive customer behaviour toward a brand. MARKETING PLAN A document developed for a time frame of one year. It encapsulates the organizations marketing strategy to illustrate how the business aims to understand-create-deliver-manage customer value. VALUE PROPOSITION An offering (goods and services) targeted at a particular market segment or customer. MARKET SEGMENTATION A fundamental pillar in marketing. Market segmentation refers to dividing customer needs into groups (or segments) in such a way that customers within a group share similar needs, and each group is distinct from other groups in terms of its needs. Market segmentation enables an organization to accrue several benefits such as the ability to serve needs better, utilize resources more effectively, and discover unmet needs. Contrast with mass marketing.

Chapter 10 FOCUS GROUPS A qualitative (exploratory) research technique that is a guided discussion between a group of respondents, led by a moderator. This technique is useful for generating and evaluating ideasnew product concepts, marketing communication messages, and so forth. CUSTOMER FOCUS An organizational philosophy that guides decision making. An organization that is customer focused makes decisions from the outside in. That is, the organization first considers customer needs and then attempts to satisfy those needs. All decisions are made keeping the customer in mind. (Contrast this philosophy with product focus.)

Chapter 11 SHAREHOLDER VALUE A management philosophy that regards maximization of shareholders equity as its highest objective. This is accomplished by increasing a firms earnings, increasing the value of the shares, or increasing the frequency or amount of dividends paid. SOCIAL MEDIA Also called new media or alternate media. The term social media refers to media made possible by the internet; for example, blogs, Twitter, Facebook, MySpace, and YouTube.

Chapter 12 SUPPLY CHAIN A network of channel partners, from raw material to final sale. A good supply chain not only moves goods, but also moves information. The proper movement and sharing of information is crucial for any organization to achieve its strategy. Zara and Saturn are good examples of this (Chapter 7). CORPORATE SUSTAINABILITY A philosophy that a business can prosper by thinking about the welfare of its customers, employees, society, and the environment. Sustainability is the result of acting in an ethical and caring manner, without making pro fits the so/emotive of a business existence. BRAND EQUITY The value a brand adds to a product. Picture a can of peas without a brand label. How much would you pay for this product? Now, picture the same product, but with a Green Giant (a well-known brand) label. How much would you pay for this product? The difference between these two price levels (most consumers would pay more for the Green Giant product) is the equity of the brand (Green Giant, in this case). CORE PRODUCT Product features or attributeswhether the container of ketchup is made of plastic or glass, the number of seats in a restaurant, and so forth. BRAND PERCEPTIONS A set of associations about a brand held by someone. Also see brand associations.